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SEC Filings

10-Q
SOUTHERN CO GAS filed this Form 10-Q on 11/04/2016
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
(UNAUDITED)


September 2016. No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2016. Southern Company Gas also provides certain defined benefit and defined contribution plans for a selected group of management and highly compensated employees. Benefits under these non-qualified plans are largely unfunded and benefits are primarily paid using corporate assets. In addition, Southern Company Gas provides certain medical care and life insurance benefits for eligible retired employees through a postretirement benefit plan – AGL Welfare Plan. Southern Company Gas also has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses.
See Note 7 to the consolidated financial statements of Southern Company Gas in Item 8 of the Form 10-K for additional information on Southern Company Gas' retirement benefit plans.
In connection with the Merger, Southern Company Gas performed updated valuations of its pension and other postretirement benefit plan assets and obligations to reflect actual census data at the new measurement date of July 1, 2016. This valuation resulted in increases to the projected benefit obligations for the pension and other postretirement benefit plans of approximately $177 million and $20 million, respectively, a decrease in the fair value of pension plan assets of $10 million, and an increase in the fair value of other postretirement benefit plan assets of $1 million. Southern Company Gas also recorded a related regulatory asset of $437 million related to unrecognized prior service cost and actuarial gain/loss, as it is probable that this amount will be recovered through future rates for Southern Company Gas' regulated utilities. The previously unrecognized prior service cost and actuarial gain/loss related to non-utility subsidiaries were eliminated through purchase accounting adjustments.
Actuarial Assumptions
The weighted average rates assumed in the actuarial calculations used to determine the net periodic costs for the pension and other postretirement benefit plans for the successor period ended September 30, 2016 and the benefit obligations as of the new measurement date, July 1, 2016, are presented below.
 
 
Successor
 
 
Predecessor
Assumptions used to determine net periodic costs:
 
July 1, 2016 through September 30, 2016
 
 
January 1, 2016 through June 30, 2016
 
For the Three and Nine Months Ended September 30, 2015
Pension plans
 
 
 
 
 
 
 
Discount rate – interest costs (a)
 
3.2
%
 
 
4.0
%
 
4.2
%
Discount rate – service costs (a)
 
4.1

 
 
4.8

 
4.2

Expected long-term return on plan assets
 
7.8

 
 
7.8

 
7.8

Annual salary increase
 
3.5

 
 
3.7

 
3.7

Pension band increase (b)
 
2.0

 
 
2.0

 
2.0

Other postretirement benefit plans
 
 

 
 
 

 
 
Discount rate – interest costs (a)
 
2.8

 
 
3.6

 
4.0

Discount rate – service costs (a)
 
4.0

 
 
4.7

 
4.0

Expected long-term return on plan assets
 
6.1

 
 
6.6

 
7.4

Annual salary increase
 
3.5

 
 
3.7

 
3.7

(a)
Rates are presented on a weighted average basis for the three and nine months ended September 30, 2015.
(b)
Only applicable to the Nicor Gas union employees. The pension bands for the former Nicor plan have been updated to reflect the new negotiated rates for each of 2016 and 2017 of 2.0%, as indicated in the union agreement dated March 2014.
 
 
Successor
 
 
Predecessor
Assumptions used to determine benefit obligations:
 
July 1, 2016
 
 
December 31, 2015
Pension plans
 
 
 
 
 
Discount rate
 
3.9
%
 
 
4.6
%
Annual salary increase
 
3.5

 
 
3.7

Pension band increase (*)
 
2.0

 
 
2.0

Other postretirement benefit plans
 
 

 
 
 

Discount rate
 
3.6

 
 
4.4

Annual salary increase
 
3.5

 
 
3.7

(*)
Only applicable to the Nicor Gas union employees. The pension bands for the former Nicor plan have been updated to reflect the new negotiated rates for each of 2016 and 2017 of 2.0%, as indicated in the union agreement dated March 2014.


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