PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS | 12 Months Ended |
Sep. 30, 2014 |
Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract] | ' |
PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS | ' |
PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS |
This footnote includes all pension plans of the Company whether historical plans or those acquired as part of the purchase of certain assets and liabilities of MGE or those acquired in the acquisition of 100% of the common shares of Alagasco on September 1, 2013 and August 31, 2014, respectively. The net pension and postretirement obligations were remeasured at that time as well as at the fiscal year end. |
Laclede Group, Laclede Gas and Alagasco all have multiple pension and postretirement plans. Two assumption rates will be shown for entities that have plans with different assumptions. |
Pension Plans |
The pension plans of Laclede Group consist of plans with Laclede Gas and plans covering the employees of Alagasco. |
Laclede Gas has non-contributory, defined benefit, trusteed forms of pension plans covering the majority of its employees. Plan assets consist primarily of corporate and US government obligations and a growth segment consisting of exposure to equity markets, commodities, real estate and inflation-indexed securities, achieved through derivative instruments and investments in diversified mutual funds. |
Alagasco has defined qualified benefit plans covering the majority of its employees and also has non-qualified supplemental plans for certain officers. Qualified plan assets are comprised of United States equities consisting of mutual and commingled funds with varying strategies, global equities consisting of mutual funds, alternative investments of limited partnerships and commingled and mutual funds, and fixed income investments. |
The net periodic pension costs include the following components: |
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| | | | | | | | | | | | | | | |
($ Millions) | 2014* | | 2013 | | 2012 | | | | |
Laclede Group | | | | | | | | | |
Service cost – benefits earned during the period | $ | 10.2 | | | $ | 9.2 | | | $ | 9.2 | | | | | |
| | | |
Interest cost on projected benefit obligation | 24.5 | | | 17 | | | 19.4 | | | | | |
| | | |
Expected return on plan assets | (27.2 | ) | | (19.4 | ) | | (19.6 | ) | | | | |
Amortization of prior other comprehensive income | 0.4 | | | — | | | — | | | | | |
| | | |
Amortization of prior service cost | 0.5 | | | 0.5 | | | 0.6 | | | | | |
| | | |
Amortization of actuarial loss | 7.1 | | | 10.7 | | | 9 | | | | | |
| | | |
Loss on lump-sum settlements | 1.5 | | | 27 | | | 20.1 | | | | | |
| | | |
Sub-total | 17 | | | 45 | | | 38.7 | | | | | |
| | | |
Regulatory adjustment | 10.4 | | | (27.5 | ) | | (18.6 | ) | | | | |
| | | |
Net pension cost | $ | 27.4 | | | $ | 17.5 | | | $ | 20.1 | | | | | |
| | | |
| | | | | | | | | |
Laclede Gas | 2014 | | 2013 | | 2012 | | | | |
Service cost – benefits earned during the period | $ | 9.7 | | | $ | 9.2 | | | $ | 9.2 | | | | | |
| | | |
Interest cost on projected benefit obligation | 24 | | | 17 | | | 19.4 | | | | | |
| | | |
Expected return on plan assets | (26.5 | ) | | (19.4 | ) | | (19.6 | ) | | | | |
Amortization of prior service cost | 0.5 | | | 0.5 | | | 0.6 | | | | | |
| | | |
Amortization of actuarial loss | 7.1 | | | 10.7 | | | 9 | | | | | |
| | | |
Loss on lump-sum settlements | 1.5 | | | 27 | | | 20.1 | | | | | |
| | | |
Sub-total | 16.3 | | | 45 | | | 38.7 | | | | | |
| | | |
Regulatory adjustment | 10.4 | | | (27.5 | ) | | (18.6 | ) | | | | |
| | | |
Net pension cost | $ | 26.7 | | | $ | 17.5 | | | $ | 20.1 | | | | | |
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| | | | | | | | | | | | | | | |
* | Includes Alagasco. | | | | | | | | | | | | | | |
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Other changes in plan assets and pension benefit obligations recognized in other comprehensive income include the following: |
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| | | | | | | | | | | | | | | |
($ Millions) | 2014* | | 2013 | | 2012 | | | | |
Laclede Group | | | | | | | | | |
Current year actuarial loss | $ | 15.7 | | | $ | 17 | | | $ | 32.9 | | | | | |
| | | |
Amortization of actuarial loss | (7.1 | ) | | (10.7 | ) | | (29.1 | ) | | | | |
Acceleration of loss recognized due to settlement | (1.5 | ) | | (27.0 | ) | | — | | | | | |
| | | |
Amortization of prior service cost | (0.5 | ) | | (0.5 | ) | | (0.6 | ) | | | | |
Sub-total | 6.6 | | | (21.2 | ) | | 3.2 | | | | | |
| | | |
Regulatory adjustment | (6.1 | ) | | 21.1 | | | (3.5 | ) | | | | |
| | | |
Total recognized in other comprehensive income | $ | 0.5 | | | $ | (0.1 | ) | | $ | (0.3 | ) | | | | |
| | | |
| | | | | | | | | |
Laclede Gas | 2014 | | 2013 | | 2012 | | | | |
Current year actuarial loss | $ | 14.2 | | | $ | 17 | | | $ | 32.9 | | | | | |
| | | |
Amortization of actuarial loss | (7.1 | ) | | (10.7 | ) | | (29.1 | ) | | | | |
Acceleration of loss recognized due to settlement | (1.5 | ) | | (27.0 | ) | | — | | | | | |
| | | |
Amortization of prior service cost | (0.5 | ) | | (0.5 | ) | | (0.6 | ) | | | | |
Sub-total | 5.1 | | | (21.2 | ) | | 3.2 | | | | | |
| | | |
Regulatory adjustment | (4.7 | ) | | 21.1 | | | (3.5 | ) | | | | |
| | | |
Total recognized in other comprehensive income | $ | 0.4 | | | $ | (0.1 | ) | | $ | (0.3 | ) | | | | |
