Employee Postretirement Benefits

12 Months Ended

Dec. 31, 2012

Employee Postretirement Benefits

5. Employee Postretirement Benefits

Pension Benefits

TECO Energy has a non-contributory defined benefit retirement plan that covers substantially all employees. Benefits are based on employees’ age, years of service and final average earnings.

The Pension Protection Act became effective Jan. 1, 2008 and requires companies to, among other things, maintain certain defined minimum funding thresholds (or face plan benefit restrictions), pay higher premiums to the PBGC if they sponsor defined benefit plans, amend plan documents and provide additional plan disclosures in regulatory filings and to plan participants.

WRERA was signed into law on Dec. 23, 2008. WRERA grants plan sponsors relief from certain funding requirements and benefits restrictions, and also provides some technical corrections to the Pension Protection Act. There are two primary provisions that impact funding results for TECO Energy. First, for plans funded less than 100%, required shortfall contributions will be based on a percentage of the funding target until 2012, rather than the funding target of 100%. Second, one of the technical corrections, referred to as asset smoothing, allows the use of asset averaging subject to certain limitations in the determination of funding requirements. TECO Energy utilizes asset smoothing in determining funding requirements.

In July 2012, the President signed into law the MAP-21. MAP-21 provides funding relief for pension plan sponsors by stabilizing discount rates used in calculating the required minimum pension contributions and increasing PBGC premium rates to be paid by plan sponsors. The company expects the required minimum pension contributions to be lower than the levels previously projected; however, the company plans on funding at levels above the required minimum pension contributions under MAP-21.

The qualified pension plan’s actuarial value of assets, including credit balance, was 83.7% of the Pension Protection Act funded target as of Jan. 1, 2012 and is estimated at 94.4% of the Pension Protection Act funded target as of Jan. 1, 2013 due to the funding relief provided under MAP-21.

Amounts disclosed for pension benefits also include the unfunded obligations for the SERP. This is a non-qualified, non-contributory defined benefit retirement plan available to certain members of senior management.

Other Postretirement Benefits

TECO Energy and its subsidiaries currently provide certain postretirement health care and life insurance benefits for substantially all employees retiring after age 50 meeting certain service requirements. Postretirement benefit levels are substantially unrelated to salary. The company reserves the right to terminate or modify the plans in whole or in part at any time.

MMA added prescription drug coverage to Medicare, with a 28% tax-free subsidy to encourage employers to retain their prescription drug programs for retirees, along with other key provisions. TECO Energy’s current retiree medical program for those eligible for Medicare (generally over age 65) includes coverage for prescription drugs. The company has determined that prescription drug benefits available to certain Medicare-eligible participants under its defined-dollar-benefit postretirement health care plan are at least “actuarially equivalent” to the standard drug benefits that are offered under Medicare Part D.

The FASB issued accounting guidance and disclosure requirements related to the MMA. The guidance requires (a) that the effects of the federal subsidy be considered an actuarial gain and recognized in the same manner as other actuarial gains and losses and (b) certain disclosures for employers that sponsor postretirement health care plans that provide prescription drug benefits.

In March 2010, the Patient Protection and Affordability Care Act and a companion bill, the Health Care and Education Reconciliation Act, collectively referred to as the Health Care Reform Acts, were signed into law. Among other things, both acts reduce the tax benefits available to an employer that receives the Medicare Part D subsidy, resulting in a write-off of any associated deferred tax asset. As a result, TECO Energy reduced its deferred tax asset in 2010 and recorded a true up in 2012. TEC is amortizing the regulatory asset over the remaining average service life of 12 years. Additionally, the Health Care Reform Acts contain other provisions that may impact TECO Energy’s obligation for retiree medical benefits. In particular, the Health Care Reform Acts include a provision that imposes an excise tax on certain high-cost plans beginning in 2018, whereby premiums paid over a prescribed threshold will be taxed at a 40% rate. TECO Energy does not currently believe the excise tax or other provisions of the Health Care Reform Acts will materially increase its PBO. TECO Energy will continue to monitor and assess the impact of the Health Care Reform Acts, including any clarifying regulations issued to address how the provisions are to be implemented, on its future results of operations, cash flows or financial position.

During 2012, the company received subsidy payments under Medicare Part D for its post-65 retiree prescription drug plan. In the second half of 2012, the company decided to implement an EGWP for its post-65 retiree prescription drug plan beginning Jan. 1, 2013. The EGWP is a private Medicare Part D plan designed to provide benefits that are at least equivalent to Medicare Part D. The EGWP reduces net periodic benefit cost by taking advantage of rebate and discount enhancements provided under the Health Care Reform Acts.

Obligations and Funded Status

TECO Energy recognizes in its statement of financial position the over-funded or under-funded status of its postretirement benefit plans. This status is measured as the difference between the fair value of plan assets and the PBO in the case of its defined benefit plan, or the APBO in the case of its other postretirement benefit plan. Changes in the funded status are reflected, net of estimated tax benefits, in the benefit liabilities and AOCI in the case of the unregulated companies, or the benefit liabilities and regulatory assets in the case of TEC. The results of operations are not impacted. Below is the detail of the change in benefit obligations, change in plan assets, unfunded liability and amounts recognized in the Consolidated Balance Sheets for 2012 and 2011.

