Employee Benefit Plans

12 Months Ended

Dec. 31, 2023

Text Block [Abstract]

Employee Benefit Plans

EMPLOYEE BENEFIT PLANS

We measure the assets and obligations of the defined benefit pension plans and other postretirement benefits plans to determine the plans’ funded status as of the end of the year. The changes in funded status that occurred during the year that are not recognized as part of net periodic benefit costs are recorded as a component of other comprehensive income (loss) or a regulatory asset.

Defined Benefit Pension Plans

At December 31, 2023 we sponsored two defined benefit pension plans: the FPU Pension Plan and the Chesapeake Supplemental Executive Retirement Plan ("SERP").

The FPU Pension Plan, a qualified plan, covers eligible FPU non-union employees hired before January 1, 2005 and union employees hired before the respective union contract expiration dates in 2005 and 2006. Prior to the FPU merger, the FPU Pension Plan was frozen with respect to additional years of service and compensation, effective December 31, 2009.

The Chesapeake SERP, a nonqualified plan, is comprised of two sub-plans. The first sub-plan was frozen with respect to additional years of service and additional compensation as of December 31, 2004. The second sub-plan provides fixed payments for several executives who joined the Company as a result of an acquisition and whose agreements with the Company provided for this benefit.

The unfunded liability for all plans at both December 31, 2023 and 2022, is included in the other pension and benefit costs liability in our consolidated balance sheets.

The following schedules set forth the funded status at December 31, 2023 and 2022 and the net periodic cost (benefit) for the years ended December 31, 2023, 2022 and 2021 for the FPU Pension Plan and the Chesapeake SERP:

	FPU Pension Plan						Chesapeake SERP
At December 31,	2023			2022			2023			2022
(in thousands)
Change in benefit obligation:
Benefit obligation — beginning of year	$	49,941		$	67,030		$	1,659		$	2,096
Interest cost	2,495			1,781			81			50
Actuarial (gain) loss	454			(15,713)			48			(335)
Benefits paid	(3,233)			(3,157)			(152)			(152)
Benefit obligation — end of year	49,657			49,941			1,636			1,659
Change in plan assets:
Fair value of plan assets — beginning of year	46,203			58,712			—			—
Actual return on plan assets	6,462			(9,552)			—			—
Employer contributions	—			200			152			152
Benefits paid	(3,233)			(3,157)			(152)			(152)
Fair value of plan assets — end of year	49,432			46,203			—			—
Accrued pension cost / funded status	$	(225)		$	(3,738)		$	(1,636)		$	(1,659)
Assumptions:
Discount rate	5.00		%	5.25		%	4.88		%	5.00		%
Expected return on plan assets	6.00		%	6.00		%	—		%	—		%

	FPU Pension Plan									Chesapeake SERP
For the Years Ended December 31,	2023			2022			2021			2023			2022			2021
(in thousands)
Components of net periodic pension cost:
Interest cost	$	2,495		$	1,781		$	1,714		$	81		$	50		$	48
Expected return on assets	(2,670)			(3,430)			(3,306)			—			—			—
Amortization of actuarial loss	407			466			612			8			28			28
Total periodic cost	$	232		$	(1,183)		$	(980)		$	89		$	78		$	76
Assumptions:
Discount rate	5.25		%	2.75		%	2.50		%	5.00		%	2.50		%	2.25		%
Expected return on plan assets	6.00		%	6.00		%	6.00		%	—		%	—		%	—		%

During the fourth quarter of 2021, we formally terminated the Chesapeake Pension Plan. Total periodic cost for the plan during that year was $2.0 million attributable to a settlement charge.

Our funding policy provides that payments to the trust of each qualified plan shall be equal to at least the minimum funding requirements of the Employee Retirement Income Security Act of 1974. The following schedule summarizes the assets of the FPU Pension Plan, by investment type, at December 31, 2023, 2022 and 2021:

	FPU Pension Plan
At December 31,	2023		2022		2021
Asset Category
Equity securities	50	%	53	%	52	%
Debt securities	49	%	38	%	38	%
Other	1	%	9	%	10	%
Total	100	%	100	%	100	%

The investment policy of the FPU Pension Plan is designed to provide the capital assets necessary to meet the financial obligations of the plan. The investment goals and objectives are to achieve investment returns that, together with contributions, will provide funds adequate to pay promised benefits to present and future beneficiaries of the plan, earn a competitive return to increasingly fund a large portion of the plan’s retirement liabilities, minimize pension expense and cumulative contributions resulting from liability measurement and asset performance, and maintain the appropriate mix of investments to reduce the risk of large losses over the expected remaining life of the plan.

