OG&E 2011 Annual Report Download - page 79

The capitalized portion of the net periodic pension benefit cost
was $6.1 million, $6.5 million and $8.4 million at December 31, 2011,
2010 and 2009, respectively. The capitalized portion of the net periodic
postretirement benefit cost was $3.8 million, $6.5 million and $4.1 mil-
lion at December 31, 2011, 2010 and 2009, respectively.
OGE Energy Corp. 77
Rate Assumptions
Pension Plan and
Restoration of Postretirement
Retirement Income Plan Benefit Plans
(Year ended December 31) 2011 2010 2009 2011 2010 2009
Discount rate 4.50% 5.30% 5.30% 4.50% 5.30% 6.00%
Rate of return on plans’ assets 8.00% 8.50% 8.50% 6.50% 8.50% 8.50%
Compensation increases 4.40% 4.40% 4.50% N/A N/A N/A
Assumed health care cost trend:
Initial trend N/A N/A N/A 8.75% 8.99% 9.49%
Ultimate trend rate N/A N/A N/A 4.48% 5.00% 5.00%
Ultimate trend year N/A N/A N/A 2028 2020 2018
N/A – not applicable
The overall expected rate of return on plan assets assumption
decreased from 8.50 percent in 2010 to 8.00 percent in 2011 in deter-
mining net periodic benefit cost due to recent returns on the Company’s
long-term investment portfolio. The rate of return on plan assets assump-
tion is the average long-term rate of earnings expected on the funds
currently invested and to be invested for the purpose of providing benefits
specified by the Pension Plan or postretirement benefit plans. This
assumption is reexamined at least annually and updated as necessary.
The rate of return on plan assets assumption reflects a combination of
historical return analysis, forward-looking return expectations and the
plans’ current and expected asset allocation.
Post-Employment Benefit Plan
Disabled employees receiving benefits from the Company’s Group Long-
Term Disability Plan are entitled to continue participating in the Company’s
Medical Plan along with their dependents. The post-employment benefit
obligation represents the actuarial present value of estimated future
medical benefits that are attributed to employee service rendered prior
to the date as of which such information is presented. The obligation
also includes future medical benefits expected to be paid to current
employees participating in the Company’s Group Long-Term Disability
Plan and their dependents, as defined in the Company’s Medical Plan.
The post-employment benefit obligation is determined by an actuary
on a basis similar to the accumulated postretirement benefit obligation.
The estimated future medical benefits are projected to grow with expected
future medical cost trend rates and are discounted for interest at the
discount rate and for the probability that the participant will discontinue
receiving benefits from the Company’s Group Long-Term Disability Plan
due to death, recovery from disability, or eligibility for retiree medical
benefits. The Company’s post-employment benefit obligation was $2.4 mil-
lion and $2.1 million at December 31, 2011 and 2010, respectively.
401(k) Plan
The Company provides a 401(k) Plan. Each regular full-time employee
of the Company or a participating affiliate is eligible to participate in
the 401(k) Plan immediately. All other employees of the Company or
a participating affiliate are eligible to become participants in the 401(k)
Plan after completing one year of service as defined in the 401(k) Plan.
Participants may contribute each pay period any whole percentage
between two percent and 19 percent of their compensation, as defined
in the 401(k) Plan, for that pay period. Participants who have attained
age 50 before the close of a year are allowed to make additional contribu-
tions referred to as "Catch-Up Contributions," subject to the limitations
of the Code. The 401(k) Plan also allows an eligible automatic contribution
arrangement and provides for a qualified default investment alternative
consistent with the U.S. Department of Labor regulations. Participants
may elect, in accordance with the 401(k) Plan procedures, to have his
or her salary deferral rate to be made in the future automatically increased
annually on a date and in an amount as specified by the participant in
such election. The 401(k) Plan was amended in October 2009, as dis-
cussed previously, whereby employees were offered a choice to either
stay in the 401(k) Plan (prior to it being amended) where the Company
matching contributions are discussed below or select an option whereby,
effective January 1, 2010, the Company contributes on behalf of each
participant, depending on the option selected, 200 percent of the partici-
pant’s contributions up to five percent of compensation or 100 percent
of the participant’s contributions up to six percent of compensation. In
the 401(k) Plan (prior to it being amended), the Company contributes to
the 401(k) Plan each pay period, on behalf of each participant, an amount
equal to 50 percent of the participant’s contributions up to six percent
of compensation for participants whose employment or re-employment
date occurred before February 1, 2000 and who have less than 20 years
of service, as defined in the 401(k) Plan, and an amount equal to 75 per-
cent of the participant’s contributions up to six percent of compensation