14.EMPLOYEE BENEFIT PLANS

Defined Contribution Plans—The ARLP Partnership’s eligible employees currently participate in a defined contribution profit sharing and savings plan (“PSSP”) that it sponsors. The PSSP covers substantially all regular full-time employees. PSSP participants may elect to make voluntary contributions to this plan up to a specified amount of their compensation. The ARLP Partnership makes matching contributions based on a percent of an employee’s eligible compensation and also makes an additional non-matching contribution. The ARLP Partnership’s contribution expense for the PSSP was approximately $22.6 million, $21.8 million and $20.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Defined Benefit Plan—Eligible employees at certain of the ARLP Partnership’s mining operations participate in a defined benefit plan (the “Pension Plan”) that it sponsors. The Pension Plan is currently closed to new applicants; however, participants in the plan continue to accrue benefits. The benefit formula for the Pension Plan is a fixed-dollar unit based on years of service.

The following sets forth changes in benefit obligations and plan assets for the years ended December 31, 2015 and 2014 and the funded status of the Pension Plan reconciled with the amounts reported in our consolidated financial statements at December 31, 2015 and 2014, respectively:

	2015		2014
	(dollars in thousands)

Change in benefit obligations:
Benefit obligations at beginning of year	$	109,626	$	85,662
Service cost	2,473		2,174
Interest cost	4,296		4,074
Actuarial (gain) loss	(6,420)		19,841
Benefits paid	(2,499)		(2,125)

Benefit obligations at end of year	107,476		109,626


Change in plan assets:
Fair value of plan assets at beginning of year	69,521		67,480
Employer contribution	3,116		2,671
Actual return on plan assets	(1,693)		1,495
Benefits paid	(2,499)		(2,125)

Fair value of plan assets at end of year	68,445		69,521

Funded status at the end of year	$	(39,031)	$	(40,105)


Amounts recognized in balance sheet:
Non-current liability	$	(39,031)	$	(40,105)

	$	(39,031)	$	(40,105)


Amounts recognized in accumulated other comprehensive income consists of:
Net actuarial loss	$	(38,787)	$	(41,278)


Weighted-average assumptions to determine benefit obligations as of December 31,
Discount rate	4.27%		3.92%
Expected rate of return on plan assets	8.00%		8.00%

Weighted-average assumptions used to determine net periodic benefit cost for the year ended December 31,
Discount rate	3.92%		4.89%
Expected return on plan assets	8.00%		8.00%

The actuarial gain component of the change in benefit obligation in 2015 was primarily attributable to an increase in the discount rate compared to December 31, 2014 and the adoption of newly issued mortality tables reflecting improved life expectancies offset by updated retirement and withdrawal rate estimates. The actuarial loss component of the change in benefit obligation in 2014 was primarily attributable to a decrease in the discount rate and the actual rate of return on plan assets compared to December 31, 2013, adoption of newly issued mortality tables reflecting improved life expectancies and updated retirement and withdrawal rate estimates.

The expected long-term rate of return used to determine the pension liability was 8.0% for both December 31, 2015 and 2014 based on an asset allocation assumption of:

As of December 31, 2015	Asset allocation assumption	Expected long- term rate of return

Domestic equity securities	70%	8.6%
Foreign equity securities	10%	5.3%
Fixed income securities/cash	20%	5.1%

	100%

The actual return on plan assets was (2.0)% and 5.4% for the years ended December 31, 2015 and 2014, respectively.