The following allocation range of asset classes is intended to produce a rate of return sufficient to meet the FPU Pension Plan’s goals and objectives:

Asset Allocation Strategy
Asset Class	Minimum Allocation Percentage		Maximum Allocation Percentage
Domestic Equities (Large Cap, Mid Cap and Small Cap)	33	%	57	%
Fixed Income (Inflation Bond and Taxable Fixed)	38	%	58	%
Foreign Equities (Developed and Emerging Markets)	3	%	7	%
Cash	0	%	5	%

Due to periodic contributions and different asset classes producing varying returns, the actual asset values may temporarily move outside of the intended ranges. The investments are monitored on a quarterly basis, at a minimum, for asset allocation and performance. At December 31, 2023 and 2022, the assets of the FPU Pension Plan were comprised of the following investments:

	Fair Value Measurement Hierarchy
	For Year Ended December 31,
Asset Category	2023		2022
(in thousands)
Mutual Funds - Equity securities
U.S. Large Cap (1)	$	15,360	$	3,413
U.S. Mid Cap (1)	4,271		1,425
U.S. Small Cap (1)	2,518		692
International (2)	2,499		9,352
Alternative Strategies (3)	—		4,824
	24,648		19,706
Mutual Funds - Debt securities
Fixed income (4)	24,228		15,343
High Yield (4)	—		2,269
	24,228		17,612
Mutual Funds - Other
Commodities (5)	—		1,832
Real Estate (6)	—		1,709
Guaranteed deposit (7)	556		398
	556		3,939
Total Pension Plan Assets in fair value hierarchy (8)	49,432		41,257
Investments measured at net asset value (9)	—		4,946
Total Pension Plan Assets	$	49,432	$	46,203

(1) Includes funds that invest primarily in United States common stocks.

(2) Includes funds that invest primarily in foreign equities and emerging markets equities.

(3) Includes funds that actively invest in both equity and debt securities, funds that sell short securities and funds that provide long-term capital appreciation. The funds may invest in debt securities below investment grade.

(4) Includes funds that invest in investment grade and fixed income securities.

(5) Includes funds that invest primarily in commodity-linked derivative instruments and fixed income securities.

(6) Includes funds that invest primarily in real estate.

(7) Includes investment in a group annuity product issued by an insurance company.

(8) All investments in the FPU Pension Plan are classified as Level 1 within the Fair Value hierarchy exclusive of the Guaranteed Deposit Account which is classified as Level 3.

(9) Certain investments that were measured at net asset value per share have not been classified in the fair value hierarchy. These amounts are presented to reconcile to total pension plan assets.

At December 31, 2023 and 2022, our pension plan investments were classified under the same fair value measurement hierarchy (Level 1 through Level 3) described under Note 9, Fair Value of Financial Instruments. The Level 3 investments were recorded at fair value based on the contract value of annuity products underlying guaranteed deposit accounts, which was calculated using discounted cash flow models. The contract value of these products represented deposits made to the contract, plus earnings at guaranteed crediting rates, less withdrawals and fees. Certain investments that were measured at net asset value per share have not been classified in the fair value hierarchy and are presented in the table above to reconcile to total pension plan assets.

The changes in the fair value within our pension assets for Level 3 investments for the years ended December 31, 2023 and 2022 were immaterial.

Other Postretirement Benefits Plans

We sponsor two defined benefit postretirement health plans: the Chesapeake Utilities Postretirement Plan ("Chesapeake Postretirement Plan") and the FPU Medical Plan. At December 31, 2023 and 2022, the funded status of the Chesapeake Postretirement Plan was $1.1 million and $0.6 million, respectively. The funded status of the FPU Medical Plan was $0.4 million and $0.7 million as of December 31, 2023 and 2022, respectively.

Net periodic postretirement benefit costs for the Chesapeake Postretirement Plan and the FPU Medical Plan were not material for the years ended December 31, 2023, 2022, and 2021.

As of December 31, 2023, there was $12.8 million not yet reflected in net periodic postretirement benefit costs and included in accumulated other comprehensive income (loss) or as a regulatory asset. Net losses of $10.8 million and $1.2 million attributable to the FPU Pension Plan and Chesapeake Postretirement Plan, respectively, comprised most of this amount with $3.2 million recorded in accumulated other comprehensive income (loss) and $8.7 million recorded as a regulatory asset at December 31, 2023.

Pursuant to a Florida PSC order, FPU continues to record as a regulatory asset the portion of the unrecognized pension and postretirement benefit costs after the merger with Chesapeake Utilities related to its regulated operations.

 Assumptions

The assumptions used for the discount rate to calculate the benefit obligations were based on the interest rates of high-quality bonds in 2023, considering the expected lives of each of the plans. In determining the average expected return on plan assets for the FPU Pension Plan, various factors, such as historical long-term return experience, investment policy and current and expected allocation, were considered. Since the FPU Pension Plan is frozen with respect to additional years of service and compensation, the rate of assumed compensation increases is not applicable.