Obligations and Funded Status	Pension Benefits				Other Benefits
(millions)	2012		2011		2012		2011
Change in benefit obligation
Net benefit obligation at prior measurement date (1)		$646.4		$610.3		$216.5		$222.0
Service cost		17.0		16.0		2.4		2.1
Interest cost		30.1		30.9		10.1		11.0
Plan participants’ contributions		0.0		0.0		3.7		3.9
Plan amendments (4)		0.0		0.0		(5.2)		0.0
Actuarial loss (gain)		54.7		26.8		16.3		(7.4)
Gross benefits paid		(33.2)		(35.2)		(14.5)		(16.2)
Settlements		0.0		(2.4)		0.0		0.0
Federal subsidy on benefits paid		n/a		n/a		1.0		1.1
Net benefit obligation at measurement date (1)		$715.0		$646.4		$230.3		$216.5
Change in plan assets
Fair value of plan assets at prior measurement date (1)		$467.6		$479.7		$0.0		$0.0
Actual return on plan assets (2)		57.9		21.8		0.0		0.0
Employer contributions		36.8		3.7		9.8		11.2
Plan participants’ contributions		0.0		0.0		3.7		3.9
Settlements		0.0		(2.4)		0.0		0.0
Net benefits paid		(33.2)		(35.2)		(13.5)		(15.1)
Fair value of plan assets at measurement date (1)		$529.1		$467.6		$0.0		$0.0
Funded status
Fair value of plan assets (3)		$529.1		$467.6		$0.0		$0.0
Less: Benefit obligation (PBO/APBO)		715.0		646.4		230.3		216.5
Funded status at measurement date (1)		(185.9)		(178.8)		(230.3)		(216.5)
Unrecognized net actuarial loss		270.3		251.7		42.7		25.5
Unrecognized prior service (benefit) cost		(0.7)		(1.2)		(1.0)		4.9
Unrecognized net transition obligation		0.0		0.0		0.0		1.9
Net amount required to be recognized at end of year		$83.7		$71.7		($188.6)		($184.2)
Amounts recognized in balance sheet
Regulatory assets		$216.5		$199.7		$59.6		$52.7
Accrued benefit costs and other current liabilities		(5.3)		(2.9)		(13.1)		(13.2)
Deferred credits and other liabilities		(180.6)		(175.9)		(217.2)		(203.3)
Accumulated other comprehensive loss (income) (pretax)		53.1		50.8		(17.9)		(20.4)
Net amount recognized at end of year		$83.7		$71.7		($188.6)		($184.2)

(1) The measurement dates were Dec. 31, 2012 and Dec. 31, 2011.

(2) The actual return on plan assets differed from expectations due to general market conditions.

(3) The MRV of plan assets is used as the basis for calculating the EROA component of periodic pension expense. MRV reflects the fair value of plan assets adjusted for experience gains and losses (i.e. the differences between actual investment returns and expected returns) spread over five years.

(4) TECO Energy implemented an EGWP for its post-65 retiree prescription drug plan beginning Jan. 1, 2013.

Amounts recognized in accumulated other comprehensive income

	Pension Benefits				Other Benefits
(millions)	2012		2011		2012			2011
Net actuarial loss (gain)	$	52.7	$	50.3	$	(17.2	)	$	(20.0	)
Prior service cost (credit)		0.4		0.5		(0.7	)		(0.8	)
Transition obligation		0.0		0.0		0.0			0.4
Amount recognized	$	53.1	$	50.8	$	(17.9	)	$	(20.4	)

The accumulated benefit obligation for all defined benefit pension plans was $664.7 million at Dec. 31, 2012 and $596.2 million at Dec. 31, 2011.

Assumptions used to determine benefit obligations at Dec. 31:

	Pension Benefits		Other Benefits
	2012	2011	2012	2011
Discount rate	4.196%	4.797%	4.180%	4.744%
Rate of compensation increase - weighted	3.76%	3.83%	3.74%	3.82%
Healthcare cost trend rate
Immediate rate	n/a	n/a	7.50%	7.75%
Ultimate rate	n/a	n/a	4.50%	4.50%
Year rate reaches ultimate	n/a	n/a	2025	2025

A one-percentage-point change in assumed health care cost trend rates would have the following effect on the benefit obligation:

(millions)	1% Increase		1% Decrease
Effect on postretirement benefit obligation	$	8.0	$	(7.0	)

The discount rate assumption used to determine the Dec. 31, 2012 benefit obligation was based on a cash flow matching technique developed by outside actuaries and a review of current economic conditions. This technique constructs hypothetical bond portfolios using high-quality (AA or better by S&P) corporate bonds available from the Barclays Capital database at the measurement date to meet the plan’s year-by-year projected cash flows. The technique calculates all possible bond portfolios that produce adequate cash flows to pay the yearly benefits and then selects the portfolio with the highest yield and uses that yield as the recommended discount rate.  

	Pension Benefits									Other Benefits
Net periodic benefit cost (1)
(millions)	2012			2011			2010			2012		2011		2010
Service cost	$	17.0		$	16.0		$	16.2		$	2.4	$	2.1	$	3.2
Interest cost		30.1			30.9			33.2			10.1		11.1		10.9
Expected return on plan assets		(37.1	)		(38.4	)		(36.3	)		0.0		0.0		0.0
Amortization of:
Actuarial loss		15.3			11.3			12.4			0.1		0.1		0.0
Prior service (benefit) cost		(0.4	)		(0.4	)		(0.4	)		0.8		0.8		0.8
Transition obligation		0.0			0.0			0.0			1.8		2.3		2.3
Settlement loss		0.0			0.9			1.6			0.0		0.0		0.0
Net periodic benefit cost	$	24.9		$	20.3		$	26.7		$	15.2	$	16.4	$	17.2

(1) Benefit cost was measured for the years ended Dec. 31, 2012, 2011 and 2010.

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year are $4.4 million and $0.1 million, respectively. The estimated net loss and prior service credit for the other postretirement benefit plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year are $0.2 million and $0.3 million, respectively.

In addition, the estimated net loss and prior service credit for the defined benefit pension plans that will be amortized from regulatory assets into net periodic benefit cost over the next fiscal year are $15.7 million and $0.5 million, respectively. The estimated net loss for the other postretirement benefit plan that will be amortized from regulatory asset into net periodic benefit cost over the next fiscal year will be $0.9 million.

Assumptions used to determine net periodic benefit cost for years ended Dec. 31:

	Pension Benefits			Other Benefits
	2012	2011	2010	2012	2011	2010
Discount rate	4.797%	5.300%	5.750%	4.744%	5.250%	5.600%
Expected long-term return on plan assets	7.50%	7.75%	8.25%	n/a	n/a	n/a
Rate of compensation increase	3.83%	3.88%	4.25%	3.82%	3.87%	4.25%
Healthcare cost trend rate
Initial rate	n/a	n/a	n/a	7.75%	8.00%	8.00%
Ultimate rate	n/a	n/a	n/a	4.50%	4.50%	5.00%
Year rate reaches ultimate	n/a	n/a	n/a	2025	2023	2017

The discount rate assumption used in calculating the net periodic benefit cost was based on a cash flow matching technique developed by outside actuaries and a review of current economic conditions. This technique constructs hypothetical bond portfolios using high-quality (AA or better by S&P) corporate bonds available from the Barclays Capital database at the measurement date to meet the plan’s year-by-year projected cash flows. The technique calculates all possible bond portfolios that produce adequate cash flows to pay the yearly benefits and then selects the portfolio with the highest yield and uses that yield as the recommended discount rate.