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* | Includes Alagasco. | | | | | | | | | | | | | | |
Laclede Group pension obligations are driven by separate plan and regulatory provisions governing Laclede Gas and Alagasco pension plans. |
Laclede Gas |
Pursuant to the provisions of Laclede Gas' pension plans, pension obligations may be satisfied by lump-sum cash payments. Pursuant to a MoPSC Order, lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds 100% of the sum of service and interest costs. Lump-sum payments recognized as settlements during fiscal year 2014, 2013, and 2012 were $22.1, $79.5, and $60.1, respectively. |
Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains or losses not yet includible in pension cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. The recovery in rates for Laclede Gas' qualified pension plan is based on an annual allowance of $4.8 effective August 1, 2007 and $15.5 effective January 1, 2011. The recovery in rates for MGE's qualified pension plan is based on an annual allowance of $10.0 effective February 20, 2010. The difference between these amounts and pension expense as calculated pursuant to the above and that otherwise would be included in the Company's Statements of Consolidated Income and Statements of Consolidated Comprehensive Income and Laclede Gas' Statements of Income and Statements of Comprehensive Income is deferred as a regulatory asset or regulatory liability. |
The following table sets forth the reconciliation of the beginning and ending balances of the pension benefit obligation at September 30: |
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| | | | | | | | | | | | | | | |
| Laclede Group | | Laclede Gas |
($ Millions) | 2014** | | 2013 | | 2014 | | 2013 |
Benefit obligation, beginning of year | $ | 503.8 | | | $ | 412.2 | | | $ | 503.8 | | | $ | 412.2 | |
|
Service cost | 10.2 | | | 9.2 | | | 9.7 | | | 9.2 | |
|
Interest cost | 24.5 | | | 17 | | | 24 | | | 17 | |
|
Actuarial (gain) loss | 39.4 | | | (24.0 | ) | | 41.5 | | | (24.0 | ) |
|
MGE acquisition | — | | | 151.4 | | | — | | | 151.4 | |
|
Alagasco acquisition | 150.3 | | | — | | | — | | | — | |
|
Settlement loss | 1.2 | | | 25 | | | 1.2 | | | 25 | |
|
Gross benefits paid * | (36.9 | ) | | (87.0 | ) | | (36.6 | ) | | (87.0 | ) |
Benefit obligation, end of year | $ | 692.5 | | | $ | 503.8 | | | $ | 543.6 | | | $ | 503.8 | |
|
Accumulated benefit obligation, end of year | $ | 613.7 | | | $ | 444.1 | | | $ | 484.1 | | | $ | 444.1 | |
|
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* | Includes $22.1 and $79.5 lump-sum payments recognized as settlements in fiscal years 2014 and 2013, respectively. | | | | | | | | | | | | | | |
** Includes Alagasco. |
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets at September 30: |
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| | | | | | | | | | | | | | | |
| Laclede Group | | Laclede Gas |
($ Millions) | 2014** | | 2013 | | 2014 | | 2013 |
Fair value of plan assets, beginning of year | $ | 345.4 | | | $ | 274.1 | | | $ | 345.4 | | | $ | 274.1 | |
|
Actual return on plan assets | 52.1 | | | 3.4 | | | 55 | | | 3.4 | |
|
Employer contributions | 23.6 | | | 28 | | | 23.6 | | | 28 | |
|
MGE acquisition | — | | | 126.9 | | | — | | | 126.9 | |
|
Alagasco acquisition | 122.4 | | | — | | | — | | | — | |
|
Gross benefits paid * | (36.9 | ) | | (87.0 | ) | | (36.6 | ) | | (87.0 | ) |
Fair value of plan assets, end of year | $ | 506.6 | | | $ | 345.4 | | | $ | 387.4 | | | $ | 345.4 | |
|
Funded status of plans, end of year | $ | (185.9 | ) | | $ | (158.4 | ) | | $ | (156.2 | ) | | $ | (158.4 | ) |
| | | | | | | | | | | | | | | |
* | Includes $22.1 and $79.5 lump-sum payments recognized as settlements in fiscal years 2014 and 2013, respectively. | | | | | | | | | | | | | | |
** Includes Alagasco. |
The following table sets forth the amounts recognized in the Balance Sheets at September 30: |
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| | | | | | | | | | | | | | | |
| Laclede Group | | Laclede Gas |
($ Millions) | 2014* | | 2013 | | 2014 | | 2013 |
Current liabilities | $ | (0.5 | ) | | $ | (0.4 | ) | | $ | (0.5 | ) | | $ | (0.4 | ) |
Non-current liabilities | (185.4 | ) | | (158.0 | ) | | (155.7 | ) | | (158.0 | ) |
Total | $ | (185.9 | ) | | $ | (158.4 | ) | | $ | (156.2 | ) | | $ | (158.4 | ) |
Pre-tax amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic pension cost consist of: | | | | | | | |
Net actuarial loss | $ | 7.7 | | | $ | 115.8 | | | $ | 7.7 | | | $ | 115.8 | |
|
Prior service costs | 0.5 | | | 4.5 | | | 0.5 | | | 4.5 | |
|
Sub-total | 8.2 | | | 120.3 | | | 8.2 | | | 120.3 | |
|
Adjustments for amounts included in Regulatory Assets | (7.9 | ) | | (116.7 | ) | | (7.9 | ) | | (116.7 | ) |
Total | $ | 0.3 | | | $ | 3.6 | | | $ | 0.3 | | | $ | 3.6 | |
|
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* | Includes Alagasco. | | | | | | | | | | | | | | |
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At September 30, 2014, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive income into net periodic pension cost during fiscal year 2015: |
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| Laclede Group | | Laclede Gas | | | | | | | | |
($ Millions) | 2015 | | 2015 | | | | | | | | |
Amortization of net actuarial loss | $ | 122.9 | | | $ | 121.4 | | | | | | | | | |
