PENSIONS AND OTHER POSTRETIREMENT BENEFITS

RIGP and Retiree Medical Plan

Services Company, which employs the majority of our workforce, sponsors a Retirement Income Guarantee Plan (“RIGP”), which is a defined benefit plan that generally guarantees employees hired before January 1, 1986 a retirement benefit based on years of service and the employee’s highest compensation for any consecutive 5-year period during the last 10 years of service or other compensation measures as defined under the respective plan provisions. The retirement benefit is subject to reduction at varying percentages for certain offsetting amounts, including benefits payable under a retirement and savings plan discussed further below. Services Company funds this benefit plan through contributions to pension trust assets, generally subject to minimum funding requirements as provided by applicable law.

Services Company also sponsors an unfunded post-retirement benefit plan (the “Retiree Medical Plan”), which provides health care and life insurance benefits to certain of its retirees. To be eligible for the health care benefits, an employee must have been hired prior to January 1, 1991 and meet certain service requirements. To be eligible for the life insurance benefits, an employee must have been hired prior to January 1, 2002 and meet certain service requirements.

The components of projected benefit obligations and plan assets, and the funded status of the RIGP and the Retiree Medical Plan (“the Plans”) were as follows for the periods indicated (in thousands):



	RIGP						Retiree Medical Plan
	Year Ended December 31,						Year Ended December 31,
	2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	17,988		$	17,180		$	36,117		$	35,149
Service cost	11			94			365			345
Interest cost	551			553			1,334			1,420
Plan participants’ contributions	—			—			510			456
Actuarial loss (gain)	346			770			(3,573		)	(188		)
Settlements	(469		)	—			—			—
Benefit payments	(1,022		)	(609		)	(1,023		)	(1,065		)
Benefit obligation at end of year	$	17,405		$	17,988		$	33,730		$	36,117

Change in plan assets:
Fair value of plan assets at beginning of year	$	6,743		$	6,003		$	—		$	—
Actual return on plan assets	(373		)	152			—			—
Plan participants’ contributions	—			—			510			456
Employer contributions	665			1,197			513			609
Settlements	(469		)	—			—			—
Benefit payments	(1,022		)	(609		)	(1,023		)	(1,065		)
Fair value of plan assets at end of year	$	5,544		$	6,743		$	—		$	—

Funded status at end of year	$	(11,861	)	$	(11,245	)	$	(33,730	)	$	(36,117	)

Amounts recognized in our consolidated balance sheets for the Plans consist of the following at the dates indicated below (in thousands):



	RIGP						Retiree Medical Plan
	December 31,						December 31,
	2015			2014			2015			2014
Liabilities:
Accrued employee benefit liabilities - current	$	—		$	—		$	(2,948	)	$	(2,998	)
Accrued employee benefit liabilities - noncurrent	(11,861		)	(11,245		)	(30,782		)	(33,119		)
Total	$	(11,861	)	$	(11,245	)	$	(33,730	)	$	(36,117	)

AOCI:
Net actuarial loss	$	5,804		$	6,062		$	1,289		$	5,061
Total	$	5,804		$	6,062		$	1,289		$	5,061

Information regarding the accumulated benefit obligation in excess of plan assets for the RIGP is as follows at the dates indicated (in thousands):



	RIGP
	December 31,
	2015		2014
Projected benefit obligation	$	17,405	$	17,988
Accumulated benefit obligation (1)	13,357		13,602
Fair value of plan assets	5,544		6,743

____________________________


(1)	The accumulated benefit obligation does not include an assumption for future compensation increases.

