Vectren 2013 Annual Report Download - page 93

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91
Health care cost trend rate assumptions do not have a material effect on the service and interest cost components of benefit
costs. The Company’s plans limit its exposure to increases in health care costs to annual changes in the Consumer Price Index
(CPI). Any increase in health care costs in excess of the CPI increase is the responsibility of the plan participants.
Benefit Obligations
A reconciliation of the Company’s benefit obligations at December 31, 2013 and 2012 follows:
Pension Benefits Other Benefits
(In millions) 2013 2012 2013 2012
Benefit obligation, beginning of period $ 377.3 $ 329.2 $ 54.4 $ 79.7
Service cost – benefits earned during the period 8.6 7.7 0.5 0.5
Interest cost on projected benefit obligation 14.7 15.5 2.0 2.8
Plan participants' contributions — — 0.8 1.6
Plan amendments — 0.7 (0.2) (26.6)
Actuarial loss (gain) (32.7) 39.0 (2.4) 2.8
Settlement loss (gain) 1.5 — — —
Medicare subsidy receipts — — — 0.5
Benefit payments (22.8) (14.8) (3.8) (6.9)
Settlement payments (8.2) — — —
Benefit obligation, end of period $ 338.4 $ 377.3 $ 51.3 $ 54.4
The accumulated benefit obligation for all defined benefit pension plans was $321.9 million and $354.5 million at December 31,
2013 and 2012, respectively.
Postretirement Benefit Change
Effective September 1, 2012, the Company no longer offers postretirement health coverage for participants 65 and older.
Rather, the Company provides a subsidy to plan participants to purchase health coverage through a private Medicare exchange.
This change in benefits provides a comparable benefit at a reduced cost made possible by current market pricing. Since this
change in benefits was a significant event pursuant to GAAP, the Company remeasured its postretirement benefit obligations as
of June 1, 2012, consistent with the notification date to participants. The change in benefits, net of the impacts associated with
remeasuring the benefit obligations using a lower discount rate, resulted in a $23 million reduction in the postretirement liability.
Substantially all of the amount was recorded as a reduction to Regulatory Assets, as the Company's retirement costs primarily
relate to its regulated utilities. The discount rate used to remeasure the postretirement benefit obligation was 3.93 percent.
The benefit obligation as of December 31, 2013 and 2012 was calculated using the following weighted average assumptions:
Pension Benefits Other Benefits
2013 2012 2013 2012
Discount rate 4.74% 4.03% 4.66% 3.91%
Rate of compensation increase 3.50% 3.50% N/A N/A
Expected increase in Consumer Price Index N/A N/A 2.75% 2.75%
To calculate the 2013 ending postretirement benefit obligation, medical claims costs in 2014 were assumed to be 7 percent
higher than those incurred in 2013. That trend was assumed to reach its ultimate trending increase of 5 percent by 2018 and
remain level thereafter. A one-percentage point change in assumed health care cost trend rates would have changed the
benefit obligation by approximately $0.4 million.