| | | | | | | |
Amortization of prior service cost | 4 | | | 4 | | | | | | | | | |
| | | | | | | |
Sub-total | 126.9 | | | 125.4 | | | | | | | | | |
| | | | | | | |
Regulatory adjustment | (122.3 | ) | | (122.3 | ) | | | | | | | | |
Total | $ | 4.6 | | | $ | 3.1 | | | | | | | | | |
| | | | | | | |
The assumptions used to calculate net periodic pension costs for Laclede Gas are as follows: |
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| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | | | | |
Weighted average discount rate - Laclede Gas plans | 4.70% | | 3.95% | | 5.10% | | | | | | | | | | |
Weighted average discount rate - MGE plans | 5.00% | | 5.05% | | —% | | | | | | | | | | |
Weighted average rate of future compensation increase * | 3.00% | | 3.00% | | 3.00% | | | | | | | | | | |
Expected long-term rate of return on plan assets * | 7.75% | | 7.75% | | 7.75% | | | | | | | | | | |
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* | Assumptions for weighted average rate of future compensation increase and expected long-term rate of return on plan assets are the same for both Laclede Gas and MGE plans. | | | | | | | | | | | | | | |
The assumptions used to calculate net periodic pension costs for Alagasco are as follows: |
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| | | | | | | | | | | | | | | |
| 2014 | | | | | | | | | | | | | | |
Weighted average discount rate | 4.00% / 4.05% | | | | | | | | | | | | | | |
Weighted average rate of future compensation increase | 2.92% | | | | | | | | | | | | | | |
Expected long-term rate of return on plan assets | 7.00% / 7.25% | | | | | | | | | | | | | | |
The weighted average discount rate is based on long-term, high quality bond indices at the measurement date. The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing historical experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each class. The expected return is a long-term assumption that generally does not change annually. However, in 2012 and 2011, the expected return assumption was adjusted to reflect capital market volatility in recent years. |
The assumptions used to calculate the benefit obligations are as follows: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | |
Weighted average discount rate - Laclede Gas | 4.30% | | 4.70% | | | | | | | | | | | | |
Weighted average discount rate - MGE | 4.45% | | 5.00% | | | | | | | | | | | | |
Weighted average discount rate - Alagasco | 4.15% / 4.25% | | —% | | | | | | | | | | | | |
Weighted average rate of future compensation increase (all plans) | 3.00% | | 3.00% | | | | | | | | | | | | |
Following are the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for plans that have a projected benefit obligation and an accumulated benefit obligation in excess of plan assets: |
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| Laclede Group | | Laclede Gas |
($ Millions) | 2014 | | 2013 | | 2014 | | 2013 |
Projected benefit obligation | $ | 692.5 | | | $ | 503.8 | | | $ | 543.7 | | | $ | 503.8 | |
|
Accumulated benefit obligation | 613.7 | | | 444.1 | | | 484.1 | | | 444.1 | |
|
Fair value of plan assets | 506.6 | | | 345.4 | | | 387.5 | | | 345.4 | |
|
Following are the targeted and actual plan assets by category as of September 30 of each year for Laclede Gas: |
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| Target | | 2014 | | 2013 | | | | | | | |
Actual | Actual | | | | | | | |
Growth Strategy | | | | | | | | | | | | |
Equity Markets | 45.5 | % | | 46.7 | % | | 45.9 | % | | | | | | | |
Commodities | 1.5 | % | | 1.5 | % | | 1.6 | % | | | | | | | |
Real Estate | 1.5 | % | | 1.5 | % | | 3 | % | | | | | | | |
Inflation-Indexed Securities | 1.5 | % | | 1.5 | % | | 1.4 | % | | | | | | | |
Debt Securities | 50 | % | | 48.7 | % | | 43.3 | % | | | | | | | |
Other* | — | % | | 0.1 | % | | 4.8 | % | | | | | | | |
Total | 100 | % | | 100 | % | | 100 | % | | | | | | | |
* Other investments in 2014 and 2013 consist of cash equivalents. |
Laclede Gas' investment policies are designed to maximize, to the extent possible, the funded status of the plan over time, and minimize volatility of funding and costs. The policy seeks to maximize investment returns consistent with these objectives and Laclede Gas' tolerance for risk. The duration of plan liabilities and the impact of potential changes in asset values on the funded status are fundamental considerations in the selection of plan assets. Outside investment management specialists are utilized in each asset class. Such specialists are provided with guidelines, where appropriate, designed to ensure that the investment portfolio is managed in accordance with the policy. The policy seeks to avoid significant concentrations of risk by investing in a diversified portfolio of assets. Investments in corporate, US government and agencies, and, to a lesser extent, international debt securities seek to provide duration matching with plan liabilities, and typically have investment grade ratings and reflect allocations across various entities and industries. During 2012, exposures to additional asset types were added to the target portfolio: commodities, real estate and inflation-indexed securities. The investment policy permits the use of derivative instruments, which may be used to achieve the desired market exposure of an index, adjust portfolio duration, or rebalance the total portfolio to the target asset allocation. The Growth Strategy utilizes a combination of derivative instruments and debt securities to achieve diversified exposure to equity and other markets while generating returns from the fixed-income investments and providing further duration matching with the liabilities. The assets acquired with the MGE pension plan include diversified funds that are equity-oriented and larger holdings of cash. These are being evaluated along with the liabilities of the MGE plan. Performance and compliance with the guidelines is regularly monitored. The policy calls for increased allocations to debt securities as the funded status improves. |
