ACCRUED WORKERS' COMPENSATION AND PNEUMOCONIOSIS BENEFITS

12 Months Ended

Dec. 31, 2022

WORKERS' COMPENSATION AND PNEUMOCONIOSIS

WORKERS' COMPENSATION AND PNEUMOCONIOSIS

21.ACCRUED WORKERS' COMPENSATION AND PNEUMOCONIOSIS BENEFITS

The following is a reconciliation of the changes in workers' compensation liability (including current and long-term liability balances):

	December 31,
	2022		2021
Beginning balance	$	53,448	$	54,739
Changes in accruals		7,384		5,168
Payments		(12,708)		(10,725)
Interest accretion		1,147		926
Valuation loss		181		3,340
Ending balance	$	49,452	$	53,448

The discount rate used to calculate the estimated present value of future obligations for workers' compensation was 4.87% and 2.41% at December 31, 2022 and 2021, respectively.

The valuation loss in 2022 was primarily attributable to an increase in the discount rate used to calculate the estimated present value of the future obligations being partially offset by unfavorable changes in claims development. The 2021valuation loss was primarily attributable to unfavorable changes in claims development partially offset by an increase in the discount rate used to calculate the estimated present value of future obligations.

As of December 31, 2022 and 2021, we had $99.8 million and $100.4 million, respectively, in surety bonds and letters of credit outstanding to secure workers' compensation obligations.

We limit our exposure to traumatic injury claims by purchasing a high deductible insurance policy that starts paying benefits after deductibles for the particular claim year have been met.  Our workers' compensation liability above is presented on a gross basis and does not include our expected receivables on our insurance policy. Our receivables for traumatic injury claims under this policy as of December 31, 2022 and 2021 are $4.1 million and $5.7 million, respectively. Our receivables are included in Other long-term assets on our consolidated balance sheets.

The following is a reconciliation of the changes in pneumoconiosis benefit obligations:

	December 31,
	2022		2021
	(in thousands)
Benefit obligations at beginning of year	$	111,316	$	108,496
Service cost		3,798		4,021
Interest cost		2,991		2,545
Actuarial loss (gain)		(9,840)		161
Benefits and expenses paid		(3,978)		(3,907)
Benefit obligations at end of year	$	104,287	$	111,316

The following is a reconciliation of the changes in the pneumoconiosis benefit obligation recognized in accumulated other comprehensive loss:

	Year Ended December 31,
	2022		2021		2020
	(in thousands)
Net actuarial gain (loss)	$	9,840	$	(161)	$	(7,787)
Reversal of amortization item:
Net actuarial loss (gain)		1,038		4,172		(686)
Total recognized in accumulated other comprehensive loss	$	10,878	$	4,011	$	(8,473)

The discount rate used to calculate the estimated present value of future obligations for pneumoconiosis benefits was 5.0%, 2.73% and 2.38% at December 31, 2022, 2021 and 2020, respectively.

	Year Ended December 31,
	2022		2021		2020
	(in thousands)
Amount recognized in accumulated other comprehensive loss consists of:
Net actuarial loss	$	25,510	$	36,388	$	40,399

The actuarial gain component of the change in benefit obligations in 2022 was primarily attributable to favorable assumption changes in the discount rate and demographics in the at-risk population.  These components were offset in part by a) unfavorable black lung claims experience, b) unfavorable assumption changes regarding future average medical benefits and legal expense levels, and c) unfavorable assumption changes related to Federal and State benefit levels. The actuarial loss component of the change in benefit obligations in 2021 was primarily attributable to unfavorable assumption changes regarding future medical and legal expense levels. These components were offset in part by a) an increase in the discount rate used to calculate the estimated present value of the future obligations and b) favorable black lung claims experience and other demographic changes in the at-risk population.

Summarized below is information about the amounts recognized in the accompanying consolidated balance sheets for pneumoconiosis and workers' compensation benefits:

	December 31,
	2022		2021
	(in thousands)
Workers' compensation claims	$	49,452	$	53,448
Pneumoconiosis benefit claims		104,287		111,316
Total obligations		153,739		164,764
Less current portion		(14,099)		(12,293)
Non-current obligations	$	139,640	$	152,471

Both the pneumoconiosis benefit and workers' compensation obligations were unfunded at December 31, 2022 and 2021.

The pneumoconiosis benefit and workers' compensation expense consists of the following components:

	Year Ended December 31,
	2022		2021		2020
	(in thousands)
Black lung benefits:
Service cost	$	3,798	$	4,021	$	3,526
Interest cost (1)		2,991		2,545		2,998
Net amortization (1)		1,038		4,172		(686)
Total pneumoconiosis expense		7,827		10,738		5,838
Workers' compensation expense		11,675		8,339		12,305
Net periodic benefit cost	$	19,502	$	19,077	$	18,143

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(1) Interest cost and net amortization is included in the Other income (expense) line item within our consolidated statements of income (see Note 2 – Summary of Significant Accounting Policies).

See Note 2 – Summary of Significant Accounting Policies for more information on our accounting policy for workers' compensation and pneumoconiosis benefits.