10. RETIREMENT PLANS

Barnwell sponsors a noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all of its U.S. employees, with benefits based on years of service and the employee’s highest consecutive five-year average earnings. Barnwell’s funding policy is intended to provide for both benefits attributed to service to date and for those expected to be earned in the future. In addition, Barnwell sponsors a Supplemental Employee Retirement Plan (“SERP”), a noncontributory supplemental retirement benefit plan which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan, and a postretirement medical insurance benefits plan (“Postretirement Medical”) covering U.S. employees who have attained at least 20 years of service with Barnwell and served at least 10 years at the position of Vice President or higher, their spouses and qualifying dependents.

The following tables detail the changes in benefit obligations, fair values of plan assets and reconciliations of the funded status of the retirement plans:


	Pension						SERP						Postretirement Medical
							September 30,
	2013			2012			2013			2012			2013			2012
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year	$	7,753,000		$	7,045,000		$	1,512,000		$	1,310,000		$	1,242,000		$	1,031,000
Service cost	272,000			302,000			52,000			50,000			14,000			12,000
Interest cost	299,000			323,000			58,000			61,000			50,000			49,000
Actuarial (gain) loss	(1,289,000		)	352,000			(294,000		)	97,000			(233,000		)	150,000
Benefits paid	(169,000		)	(261,000		)	(6,000		)	(6,000		)	-			-
Administrative expenses paid	(8,000		)	(8,000		)	-			-			-			-
Benefit obligation at end of year	6,858,000			7,753,000			1,322,000			1,512,000			1,073,000			1,242,000

Change in Plan Assets:
Fair value of plan assets at beginning of year	5,388,000			4,214,000			-			-			-			-
Actual return on plan assets	300,000			773,000			-			-			-			-
Employer contributions	600,000			670,000			6,000			6,000			-			-
Benefits paid	(169,000		)	(261,000		)	(6,000		)	(6,000		)	-			-
Administrative expenses paid	(8,000		)	(8,000		)	-			-			-			-
Fair value of plan assets at end of year	6,111,000			5,388,000			-			-			-			-
Funded status	$	(747,000	)	$	(2,365,000	)	$	(1,322,000	)	$	(1,512,000	)	$	(1,073,000	)	$	(1,242,000	)

Amounts recognized in the Consolidated Balance Sheets:
Current liabilities	$	-		$	-		$	(5,000	)	$	(5,000	)	$	-		$	-
Noncurrent liabilities	(747,000		)	(2,365,000		)	(1,317,000		)	(1,507,000		)	(1,073,000		)	(1,242,000		)
Net amount	$	(747,000	)	$	(2,365,000	)	$	(1,322,000	)	$	(1,512,000	)	$	(1,073,000	)	$	(1,242,000	)

Amounts recognized in accumulated other comprehensive income:
Net actuarial loss (gain)	$	1,254,000		$	2,559,000		$	200,000		$	514,000		$	(263,000	)	$	(30,000	)
Prior service cost (credit)	88,000			93,000			(87,000		)	(92,000		)	12,000			148,000
Accumulated other comprehensive loss (income)	$	1,342,000		$	2,652,000		$	113,000		$	422,000		$	(251,000	)	$	118,000

Barnwell estimates that it will make approximately $600,000 in contributions to the Pension Plan during fiscal 2014. The SERP and Postretirement Medical plans are unfunded and Barnwell will fund benefits when payments are made. Barnwell does not expect to make any benefit payments under the Postretirement Medical plan during fiscal 2014 and expected payments under the SERP for fiscal 2014 are not significant. Fluctuations in actual market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods.

The following table presents the weighted-average assumptions used to determine benefit obligations and net benefit costs:

Pension

SERP

Postretirement Medical

Year ended September 30,

2013

2012

2013

2012

2013

2012

Assumptions used to determine fiscal year-end benefit obligations:

Discount rate

5.00%

4.00%

5.00%

4.00%

5.00%

4.00%

Rate of compensation increase

4.00%

4.00%

4.00%

4.00%

N/A

N/A

Assumptions used to determine net benefit costs (years ended):

Discount rate

4.00%

4.75%

4.00%

4.75%

4.00%

4.75%

Expected return on plan assets

7.00%

7.00%

N/A

N/A

N/A

N/A

Rate of compensation increase

4.00%

5.00%

4.00%

5.00%

N/A

N/A

The components of net periodic benefit cost are as follows:


	Pension								SERP								Postretirement Medical
	Year ended September 30,
	2013				2012				2013				2012				2013			2012
Net periodic benefit cost for the year:
Service cost		$	272,000			$	302,000			$	52,000			$	50,000			$	14,000		$	12,000
Interest cost		299,000				323,000				58,000				61,000				50,000			49,000
Expected return on plan assets		(387,000		)		(327,000		)		-				-				-			-
Amortization of prior service cost (credit)		5,000				5,000				(5,000		)		(1,000		)		136,000			136,000
Amortization of net actuarial loss (gain)		103,000				112,000				20,000				17,000				-			(11,000		)
Net periodic benefit cost		$	292,000			$	415,000			$	125,000			$	127,000			$	200,000		$	186,000

The amounts that are estimated to be amortized from accumulated other comprehensive income into net periodic benefit cost in the next fiscal year are as follows:

								Postretirement
	Pension			SERP				Medical
Prior service cost (credit)		$	5,000		$	(5,000	)		$	12,000
Net actuarial loss (gain)		37,000			4,000				(21,000		)
		$	42,000		$	(1,000	)		$	(9,000	)

The accumulated benefit obligation differs from the projected benefit obligation in that it assumes future compensation levels will remain unchanged. The accumulated benefit obligation for the pension plan was $5,772,000 and $6,263,000 at September 30, 2013 and 2012, respectively. The accumulated benefit obligation for the SERP was $1,006,000 and $1,075,000 at September 30, 2013 and 2012, respectively.

