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EMPLOYEE BENEFIT PLANS
 12 Months Ended
Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract]  
EMPLOYEE BENEFIT PLANS
Employee Benefit Plans

Defined Benefit Plans

We participate in the Integrys Energy Group Retirement Plan, a noncontributory, qualified pension plan sponsored by IBS. We are responsible for our share of the plan assets and obligations. Our balance sheets reflect only the liabilities associated with our past and current employees and our share of the plan assets. The defined benefit pension plans are closed to all new hires. In addition, the service accruals for the defined benefit pension plans were frozen for non-union employees as of January 1, 2013.

Integrys Energy Group also offers medical, dental, and life insurance benefits to our active employees and their dependents. We expense the allocated costs of these benefits as incurred.

We serve as plan sponsor and administrator for certain other postretirement benefit plans. The benefits are funded through irrevocable trusts, as allowed for income tax purposes. Our balance sheets reflect only the liabilities associated with our past and current employees and our share of the plan assets and obligations.

During 2012, $35.3 million of the pension obligation related to the unfunded nonqualified retirement plans were transferred to related parties.

The following tables provide a reconciliation of the changes in our share of the plans' benefit obligations and fair value of assets:
 
 
Pension Benefits
 
Other Benefits
(Millions)
 
2013
 
2012
 
2013
 
2012
Change in benefit obligation
 
 
 
 
 
 
 
 
Obligation at January 1
 
$
772.6

 
$
721.4

 
$
328.5

 
$
294.8

Service cost
 
10.8

 
12.8

 
10.6

 
8.5

Interest cost
 
30.6

 
34.0

 
13.4

 
15.1

Plan amendments
 
—

 
—

 
0.1

 
—

Transfer to affiliates
 
(6.6
)
 
(41.9
)
 
—

 
—

Actuarial (gain) loss, net
 
(63.6
)
 
75.0

 
(51.4
)
 
18.4

Participant contributions
 
—

 
—

 
0.6

 
0.4

Benefit payments
 
(26.3
)
 
(28.7
)
 
(10.0
)
 
(9.5
)
Federal subsidy on benefits paid
 
—

 
—

 
0.9

 
0.8

Obligation at December 31
 
$
717.5

 
$
772.6

 
$
292.7

 
$
328.5

 
 
 
 
 
 
 
 
 
Change in fair value of plan assets
 
 
 
 
 
 
 
 
Fair value of plan assets at January 1
 
$
719.6

 
$
554.0

 
$
213.7

 
$
185.6

Actual return on plan assets
 
112.1

 
91.2

 
29.0

 
24.9

Employer contributions
 
40.3

 
109.7

 
3.2

 
12.3

Participant contributions
 
—

 
—

 
0.6

 
0.4

Benefit payments
 
(26.3
)
 
(28.7
)
 
(10.0
)
 
(9.5
)
Transfer to affiliates
 
(6.6
)
 
(6.6
)
 
—

 
—

Fair value of plan assets at December 31
 
$
839.1

 
$
719.6

 
$
236.5

 
$
213.7

Funded status at December 31
 
$
121.6

 
$
(53.0
)
 
$
(56.2
)
 
$
(114.8
)


The amounts recognized on our balance sheets at December 31 related to the funded status of the benefit plans were as follows:
 
 
Pension Benefits
 
Other Benefits
(Millions)
 
2013
 
2012
 
2013
 
2012
Long-term assets
 
$
145.1

 
$
—

 
$
—

 
$
—

Current liabilities
 
3.1

 
3.0

 
0.2

 
0.2

Long-term liabilities
 
20.4

 
50.0

 
56.0

 
114.6

Total net assets (liabilities)
 
$
121.6

 
$
(53.0
)

$
(56.2
)

$
(114.8
)


The accumulated benefit obligation for the defined benefit pension plans was $658.3 million and $686.2 million at December 31, 2013, and 2012, respectively.

The following table shows information for qualified pension plans with an accumulated benefit obligation in excess of plan assets. There were no plan assets related to these pension plans. Amounts presented are as of December 31:
(Millions)
 
2013
 
2012
Projected benefit obligation
 
$
23.5

 
$
28.6

Accumulated benefit obligation
 
21.8

 
25.2



The following table shows the amounts that had not yet been recognized in our net periodic benefit cost as of December 31:
 
 
Pension Benefits
 
Other Benefits
(Millions)
 
2013
 
2012
 
2013
 
2012
Net regulatory assets
 
 
 
 
 
 
 
 
Net actuarial loss
 
$
110.2

 
$
252.7

 
$
11.5

 
$
84.6

Prior service cost (credit)
 
