OG&E 2011 Annual Report Download - page 77

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OGE Energy Corp. 75
The following table presents the status of the Company’s
postretirement benefit plans at December 31, 2011 and 2010. These
amounts have been recorded in Accrued Benefit Obligations with the
offset in Accumulated Other Comprehensive Loss (except OG&E’s portion
which is recorded as a regulatory asset as discussed in Note 1) in the
Company’s Consolidated Balance Sheet. The amounts in Accumulated
Other Comprehensive Loss and those recorded as a regulatory asset
represent a net periodic benefit cost to be recognized in the Consolidated
Statements of Income in future periods.
(In millions, December 31) 2011 2010
Benefit obligations $(280.6) $(337.1)
Fair value of plan assets 61.0 58.5
Funded status at end of year $(219.6) $(278.6)
The assumed health care cost trend rates have a significant effect
on the amounts reported for postretirement medical benefit plans. Future
health care cost trend rates are assumed to be 8.75 percent in 2012 with
the rates trending downward to 4.48 percent by 2028. A one-percentage
point change in the assumed health care cost trend rate would have
the following effects:
(In millions, year ended December 31) 2011 2010 2009
One-percentage point increase
Effect on aggregate of the service and
interest cost components $÷«– $3.1 $÷2.4
Effect on accumulated postretirement
benefit obligations 0.1 0.7 40.3
One-percentage point decrease
Effect on aggregate of the service and
interest cost components $0.1 $2.5 $÷1.9
Effect on accumulated postretirement
benefit obligations 0.6 1.6 32.9
Medicare Prescription Drug, Improvement
and Modernization Act of 2003
On December 8, 2003, President Bush signed into law the Medicare
Prescription Drug, Improvement and Modernization Act of 2003, which
expanded Medicare to include, for the first time, coverage for prescrip-
tion drugs. The following table summarizes the gross benefit payments
the Company expects to pay related to its postretirement benefit plans,
including prescription drug benefits. The Company received $1.3 million
in Federal subsidy receipts in 2011. Due to amendments in the Company’s
retiree medical plan discussed above, the Company does not expect to
receive any additional Federal subsidies in the future.
Gross Projected
Postretirement
(In millions) Benefit Payments
2012 $15.4
2013 16.0
2014 16.9
2015 17.7
2016 18.3
2017 and Beyond 97.0
Plan Investments
The following tables summarize the postretirement benefit plans
investments that are measured at fair value on a recurring basis at
December 31, 2011 and 2010. There were no Level 2 investments held
by the postretirement benefit plans at December 31, 2011 and 2010.
(In millions, December 31) 2011 Level 1 Level 3
Group retiree medical
insurance contract(A) $54.3 $÷«– $54.3
Mutual funds investment
U.S. equity investments 5.3 5.3 –
Money market funds investment 0.7 0.7 –
Cash 0.7 0.7 –
Total Plan investments $61.0 $6.7 $54.3
(A) This category represents a group retiree medical insurance contract which invests in a pool of
common stocks, bonds and money market accounts, of which a significant portion is comprised
of mortgage-backed securities.
(In millions, December 31) 2010 Level 1 Level 3
Group retiree medical
insurance contract(A) $52.4 $÷«– $52.4
Mutual funds investment
U.S. equity investments 5.5 5.5 –
Money market funds investment 0.6 0.6 –
Total Plan investments $58.5 $6.1 $52.4
(A) This category represents a group retiree medical insurance contract which invests in a pool of
common stocks, bonds and money market accounts, of which a significant portion is comprised
of mortgage-backed securities.
The postretirement benefit plans Level 3 investment includes an
investment in a group retiree medical insurance contract. The unobserv-
able input included in the valuation of the contract includes the approach
for determining the allocation of the postretirement benefit plans pro-rata
share of the total assets in the contract.
The following table summarizes the postretirement benefit plans
investments that are measured at fair value on a recurring basis using
significant unobservable inputs (Level 3).
(In millions, year ended December 31) 2011
Group retiree medical insurance contract
Beginning balance $52.4
Interest income 1.3
Net unrealized gains related to instruments
held at the reporting date 0.9
Dividend income 0.8
Realized gains 0.1
Administrative expenses and charges (0.1)
Claims paid (1.1)
Ending balance $54.3