Retirement Plan and Other Post-Retirement Benefits

The Company has a tax-qualified, noncontributory, defined-benefit retirement plan (Retirement Plan). The Retirement Plan covers certain non-collectively bargained employees hired before July 1, 2003 and certain collectively bargained employees hired before November 1, 2003. Certain non-collectively bargained employees hired after June 30, 2003 and certain collectively bargained employees hired after October 31, 2003 are eligible for a Retirement Savings Account benefit provided under the Company’s defined contribution Tax-Deferred Savings Plans. Costs associated with the Retirement Savings Account were $2.6 million, $2.3 million and $1.9 million for the years ended September 30, 2016, 2015 and 2014, respectively. Costs associated with the Company’s contributions to the Tax-Deferred Savings Plans, exclusive of the costs associated with the Retirement Savings Account, were $5.9 million, $5.8 million, and $5.2 million for the years ended September 30, 2016, 2015 and 2014, respectively.

The Company provides health care and life insurance benefits (other post-retirement benefits) for a majority of its retired employees. The other post-retirement benefits cover certain non-collectively bargained employees hired before January 1, 2003 and certain collectively bargained employees hired before October 31, 2003.

The Company’s policy is to fund the Retirement Plan with at least an amount necessary to satisfy the minimum funding requirements of applicable laws and regulations and not more than the maximum amount deductible for federal income tax purposes. The Company has established VEBA trusts for its other post-retirement benefits. Contributions to the VEBA trusts are tax deductible, subject to limitations contained in the Internal Revenue Code and regulations and are made to fund employees’ other post-retirement benefits, as well as benefits as they are paid to current retirees. In addition, the Company has established 401(h) accounts for its other post-retirement benefits. They are separate accounts within the Retirement Plan trust used to pay retiree medical benefits for the associated participants in the Retirement Plan. Although these accounts are in the Retirement Plan trust, for funding status purposes as shown below, the 401(h) accounts are included in Fair Value of Assets under Other Post-Retirement Benefits. Contributions are tax-deductible when made, subject to limitations contained in the Internal Revenue Code and regulations.

The expected return on Retirement Plan assets, a component of net periodic benefit cost shown in the tables below, is applied to the market-related value of plan assets. The market-related value of plan assets is the market value as of the measurement date adjusted for variances between actual returns and expected returns (from previous years) that have not been reflected in net periodic benefit costs. The expected return on other post-retirement benefit assets (i.e. the VEBA trusts and 401(h) accounts), which is a component of net periodic benefit cost shown in the tables below, is applied to the fair value of assets as of the measurement date.

Reconciliations of the Benefit Obligations, Plan Assets and Funded Status, as well as the components of Net Periodic Benefit Cost and the Weighted Average Assumptions of the Retirement Plan and other post-retirement benefits are shown in the tables below. The date used to measure the Benefit Obligations, Plan Assets and Funded Status is September 30 for fiscal years 2016, 2015 and 2014.