	2015		2014		2013
			(in thousands)
Components of net periodic benefit cost:
Service cost	$	2,473	$	2,174	$	2,783
Interest cost	4,296		4,074		3,640
Expected return on plan assets	(5,590)		(5,475)		(4,446)
Amortization of net loss	3,354		773		2,653

Net periodic benefit cost	$	4,533	$	1,546	$	4,630

	2015		2014
	(in thousands)
Other changes in plan assets and benefit obligation recognized in accumulated other comprehensive income:
Net actuarial loss	$	(863)	$	(23,821)
Reversal of amortization item:
Net actuarial loss	3,354		773

Total recognized in accumulated other comprehensive income (loss)	2,491		(23,048)
Net periodic benefit cost	(4,533)		(1,546)

Total recognized in net periodic benefit cost and accumulated other comprehensive loss	$	(2,042)	$	(24,594)

Estimated future benefit payments as of December 31, 2015 are as follows:

Year Ending
December 31,	(in thousands)

2016	$	2,972
2017	3,340
2018	3,766
2019	4,193
2020	4,653
2021-2025	29,193

	$		48,117

The ARLP Partnership expects to contribute $2.6 million to the Pension Plan in 2016. The estimated net actuarial loss for the Pension Plan that will be amortized from AOCI into net periodic benefit cost during the 2016 fiscal year is $3.2 million.

The compensation committee of the MGP Board of Directors (“MGP Compensation Committee”) maintains a Funding and Investment Policy Statement (“Policy Statement”) for the Pension Plan. The Policy Statement provides that the assets of the Pension Plan be invested in a prudent manner based on the stated purpose of the Pension Plan and diversified among a broad range of investments including domestic and international equity securities, domestic fixed income securities and cash equivalents. The Pension Plan allows for the utilization of options in a “collar strategy” to limit potential exposure to market fluctuations. The investment goal of the Pension Plan is to ensure that the assets provide sufficient resources to meet or exceed the benefit obligations as determined under terms and conditions of the Pension Plan. The Policy Statement provides that the Pension Plan shall be funded by employer contributions in amounts determined in accordance with generally accepted actuarial standards. The investment objectives as established by the Policy Statement are, first, to increase the value of the assets under the Pension Plan and, second, to control the level of risk or volatility of investment returns associated with Pension Plan investments.

In general, increases in benefit obligations will be offset by employer contributions and market returns. However, general market conditions may result in market losses. When the Pension Plan experiences market losses, significant variations in the funded status of the Pension Plan can, and often do, occur. Actuarial methods utilized in determining required future employer contributions take into account the long-term effect of market losses and result in increased future employer contributions, thus offsetting such market losses. Conversely, the long-term effect of market gains will result in decreased future employer contributions. Total account performance is reviewed at least annually, using a dynamic benchmark approach to track investment performance.

The MGP Compensation Committee has selected an investment manager to implement the selection and on-going evaluation of Pension Plan investments. The investments shall be selected from the following assets classes (which may include mutual funds, collective funds, or the direct investment in individual stocks, bonds or cash equivalent investments): (a) money market accounts, (b) U.S. Government bonds, (c) corporate bonds, (d) large, mid, and small capitalization stocks, and (e) international stocks. The Policy Statement provides the following guidelines and limitations, subject to exceptions authorized by the MGP Compensation Committee: (i) the maximum investment in any one stock should not exceed 10.0% of the total stock portfolio, (ii) the maximum investment in any one industry should not exceed 30.0% of the total stock portfolio, and (iii) the average credit quality of the bond portfolio should be at least AA with a maximum amount of non-investment grade debt of 10.0%.

The Policy Statement’s asset allocation guidelines are as follows:

	Percentage of Total Portfolio
	Minimum	Target	Maximum

Domestic equity securities	50%	70%	90%
Foreign equity securities	0%	10%	20%
Fixed income securities/cash	5%	20%	40%

Domestic equity securities primarily include investments in individual common stocks or registered investment companies that hold positions in companies that are based in the U.S. Foreign equity securities primarily include investments in individual common stocks or registered investment companies that hold positions in companies based outside the U.S. Fixed income securities primarily include individual bonds or registered investment companies that hold positions in U.S. Treasuries, U.S. government obligations, corporate bonds, mortgage-backed securities, and preferred stocks. Short-term market conditions may result in actual asset allocations that fall outside the minimum or maximum guidelines reflected in the Policy Statement.

