NOTE 13 – EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT PLAN: Substantially all of our 1,467 employees participate in the National Rural Electric Cooperative Association Retirement Security Plan (“RS Plan”) except for the 225 employees of Colowyo Coal. The RS Plan is a defined benefit pension plan qualified under Section 401(a) and tax‑exempt under Section 501(a) of the Internal Revenue Code. It is considered a multiemployer plan under the accounting standards for compensation ‑ retirement benefits. The plan sponsor’s Employer Identification Number is 53‑0116145 and the Plan Number is 333.

A unique characteristic of a multiemployer plan compared to a single employer plan is that all plan assets are available to pay benefits to any plan participant. Separate asset accounts are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefits to employees of other participating employers.

Our contributions to the RS Plan in each of the years 2019, 2018 and 2017 represented less than 5 percent of the total contributions made each year to the plan by all participating employers. We made contributions to the RS Plan of $25.8, $27.8 and $26.7 million in 2019, 2018 and 2017, respectively.

In December 2012, the National Rural Electric Cooperative Association (“NRECA”) approved an option to allow participating cooperatives in the RS Plan to make a contribution prepayment and reduce future required contributions. The prepayment amount is a cooperative’s share, as of January 1, 2013, of future contributions required to fund the RS Plan’s unfunded value of benefits earned to date using RS Plan actuarial valuation assumptions. The prepayment amount is equal to approximately 2.5 times a cooperative’s annual RS Plan required contribution as of January 1, 2013. After making the prepayment, the annual contribution was reduced by approximately 25 percent, retroactive to January 1, 2013. The reduced annual contribution is expected to continue for approximately 15 years. However, changes in interest rates, asset returns and other plan experience different from expected, plan assumption changes and other factors may have an impact on future contributions and the 15-year period.

In May 2013, we elected to make a contribution prepayment of $71.2 million to the RS Plan. This contribution prepayment was determined to be a long‑term prepayment and therefore recorded in deferred charges and amortized beginning January 1, 2013 over the 13‑year period calculated by subtracting the average age of our workforce from our normal retirement age under the RS Plan.

Our contributions to the RS Plan include contributions for substantially all of the 280 bargaining unit employees that are made in accordance with collective bargaining agreements.

For the RS Plan, a “zone status” determination is not required, and therefore not determined, under the Pension Protection Act (“Act”) of 2006. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by individual employer. In total, the RS Plan was over 80 percent funded at both January 1, 2019 and January 1, 2018, based on the Act funding target and the Act actuarial value of assets on those dates.

Because the provisions of the Act do not apply to the RS Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the plan and may change as a result of plan experience.

We participate in the NRECA Pension Restoration Plan and the NRECA Executive Benefit Restoration Plan, both of which are intended to provide a supplemental benefit to the defined benefit plan for an eligible group of highly compensated employees. Eligible employees include the Chief Executive Officer and any other employees that become eligible. All our executive employees currently participate in one of the following pension restoration plans: the NRECA Pension Restoration Plan or the NRECA Executive Benefit Restoration Plan. Eligibility is determined annually and is based on January 1 base salary that exceeds the limits of the defined benefit plan. As of December 31, 2019, the executive benefit restoration obligation included in accumulated postretirement benefit and postemployment obligations on our consolidated statements of financial position was $0.7 million.

DEFINED CONTRIBUTION PLAN: We have a qualified savings plan for eligible employees who may make pre‑tax and after‑tax contributions totaling up to 100 percent of their eligible earnings subject to certain limitations under federal law. We make no contributions for the 280 bargaining unit employees. For all of the eligible non‑bargaining unit employees, other than the 225 employees of Colowyo Coal, we contribute 1 percent of an employee’s eligible earnings. For the bargaining unit employees of New Horizon Mine, we match 1 percent of employee’s contributions. For the employees of Colowyo Coal, we contribute 7 percent of an employee’s eligible earnings and also match an employee’s contributions up to 5 percent. We made contributions to the plan of $3.5 million, $4.6 million, and $3.2 million in 2019, 2018, and 2017, respectively.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: We sponsor three medical plans for all non‑bargaining unit employees under the age of 65. Two of the plans provide postretirement medical benefits to full‑time non‑bargaining unit employees and retirees who receive benefits under those plans, who have attained age 55, and who elect to participate. All three of these non‑bargaining unit medical plans offer postemployment medical benefits to employees on long‑term disability. The plans were unfunded at December 31, 2019, are contributory (with retiree premium contributions equivalent to employee premiums, adjusted annually) and contain other cost‑sharing features such as deductibles.

The postretirement medical benefit and postemployment medical benefit obligations are determined annually (during the fourth quarter) by an independent actuary and are included in accumulated postretirement benefit and postemployment obligations on our consolidated statements of financial position as follows (dollars in thousands):


	2019		2018
Postretirement medical benefit obligation at beginning of period	$	8,556	$	8,455
Service cost		563		677
Interest cost		352		288
Benefit payments (net of contributions by participants)		(617)		(408)
Actuarial loss (gain)		1,341		(456)
Postretirement medical benefit obligation at end of period	$	10,195	$	8,556
Postemployment medical benefit obligation at end of period		375		371
Total postretirement and postemployment medical obligations at end of period	$	10,570	$	8,927

The service cost component of our net periodic benefit cost is included in operating expenses on our consolidated statements of operations. The components of net periodic benefit cost other than the service cost component are included in other income (expense) on our consolidated statements of operations.

In accordance with the accounting standard related to postretirement benefits other than pensions, actuarial gains and losses are not recognized in income but are instead recorded in accumulated other comprehensive income on our consolidated statements of financial position. If the unrecognized amount is in excess of 10 percent of the projected benefit obligation, amounts are reclassified out of accumulated other comprehensive income and included in net income as the excess amount is amortized over the average remaining service lives of the active plan participants. Unrecognized actuarial gains and losses have been determined per actuarial studies for the postretirement medical benefit obligation.

The net unrecognized actuarial gains and losses related to the postretirement medical benefit obligation are included in accumulated other comprehensive income as follows (dollars in thousands):


	2019		2018
Amounts included in accumulated other comprehensive income at beginning of period	$	375	$	(369)
Amortization of actuarial (gain) loss into income		(342)		367
Amortization of prior service cost into other income		(79)		(79)
Actuarial (loss) gain		(1,341)		456
Amounts included in accumulated other comprehensive income at end of period	$	(1,387)	$	375

The assumptions used in the 2019 actuarial study performed for our postretirement medical benefit obligation were as follows:


Weighted-average discount rate	4.10	%
Initial health care cost trend (2018)	8.00	%
Ultimate health care cost trend	4.50	%
Year that the rate reached the ultimate health care cost trend rate	2027
Expected return on plan assets (unfunded)	N/A
Average remaining service lives of active plan participants (years)	12.35

Changes in the assumed health care cost trend rates would impact the accumulated postretirement medical benefit obligation and the net periodic postretirement medical benefit expense as follows (dollars in thousands):


	1% Increase		1% Decrease
Accumulated postretirement medical benefit obligation	$	1,159	$	(992)
Net periodic postretirement medical benefit expense		138		(116)

The following are the expected future benefits to be paid (net of contributions by participants) related to the postretirement medical benefit obligation during the next ten years (dollars in thousands):


2020	$	621
2021		719
2022		725
2023		685
2024		688
2025 through 2029		3,338
	$	6,776