2.4

 
6.0

 
(12.0
)
 
(14.3
)
Total
 
$
112.6

 
$
258.7

 
$
(0.5
)
 
$
70.3



The following table shows the estimated amounts in regulatory assets that will be amortized into net periodic benefit cost during 2014:
(Millions)
 
Pension Benefits
 
Other Benefits
Net actuarial losses
 
$
15.2

 
$
2.1

Prior service cost (credit)
 
0.6

 
(2.2
)
Total 2014 - estimated amortization
 
$
15.8

 
$
(0.1
)


The following table shows the components of net periodic benefit cost (including amounts capitalized to our balance sheets) for our benefit plans:
 
 
Pension Benefits
 
Other Benefits
(Millions)
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Service cost
 
$
10.8

 
$
12.8

 
$
11.3

 
$
10.6

 
$
8.5

 
$
7.1

Interest cost
 
30.6

 
34.0

 
36.1

 
13.4

 
15.1

 
15.1

Expected return on plan assets
 
(57.2
)
 
(55.4
)
 
(46.8
)
 
(14.8
)
 
(14.6
)
 
(14.2
)
Amortization of transition obligation
 
—

 
—

 
—

 
—

 
0.2

 
0.2

Amortization of prior service cost (credit)
 
3.6

 
4.5

 
4.8

 
(2.1
)
 
(3.0
)
 
(3.5
)
Amortization of net actuarial loss
 
24.0

 
14.9

 
8.6

 
7.5

 
5.7

 
3.0

Net periodic benefit cost
 
$
11.8

 
$
10.8

 
$
14.0

 
$
14.6

 
$
11.9

 
$
7.7



Assumptions – Pension and Other Postretirement Benefit Plans

The weighted-average assumptions used to determine benefit obligations for the plans were as follows for the years ended December 31:
 
 
Pension Benefits
 
Other Benefits
 
 
2013
 
2012
 
2013
 
2012
Discount rate
 
4.92%
 
4.07%
 
4.98%
 
4.01%
Rate of compensation increase
 
4.25%
 
4.26%
 
N/A
 
N/A
Assumed medical cost trend rate
 
N/A
 
N/A
 
6.50%
 
7.00%
Ultimate trend rate
 
N/A
 
N/A
 
5.00%
 
5.00%
Year ultimate trend rate is reached
 
N/A
 
N/A
 
2019
 
2019
Assumed dental cost trend rate
 
N/A
 
N/A
 
5.00%
 
5.00%

The weighted-average assumptions used to determine net periodic benefit cost for the plans were as follows for the years ended December 31:
 
 
Pension Benefits
 
 
2013
 
2012
 
2011
Discount rate
 
4.07%
 
5.10%
 
5.80%
Expected return on assets
 
8.00%
 
8.25%
 
8.25%
Rate of compensation increase
 
4.26%
 
4.26%
 
4.28%

 
 
Other Benefits
 
 
2013
 
2012
 
2011
Discount rate
 
4.01%
 
5.04%
 
5.80%
Expected return on assets
 
8.00%
 
8.25%
 
8.25%
Assumed medical cost trend rate (under age 65)
 
7.00%
 
7.00%
 
7.50%
Ultimate trend rate
 
5.00%
 
5.00%
 
5.00%
Year ultimate trend rate is reached
 
2019
 
2016
 
2016
Assumed medical cost trend rate (over age 65)
 
7.00%
 
7.50%
 
8.00%
Ultimate trend rate
 
5.00%
 
5.00%
 
5.50%
Year ultimate trend rate is reached
 
2019
 
2016
 
2016
Assumed dental cost trend rate
 
5.00%
 
5.00%
 
5.00%


We establish our expected return on assets assumption based on consideration of historical and projected asset class returns, as well as the target allocations of the benefit trust portfolios. For 2014, the expected return on assets assumption for the plans is 8.00%.

Assumed health care cost trend rates have a significant effect on the amounts reported by us for the health care plans. For the year ended December 31, 2013, a one-percentage-point change in assumed health care cost trend rates would have had the following effects:
 
 
One-Percentage-Point
(Millions)
 
Increase
 
Decrease
Effect on total of service and interest cost components of net periodic postretirement health care benefit cost
 
$
5.0

 
$
(3.9
)
Effect on the health care component of the accumulated postretirement benefit obligation
 
51.2

 
(40.5
)


Pension and Other Postretirement Benefit Plan Assets

Integrys Energy Group's investment policy includes various guidelines and procedures designed to ensure assets are invested in an appropriate manner to meet expected future benefits to be earned by participants. The investment guidelines consider a broad range of economic conditions. The policy is established and administered in a manner that is compliant at all times with applicable regulations.

