Employee Retirement Plans

Defined Benefit Pension and Other Postretirement Plans. In the U.S., we currently sponsor one defined benefit pension plan for employees hired prior to January 1, 2009, of UGI, UGI Utilities, PNG, CPG and certain of UGI’s other domestic wholly owned subsidiaries. Effective December 31, 2010, we merged our then-existing two U.S. defined benefit pension plans covering these employees ("U.S. Pension Plans Merger"). The Company's two U.S. pension plans prior to the Pension Plans Merger, and the single U.S. pension plan after the Pension Plans Merger, are hereafter referred to as the "U.S. Pension Plan."

We also provide postretirement health care benefits to certain retirees and active employees and postretirement life insurance benefits to nearly all domestic active and retired employees. In addition, Antargaz employees are covered by certain defined benefit pension and postretirement plans. Although the disclosures in the tables below include amounts related to the Antargaz plans, such amounts are not material.

The following table provides a reconciliation of the projected benefit obligations (“PBOs”) of the U.S. Pension Plan and the Antargaz pension plans, the accumulated benefit obligations (“ABOs”) of our other postretirement benefit plans, plan assets, and the funded status of pension and other postretirement plans as of September 30, 2012 and 2011. ABO is the present value of benefits earned to date with benefits based upon current compensation levels. PBO is ABO increased to reflect estimated future compensation.



	Pension Benefits						Other Postretirement Benefits
	2012			2011			2012			2011
Change in benefit obligations:
Benefit obligations — beginning of year	$	462.9		$	471.8		$	20.5		$	22.9
Service cost	9.3			8.8			0.4			0.4
Interest cost	25.1			24.1			1.1			1.1
Actuarial loss (gain)	82.4			(22.0		)	3.2			(2.4		)
Plan amendments	0.1			—			1.0			(0.1		)
Acquisitions	14.6			—			—			—
Foreign currency	(0.7		)	(0.1		)	(0.1		)	—
Benefits paid	(20.3		)	(19.7		)	(1.4		)	(1.4		)
Benefit obligations — end of year	$	573.4		$	462.9		$	24.7		$	20.5

Change in plan assets:
Fair value of plan assets — beginning of year	$	290.0		$	287.9		$	9.8		$	10.0
Actual gain on plan assets	51.2			2.6			1.7			0.1
Foreign currency	(0.5		)	—			—			—
Employer contributions	32.2			19.2			1.1			1.1
Acquisitions	17.3			—			—			—
Benefits paid	(20.3		)	(19.7		)	(1.4		)	(1.4		)
Fair value of plan assets — end of year	$	369.9		$	290.0		$	11.2		$	9.8
Funded status of the plans — end of year	$	(203.5	)	$	(172.9	)	$	(13.5	)	$	(10.7	)

(Liabilities) recorded in the balance sheet:
Unfunded liabilities — included in other current liabilities	$	(15.8	)	$	(27.6	)	$	(0.6	)	$	(0.6	)
Unfunded liabilities — included in other noncurrent liabilities	(187.7		)	(145.3		)	(12.9		)	(10.1		)
Net amount recognized	$	(203.5	)	$	(172.9	)	$	(13.5	)	$	(10.7	)

Amounts recorded in UGI Corporation stockholders’ equity (pre-tax):
Prior service credit	$	(0.1	)	$	(0.2	)	$	(0.1	)	$	(0.1	)
Net actuarial loss (gain)	25.3			13.6			0.4			(0.8		)
Total	$	25.2		$	13.4		$	0.3		$	(0.9	)

Amounts recorded in regulatory assets and liabilities (pre-tax):
Prior service cost (credit)	$	1.5		$	1.8		$	(2.8	)	$	(3.2	)
Net actuarial loss	184.5			146.9			5.8			6.3
Total	$	186.0		$	148.7		$	3.0		$	3.1

In Fiscal 2013, we estimate that we will amortize approximately $15.4 of net actuarial losses and $(0.1) of prior service credits from UGI stockholders’ equity and regulatory assets into retiree benefit cost.

Actuarial assumptions for our domestic plans are described below. Assumptions for the Antargaz plans are based upon market conditions in France. The discount rates at September 30 are used to measure the year-end benefit obligations and the earnings effects for the subsequent year. The discount rate assumption was determined by selecting a hypothetical portfolio of high quality corporate bonds appropriate to provide for the projected benefit payments of the plans. The discount rate was then developed as the single rate that equates the market value of the bonds purchased to the discounted value of the plans’ benefit payments. The expected rate of return on assets assumption is based on the current and expected asset allocations as well as historical and expected returns on various categories of plan assets (as further described below).



