OG&E 2010 Annual Report Download - page 85

Net Periodic Benefit Cost
Restoration of Retirement Postretirement
Pension Plan Income Plan Benefit Plans
Year ended December 31
(In millions) 2010 2009 2008 2010 2009 2008 2010 2009 2008
Service cost $ 10.1 $ 11.5 $ 12.4 $ --- $ --- $ --- $ 2.9 $ 2.2 $
Interest cost 25.4 24.7 24.9 0.1 0.1 0.1 13.7 11.5
Expected return on plan assets (34.3) (26.3) (34.3) --- --- --- (6.6) (6.3)
Amortization of transition
obligation --- --- --- --- --- --- 2.6 2.5
Amortization of net loss 17.6 18.5 7.4 0.1 0.1 0.1 10.2 4.1
Amortization of unrecognized
prior service cost 2.5 0.9 1.1 0.2 0.1 0.1 --- 0.7
Curtailments --- 0.2 --- --- --- --- --- ---
Net periodic benefit cost (A) $ 21.3 $ 29.5 $ 11.5 $ 0.4 $ 0.3 $ 0.3 $ 22.8 $ 14.7 $
(A) In addition to the $21.7 million, $29.8 million and $11.8 million of net periodic benefit cost recognized in 2010, 2009 and 2008, respectively, the
Company recognized the following:
Ÿan increase in pension expense in 2010 of $8.1 million, a reduction in pension expense in 2009 of $2.2 million and an increase
in pension expense in 2008 of $10.1 million to maintain the allowable amount to be recovered for pension expense in the
Oklahoma jurisdiction which are identified as Deferred Pension Plan Expenses (see Note 1); and
Ÿa reduction in pension expense in 2009 of $3.2 million in the Arkansas jurisdiction to reflect the approval of recovery of the
Company’s 2006 and 2007 pension settlement costs in the May 2009 Arkansas rate order which are identified as Deferred
Pension Plan Expenses (see Note 1).
The capitalized portion of the net periodic pension benefit cost was $5.7 million, $7.5 million and $3.6 million at December
31, 2010, 2009 and 2008, respectively. The capitalized portion of the net periodic postretirement benefit cost was $5.8 million, $3.6
million and $4.2 million at December 31, 2010, 2009 and 2008, respectively.
Rate Assumptions
Pension Plan and Postretirement
Restoration of Retirement Income Plan Benefit Plans
Year ended December 31 2010 2009 2008 2010 2009 2008
Discount rate 5.30% 5.30% 6.25% 5.30% 6.00% 6.25%
Rate of return on plans’ assets 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Compensation increases 4.40% 4.50% 4.50% N/A N/A N/A
Assumed health care cost trend:
Initial trend N/A N/A N/A 8.99% 9.49% 9.00%
Ultimate trend rate N/A N/A N/A 5.00% 5.00% 4.50%
Ultimate trend year N/A N/A N/A 2020 2018 2014
N/A - not applicable
The overall expected rate of return on plan assets assumption remained at 8.50 percent in 2009 and 2010 in determining net
periodic benefit cost. The rate of return on plan assets assumption 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 OGE Energy’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 OGE Energy’s Group Long-Term Disability Plan and their dependents, as defined in OGE Energy’s Medical Plan.
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