The weighted average assumptions used in determining net periodic benefit cost for the Plans were as follows for the periods indicated:



	RIGP						Retiree Medical Plan
	Year Ended December 31,						Year Ended December 31,
	2015		2014		2013		2015		2014		2013
Discount rate	3.3	%	3.5	%	2.7	%	3.9	%	4.4	%	3.6	%
Expected return on plan assets	5.8	%	5.8	%	5.8	%	N/A		N/A		N/A
Rate of compensation increase	3.0	%	3.0	%	3.0	%	3.0	%	3.0	%	3.0	%

The assumptions used in determining benefit obligations for the Plans were as follows at the dates indicated:



	RIGP				Retiree Medical Plan
	December 31,				December 31,
	2015		2014		2015		2014
Discount rate	3.5	%	3.3	%	4.1	%	3.9	%
Rate of compensation increase	3.0	%	3.0	%	3.0	%	3.0	%

The discount rate reflects the rate at which benefits could be effectively settled on the measurement date. For the years ended December 31, 2015, 2014, and 2013, the discount rate was determined based on a projection of expected cash flows from the Plans using relevant economic benchmarks available as of each year end. The expected return on plan assets was determined based on projected long-term market returns for each asset class in which the Plans are invested, weighted by the target asset class allocations. The rate of compensation increase represents the long-term assumption for future increases to salaries.

The assumed annual rate of increase in the per capita cost of covered health care benefits as of December 31, 2015 in the Retiree Medical Plan was 6.0% for 2016, grading down to 4.5% in 2021, and thereafter. The assumed health care cost trend rates may have a significant effect on the amounts reported for the Retiree Medical Plan. Based on a hypothetical 1% movement in the assumed health care cost trend rates, the change in costs would have had the following effects on the December 31, 2015 results (in thousands):



	1% Increase		1% (Decrease)
Effect on total service cost and interest cost components	$	56	$	(50	)
Effect on postretirement benefit obligation	778		(700		)

The components of the net periodic benefit cost and other changes recognized in OCI for the Plans were as follows for the periods indicated (in thousands):



	RIGP									Retiree Medical Plan
	Year Ended December 31,									Year Ended December 31,
	2015			2014			2013			2015			2014			2013

Components of net periodic benefit cost:
Service cost	$	11		$	94		$	217		$	365		$	345		$	431
Interest cost	551			553			538			1,334			1,420			1,409
Expected return on plan assets	(334		)	(333		)	(393		)	—			—			—
Amortization of prior service credit	—			—			—			—			—			(1,624		)
Actuarial loss due to settlements	469			—			773			—			—			—
Amortization of unrecognized loss	842			667			1,232			199			31			1,193
Net periodic benefit cost	$	1,539		$	981		$	2,367		$	1,898		$	1,796		$	1,409

Other changes in plan assets and benefit obligations recognized in OCI:
Net actuarial loss (gain)	$	1,053		$	951		$	(3,298	)	$	(3,573	)	$	(188	)	(7,756		)
Amortization of unrecognized loss	(842		)	(667		)	(1,232		)	(199		)	(31		)	(1,193		)
Actuarial loss due to settlements	(469		)	—			(773		)	—			—			—
Amortization of prior service credit	—			—			—			—			—			1,624
Total recognized in OCI	$	(258	)	$	284		$	(5,303	)	$	(3,772	)	$	(219	)	$	(7,325	)
Total recognized in net period benefit cost and OCI	$	1,281		$	1,265		$	(2,936	)	$	(1,874	)	$	1,577		$	(5,916	)

We expect that the following amounts, currently included in OCI, for the Plans will be recognized in our consolidated statement of operations during the year ending December 31, 2016 (in thousands):



	RIGP		Retiree Medical Plan
Amortization of unrecognized loss	$	923	$	—

We estimate the following benefit payments, which reflect expected future service, as appropriate, will be paid for the Plans in the years indicated below as such (in thousands):



	RIGP		Retiree Medical Plan
2016	$	1,827	$	3,009
2017	2,147		2,946
2018	1,825		2,912
2019	1,871		2,893
2020	1,681		2,801
Thereafter	5,922		11,500

We expect to contribute $4.0 million to our benefit plans in 2016. Funding requirements for subsequent years are uncertain and will depend on whether there are any changes in the actuarial assumptions used to calculate plan funding levels, the actual return on plan assets and any legislative or regulatory changes affecting plan funding requirements. For tax planning, financial planning, cash flow management or cost reduction purposes, we may increase, accelerate, decrease or delay contributions to the plan to the extent permitted by law.

