OG&E 2011 Annual Report Download - page 78

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76 OGE Energy Corp.
Early Retiree Reinsurance Program
The Patient Protection and Affordable Care Act of 2010 authorized a
temporary reinsurance program to pay certain employment-based group
health plans up to 80 percent of each early retiree’s annual claims cost
between $15,000 and $90,000. The program will end by the earlier of
January 1, 2014 or when the limited $5 billion in funding runs out. The
Company received $0.7 million in Federal subsidy receipts in 2011. The
Company’s reimbursement proceeds are excluded from gross income and
were used to reduce the health benefit costs for the plan and to reduce
premium contributions for the plan participants. The Company does not
expect to receive any additional benefits provided by this program.
Obligations and Funded Status
The following table presents the status of the Company’s Pension Plan,
the Restoration of Retirement Income Plan and the postretirement ben-
efit plans for 2011 and 2010. The benefit obligation for the Company’s
Pension Plan and the Restoration of Retirement Income Plan represents
the projected benefit obligation, while the benefit obligation for the
postretirement benefit plans represents the accumulated postretirement
benefit obligation. The accumulated postretirement benefit obligation
for the Company’s Pension Plan and Restoration of Retirement Income
Plan differs from the projected benefit obligation in that the former
includes no assumption about future compensation levels. The accu-
mulated postretirement benefit obligation for the Pension Plan and the
Restoration of Retirement Income Plan at December 31, 2011 was
$656.1 million and $11.9 million, respectively. The accumulated postre-
tirement benefit obligation for the Pension Plan and the Restoration of
Retirement Income Plan at December 31, 2010 was $601.4 million and
$8.7 million, respectively. The details of the funded status of the Pension
Plan, the Restoration of Retirement Income Plan and the postretirement
benefit plans and the amounts included in the Consolidated Balance
Sheets are as follows:
Restoration of Postretirement
Pension Plan Retirement Income Plan Benefit Plans
(In millions, December 31) 2011 2010 2011 2010 2011 2010
Change in benefit obligation
Beginning obligations $(640.9) $(610.9) $(10.8) $÷(8.3) $(337.1) $(288.0)
Service cost (17.6) (16.7) (1.0) (0.9) (3.5) (4.3)
Interest cost (33.3) (31.8) (0.6) (0.5) 12.5 (17.0)
Plan amendments ––––91.4 –
Participants’ contributions ––––(8.1) (7.3)
Medicare subsidies received ––––(2.0) (1.4)
Actuarial gains (losses) (48.3) (15.9) (1.0) (1.5) (25.7) (36.6)
Benefits paid 42.4 34.4 0.1 0.4 16.9 17.5
Ending obligations $(697.7) $(640.9) $(13.3) $(10.8) $(280.6) $(337.1)
Change in plans’ assets
Beginning fair value $«574.0 $«496.3 $÷÷÷– $÷÷÷– $÷«58.5 $÷«55.0
Actual return on plans’ assets 8.2 62.1 ––2.7 5.2
Employer contributions 50.0 50.0 0.1 0.4 6.6 7.1
Participants’ contributions ––––8.1 7.3
Medicare subsidies received ––––2.0 1.4
Benefits paid (42.4) (34.4) (0.1) (0.4) (16.9) (17.5)
Ending fair value 589.8 574.0 ––61.0 58.5
Funded status at end of year $(107.9) $÷(66.9) $(13.3) $(10.8) $(219.6) $(278.6)
Net Periodic Benefit Cost
Restoration of Postretirement
Pension Plan Retirement Income Plan Benefit Plans
(In millions, year ended December 31) 2011 2010 2009 2011 2010 2009 2011 2010 2009
Service cost $17.6 $«16.7 $«18.1 $1.0 $0.9 $0.7 $÷«3.5 $÷4.3 $÷3.3
Interest cost 33.3 31.8 31.4 0.6 0.5 0.4 12.5 17.0 14.1
Expected return on plan assets (45.5) (42.4) (33.0) –––(5.1) (6.9) (6.5))
Amortization of transition obligation ––– –––2.7 2.7 2.7
Amortization of net loss 19.2 21.3 23.5 0.4 0.3 0.3 18.3 12.1 5.0
Amortization of unrecognized
prior service cost(A) 2.4 2.4 0.8 0.7 0.7 0.6 (16.5) –1.0
Net periodic benefit cost(B) $27.0 $«29.8 $«40.8 $2.7 $2.4 $2.0 $«15.4 $29.2 $19.6
(A) Unamortized prior service cost is amortized on a straight-line basis over the average remaining service period to the first eligibility age of participants who are expected to receive a benefit and are
active at the date of the plan amendment.
(B) In addition to the $45.1 million, $61.4 million and $62.4 million of net periodic benefit cost recognized in 2011, 2010 and 2009, respectively, the Company recognized the following:
• An increase in pension expense in 2011 and 2010 of $10.8 million and $8.1 million, respectively, and a reduction in pension expense in 2009 of $2.2 million to maintain the allowable amount to be
recovered for pension expense in the Oklahoma jurisdiction which are included in the Pension tracker regulatory liability (see Note 1);
• A reduction in pension expense in 2009 of $3.2 million in the Arkansas jurisdiction to reflect the approval of recovery of OG&E’s 2006 and 2007 pension settlement costs in the May 2009 Arkansas
rate order which are included in the Pension tracker regulatory liability) (see Note 1); and
• An increase in postretirement medical expense in 2011 of $3.5 million to maintain the allowable amount to be recovered for postretirement medical expense in the Oklahoma jurisdiction which are
included in the Pension tracker regulatory liability (see Note 1).