OG&E 2010 Annual Report Download - page 82

(A) This category primarily represents U.S. corporate bonds with an investment grade rating at or above Baa3 or BBB- by Moody’s,
Standard & Poor’s or Fitch.
(B) This category represents U.S. treasury notes and bonds with a Moody’s rating of Aaa and Government Agency Bonds with a
Moody’s rating of A1 or higher.
(C) This category represents units of participation in a certain commingled fund that primarily invest in stocks and bonds of U.S.
companies.
(D) This category represents units of participation in an investment pool which primarily invests in commercial paper, repurchase
agreements and U.S. treasury notes and bonds and certificates of deposit.
The three levels defined in the fair value hierarchy are as follows:
Level 1 inputs are quoted prices in active markets for identical unrestricted assets or liabilities that are accessible by the
Pension Plan and postretirement benefit plans at the measurement date.
Level 2 inputs are inputs other than quoted prices in active markets included within Level 1 that are either directly or
indirectly observable at the reporting date for the asset or liability for substantially the full term of the asset or liability. Level 2 inputs
include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in
markets that are not active.
Level 3 inputs are prices or valuation techniques for the asset or liability that require inputs that are both significant to the
fair value measurement and unobservable (i.e., supported by little or no market activity). Unobservable inputs reflect the Pension Plan
and postretirement benefit plans own assumptions about the assumptions that market participants would use in pricing the asset or
liability (including assumptions about risk).
Postretirement Benefit Plans
In addition to providing pension benefits, OGE Energy provides certain medical and life insurance benefits for eligible
retired members. Regular, full-time, active employees hired prior to February 1, 2000 whose age and years of credited service total or
exceed 80 or have attained age 55 with 10 years of vesting service at the time of retirement are entitled to postretirement medical
benefits while employees hired on or after February 1, 2000 are not entitled to postretirement medical benefits. Effective January 1,
2010, the age for dependents to participate in the Company’s Medical Plan was increased to age 21 and if the dependent is a full-time
student to age 26. Effective July 1, 2010, the age for dependents to participate in the Company’s Medical Plan was increased to age 26
regardless of whether or not the dependent is a full-time student. All regular, full-time, active employees whose age and years of
credited service total or exceed 80 or have attained age 55 with three years of vesting service at the time of retirement are entitled to
postretirement life insurance benefits. Eligible retirees must contribute such amount as OGE Energy specifies from time to time
toward the cost of coverage for postretirement benefits. The benefits are subject to deductibles, co-payment provisions and other
limitations. The Company charges to expense the postretirement benefit costs and includes an annual amount as a component of the
cost-of-service in future ratemaking proceedings.
At the beginning of January 2011, OGE Energy adopted several amendments to the retiree medical plan. Effective January
1, 2012, medical costs for pre-65 aged eligible retirees will be fixed at the 2011 level and OGE Energy will cover future annual
medical inflationary cost increases up to five percent. Increases in excess of five percent annually will be covered by the pre-65 aged
retiree in the form of premium increases. Also, effective January 1, 2012, OGE Energy will supplement Medicare coverage for
Medicare-eligible retirees, providing them a fixed stipend based on OGE Energy’s expected average 2011 premium for medical and
drug coverage, and allow those Medicare-eligible retirees to acquire coverage from a Company-provided third-party administrator.
The effect of these plan amendments will be reflected in OGE Energy’s March 31, 2011 Consolidated Balance Sheet as a reduction to
the postretirement benefit obligation of $91.3 million, an increase in other comprehensive income of $16.9 million and a reduction to
the Company’s benefit obligations regulatory asset of $74.4 million.
Plan Investments
The following tables summarize OGE Energy’s postretirement benefit plans investments that are measured at fair value on a
recurring basis at December 31, 2010 and 2009. There were no Level 2 investments held by the postretirement benefit plans at
December 31, 2010 and 2009.
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