Following are the targeted and actual plan assets by category as of September 30, 2014 for Alagasco: |
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| Target | | 2014 | | | | | | | | | | |
Actual | | | | | | | | | | |
Equity Markets | 46 | % | | 46 | % | | | | | | | | | | |
Debt Securities | 33 | % | | 29 | % | | | | | | | | | | |
Other | 21 | % | | 25 | % | | | | | | | | | | |
Total | 100 | % | | 100 | % | | | | | | | | | | |
* Other investments in 2014 includes cash and cash equivalents, hedge funds, real estate, and all asset funds, which can invest in equities or fixed income. |
Alagasco employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets with a prudent level of risk. Risk tolerance is established through consideration of plan liabilities, plan funded status, corporate financial condition and market conditions. Alagasco has developed an investment strategy that focuses on asset allocation, diversification and quality guidelines. The investment goals are to obtain an adequate level of return to meet future obligations of the plan by providing above average risk-adjusted returns with a risk exposure in the mid-range of comparable funds. Investment managers are retained Alagasco to manage separate pools of assets. Funds are allocated to such managers in order to achieve an appropriate, diversified, and balanced asset mix. Comparative market and peer group benchmarks are utilized to ensure that investment managers are performing satisfactorily. Alagasco seeks to maintain an appropriate level of diversification to minimize the risk of large losses in a single asset class. Accordingly, plan assets for the pension plans and the postretirement health care and life insurance benefit plan do not have a concentration of assets in a single entity, industry, country, commodity or class of investment fund. |
Following are expected pension benefit payments for the succeeding five fiscal years, and in aggregate for the five years thereafter for Laclede Group: |
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($ Millions) | | | Pensions from | | Pensions from | | | | |
Pensions from | Laclede Gas | Alagasco | | | | |
Qualified Trust | Funds | Funds | | | | |
2015 | $ | 22.3 | | | $ | 0.5 | | | $ | 9.9 | | | | | |
| | | |
2016 | 25.2 | | | 0.5 | | | 10.2 | | | | | |
| | | |
2017 | 27 | | | 0.6 | | | 10.6 | | | | | |
| | | |
2018 | 30.6 | | | 0.6 | | | 10.6 | | | | | |
| | | |
2019 | 32.9 | | | 0.7 | | | 11.2 | | | | | |
| | | |
2020 – 2024 | 224.4 | | | 4.4 | | | 58.7 | | | | | |
| | | |
Following are expected pension benefit payments for the succeeding five fiscal years, and in aggregate for the five years thereafter for Laclede Gas: |
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| | | | | | | | | | | | | | | |
($ Millions) | | | Pensions from | | | | | | | | |
Pensions from | Laclede Gas | | | | | | | | |
Qualified Trust | Funds | | | | | | | | |
2015 | $ | 22.3 | | | $ | 0.5 | | | | | | | | | |
| | | | | | | |
2016 | 25.2 | | | 0.5 | | | | | | | | | |
| | | | | | | |
2017 | 27 | | | 0.6 | | | | | | | | | |
| | | | | | | |
2018 | 30.6 | | | 0.6 | | | | | | | | | |
| | | | | | | |
2019 | 32.9 | | | 0.7 | | | | | | | | | |
| | | | | | | |
2020 – 2024 | 224.4 | | | 4.4 | | | | | | | | | |
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The funding policy of Laclede Gas is to contribute an amount not less than the minimum required by government funding standards, nor more than the maximum deductible amount for federal income tax purposes. Contributions to the pension plans in fiscal year 2015 are anticipated to be $26.4 into the qualified trusts, and $0.5 into the non-qualified plans. |
Postretirement Benefits |
Laclede Gas provides certain life insurance benefits at retirement. Medical insurance is available after early retirement until age 65. The transition obligation not yet includible in postretirement benefit cost is being amortized over 20 years. Postretirement benefit costs in 2014, 2013, and 2012 amounted to $9.1, $9.5, and $9.5, respectively, including amounts charged to construction. |
Net periodic postretirement benefit costs consisted of the following components: |
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| | | | | | | | | | | | | | | |
($ Millions) | | | | | | | | | |
Laclede Group | 2014* | | 2013 | | 2012 | | | | |
Service cost – benefits earned during the period | $ | 11.3 | | | $ | 10.2 | | | $ | 8.1 | | | | | |
| | | |
Interest cost on accumulated postretirement benefit obligation | 8.9 | | | 5.2 | | | 5.5 | | | | | |
| | | |
Expected return on plan assets | (7.3 | ) | | (4.5 | ) | | (4.0 | ) | | | | |
Amortization of prior other comprehensive loss | (0.2 | ) | | — | | | — | | | | | |