We do not fund the Retiree Medical Plan and, accordingly, no assets are invested in the plan. A summary of investments in the RIGP are as follows at the dates indicated (in thousands):



	December 31, 2015				December 31, 2014
	Level 1		Level 3		Level 1		Level 3
Mutual fund - fixed-income securities	$	2,759	$	—	$	3,107	$	—
Mutual fund - money market	465		—		660		—
Coal lease	—		2,320		—		2,976
Fair value of plan assets	$	3,224	$	2,320	$	3,767	$	2,976

The values of the Level 1 mutual funds were based on quoted market prices in active markets for identical assets. The mutual fund — fixed-income securities generally seeks long-term growth of capital and income and invests in a portfolio consisting primarily of fixed-income securities.

The values of the Level 3 coal lease were determined using an expected present value of future cash flows valuation model. This investment relates to a 20.8% interest in a coal lease, which derives value from specified minimum royalty payments received from CONSOL Energy Inc. related to coal reserves mined from two Pennsylvania mines owned by the lessor. The coal lease extends through 2023.

The following table summarizes the activity in our Level 3 pension assets for the periods indicated (in thousands):



	Year Ended December 31,
	2015			2014
Beginning balance, January 1	$	2,976		$	3,303
Lease payments received	393			307
Unrealized loss	(656		)	(327		)
Transfers out of Level 3	(393		)	(307		)
Ending balance, December 31	$	2,320		$	2,976

The RIGP investment policy does not target specific asset classes, but seeks to balance the preservation and growth of capital in the plan’s mutual funds with the income derived with proceeds from the coal lease. While no significant changes in the asset class allocation of the plan are expected during the upcoming year, Services Company may make changes at any time.

Retirement and Savings Plans

Services Company also sponsors the Retirement and Savings Plan (“RASP”) through which it provides retirement benefits for substantially all of its regular full-time employees located in the continental United States, except those covered by certain labor contracts. The RASP consists of two components. Under the first component, Services Company contributes 5% of each eligible employee’s covered salary to an employee’s separate account maintained in the RASP. Under the second component, Services Company makes a matching contribution into the employee’s separate account for 100% of an employee’s contribution to the RASP up to 5% (or 6% if an employee has over 20 years of service) of an employee’s eligible covered salary. Total costs of the RASP were $15.2 million, $14.0 million and $10.7 million during the years ended December 31, 2015, 2014 and 2013, respectively.

Services Company also participates in a multi-employer retirement income plan and a multi-employer postretirement benefit plan, both of which provide retirement and health care and life insurance benefits to employees covered by certain labor contracts. We do not administer these plans and contribute to them in accordance with the provisions of negotiated labor contracts. The costs of providing these benefits, in aggregate, were $1.4 million, $1.0 million and $0.6 million during the years ended December 31, 2015, 2014 and 2013, respectively.

Additionally, certain of our wholly owned subsidiaries provide a savings and retirement plan to employees. The costs of providing these benefits, which primarily relates to BORCO, were $1.4 million, $1.4 million and $1.2 million during the years ended December 31, 2015, 2014 and 2013, respectively.

Employee Stock Ownership Plan

Services Company provides the ESOP to the majority of its employees hired before September 16, 2004. Employees hired by Services Company after September 15, 2004 and certain employees covered by a union multiemployer pension plan do not participate in the ESOP. The ESOP owns all of the outstanding common stock of Services Company. Buckeye, as primary beneficiary, consolidates Services Company.

The ESOP was frozen with respect to benefits effective March 27, 2011 (the “Freeze Date”). No Services Company contributions (other than dividend equivalent payments) have been made on behalf of current participants in the Plan after the Freeze Date. Even though contributions under the ESOP are no longer being made, each eligible participant’s ESOP account continues to be credited with its share of any stock dividends or other stock distributions associated with Services Company stock.

Individual employees were allocated shares based upon the ratio of their eligible compensation to total eligible compensation. Eligible compensation generally included base salary, overtime payments and certain bonuses. All Services Company stock has been released to ESOP participants. Total ESOP related costs charged to earnings were nominal for each of the years ended December 31, 2015, 2014, and 2013.