	Retirement Plan									Other Post-Retirement Benefits
	Year Ended September 30									Year Ended September 30
	2016			2015			2014			2016			2015			2014
	(Thousands)
Change in Benefit Obligation
Benefit Obligation at Beginning of Period	$	1,026,190		$	999,499		$	946,305		$	464,987		$	465,583		$	460,634
Service Cost	11,710			12,047			11,987			2,331			2,693			2,939
Interest Cost	42,315			41,217			43,574			20,386			19,285			21,308
Plan Participants’ Contributions	—			—			—			2,558			2,242			2,265
Retiree Drug Subsidy Receipts	—			—			—			1,925			1,338			1,419
Amendments(1)	—			7,752			—			—			—			—
Actuarial (Gain) Loss	76,309			23,426			53,887			60,402			(1,575		)	1,087
Benefits Paid	(59,103		)	(57,751		)	(56,254		)	(26,451		)	(24,579		)	(24,069		)
Benefit Obligation at End of Period	$	1,097,421		$	1,026,190		$	999,499		$	526,138		$	464,987		$	465,583
Change in Plan Assets
Fair Value of Assets at Beginning of Period	$	834,870		$	869,791		$	799,307		$	477,959		$	497,601		$	472,392
Actual Return on Plan Assets	87,008			(13,370		)	93,238			37,415			534			44,898
Employer Contributions	7,000			36,200			33,500			2,839			2,161			2,115
Plan Participants’ Contributions	—			—			—			2,558			2,242			2,265
Benefits Paid	(59,103		)	(57,751		)	(56,254		)	(26,451		)	(24,579		)	(24,069		)
Fair Value of Assets at End of Period	$	869,775		$	834,870		$	869,791		$	494,320		$	477,959		$	497,601
Net Amount Recognized at End of Period (Funded Status)	$	(227,646	)	$	(191,320	)	$	(129,708	)	$	(31,818	)	$	12,972		$	32,018
Amounts Recognized in the Balance Sheets Consist of:
Non-Current Liabilities	$	(227,646	)	$	(191,320	)	$	(129,708	)	$	(49,467	)	$	(11,487	)	$	(4,494	)
Non-Current Assets	—			—			—			17,649			24,459			36,512
Net Amount Recognized at End of Period	$	(227,646	)	$	(191,320	)	$	(129,708	)	$	(31,818	)	$	12,972		$	32,018
Accumulated Benefit Obligation	$	1,039,408		$	968,984		$	940,068		N/A			N/A			N/A
Weighted Average Assumptions Used to Determine Benefit Obligation at September 30
Discount Rate	3.60		%	4.25		%	4.25		%	3.70		%	4.50		%	4.25		%
Rate of Compensation Increase	4.70		%	4.75		%	4.75		%	4.70		%	4.75		%	4.75		%



	Retirement Plan									Other Post-Retirement Benefits
	Year Ended September 30									Year Ended September 30
	2016			2015			2014			2016			2015			2014
	(Thousands)
Components of Net Periodic Benefit Cost
Service Cost	$	11,710		$	12,047		$	11,987		$	2,331		$	2,693		$	2,939
Interest Cost	42,315			41,217			43,574			20,386			19,285			21,308
Expected Return on Plan Assets	(59,369		)	(59,615		)	(59,974		)	(31,535		)	(34,089		)	(37,424		)
Amortization of Prior Service Cost (Credit)	1,234			183			210			(912		)	(1,913		)	(2,138		)
Recognition of Actuarial Loss(2)	32,248			36,129			36,007			5,530			4,148			2,645
Net Amortization and Deferral for Regulatory Purposes	3,957			7,739			8,151			17,123			20,322			23,263
Net Periodic Benefit Cost	$	32,095		$	37,700		$	39,955		$	12,923		$	10,446		$	10,593
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost at September 30
Discount Rate	4.25		%	4.25		%	4.75		%	4.50		%	4.25		%	4.75		%
Expected Return on Plan Assets	7.25		%	7.50		%	8.00		%	6.75		%	7.00		%	8.00		%
Rate of Compensation Increase	4.75		%	4.75		%	4.75		%	4.75		%	4.75		%	4.75		%


(1)	In fiscal 2015, the Company passed an amendment which updated the mortality table used in the Retirement Plan's definition of "actuarially equivalent" effective July 1, 2015. This increased the benefit obligation of the Retirement Plan.


(2)	Distribution Corporation’s New York jurisdiction calculates the amortization of the actuarial loss on a vintage year basis over 10 years, as mandated by the NYPSC. All the other subsidiaries of the Company utilize the corridor approach.

The Net Periodic Benefit Cost in the table above includes the effects of regulation. The Company recovers pension and other post-retirement benefit costs in its Utility and Pipeline and Storage segments in accordance with the applicable regulatory commission authorizations. Certain of those commission authorizations established tracking mechanisms which allow the Company to record the difference between the amount of pension and other post-retirement benefit costs recoverable in rates and the amounts of such costs as determined under the existing authoritative guidance as either a regulatory asset or liability, as appropriate. Any activity under the tracking mechanisms (including the amortization of pension and other post-retirement regulatory assets and liabilities) is reflected in the Net Amortization and Deferral for Regulatory Purposes line item above.

