OG&E 2012 Annual Report Download - page 74

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72 OGE Energy Corp.
Plan Investments
The following tables summarize the postretirement benefit plans
investments that are measured at fair value on a recurring basis at
December 31, 2012 and 2011. There were no Level 2 investments held
by the postretirement benefit plans at December 31, 2012 and 2011.
(In millions, December 31) 2012 Level 1 Level 3
Group retiree medical
insurance contract(A) $53.3 $÷«– $53.3
Mutual funds investment
U.S. equity investments 6.0 6.0 –
Money market funds investment 0.3 0.3 –
Total Plan investments $59.6 $6.3 $53.3
(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) 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.
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) 2012
Group retiree medical insurance contract
Beginning balance $54.3
Net unrealized gains related to instruments
held at the reporting date 5.5
Interest income 1.2
Dividend income 0.6
Realized gains 0.6
Administrative expenses and charges (0.1)
Claims paid (8.8)
Ending balance $53.3
The following table presents the status of the Company’s
postretirement benefit plans at December 31, 2012 and 2011. 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) 2012 2011
Benefit obligations $(301.0) $(280.6)
Fair value of plan assets 59.6 61.0
Funded status at end of year $(241.4) $(219.6)
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 8.55 percent in
2013 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) 2012 2011 2010
One-percentage point increase
Effect on aggregate of the service and
interest cost components $÷«– $÷«– $3.1
Effect on accumulated postretirement
benefit obligations 0.1 0.1 0.7
One-percentage point decrease
Effect on aggregate of the service and
interest cost components $0.1 $0.1 $2.5
Effect on accumulated postretirement
benefit obligations 0.9 0.6 1.6
Medicare Prescription Drug, Improvement
and Modernization Act of 2003
The Medicare Prescription Drug, Improvement and Modernization Act
of 2003 expanded coverage for prescription drugs. The following table
summarizes the gross benefit payments the Company expects to pay
related to its postretirement benefit plans, including prescription
drug benefits.
Gross Projected
Postretirement
(In millions) Benefit Payments
2013 $15.4
2014 16.3
2015 17.0
2016 17.6
2017 18.1
After 2017 94.9