Central to the policy are target allocation ranges by major asset categories. The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters and to achieve asset returns that meet or exceed the plans' actuarial assumptions and that are competitive with like instruments employing similar investment strategies. The portfolio diversification provides protection against significant concentrations of risk in the plan assets. The target asset allocations for pension and other postretirement benefit plans that have significant assets are: 70% equity securities and 30% fixed income securities. Equity securities primarily include investments in large-cap and small-cap companies. Fixed income securities primarily include corporate bonds of companies from diversified industries, United States government securities, and mortgage-backed securities.

The Board of Directors of Integrys Energy Group established the Employee Benefits Administrator Committee (composed of members of Integrys Energy Group and its subsidiaries' management) to manage the operations and administration of all benefit plans and trusts. The committee monitors the asset allocation, and the portfolio is rebalanced when necessary.

Pension and other postretirement benefit plan investments are recorded at fair value. See Note 1(t), Fair Value, for more information regarding the fair value hierarchy and the classification of fair value measurements based on the types of inputs used.

The following table provides the fair values of our investments by asset class:
 
 
December 31, 2013
 
 
Pension Plan Assets
 
Other Benefit Plan Assets
(Millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Class
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1.1

 
$
19.7

 
$
—

 
$
20.8

 
$
—

 
$
2.3

 
$
—

 
$
2.3

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     United States equity
 
54.1

 
239.9

 
—

 
294.0

 
14.2

 
66.5

 
—

 
80.7

     International equity
 
61.5

 
231.3

 
—

 
292.8

 
16.7

 
63.3

 
—

 
80.0

Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     United States government
 
—

 
50.4

 
—

 
50.4

 
65.0

 
0.6

 
—

 
65.6

     Foreign government
 
—

 
9.1

 
1.3

 
10.4

 
—

 
—

 
—

 
—

     Corporate debt
 
—

 
134.8

 
0.7

 
135.5

 
—

 
—

 
—

 
—

     Asset-backed securities
 
—

 
33.3

 
—

 
33.3

 
—

 
—

 
—

 
—

     Other
 
—

 
9.4

 
—

 
9.4

 
(0.1
)
 
—

 
—

 
(0.1
)
 
 
116.7

 
727.9

 
2.0

 
846.6

 
95.8

 
132.7

 
—

 
228.5

401(h) other benefit plan assets
     invested as pension assets (1)
 
(1.1
)
 
(7.1
)
 
—

 
(8.2
)
 
1.1

 
7.1

 
—

 
8.2

Total (2)
 
$
115.6

 
$
720.8

 
$
2.0

 
$
838.4

 
$
96.9

 
$
139.8

 
$
—

 
$
236.7


(1) 
Pension trust assets are used to pay other postretirement benefits as allowed under Internal Revenue Code Section 401(h).

(2) 
Investments do not include accruals or pending transactions that are included in the table reconciling the change in fair value of plan assets.
 
 
December 31, 2012
 
 
Pension Plan Assets
 
Other Benefit Plan Assets
(Millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Class
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
3.3

 
$
13.3

 
$
—

 
$
16.6

 
$
—

 
$
4.0

 
$
—

 
$
4.0

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     United States equity
 
88.2

 
211.6

 
—

 
299.8

 
23.8

 
60.6

 
—

 
84.4

     International equity
 
50.4

 
157.8

 
—

 
208.2

 
13.3

 
45.0

 
—

 
58.3

Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     United States government
 
—

 
52.7

 
—

 
52.7

 
61.0

 
—

 
—

 
61.0

     Foreign government
 
—

 
10.7

 
2.2

 
12.9

 
—

 
—

 
—

 
—

     Corporate debt
 
—

 
103.6

 
0.5

 
104.1

 
—

 
—

 
—

 
—

     Asset-backed securities
 
—

 
29.7

 
—

 
29.7

 
—

 
—

 
—

 
—

     Other
 
—

 
5.9

 
—

 
5.9

 
(1.1
)
 
—

 
—

 
(1.1
)
 
 
141.9

 
585.3

 
2.7

 
729.9

 
97.0

 
109.6

 
—

 
206.6

401(h) other benefit plan assets
     invested as pension assets (1)
 
(1.5
)
 
(5.9
)
 
—

 
(7.4
)
 
1.5

 
5.9

 
—

 
7.4

Total (2)
 
$
140.4

 
$
579.4

 
$
2.7

 
$
722.5

 
$
98.5

 
$
115.5

 
$
—

 
$
214.0


(1) 
Pension trust assets are used to pay other postretirement benefits as allowed under Internal Revenue Code Section 401(h).