In addition to the Retirement Plan discussed above, the Company also has Non-Qualified benefit plans that cover a group of management employees designated by the Chief Executive Officer of the Company. These plans provide for defined benefit payments upon retirement of the management employee, or to the spouse upon death of the management employee. The net periodic benefit cost associated with these plans were $7.5 million, $7.0 million and $7.5 million in 2016, 2015 and 2014, respectively. The accumulated benefit obligations for the plans were $72.4 million, $66.0 million and $65.7 million at September 30, 2016, 2015 and 2014, respectively. The projected benefit obligations for the plans were $91.7 million, $85.8 million and $85.5 million at September 30, 2016, 2015 and 2014, respectively. At September 30, 2016, $9.8 million of the projected benefit obligation is recorded in Other Accruals and Current Liabilities and the remaining $81.9 million is recorded in Other Deferred Credits on the Consolidated Balance Sheets. At September 30, 2015, $4.5 million of the projected benefit obligation was recorded in Other Accruals and Current Liabilities and the remaining $81.3 million was recorded in Other Deferred Credits on the Consolidated Balance Sheets. At September 30, 2014, $6.6 million of the projected benefit obligation was recorded in Other Accruals and Current Liabilities and the remaining $78.9 million was recorded in Other Deferred Credits on the Consolidated Balance Sheets. The weighted average discount rates for these plans were 2.80%, 3.50% and 3.50% as of September 30, 2016, 2015 and 2014, respectively and the weighted average rate of compensation increase for these plans were 7.75%, 7.75% and 7.50% as of September 30, 2016, 2015 and 2014, respectively.

The cumulative amounts recognized in accumulated other comprehensive income (loss), regulatory assets, and regulatory liabilities through fiscal 2016, the changes in such amounts during 2016, as well as the amounts expected to be recognized in net periodic benefit cost in fiscal 2017 are presented in the table below:



	Retirement Plan			Other Post-Retirement Benefits			Non-Qualified Benefit Plans
	(Thousands)
Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Regulatory Liabilities(1)
Net Actuarial Loss	$	(303,602	)	$	(108,907	)	$	(27,041	)
Prior Service (Cost) Credit	(7,191		)	4,115			—
Net Amount Recognized	$	(310,793	)	$	(104,792	)	$	(27,041	)
Changes to Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Regulatory Liabilities Recognized During Fiscal 2016(1)
Increase in Actuarial Loss, excluding amortization(2)	$	(48,670	)	$	(54,523	)	$	(5,450	)
Change due to Amortization of Actuarial Loss	32,248			5,530			3,338
Prior Service (Cost) Credit	1,234			(912		)	—
Net Change	$	(15,188	)	$	(49,905	)	$	(2,112	)
Amounts Expected to be Recognized in Net Periodic Benefit Cost in the Next Fiscal Year(1)
Net Actuarial Loss	$	(42,687	)	$	(18,415	)	$	(4,059	)
Prior Service (Cost) Credit	(1,058		)	429			—
Net Amount Expected to be Recognized	$	(43,745	)	$	(17,986	)	$	(4,059	)


(1)	Amounts presented are shown before recognizing deferred taxes.


(2)	Amounts presented include the impact of actuarial gains/losses related to return on assets, as well as the Actuarial (Gain) Loss amounts presented in the Change in Benefit Obligation.

In order to adjust the funded status of its pension (tax-qualified and non-qualified) and other post-retirement benefit plans at September 30, 2016, the Company recorded a $55.9 million increase to Other Regulatory Assets in the Company’s Utility and Pipeline and Storage segments and a $11.3 million (pre-tax) decrease to Accumulated Other Comprehensive Income.

The effect of the discount rate change for the Retirement Plan in 2016 was to increase the projected benefit obligation of the Retirement Plan by $78.5 million. In 2016, other actuarial experience decreased the projected benefit obligation for the Retirement Plan by $2.2 million. The effect of the mortality assumption change for the Retirement Plan in 2015 was to increase the projected benefit obligation of the Retirement Plan by $24.2 million. The effect of the discount rate change for the Retirement Plan in 2014 was to increase the projected benefit obligation of the Retirement Plan by $53.7 million.

The Company made cash contributions totaling $7.0 million to the Retirement Plan during the year ended September 30, 2016. The Company expects that the annual contribution to the Retirement Plan in 2017 will be in the range of $15.0 million to $20.0 million.

