Pension and Other Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2019

Defined Contribution Plan [Abstract]

Pension and Other Postretirement Benefit Plans

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 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 did not exceed this threshold during the years ended December 31, 2019 and 2018. However, lump sum payments did exceed this threshold during the year ended December 31, 2017. Accordingly, CONSOL Energy recognized settlement expense of $10,153 for the year ended December 31, 2017 in Operating and Other Costs in the Consolidated Statements of Income.

Other Postretirement Benefit Plan

Certain subsidiaries of CONSOL Energy provide medical and prescription drug benefits to retired employees covered by the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act). Represented hourly employees are eligible to participate based upon the terms of 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, 2019 and 2018 is as follows:

	Pension Benefits						Other Postretirement Benefits
	at December 31,						at December 31,
	2019			2018			2019			2018
Change in benefit obligation:
Benefit obligation at beginning of period	$	644,142		$	733,990		$	473,591		$	591,563
Service cost	3,950			1,150			—			—
Interest cost	25,101			23,505			18,320			18,706
Actuarial loss (gain)	95,078			(60,351		)	4,761			(101,259		)
Benefits and other payments	(48,173		)	(54,152		)	(32,343		)	(35,419		)
Benefit obligation at end of period	$	720,098		$	644,142		$	464,329		$	473,591
Change in plan assets:
Fair value of plan assets at beginning of period	$	578,347		$	679,245		$	—		$	—
Actual return on plan assets	136,976			(48,470		)	—			—
Company contributions	1,331			1,724			32,343			35,419
Benefits and other payments	(48,173		)	(54,152		)	(32,343		)	(35,419		)
Fair value of plan assets at end of period	$	668,481		$	578,347		$	—		$	—
Funded status:
Current liabilities	$	(1,687	)	$	(1,623	)	$	(31,833	)	$	(32,345	)
Noncurrent liabilities	(49,930		)	(64,172		)	(432,496		)	(441,246		)
Net obligation recognized	$	(51,617	)	$	(65,795	)	$	(464,329	)	$	(473,591	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial loss	$	255,830		$	263,229		$	179,937		$	184,438
Prior service credit	—			(367		)	(20,949		)	(23,354		)
Net amount recognized (before tax effect)	$	255,830		$	262,862		$	158,988		$	161,084

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,
	2019			2018			2017			2019			2018			2017
Components of net periodic benefit (credit) cost:
Service cost	$	3,950		$	1,150		$	2,948		$	—		$	—		$	—
Interest cost	25,101			23,505			25,265			18,320			18,706			23,945
Expected return on plan assets	(40,457		)	(40,370		)	(42,383		)	—			—			—
Amortization of prior service credits	(367		)	(502		)	(502		)	(2,405		)	(2,405		)	(2,405		)
Recognized net actuarial loss	5,958			8,715			8,896			9,262			16,205			23,112
Settlement loss	—			—			10,153			—			—			—
Net periodic benefit (credit) cost	$	(5,815	)	$	(7,502	)	$	4,377		$	25,177		$	32,506		$	44,652

Amounts included in accumulated other comprehensive loss which are expected to be recognized in 2020 net periodic benefit costs:

			Other
	Pension		Postretirement
	Benefits		Benefits
Prior service credit recognition	$	—	$	(2,405	)
Actuarial loss recognition	$	6,922	$	9,278

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,
	2019		2018
Projected benefit obligation	$	720,098	$	644,142
Accumulated benefit obligation	$	719,985	$	644,069
Fair value of plan assets	$	668,481	$	578,347

Assumptions:

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

	Pension Obligations				Other Postretirement Obligations
	at December 31,				at December 31,
	2019		2018		2019		2018
Discount rate	3.28	%	4.34	%	3.27	%	4.34	%
Rate of compensation increase	3.68	%	3.73	%	—		—

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,
	2019		2018		2017		2019		2018		2017
Discount rate	4.37	%	3.69	%	4.27	%	4.34	%	3.65	%	4.22	%
Expected long-term return on plan assets	6.90	%	6.90	%	6.90	%	—		—		—
Rate of compensation increase	3.73	%	3.73	%	3.90	%	—		—		—

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,
	2019		2018
Health care cost trend rate for next year	5.65	%	5.83	%
Rate to which the cost trend is assumed to decline (ultimate trend rate)	4.50	%	4.50	%
Year that the rate reaches ultimate trend rate	2038		2038

Assumed health care cost trend rates have a significant effect on the amounts reported for the medical plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:

	1 Percentage		1 Percentage
	Point Increase		Point Decrease
Effect on total of service and interest cost components	$	2,023	$	(1,725	)
Effect on accumulated postretirement benefit obligation	$	48,891	$	(41,917	)

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 23.5% U.S. equity securities, 15% non-U.S. equity securities, 6.5% global equity securities and 55% 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, 2019 and 2018 by asset category are as follows:

	Fair Value Measurements at December 31, 2019								Fair Value Measurements at December 31, 2018
			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	$	97	$	97	$	—	$	—	$	101	$	101	$	—	$	—
Mercer Common Collective Trusts (a)	668,384		—		—		—		578,246		—		—		—
Total	$	668,481	$	97	$	—	$	—	$	578,347	$	101	$	—	$	—

__________

(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, 2019 or 2018.

There are no assets in the other postretirement benefit plan at December 31, 2019 or 2018.

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 2020. Pension benefit payments are primarily funded from the Trust. CONSOL Energy expects to pay benefits of $1,687 from the non-qualified pension plan in 2020. CONSOL Energy does not expect to contribute to the other postretirement benefit plan in 2020 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
2020	$	44,619	$	31,833
2021	$	43,297	$	29,935
2022	$	43,438	$	29,302
2023	$	42,905	$	28,664
2024	$	42,837	$	27,881
Year 2025-2029	$	200,271	$	134,541