| Employee Benefit Plans | 12) Employee Benefit Plans
Defined Contribution Plans
The Partnership has several 401(k) and other defined contribution
plans that cover eligible non-union and union employees, and makes
employer contributions to these plans, subject to IRS limitations.
These plans provide for each participant to contribute from 0% to
60% of compensation, subject to IRS limitations. The
Partnership’s aggregate contributions to the 401(k) plans
during fiscal 2015, 2014, and 2013, were $5.7 million, $5.2
million, and $4.9 million, respectively. The Partnership’s
aggregate contribution to the other defined contribution plans for
fiscal years 2015, 2014, and 2013, were $0.6 million, $0.5 million
and $0.5 million, respectively.
Management Incentive Compensation Plan
The Partnership has a Management Incentive Compensation Plan. The
long-term compensation structure is intended to align the
employee’s performance with the long-term performance of our
unitholders. Under the Plan, certain named employees who
participate shall be entitled to receive a pro rata share of an
amount in cash equal to:
• 50% of the distributions
(“Incentive Distributions”) of Available Cash in excess
of the minimum quarterly distribution of $0.0675 per unit otherwise
distributable to Kestrel Heat pursuant to the Partnership Agreement
on account of its general partner units; and
• 50% of the cash proceeds (the
“Gains Interest”) which Kestrel Heat shall receive from
the sale of its general partner units (as defined in the
Partnership Agreement), less expenses and applicable taxes.
The pro rata share payable to each participant under the Plan is
based on the number of participation points as described under
“Fiscal 2015 Compensation Decisions—Management
Incentive Compensation Plan.” The amount paid in Incentive
Distributions is governed by the Partnership Agreement and the
calculation of Available Cash.
To fund the benefits under the Plan, Kestrel Heat has agreed to
forego receipt of the amount of Incentive Distributions that are
payable to plan participants. For accounting purposes, amounts
payable to management under this Plan will be treated as
compensation and will reduce net income. Kestrel Heat has also
agreed to contribute to the Partnership, as a contribution to
capital, an amount equal to the Gains Interest payable to
participants in the Plan by the Partnership. The Partnership is not
required to reimburse Kestrel Heat for amounts payable pursuant to
the Plan.
The Plan is administered by the Partnership’s Chief Financial
Officer under the direction of the Board or by such other officer
as the Board may from time to time direct. In general, no payments
will be made under the Plan if the Partnership is not distributing
cash under the Incentive Distributions described above.
Effective as of July 19, 2012, the Board of Directors adopted
certain amendments (the “Plan Amendments”) to the Plan.
Under the Plan Amendments, the number and identity of the Plan
participants and their participation interests in the Plan have
been frozen at the current levels. In addition, under the Plan
Amendments, the plan benefits (to the extent vested) may be
transferred upon the death of a participant to his or her heirs. A
participant’s vested percentage of his or her plan benefits
will be 100% during the time a participant is an employee or
consultant of the Partnership. Following the termination of such
positions, a participant’s vested percentage shall be equal
to 20% for each full or partial year of employment or consultation
with the Partnership starting with the fiscal year ended
September 30, 2012 (33 1/3% in the case of the
Partnership’s chief executive officer at that time).
The Partnership distributed to management and the general partner
Incentive Distributions of approximately $605,000 during fiscal
2015, $447,000 during fiscal 2014, and $330,000 during fiscal 2013.
Included in these amounts for fiscal 2015, 2014, and 2013, were
distributions under the management incentive compensation plan of
$302,000, $223,000, and $165,000, respectively, of which named
executive officers received approximately $135,000 during fiscal
2015, $100,000 during fiscal 2014, and $119,000 during fiscal 2013.
With regard to the Gains Interest, Kestrel Heat has not given any
indication that it will sell its general partner units within the
next twelve months. Thus the Plan’s value attributable to the
Gains Interest currently cannot be determined.
Multiemployer Pension Plans
At September 30, 2015, approximately 40% of our employees were
covered by collective bargaining agreements and approximately 9% of
our employees are in collective bargaining agreements that are up
for renewal within the next fiscal year. We contribute to various
multiemployer union administered pension plans under the terms of
collective bargaining agreements that provide for such plans for
covered union-represented employees. The risks of participating in
these multiemployer plans are different from single-employer plans
in that assets contributed are pooled and may be used to provide
benefits to employees of other participating employers. If a
participating employer stops contributing to the plan, the
remaining participating employers may be required to bear the
unfunded obligations of the plan. If we choose to stop
participating in a multiemployer plan, we may be required to pay a
withdrawal liability in part based on the underfunded status of the
plan.
The following table outlines our participation and contributions to
multiemployer pension plans for the periods ended
September 30, 2015, 2014 and 2013. The EIN/Pension Plan Number
column provides the Employer Identification Number
(“EIN”) and the three-digit plan number. The most
recent Pension Protection Act Zone Status for 2015 and 2014 relates
to the plans’ two most recent fiscal year-ends, based on
information received from the plans as reported on their Form 5500
Schedule MB. Among other factors, plans in the red zone are
generally less than 65 percent funded, plans in the yellow zone are
less than 80 percent funded, and plans in the green zone are at
least 80 percent funded. The FIP/RP Status Pending/Implemented
column indicates plans for which a financial improvement plan
(“FIP”) or a rehabilitation plan (“RP”) is
either pending or has been implemented. Certain plans have been
aggregated in the All Other Multiemployer Pension Plans line of the
following table, as our participation in each of these individual
plans is not significant.