The following Retirement Plan benefit payments, which reflect expected future service, are expected to be paid by the Retirement Plan during the next five years and the five years thereafter: $62.4 million in 2017; $63.6 million in 2018; $64.3 million in 2019; $64.8 million in 2020; $65.6 million in 2021; and $333.9 million in the five years thereafter.

The effect of the discount rate change in 2016 was to increase the other post-retirement benefit obligation by $49.4 million. Other actuarial experience increased the other post-retirement benefit obligation in 2016 by $11.0 million primarily attributable to a revision in assumed per-capita claims cost, premiums, participant contributions and drug subsidy assumptions based on actual experience.

The effect of the discount rate change in 2015 was to decrease the other post-retirement benefit obligation by $14.3 million. Other actuarial experience increased the other post-retirement benefit obligation in 2015 by $12.8 million primarily attributable to the change in mortality assumption.

The effect of the discount rate change in 2014 was to increase the other post-retirement benefit obligation by $26.4 million. Other actuarial experience decreased the other post-retirement benefit obligation in 2014 by $25.3 million primarily attributable to a revision in assumed per-capita claims cost, premiums and participant contributions based on actual experience.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 provides for a prescription drug benefit under Medicare (Medicare Part D), as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D.

The estimated gross other post-retirement benefit payments and gross amount of Medicare Part D prescription drug subsidy receipts are as follows (dollars in thousands):



	Benefit Payments		Subsidy Receipts
2017	$	26,511	$	(1,662	)
2018	$	27,775	$	(1,812	)
2019	$	28,901	$	(1,975	)
2020	$	29,996	$	(2,125	)
2021	$	31,071	$	(2,266	)
2022 through 2026	$	164,611	$	(13,295	)

Assumed health care cost trend rates as of September 30 were:



	2016			2015			2014
Rate of Medical Cost Increase for Pre Age 65 Participants	5.75	%	(1)	6.93	%	(2)	7.10	%	(2)
Rate of Medical Cost Increase for Post Age 65 Participants	4.75	%	(1)	6.68	%	(2)	6.73	%	(2)
Annual Rate of Increase in the Per Capita Cost of Covered Prescription Drug Benefits	9.00	%	(1)	7.17	%	(2)	7.47	%	(2)
Annual Rate of Increase in the Per Capita Medicare Part B Reimbursement	4.75	%	(1)	6.68	%	(2)	6.73	%	(2)
Annual Rate of Increase in the Per Capita Medicare Part D Subsidy	7.20	%	(1)	6.65	%	(2)	6.79	%	(2)


(1)	It was assumed that this rate would gradually decline to 4.5% by 2039.


(2)	It was assumed that this rate would gradually decline to 4.5% by 2028.

The health care cost trend rate assumptions used to calculate the per capita cost of covered medical care benefits have a significant effect on the amounts reported. If the health care cost trend rates were increased by 1% in each year, the other post-retirement benefit obligation as of October 1, 2016 would increase by $70.7 million. This 1% change would also have increased the aggregate of the service and interest cost components of net periodic post-retirement benefit cost for 2016 by $3.0 million. If the health care cost trend rates were decreased by 1% in each year, the other post-retirement benefit obligation as of October 1, 2016 would decrease by $57.9 million. This 1% change would also have decreased the aggregate of the service and interest cost components of net periodic post-retirement benefit cost for 2016 by $2.5 million.

The Company made cash contributions totaling $2.6 million to its VEBA trusts and 401(h) accounts during the year ended September 30, 2016. In addition, the Company made direct payments of $0.2 million to retirees not covered by the VEBA trusts and 401(h) accounts during the year ended September 30, 2016. The Company expects that the annual contribution to its VEBA trusts and 401(h) accounts in 2017 will be in the range of $3.0 million to $5.0 million.