The expected return on assets assumption was based on historical returns, fixed income spreads and equity premiums consistent with the portfolio and asset allocation at the measurement date. A change in asset allocations could have a significant impact on the expected return on assets. Additionally, expectations of long-term inflation, real growth in the economy and a provision for active management and expenses paid were incorporated in the assumption. For the year ended Dec. 31, 2012, TECO Energy’s pension plan experienced actual asset returns of approximately 12.6%.

The compensation increase assumption was based on the same underlying expectation of long-term inflation together with assumptions regarding real growth in wages and company-specific merit and promotion increases.

A one-percentage-point change in assumed health care cost trend rates would have the following effect on expense:

(millions)	1% Increase		1% Decrease
Effect on periodic cost	$	0.5	$	(0.4	)

Pension Plan Assets

Pension plan assets (plan assets) are primarily invested in a mix of equity and fixed income securities. The company’s investment objective is to obtain above-average returns while minimizing volatility of expected returns and funding requirements over the long term. The company’s strategy is to hire proven managers and allocate assets to reflect a mix of investment styles, emphasize preservation of principal to minimize the impact of declining markets, and stay fully invested except for cash to meet benefit payment obligations and plan expenses.

	Target Allocation	Actual Allocation, End of Year
Asset Category		2012	2011
Equity securities	55%	55%		50%
Fixed income securities	45%	45%		50%
Total	100%	100%		100%

The company reviews the plan’s asset allocation periodically and re-balances the investment mix to maximize asset returns, optimize the matching of investment yields with the plan’s expected benefit obligations, and minimize pension cost and funding. The company expects to take additional steps to more closely match plan assets with plan liabilities.

The plan’s investments are held by a trust fund administered by JP Morgan Chase Bank, N.A. (JP Morgan). JP Morgan measures fair value using the procedures set forth below for all investments. When available, JP Morgan uses quoted market prices on investments traded on an exchange to determine fair value and classifies such items as Level 1. In some cases where a market exchange price is available, but the investments are traded in a secondary market, JP Morgan makes use of acceptable practical expedients to calculate fair value, and the company classifies these items as Level 2.

If observable transactions and other market data are not available, fair value is based upon third-party developed models that use, when available, current market-based or independently-sourced market parameters such as interest rates, currency rates or option volatilities. Items valued using third-party generated models are classified according to the lowest level input or value driver that is most significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable.

As required by the fair value accounting standards, the investments are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The plan’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. For cash equivalents, the cost approach was used in determining fair value. For bonds and U.S. government agencies, the income approach was used. For other investments, the market approach was used. The following table sets forth by level within the fair value hierarchy the plan’s investments as of Dec. 31, 2012 and Dec. 31, 2011.

Pension Plan Investments
(millions)	At Fair Value as of Dec. 31, 2012
	Level 1		Level 2		Level 3		Total
Cash		$0.0		$0.0		$0.0		$0.0
Accounts receivable		64.8		0.0		0.0		64.8
Accounts payable		(72.8)		0.0		0.0		(72.8)
Cash equivalents
Short term investment funds (STIFs)		9.0		0.0		0.0		9.0
Treasury bills (T bills)		0.0		0.6		0.0		0.6
Repurchase agreements		0.0		23.1		0.0		23.1
Certificates of deposit (CDs)		0.0		1.1		0.0		1.1
Commercial paper		0.0		0.9		0.0		0.9
Money markets		0.0		0.6		0.0		0.6
Total cash equivalents		9.0		26.3		0.0		35.3
Equity securities
Common stocks		125.3		0.0		0.0		125.3
American depository receipts (ADRs)		6.2		0.0		0.0		6.2
Real estate investment trusts (REITs)		2.0		0.0		0.0		2.0
Mutual funds		153.4		0.0		0.0		153.4
Preferred stocks		0.0		0.8		0.0		0.8
Total equity securities		286.9		0.8		0.0		287.7
Fixed income securities
Municipal bonds		0.0		8.0		0.0		8.0
Government bonds		0.0		53.0		0.0		53.0
Corporate bonds		0.0		19.8		0.0		19.8
Asset backed securities (ABS)		0.0		0.5		0.0		0.5
Mortgage backed securities (MBS)		0.0		17.6		0.0		17.6
Commercial mortgage backed securities (CMBS)		0.0		0.3		0.0		0.3
Collateralized mortgage obligations (CMOs)		0.0		2.5		0.0		2.5
Mutual fund		0.0		63.7		0.0		63.7
Commingled fund		0.0		49.4		0.0		49.4
Total fixed income securities		0.0		214.8		0.0		214.8
Derivatives
Swaps		0.0		(0.5)		0.0		(0.5)
Purchased options (swaptions)		0.0		0.1		0.0		0.1
Written options (swaptions)		0.0		(0.4)		0.0		(0.4)
Total derivatives		0.0		(0.8)		0.0		(0.8)
Miscellaneous		0.0		0.1		0.0		0.1
Total		$287.9		$241.2		$0.0		$529.1

Pension Plan Investments
(millions)	At Fair Value as of Dec. 31, 2011
	Level 1			Level 2			Level 3		Total
Cash		$4.4			$0.0			$0.0		$4.4
Accounts receivable		39.6			0.0			0.0		39.6
Accounts payable		(20.4	)		0.0			0.0		(20.4	)
Cash equivalents
STIF		13.2			0.0			0.0		13.2
T bills		0.0			4.3			0.0		4.3
Money markets		0.0			0.3			0.0		0.3
Total cash equivalents		13.2			4.6			0.0		17.8
Equity securities
Common stocks		114.2			0.0			0.0		114.2
ADRs		6.5			0.6			0.0		7.1
REITs		2.0			0.0			0.0		2.0
Mutual fund		88.3			0.0			0.0		88.3
Preferred stocks		0.0			1.0			0.0		1.0
Commingled fund		0.0			19.8			0.0		19.8
Total equity securities		211.0			21.4			0.0		232.4
Fixed income securities
Municipal bonds		0.0			8.7			0.0		8.7
Government bonds		0.0			31.7			0.0		31.7
Corporate bonds		0.0			29.5			0.0		29.5
ABS		0.0			0.5			0.0		0.5
MBS		0.0			20.0			0.0		20.0
CMO		0.0			2.5			0.0		2.5
Mutual funds		0.0			101.1			0.0		101.1
Total fixed income securities		0.0			194.0			0.0		194.0
Derivatives
Swaps		0.0			(0.3	)		0.0		(0.3	)
Written options		0.0			0.1			0.0		0.1
Total derivatives		0.0			(0.2	)		0.0		(0.2	)
Total		$247.8			$219.8			$0.0		$467.6

• The primary pricing inputs in determining the fair value of the Level 1 assets, excluding the mutual funds and STIF, are closing quoted prices in active markets.

