| Retirement and Post-Retirement Employee Benefit Plans | Retirement and Post-Retirement Employee Benefit Plans We have both funded and unfunded noncontributory defined benefit plans that together cover most of our employees. We also maintain post-retirement plans that provide health care benefits to retired employees. Finally, we sponsor a defined contribution plan that cover substantially all employees. These plans are discussed in further detail below. As a rate regulated entity, we generally recover our pension costs in our rates over a period of up to 15 years. The amounts that have not yet been recognized in net periodic pension cost that have been recorded as regulatory assets are as follows: Defined Benefits Plan Supplemental Executive Retirement Plans Postretirement Plans Total (In thousands) September 30, 2017 Unrecognized prior service credit $ (1,278 ) $ — $ 1,309 $ 31 Unrecognized actuarial (gain) loss 62,388 42,170 (87,196 ) 17,362 $ 61,110 $ 42,170 $ (85,887 ) $ 17,393 September 30, 2016 Unrecognized prior service credit $ (1,509 ) $ — $ (2,880 ) $ (4,389 ) Unrecognized actuarial (gain) loss 127,028 51,558 (54,298 ) 124,288 $ 125,519 $ 51,558 $ (57,178 ) $ 119,899 Defined Benefit Plans Employee Pension Plan As of September 30, 2017 , we maintained one defined benefit plan, the Atmos Energy Corporation Pension Account Plan (the Plan). The assets of the Plan are held within the Atmos Energy Corporation Master Retirement Trust (the Master Trust). The Plan is a cash balance pension plan that was established effective January 1999 and covers most of the employees of Atmos Energy that were hired before September 30, 2010. The plan was closed to new participants effective October 1, 2010. Opening account balances were established for participants as of January 1999 equal to the present value of their respective accrued benefits under the pension plans which were previously in effect as of December 31, 1998. The Plan credits an allocation to each participant’s account at the end of each year according to a formula based on the participant’s age, service and total pay (excluding incentive pay). In addition, at the end of each year, a participant’s account is credited with interest on the employee’s prior year account balance. Participants are fully vested in their account balances after three years of service and may choose to receive their account balances as a lump sum or an annuity. Generally, our funding policy is to contribute annually an amount in accordance with the requirements of the Employee Retirement Income Security Act of 1974, including the funding requirements under the Pension Protection Act of 2006 (PPA). However, additional voluntary contributions are made from time to time as considered necessary. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. During fiscal 2017 and 2016 we contributed $5.0 million and $15.0 million in cash to the Plan to achieve a desired level of funding while maximizing the tax deductibility of this payment. Based upon market conditions at September 30, 2017 , the current funded position of the Plan and the funding requirements under the PPA, we do not anticipate a minimum required contribution for fiscal 2018 . However, we may consider whether a voluntary contribution is prudent to maintain certain funding levels. We make investment decisions and evaluate performance of the assets in the Master Trust on a medium-term horizon of at least three to five years. We also consider our current financial status when making recommendations and decisions regarding the Master Trust’s assets. Finally, we strive to ensure the Master Trust’s assets are appropriately invested to maintain an acceptable level of risk and meet the Master Trust’s long-term asset investment policy adopted by the Board of Directors. To achieve these objectives, we invest the Master Trust’s assets in equity securities, fixed income securities, interests in commingled pension trust funds, other investment assets and cash and cash equivalents. Investments in equity securities are diversified among the market’s various subsectors in an effort to diversify risk and maximize returns. Fixed income securities are invested in investment grade securities. Cash equivalents are invested in securities that either are short term (less than 180 days) or readily convertible to cash with modest risk. The following table presents asset allocation information for the Master Trust as of September 30, 2017 and 2016 . Targeted Allocation Range Actual Allocation September 30 Security Class 2017 2016 Domestic equities 35%-55% 43.9 % 40.5 % International equities 10%-20% 17.2 % 15.5 % Fixed income 5%-30% 10.6 % 11.2 % Company stock 0%-15% 11.8 % 15.1 % Other assets 0%-20% 16.5 % 17.7 % At September 30, 2017 and 2016 , the Plan held 716,700 and 956,700 shares of our common stock which represented 11.8 percent and 15.1 percent of total Plan assets. These shares generated dividend income for the Plan of approximately $1.7 million