13. 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 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 $18.7 million, $18.2 million and $22.6 million for the years ended December 31, 2017, 2016 and 2015, 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 and effective January 31, 2017, participants within the Pension Plan are no longer receiving benefit accruals for service. The amendment did not materially affect pension benefits accrued prior to January 31, 2017. All participants can participate in enhanced benefits provisions under the PSSP. 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, 2017 and 2016 and the funded status of the Pension Plan reconciled with the amounts reported in our consolidated financial statements at December 31, 2017 and 2016, respectively:


	2017		2016
	(dollars in thousands)
Change in benefit obligations:
Benefit obligations at beginning of year	$	113,482	$	107,476
Service cost		—		2,205
Interest cost		4,587		4,493
Actuarial loss		13,501		901
Benefits paid		(4,272)		(3,091)
Plan amendments		—		1,498
Benefit obligations at end of year		127,298		113,482

Change in plan assets:
Fair value of plan assets at beginning of year		71,412		68,445
Employer contribution		2,971		2,608
Actual return on plan assets		11,870		3,450
Benefits paid		(4,272)		(3,091)
Fair value of plan assets at end of year		81,981		71,412
Funded status at the end of year	$	(45,317)	$	(42,070)

Amounts recognized in balance sheet:
Non-current liability	$	(45,317)	$	(42,070)

Amounts recognized in accumulated other comprehensive income consists of:
Prior service cost	$	(1,312)	$	(1,498)
Net actuarial loss		(41,979)		(38,424)
	$	(43,291)	$	(39,922)

Weighted-average assumptions to determine benefit obligations as of December 31,
Discount rate		3.54%		4.06%
Expected rate of return on plan assets		7.00%		7.00%

Weighted-average assumptions used to determine net periodic benefit cost for the year ended December 31,
Discount rate		4.06%		4.27%
Expected return on plan assets		7.00%		7.50%

The actuarial loss component of the change in benefit obligation in 2017 was primarily attributable to a decrease in the discount rate compared to December 31, 2016 and updated retirement and withdrawal rates, offset in part by improved life expectancies. The actuarial loss component of the change in benefit obligation in 2016 was primarily attributable to a decrease in the discount rate compared to December 31, 2015, offset in part by improved life expectancies and updated retirement and withdrawal rate estimates.

The expected long-term rate of return used to determine the pension liability is based on a 1.5% active management premium in addition to an asset allocation assumption of:



		Asset allocation
As of December 31, 2017		assumption
Equity securities		62%
Fixed income securities		33%
Real estate		5%
		100%

The actual return on plan assets was 18.0% and 5.9% for the years ended December 31, 2017 and 2016, respectively.


	Year Ended December 31,
	2017		2016		2015
	(in thousands)
Components of net periodic benefit cost:
Service cost	$	—	$	2,205	$	2,473
Interest cost		4,587		4,493		4,296
Expected return on plan assets		(4,978)		(5,138)		(5,590)
Amortization of prior service cost		186		—		—
Amortization of net loss		3,054		2,952		3,354
Net periodic benefit cost	$	2,849	$	4,512	$	4,533


	2017		2016
	(in thousands)
Other changes in plan assets and benefit obligation recognized in accumulated other comprehensive loss:
Prior service cost	$	—	$	(1,498)
Net actuarial loss		(6,610)		(2,589)
Reversal of amortization item:
Prior service cost		186		—
Net actuarial loss		3,054		2,952
Total recognized in accumulated other comprehensive loss		(3,370)		(1,135)
Net periodic benefit cost		(2,849)		(4,512)
Total recognized in net periodic benefit cost and accumulated other comprehensive loss	$	(6,219)	$	(5,647)

Estimated future benefit payments as of December 31, 2017 are as follows:


Year Ended
December 31,	(in thousands)

2018	$	4,238
2019		4,651
2020		5,053
2021		5,420
2022		5,696
2023-2027		32,329
	$	57,387

The ARLP Partnership expects to contribute $3.8 million to the Pension Plan in 2018. The estimated net actuarial loss and prior service cost for the Pension Plan that will be amortized from AOCL into net periodic benefit cost during the 2018 fiscal year is $3.8 million and $0.2 million, respectively.

The Compensation Committee has appointed an investment manager with full investment authority with respect to Pension Plan investments subject to investment guidelines and compliance with ERISA or other applicable laws. The investment manager employs a series of asset allocation strategy phases to glide the portfolio risk commensurate with both plan characteristics and market conditions. The objective of the allocation policy is to reach and maintain fully funded status. The total portfolio allocation will be adjusted as the funded ratio of the Pension Plan changes and market conditions warrant. The target allocation includes investments in equity and fixed income commingled investment funds. Total account performance is reviewed at least annually, using a dynamic benchmark approach to track investment performance. General asset allocation guidelines at December 31, 2017 are as follows:


	Percentage of Total Portfolio
	Minimum	Target	Maximum

Equity securities	45%	62%	80%
Fixed income securities	10%	33%	55%
Real estate	0%	5%	10%

Equity securities include domestic equity securities, developed international securities, emerging markets equity securities and real estate investment trust. Fixed income securities include domestic and international investment grade fixed income securities, high yield securities and emerging markets fixed income securities. Fixed income futures may also be utilized within the fixed income securities asset allocation.

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


	December 31, 2017		December 31, 2016
	(in thousands)
Cash and cash equivalents (a)	$	1,439	$	1,137

Commingled investment funds measured at net asset value (b):
Equities - U.S. large-cap		26,031		21,082
Equities - U.S. small-cap		6,120		6,531
Equities - International developed markets		15,015		11,074
Equities - International emerging markets		6,528		4,614
Fixed income - Investment grade		13,546		16,823
Fixed income - High yield		4,325		4,543
Real estate		3,754		4,259
Other		5,223		1,349
Total	$	81,981	$	71,412

(a)

Cash and cash equivalents represents a Level 1 fair value measurement. See Note 2 – Summary of Significant Accounting Policies – Fair Value Measurements for more information regarding the definitions of fair value hierarchy levels.

(b)

Investments measured at fair value using the net asset value per share (or its equivalent) have not been classified within the fair value hierarchy. The fair values of all commingled investment funds are determined based on the net asset values per unit of each of the funds. The net asset values per unit represent the aggregate value of the fund's assets at fair value less liabilities, divided by the number of units outstanding.

See Note 2 – Summary of Significant Accounting Policies for more information on our accounting policy for pension benefits.