• The STIFs are valued at NAV as determined by JP Morgan. Shares may be sold any day the fund is accepting purchase orders, at the next NAV calculated after the order is accepted. The NAV is validated with purchases and sales at NAV, making this a Level 1 asset.

• The primary pricing inputs in determining the Level 1 mutual funds are the mutual funds’ NAVs. The funds are registered open-ended mutual funds and the NAVs are validated with purchases and sales at NAV, making these Level 1 assets.

• The T bills, CDS, commercial paper, money markets, and repurchase agreements are valued at cost due to their short term nature. Additionally, repurchase agreements are backed by collateral.

• The primary pricing inputs in determining the fair value of the preferred stock is the price of comparable issues and dealer quotes.

• The primary pricing inputs in determining the fair value Level 2 municipal bonds are benchmark yields, historical spreads, sector curves, rating updates, and prepayment schedules. The primary pricing inputs in determining the fair value of government bonds are the U.S. Treasury curve, CPI, and broker quotes, if available. The primary pricing inputs in determining the fair value of corporate bonds are the U.S. Treasury curve, base spreads, YTM, and benchmark quotes. ABS and CMO are priced using TBA prices, Treasury curves, swap curves, cash flow information, and bids and offers as inputs. MBS are priced using TBA prices, Treasury curves, average lives, spreads, and cash flow information. Commercial MBS are priced using payment information and yields.

• The primary pricing input in determining the fair value of the Level 2 mutual fund is its NAV. However, since this mutual fund is an unregistered open-ended mutual fund, it is a Level 2 asset.

• The commingled fund at Dec. 31, 2012 is a private fund valued at NAV. The fund invests in long duration U.S. investment-grade fixed income assets and seeks to increase return through active management of interest rate and credit risks. The NAV is calculated based on bid prices of the underlying securities. The fund honors subscription activity on the first business day of the month and the first business day following the 15^th calendar day of the month. Redemptions are honored on the 15^th or last business day of the month, providing written notice is given at least ten business days prior to withdrawal date. The commingled fund at Dec. 31, 2011 invests primarily in international equity securities, normally excluding securities issued in the U.S., with large- and mid-market capitalizations. The fund may invest in “value” or “growth” securities and is not limited to a particular investment style. The fund is valued using the NAV, as determined by the fund’s trustee in accordance with U.S. GAAP, at year end. For redemption, written notice of the amount to be withdrawn must be given no later than 4:00 p.m. eastern standard time.

• Swaps are valued using benchmark yields, swap curves, and cash flow analyses.

• Options are valued using the bid-ask spread and the last price.

Other Postretirement Benefit Plan Assets

There are no assets associated with the company’s other postretirement benefits plan.

Contributions

The company’s policy is to fund the qualified pension plan at or above amounts determined by its actuaries to meet ERISA guidelines for minimum annual contributions and minimize PBGC premiums paid by the plan. The company made $35.5 million of contributions to this plan in 2012 and no cash contributions in 2011, which met the minimum funding requirements for both 2012 and 2011. These amounts are reflected in the “Other” line on the Consolidated Statements of Cash Flows. The company estimates its required minimum contribution in 2013 to be $15.1 million and required minimum annual contributions from 2014 to 2017 to range from $30.0 to $50.0 million per year based on current assumptions.

The SERP is funded annually to meet the benefit obligations. The company made contributions of $1.3 million and $3.7 million to this plan in 2012 and 2011, respectively. In 2013, the company expects to make a contribution of about $5.3 million to this plan.

The other postretirement benefits are funded annually to meet benefit obligations. The company’s contribution toward health care coverage for most employees who retired after the age of 55 between Jan. 1, 1990 and Jun. 30, 2001 is limited to a defined dollar benefit based on service. The company’s contribution toward pre-65 and post-65 health care coverage for most employees retiring on or after Jul. 1, 2001 is limited to a defined dollar benefit based on an age and service schedule. In 2013, the company expects to make a contribution of about $13.1 million. Postretirement benefit levels are substantially unrelated to salary.

Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Expected Benefit Payments
(including projected service and net of employee contributions)
(millions)	Pension Benefits		Other Postretirement Benefits
2013	$	50.2	$	13.1
2014		48.2		13.8
2015		50.4		14.3
2016		54.4		14.9
2017		54.7		15.3
2018-2022		296.3		80.5

Defined Contribution Plan

The company has a defined contribution savings plan covering substantially all employees of TECO Energy and its subsidiaries that enables participants to save a portion of their compensation up to the limits allowed by IRS guidelines. The company and its subsidiaries match up to 6% of the participant’s payroll savings deductions. Effective April 2010, employer matching contributions were 60% of eligible participant contributions with additional incentive match of up to 40% of eligible participant contributions based on the achievement of certain operating company financial goals. Prior to this, the employer matching contributions were 50% of eligible participant contributions, with an additional incentive match of up to 50%. For the years ended Dec. 31, 2012, 2011 and 2010, the company and its subsidiaries recognized expense totaling $7.0 million, $9.0 million and $12.6 million, respectively, related to the matching contributions made to this plan.

TAMPA ELECTRIC CO [Member]

Employee Postretirement Benefits

5. Employee Postretirement Benefits

Pension Benefits

TEC is a participant in the comprehensive retirement plans of TECO Energy, including a non-contributory defined benefit retirement plan that covers substantially all employees. Benefits are based on the employees’ age, years of service and final average earnings. Where appropriate and reasonably determinable, the portion of expenses, income, gains or losses allocable to TEC are presented. Otherwise, such amounts presented reflect the amount allocable to all participants of the TECO Energy retirement plans.

The Pension Protection Act became effective Jan. 1, 2008 and requires companies to, among other things, maintain certain defined minimum funding thresholds (or face plan benefit restrictions), pay higher premiums to the Pension Benefit Guaranty Corporation if they sponsor defined benefit plans, amend plan documents and provide additional plan disclosures in regulatory filings and to plan participants.