Investment Valuation

The Retirement Plan assets and other post-retirement benefit assets are valued under the current fair value framework. See Note F — Fair Value Measurements for further discussion regarding the definition and levels of fair value hierarchy established by the authoritative guidance.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Below is a listing of the major categories of plan assets held as of September 30, 2016 and 2015, as well as the associated level within the fair value hierarchy in which the fair value measurements in their entirety fall, based on the lowest level input that is significant to the fair value measurement in its entirety (dollars in thousands):



	Total Fair Value Amounts at September 30, 2016			Level 1			Level 2			Level 3
Retirement Plan Investments
Domestic Equities(1)	$	256,796		$	188,253		$	68,543		$	—
International Equities(2)	104,592			—			104,592			—
Global Equities(3)	120,025			—			120,025			—
Domestic Fixed Income(4)	342,442			1,647			340,795			—
International Fixed Income(5)	744			407			337			—
Global Fixed Income(6)	81,146			—			81,146			—
Real Estate	2,970			—			—			2,970
Cash and Cash Equivalents	24,812			—			24,812			—
Total Retirement Plan Investments	933,527			190,307			740,250			2,970
401(h) Investments	(58,707		)	(12,025		)	(46,494		)	(188		)
Total Retirement Plan Investments (excluding 401(h) Investments)	$	874,820		$	178,282		$	693,756		$	2,782
Miscellaneous Accruals, Interest Receivables, and Non-Interest Cash	(5,045		)
Total Retirement Plan Assets	$	869,775



	Total Fair Value Amounts at September 30, 2015			Level 1			Level 2			Level 3
Retirement Plan Investments
Domestic Equities(1)	$	229,811		$	170,166		$	59,645		$	—
International Equities(2)	96,478			—			96,478			—
Global Equities(3)	112,802			—			112,802			—
Domestic Fixed Income(4)	303,508			1,539			301,969			—
International Fixed Income(5)	883			883			—			—
Global Fixed Income(6)	86,773			—			86,773			—
Hedge Fund Investments	26,490			—			—			26,490
Real Estate	4,724			—			—			4,724
Cash and Cash Equivalents	27,723			—			27,723			—
Total Retirement Plan Investments	889,192			172,588			685,390			31,214
401(h) Investments	(53,686		)	(10,420		)	(41,381		)	(1,885		)
Total Retirement Plan Investments (excluding 401(h) Investments)	$	835,506		$	162,168		$	644,009		$	29,329
Miscellaneous Accruals, Interest Receivables, and Non-Interest Cash	(636		)
Total Retirement Plan Assets	$	834,870


(1)	Domestic Equities include mostly collective trust funds, common stock, and exchange traded funds.


(2)	International Equities include mostly collective trust funds and common stock.


(3)	Global Equities are comprised of collective trust funds.


(4)	Domestic Fixed Income securities include mostly collective trust funds, corporate/government bonds and mortgages, and exchange traded funds.


(5)	International Fixed Income securities are comprised mostly of an exchange traded fund.


(6)	Global Fixed Income securities are comprised of a collective trust fund.



	Total Fair Value Amounts at September 30, 2016		Level 1		Level 2		Level 3
Other Post-Retirement Benefit Assets held in VEBA Trusts
Collective Trust Funds — Domestic Equities	$	139,617	$	139,617	$	—	$	—
Collective Trust Funds — International Equities	51,488		—		51,488		—
Exchange Traded Funds — Fixed Income	230,761		230,761		—		—
Cash Held in Collective Trust Funds	13,176		—		13,176		—
Total VEBA Trust Investments	435,042		370,378		64,664		—
401(h) Investments	58,707		12,025		46,494		188
Total Investments (including 401(h) Investments)	$	493,749	$	382,403	$	111,158	$	188
Miscellaneous Accruals (Including Current and Deferred Taxes, Claims Incurred But Not Reported, Administrative)	571
Total Other Post-Retirement Benefit Assets	$	494,320



	Total Fair Value Amounts at September 30, 2015		Level 1		Level 2		Level 3
Other Post-Retirement Benefit Assets held in VEBA Trusts
Collective Trust Funds — Domestic Equities	$	128,336	$	—	$	128,336	$	—
Collective Trust Funds — International Equities	48,857		—		48,857		—
Exchange Traded Funds — Fixed Income	233,471		233,471		—		—
Cash Held in Collective Trust Funds	13,119		—		13,119		—
Total VEBA Trust Investments	423,783		233,471		190,312		—
401(h) Investments	53,686		10,420		41,381		1,885
Total Investments (including 401(h) Investments)	$	477,469	$	243,891	$	231,693	$	1,885
Miscellaneous Accruals (Including Current and Deferred Taxes, Claims Incurred But Not Reported, Administrative)	490
Total Other Post-Retirement Benefit Assets	$	477,959