| | | |
Amortization of transition obligation | — | | | 0.1 | | | 0.1 | | | | | |
| | | |
Amortization of prior service credit | — | | | — | | | (2.1 | ) | | | | |
| | | |
Amortization of actuarial loss | 6 | | | 5.3 | | | 4.3 | | | | | |
| | | |
Sub-total | 18.7 | | | 16.3 | | | 11.9 | | | | | |
| | | |
Regulatory adjustment | (9.6 | ) | | (6.8 | ) | | (2.4 | ) | | | | |
Net postretirement benefit cost | $ | 9.1 | | | $ | 9.5 | | | $ | 9.5 | | | | | |
| | | |
| | | | | | | | | |
Laclede Gas | 2014 | | 2013 | | 2012 | | | | |
Service cost – benefits earned during the period | $ | 11.2 | | | $ | 10.2 | | | $ | 8.1 | | | | | |
| | | |
Interest cost on accumulated postretirement benefit obligation | 8.7 | | | 5.2 | | | 5.5 | | | | | |
| | | |
Expected return on plan assets | (6.8 | ) | | (4.5 | ) | | (4.0 | ) | | | | |
Amortization of transition obligation | — | | | 0.1 | | | 0.1 | | | | | |
| | | |
Amortization of prior service credit | — | | | — | | | (2.1 | ) | | | | |
| | | |
Amortization of actuarial loss | 6 | | | 5.3 | | | 4.3 | | | | | |
| | | |
Sub-total | 19.1 | | | 16.3 | | | 11.9 | | | | | |
| | | |
Regulatory adjustment | (9.6 | ) | | (6.8 | ) | | (2.4 | ) | | | | |
Net postretirement benefit cost | $ | 9.5 | | | $ | 9.5 | | | $ | 9.5 | | | | | |
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* | Includes Alagasco. | | | | | | | | | | | | | | |
Other changes in plan assets and postretirement benefit obligations recognized in other comprehensive income include the following: |
| | | | |
| | | | | | | | | | | | | | | |
($ Millions) | | | | | | | | | |
Laclede Group | 2014* | | 2013 | | 2012 | | | | |
Current year actuarial (gain) loss | $ | (3.1 | ) | | $ | 16.3 | | | $ | 10.1 | | | | | |
| | | |
Amortization of actuarial loss | (6.0 | ) | | (5.3 | ) | | (4.3 | ) | | | | |
Amortization of prior service credit | 2.5 | | | — | | | 2.1 | | | | | |
| | | |
Amortization of transition obligation | — | | | (0.1 | ) | | (0.1 | ) | | | | |
| | | |
Sub-total | (6.6 | ) | | 10.9 | | | 7.8 | | | | | |
| | | |
Regulatory adjustment | 6.6 | | | (10.9 | ) | | (7.8 | ) | | | | |
| | | |
Total recognized in other comprehensive income | $ | — | | | $ | — | | | $ | — | | | | | |
| | | |
| | | | | | | | | |
Laclede Gas | 2014 | | 2013 | | 2012 | | | | |
Current year actuarial (gain) loss | $ | (4.2 | ) | | $ | 16.3 | | | $ | 10.1 | | | | | |
| | | |
Amortization of actuarial loss | (6.0 | ) | | (5.3 | ) | | (4.3 | ) | | | | |
Amortization of prior service credit | 2.5 | | | — | | | 2.1 | | | | | |
| | | |
Amortization of transition obligation | — | | | (0.1 | ) | | (0.1 | ) | | | | |
| | | |
Sub-total | (7.7 | ) | | 10.9 | | | 7.8 | | | | | |
| | | |
Regulatory adjustment | 7.7 | | | (10.9 | ) | | (7.8 | ) | | | | |
| | | |
Total recognized in other comprehensive income | $ | — | | | $ | — | | | $ | — | | | | | |
| | | |
| | | | | | | | | | | | | | | |
* | Includes Alagasco. | | | | | | | | | | | | | | |
Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains and losses not yet includible in postretirement benefit cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the accumulated postretirement benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. The recovery in rates for Laclede Gas' postretirement benefit plans is based on an annual allowance of $7.6 effective August 1, 2007 and $9.5 effective January 1, 2011. The difference between these amounts and postretirement benefit cost based on the above and that otherwise would be included in the Statements of Consolidated Income and Statements of Consolidated Comprehensive Income is deferred as a regulatory asset or regulatory liability. |
The following table sets forth the reconciliation of the beginning and ending balances of the postretirement benefit obligation at September 30: |
|
| | | | | | | | | | | | | | | |
| Laclede Group | | Laclede Gas |
($ Millions) | 2014* | | 2013 | | 2014 | | 2013 |
Benefit obligation, beginning of year | $ | 180.1 | | | $ | 127.2 | | | $ | 180.1 | | | $ | 127.2 | |
|
Service cost | 11.3 | | | 10.2 | | | 11.2 | | | 10.2 | |
|
Interest cost | 8.9 | | | 5.2 | | | 8.7 | | | 5.2 | |
|
Actuarial loss (gain) | 1.2 | | | 17.5 | | | 2.2 | | | 17.5 | |
|
Plan amendments | 2.5 | | | — | | | 2.5 | | | — | |
|
MGE acquisition | — | | | 28.4 | | | — | | | 28.4 | |
|
Alagasco acquisition | 61.8 | | | — | | | — | | | — | |
|
Gross benefits paid | (7.3 | ) | | (8.4 | ) | | (6.8 | ) | | (8.4 | ) |
Benefit obligation, end of year | $ | 258.5 | | | $ | 180.1 | | | $ | 197.9 | | | $ | 180.1 | |
|
| | | | | | | | | | | | | | | |
* | Includes Alagasco. | | | | | | | | | | | | | | |
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets at September 30: |
|
| | | | | | | | | | | | | | | |
| Laclede Group | | Laclede Gas |
($ Millions) | 2014* | | 2013 | | 2014 | | 2013 |
Fair value of plan assets at beginning of year | $ | 111.6 | | | $ | 67.4 | | | $ | 111.6 | | | $ | 67.4 | |
|
Actual return on plan assets | 11.6 | | | 5.6 | | | 13.3 | | | 5.6 | |
|
Employer contributions | 19.1 | | | 16.6 | | | 19.1 | | | 16.6 | |
|
MGE acquisition | — | | | 30.4 | | | — | | | 30.4 | |
|
Alagasco acquisition | 87.5 | | | — | | | — | | | — | |
|
Gross benefits paid | (7.3 | ) | | (8.4 | ) | | (6.8 | ) | | (8.4 | ) |
Fair value of plan assets, end of year | $ | 222.5 | | | $ | 111.6 | | | $ | 137.2 | | | $ | 111.6 | |
