EMPLOYEE BENEFIT PLANS

Plan Terminations: Energen terminated its qualified defined benefit pension plan on January 31, 2015 and distributed benefits in December 2015. In February 2018, Energen received notice that the Pension Benefit Guaranty Corporation had completed its audit of the termination of the pension plan and of the distribution of plan assets noting no exceptions.

Energen’s non-qualified supplemental retirement plans were terminated effective December 31, 2014. Distributions under the plans were partially made in the first quarter of 2015 with the remainder of approximately $14.5 million paid in the first quarter of 2016. The Company expects to make no additional benefit payments with respect to the termination of the non-qualified supplemental retirement plans. Certain annuities associated with our non-qualified supplemental retirement plans remain of approximately $1.0 million and $1.1 million and are included in other current liabilities and other long-term liabilities on the consolidated balance sheets at December 31, 2017 and 2016, respectively.

Benefit Obligations: The following table sets forth the funded status of the postretirement health care and life insurance benefit plans and their reconciliation with the related amounts in Energen’s consolidated financial statements.



As of December 31, (in thousands)	2017			2016
	Postretirement Benefits
Accumulated benefit obligation
Benefit obligation:
Balance at beginning of period	$	5,447		$	6,488
Service cost	70			94
Interest cost	227			223
Actuarial loss	413			917
Plan amendments	—			(422		)
Curtailment gain	—			(477		)
Benefits paid	(221		)	(1,376		)
Balance at end of period	$	5,936		$	5,447
Plan assets:
Fair value of plan assets at beginning of period	$	9,066		$	10,369
Actual return (loss) on plan assets*	(263		)	73
Benefits paid	(221		)	(1,376		)
Fair value of plan assets at end of period	8,582			9,066
Funded status of plans	$	2,646		$	3,619



Amounts recognized on consolidated balance sheets:
Noncurrent assets recognized	$	2,646		$	3,619
Amounts recognized to accumulated other comprehensive income:
Prior service credit, net of taxes	$	(1,680	)	$	(2,111	)
Net actuarial loss, net of taxes	1,300			643
Total accumulated other comprehensive income	$	(380	)	$	(1,468	)

*Actual loss on plan assets for the year ended December 31, 2017 include $0.9 million for tax payments.

The components of net periodic benefit cost were as follows:



Years ended December 31, (in thousands)	2017			2016			2015
Pension Plans
Components of net periodic benefit cost:
Interest cost	$	—		$	—		$	816
Actuarial loss amortization	—			—			737
Settlement charge	—			3,325			29,767
Net periodic expense	$	—		$	3,325		$	31,320
Postretirement Benefit Plans
Components of net periodic benefit cost:
Service cost	$	70		$	94		$	392
Interest cost	227			223			466
Expected long-term return on assets	(249		)	(316		)	(457		)
Prior service cost amortization	(454		)	(465		)	—
Actuarial gain amortization	10			—			—
Settlement charge	—			45			—
Curtailment gain	—			(816		)	—
Net periodic (income) expense	$	(396	)	$	(1,235	)	$	401

Other changes in plan assets and projected benefit obligations recognized in other comprehensive income were as follows:



Years ended December 31, (in thousands)	2017			2016			2015
Pension Plans
Net actuarial gain experienced during the year	$	—		$	—		$	(394	)
Net actuarial loss recognized as expense	—			(3,352		)	(30,478		)
Total recognized in other comprehensive loss	—			(3,352		)	(30,872		)
Postretirement Benefit Plans
Net actuarial (gain) loss experienced during the year	$	925		$	682		$	(645	)
Net actuarial loss recognized as expense	(10		)	(9		)	—
Prior service cost recognized as income	—			780			—
Prior service credit during the year	—			(421		)	(4,071		)
Prior service cost amortization	454			465			—
Total recognized in other comprehensive income (loss)	$	1,369		$	1,497		$	(4,716	)

In the first quarter of 2016, Energen incurred a settlement charge of $3.3 million for the payment of lump sums from the non-qualified supplemental retirement plans. In the three months ended March 31, 2016, Energen incurred a curtailment gain of $0.8 million in connection with the reduction in workforce.

In the year ended December 31, 2015, Energen incurred settlement charges of $27.3 million for the payment of lump sums from the qualified defined benefit pension plans. Also in the first quarter of 2015, Energen incurred a settlement charge of $2.5 million for the payment of lump sums from the non-qualified supplemental retirement plans.

Estimated amounts to be amortized from accumulated other comprehensive income into postretirement benefit cost during 2018 are included in the table below.