The benefits expected to be paid under the retirement plans as of September 30, 2013 are as follows:

					Postretirement
	Pension		SERP		Medical
Expected Benefit Payments:
Fiscal year ending September 30, 2014	$	216,000	$	5,000	$	-
Fiscal year ending September 30, 2015	$	202,000	$	4,000	$	-
Fiscal year ending September 30, 2016	$	189,000	$	3,000	$	-
Fiscal year ending September 30, 2017	$	260,000	$	3,000	$	-
Fiscal year ending September 30, 2018	$	279,000	$	2,000	$	29,000
Fiscal years ending September 30, 2019 through 2023	$	1,996,000	$	382,000	$	287,000

The following table provides the assumed health care cost trend rates related to the measurement of Barnwell’s postretirement medical obligations.

	Year ended September 30,
	2013	2012
Health care cost trend rates assumed for next year	8.0%	8.5%
Ultimate cost trend rate	5.0%	5.0%
Year that the rate reaches the ultimate trend rate	2020	2020

The assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement medical obligations. A one-percentage-point change in the assumed health care cost trend rates would have the following effects:

	1-Percentage	1-Percentage
	Point Increase	Point (Decrease)
Effect on total service and interest cost components	$ 15,000	$ (12,000)
Effect on accumulated postretirement benefit obligations	$ 219,000	$ (175,000)

Plan Assets

Management communicates periodically with its professional investment advisors to establish investment policies, direct investments and select investment options. The overall investment objective of the Pension Plan is to attain a diversified combination of investments that provides long-term growth in the assets of the plan to fund future benefit obligations while managing risk in order to meet current benefit obligations. Generally, interest and dividends received provide cash flows to fund current benefit obligations. Longer-term obligations are generally estimated to be provided for by growth in equity securities. The Company’s investment policy permits investments in a diversified mix of U.S. and international equities, fixed income securities and cash equivalents.

Barnwell’s investments in fixed income securities include corporate bonds, U.S. treasuries, preferred securities, and fixed income exchange-traded funds. The Company’s investments in equity securities primarily include domestic and international large-cap companies, as well as, domestic and international equity securities exchange-traded funds. Plan assets include $8,000 of Barnwell’s stock at September 30, 2013.

The Company’s year-end target allocation, by asset category, and the actual asset allocations were as follows:

	Target	September 30,
Asset Category	Allocation	2013	2012
Cash and other	0% - 30%	5%	1%
Fixed income securities	20% - 60%	25%	30%
Equity securities	30% - 70%	70%	69%

Actual investment allocations may vary from our target allocations from time to time due to prevailing market conditions. We periodically review our actual investment allocations and rebalance our investments to our target allocations as dictated by current and anticipated market conditions and required cash flows.

We categorize plan assets into three levels based upon the assumptions used to price the assets. Level 1 provides the most reliable measure of fair value, whereas Level 3 requires significant management judgment in determining the fair value. Equity securities and exchange-traded funds are valued by obtaining quoted prices on recognized and highly liquid exchanges. Fixed income securities are valued based upon the closing price reported in the active market in which the security is traded. All of our plan assets are categorized as Level 1 assets, and as such, the actual market value is used to determine the fair value of assets. The following tables set forth by level, within the fair value hierarchy, pension plan assets at their fair value:

				Fair Value Measurements Using:
	Carrying			Quoted			Significant
	Amount			Prices in			Other			Significant
	as of			Active			Observable			Unobservable
	September 30,			Markets			Inputs			Inputs
	2013			(Level 1)			(Level 2)			(Level 3)
Financial Assets:
Cash		$	316,000		$	316,000		$	-		$	-
U.S. government bonds			97,000			97,000			-			-
Corporate bonds			710,000			710,000			-			-
Fixed income exchange-traded funds			458,000			458,000			-			-
Preferred securities			226,000			226,000			-			-
Equity securities exchange-traded funds			634,000			634,000			-			-
Equities			3,670,000			3,670,000			-			-

Total		$	6,111,000		$	6,111,000		$	-		$	-

				Fair Value Measurements Using:
	Carrying			Quoted			Significant
	Amount			Prices in			Other			Significant
	as of			Active			Observable			Unobservable
	September 30,			Markets			Inputs			Inputs
	2012			(Level 1)			(Level 2)			(Level 3)
Financial Assets:
Cash		$	72,000		$	72,000		$	-		$	-
U.S. government bonds			100,000			100,000			-			-
Corporate bonds			400,000			400,000			-			-
Fixed income exchange-traded funds			850,000			850,000			-			-
Preferred securities			232,000			232,000			-			-
Equity securities exchange-traded funds			283,000			283,000			-			-
Equities			3,451,000			3,451,000			-			-

Total		$	5,388,000		$	5,388,000		$	-		$	-