and $1.8 million during fiscal 2017 and 2016 . Our employee pension plan expenses and liabilities are determined on an actuarial basis and are affected by numerous assumptions and estimates including the market value of plan assets, estimates of the expected return on plan assets and assumed discount rates and demographic data. We review the estimates and assumptions underlying our employee pension plans annually based upon a September 30 measurement date. The development of our assumptions is fully described in our significant accounting policies in Note 2 . The actuarial assumptions used to determine the pension liability for the Plan was determined as of September 30, 2017 and 2016 and the actuarial assumptions used to determine the net periodic pension cost for the Plan was determined as of September 30, 2016 , 2015 and 2014 . On October 20, 2017 , the Society of Actuaries released its annually-updated mortality improvement scale for pension plans incorporating new assumptions surrounding life expectancies in the United States. As of September 30, 2017, we updated our assumed mortality rates to incorporate the updated mortality table. Additional assumptions are presented in the following table: Pension Liability Pension Cost 2017 2016 2017 2016 2015 Discount rate 3.89 % 3.73 % 3.73 % 4.55 % 4.43 % Rate of compensation increase 3.50 % 3.50 % 3.50 % 3.50 % 3.50 % Expected return on plan assets 6.75 % 7.00 % 7.00 % 7.00 % 7.25 % The following table presents the Plan’s accumulated benefit obligation, projected benefit obligation and funded status as of September 30, 2017 and 2016 : 2017 2016 (In thousands) Accumulated benefit obligation $ 505,355 $ 516,924 Change in projected benefit obligation: Benefit obligation at beginning of year $ 545,480 $ 508,599 Service cost 18,109 16,419 Interest cost 20,443 23,193 Actuarial (gain) loss (16,347 ) 41,847 Benefits paid (1) (34,230 ) (44,578 ) Benefit obligation at end of year 533,455 545,480 Change in plan assets: Fair value of plan assets at beginning of year 473,950 450,932 Actual return on plan assets 63,524 52,596 Employer contributions 5,000 15,000 Benefits paid (1) (34,230 ) (44,578 ) Fair value of plan assets at end of year 508,244 473,950 Reconciliation: Funded status (25,211 ) (71,530 ) Unrecognized prior service cost — — Unrecognized net loss — — Accrued pension cost $ (25,211 ) $ (71,530 ) (1) Includes $12.8 million of one-time payments to eligible deferred vested participants who elected to receive a lump-sum payout of their pension benefits during fiscal 2016. Net periodic pension cost for the Plan for fiscal 2017 , 2016 and 2015 is recorded as operating expense and included the following components: Fiscal Year Ended September 30 2017 2016 2015 (In thousands) Components of net periodic pension cost: Service cost $ 18,109 $ 16,419 $ 16,231 Interest cost 20,443 23,193 21,850 Expected return on assets (27,975 ) (27,522 ) (25,744 ) Amortization of prior service credit (231 ) (226 ) (192 ) Recognized actuarial loss 12,744 10,693 13,322 Net periodic pension cost $ 23,090 $ 22,557 $ 25,467 The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of September 30, 2017 and 2016 . As required by authoritative accounting literature, assets are categorized in their entirety based on the lowest level of input that is significant to the fair value measurement. The methods used to determine fair value for the assets held by the Plan are fully described in Note 2 . Investments in our common/collective trusts and limited partnerships that are measured at net asset value per share equivalent are not classified in the fair value hierarchy. The net asset value amounts presented are intended to reconcile the fair value hierarchy to the total investments. In addition to the assets shown below, the Plan had net accounts receivable of $0.6 million and $2.6 million at September 30, 2017 and 2016 which materially approximates fair value due to the short-term nature of these assets. Assets at Fair Value as of September 30, 2017 Level 1 Level 2 Level 3 Total (In thousands) Investments: Common stocks $ 164,910 $ — $ — $ 164,910 Money market funds — 9,588 — 9,588 Registered investment companies 64,102 — — 64,102 Government securities: Mortgage-backed securities — 15,664 — 15,664 U.S. treasuries 5,129 822 — 5,951 Corporate bonds — 32,314 — 32,314 Total investments at fair value $ 234,141 $ 58,388 $ — 292,529 Investments measured at net asset value: Common/collective trusts (1) 150,976 Limited partnerships (1) 64,135 Total investments at fair value $ 507,640 Assets at Fair Value as of September 30, 2016 Level 1 Level 2 Level 3 Total (In thousands) Investments: Common stocks $ 157,111 $ — $ — $ 157,111 Money market funds — 11,522 — 11,522 Registered investment companies 87,396 — — 87,396 Government securities: Mortgage-backed securities — 15,223 — 15,223 U.S. treasuries 4,704 863 — 5,567 Corporate bonds — 31,929 — 31,929 Total assets in the fair value hierarchy $ 249,211 $ 59,537 $ — 308,748 