NOTE 16—PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:

CONSOL Energy has non-contributory defined benefit retirement plans covering substantially all salaried employees. The benefits for these plans are based primarily on years of service and employees' pay near retirement. CONSOL Energy's salaried plan allows for lump-sum distributions of benefits earned up until December 31, 2005, at the employees' election. The Restoration Plan was frozen effective December 31, 2006 and was replaced prospectively with the CONSOL Energy Supplemental Retirement Plan. CONSOL Energy's Restoration Plan allows only for lump-sum distributions earned up until December 31, 2006. Effective September 8, 2009, the Supplemental Retirement Plan was amended to include employees of CNX Gas. The Supplemental Retirement Plan was frozen effective December 31, 2011 for certain employees and was replaced prospectively with the CONSOL Energy Defined Contribution Restoration Plan.

Certain subsidiaries of CONSOL Energy provide medical and life insurance benefits to retired employees not covered by the Coal Industry Retiree Health Benefit Act of 1992. The medical plans contain certain cost sharing and containment features, such as deductibles, coinsurance, health care networks and coordination with Medicare. For salaried or non-represented hourly employees hired before January 1, 2007, the eligibility requirement is either age 55 with 20 years of service or age 62 with 15 years of service. Also, salaried employees and retirees contribute a target of 20% of the medical plan operating costs. Contributions may be higher, dependent on either years of service or a combination of age and years of service at retirement. Prospective annual cost increases of up to 6% will be shared by CONSOL Energy and the participants based on their age and years of service at retirement. Annual cost increases in excess of 6% will be the responsibility of the participants. In 2012, the salaried OPEB plan was amended to reduce medical and prescription drug benefits as of January 1, 2014. The plan amendment calls for a fixed annual retiree medical contribution into a Health Reimbursement Account for eligible employees. The amount of the contribution will be dependent on several factors, and the money in the account can be used to help pay for a commercial medical plan, Medicare Part B or Part D premiums, and other qualified medical expenses. Employees who work or worked in corporate or operational support positions at retirement and who are age 50 or older at December 31, 2013 will receive the revised benefit in lieu of the current retiree medical and prescription drug benefits described above upon meeting the eligibility requirements at retirement. Employees who work or worked in corporate or operational support positions who are under age 50 at December 31, 2013 will receive no retiree medical or prescription drug benefits. In addition, any salaried or non-represented hourly employees that were hired or rehired effective January 1, 2007 or later and do not work in a corporate or operational support position are not eligible for retiree health benefits. In lieu of traditional retiree health coverage, if certain eligibility requirements are met, these employees will receive a retiree medical spending allowance of $2,250 per year for each year of service at retirement.

On March 31, 2012, the salaried OPEB plan was remeasured to reflect the announced plan amendment, which is described above. The remeasurement reflected the reduction in benefits and the change in discount rate to 4.57% at March 31, 2012 from 4.51% at December 31, 2011. The remeasurement resulted in an $80,571 reduction in the OPEB liability with a corresponding adjustment of $50,276 in other comprehensive income, net of $30,295 in deferred taxes. The change resulted in a $9,425 reduction in OPEB expense compared to what was originally expected to be recognized for the year ended December 31, 2012.

The OPEB liability includes $3,000 and $12,400 as of December 31, 2013 and 2012, respectively, due to the PPACA reform legislation; in particular, the estimated impact of the potential excise tax beginning in 2018. The estimated liability for the excise tax was calculated using the following assumptions: testing pre-Medicare and Medicare covered retirees on a combined basis; assuming individual participants have an average claim cost and future healthcare trend assumptions equal to those used in the year-end valuation; assuming the 2018 tax threshold amount to increase for inflation in later years. These assumptions may change once additional guidance becomes available. The 2013 and 2012 OPEB liability also includes the estimated impact of PPACA legislation regarding the fees to support the Transitional Reinsurance Program. Due to the fact that the state-based exchanges are expected to incur losses during their first few years of existence, the legislation provides for a temporary fee on health insurance issuers and self-insured group health plans that will be used to support these exchanges. The fee is payable for plan years 2014 through 2016. The fee for 2014 is $63 per covered pre-Medicare person, and is estimated to drop to $42 and $26 per covered pre-65 person in 2015 and 2016, respectively.