(2) 
Investments do not include accruals or pending transactions that are included in the table reconciling the change in fair value of plan assets.

The following table sets forth a reconciliation of changes in the fair value of pension plan assets categorized as Level 3 in the fair value hierarchy:
(Millions)
 
Foreign Government Debt
 
Corporate Debt
 
Total
Beginning balance at January 1, 2013
 
$
2.2

 
$
0.5

 
$
2.7

Net realized and unrealized losses
 
(0.1
)
 
(0.2
)
 
(0.3
)
Purchases
 
0.3

 
—

 
0.3

Sales
 
(1.1
)
 
(0.2
)
 
(1.3
)
Transfers into Level 3
 
—

 
0.8

 
0.8

Transfers out of Level 3
 
—

 
(0.2
)
 
(0.2
)
Ending balance at December 31, 2013
 
$
1.3

 
$
0.7

 
$
2.0

 
 
 
 
 
 
 
Net unrealized gains related to assets still held at the end of the period
 
$
(0.1
)
 
$
(0.2
)
 
$
(0.3
)

(Millions)
 
Foreign Government Debt
 
Corporate Debt
 
Total
Beginning balance at January 1, 2012
 
$
2.8

 
$
1.1

 
$
3.9

Net realized and unrealized gains
 
0.5

 
0.1

 
0.6

Purchases
 
0.6

 
0.3

 
0.9

Sales
 
(1.0
)
 
(0.2
)
 
(1.2
)
Transfers out of Level 3
 
(0.7
)
 
(0.8
)
 
(1.5
)
Ending balance at December 31, 2012
 
$
2.2

 
$
0.5

 
$
2.7

 
 
 
 
 
 
 
Net unrealized losses related to assets still held at the end of the period
 
$
0.2

 
$
—

 
$
0.2



Cash Flows Related to Pension and Other Postretirement Benefit Plans

Our funding policy is to contribute at least the minimum amounts that are required to be funded under the Employee Retirement Income Security Act, but not more than the maximum amounts that are currently deductible for income tax purposes. We expect to contribute $47.3 million to pension plans and $3.9 million to other postretirement benefit plans in 2014, dependent on various factors affecting us, including our liquidity position and tax law changes.

The following table shows the payments, reflecting expected future service, that we expect to make for pension and other postretirement benefits. In addition, the table shows the expected federal subsidies, provided under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which will partially offset other postretirement benefits.
(Millions)
 
Pension Benefits
 
Other Benefits
 
Federal Subsidies
2014
 
$
40.6

 
$
12.7

 
$
0.9

2015
 
40.8

 
13.5

 
1.0

2016
 
42.0

 
14.4

 
1.0

2017
 
43.9

 
15.4

 
1.0

2018
 
44.0

 
16.4

 
1.1

2019 through 2023
 
228.2

 
95.1

 
6.0



Defined Contribution Benefit Plans

Integrys Energy Group maintains a 401(k) Savings Plan for substantially all of our full-time employees. A percentage of employee contributions are matched through an employee stock ownership plan (ESOP) contribution up to certain limits. Certain union employees receive a contribution to their ESOP account regardless of their participation in the 401(k) Savings Plan. Certain employees participate in a defined contribution pension plan, in which certain amounts are contributed to an employee's account based on the employee's wages, age, and years of service. Our share of the total costs incurred under all these plans was $8.2 million in 2013, $5.5 million in 2012, and $5.0 million in 2011.

Integrys Energy Group maintains deferred compensation plans that enable certain key employees, including some who are our employees, to defer payment of a portion of their compensation on a pre-tax basis. Compensation is generally deferred in the form of cash and is indexed to certain investment options or Integrys Energy Group common stock. The deemed dividends paid on the common stock are automatically reinvested.

The deferred compensation arrangements for which distributions are made solely in Integrys Energy Group common stock are classified as an equity instrument on the balance sheets. Changes in the fair value of this portion of the deferred compensation obligation are not recognized. The deferred compensation obligation classified as an equity instrument was $8.0 million at December 31, 2013, and $8.1 million at December 31, 2012.

The portion of the deferred compensation obligation that is indexed to various investment options and allows for distributions in cash is classified as a liability on the balance sheets. The liability is adjusted, with a charge or credit to expense, to reflect changes in the fair value of the deferred compensation obligation. The obligation classified within other long-term liabilities was $15.1 million at December 31, 2013, and $14.9 million at December 31, 2012. The costs incurred under this arrangement were $1.5 million in 2013, $1.1 million in 2012, and $0.5 million in 2011.