	Pension Plan								Other Postretirement Benefits
	2012		2011 (a)		2010		2009		2012		2011		2010		2009
Weighted-average assumptions:
Discount rate	4.20	%	5.30	%	5.00	%	5.50	%	4.20	%	5.30	%	5.00	%	5.50	%
Expected return on plan assets	7.75	%	8.00	%	8.50	%	8.50	%	5.20	%	5.50	%	5.50	%	5.50	%
Rate of increase in salary levels	3.25	%	3.50	%	3.75	%	3.75	%	3.25	%	3.50	%	3.75	%	3.75	%

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(a)	The discount rates used during Fiscal 2011 to calculate pension expense were rates of 5.0% through December 31, 2010 (the date of the U.S. Pension Plans Merger) and 5.5% for the remainder of Fiscal 2011.

The ABOs for the U.S. Pension Plan were $496.4 and $415.0 as of September 30, 2012 and 2011, respectively.

Net periodic pension expense and other postretirement benefit cost includes the following components:



	Pension Benefits									Other Postretirement Benefits
	2012			2011			2010			2012			2011			2010
Service cost	$	9.3		$	8.8		$	8.7		$	0.4		$	0.4		$	0.4
Interest cost	25.1			24.1			23.5			1.1			1.1			1.1
Expected return on assets	(26.2		)	(25.8		)	(25.8		)	(0.5		)	(0.5		)	(0.5		)
Curtailment gain	—			—			—			—			(3.2		)	—
Settlement loss	—			—			1.0			—			—			—
Amortization of:
Prior service cost (benefit)	0.2			0.2			—			(0.3		)	(0.7		)	(0.4		)
Actuarial loss	8.4			7.5			5.9			0.3			0.4			0.1
Net benefit cost (income)	16.8			14.8			13.3			1.0			(2.5		)	0.7
Change in associated regulatory liabilities	—			—			—			3.2			3.1			3.1
Net benefit cost after change in regulatory liabilities	$	16.8		$	14.8		$	13.3		$	4.2		$	0.6		$	3.8

U.S. Pension Plan's assets are held in trust. It is our general policy to fund amounts for U.S. Pension Plan benefits equal to at least the minimum required contribution set forth in applicable employee benefit laws. From time to time we may, at our discretion, contribute additional amounts. During Fiscal 2012, Fiscal 2011 and Fiscal 2010, we made cash contributions to the U.S. Pension Plan of $31.2, $18.7 and $3.4, respectively. We believe that in Fiscal 2013 we will be required to make contributions to the U.S. Pension Plan totaling approximately $16.

UGI Utilities has established a Voluntary Employees’ Beneficiary Association (“VEBA”) trust to pay retiree health care and life insurance benefits by depositing into the VEBA the annual amount of postretirement benefits costs determined under GAAP. The difference between such amounts and amounts included in UGI Gas’ and Electric Utility’s rates is deferred for future recovery from, or refund to, ratepayers. The required contributions to the VEBA during Fiscal 2013 are not expected to be material.

Expected payments for pension benefits and for other postretirement welfare benefits are as follows:



	Pension Benefits		Other Postretirement Benefits
Fiscal 2013	$	22.3	$	1.9
Fiscal 2014	23.3		1.9
Fiscal 2015	24.6		1.9
Fiscal 2016	27.4		1.9
Fiscal 2017	28.0		1.8
Fiscal 2018 - 2022	158.0		8.7

The assumed domestic health care cost trend rates are 7.0% for Fiscal 2013, decreasing to 5.0% in Fiscal 2017. A one percentage point change in the assumed health care cost trend rate would not have a material impact on the Fiscal 2012 other postretirement benefit cost or September 30, 2012, other postretirement benefit ABO.

We also sponsor unfunded and non-qualified supplemental executive retirement plans. At September 30, 2012 and 2011, the PBOs of these plans were $29.5 and $25.6, respectively. We recorded net costs for these plans of $3.0 in Fiscal 2012, $3.0 in Fiscal 2011 and $2.6 in Fiscal 2010. These costs are not included in the tables above. Amounts recorded in UGI’s stockholders’ equity for these plans include pre-tax losses of $11.0 and $7.6 at September 30, 2012 and 2011, respectively, principally representing unrecognized actuarial losses. We expect to amortize approximately $0.7 of such pre-tax actuarial losses into retiree benefit cost in Fiscal 2013.

U.S. Pension Plan and VEBA Assets. The assets of the U.S. Pension Plan and the VEBA are held in trust. The investment policies and asset allocation strategies for the assets in these trusts are determined by an investment committee comprising officers of UGI and UGI Utilities. The overall investment objective of the U.S. Pension Plan and the VEBA is to achieve the best long-term rates of return within prudent and reasonable levels of risk. To achieve the stated objective, investments are made principally in publicly-traded diversified equity and fixed income mutual funds and UGI Common Stock.