|
Funded status of plans, end of year | $ | (36.0 | ) | | $ | (68.5 | ) | | $ | (60.7 | ) | | $ | (68.5 | ) |
| | | | | | | | | | | | | | | |
* | Includes Alagasco. | | | | | | | | | | | | | | |
The following table sets forth the amounts recognized in the Balance Sheets at September 30: |
|
| | | | | | | | | | | | | | | |
| Laclede Group | | Laclede Gas |
($ Millions) | 2014* | | 2013 | | 2014 | | 2013 |
Non-current assets | $ | 25 | | | $ | 2.5 | | | $ | 0.3 | | | $ | 2.5 | |
|
Current liabilities | (0.3 | ) | | (0.3 | ) | | (0.3 | ) | | (0.3 | ) |
Non-current liabilities | (60.7 | ) | | (70.7 | ) | | (60.7 | ) | | (70.7 | ) |
Total | $ | (36.0 | ) | | $ | (68.5 | ) | | $ | (60.7 | ) | | $ | (68.5 | ) |
Pre-tax amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic postretirement benefit cost consist of: | | | | | | | |
Net actuarial loss | $ | 54.4 | | | $ | 63.6 | | | $ | 53.3 | | | $ | 63.6 | |
|
Prior service credit | 2.5 | | | — | | | 2.5 | | | — | |
|
Transition obligation | — | | | — | | | — | | | — | |
|
Sub-total | 56.9 | | | 63.6 | | | 55.8 | | | 63.6 | |
|
Adjustments for amounts included in Regulatory Assets | (56.9 | ) | | (63.6 | ) | | (55.8 | ) | | (63.6 | ) |
Total | $ | — | | | $ | — | | | $ | — | | | $ | — | |
|
| | | | | | | | | | | | | | | |
* | Includes Alagasco. | | | | | | | | | | | | | | |
At September 30, 2014, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive income into net periodic postretirement benefit cost during fiscal year 2015: |
| | | | | | | | |
| | | | | | | | | | | | | | | |
| Laclede Group | | Laclede Gas | | | | | | | | |
($ Millions) | 2015* | | 2015 | | | | | | | | |
Amortization of net actuarial loss | $ | 5.1 | | | $ | 5.1 | | | | | | | | | |
| | | | | | | |
Amortization of prior service cost | 0.8 | | | 0.8 | | | | | | | | | |
| | | | | | | |
Sub-total | 5.9 | | | 5.9 | | | | | | | | | |
| | | | | | | |
Regulatory adjustment | (5.9 | ) | | (5.9 | ) | | | | | | | | |
Total | $ | — | | | $ | — | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | |
* | Includes Alagasco. | | | | | | | | | | | | | | |
The assumptions used to calculate net periodic postretirement benefit costs for Laclede Gas are as follows: |
| | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | | | | |
Weighted average discount rate Laclede Gas plans | 4.60% | | 3.80% | | 5.05% | | | | | | | | | | |
Weighted average discount rate MGE plans | 4.95% | | 5.00% | | —% | | | | | | | | | | |
Weighted average rate of future compensation increase * | 3.00% | | 3.00% | | 3.00% | | | | | | | | | | |
Expected long-term rate of return on plan assets - Laclede Gas plans | 6.25% / 7.75% | | 7.75% | | 7.75% | | | | | | | | | | |
Expected long-term rate of return on plan assets - MGE plans | 3.75% / 5.75% | | 5.75% | | —% | | | | | | | | | | |
The assumptions used to calculate net periodic postretirement benefit costs for Alagasco are as follows: |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | | | | | | | | | | | | | |
Weighted average discount rate | 4.25% | | | | | | | | | | | | | | |
Expected long-term rate of return on plan assets | 4.75% / 7.50% | | | | | | | | | | | | | | |
The weighted average discount rate is based on long-term, high quality bond indices at the measurement date. The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing historical experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each class. The expected return is a long-term assumption that generally does not change annually. However, in 2012 and 2011, the expected return assumption was adjusted to reflect capital market volatility in recent years. |
The assumptions used to calculate the accumulated postretirement benefit obligations are as follows: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | |
Weighted average discount rate - Laclede Gas plans | 4.15% | | 4.60% | | | | | | | | | | | | |
Weighted average discount rate - MGE Plans | 4.40% | | 4.95% | | | | | | | | | | | | |
Weighted average rate of future compensation increase | 3.00% | | 3.00% | | | | | | | | | | | | |
The assumptions used to calculate the accumulated postretirement benefit obligations for Alagasco are as follows: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | |
Weighted average discount rate | 4.40% | | —% | | | | | | | | | | | | |
The assumed medical cost trend rates at September 30 are as follows: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | |
Medical cost trend assumed for next year - Laclede Gas & MGE | 7.50% | | 7.50% | | | | | | | | | | | | |
Medical cost trend assumed for next year - Alagasco | 7.25% | | —% | | | | | | | | | | | | |
Rate to which the medical cost trend rate is assumed to decline (the ultimate medical cost trend rate) | 5.00% | | 5.00% | | | | | | | | | | | | |
Year the rate reaches the ultimate trend | 2020 | | 2020 | | | | | | | | | | | | |
The following table presents the effect of an assumed 1% change in the assumed medical cost trend rate: |
| | | | | | | | |
| | | | | | | | | | | | | | | |
($ Millions) | 1% Increase | | 1% Decrease | | | | | | | | |
Laclede Group | | | | | | | | | | | |
Effect on net periodic postretirement benefit cost | $ | 1.4 | | | $ | (1.3 | ) | | | | | | | | |
| | | | | | | |
Effect on accumulated postretirement benefit obligation | 7.1 | | | (6.7 | ) | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | |
Laclede Gas | | | | | | | | | | | |
