Note 15 - Pension and Other Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Retirement Benefits [Text Block]

NOTE 15—PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:

Pension

CONSOL Energy has non-contributory defined benefit retirement plans. The benefits for these plans are based primarily on years of service and employees' pay. CONSOL Energy's qualified pension plan (the “Pension Plan”) allows for lump-sum distributions of benefits earned up until December 31, 2005, at the employees' election. Pursuant to the Separation and Distribution Agreement that provided for the separation and distribution (the “SDA”) and related ancillary agreements, the sponsorship of the qualified pension plan was transferred to the Company.

According to the Defined Benefit Plans Topic of the FASB Accounting Standards Codification, if the lump sum distributions made during a plan year, which for CONSOL Energy is January 1 to December 31, exceed the total of the projected service cost and interest cost for the plan year, settlement accounting is required. Lump sum payments exceeded this threshold during the year ended December 31, 2021. Accordingly, CONSOL Energy recognized expense of $22 for the year ended December 31, 2021 in Operating and Other Costs in the Consolidated Statements of Income. The settlement charges represented a pro rata portion of the net unrecognized loss based on the percentage reduction in the projected benefit obligation due to the lump sum payments. The settlement charges noted above also resulted in a remeasurement of the pension plan at June 30, 2021, which reduced the pension liability by $1,009. The settlement and corresponding remeasurement of the pension plan resulted in an adjustment of $766 to Other Comprehensive Income, net of $265 in deferred taxes. Lump sum payments did not exceed this threshold during the years ended  December 31, 2020 and 2019.

Other Postretirement Benefit Plan

Certain subsidiaries of CONSOL Energy provide medical and prescription drug benefits to retired employees covered by either the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act) or the National Bituminous Coal Wage Agreement of 2011.

The reconciliation of changes in the benefit obligation, plan assets and funded status of these plans at December 31, 2021 and 2020 is as follows:

	Pension Benefits						Other Postretirement Benefits
	at December 31,						at December 31,
	2021			2020			2021			2020
Change in benefit obligation:
Benefit obligation at beginning of period	$	778,868		$	720,098		$	413,710		$	464,329
Service cost		1,114			1,183			—			—
Interest cost		14,230			20,176			7,274			12,795
Actuarial (gain) loss		(25,073	)		84,663			(42,836	)		(38,455	)
Plan settlement		(719	)		—			—			—
Benefits and other payments		(45,414	)		(47,252	)		(24,851	)		(24,959	)
Benefit obligation at end of period	$	723,006		$	778,868		$	353,297		$	413,710
Change in plan assets:
Fair value of plan assets at beginning of period	$	740,978		$	668,481		$	—		$	—
Actual return on plan assets		36,867			118,403			—			—
Company contributions		2,254			1,346			24,851			24,959
Benefits and other payments		(45,414	)		(47,252	)		(24,851	)		(24,959	)
Plan settlement		(719	)		—			—			—
Fair value of plan assets at end of period	$	733,966		$	740,978		$	—		$	—
Funded status:
Noncurrent assets	$	38,947		$	—		$	—		$	—
Current liabilities		(1,974	)		(2,531	)		(23,638	)		(26,073	)
Noncurrent liabilities		(26,013	)		(35,359	)		(329,659	)		(387,637	)
Net asset (obligation) recognized	$	10,960		$	(37,890	)	$	(353,297	)	$	(413,710	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial loss	$	231,726		$	256,988		$	82,851		$	132,203
Prior service credit		—			—			(16,138	)		(18,544	)
Net amount recognized (before tax effect)	$	231,726		$	256,988		$	66,713		$	113,659

The components of net periodic benefit (credit) cost are as follows:

	Pension Benefits									Other Postretirement Benefits
	For the Years Ended December 31,									For the Years Ended December 31,
	2021			2020			2019			2021			2020			2019
Components of net periodic benefit (credit) cost:
Service cost	$	1,114		$	1,183		$	3,950		$	—		$	—		$	—
Interest cost		14,230			20,176			25,101			7,274			12,795			18,320
Expected return on plan assets		(42,168	)		(41,821	)		(40,457	)		—			—			—
Amortization of prior service credits		—			—			(367	)		(2,405	)		(2,405	)		(2,405	)
Recognized net actuarial loss		5,469			6,922			5,958			6,516			9,277			9,262
Settlement loss recognized		22			—			—			—			—			—
Net periodic benefit (credit) cost	$	(21,333	)	$	(13,540	)	$	(5,815	)	$	11,385		$	19,667		$	25,177

  (Credits) expenses related to pension and other post-employment benefits are reflected in Operating and Other Costs in the Consolidated Statements of Income.

CONSOL Energy utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the Pension Plan. Cumulative gains and losses that are in excess of 10% of the greater of either the projected benefit obligation (PBO) or the market-related value of plan assets are amortized over the expected remaining future lifetime of all plan participants for the Pension Plan.

CONSOL Energy also utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the OPEB Plan. Cumulative gains and losses that are in excess of 10% of the greater of either the accumulated postretirement benefit obligation (APBO) or the market-related value of plan assets are amortized over the average future remaining lifetime of the current inactive population for the OPEB Plan.