According to the Defined Benefit Plans Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification, if the lump sum distributions made for the plan year, which for CONSOL Energy is January 1 to December 31, exceed the total of the projected service cost and interest cost for the plan year, settlement accounting is required. Lump sum payments exceeded this threshold during the year ended December 31, 2013. Accordingly, CONSOL Energy recognized expense of $39,482 for the year ended December 31, 2013 in Costs of Goods Sold and Other Operating Charges in the Consolidated Statement of Income. The settlement charges represented a pro rata portion of the net unrecognized loss based on the percentage reduction in the projected benefit obligation due to the lump sum payments. The settlement charges noted above also resulted in remeasurements of the pension plan throughout 2013.

On December 5, 2013, CONSOL Energy completed the sale of its Consolidation Coal Company and certain other subsidiaries to Murray Energy Corporation. As a result of the sale, the obligations for certain participants of the OPEB Plan are the primary responsibility of Murray Energy. This reduced CONSOL Energy's OPEB liability by $1,891,057 at December 31, 2013. These plan settlements resulted in adjustments of $339,318 in Other Comprehensive Income, net of $203,610 in deferred taxes at December 31, 2013. As the result of corporate staffing reductions associated with the sale, the Pension and OPEB plans also recognized curtailment gains of $374 and $39,650 for the year ended December 31, 2013. The curtailment gains resulted in adjustments of $231 and $24,515 in Other Comprehensive Income, net of $143 and $15,135 in deferred taxes for the Pension Plan and the OPEB plan, respectively, at December 31, 2013.

The reconciliation of changes in the benefit obligation, plan assets and funded status of these plans at December 31, 2013 and 2012, is as follows:



	Pension Benefits						Other Postretirement Benefits
	at December 31,						at December 31,
	2013			2012			2013			2012
Change in benefit obligation:
Benefit obligation at beginning of period	$	953,102		$	857,352		$	3,018,172		$	3,242,200
Service cost	20,865			20,466			18,680			18,817
Interest cost	36,829			37,586			111,687			135,695
Actuarial loss (gain)	(82,718		)	90,502			(73,632		)	(131,150		)
Plan amendments	—			—			—			(80,570		)
Plan curtailments	(6,551		)	—			—			—
Plan settlements	(86,925		)	—			(1,891,057		)	—
Participant contributions	—			—			6,150			5,651
Benefits and other payments	(21,958		)	(52,804		)	(168,026		)	(172,471		)
Benefit obligation at end of period	$	812,644		$	953,102		$	1,021,974		$	3,018,172

Change in plan assets:
Fair value of plan assets at beginning of period	$	728,161		$	582,571		$	—		$	—
Actual return on plan assets	94,084			87,935			—			—
Company contributions	55,469			110,459			161,876			166,820
Participant contributions	—			—			6,150			5,651
Benefits and other payments	(21,958		)	(52,804		)	(168,026		)	(172,471		)
Plan Settlements	(86,925		)	—			—			—
Fair value of plan assets at end of period	$	768,831		$	728,161		$	—		$	—

Funded status:
Noncurrent assets	$	9,032		$	—		$	—		$	—
Current liabilities	(4,593		)	(6,937		)	(60,847		)	(58,452		)
Noncurrent liabilities	(48,252		)	(218,004		)	(961,127		)	(882,600		)
Liabilities of discontinued operations	—			—			—			(2,077,120		)
Net obligation recognized	$	(43,813	)	$	(224,941	)	$	(1,021,974	)	$	(3,018,172	)

Amounts recognized in accumulated other comprehensive income consist of:
Net actuarial loss	$	286,637		$	495,511		$	433,073		$	1,116,051
Prior service credit	(4,629		)	(6,614		)	(34,086		)	(104,288		)
Net amount recognized (before tax effect)	$	282,008		$	488,897		$	398,987		$	1,011,763

The components of net periodic benefit costs are as follows:



	Pension Benefits									Other Postretirement Benefits
	For the Years Ended December 31,									For the Years Ended December 31,
	2013			2012			2011			2013			2012			2011
Components of net periodic benefit cost:
Service cost	$	20,865		$	20,466		$	17,457		$	18,680		$	18,817		$	13,677
Interest cost	36,829			37,586			37,744			111,687			135,695			179,739
Expected return on plan assets	(51,814		)	(46,157		)	(38,522		)	—			—			—
Amortization of prior service (credits)	(1,611		)	(1,630		)	(666		)	(30,552		)	(51,828		)	(46,397		)
Recognized net actuarial loss	37,853			47,834			38,102			66,417			80,875			105,364
Curtailment gain	(374		)	—			—			(39,650		)	—			—
Settlement loss (gain)	39,482			—			—			(1,348,129		)	—			—
Net periodic benefit cost (credit)	$	81,230		$	58,099		$	54,115		$	(1,221,547	)	$	183,559		$	252,383

Expenses (income) attributable to discontinued operations included in the net periodic cost (credit) above (including settlements and curtailments associated with the sale of CCC and certain subsidiaries to Murray Energy) were $8,231, $11,587, and $10,693 for the years ended December 31, 2013, 2012, and 2011, respectively, for the Pension Plans and were $(1,293,975), $101,418, and $140,524 for the years ended December 31, 2013, 2012, and 2011, respectively, for the Other Postretirement Benefits Plan.

Amounts included in accumulated other comprehensive loss, expected to be recognized in 2014 net periodic benefit costs:



				Other
	Pension			Postretirement
	Benefits			Benefits
Prior Service (credit) recognition	$	(1,384	)	$	(8,784	)
Actuarial loss recognition	$	23,564		$	25,474

The following table provides information related to pension plans with an accumulated benefit obligation in excess of plan assets:



	As of December 31,
	2013		2012
Projected benefit obligation	$	52,845	$	953,102
Accumulated benefit obligation	$	50,820	$	895,493
Fair value of plan assets	$	—	$	728,161

Assumptions:

The weighted-average assumptions used to determine benefit obligations are as follows:



	Pension Benefits				Other Postretirement Benefits
	For the Year Ended				For the Year Ended
	December 31,				December 31,
	2013		2012		2013		2012
Discount rate	4.87	%	4.00	%	4.88	%	4.05	%
Rate of compensation increase	4.23	%	3.77	%	—		—

The discount rates are determined using a Company-specific yield curve model (above-mean) developed with the assistance of an external actuary. The Company-specific yield curve models (above-mean) use a subset of the expanded bond universe to determine the Company-specific discount rate. Bonds used in the yield curve are rated AA by Moody's or Standard & Poor's as of the measurement date. The yield curve models parallel the plans' projected cash flows, and the underlying cash flows of the bonds included in the models exceed the cash flows needed to satisfy the Company plans'.

The weighted-average assumptions used to determine net periodic benefit costs are as follows:



	Pension Benefits at						Other Postretirement Benefits at
	December 31,						December 31,
	2013		2012		2011		2013		2012		2011
Discount rate	4.00	%	4.50	%	5.30	%	4.05	%	4.51	%	5.33	%
Expected long-term return on plan assets	7.75	%	8.00	%	8.00	%	—		—		—
Rate of compensation increase	3.77	%	3.82	%	3.66	%	—		—		—

The long-term rate of return is the sum of the portion of total assets in each asset class held multiplied by the expected return for that class, adjusted for expected expenses to be paid from the assets. The expected return for each class is determined using the plan asset allocation at the measurement date and a distribution of compound average returns over a 20-year time horizon. The model uses asset class returns, variances and correlation assumptions to produce the expected return for each portfolio. The return assumptions used forward-looking gross returns influenced by the current Treasury yield curve. These returns recognize current bond yields, corporate bond spreads and equity risk premiums based on current market conditions.