(in thousands)
Amortization of prior service credit	$	(454	)
Amortization of net actuarial loss	$	125

Energen has a long-term disability plan covering most employees. Energen had expense of $0.1 million for the year ended December 31, 2017. Energen had expense of $0.2 million for each of the years ended December 31, 2016 and 2015.

Assumptions: The weighted average rate assumptions to determine net periodic benefit costs were as follows:



Years ended December 31,	2017		2016		2015
Pension Plans
Discount rate	—		—		0.96	%
Postretirement Benefit Plans
Discount rate	4.30	%	4.37	%	4.25	%
Expected long-term return on plan assets	4.30	%	4.96	%	6.20	%

For the year ended December 31, 2015, the discount rate for the pension plans shown above represents the weighted average for the nonqualified supplemental retirement plan. As the plans were frozen as of December 31, 2014, the rate of compensation increase no longer applies for any of the plans.

The weighted average assumptions used to determine the postretirement benefit obligations at the measurement date were as follows:



Years ended December 31,	2017		2016
Discount rate	3.70	%	4.30	%

Health care costs trend rates will not have a material impact to the accumulated postretirement benefit obligation as the majority of employees will receive a fixed postretirement benefit.

Investment Strategy: For our postretirement benefit plan assets, we continue to employ a total return investment approach whereby a mix of fixed income investments and equities are used to meet future plan obligations on a long-term basis with a prudent level of risk. Risk tolerance is established through consideration of plan liabilities, plan funded status, corporate financial condition and market conditions.

Energen seeks to maintain an appropriate level of diversification to minimize the risk of large losses in a single asset class. Accordingly, plan assets for the postretirement health care and life insurance benefit plan do not have a concentration of assets in a single entity, industry, commodity or class of investment fund.

The Company’s weighted average plan asset allocations by asset category for postretirement benefit plans were as follows:



As of December 31,	Target		2017		2016
Asset category:
Equity securities	21	%	21	%	26	%
Debt securities	74	%	73	%	74	%
Other	5	%	6	%	—
Total	100	%	100	%	100	%

Equity securities for postretirement benefits do not include the Company’s common stock.

Plan assets included in the funded status of the postretirement benefit plans were as follows:



	December 31, 2017
(in thousands)	Level 1		Level 2		Total
United States equities	$	165	$	—	$	165
Global equities	1,673		—		1,673
Fixed income	6,224		—		6,224
Other	520		—		520
Total	$	8,582	$	—	$	8,582



	December 31, 2016
(in thousands)	Level 1		Level 2		Total
Cash and cash equivalents	$	10	$	—	$	10
United States equities	180		—		180
Global equities	2,158		—		2,158
Fixed income	6,718		—		6,718
Total	$	9,066	$	—	$	9,066

Energen had no Level 3 postretirement benefit plan assets. United States equities consist of mutual funds with varying strategies. These funds invest largely in medium to large capitalized companies with exposure blending growth, market-oriented and value styles. Additional fund investments include small capitalization companies, and certain of these funds utilize tax-sensitive management approaches. Global equities are mutual funds that invest in both United States and non-United States securities broadly diversified across most developed markets with exposure blending growth, market-oriented and value styles. Fixed income securities are high-quality short-duration securities including investment-grade market sectors with tactical investments in non-investment grade sectors.

Cash Flows: Due to restructuring of our plans, Energen no longer qualifies for benefits related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The following benefit payments, which reflect expected future service, as appropriate, are anticipated to be paid as follows:



(in thousands)		Postretirement Benefits
2018		$349
2019		$327
2020		$347
2021		$367
2022		$320
2023-2027		$1,597

Energen Employee Savings Plan (ESP): The Company sponsors the ESP for the benefit of substantially all employees. The ESP allows eligible employees to contribute a percentage of their annual compensation. The Company makes contributions matching a portion of the employee’s contribution and, additionally, makes employer supplemental contributions as a percentage of each employee’s compensation. Expense associated with Energen contributions to the ESP was $3.2 million, $3.3 million and $5.7 million for the years ended December 31, 2017, 2016 and 2015, respectively.

2017 Change in Control Severance Pay Plan

In November 2017, Energen adopted the Change in Control Severance Pay Plan which provides for certain severance payments to non-officer employees of Energen Corporation in the event of an involuntary termination of employment other than for cause or a voluntary termination for good reason within one year following any Change in Control. Change in Control, as used in the Plan, has the same definition included in Energen’s Severance Compensation Agreements with named executive officers. The Plan has an initial term of three years, with an automatic one-year extension each anniversary, beginning with the second anniversary of the effective date of the Plan, absent Company notification that it will not be extended. The Plan may not be terminated (nor may any amendment which adversely affects rights of participants under the Plan become effective) during the one-year period following a Change in Control.