The following table provides information related to pension plans with an accumulated benefit obligation in excess of plan assets:

	As of December 31,
	2021		2020
Projected benefit obligation	$	27,988	$	778,868
Accumulated benefit obligation	$	27,734	$	778,618
Fair value of plan assets	$	—	$	740,978

Assumptions:

The weighted-average assumptions used to determine benefit obligations are as follows:

	Pension Obligations						Other Postretirement Obligations
	at December 31,						at December 31,
	2021			2020			2021			2020
Discount rate		2.83	%		2.36	%		2.79	%		2.39	%
Rate of compensation increase		3.78	%		3.76	%		—			—

The discount rates are determined using a Company-specific yield curve model (above-mean) developed with the assistance of an external actuary. The Company-specific yield curve models (above-mean) use a subset of the expanded bond universe to determine the Company-specific discount rate. Bonds used in the yield curve are rated AA by Moody's or Standard & Poor's as of the measurement date. The yield curve models parallel the plans' projected cash flows, and the underlying cash flows of the bonds included in the models exceed the cash flows needed to satisfy the Company's plans.

The weighted-average assumptions used to determine net periodic benefit costs are as follows:

	Pension Benefits									Other Postretirement Benefits
	For the Years Ended									For the Years Ended
	December 31,									December 31,
	2021			2020			2019			2021			2020			2019
Discount rate		2.46	%		3.35	%		4.37	%		2.39	%		3.27	%		4.34	%
Expected long-term return on plan assets		5.60	%		6.48	%		6.90	%		—			—			—
Rate of compensation increase		3.76	%		3.68	%		3.73	%		—			—			—

The long-term rate of return is the sum of the portion of total assets in each asset class held multiplied by the expected return for that class, adjusted for expected expenses to be paid from the assets. The expected return for each class is determined using the plan asset allocation at the measurement date and a distribution of compound average returns over a twenty-year time horizon. The model uses asset class returns, variances and correlation assumptions to produce the expected return for each portfolio. The return assumptions used forward-looking gross returns influenced by the current Treasury yield curve. These returns recognize current bond yields, corporate bond spreads and equity risk premiums based on current market conditions.

The assumed health care cost trend rates are as follows:

	At December 31,
	2021			2020
Health care cost trend rate for next year		5.35	%		5.43	%
Rate to which the cost trend is assumed to decline (ultimate trend rate)		4.00	%		4.50	%
Year that the rate reaches ultimate trend rate	2046			2038

Plan Assets:

The Company’s overall investment strategy is to meet current and future benefit payment needs through diversification across asset classes, fund strategies and fund managers to achieve an optimal balance between risk and return and between income and growth of assets through capital appreciation. Consistent with the objectives of the pension trust (the “Trust”) and in consideration of the Trust’s current funded status and the current level of market interest rates, the Retirement Board, as appointed by the CONSOL Energy Board of Directors (the “Retirement Board”) has approved an asset allocation strategy that will change over time in response to future improvements in the Trust’s funded status and/or changes in market interest rates. Such changes in asset allocation strategy are intended to allocate additional assets to the fixed income asset class should the Trust’s funded status improve. In this framework, the current target allocation for plan assets is 13% U.S. equity securities, 8.5% non-U.S. equity securities, 3.5% global equity securities and 75% fixed income. Both the equity and fixed income portfolios are comprised of both active and passive investment strategies. The Trust is primarily invested in Mercer Common Collective Trusts. Equity securities consist of investments in large and mid/small cap companies; non-U.S. equities are derived from both developed and emerging markets. Fixed income securities consist primarily of U.S. long duration fixed income corporate and U.S. Treasury instruments. The average quality of the fixed income portfolio must be rated at least “investment grade” by nationally recognized rating agencies. Within the fixed income asset class, investments are invested primarily across various strategies such that the overall profile strongly correlates with the interest rate sensitivity of the Trust’s liabilities in order to reduce the volatility resulting from the risk of changes in interest rates and the impact of such changes on the Trust’s overall financial status. Derivatives, interest rate swaps, options and futures are permitted investments for the purpose of reducing risk and to extend the duration of the overall fixed income portfolio; however, they may not be used for speculative purposes. All or a portion of the assets may be invested in mutual funds or other commingled vehicles so long as the pooled investment funds have an adequate asset base relative to their asset class; are invested in a diversified manner; and have management and/or oversight by an Investment Advisor registered with the SEC. The Retirement Board reviews the investment program on an ongoing basis including asset performance, current trends and developments in capital markets, changes in Trust liabilities and ongoing appropriateness of the overall investment policy.

The fair values of plan assets at December 31, 2021 and 2020 by asset category are as follows:

	Fair Value Measurements at December 31, 2021								Fair Value Measurements at December 31, 2020
			Quoted								Quoted
			Prices in								Prices in
			Active								Active
			Markets for		Significant		Significant				Markets for		Significant		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
			Assets		Inputs		Inputs				Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)
Asset Category
Cash/Accrued Income	$	102	$	102	$	—	$	—	$	100	$	100	$	—	$	—
Mercer Common Collective Trusts (a)		733,864		—		—		—		740,878		—		—		—
Total	$	733,966	$	102	$	—	$	—	$	740,978	$	100	$	—	$	—

(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy but are included in the total.

There are no investments in CONSOL Energy stock held by these plans at December 31, 2021 or 2020.

There are no assets in the other postretirement benefit plan at December 31, 2021 or 2020.

Cash Flows:

If necessary, CONSOL Energy intends to contribute to the pension trust using prudent funding methods. However, the Company does not expect to contribute to the pension plan trust in 2022. Pension benefit payments are primarily funded from the Trust. CONSOL Energy expects to pay benefits of $1,974 from the non-qualified pension plan in 2022. CONSOL Energy does not expect to contribute to the other postretirement benefit plan in 2022 and intends to pay benefit claims as they become due.

The following benefit payments, reflecting expected future service, are expected to be paid:

			Other
	Pension		Postretirement
	Benefits		Benefits
2022	$	43,826	$	23,638
2023	$	44,331	$	22,893
2024	$	42,723	$	22,063
2025	$	41,253	$	21,810
2026	$	42,622	$	21,460
Year 2027-2031	$	193,244	$	101,663