The assumed health care cost trend rates are as follows:



	At December 31,
	2013		2012		2011
Health care cost trend rate for next year	6.17	%	6.30	%	6.85	%
Rate to which the cost trend is assumed to decline (ultimate trend rate)	4.50	%	4.50	%	4.50	%
Year that the rate reaches ultimate trend rate	2026		2026		2026

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



	1-Percentage		1-Percentage
	Point Increase		Point Decrease
Effect on total of service and interest cost components	$	17,296	$	(14,297	)
Effect on accumulated postretirement benefit obligation	$	123,355	$	(103,788	)

Assumed discount rates also have a significant effect on the amounts reported for both pension and other benefit costs. A one-quarter percentage point change in assumed discount rate would have the following effect on benefit costs:



	0.25 Percentage			0.25 Percentage
	Point Increase			Point Decrease
Pension benefit costs (decrease) increase	$	(1,797	)	$	1,798
Other postemployment benefits costs (decrease) increase	$	(3,690	)	$	3,830

Plan Assets:

The company’s overall investment strategy is to meet current and future benefit payment needs through diversification across asset classes, fund strategies and fund managers to achieve an optimal balance between risk and return and between income and growth of assets through capital appreciation. The target allocations for plan assets are 31 percent U.S. equity securities, 20 percent non-U.S. equity securities, 9 percent global equity securities, and 40 percent fixed income. Both the equity and fixed income portfolios are comprised of both active and passive investment strategies. The Trust is primarily invested in Mercer Common Collective Trusts. Equity securities consist of investments in large and mid/small cap companies with non-U.S. equities being derived from both developed and emerging markets. Fixed income securities consist of U.S. as well as international instruments, including emerging markets. The core domestic fixed income portfolios invest in government, corporate, asset-backed securities and mortgage-backed obligations. The average quality of the fixed income portfolio must be rated at least “investment grade” by nationally recognized rating agencies. Within the fixed income asset class, investments are invested primarily across various strategies such that its overall profile strongly correlates with the interest rate sensitivity of the Trust’s liabilities in order to reduce the volatility resulting from the risk of changes in interest rates and the impact of such changes on the Trust’s overall financial status. Derivatives, interest rate swaps, options and futures are permitted investments for the purpose of reducing risk and to extend the duration of the overall fixed income portfolio; however they may not be used for speculative purposes. All or a portion of the assets may be invested in mutual funds or other comingled vehicles so long as the pooled investment funds have an adequate asset base relative to their asset class; are invested in a diversified manner; and have management and/or oversight by an Investment Advisor registered with the SEC. The Retirement Board, as appointed by the CONSOL Energy Board of Directors, reviews the investment program on an ongoing basis including asset performance, current trends and developments in capital markets, changes in Trust liabilities and ongoing appropriateness of the overall investment policy.

The fair values of plan assets at December 31, 2013 and 2012 by asset category are as follows:



	Fair Value Measurements at December 31, 2013								Fair Value Measurements at December 31, 2012
			Quoted								Quoted
			Prices in								Prices in
			Active								Active
			Markets for		Significant		Significant				Markets for		Significant		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
			Assets		Inputs		Inputs				Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)
Asset Category
Cash/Accrued Income	$	634	$	634	$	—	$	—	$	610	$	610	$	—	$	—
US Equities (a)	14		14		—		—		11		11		—		—
Mercer Collective Trusts
US Large Cap Growth Equity (b)	56,006		—		56,006		—		63,726		—		63,726		—
US Large Cap Value Equity (c)	56,802		—		56,802		—		64,381		—		64,381		—
US Small/Mid Cap Growth Equity (d)	28,530		—		28,530		—		26,406		—		26,406		—
US Small/Mid Cap Value Equity (e)	28,552		—		28,552		—		26,411		—		26,411		—
US Core Fixed Income (f)	35,533		—		35,533		—		38,045		—		38,045		—
Non-US Core Equity (g)	126,712		—		126,712		—		146,009		—		146,009		—
Emerging Markets Equity (h)	29,778		—		29,778		—		33,541		—		33,541		—
Global Low Volatility Equity (i)	70,138		—		70,138		—		—		—		—		—
US Long Duration Investment Grade Fixed Income (j)	55,593		—		55,593		—		39,925		—		39,925		—
US Long Duration Fixed Income (k)	33,489		—		33,489		—		30,675		—		30,675		—
US Large Cap Passive Equity (l)	75,468		—		75,468		—		81,067		—		81,067		—
US Passive Fixed Income (m)	20,287		—		20,287		—		20,415		—		20,415		—
US Long Duration Passive Fixed Income (n)	34,108		—		34,108		—		29,483		—		29,483		—
US Ultra Long Duration Fixed Income (o)	7,656		—		7,656		—		34,595		—		34,595		—
US Active Long Corporate Investment (p)	105,412		—		105,412		—		92,861		—		92,861		—
Long Strips Fixed Income (q)	2,022		—		2,022		—		—		—		—		—
Opportunistic Fixed Income (r)	2,097		—		2,097		—		—		—		—		—
Total	$	768,831	$	648	$	768,183	$	—	$	728,161	$	621	$	727,540	$	—

__________


(a)	This category includes investments in US common stocks and corporate debt.

