PENSION AND POSTRETIREMENT PLANS

Cable ONE Spin-Off. On July 1, 2015, as part of the spin-off, Cable ONE assumed the liability related to their employees participating in the Company's Supplemental Executive Retirement Plan (SERP). The Company also eliminated the accrual of pension benefits for all Cable ONE employees related to their future service. As a result of the spin-off of Cable ONE, the Company remeasured the accumulated and projected benefit obligation of the pension plan and SERP as of July 1, 2015, and recorded curtailment and settlement gains. The new measurement basis was used for the recognition of the SERP cost recorded in the third quarter of 2015 and the pension benefit recorded for the first two months of the third quarter of 2015. The curtailment gain on the spin-off of Cable ONE is included in income from discontinued operations, net of tax. The settlement gain on the spin-off of Cable ONE is included in the SERP liability distributed to Cable ONE (see Note 2).

KHE Campuses Sale. On September 3, 2015, the Company eliminated the accrual of pension benefits for almost all of the KHE Campus employees related to their future service. As a result, the Company remeasured the accumulated and projected benefit obligation of the pension plan as of September 3, 2015, and the Company recorded a curtailment gain in the third quarter of 2015. The new measurement basis was used for the recognition of the Company's pension benefit beginning in September 2015. The curtailment gain on the sale of the KHE Campuses is included in the loss on the sale of the KHE Campuses and reported in Other (expense) income, net on the Condensed Consolidated Statement of Operations.

Defined Benefit Plans. The total benefit arising from the Company’s defined benefit pension plans, including a portion included in discontinued operations, consists of the following components:



	Three Months Ended September 30						Nine Months Ended September 30
(in thousands)	2016			2015			2016			2015
Service cost	$	5,040		$	6,090		$	15,422		$	20,593
Interest cost	12,845			13,516			38,763			39,077
Expected return on assets	(30,348		)	(33,673		)	(91,122		)	(96,771		)
Amortization of prior service cost	74			79			223			241
Recognized actuarial gain	—			(6,057		)	—			(6,057		)
Net Periodic Benefit	(12,389		)	(20,045		)	(36,714		)	(42,917		)
Curtailment gains	—			(3,267		)	—			(3,267		)
Early retirement programs and special separation benefit expense	—			3,734			—			3,734
Total Benefit	$	(12,389	)	$	(19,578	)	$	(36,714	)	$	(42,450	)

For the three and nine months ended September 30, 2015, the net periodic benefit for the Company's pension plans, as reported above, includes benefits of $0.1 million and costs of $1.9 million, respectively, reported in discontinued operations. The curtailment gain of $2.2 million related to the Cable spin-off is also included in discontinued operations for the three and nine months ended September 30, 2015. The curtailment gain of $1.1 million related to the sale of the KHE Campuses business is included in Other (expense) income, net.

In the third quarter of 2015, the Company recorded $3.7 million related to a Separation Incentive Program for certain Kaplan employees, which was funded from the assets of the Company's pension plan.

The total cost arising from the Company’s Supplemental Executive Retirement Plan (SERP), including a portion included in discontinued operations, consists of the following components:



	Three Months Ended September 30				Nine Months Ended September 30
(in thousands)	2016		2015		2016		2015
Service cost	$	246	$	464	$	738	$	1,482
Interest cost	1,096		1,140		3,288		3,410
Amortization of prior service cost	114		115		342		343
Recognized actuarial loss	665		630		1,995		2,385
Net Periodic Cost	$	2,121	$	2,349	$	6,363	$	7,620

For the nine months ended September 30, 2015, the net periodic cost for the Company's SERP, as reported above, includes costs of $0.2 million reported in discontinued operations.

Defined Benefit Plan Assets. The Company’s defined benefit pension obligations are funded by a portfolio made up of a U.S. stock index fund, a relatively small number of stocks and high-quality fixed-income securities that are held by a third-party trustee. The assets of the Company’s pension plan were allocated as follows:



	As of
	September 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
U.S. equities	78	%	62	%
U.S. fixed income	15	%	13	%
International equities	7	%	25	%
	100	%	100	%

Beginning in the second quarter of 2016, the Company started managing approximately 44% of the pension assets internally, of which the majority is invested in a U.S. stock index fund with the remaining investments in Berkshire Hathaway stock and short-term fixed income securities. The remaining 56% of plan assets are still managed by two investment companies. The goal for the investments is to produce moderate long-term growth in the value of these assets, while protecting them against large decreases in value. Both investment managers may invest in a combination of equity and fixed-income securities and cash. The managers are not permitted to invest in securities of the Company or in alternative investments. The investment managers cannot invest more than 20% of the assets at the time of purchase in the stock of Berkshire Hathaway or more than 10% of the assets in the securities of any other single issuer, except for obligations of the U.S. Government, without receiving prior approval from the Plan administrator. As of September 30, 2016, the investment managers can invest no more than 23% of the assets they manage in specified international exchanges, at the time the investment is made, and no less than 10% of the assets could be invested in fixed-income securities.

In determining the expected rate of return on plan assets, the Company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. In addition, the Company may consult with and consider the input of financial and other professionals in developing appropriate return benchmarks.

The Company evaluated its defined benefit pension plan asset portfolio for the existence of significant concentrations (defined as greater than 10% of plan assets) of credit risk as of September 30, 2016. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country and individual fund. At September 30, 2016, the pension plan held investments in one common stock and one U.S. stock index fund that exceeded 10% of total plan assets, valued at $915.2 million, or 45% of total plan assets. At December 31, 2015, the pension plan held common stock in two investments that exceeded 10% of total plan assets, valued at $562.6 million, or 25% of total plan assets. At December 31, 2015, the pension plan held investments in one foreign country that exceeded 10% of total plan assets, valued at $332.4 million, or 15% of total plan assets.

Other Postretirement Plans. The total cost arising from the Company’s other postretirement plans consists of the following components:



	Three Months Ended September 30						Nine Months Ended September 30
(in thousands)	2016			2015			2016			2015
Service cost	$	346		$	333		$	1,039		$	999
Interest cost	308			325			923			974
Amortization of prior service credit	(83		)	(126		)	(251		)	(377		)
Recognized actuarial gain	(376		)	(249		)	(1,127		)	(747		)
Net Periodic Cost	$	195		$	283		$	584		$	849