For the Westchester Teamsters Pension Fund, Local 553 Pension Fund
and Local 463 Pension Fund, we provided more than 5 percent of the
total plan contributions from all employers for 2015, 2014 and
2013, as disclosed in the respective plan’s Form 5500. The
collective bargaining agreements of these plans require
contributions based on the hours worked and there are no minimum
contributions required.
Pension Protection Act Zone Status FIP / RP Status Partnership Contributions
Pension Fund EIN / Pension Plan Number 2015 2014 Pending / 2015 2014 2013 Surcharge
Expiration Date of Collective-
New England Teamsters and Trucking Industry Pension Fund 04-6372430 Red Red Yes / $ 3,183 $ 2,868 $ 2,709 No 03/31/17 to
Westchester Teamsters Pension Fund 13-6123973 Green Green N/A 877 855 820 No 01/31/19 to
Local 553 Pension Fund 13-6637826 Green Green N/A 2,838 2,649 2,729 No 12/15/16 to
Local 463 Pension Fund 11-1800729 Green Green N/A 171 156 146 No 06/30/16 to
All Other Multiemployer Pension Plans 2,149 1,846 1,614
Total Contributions $ 9,218 $ 8,374 $ 8,018
Agreement with the New England Teamsters and Trucking Industry
Pension Fund
In September 2015, the Teamsters ratified an agreement among
certain subsidiaries of the Partnership and the New England
Teamsters and Trucking Industry Pension Fund (“the NETTI
Fund”), a multiemployer pension plan in which such
subsidiaries participate, providing for the Partnership’s
participating subsidiaries to withdraw from the NETTI Fund’s
original employer pool and enter the NETTI Fund’s new
employer pool. The withdrawal from the original employer pool
triggered an undiscounted withdrawal obligation of $48.0 million
that is to be paid in equal monthly installments over 30 years, or
$1.6 million per year. The annual after tax cash impact of entering
into this agreement is a reduction of approximately $0.9
million.
We recorded in the fourth quarter of fiscal 2015, a $17.8 million
charge in order to establish a withdrawal liability on our
consolidated balance sheet, which represents the present value of
the $48.0 million future payment obligation at a discount rate of
8.22%. In addition we recorded a non-cash deferred tax benefit of
approximately $7.0 million. The net result of these two
non-cash items reduced our net income for fiscal 2015 by $10.8
million.
The NETTI Fund includes over two hundred of our current employees
and has been classified as carrying “red zone” status,
meaning that the value of NETTI Fund’s assets are less than
65% of the actuarial value of the NETTI Fund’s benefit
obligations.
As of September 30, 2015 we had $0.1 million and $17.6 million
balances included in the captions accrued expenses and other
current liabilities and other long-term liabilities, respectively,
on our consolidated balance sheet representing the remaining
balance of the NETTI withdrawal liability. Based on the borrowing
rates currently available to the Partnership for long-term
financing of a similar maturity, the fair value of the NETTI
withdrawal liability as of September 30, 2015 was $16.7
million. We utilized Level 2 inputs in the fair value hierarchy of
valuation techniques to determine the fair value of this
liability.
Our status in the newly-established pool of the NETTI Fund is
accounted for as participation in a new multiemployer pension plan,
and therefore we recognize expense based on the
contractually-required contribution for each period, and we
recognize a liability for any contributions due and unpaid at the
end of a reporting period.
Defined Benefit Plans
The Partnership accounts for its two frozen defined benefit pension
plans (“the Plan”) in accordance with FASB ASC
715-10-05 Compensation-Retirement Benefits. The Partnership has no
post-retirement benefit plans.
Effective September 30, 2015, the Partnership adopted the
Society of Actuaries 2015 Mortality Tables Report and Mortality
Improvement Scale, which updated the mortality assumptions that
private defined benefit retirement plans in the United States use
in the actuarial valuations that determine a plan sponsor’s
pension obligations. The updated mortality data reflects lower
mortality improvement than assumed in the Society of Actuaries 2014
Mortality Table Report and Improvement Scale, and affected plans
generally expect the value of the actuarial obligations to
decrease, depending on the specific demographic characteristics of
the plan participants and the types of benefits.