WRERA was signed into law on Dec. 23, 2008. WRERA grants plan sponsors relief from certain funding requirements and benefits restrictions, and also provides some technical corrections to the Pension Protection Act. There are two primary provisions that impact funding results for TECO Energy. First, for plans funded less than 100%, required shortfall contributions will be based on a percentage of the funding target until 2012, rather than the funding target of 100%. Second, one of the technical corrections, referred to as asset smoothing, allows the use of asset averaging subject to certain limitations in the determination of funding requirements. TECO Energy utilizes asset smoothing in determining funding requirements.

In July 2012, the President signed into law the MAP-21. MAP-21 provides funding relief for pension plan sponsors by stabilizing discount rates used in calculating the required minimum pension contributions and increasing PBGC premium rates to be paid by plan sponsors. The company expects the required minimum pension contributions to be lower than the levels previously projected; however, the company plans on funding at levels above the required minimum pension contributions under MAP-21.

The qualified pension plan’s actuarial value of assets, including credit balance, was 83.7% of the Pension Protection Act funded target as of Jan. 1, 2012 and is estimated at 94.4% of the Pension Protection Act funded target as of Jan. 1, 2013 due to the funding relief provided under MAP-21.

Amounts disclosed for pension benefits also include the unfunded obligations for the SERP. This is a non-qualified, non-contributory defined benefit retirement plan available to certain members of senior management.

Other Postretirement Benefits

TECO Energy and its subsidiaries currently provide certain postretirement health care and life insurance benefits for substantially all employees retiring after age 50 meeting certain service requirements. Where appropriate and reasonably determinable, the portion of expenses, income, gains or losses allocable to TEC are presented. Otherwise, such amounts presented reflect the amount allocable to all participants of the TECO Energy postretirement health care and life insurance plans. Postretirement benefit levels are substantially unrelated to salary. TECO Energy reserves the right to terminate or modify the plans in whole or in part at any time.

MMA added prescription drug coverage to Medicare, with a 28% tax-free subsidy to encourage employers to retain their prescription drug programs for retirees, along with other key provisions. TECO Energy’s current retiree medical program for those eligible for Medicare (generally over age 65) includes coverage for prescription drugs. The company has determined that prescription drug benefits available to certain Medicare-eligible participants under its defined-dollar-benefit postretirement health care plan are at least “actuarially equivalent” to the standard drug benefits that are offered under Medicare Part D. The FASB issued accounting guidance and disclosure requirements related to the MMA. The guidance requires (a) that the effects of the federal subsidy be considered an actuarial gain and recognized in the same manner as other actuarial gains and losses and (b) certain disclosures for employers that sponsor postretirement health care plans that provide prescription drug benefits.

In March 2010, the Patient Protection and Affordability Care Act and a companion bill, the Health Care and Education Reconciliation Act, collectively referred to as the Health Care Reform Acts, were signed into law. Among other things, both acts reduced the tax benefits available to an employer that receives the Medicare Part D subsidy, resulting in a write-off of any associated deferred tax asset. As a result, TEC reduced its deferred tax asset and recorded a corresponding regulatory asset in 2010. This amount was trued up in 2012. TEC is amortizing the regulatory asset over the remaining average service life of 12 years. Additionally, the Health Care Reform Acts contain other provisions that may impact TECO Energy’s obligation for retiree medical benefits. In particular, the Health Care Reform Acts include a provision that imposes an excise tax on certain high-cost plans beginning in 2018, whereby premiums paid over a prescribed threshold will be taxed at a 40% rate. TECO Energy does not currently believe the excise tax or other provisions of the Health Care Reform Acts will materially increase its PBO. TECO Energy will continue to monitor and assess the impact of the Health Care Reform Acts, including any clarifying regulations issued to address how the provisions are to be implemented, on its future results of operations, cash flows or financial position.

During 2012, the company received subsidy payments under Medicare Part D for its post-65 retiree prescription drug plan. In the second half of 2012, the company decided to implement an EGWP for its post-65 retiree prescription drug plan beginning Jan. 1, 2013. The EGWP is a private Medicare Part D plan designed to provide benefits that are at least equivalent to Medicare Part D. The EGWP reduces net periodic benefit cost by taking advantage of rebate and discount enhancements provided under the Health Care Reform Acts.

Obligations and Funded Status

TEC recognizes in its statement of financial position the over-funded or under-funded status of its postretirement benefit plans. This status is measured as the difference between the fair value of plan assets and the PBO in the case of its defined benefit plan, or the APBO in the case of its other postretirement benefit plan. Changes in the funded status are reflected, net of estimated tax benefits, in benefit liabilities and regulatory assets. The results of operations are not impacted. Below is the detail of the change in benefit obligations, change in plan assets, unfunded liability and amounts recognized in TECO Energy’s Consolidated Balance Sheets for 2012 and 2011.

TECO Energy	Pension Benefits				Other Benefits
Obligations and Funded Status
(millions)	2012		2011		2012		2011
Change in benefit obligation
Net benefit obligation at prior measurement date (1)		$646.4		$610.3		$216.5		$222.0
Service cost		17.0		16.0		2.4		2.1
Interest cost		30.1		30.9		10.1		11.0
Plan participants’ contributions		0.0		0.0		3.7		3.9
Plan amendments (4)		0.0		0.0		(5.2)		0.0
Actuarial loss (gain)		54.7		26.8		16.3		(7.4)
Gross benefits paid		(33.2)		(35.2)		(14.5)		(16.2)
Settlements		0.0		(2.4)		0.0		0.0
Federal subsidy on benefits paid		n/a		n/a		1.0		1.1
Net benefit obligation at measurement date (1)		$715.0		$646.4		$230.3		$216.5
Change in plan assets
Fair value of plan assets at prior measurement date (1)		$467.6		$479.7		$0.0		$0.0
Actual return on plan assets (2)		57.9		21.8		0.0		0.0
Employer contributions		36.8		3.7		9.8		11.2
Plan participants’ contributions		0.0		0.0		3.7		3.9
Settlements		0.0		(2.4)		0.0		0.0
Gross benefits paid		(33.2)		(35.2)		(13.5)		(15.1)
Fair value of plan assets at measurement date (1)		$529.1		$467.6		$0.0		$0.0
Funded status
Fair value of plan assets (3)		$529.1		$467.6		$0.0		$0.0
Less: Benefit obligation (PBO/APBO)		715.0		646.4		230.3		216.5
Funded status at measurement date (1)		(185.9)		(178.8)		(230.3)		(216.5)
Unrecognized net actuarial loss		270.3		251.7		42.7		25.5
Unrecognized prior service (benefit) cost		(0.7)		(1.2)		(1.0)		4.9
Unrecognized net transition obligation		0.0		0.0		0.0		1.9
Net amount required to be recognized at end of year		$83.7		$71.7		($188.6)		($184.2)
Amounts recognized in balance sheet
Regulatory assets		$216.5		$199.7		$59.6		$52.7
Accrued benefit costs and other current liabilities		(5.3)		(2.9)		(13.1)		(13.2)
Deferred credits and other liabilities		(180.6)		(175.9)		(217.2)		(203.3)
Accumulated other comprehensive loss (income) (pretax)		53.1		50.8		(17.9)		(20.4)
Net amount recognized at end of year		$83.7		$71.7		($188.6)		($184.2)