Investments measured at net asset value: Common/collective trusts (1) 105,124 Limited partnerships (1) 57,438 Total investments at fair value $ 471,310 (1) The fair value of our common/collective trusts and limited partnerships are measured using the net asset value per share practical expedient. There are no redemption restrictions, redemption notice periods or unfunded commitments for these investments. The redemption frequency is daily. Supplemental Executive Retirement Plans We have three nonqualified supplemental plans which provide additional pension, disability and death benefits to our officers, division presidents and certain other employees of the Company. The first plan is referred to as the Supplemental Executive Benefits Plan (SEBP) and covers our officers, division presidents and certain other employees of the Company who were employed on or before August 12, 1998. The SEBP is a defined benefit arrangement which provides a benefit equal to 75 percent of covered compensation under which benefits paid from the underlying qualified defined benefit plan are an offset to the benefits under the SEBP. In August 1998, we adopted the Supplemental Executive Retirement Plan (SERP) (formerly known as the Performance-Based Supplemental Executive Benefits Plan), which covers all officers or division presidents selected to participate in the plan between August 12, 1998 and August 5, 2009 and any corporate officer who was appointed to the Management Committee through December 31, 2016. The SERP is a defined benefit arrangement which provides a benefit equal to 60 percent of covered compensation under which benefits paid from the underlying qualified defined benefit plan are an offset to the benefits under the SERP. Effective August 5, 2009, we adopted a new defined benefit Supplemental Executive Retirement Plan (the 2009 SERP), for corporate officers, division presidents or any other employees selected at the discretion of the Board. Under the 2009 SERP, a nominal account has been established for each participant, to which the Company contributes at the end of each calendar year an amount equal to ten percent ( 25 percent for members of the Management Committee appointed on or after January 1, 2017) of the total of each participant’s base salary and cash incentive compensation earned during each prior calendar year, beginning December 31, 2009. The benefits vest after three years of service and attainment of age 55 and earn interest credits at the same annual rate as the Company’s Pension Account Plan (currently 4.69% ). Due to the departure of certain executives in February 2017, we recognized a settlement loss of $2.7 million associated with our SEBP and made an $8.6 million benefit payment during the fourth quarter of fiscal 2017. Similar to our employee pension plans, we review the estimates and assumptions underlying our supplemental plans annually based upon a September 30 measurement date using the same techniques as our employee pension plans. The actuarial assumptions used to determine the pension liability for the supplemental plans were determined as of September 30, 2017 and 2016 and the actuarial assumptions used to determine the net periodic pension cost for the supplemental plans were determined as of September 30, 2016 , 2015 and 2014 . These assumptions are presented in the following table: Pension Liability Pension Cost 2017 2016 2017 2016 2015 Discount rate 3.89 % 3.73 % 3.73 % 4.55 % 4.43 % Rate of compensation increase 3.50 % 3.50 % 3.50 % 3.50 % 3.50 % The following table presents the supplemental plans’ accumulated benefit obligation, projected benefit obligation and funded status as of September 30, 2017 and 2016 : 2017 2016 (In thousands) Accumulated benefit obligation $ 130,070 $ 137,616 Change in projected benefit obligation: Benefit obligation at beginning of year $ 142,574 $ 122,393 Service cost 2,756 2,371 Interest cost 4,744 5,185 Actuarial (gain) loss (2,452 ) 17,229 Benefits paid (4,588 ) (4,604 ) Settlements (8,554 ) — Benefit obligation at end of year 134,480 142,574 Change in plan assets: Fair value of plan assets at beginning of year — — Employer contribution 13,142 4,604 Benefits paid (4,588 ) (4,604 ) Settlements (8,554 ) — Fair value of plan assets at end of year — — Reconciliation: Funded status (134,480 ) (142,574 ) Unrecognized prior service cost — — Unrecognized net loss — — Accrued pension cost $ (134,480 ) $ (142,574 ) Assets for the supplemental plans are held in separate rabbi trusts. At September 30, 2017 and 2016 , assets held in the rabbi trusts consisted of available-for-sale securities of $42.9 million and $41.3 million , which are included in our fair value disclosures in Note 14 . Net periodic pension cost for the supplemental plans for fiscal 2017 , 2016 and 2015 is recorded as operating expense and included the following components: Fiscal Year Ended September 30 2017 2016 2015 (In thousands) Components of net periodic pension cost: Service cost $ 2,756 $ 2,371 $ 3,971 Interest cost 4,744 5,185 4,943 Amortization of transition asset — — — Amortization of prior service cost — — — Recognized actuarial loss 4,251 2,586 2,343 Settlements 2,685 — — Net periodic pension cost $ 14,436 $ 10,142 $ 11,257 Estimated Future Benefit Payments The following benefit payments for our defined benefit plans, which reflect expected future service, as appropriate, are expected to be paid in the following fiscal years: Pension Plan Supplemental Plans (In thousands) 2018 $ 32,173 $ 18,411 2019 32,903 23,000 2020 34,314 4,701 2021 36,487 4,609 2022 37,857 17,520 2023-2027 204,690 48,415 Postretirement Benefits We sponsor the Retiree Medical Plan for Retirees and Disabled Employees of Atmos Energy Corporation (the Atmos Retiree Medical Plan). This plan provides medical and prescription drug protection to all qualified participants based on their date of retirement. The Atmos Retiree Medical Plan provides different levels of benefits depending on the level of coverage chosen by the participants and the terms of predecessor plans; however, we generally pay 80 percent of the projected net claims and administrative costs and participants pay the remaining 20 percent of this cost. Effective January 1, 2015, for employees who had not met the participation requirements by September 30, 2009, the contribution rates for the Company will be limited to a three percent cost increase in claims and administrative costs each year, with the participant responsible for the additional costs. Generally, our funding policy is to contribute annually an amount in accordance with the requirements of ERISA. However, additional voluntary contributions are made annually as considered necessary. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. We expect to contribute between $10 million and $20 million to our postretirement benefits plan during fiscal 2018 . We maintain a formal investment policy with respect to the assets in our postretirement benefits plan to ensure the assets funding the postretirement benefit plan are appropriately invested to maintain an acceptable level of risk. We also consider our current financial status when making recommendations and decisions regarding the postretirement benefits plan. We currently invest the assets funding our postretirement benefit plan in diversified investment funds which consist of common stocks, preferred stocks and fixed income securities. The diversified investment funds may invest up to 75 percent of assets in common stocks and convertible securities. The following table presents asset allocation information for the postretirement benefit plan assets as of September 30, 2017 and 2016 . Actual Allocation September 30 Security Class 2017 2016 Diversified investment funds 97.5 % 97.2 % Cash and cash equivalents 2.5 % 2.8 % Similar to our employee pension and supplemental plans, we review the estimates and assumptions underlying our postretirement benefit plan annually based upon a September 30 measurement date using the same techniques as our employee pension plans. The actuarial assumptions used to determine the pension liability for our postretirement plan were determined as of September 30, 2017 and 2016 and the actuarial assumptions used to determine the net periodic pension cost for the postretirement plan were determined as of September 30, 2016 , 2015 and 2014 . The assumptions are presented in the following table: Postretirement Liability Postretirement Cost 2017 2016 2017 2016 2015 Discount rate 3.89 % 3.73 % 3.73 % 4.55 % 4.43 % Expected return on plan assets 4.29 % 4.45 % 4.45 % 4.45 % 4.60 % Initial trend rate 7.00 % 7.50 % 7.50 % 7.50 % 7.50 % Ultimate trend rate 5.00 % 5.00 % 5.00 % 5.00 % 5.00 % Ultimate trend reached in 2022 2022 2022 2021 2020 The following table presents the postretirement plan’s benefit obligation and funded status as of September 30, 2017 and 2016 : 2017 2016 (In thousands) Change in benefit obligation: Benefit obligation at beginning of year $ 279,222 $ 267,179 Service cost 12,436 10,823 Interest cost 10,679 12,424 Plan participants’ contributions 4,936 4,289 Actuarial gain (21,750 ) (1,052 ) Benefits paid (13,970 ) (14,441 ) Plan amendments 2,545 — Benefit obligation at end of year 274,098 279,222 Change in plan assets: Fair value of plan assets at beginning of year 158,977 138,009 Actual return on plan assets 21,160 14,528 Employer contributions 13,687 16,592 Plan participants’ contributions 4,936 4,289 Benefits paid (13,970 ) (14,441 ) Fair value of plan assets at end of year 184,790 158,977 Reconciliation: Funded status (89,308 ) (120,245 ) Unrecognized transition obligation — — Unrecognized prior service cost — — Unrecognized net loss — — Accrued postretirement cost $ (89,308 ) $ (120,245 ) Net periodic postretirement cost for fiscal 2017 , 2016 and 2015 is recorded as operating expense and included the components presented below. Fiscal Year Ended September 30 2017 2016 2015 (In thousands) Components of net periodic postretirement