OG&E 2013 Annual Report Download - page 67

OGE Energy Corp. 61
OG&E must obtain regulatory approval from the FERC in order
to borrow on a short-term basis. OG&E 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, 2013 and ending
December 31, 2014.
13. Retirement Plans and Postretirement Benefit Plans
Pension Plan and Restoration of Retirement Income Plan
Employees hired or rehired on or after December 1, 2009 do not
participate in the Pension Plan but are eligible to participate in the
401(k) Plan where, for each pay period, the Company contributes
to the 401(k) Plan, on behalf of each participant, 200 percent of the
participant’s contributions up to five percent of compensation.
It is the Company’s policy to fund the Pension Plan on a current
basis based on the net periodic pension expense as determined by
the Company’s actuarial consultants. During both 2013 and 2012,
OGE Energy made contributions to its Pension Plan of $35 million to
help ensure that the Pension Plan maintains an adequate funded status.
Such contributions are intended to provide not only for benefits attrib-
uted to service to date, but also for those expected to be earned in the
future. During 2014, OGE Energy expects to contribute up to $26 million
to its Pension Plan. The expected contribution to the Pension Plan
during 2014 would be a discretionary contribution, anticipated to be in
the form of cash, and is not required to satisfy the minimum regulatory
funding requirement specified by the Employee Retirement Income
Security Act of 1974, as amended. OGE Energy could be required to
make additional contributions if the value of its pension trust and
postretirement benefit plan trust assets are adversely impacted by
a major market disruption in the future.
In accordance with ASC Topic 715, “Compensation – Retirement
Benefits,” a one-time settlement charge is required to be recorded by
an organization when lump sum payments or other settlements that
relieve the organization from the responsibility for the pension benefit
obligation during a plan year exceed the service cost and interest cost
components of the organization’s net periodic pension cost. During
2013, the Company experienced an increase in both the number of
employees electing to retire and the amount of lump sum payments to
be paid to such employees upon retirement. As a result, and based in
part on the Company’s historical experience regarding eligible employees
who elect to retire in the last quarter of a particular year, the Company
recorded pension settlement charges of $22.4 million in the fourth quarter
of 2013, of which $17.0 million related to OG&E’s Oklahoma jurisdiction
and has been included in the pension tracker. The pension settlement
charge did not require a cash outlay by the Company and did not increase
the Company’s total pension expense over time, as the charges were
an acceleration of costs that otherwise would be recognized as pension
expense in future periods.
The Company provides a Restoration of Retirement Income Plan to
those participants in the Company’s Pension Plan whose benefits are
subject to certain limitations of the Code. Participants in the Restoration
of Retirement Income Plan receive the same benefits that they would
have received under the Company’s Pension Plan in the absence of lim-
itations imposed by the Federal tax laws. The Restoration of Retirement
Income Plan is intended to be an unfunded plan.
The following table presents the status of the Company’s Pension
Plan and Restoration of Retirement Income Plan at December 31, 2013
and 2012. 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.
Restoration of
Pension Plan Retirement Income Plan
(In millions, December 31) 2013 2012 2013 2012
Benefit obligations $(658.1) $(747.1) $(14.0) $(14.5)
Fair value of plan assets 654.9 626.0 ––
Funded status at end of year $÷÷(3.2) $(121.1) $(14.0) $(14.5)
The following table summarizes the benefit payments the Company
expects to pay related to its Pension Plan and Restoration of Retirement
Income Plan. These expected benefits are based on the same assump-
tions used to measure the Company’s benefit obligation at the end
of the year and include benefits attributable to estimated future
employee service.
(In millions) Projected Benefit Payments
2014 $93.2
2015 82.0
2016 76.7
2017 71.7
2018 64.7
After 2018 270.1
Plan Investments, Policies and Strategies
The Pension Plan assets are held in a trust which follows an investment
policy and strategy designed to reduce the funded status volatility of the
Plan by utilizing liability driven investing. The purpose of liability driven
investing is to structure the asset portfolio to more closely resemble the
pension liability and thereby more effectively hedge against changes in
the liability. The investment policy follows a glide path approach that
shifts a higher portfolio weighting to fixed income as the Plan’s funded
status increases. The table below sets forth the targeted fixed income
and equity allocations at different funded status levels.
Projected Benefit Obligation
Funded Status Thresholds <90% 95% 100% 105% 110% 115% 120%
Fixed income 50% 58% 65% 73% 80% 85% 90%
Equity 50% 42% 35% 27% 20% 15% 10%
Total 100% 100% 100% 100% 100% 100% 100%