(b)

This category invests primarily in common stock of large cap companies in the U.S. with above average earnings growth and revenue expectations. It targets broad diversification across economic sectors and seeks to achieve lower overall portfolio volatility by investing in complementary active managers with varying risk characteristics. Fund selection and allocations within the portfolio are implemented by Mercer’s investment management team. The strategy is benchmarked to the Russell 1000 Growth Index.

(c)

This category invests primarily in U.S. large cap companies that appear to be undervalued relative to their intrinsic value. It targets broad diversification across economic sectors and seeks to achieve lower overall portfolio volatility by investing in complementary active managers with varying risk characteristics. Fund selection and allocations within the portfolio are implemented by Mercer’s investment management team. The strategy is benchmarked to the Russell 1000 Value Index.

(d)

This category invests in small to mid-sized U.S. companies with above average earnings growth and revenue expectations. It targets broad diversification across economic sectors and seeks to achieve lower overall portfolio volatility by investing in complementary active managers with varying risk characteristics. Fund selection and allocations within the portfolio are implemented by Mercer’s investment management team. The smaller cap orientation of the strategy requires the investment team to be cognizant of liquidity and capital constraints, which are monitored on an ongoing basis. The strategy is benchmarked to the Russell 2500 Growth Index.

(e)

This category invests in small to mid-sized U.S. companies that appear to be undervalued relative to their intrinsic value. It targets broad diversification across economic sectors and seeks to achieve lower overall portfolio volatility by investing in complementary active managers with varying risk characteristics. Fund selection and allocations within the portfolio are implemented by Mercer’s investment management team. The smaller cap orientation of the strategy requires the investment team to be cognizant of liquidity and capital constraints, which are monitored on an ongoing basis. The strategy is benchmarked to the Russell 2500 Value Index.

(f)

This category invests primarily in U.S. dollar-denominated investment grade and government securities. It may also invest opportunistically in out-of-benchmark positions including U.S. high yield, non-U.S. bonds, and Treasury Inflation-Protected Securities (TIPs). The strategy seeks to achieve lower overall portfolio volatility by investing in complementary active managers with varying risk characteristics, and total portfolio duration is targeted to be within 20% of the benchmark’s duration. Total exposure to high yield issues is typically less than 10%, inclusive of direct investment in high yield and exposure through other core fixed income funds. Fund selection and allocations within the portfolio are implemented by Mercer’s investment management team. The strategy is benchmarked to the Barclays Capital Aggregate Index.

(g)

This category invests in all cap companies primarily operating in developed non-US markets, with some exposure to emerging markets. The strategy targets broad diversification across economic sectors and seeks to achieve lower overall portfolio volatility by investing in complementary active managers with varying risk characteristics. Total exposure to emerging markets is typically 10-15%, inclusive of direct investment in emerging markets and exposure through other non-U.S. equity funds. Fund selection and allocations within the portfolio are implemented by Mercer’s investment management team. The strategy is benchmarked to the MSCI EAFE Index.

(h)

This category invests in companies operating in non-US emerging markets. The strategy targets broad diversification across economic sectors and seeks to achieve lower overall portfolio volatility by investing in complementary active managers with varying risk characteristics. Fund selection and allocations within the portfolio are implemented by Mercer’s investment management team. The strategy is benchmarked to the MSCI Emerging Markets Index.


(i)	This category invests in companies operating in developed markets, globally. The strategy targets a diversified portfolio of equity securities issued by companies which the investment managers believe will exhibit less volatility in their price performance relative to the broad equity market as described by the MSCI World Index. The strategy is benchmarked to the MSCI World Index.