cost: Service cost $ 12,436 $ 10,823 $ 15,583 Interest cost 10,679 12,424 14,385 Expected return on assets (7,185 ) (6,264 ) (6,431 ) Amortization of transition obligation — 82 272 Amortization of prior service credit (1,644 ) (1,644 ) (1,644 ) Recognized actuarial (gain) loss (2,827 ) (2,167 ) — Net periodic postretirement cost $ 11,459 $ 13,254 $ 22,165 Assumed health care cost trend rates have a significant effect on the amounts reported for the plan. A one-percentage point change in assumed health care cost trend rates would have the following effects on the latest actuarial calculations: One-Percentage Point Increase One-Percentage Point Decrease (In thousands) Effect on total service and interest cost components $ 4,526 $ (3,584 ) Effect on postretirement benefit obligation $ 41,259 $ (33,863 ) We are currently recovering other postretirement benefits costs through our regulated rates in substantially all of our service areas under accrual accounting as prescribed by accounting principles generally accepted in the United States. Other postretirement benefits costs have been specifically addressed in rate orders in each jurisdiction served by our Kentucky/Mid-States, West Texas, Mid-Tex and Mississippi Divisions as well as our Kansas jurisdiction and Atmos Pipeline – Texas or have been included in a rate case and not disallowed. Management believes that this accounting method is appropriate and will continue to seek rate recovery of accrual-based expenses in its ratemaking jurisdictions that have not yet approved the recovery of these expenses. The following tables set forth by level, within the fair value hierarchy, the Retiree Medical Plan’s assets at fair value as of September 30, 2017 and 2016 . The methods used to determine fair value for the assets held by the Retiree Medical Plan are fully described in Note 2 . Assets at Fair Value as of September 30, 2017 Level 1 Level 2 Level 3 Total (In thousands) Investments: Money market funds $ — $ 4,534 $ — $ 4,534 Registered investment companies 180,256 — — 180,256 Total investments at fair value $ 180,256 $ 4,534 $ — $ 184,790 Assets at Fair Value as of September 30, 2016 Level 1 Level 2 Level 3 Total (In thousands) Investments: Money market funds $ — $ 4,470 $ — $ 4,470 Registered investment companies 154,507 — — 154,507 Total investments at fair value $ 154,507 $ 4,470 $ — $ 158,977 Estimated Future Benefit Payments The following benefit payments paid by us, retirees and prescription drug subsidy payments for our postretirement benefit plans, which reflect expected future service, as appropriate, are expected to be paid in the following fiscal years. Company payments for fiscal 2017 include contributions to our postretirement plan trusts. Company Payments Retiree Payments Subsidy Payments Total Postretirement Benefits (In thousands) 2018 $ 15,387 $ 3,392 $ — $ 18,779 2019 12,140 3,751 — 15,891 2020 12,658 4,171 — 16,829 2021 13,571 4,704 — 18,275 2022 14,523 5,282 — 19,805 2023-2027 85,118 35,165 — 120,283 Defined Contribution Plan The Atmos Energy Corporation Retirement Savings Plan and Trust (the Retirement Savings Plan) covers substantially all employees and is subject to the provisions of Section 401(k) of the Internal Revenue Code. Effective January 1, 2007, employees automatically become participants of the Retirement Savings Plan on the date of employment. Participants may elect a salary reduction up to a maximum of 65 percent of eligible compensation, as defined by the Plan, not to exceed the maximum allowed by the Internal Revenue Service. New participants are automatically enrolled in the Plan at a salary reduction amount of four percent of eligible compensation, from which they may opt out. We match 100 percent of a participant’s contributions, limited to four percent of the participant’s salary. Participants are eligible to receive matching contributions after completing one year of service, in which they are immediately vested. Participants are also permitted to take out a loan against their accounts subject to certain restrictions. Employees hired on or after October 1, 2010 participate in the enhanced plan in which participants receive a fixed annual contribution of four percent of eligible earnings to their Retirement Savings Plan account. Participants will continue to be eligible for company matching contributions of up to four percent of their eligible earnings and will be fully vested in the fixed annual contribution after three years of service. Prior to December 31, 2015, we also maintained the AEH 401(k) Profit-Sharing Plan, which covered substantially all AEH employees. Matching and fixed annual contributions to the Retirement Savings Plan and the AEH 401(k) Profit-Sharing Plan are expensed as incurred and amounted to $15.4 million , $15.8 million and $14.8 million for fiscal years 2017 , 2016 and 2015 . At September 30, 2017 and 2016 , the Retirement Savings Plan held 3.7 percent and 4.2 percent of our outstanding common stock. |
