14. Retirement Benefits Plans

Defined Benefit Pension Plan and Postretirement Health Care and Life Insurance Plans

The Company had a noncontributory defined benefit pension plan (“defined benefit plan”), which provided retirement benefits for certain of its employees. Effective January 1, 2011, pension benefits under the Company’s defined benefit plan were frozen for all participants in this plan. Effective May 30, 2014, Dominion Coal Corporation, a wholly-owned subsidiary of the Company, terminated its defined benefit plan, a plan that was previously offered generally to all full-time employees of Dominion Coal Corporation. Subsequently, the Company obtained IRS approval for the plan termination and executed an agreement with a high-quality insurance company to annuitize the pension plan using plan assets. As a result of the termination of the Dominion Coal defined benefit plan, each participant became fully vested in his or her benefits thereunder without regard to age and years of service.

As a result of the pension termination, unrecognized losses, which previously were recorded in accumulated other comprehensive loss on the Consolidated Balance Sheets, were recognized as expense. The net settlement loss of $12.6 million was recorded in cost of products sold and operating expenses on the Consolidated Statements of Operations during 2015. At December 31, 2015, there are no remaining benefit obligations or plan assets related to the defined benefit pension plan.

The Company also has plans which provide health care and life insurance benefits for many of its retirees (“postretirement benefit plans”). The postretirement benefit plans are unfunded and the costs are borne by the Company. The Company amended its postretirement benefit plans during the first quarter of 2010. Effective January 1, 2011, postretirement medical benefits for future retirees were phased out or eliminated for non-mining employees with less than ten years of service. Employer costs for all those still eligible for such benefits were capped. The termination of coal mining employees triggered a curtailment gain of $4.1 million of $2.5 million in 2015 and 2014, respectively, which represented accelerated amortization of prior service credits previously recorded in accumulated other comprehensive income.

Defined benefit plan expense (benefit) consisted of the following components:



	Years Ended December 31,
	2015			2014			2013
	(Dollars in millions)
Interest cost on benefit obligations	$	0.7		$	1.5		$	1.3
Expected return on plan assets	(0.7		)	(1.8		)	(2.4		)
Settlement loss	12.6			—			—
Amortization of:
Actuarial losses	0.5			0.5			1.0
Total expense (benefit)	$	13.1		$	0.2		$	(0.1	)

Postretirement benefit plans benefit consisted of the following components:



	Years Ended December 31,
	2015			2014			2013
	(Dollars in millions)
Service cost	$	—		$	0.2		$	0.3
Interest cost on benefit obligations	1.3			1.5			1.4
Amortization of:
Actuarial losses	0.8			0.9			1.5
Prior service benefit	(1.2		)	(5.6		)	(5.7		)
Curtailment gain	(4.1		)	(2.5		)	—
Total benefit	$	(3.2	)	$	(5.5	)	$	(2.5	)

Amortization of actuarial losses and prior service benefit for 2016 is estimated to be $0.8 million and $0.7 million, respectively, for the postretirement benefit plans.

Defined benefit plan and postretirement benefit plans expense (benefit) is determined using actuarial assumptions as of the beginning of the year or using weighted-average assumptions when curtailments, settlements and/or other events require a plan remeasurement. The following assumptions were used to determine defined benefit plan and postretirement benefit plans expense (benefit):



	Defined Benefit Plan						Postretirement Benefit Plans
	2015		2014		2013		2015		2014		2013
Discount Rate	—	%	4.55	%	3.65	%	3.45	%	4.15	%	3.30	%
Long-term expected rate of return on plan assets	—	%	4.90	%	7.10	%	—	%	—	%	—	%

The long-term expected rate of return on plan assets was estimated based on a variety of factors, including the historical investment return achieved over a long-term period, the targeted allocation of plan assets and expectations concerning future returns in the marketplace for fixed income securities.

The following amounts were recognized as components of other comprehensive (loss) income for the years ended December 31, 2015, 2014 and 2013:



	Years Ended December 31,
	Defined Benefit Plan							Postretirement Benefit Plans
	2015		2014			2013		2015			2014			2013
	(Dollars in millions)
Reclassifications to earnings of:
Actuarial loss amortization	$	0.5	$	0.5		$	1.0	$	0.8		$	0.9		$	1.5
Prior service benefit amortization	—		—			—		(1.2		)	(5.6		)	(5.7		)
Curtailment gain	—		—			—		(4.1		)	(2.5		)	—
Settlement loss	12.6		—			—		—			—			—
Retirement benefit plan funded status adjustments:
Actuarial gains (losses)	0.9		(3.9		)	5.6		(1.4		)	0.2			3.9
Prior service cost	—		(0.5		)	—		—			—			—
	$	14.0	$	(3.9	)	$	6.6	$	(5.9	)	$	(7.0	)	$	(0.3	)

