COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION:

Under the Federal Coal Mine Health and Safety Act of 1969, as amended, CONSOL Energy is responsible for medical and disability benefits to employees and their dependents resulting from occurrences of coal workers' pneumoconiosis disease. CONSOL Energy is also responsible under various state statutes for pneumoconiosis benefits. CONSOL Energy primarily provides for these claims through a self-insurance program. The calculation of the actuarial present value of the estimated pneumoconiosis obligation is based on an annual actuarial study by independent actuaries and uses assumptions regarding disability incidence, medical costs, indemnity levels, mortality, death benefits, dependents and interest rates which are derived from actual company experience and outside sources. Recent legislative changes have not been favorable for CWP. Although these changes have not had a significant impact on the liability, CONSOL has noticed an increase in claims. Actuarial gains or losses can result from differences in incident rates and severity of claims filed as compared to original assumptions.

CONSOL Energy must also compensate individuals who sustain employment-related physical injuries or some types of occupational diseases and, on some occasions, for costs of their rehabilitation. Workers' compensation laws will also compensate survivors of workers who suffer employment-related deaths. Workers' compensation laws are administered by state agencies, and each state has its own set of rules and regulations regarding compensation that is owed to an employee that is injured in the course of employment. CONSOL Energy primarily provides for these claims through a self-insurance program. CONSOL Energy recognizes an actuarial present value of the estimated workers' compensation obligation calculated by independent actuaries. The calculation is based on claims filed and an estimate of claims incurred but not yet reported as well as various assumptions, including discount rate, future healthcare trend rate, benefit duration and recurrence of injuries. Actuarial gains or losses associated with workers' compensation have resulted from discount rate changes and differences in claims experience and incident rates as compared to prior assumptions.



	CWP						Workers' Compensation
	at December 31,						at December 31,
	2016			2015			2016			2015
Change in benefit obligation:
Benefit obligation at beginning of period	$	122,503		$	126,098		$	83,165		$	89,741
State administrative fees and insurance bond premiums	—			—			3,265			3,581
Service cost	4,327			6,491			7,618			9,389
Interest cost	4,283			5,116			2,550			3,195
Actuarial loss (gain)	439			(5,089		)	123			(4,089		)
Benefits paid	(11,409		)	(10,113		)	(17,028		)	(18,999		)
Curtailment gain	(1,307		)	—			—			—
Settlements	—			—			—			347
Benefit obligation at end of period	$	118,836		$	122,503		$	79,693		$	83,165

Current assets	$	—		$	—		$	1,458		$	1,450
Current liabilities	(10,763		)	(9,471		)	(13,874		)	(14,803		)
Noncurrent liabilities	(108,073		)	(113,032		)	(67,277		)	(69,812		)
Net obligation recognized	$	(118,836	)	$	(122,503	)	$	(79,693	)	$	(83,165	)

Amounts recognized in accumulated other comprehensive income consist of:
Net actuarial gain	$	(62,714	)	$	(68,101	)	$	(12,914	)	$	(13,440	)
Net amount recognized (before tax effect)	$	(62,714	)	$	(68,101	)	$	(12,914	)	$	(13,440	)

The components of the net periodic cost are as follows:



	CWP									Workers’ Compensation
	For the Years Ended									For the Years Ended
	December 31,									December 31,
	2016			2015			2014			2016			2015			2014
Service cost	$	4,327		$	6,491		$	5,674		$	7,618		$	9,389		$	9,781
Interest cost	4,283			5,116			5,537			2,550			3,195			3,577
Recognized net actuarial gain	(4,948		)	(5,576		)	(6,196		)	(403		)	(31		)	(382		)
State administrative fees and insurance bond premiums	—			—			—			3,265			3,581			3,352
Curtailment gain	(1,307		)	—			—			—			—			—
Settlement gain	—			—			—			—			—			—
Net periodic cost	$	2,355		$	6,031		$	5,015		$	13,030		$	16,134		$	16,328

(Income) expense attributable to discontinued operations included in the CWP net periodic cost was $(1,290), $297 and $87 for the years ended December 31, 2016, 2015 and 2014, respectively.

On March 31, 2016, CONSOL Energy completed the sale of its membership interests in BMC (see Note 2 - Discontinued Operations). As a result of the sale, certain obligations of the CWP plan were transferred to the buyer. This transfer triggered a curtailment gain of $1,307. The curtailment resulted in a plan remeasurement increasing plan liabilities by $7,713 at March 31, 2016.

The following are amounts included in accumulated other comprehensive income that are expected to be recognized in 2017 net periodic benefit costs:



				Workers'
	CWP			Compensation
	Benefits			Benefits
Actuarial gain recognition	$	(7,631	)	$	(610	)

CONSOL Energy utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the Workers’ Compensation and CWP plans. Cumulative gains and losses that are in excess of 10% of the greater of either the estimated liability or the market-related value of plan assets are amortized over the expected average remaining future service of the current active membership of the Workers’ Compensation and CWP plans.

Assumptions:

The weighted-average discount rates used to determine benefit obligations and net periodic cost (benefit) are as follows:



	CWP						Workers' Compensation
	For the Years Ended						For the Years Ended
	December 31,						December 31,
	2016		2015		2014		2016		2015		2014
Benefit obligations	4.40	%	4.60	%	4.21	%	4.05	%	4.26	%	3.84	%
Net periodic cost	4.60	%	4.21	%	4.75	%	4.26	%	3.84	%	4.57	%

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's plans.

Cash Flows:

CONSOL Energy does not intend to make contributions to the CWP or Workers' Compensation plans in 2017, but it intends to pay benefit claims as they become due.

The following benefit payments, which reflect expected future claims as appropriate, are expected to be paid:



			Workers' Compensation
	CWP		Total		Actuarial		Other
	Benefits		Benefits		Benefits		Benefits
2017	$	10,763	$	15,897	$	12,416	$	3,481
2018	$	8,417	$	15,193	$	11,625	$	3,568
2019	$	7,606	$	15,061	$	11,404	$	3,657
2020	$	7,137	$	15,044	$	11,295	$	3,749
2021	$	6,963	$	15,056	$	11,214	$	3,842
Year 2022-2026	$	35,714	$	76,577	$	55,876	$	20,701