Employee Benefit Plans

12 Months Ended

Dec. 31, 2017

16. Employee Benefit Plans

Our Consolidated Statements of Operations and Comprehensive Income (Loss) include expenses in connection with employee benefit plans, as follows for the years ended December 31 (in thousands):

		2017		2016		2015
Cloud Peak Energy defined contribution retirement plans		$	7,241	$	10,312	$	11,725
Cloud Peak Energy retiree medical plan			(5,471)		(1,841)		8,096
	Total	$	1,770	$	8,471	$	19,821

Cloud Peak Energy Defined Contribution Retirement Plans

We sponsor two defined contribution plans to assist eligible employees in providing for retirement. Our employees may elect to contribute a portion of their salary on a pre- or post-tax basis to their accounts. We match all employee contributions up to 8% of eligible compensation. All contributions are fully vested at the date of contribution. Total contributions for the years ended December 31 are as follows (in thousands):

			2017			2016			2015
	Contributions		$	7,241		$	10,312		$	11,725

Cloud Peak Energy Retiree Medical Plan

We provide certain postretirement medical coverage for eligible employees (the “Retiree Medical Plan”). Employees who are 55 years old and have completed ten years of service with us generally are entitled to receive benefits under the Retiree Medical Plan, except for employees who were eligible at the date of the IPO to receive benefits under the Rio Tinto retiree medical plan and elect to receive such benefits. Our retiree medical plan grants credit for service rendered by our employees to Rio Tinto prior to the IPO. This plan is unfunded.

In April 2016, we communicated certain changes in our Retiree Medical Plan to employees that became effective January 1, 2017. Changes included a decrease in the number of active employees that were eligible for the plan as well as moving to a fixed dollar subsidy amount away from a defined benefit plan. These plan changes reduced our accumulated postretirement benefit obligation by $47.7 million during the second quarter of 2016. The plan changes eliminated the old prior service cost base and established a new negative prior service cost base of approximately $41.1 million, which will be amortized to income over 4.2 years.

Net periodic postretirement benefit costs included the following components for the years ended December 31 were as follows (in thousands):

	2017		2016		2015
Service cost	$	894	$	2,225	$	4,916
Interest cost		918		1,187		1,929
Amortization of prior service cost (credit)		(7,283)		(5,253)		1,252
Net periodic postretirement benefit cost (credit)	$	(5,471)	$	(1,841)	$	8,096

Annually, we remeasure and adjust the liability for the accumulated postretirement benefit obligation (“APBO”). Changes in the APBO include the following components as of December 31 (in thousands):

	2017		2016		2015
Beginning Balance	$	23,562	$	61,407	$	50,697
Current period service costs		894		2,225		4,916
Interest costs		918		1,187		1,929
Plan amendment		—		(47,671)		—
Benefits paid, net of retiree contributions		(277)		(198)		(9)
Change in actuarial assumptions and actuarial loss		794		6,612		3,874
Ending Balance		25,891		23,562		61,407
Less current portion		933		612		562
Long-term APBO	$	24,958	$	22,950	$	60,845

The amounts recognized in Accumulated other comprehensive income (loss) related to the APBO consist of the following as of December 31:

	2017		2016
Net prior service credit	$	24,062	$	33,804
Net actuarial loss		(16,520)		(18,184)
		7,542		15,620
Income taxes		611		611
	$	8,153	$	16,231

The following amounts will be amortized from Accumulated other comprehensive income into net periodic benefit cost in 2018:

Net prior service credit	$	(9,742)
Net actuarial loss (gain)		2,392
	$	(7,350)

We used the following assumptions in the measurement of the APBO for the years ended December 31:

	2017		2016		2015
Discount rate	3.46	%	3.95	%	4.14	%
Health care cost trend rate assumed for next year	N/A	%	N/A	%	7.50	%
Ultimate health care cost trend rate	N/A	%	N/A	%	5.00	%
Year that the rate reaches the ultimate trend rate	N/A		N/A		2026

Our estimated future benefit payments under the Retiree Medical Plan, which are net of estimated employee contributions and reflect expected future service, are as follows for the years ended December 31 (in thousands):

2018	$	949
2019		896
2020		1,062
2021		1,204
2022		1,324
2023 - 2027		7,832