The following tables set forth the components of the changes in benefit obligations and fair value of plan assets during 2015 and 2014, as well as the funded status at December 31, 2015 and 2014:



	Years Ended December 31,
	Defined Benefit Plan						Postretirement Benefit Plans
	2015			2014			2015			2014
	(Dollars in millions)
Benefit obligations at beginning of year⁽¹⁾	$	39.9		$	32.9		$	37.1		$	38.4
Service cost	—			—			—			0.2
Interest cost	0.7			1.5			1.3			1.5
Actuarial (gains) losses	(2.5		)	7.2			1.4			1.2
Plan amendments⁽²⁾	—			0.5			—			—
Curtailments	—			—			—			(1.4		)
Benefits paid	(1.5		)	(2.2		)	(5.0		)	(2.8		)
Settlement of obligation	(36.6		)	—			—			—
Benefit obligations at end of year⁽¹⁾	$	—		$	39.9		$	34.8		$	37.1
Fair value of plan assets at beginning of year	$	39.8		$	36.9
Actual (loss) income on plan assets	(1.0		)	5.1
Benefits paid from plan assets	(1.5		)	(2.2		)
Settlement of obligation	(36.6		)	—
Transfer to defined contribution plan	(0.7		)	—
Fair value of plan assets at end of year	$	—		$	39.8
Net liability at end of year⁽³⁾	$	—		$	(0.1	)	$	(34.8	)	$	(37.1	)

(1) Represents both the accumulated benefit obligation and the projected benefit obligation for the defined benefit plan and the accumulated postretirement benefit obligations for the postretirement benefit plans.

(2) The pension plan was terminated, effective May 30, 2014. As part of the plan termination process, all partially vested terminated participants were fully vested, and as a result, their accrued benefit increased $0.5 million. The amount is treated as a new prior service cost base which will be amortized over the plan's average future service.

(3) Represents retirement benefit assets (liabilities), including current portion, on the Consolidated Balance Sheets. The current portion of retirement liabilities, which totaled $3.5 million and $3.7 million at December 31, 2015 and 2014, respectively, is classified in accrued liabilities on the Consolidated Balance Sheets.

The following table sets forth the cumulative amounts not yet recognized in net income (loss) at December 31, 2015 and 2014:



	Defined Benefit Plan				Postretirement Benefit Plans
	2015		2014		2015			2014
	(Dollars in millions)
Cumulative amounts not yet recognized in net income (loss):
Actuarial losses	$	—	$	13.5	$	10.6		$	10.0
Prior service costs (benefits)	—		0.5		(3.1		)	(8.4		)
Accumulated other comprehensive loss (before related tax benefit)	$	—	$	14.0	$	7.5		$	1.6

The following table sets forth the plan assets in the funded defined benefit plan measured at fair value, by input level, at December 31, 2015 and 2014:



	Quoted Prices in Active Markets for Identical Assets (Level 1)
	2015		2014
	(Dollars in millions)
Mutual funds:
Fixed income securities	$	—	$	39.4
Cash and cash equivalents	—		0.4
Total	$	—	$	39.8

Investments in mutual funds are valued at the closing market price on the last business day of the year.

The expected benefit payments through 2024 for the postretirement benefit plan are as follows:



		Postretirement Benefit Plans
	(Dollars in millions)
Year ending December 31:
2016		$	3.5
2017		3.4
2018		3.2
2019		3.0
2020		2.9
2021 through 2024		11.7

The measurement date for the Company’s defined benefit plan and postretirement benefit plans is December 31. The following discount rates were used at December 31, 2015 and 2014, respectively, to determine the benefit for the plans (in percentages):



	Defined Benefit Plan				Postretirement Benefit Plans
	2015		2014		2015		2014
Discount rate	—	%	3.75	%	3.80	%	3.45	%

The health care cost trend assumption used at December 31, 2015, to compute the accumulated postretirement benefit obligation for the postretirement benefit plans was an increase of 7.00 percent (7.50 percent at December 31, 2014), which is assumed to decline gradually to 5.00 percent in 2021 and to remain at that level thereafter. A one-percentage point change each year in assumed health care cost trend rates would have an impact of less than $0.1 million on the total of service and interest cost components of postretirement benefits expense and the accumulated postretirement benefit obligation as of December 31, 2015 and 2014.

Defined Contribution Plans

The Company has defined contribution plans which provide retirement benefits for certain of its employees. The Company’s contributions, which are principally based on the Company’s pretax income and the aggregate compensation levels of participating employees and are charged against income as incurred, amounted to $6.5 million, $8.0 million and $7.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.