The following table provides the net periodic benefit cost for the
period, a reconciliation of the changes in the Plan assets,
projected benefit obligations, and the amounts recognized in other
comprehensive income and accumulated other comprehensive income at
the dates indicated using a measurement date of September 30
(in thousands):
Debit / (Credit) Net Periodic Pension Cash Fair Pension Projected Other Gross Pension Related
Fiscal Year 2013
Beginning balance $ 60,303 $ (73,051 ) $ 31,865
Interest cost 2,477 (2,477 )
Actual return on plan assets (332 ) 332
Employer contributions (3,476 ) 3,476
Benefit payments (4,083 ) 4,083
Investment and other expenses (285 ) 285
Difference between actual and expected return on plan assets (3,475 ) 3,475
Anticipated expenses 302 (302 )
Actuarial gain 7,157 (7,157 )
Amortization of unrecognized net actuarial loss 2,655 (2,655 )
Annual cost/change $ 1,342 $ (3,476 ) (275 ) 8,746 $ (6,337 ) (6,337 )
Ending balance $ 60,028 $ (64,305 ) $ 25,528
Funded status at the end of the year $ (4,277 )
Fiscal Year 2014
Interest cost 2,761 (2,761 )
Actual return on plan assets (7,614 ) 7,614
Employer contributions (2,014 ) 2,014
Benefit payments (4,277 ) 4,277
Investment and other expenses (262 ) 262
Difference between actual and expected return on plan assets 4,472 (4,472 )
Anticipated expenses 300 (300 )
Actuarial loss (7,655 ) 7,655
Amortization of unrecognized net actuarial loss 2,113 (2,113 )
Annual cost/change $ 1,770 $ (2,014 ) 5,351 (6,177 ) $ 1,070 1,070
Ending balance $ 65,379 $ (70,482 ) $ 26,598
Funded status at the end of the year $ (5,103 )
Fiscal Year 2015
Interest cost 2,762 (2,762 )
Actual return on plan assets (679 ) 679
Employer contributions (1,743 ) 1,743
Benefit payments (4,013 ) 4,013
Investment and other expenses (577 ) 577
Difference between actual and expected return on plan assets (2,259 ) 2,259
Anticipated expenses 327 (327 )
Actuarial loss 1,860 (1,860 )
Amortization of unrecognized net actuarial loss 2,226 (2,226 )
Annual cost/change $ 1,800 $ (1,743 ) (1,591 ) 3,361 $ (1,827 ) (1,827 )
Ending balance $ 63,788 $ (67,121 ) $ 24,771
Funded status at the end of the year $ (3,333 )
At September 30, 2015 and 2014, the amounts included on the
balance sheet in other long-term liabilities were $3.3 million and
$5.1 million, respectively.
The $24.8 million net actuarial loss balance at September 30,
2015 for the two frozen defined benefit pension plans in
accumulated other comprehensive income will be recognized and
amortized into net periodic pension costs as an actuarial loss in
future years. The estimated amount that will be amortized from
accumulated other comprehensive income into net periodic pension
cost over the next fiscal year is $2.6 million.
September 30,
Weighted-Average Assumptions Used in the
Measurement of the Partnership’s Benefit
Obligation 2015 2014 2013
Discount rate at year end date 4.05 % 4.05 % 4.45 %
Expected return on plan assets for the year ended 5.50 % 5.75 % 7.00 %
Rate of compensation increase N/A N/A N/A
The expected return on plan assets is determined based on the
expected long-term rate of return on plan assets and the
market-related value of plan assets determined using fair
value.
The Partnership’s expected long-term rate of return on plan
assets is updated at least annually, taking into consideration our
asset allocation, historical returns on the types of assets held,
and the current economic environment. For fiscal year 2016, the
Partnership’s assumption for return on plan assets will
remain at 5.50% per annum.
The discount rate used to determine net periodic pension expense
for fiscal year 2015, 2014, and 2013 was 4.05%, 4.45%, and 3.50%,
respectively. The discount rate used by the Partnership in
determining pension expense and pension obligations reflects the
yield of high quality (AA or better rating by a recognized rating
agency) corporate bonds whose cash flows are expected to match the
timing and amounts of projected future benefit payments.
The Plan’s objectives are to have the ability to pay benefit
and expense obligations when due, to maintain the funded ratio of
the Plan, to maximize return within reasonable and prudent levels
of risk in order to minimize contributions and charges to the
profit and loss statement, and to control costs of administering
the Plan and managing the investments of the Plan. The target asset
allocation of the Plan (currently 80% domestic fixed income, 15%
domestic equities and 5% international equities) is based on a
long-term perspective, and as the Plan gets closer to being fully
funded, the allocations have been adjusted to lower volatility from
equity holdings.
The Partnership had no Level 2 or Level 3 pension plan assets
during the three years ended September 30, 2015. The fair
values and percentage of the Partnership’s pension plan
assets by asset category are as follows (in thousands):
September 30,
2015 2014
Asset Category Level 1 Concentration Level 1 Concentration
Corporate and U.S. government bond fund (1) $ 51,477 81 % $ 52,204 79 %
U.S. large-cap equity (1) 8,932 14 % 9,774 15 %
International equity (1) 2,832 4 % 3,093 5 %
Cash 547 1 % 308 1 %
Total $ 63,788 100 % $ 65,379 100 %
(1) Represent investments in Vanguard
funds that seek to replicate the asset category description.
The Partnership is not obligated to make a minimum required
contribution in fiscal year 2016, and currently does not expected
to make an optional pension contribution.
Expected benefit payments over each of the next five years will
total approximately $4.5 million per year. Expected benefit
payments for the five years thereafter will aggregate approximately
$20.5 million. |