The health care inflation rate for 2023 used to calculate the benefit obligation is 5 percent for medical and 6 percent for prescription drugs for the Chesapeake Postretirement Plan; and 5 percent for both medical and prescription drugs for the FPU Medical Plan.

Estimated Future Benefit Payments

In 2024, we do not expect to contribute to the FPU Pension Plan, and total payments of $0.2 million are expected for the Chesapeake SERP, Chesapeake Postretirement Plan and FPU Medical Plan combined.

The schedule below shows the estimated future benefit payments for each of the plans previously described:

	FPU Pension Plan(1)		Chesapeake SERP(2)		Chesapeake Postretirement Plan(2)		FPU Medical Plan(2)
(in thousands)
2024	$	3,528	$	151	$	42	$	35
2025	$	3,603	$	164	$	46	$	35
2026	$	3,617	$	161	$	45	$	34
2027	$	3,616	$	158	$	48	$	33
2028	$	3,651	$	154	$	49	$	32
Years 2029 through 2033	$	17,951	$	689	$	299	$	143

(1) The pension plan is funded; therefore, benefit payments are expected to be paid out of the plan assets.

(2) Benefit payments are expected to be paid out of our general funds.

Retirement Savings Plan

We sponsor a 401(k) Retirement Savings Plan which is offered to all eligible employees who have completed three months of service. We match 100 percent of eligible participants’ pre-tax contributions to the Retirement Savings Plan up to a maximum of six percent of eligible compensation. The employer matching contribution is made in cash and is invested based on a participant’s investment directions. In addition, we may make a discretionary supplemental contribution to participants in the plan, without regard to whether or not they make pre-tax contributions. Any supplemental employer contribution is generally made in our common stock. With respect to the employer match and supplemental employer contribution, employees are 100 percent vested after two years of service or upon reaching 55 years of age while still employed by us. New employees who do not make an election to contribute and do not opt out of the Retirement Savings Plan will be automatically enrolled at a deferral rate of three percent, and the automatic deferral rate will increase by one percent per year up to a maximum of ten percent. All contributions and matched funds can be invested among the mutual funds available for investment.

Employer contributions to our Retirement Savings Plan totaled $6.6 million, $6.2 million, and $5.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, there were 798,586 shares of our common stock reserved to fund future contributions to the Retirement Savings Plan.

Non-Qualified Deferred Compensation Plan

Members of our Board of Directors and officers of the Company are eligible to participate in the Non-Qualified Deferred Compensation Plan. Directors can elect to defer any portion of their cash or stock compensation and officers can defer up to 80 percent of their base compensation, cash bonuses or any amount of their stock bonuses (net of required withholdings). Officers may receive a matching contribution on their cash compensation deferrals up to six percent of their compensation, provided it does not duplicate a match they receive in the Retirement Savings Plan. Stock bonuses are not eligible for matching contributions. Participants are able to elect the payment of deferred compensation to begin on a specified future date or upon separation from service. Additionally, participants can elect to receive payments upon the earlier or later of a fixed date or separation from service. The payments can be made in one lump sum or annual installments for up to 15 years.

All obligations arising under the Non-Qualified Deferred Compensation Plan are payable from our general assets, although we have established a Rabbi Trust to informally fund the plan. Deferrals of cash compensation may be invested by the participants in various mutual funds (the same options that are available in the Retirement Savings Plan). The participants are credited with gains or losses on those investments. Deferred stock compensation may not be diversified. The participants are credited with dividends on their deferred common stock units in the same amount that is received by all other stockholders. Such dividends are reinvested into additional deferred common stock units. Assets held in the Rabbi Trust, recorded as Investments on the consolidated balance sheet, had a fair value of $12.3 million and $10.6 million at December 31, 2023 and 2022, respectively. The assets of the Rabbi Trust are at all times subject to the claims of our general creditors.

Deferrals of officer base compensation and cash bonuses and directors’ cash retainers are paid in cash. All deferrals of executive performance shares and directors' stock retainers are made in the form of deferred common stock units and are paid out in shares of our common stock, on a one-for-one basis, except that cash is paid in lieu of fractional shares. The value of our stock held in the Rabbi Trust is classified within the stockholders’ equity section of the consolidated balance sheets and has been accounted for in a manner similar to treasury stock. The amounts recorded under the Non-Qualified Deferred Compensation Plan totaled $9.1 million and $7.1 million at December 31, 2023 and 2022, respectively, which are also shown as a deduction against stockholders' equity in the consolidated balance sheet.