(1) The measurement dates were Dec. 31, 2012 and Dec. 31, 2011.

(2) The actual return on plan assets differed from expectations due to general market conditions.

(3) The MRV of plan assets is used as the basis for calculating the EROA component of periodic pension expense. MRV reflects the fair value of plan assets adjusted for experience gains and losses (i.e. the differences between actual investment returns and expected returns) spread over five years.

(4) TECO Energy implemented an EGWP for its post-65 retiree prescription drug plan beginning Jan. 1, 2013.

Tampa Electric Company	Pension Benefits				Other Benefits
Amounts recognized in balance sheet
(millions)	2012		2011		2012		2011
Regulatory assets	$	216.5	$	199.7	$	59.6	$	52.7
Accrued benefit costs and other current liabilities		(0.9)		(1.0)		(10.6)		(10.6)
Deferred credits and other liabilities		(139.8)		(133.2)		(174.2)		(163.6)
	$	75.8	$	65.5	$	(125.2)	$	(121.5)

The accumulated benefit obligation for TECO Energy Consolidated defined benefit pension plans was $664.7 million at Dec. 31, 2012 and $596.2 million at Dec. 31, 2011.

Assumptions used to determine benefit obligations at Dec. 31:

	Pension Benefits		Other Benefits
	2012	2011	2012		2011
Discount rate	4.196%	4.797%		4.180%		4.744%
Rate of compensation increase-weighted average	3.76%	3.83%		3.74%		3.82%
Healthcare cost trend rate
Immediate rate	n/a	n/a		7.50%		7.75%
Ultimate rate	n/a	n/a		4.50%		4.50%
Year rate reaches ultimate	n/a	n/a		2025		2025

A one-percentage-point change in assumed health care cost trend rates would have the following effect on TEC’s benefit obligation:

(millions)	1% Increase		1 % Decrease
Effect on postretirement benefit obligation	$	6.5	$	(5.7)

The discount rate assumption used to determine the Dec. 31, 2012 benefit obligation was based on a cash flow matching technique developed by outside actuaries and a review of current economic conditions. This technique constructs hypothetical bond portfolios using high-quality (AA or better by S&P) corporate bonds available from the Barclays Capital database at the measurement date to meet the plan’s year-by-year projected cash flows. The technique calculates all possible bond portfolios that produce adequate cash flows to pay the yearly benefits and then selects the portfolio with the highest yield and uses that yield as the recommended discount rate.

Components of TECO Energy Consolidated net periodic benefit cost ⁽¹⁾

	Pension Benefits									Other Benefits
(millions)	2012			2011			2010			2012		2011		2010
Service cost	$	17.0		$	16.0		$	16.2		$	2.4	$	2.1	$	3.2
Interest cost		30.1			30.9			33.2			10.1		11.1		10.9
Expected return on plan assets		(37.1	)		(38.4	)		(36.3	)		0.0		0.0		0.0
Amortization of:
Actuarial loss		15.3			11.3			12.4			0.1		0.1		0.0
Prior service (benefit) cost		(0.4	)		(0.4	)		(0.4	)		0.8		0.8		0.8
Transition obligation		0.0			0.0			0.0			1.8		2.3		2.3
Curtailment loss (benefit)		0.0			0.0			0.0			0.0		0.0		0.0
Settlement loss		0.0			0.9			1.6			0.0		0.0		0.0
Net periodic benefit cost	$	24.9		$	20.3		$	26.7		$	15.2	$	16.4	$	17.2

(1) Benefit cost was measured for the years ended Dec. 31, 2012, 2011 and 2010.

TEC’s portion of the net periodic benefit costs for pension benefits was $18.3 million, $13.1 million and $18.6 million for 2012, 2011 and 2010, respectively. TEC’s portion of the net periodic benefit costs for other benefits was $12.4 million, $10.0 million and $13.8 million for 2012, 2011 and 2010, respectively.

The estimated net loss and prior service credit for the defined benefit pension plans that will be amortized by TEC from regulatory assets into net periodic benefit cost over the next fiscal year are $15.7 million and $0.5 million. The estimated net loss for the other postretirement benefit plan that will be amortized from regulatory asset into net periodic benefit cost over the next fiscal year totals $0.9 million.

Assumptions used to determine net periodic benefit cost for years ended Dec. 31:

	Pension Benefits						Other Benefits
	2012		2011		2010		2012		2011		2010
Discount rate		4.797%		5.30%		5.75%		4.744%		5.25%		5.60%
Expected long-term return on plan assets		7.50%		7.75%		8.25%		n/a		n/a		n/a
Rate of compensation increase		3.83%		3.88%		4.25%		3.82%		3.87%		4.25%
Healthcare cost trend rate
Immediate rate		n/a		n/a		n/a		7.75%		8.00%		8.00%
Ultimate rate		n/a		n/a		n/a		4.50%		4.50%		5.00%
Year rate reaches ultimate		n/a		n/a		n/a		2025		2023		2017

The discount rate assumption was based on a cash flow matching technique developed by outside actuaries and a review of current economic conditions. This technique constructs hypothetical bond portfolios using high-quality (AA or better by S&P) corporate bonds available from the Barclays Capital database at the measurement date to meet the plan’s year-by-year projected cash flows. The technique calculates all possible bond portfolios that produce adequate cash flows to pay the yearly benefits and then selects the portfolio with the highest yield and uses that yield as the recommended discount rate.