(j)

This category invests in a passively managed U.S. long duration corporate investment grade portfolio at a 90% weight and a passively managed U.S. Long Treasury portfolio at a 10% weight. It seeks to provide broad exposure to U.S. long duration investment grade credit while allowing for short term liquidity through a strategic allocation to US Treasuries. The strategy is benchmarked 90% to the Barclays Capital U.S. Long Credit Index and 10% to the Barclays Capital Long Treasury.

(k)

This category invests primarily in U.S. dollar denominated investment grade bonds and government securities with durations between 9 and 11 years. It may also invest opportunistically in out-of-benchmark positions including U.S. high yield, non-U.S. bonds, municipal bonds, and TIPs. The strategy seeks to achieve lower overall portfolio volatility by investing in complementary active managers with varying risk characteristics. Fund selection and allocations within the portfolio are implemented by Mercer’s investment management team. The strategy is benchmarked to the Barclays Capital U.S. Long Government/Credit Index.


(l)	This category invests in common stock of U.S. large cap companies. The strategy is benchmarked to the S&P 500 Index.


(m)	This category invests primarily in U.S. dollar-denominated investment grade bonds and government securities. The strategy and its underlying passive investments are benchmarked to the Barclays Capital Aggregate Index.


(n)	This category invests primarily in U.S. dollar-denominated investment grade bonds and government securities with durations between 9 and 11 years. The strategy and its underlying passive investments are benchmarked to the Barclays Capital Long Government/Credit Index.

(o)

This category seeks to reduce the volatility of the plan’s funded status and extend the duration of the assets by investing in a series of ultra long duration portfolios with target durations of up to 35 years. Each underlying portfolio is managed by a sub-advisor and consists of five interest rate swaps with sequential target or maturity dates, with the longest dated portfolio maturing in 2045. The interest rate swaps are fully collateralized, resulting in no leverage. The cash collateral is invested by the sub-advisor in an actively managed cash strategy that seeks to provide a return in excess of 3 month LIBOR. The ultra long duration strategy is used in conjunction with liability driven investing solutions, which seek to align the duration of the assets to the plan’s liabilities. The Strategy is benchmarked to a Custom Liability Benchmark Portfolio.

(p)

This category invests in a U.S. long duration corporate investment grade portfolio at a 90% weight and a U.S. long treasury portfolio at a 10% weight. It seeks to provide broad exposure to U.S. long duration investment grade corporate bonds with an emphasis on reducing default risk through active management while allowing for short term liquidity through a strategic allocation to U.S. Treasuries. The strategy is benchmarked 90% to the Barclays Capital U.S. Long Corporate Index and 10% to the Barclay’s Capital Long Treasury.


(q)	This category invests primarily in long dated US Treasury STRIPS often with maturities greater than 20 years. The strategy and its underlying passive investments are benchmarked to the Barclays Capital U.S. 20+ Year STRIPS Index.


(r)	This category invests primarily in fixed income securities from issuers either located in developing/emerging markets or those rated below investment grade (high yield), globally, The strategy is benchmarked to a blended index of 50% JP Morgan Government Bond Index Emerging Markets Global Diversified and 50% Bank of America/Merrill Lynch Global High Yield Index.

There are no investments in CONSOL Energy stock held by these plans at December 31, 2013 or 2012.

There are no assets in the other postretirement benefit plans at December 31, 2013 or 2012.

Cash Flows:

CONSOL Energy expects to contribute to the pension trust using prudent funding methods. Currently, depending on asset values and asset returns held in the trust, we expect to contribute $25,000 - $35,000 to our pension plan trust in 2014. Pension benefit payments are primarily funded from the trust. CONSOL Energy does not expect to contribute to the other postemployment plan in 2014. We intend to pay benefit claims as they are due.

The following benefit payments, reflecting expected future service, are expected to be paid:



			Other
	Pension		Postretirement
	Benefits		Benefits
2014	$	90,347	$	60,847
2015	$	50,080	$	62,914
2016	$	48,952	$	65,493
2017	$	49,415	$	67,623
2018	$	50,741	$	68,395
Year 2019-2023	$	262,986	$	338,544