OG&E 2009 Annual Report Download - page 84

OGE Energy’s and the Company’s ability to access the commercial paper market could be adversely impacted by a credit
ratings downgrade or major market disruptions. Pricing grids associated with the back-up lines of credit could cause annual fees and
borrowing rates to increase if an adverse ratings impact occurs. The impact of any future downgrades of the ratings of OGE Energy or
the Company would result in an increase in the cost of short-term borrowings but would not result in any defaults or accelerations as a
result of the rating changes. Any future downgrade of the Company would also lead to higher long-term borrowing costs and, if below
investment grade, would require the Company to post cash collateral or letters of credit.
Unlike OGE Energy, the Company must obtain regulatory approval from the FERC in order to borrow on a short-term
basis. The Company has the necessary regulatory approvals to incur up to $800 million in short-term borrowings at any one time for a
two-year period beginning January 1, 2009 and ending December 31, 2010.
11. Retirement Plans and Postretirement Benefit Plans
In December 2008, the FASB issued “Employer’s Disclosures about Postretirement Benefit Plan Assets,” which amends
previously issued accounting guidance in this area. The new standard requires additional disclosures related to: (i) investment policies
and strategies, (ii) categories of plan assets, (iii) fair value measurement of plan assets and (iv) significant concentrations of risk. The
Company adopted this new standard effective December 31, 2009 and has presented the additional disclosures below.
Defined Benefit Pension Plan
In October 2009, OGE Energy’s qualified defined benefit retirement plan (“Pension Plan”) and OGE Energy’s qualified
defined contribution retirement plan (“401(k) Plan”) were amended, effective December 31, 2009, to offer a one-time irrevocable
election (the “Choice Program”) for eligible employees, depending on their hire date, to select a future retirement benefit combination
from OGE Energy’s Pension Plan and OGE Energy’s 401(k) Plan. Eligible employees hired before February 1, 2000, were allowed to
select one of three options as the future retirement benefit combination and eligible employees hired on or after February 1, 2000, and
before December 1, 2009, were allowed to select from two options as the future retirement benefit combination as discussed below.
Eligible employees hired before February 1, 2000, were allowed to select one of following three options as the future
retirement benefit combination:
Option 1: Stay or participate in the current Pension Plan where employees will receive the greater of the cash balance benefit
discussed below under Option 1 for employees hired after February 1, 2000 or a benefit based primarily on years of credited
service and the average of the five highest consecutive years of compensation during an employee’s last 10 years prior to
retirement, with reductions in benefits for each year prior to age 62 unless the employee’s age and years of credited service
equal or exceed 80. Social Security benefits are deducted in determining benefits payable under the Pension Plan. Also, as
part of Option 1, employees will stay in their current 401(k) Plan matching contribution formula where, for each pay period
beginning on or after January 1, 2010, OGE Energy contributes to the 401(k) Plan, on behalf of each participant, 50 percent
of the participant’s contributions up to six percent of compensation for participants who have less than 20 years of service (as
defined in the 401(k) Plan) and 75 percent of the participant’s contributions up to six percent of compensation for participants
who have 20 or more years of service.
Option 2: Freeze the current monthly income benefit under the Pension Plan at December 31, 2009, and, for each pay period
beginning on or after January 1, 2010, OGE Energy will also contribute to the 401(k) Plan, on behalf of each participant, 200
percent of the participant’s contributions up to five percent of compensation.
Option 3: Freeze and convert the current Pension Plan benefit at December 31, 2009, which will be based on the lump-sum
value of the participant’s benefit at December 31, 2009, determined as if the participant had terminated employment and
commenced benefit payments on that date, to a stable value account balance which will only accrue annual interest credits in
the future, and, for each pay period beginning on or after January 1, 2010, OGE Energy will also contribute to the 401(k)
Plan, on behalf of each participant, 100 percent of the contributions up to six percent of compensation.
Eligible employees hired on or after February 1, 2000, and before December 1, 2009, were allowed to select from the
following two options as the future retirement benefit combination:
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