The expected return on assets assumption was based on historical returns, fixed income spreads and equity premiums consistent with the portfolio and asset allocation. A change in asset allocations could have a significant impact on the expected return on assets. Additionally, expectations of long-term inflation, real growth in the economy and a provision for active management and expenses paid were incorporated in the assumption. For the year ended Dec. 31, 2012, TECO Energy’s pension plan experienced actual asset returns of approximately 12.64%.

The compensation increase assumption was based on the same underlying expectation of long-term inflation together with assumptions regarding real growth in wages and company-specific merit and promotion increases.

A one-percentage-point change in assumed health care cost trend rates would have the following effect on TEC’s expense:

(millions)	1% Increase		1% Decrease
Effect on periodic cost	$	0.4	$	(0.3	)

Pension Plan Assets

Pension plan assets (plan assets) are invested in a mix of equity and fixed income securities. TECO Energy’s investment objective is to obtain above-average returns while minimizing volatility of expected returns and funding requirements over the long term. TECO Energy’s strategy is to hire proven managers and allocate assets to reflect a mix of investment styles, emphasize preservation of principal to minimize the impact of declining markets, and stay fully invested except for cash to meet benefit payment obligations and plan expenses.

	Target Allocation	Actual Allocation, End of Year
Asset Category		2012	2011
Equity securities	55%	55%		50%
Fixed income securities	45%	45%		50%
Total	100%	100%		100%

TECO Energy reviews the plan’s asset allocation periodically and re-balances the investment mix to maximize asset returns, optimize the matching of investment yields with the plan’s expected benefit obligations, and minimize pension cost and funding. TECO Energy, Inc. expects to take additional steps to more closely match plan assets with plan liabilities.

The plan’s investments are held by a trust fund administered by JP Morgan Chase Bank, N.A. (JP Morgan). JP Morgan measures fair value using the procedures set forth below for all investments. When available, JP Morgan uses quoted market prices on investments traded on an exchange to determine fair value and classifies such items as Level 1. In some cases where a market exchange price is available, but the investments are traded in a secondary market, JP Morgan makes use of acceptable practical expedients to calculate fair value, and the company classifies these items as Level 2.

If observable transactions and other market data are not available, fair value is based upon third-party developed models that use, when available, current market-based or independently-sourced market parameters such as interest rates, currency rates or option volatilities. Items valued using third-party generated models are classified according to the lowest level input or value driver that is most significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable.

As required by the fair value accounting standards, the investments are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The plan’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. For cash equivalents, the cost approach was used in determining fair value. For bonds and U.S. government agencies, the income approach was used. For other investments, the market approach was used. The following table sets forth by level within the fair value hierarchy the plan’s investments as of Dec. 31, 2012 and 2011.

Pension Plan Investments
(millions)	At Fair Value as of Dec. 31, 2012
	Level 1		Level 2		Level 3		Total
Cash		$0.0		$0.0		$0.0		$0.0
Accounts receivable		64.8		0.0		0.0		64.8
Accounts payable		(72.8)		0.0		0.0		(72.8)
Cash equivalents
Short term investment funds (STIFs)		9.0		0.0		0.0		9.0
Treasury bills (T bills)		0.0		0.6		0.0		0.6
Repurchase agreements		0.0		23.1		0.0		23.1
Certificates of deposit (CDs)		0.0		1.1		0.0		1.1
Commercial paper		0.0		0.9		0.0		0.9
Money markets		0.0		0.6		0.0		0.6
Total cash equivalents		9.0		26.3		0.0		35.3
Equity securities
Common stocks		125.3		0.0		0.0		125.3
American depository receipts (ADRs)		6.2		0.0		0.0		6.2
Real estate investment trusts (REITs)		2.0		0.0		0.0		2.0
Mutual funds		153.4		0.0		0.0		153.4
Preferred stocks		0.0		0.8		0.0		0.8
Total equity securities		286.9		0.8		0.0		287.7
Fixed income securities
Municipal bonds		0.0		8.0		0.0		8.0
Government bonds		0.0		53.0		0.0		53.0
Corporate bonds		0.0		19.8		0.0		19.8
Asset backed securities (ABS)		0.0		0.5		0.0		0.5
Mortgage backed securities (MBS)		0.0		17.6		0.0		17.6
Commercial mortgage backed securities (CMBS)		0.0		0.3		0.0		0.3
Collateralized mortgage obligations (CMOs)		0.0		2.5		0.0		2.5
Mutual fund		0.0		63.7		0.0		63.7
Commingled fund		0.0		49.4		0.0		49.4
Total fixed income securities		0.0		214.8		0.0		214.8
Derivatives
Swaps		0.0		(0.5)		0.0		(0.5)
Purchased options (swaptions)		0.0		0.1		0.0		0.1
Written options (swaptions)		0.0		(0.4)		0.0		(0.4)
Total derivatives		0.0		(0.8)		0.0		(0.8)
Miscellaneous		0.0		0.1		0.0		0.1
Total		$287.9		$241.2		$0.0		$529.1

Pension Plan Investments
(millions)	At Fair Value as of Dec. 31, 2011
	Level 1		Level 2		Level 3		Total
Cash		$4.4		$0.0		$0.0		$4.4
Accounts receivable		39.6		0.0		0.0		39.6
Accounts payable		(20.4)		0.0		0.0		(20.4)
Cash equivalents
Short term investment fund (STIF)		13.2		0.0		0.0		13.2
Treasury bills (T bills)		0.0		4.3		0.0		4.3
Money markets		0.0		0.3		0.0		0.3
Total cash equivalents		13.2		4.6		0.0		17.8
Equity securities
Common stocks		114.2		0.0		0.0		114.2
American depository receipt (ADR)		6.5		0.6		0.0		7.1
Real estate investment trust (REIT)		2.0		0.0		0.0		2.0
Mutual fund		88.3		0.0		0.0		88.3
Preferred stocks		0.0		1.0		0.0		1.0
Commingled fund		0.0		19.8		0.0		19.8
Total equity securities		211.0		21.4		0.0		232.4
Fixed income securities
Municipal bonds		0.0		8.7		0.0		8.7
Government bonds		0.0		31.7		0.0		31.7
Corporate bonds		0.0		29.5		0.0		29.5
Asset backed securities (ABS)		0.0		0.5		0.0		0.5
Mortgage back securities (MBS)		0.0		20.0		0.0		20.0
CMO		0.0		2.5		0.0		2.5
Mutual funds		0.0		101.1		0.0		101.1
Total fixed income securities		0.0		194.0		0.0		194.0
Derivatives
Swaps		0.0		(0.3)		0.0		(0.3)
Written options		0.0		0.1		0.0		0.1
Total derivatives		0.0		(0.2)		0.0		(0.2)
Total		$247.8		$219.8		$0.0		$467.6

• The primary pricing inputs in determining the fair value of the Level 1 assets, excluding the mutual funds and STIF, are closing quoted prices in active markets.