The targets, target ranges and actual allocations for the U.S. Pension Plan and VEBA trust assets at September 30 are as follows:

U.S. Pension Plan



	Actual				Target Asset Allocation		Permitted Range
	2012		2011		Target Asset Allocation		Permitted Range
Equity investments:
Domestic	53.5	%	49.4	%	52.5	%	40.0% - 65.0%
International	10.5	%	10.7	%	12.5	%	7.5% - 17.5%
Total	64.0	%	60.1	%	65.0	%	60.0% - 70.0%
Fixed income funds & cash equivalents	36.0	%	39.9	%	35.0	%	30.0% - 40.0%
Total	100.0	%	100.0	%	100.0	%

VEBA



	Actual				Target Asset Allocation		Permitted Range
	2012		2011		Target Asset Allocation		Permitted Range
Domestic equity investments	68.5	%	62.2	%	65.0	%	60.0% - 70.0%
Fixed income funds & cash equivalents	31.5	%	37.8	%	35.0	%	30.0% - 40.0%
Total	100.0	%	100.0	%	100.0	%

Domestic equity investments include investments in large-cap mutual funds indexed to the S&P 500 and actively managed mid- and small-cap mutual funds. Investments in international equity mutual funds are indexed to various Morgan Stanley Composite indices. The fixed income investments comprise investments designed to match the duration of the Barclays Capital Aggregate Bond Index. According to statute, the aggregate holdings of all qualifying employer securities may not exceed 10% of the fair value of trust assets at the time of purchase. UGI Common Stock represented 7.5% and 7.6% of U.S. Pension Plan assets at September 30, 2012 and 2011, respectively. At September 30, 2012, there were no significant concentrations of risk (defined as greater than 10% of the fair value of total assets) associated with any individual company, industry sector or international geographic region.

GAAP establishes a hierarchy that prioritizes fair value measurements based upon the inputs and valuation techniques used to measure fair value. This fair value hierarchy groups assets into three levels, as described in Note 2. We maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value. The fair values of U.S. Pension Plan and VEBA trust assets are derived from quoted market prices as substantially all of these instruments have active markets. Cash equivalents are valued at the fund’s unit net asset value as reported by the trustee.

The fair values of the U.S. Pension Plan and VEBA trust assets at September 30, 2012 and 2011, by asset class are as follows:



	U.S. Pension Plan
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total
September 30, 2012:
Equity investments:
Domestic	$	188.2	$	—	$	—	$	188.2
International	36.9		—		—		36.9
Fixed income	123.3		—		—		123.3
Cash equivalents	—		3.1		—		3.1
Total	$	348.4	$	3.1	$	—	$	351.5

September 30, 2011:
Equity investments:
Domestic	$	143.1	$	—	$	—	$	143.1
International	31.0		—		—		31.0
Fixed income	113.6		—		—		113.6
Cash equivalents	—		2.0		—		2.0
Total	$	287.7	$	2.0	$	—	$	289.7



	VEBA
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total
September 30, 2012:
Domestic equity	$	7.7	$	—	$	—	$	7.7
Fixed income	3.4		—		—		3.4
Cash equivalents	—		0.1		—		0.1
Total	$	11.1	$	0.1	$	—	$	11.2

September 30, 2011:
Domestic equity	$	6.1	$	—	$	—	$	6.1
Fixed income	3.3		—		—		3.3
Cash equivalents	—		0.4		—		0.4
Total	$	9.4	$	0.4	$	—	$	9.8

The expected long-term rates of return on U.S. Pension Plan and VEBA trust assets have been developed using a best estimate of expected returns, volatilities and correlations for each asset class. The estimates are based on historical capital market performance data and future expectations provided by independent consultants. Future expectations are determined by using simulations that provide a wide range of scenarios of future market performance. The market conditions in these simulations consider the long-term relationships between equities and fixed income as well as current market conditions at the start of the simulation. The expected rate begins with a risk-free rate of return with other factors being added such as inflation, duration, credit spreads and equity risk premiums. The rates of return derived from this process are applied to our target asset allocation to develop a reasonable return assumption.

Defined Contribution Plans. We sponsor 401(k) savings plans for eligible employees of UGI and certain of UGI’s domestic subsidiaries. Generally, participants in these plans may contribute a portion of their compensation on either a before-tax basis, or on both a before-tax and after-tax basis. These plans also provide for employer matching contributions at various rates. The cost of benefits under the savings plans totaled $13.7 in Fiscal 2012, $10.4 in Fiscal 2011 and $9.8 in Fiscal 2010.