Asset allocations as of December 31,	2015	2014

Domestic equity securities	70%	71%
Foreign equity securities	10%	8%
Fixed income securities/cash	20%	21%
	100%	100%

The ARLP Partnership considers multiple factors in its investment strategy. The following factors have been taken into consideration with respect to the Pension Plan’s long-term investment goals and objectives and in the establishment of the Pension Plan’s target investment allocation:

The long-term nature of providing retirement income benefits to Pension Plan participants;

The projected annual funding requirements necessary to meet the benefit obligations;

The current level of benefit payments to Pension Plan participants and beneficiaries; and

Ongoing analysis of economic conditions and investment markets.

The following information discloses the fair values of the Pension Plan assets, by asset category, for the periods indicated:

	December 31, 2015						December 31, 2014

	Level 1 (a)		Level 2 (a)		Level 3 (a)		Level 1 (a)		Level 2 (a)		Level 3 (a)
	(in thousands)

Cash and cash equivalents	$	883	$	-	$	-	$	917	$	-	$	-
Equity securities (b):
U.S. large-cap growth	17,977		-		-		19,147		-		-
U.S. large-cap value	17,635		-		-		19,196		-		-
U.S. small/mid-cap blend	7,609		-		-		8,681		-		-
International large-cap core	3,257		-		-		2,934		-		-
Fixed income securities:
U.S. Treasury securities (c)	1,234		-		-		1,455		-		-
Corporate bonds (d)	-		1,938		-		-		1,802		-
Preferred stock	-		-		-		-		61		-
Taxable municipal bonds (d)	-		182		-		-		193		-
International bonds (d)	-		319		-		-		227		-
Equity mutual funds (e):
U.S. mid-cap growth	-		4,948		-		-		2,537		-
International	-		3,322		-		-		2,856		-
Fixed income mutual funds (e):
Corporate bond	-		4,668		-		-		4,729		-
Mortgage backed-securities	-		1,277		-		-		1,226		-
Short term investment grade bond	-		1,322		-		-		1,417		-
Intermediate investment grade bond	-		801		-		-		1,013		-
High yield bond	-		693		-		-		689		-
International bond	-		226		-		-		296		-
Stock market index options (f):
Puts	143		-		-		111		-		-
Calls	(54)		-		-		(40)		-		-
Accrued income (g)	-		65		-		-		74		-

Total	$	48,684	$	19,761	$	-	$	52,401	$	17,120	$	-

(a)

See Note 2 – Summary of Significant Accounting Policies – Fair Value Measurements for more information regarding the definitions of fair value hierarchy levels.

(b)

Equity securities include investments in publicly traded common stock and preferred stock. Publicly-traded common stocks are traded on a national securities exchange and investments in common and preferred stocks are valued using quoted market prices multiplied by the number of shares owned.

(c)

U.S. Treasury securities include agency and treasury debt. These investments are valued using dealer quotes in an active market.

(d)

Bonds are valued utilizing a market approach that includes various valuation techniques and sources such as value generation models, broker quotes in active and non-active markets, benchmark yields and securities, reported trades, issuer spreads, and/or other applicable reference data. The corporate bonds and notes category is primarily comprised of U.S. dollar denominated, investment grade securities. Less than 5 percent of the securities have a rating below investment grade.

(e)

Mutual funds are valued daily in actively traded markets by an independent custodian for the investment manager. For purposes of calculating the value, portfolio securities and other assets for which market quotes are readily available are valued at market value. Market value is generally determined on a basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services. Investments initially valued in currencies other than the U.S. dollars are converted to the U.S. dollar using exchange rates obtained from pricing services.

(f)

Options are valued utilizing quotes in active markets.

(g)

Accrued income represents dividends declared, but not received, on equity securities owned at December 31, 2015 and 2014.