The fair values disclosed in the above tables may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following tables provide a reconciliation of the beginning and ending balances of the Retirement Plan and other post-retirement benefit assets measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3). For the years ended September 30, 2016 and September 30, 2015, there were no transfers from Level 1 to Level 2. In addition, as shown in the following tables, there were no transfers in or out of Level 3.



	Retirement Plan Level 3 Assets (Thousands)
	Hedge Funds			Real Estate			Excluding 401(h) Investments			Total


Balance at September 30, 2014	$	45,213		$	3,792		$	(2,909	)	$	46,096
Realized Gains/(Losses)	2,284			—			(135		)	2,149
Unrealized Gains/(Losses)	317			871			(103		)	1,085
Purchases	—			82			(5		)	77
Sales	(21,324		)	(21		)	1,267			(20,078		)
Balance at September 30, 2015	26,490			4,724			(1,885		)	29,329
Realized Gains/(Losses)	5,878			—			(354		)	5,524
Unrealized Gains/(Losses)	(5,445		)	(404		)	344			(5,505		)
Sales	(26,923		)	(1,350		)	1,707			(26,566		)
Balance at September 30, 2016	$	—		$	2,970		$	(188	)	$	2,782



	Other Post-Retirement Benefit Level 3 Assets (Thousands)
		401(h) Investments
		401(h) Investments
Balance at September 30, 2014		$	2,909
Realized Gains/(Losses)		135
Unrealized Gains/(Losses)		103
Purchases		5
Sales		(1,267		)
Balance at September 30, 2015		1,885
Realized Gains/(Losses)		354
Unrealized Gains/(Losses)		(344		)
Sales		(1,707		)
Balance at September 30, 2016		$	188

The Company’s assumption regarding the expected long-term rate of return on plan assets is 7.00% (Retirement Plan) and 6.50% (other post-retirement benefits), effective for fiscal 2017. The return assumption reflects the anticipated long-term rate of return on the plan’s current and future assets. The Company utilizes projected capital market conditions and the plan’s target asset class and investment manager allocations to set the assumption regarding the expected return on plan assets.

The long-term investment objective of the Retirement Plan trust, the VEBA trusts and the 401(h) accounts is to achieve the target total return in accordance with the Company’s risk tolerance. Assets are diversified utilizing a mix of equities, fixed income and other securities (including real estate). The target allocation for the Retirement Plan and the VEBA trusts (including 401(h) accounts) is 40-60% equity securities, 40-60% fixed income securities and 0-15% other. Risk tolerance is established through consideration of plan liabilities, plan funded status and corporate financial condition. The assets of the Retirement Plan trusts, VEBA trusts and the 401(h) accounts have no significant concentrations of risk in any one country (other than the United States), industry or entity.

Investment managers are retained to manage separate pools of assets. Comparative market and peer group performance of individual managers and the total fund are monitored on a regular basis, and reviewed by the Company’s Retirement Committee on at least a quarterly basis.

The discount rate used to present value the future benefit payment obligations of the Retirement Plan is 3.60% at September 30, 2016. The discount rate used to present value the future benefit payment obligations of the Company’s other post-retirement benefits is 3.70% as of September 30, 2016. The discount rate used to present value the future benefit payment obligations of the Non-Qualified benefit plans is 2.80% as of September 30, 2016. The Company utilizes the Mercer Yield Curve Above Mean Model to determine the discount rate. The yield curve is a spot rate yield curve that provides a zero-coupon interest rate for each year into the future. Each year’s anticipated benefit payments are discounted at the associated spot interest rate back to the measurement date. The discount rate is then determined based on the spot interest rate that results in the same present value when applied to the same anticipated benefit payments. In determining the spot rates, the model will exclude coupon interest rates that are in the lower 50^th percentile based on the assumption that the Company would not utilize more expensive (i.e. lower yield) instruments to settle its liabilities.