OG&E 2013 Annual Report Download - page 70

64 OGE Energy Corp.
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 Plan’s 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, the Company 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 at
least age 55 with 10 or more years of 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. Eligible retirees must contribute such amount as the Company
specifies from time to time toward the cost of coverage for postretire-
ment benefits. The benefits are subject to deductibles, co-payment
provisions and other limitations. OG&E charges to expense the postre-
tirement benefit costs and includes an annual amount as a component
of the cost-of-service in future ratemaking proceedings.
The Company’s contribution to the medical costs for pre-65 aged
eligible retirees are fixed at the 2011 level and the Company covers
future annual medical inflationary cost increases up to five percent.
Increases in excess of five percent annually are covered by the pre-65
aged retiree in the form of premium increases. The Company provides
Medicare-eligible retirees and their Medicare-eligible spouses an annual
fixed contribution to a Company-sponsored health reimbursement
arrangement. Medicare-eligible retirees are able to purchase individual
insurance policies supplemental to Medicare through a third-party
administrator and use their health reimbursement arrangement funds for
reimbursement of medical premiums and other eligible medical expenses.
Plan Investments
The following tables summarize the postretirement benefit plans
investments that are measured at fair value on a recurring basis at
December 31, 2013 and 2012. There were no Level 2 investments held
by the postretirement benefit plans at December 31, 2013 and 2012.
(In millions, December 31) 2013 Level 1 Level 3
Group retiree medical
insurance contract(A) $53.1 $÷«– $53.1
Mutual funds investment
U.S. equity investments 7.9 7.9 –
Money market funds investment 0.4 0.4 –
Total Plan investments $61.4 $8.3 $53.1
(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) 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.
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) 2013
Group retiree medical insurance contract
Beginning balance $53.3
Net unrealized gains related to instruments
held at the reporting date (0.5)
Interest income 1.1
Dividend income 0.6
Realized gains 0.4
Administrative expenses and charges (0.1)
Claims paid (1.7)
Ending balance $53.1
The following table presents the status of the Company’s
postretirement benefit plans 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.
(In millions, December 31) 2013 2012
Benefit obligations $(258.2) $(301.0)
Fair value of plan assets 61.4 59.6
Funded status at end of year $(196.8) $(241.4)