• The STIFs are valued at net asset value (NAV) as determined by JP Morgan. Shares may be sold any day the fund is accepting purchase orders, at the next NAV calculated after the order is accepted. The NAV is validated with purchases and sales at NAV, making this a Level 1 asset.

• The primary pricing inputs in determining the Level 1 mutual funds are the mutual funds’ NAVs. The funds are registered open-ended mutual funds and the NAVs are validated with purchases and sales at NAV, making these Level 1 assets.

• The T bills, CDs, commercial paper, money markets, and repurchase agreements are valued at cost due to their short term nature. Additionally, repurchase agreements are backed by collateral.

• The primary pricing inputs in determining the fair value of the preferred stock is the price of comparable issues and dealer quotes.

• The primary pricing inputs in determining the fair value Level 2 municipal bonds are benchmark yields, historical spreads, sector curves, rating updates, and prepayment schedules. The primary pricing inputs in determining the fair value of government bonds are the U.S. Treasury curve, CPI, and broker quotes, if available. The primary pricing inputs in determining the fair value of corporate bonds are the U.S. Treasury curve, base spreads, YTM, and benchmark quotes. Asset backed securities (ABS) and collateralized mortgage obligations (CMO) are priced using TBA prices, Treasury curves, swap curves, cash flow information, and bids and offers as inputs. Mortgage backed securities (MBS) are priced using TBA prices, Treasury curves, average lives, spreads, and cash flow information. Commercial MBS are priced using payment information and yields.

• The primary pricing input in determining the fair value of the Level 2 mutual fund is its NAV. However, since this mutual fund is an unregistered open-ended mutual fund, it is a Level 2 asset.

• The commingled fund at Dec. 31, 2012 is a private fund valued at NAV. The fund invests in long duration U.S. investment-grade fixed income assets and seeks to increase return through active management of interest rate and credit risks. The NAV is calculated based on bid prices of the underlying securities. The fund honors subscription activity on the first business day of the month and the first business day following the 15^th calendar day of the month. Redemptions are honored on the 15^th or last business day of the month, providing written notice is given at least ten business days prior to withdrawal date. The commingled fund at Dec. 31, 2011 invests primarily in international equity securities, normally excluding securities issued in the U.S., with large- and mid-market capitalizations. The fund may invest in “value” or “growth” securities and is not limited to a particular investment style. The fund is valued using the NAV, as determined by the fund’s trustee in accordance with U.S. GAAP, at year end. For redemption, written notice of the amount to be withdrawn must be given no later than 4:00 p.m. eastern standard time.

• Swaps are valued using benchmark yields, swap curves, and cash flow analyses.

• Options are valued using the bid-ask spread and the last price.

Other Postretirement Benefit Plan Assets

There are no assets associated with TECO Energy’s other postretirement benefits plan.

Contributions

TECO Energy’s policy is to fund the qualified pension plan at or above amounts determined by its actuaries to meet ERISA guidelines for minimum annual contributions and minimize PBGC premiums paid by the plan. TECO Energy made $35.5 million of contributions to this plan in 2012 and no cash contributions in 2011, which met the minimum funding requirements for both 2012 and 2011. TEC’s portion of the contribution in 2012 was $27.9 million. These amounts are reflected in the “Other” line on the Consolidated Statements of Cash Flows. TECO Energy estimates its required minimum contribution in 2013 to be $15.1 million, with TEC’s portion being $11.8 million. TECO Energy estimates annual required minimum contributions from 2014 to 2017 to range from $30.0 to $50.0 million per year based on current assumptions, with TEC’s portion to range from $20 million to $40 million.

The SERP is funded annually to meet the benefit obligations. TECO Energy made contributions of $1.3 million and $3.7 million to this plan in 2012 and 2011, respectively. TEC’s portion of the contributions in 2012 and 2011 were $0.6 million and $1.0 million, respectively. In 2013, TECO Energy expects to make a contribution of about $5.3 million to this plan. TEC’s portion of the expected contribution is about $0.9 million.

The other postretirement benefits are funded annually to meet benefit obligations. TECO Energy’s contribution toward health care coverage for most employees who retired after the age of 55 between Jan. 1, 1990 and Jun. 30, 2001 is limited to a defined dollar benefit based on service. TECO Energy’s contribution toward pre-65 and post-65 health care coverage for most employees retiring on or after Jul. 1, 2001 is limited to a defined dollar benefit based on an age and service schedule. In 2013, TECO Energy expects to make a contribution of about $13.1 million. TEC’s portion of the expected contribution is $10.6 million. Postretirement benefit levels are substantially unrelated to salary.

Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Expected Benefit Payments - TECO Energy
(including projected service and net of employee contributions)
(millions)	Pension Benefits		Other Postretirement Benefits
2013	$	50.2	$	13.1
2014		48.2		13.8
2015		50.4		14.3
2016		54.4		14.9
2017		54.7		15.3
2018-2022		296.3		80.5

Defined Contribution Plan

TECO Energy has a defined contribution savings plan covering substantially all employees of TECO Energy and its subsidiaries that enables participants to save a portion of their compensation up to the limits allowed by IRS guidelines. TECO Energy and its subsidiaries match up to 6% of the participant’s payroll savings deductions. Employer matching contributions are 60% of eligible participant contributions with additional incentive match of up to 40% of eligible participant contributions based on the achievement of certain operating company financial goals. For the years ended Dec. 31, 2012, 2011 and 2010, TECO Energy and its subsidiaries recognized expense totaling $7.0 million, $9.0 million and $12.6 million, respectively, related to the matching contributions made to this plan. TEC’s portion of expense totaled $6.0 million, $5.8 million and $8.8 million for 2012, 2011 and 2010, respectively.