Effect on net periodic postretirement benefit cost | $ | 1.4 | | | $ | (1.3 | ) | | | | | | | | |
| | | | | | | |
Effect on accumulated postretirement benefit obligation | 6.4 | | | (5.9 | ) | | | | | | | | |
| | | | | | | |
Following are the targeted and actual plan assets by category as of September 30 of each year for Laclede Gas: |
| | | | | | | |
| | | | | | | | | | | | | | | |
| Target | | 2014 | | 2013 | | | | | | | |
Actual | Actual | | | | | | | |
Equity Securities | 60 | % | | 59 | % | | 59 | % | | | | | | | |
Debt Securities | 40 | % | | 39 | % | | 39 | % | | | | | | | |
Other | — | % | | 2 | % | | 2 | % | | | | | | | |
Total | 100 | % | | 100 | % | | 100 | % | | | | | | | |
Following are the targeted and actual plan assets by category as of September 30, 2014 for Alagasco: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Target | | 2014 | | | | | | | | | | | | |
Actual | | | | | | | | | | | | |
Equity Securities | 60.00% | | 60.00% | | | | | | | | | | | | |
Debt Securities | 40.00% | | 40.00% | | | | | | | | | | | | |
Other | —% | | —% | | | | | | | | | | | | |
Total | 100.00% | | 100.00% | | | | | | | | | | | | |
Missouri state law provides for the recovery in rates of costs accrued pursuant to GAAP provided that such costs are funded through an independent, external funding mechanism. Laclede Gas established Voluntary Employees’ Beneficiary Association and Rabbi Trusts as its external funding mechanisms. Laclede Gas’ investment policy seeks to maximize investment returns consistent with Laclede Gas' tolerance for risk. Outside investment management specialists are utilized in each asset class. Such specialists are provided with guidelines, where appropriate, designed to ensure that the investment portfolio is managed in accordance with policy. Performance and compliance with the guidelines is regularly monitored. Laclede Gas' current investment policy targets an asset allocation of 60% to equity securities and 40% to debt securities, excluding cash held in short-term debt securities for the purpose of making benefit payments. Laclede Gas currently invests in a mutual fund which is rebalanced on an ongoing basis to the target allocation. The mutual fund is diversified across US stock and bond markets. |
Following are expected postretirement benefit payments for the succeeding five fiscal years, and in aggregate for the five years thereafter for Laclede Group: |
| | | | |
| | | | | | | | | | | | | | | |
($ Millions) | Benefits Paid | | Benefits Paid | | Benefits Paid | | | | |
from | from Laclede Gas | from Alagasco Funds | | | | |
Qualified Trust | Funds | | | | | |
2015 | $ | 9.7 | | | $ | 0.3 | | | $ | 3.8 | | | | | |
| | | |
2016 | 10.6 | | | 0.3 | | | 3.8 | | | | | |
| | | |
2017 | 11.5 | | | 0.3 | | | 3.8 | | | | | |
| | | |
2018 | 12.5 | | | 0.4 | | | 3.8 | | | | | |
| | | |
2019 | 13.9 | | | 0.4 | | | 3.8 | | | | | |
| | | |
2020 – 2024 | 87 | | | 2.1 | | | 18.6 | | | | | |
| | | |
|
Following are expected postretirement benefit payments for the succeeding five fiscal years, and in aggregate for the five years thereafter for Laclede Gas: |
| | | | | | | | |
| | | | | | | | | | | | | | | |
($ Millions) | Benefits Paid | | Benefits Paid | | | | | | | | |
from | from Laclede Gas | | | | | | | | |
Qualified Trust | Funds | | | | | | | | |
2015 | $ | 9.7 | | | $ | 0.3 | | | | | | | | | |
| | | | | | | |
2016 | 10.6 | | | 0.3 | | | | | | | | | |
| | | | | | | |
2017 | 11.5 | | | 0.3 | | | | | | | | | |
| | | | | | | |
2018 | 12.5 | | | 0.4 | | | | | | | | | |
| | | | | | | |
2019 | 13.9 | | | 0.4 | | | | | | | | | |
| | | | | | | |
2020 – 2024 | 87 | | | 2.1 | | | | | | | | | |
| | | | | | | |
|
Laclede Gas' funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. Contributions to the postretirement plans in fiscal year 2015 are anticipated to be $18.1 to the qualified trusts, and $0.3 paid directly to participants from Laclede Gas funds. |
Other Plans |
Laclede Gas sponsors 401(k) plans that cover substantially all employees. The plans allow employees to contribute a portion of their base pay in accordance with specific guidelines. Laclede Gas provides a match of such contributions within specific limits. The cost of the defined contribution plans of Laclede Gas amounted to $6.7, $5.0, and $3.8 for fiscal years 2014, 2013, and 2012, respectively. |
Fair Value Measurements of Pension and Other Postretirement Plan Assets |
Laclede Group |
The table below categorizes the fair value measurements of the Laclede Group's pension plan assets: |
|
| | | | | | | | | | | | | | | |
($ Millions) | Quoted Prices in | | Significant | | Significant | | Total |
Active Markets | Observable | Unobservable |
(Level 1) | Inputs | Inputs |
| (Level 2) | (Level 3) |
As of September 30, 2014 | | | | | | | |
Cash and cash equivalents | $ | 8.6 | | | $ | 1.6 | | | $ | — | | | $ | 10.2 | |
|
Stock/Bond mutual fund | 54.2 | | | 74.7 | | | 9.3 | | | 138.2 | |
|
Debt Securities | | | | | | | |
US bond mutual funds | 73.6 | | | — | | | — | | | 73.6 | |
|
US government | — | | | 64.5 | | | — | | | 64.5 | |
|
US corporate | — | | | 164 | | | — | | | 164 | |
|
US municipal | — | | | 8.2 | | | — | | | 8.2 | |
|
International | — | | | 35.5 | | | — | | | 35.5 | |
|
Alternative | — | | | 13.4 | | | — | | | $ | 13.4 | |
|
Derivative instruments (a) | — | | | (1.0 | ) | | — | | | (1.0 | ) |
|
Total | $ | 136.4 | | | $ | 360.9 | | | $ | 9.3 | | | $ | 506.6 | |
|
| | | | | | | |
As of September 30, 2013 | | | | | | | |
Cash and cash equivalents | $ | 18.2 | | | $ | — | | | $ | — | | | $ | 18.2 | |
|
Stock/Bond mutual fund | — | | | 115.8 | | | — | | | $ | 115.8 | |
|
Debt Securities | | | | | | | |
US bond mutual funds | 17.7 | | | — | | | — | | | $ | 17.7 | |
|
US government | — | | | 55.7 | | | — | | | $ | 55.7 | |
|
US corporate | — | | | 110.9 | | | — | | | $ | 110.9 | |
|
US municipal | — | | | 6.8 | | | — | | | $ | 6.8 | |
|
International | — | | | 21.6 | | | — | | | $ | 21.6 | |
|
Derivative instruments (b) | — | | | (1.3 | ) | | — | | | $ | (1.3 | ) |
|
Total | $ | 35.9 | | | $ | 309.5 | | | $ | — | | | $ | 345.4 | |
|
| | | | | | | | | | | | | | | |
(a) | Derivative assets of $2.9 net of cash margin payable of $3.9. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
(b) | Derivative assets of $4.2 net of cash margin payable of $5.5. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
(c) | The table below categorizes the fair value measurements of The Laclede Group's postretirement plan assets: | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
($ Millions) | Quoted Prices in | | Significant | | Significant | | Total |
Active Markets | Observable | Unobservable |
(Level 1) | Inputs | Inputs |
| (Level 2) | (Level 3) |
As of September 30, 2014 | | | | | | | |
Cash and cash equivalents | $ | 2.3 | | | $ | — | | | $ | — | | | $ | 2.3 | |
|
US stock/bond mutual fund | 213 | | | — | | | — | | | 213 | |
|
International Fund | 7.2 | | | — | | | — | | | 7.2 | |
|
Total | $ | 222.5 | | | $ | — | | | $ | — | | | $ | 222.5 | |
|
| | | | | | | |
As of September 30, 2013 | | | | | | | |
Cash and cash equivalents | $ | 1.4 | | | $ | — | | | $ | — | | | $ | 1.4 | |
|
US stock/bond mutual fund | 110.2 | | | — | | | — | | | 110.2 | |
|
Total | $ | 111.6 | | | $ | — | | | $ | — | | | $ | 111.6 | |
|
Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values of derivative instruments are calculated by investment managers who use valuation models that incorporate observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities. |
Laclede Gas |
The table below categorizes the fair value measurements of Laclede Gas' pension plan assets: |
|
| | | | | | | | | | | | | | | |
($ Millions) | Quoted Prices in | | Significant | | Significant | | Total |
Active Markets | Observable | Unobservable |
(Level 1) | Inputs | Inputs |
| (Level 2) | (Level 3) |
As of September 30, 2014 | | | | | | | |
Cash and cash equivalents | $ | 8.3 | | | $ | — | | | $ | — | | | $ | 8.3 | |
|
Stock/Bond mutual fund | — | | | 39.2 | | | 9.3 | | | 48.5 | |
|
Debt Securities | | | | | | | |
US bond mutual funds | 73.6 | | | — | | | — | | | 73.6 | |
|
US government | — | | | 60.5 | | | — | | | 60.5 | |
|
US corporate | — | | | 154.5 | | | — | | | 154.5 | |
|
US municipal | — | | | 8.2 | | | — | | | 8.2 | |
|
International | — | | | 34.8 | | | — | | | 34.8 | |
|
Derivative instruments (a) | — | | | (1.0 | ) | | — | | | (1.0 | ) |
|
Total | $ | 81.9 | | | $ | 296.2 | | | $ | 9.3 | | | $ | 387.4 | |
|
| | | | | | | |
As of September 30, 2013 | | | | | | | |
Cash and cash equivalents | $ | 18.2 | | | $ | — | | | $ | — | | | $ | 18.2 | |
|
Stock/Bond mutual fund | — | | | 115.8 | | | — | | | 115.8 | |
|
Debt Securities | | | | | | | |
US bond mutual funds | 17.7 | | | — | | | — | | | 17.7 | |
|
US government | — | | | 55.7 | | | — | | | 55.7 | |
|
US corporate | — | | | 110.9 | | | — | | | 110.9 | |
|
US municipal | — | | | 6.8 | | | — | | | 6.8 | |
|
International | — | | | 21.6 | | | — | | | 21.6 | |
|
Derivative instruments (b) | — | | | (1.3 | ) | | — | | | (1.3 | ) |
|
Total | $ | 35.9 | | | $ | 309.5 | | | $ | — | | | $ | 345.4 | |
|
| | | | | | | | | | | | | | | |
(a) | Derivative assets of $2.9 net of cash margin payable of $3.9. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
(b) | Derivative assets of $4.2 net of cash margin payable of $5.5. | | | | | | | | | | | | | | |
The table below categorizes the fair value measurements of Laclede Gas' postretirement plan assets: |
|
| | | | | | | | | | | | | | | |
($ Millions) | Quoted Prices in | | Significant | | Significant | | Total |
Active Markets | Observable | Unobservable |
(Level 1) | Inputs | Inputs |
| (Level 2) | (Level 3) |
As of September 30, 2014 | | | | | | | |
Cash and cash equivalents | $ | 2.3 | | | $ | — | | | $ | — | | | $ | 2.3 | |
|
US stock/bond mutual fund | 134.9 | | | — | | | — | | | 134.9 | |
|
Total | $ | 137.2 | | | $ | — | | | $ | — | | | $ | 137.2 | |
|
| | | | | | | |
As of September 30, 2013 | | | | | | | |
Cash and cash equivalents | $ | 1.4 | | | $ | — | | | $ | — | | | $ | 1.4 | |
|
US stock/bond mutual fund | 110.2 | | | — | | | — | | | 110.2 | |
|
Total | $ | 111.6 | | | $ | — | | | $ | — | | | $ | 111.6 | |
|
Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values of derivative instruments are calculated by investment managers who use valuation models that incorporate observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities. |
The table below details the change in level three investments for the year ended September 30, 2014: |
| | | |
| | | | | | | | | | | | | | | |
($ Millions) | | 1-Oct-13 | | Transfers in (out) of Level 3 | | 30-Sep-14 | | | |
Stock/Bond mutual fund | | $ | — | | | $ | 9.3 | | | $ | 9.3 | | | | |
| | |