Employee Retirement Plans

12 Months Ended

Sep. 30, 2020

Retirement Benefits [Abstract]

Employee Retirement Plans

Note 8 — Employee Retirement Plans

Defined Benefit Pension and Other Postretirement Plans

The U.S. Pension Plan is a defined benefit pension plan for employees hired prior to January 1, 2009, of UGI, UGI Utilities, and certain of UGI’s other domestic wholly owned subsidiaries. U.S. Pension Plan benefits are based on years of service, age and employee compensation.

We also provide postretirement health care benefits to certain retirees and postretirement life insurance benefits to certain U.S. active and retired employees. In addition, certain UGI International employees in France and Belgium are covered by defined benefit pension and postretirement plans. Although the disclosures in the tables below include amounts related to the UGI International plans, such amounts are not material.

The following table provides a reconciliation of the PBOs of our pension plans (the U.S. Pension Plan and the UGI International pension plans), the ABOs of our other postretirement benefit plans, plan assets, and the funded status of pension and other postretirement plans as of September 30, 2020 and 2019. 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
	2020		2019		2020		2019
Change in benefit obligations:
Benefit obligations — beginning of year	$	750	$	669	$	23	$	19
Service cost	11		10		—		—
Interest cost	23		27		1		1
Actuarial loss	27		89		1		4
Curtailments	(2)		(1)		—		—
Settlements	—		(13)		—		—
Foreign currency	3		(3)		—		—
Benefits paid	(30)		(28)		(1)		(1)
Benefit obligations — end of year	$	782	$	750	$	24	$	23
Change in plan assets:
Fair value of plan assets — beginning of year	$	547	$	563	$	16	$	15
Actual gain on plan assets	53		13		2		1
Foreign currency	1		(1)		—		—
Employer contributions	13		12		—		—
Settlements	—		(13)		—		—
Benefits paid	(29)		(27)		(1)		—
Fair value of plan assets — end of year	$	585	$	547	$	17	$	16
Funded status of the plans — end of year	$	(197)	$	(203)	$	(7)	$	(7)
Assets (liabilities) recorded in the balance sheet:
Assets in excess of liabilities — included in other noncurrent assets	$	—	$	—	$	3	$	3
Unfunded liabilities — included in other noncurrent liabilities	(197)		(203)		(10)		(10)
Net amount recognized	$	(197)	$	(203)	$	(7)	$	(7)
Amounts recorded in UGI Corporation stockholders’ equity (pre-tax):
Prior service cost (benefit)	$	1	$	1	$	(1)	$	(1)
Net actuarial loss	24		26		—		—
Total	$	25	$	27	$	(1)	$	(1)
Amounts recorded in regulatory assets and liabilities (pre-tax):
Prior service cost	$	—	$	1	$	—	$	—
Net actuarial loss	174		177		1		1
Total	$	174	$	178	$	1	$	1

In Fiscal 2020 and Fiscal 2019, the change in the pension plans’ PBO due to actuarial gains and losses is principally the result of changes in discount rates. The change in the pension plans’ PBO in Fiscal 2019 also reflects a settlement resulting from the conversion of a defined benefit pension plan to a defined contribution plan in the Netherlands. In Fiscal 2021, the estimated amount that will be amortized from UGI Stockholders’ equity and regulatory assets into net periodic benefit cost is approximately $15, the majority of which represents net actuarial losses, primarily associated with the U.S. Pension Plan.

Actuarial assumptions for our U.S. plans are described below. 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 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
	2020		2019		2018		2020		2019		2018
Weighted-average assumptions:
Discount rate – benefit obligations	2.90	%	3.30	%	4.40	%	3.00	%	3.30	%	4.40	%
Discount rate – benefit cost	3.30	%	4.40	%	4.00	%	3.30	%	4.40	%	4.00	%
Expected return on plan assets	7.20	%	7.30	%	7.40	%	5.00	%	5.00	%	5.00	%
Rate of increase in salary levels	3.25	%	3.25	%	3.25	%	3.25	%	3.25	%	3.25	%

The ABO for the U.S. Pension Plan was $687 and $659 as of September 30, 2020 and 2019, respectively.

The service cost component of our pension and other postretirement plans, net of amounts capitalized, are reflected in “Operating and administrative expenses” on the Consolidated Statements of Income. The non-service cost components, net of amounts capitalized by UGI Utilities as a regulatory asset, are reflected in “Other non-operating (expense) income, net” on the Consolidated Statements of Income. Other postretirement benefit cost was not material for all periods presented. Net periodic pension cost include the following components:

	Pension Benefits
	2020		2019		2018
Service cost	$	11	$	10	$	11
Interest cost	23		27		26
Expected return on assets	(38)		(36)		(35)
Curtailment gain	(1)		—		—
Amortization of:
Prior service cost	1		—		1
Actuarial loss	15		8		13
Net cost	$	11	$	9	$	16

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 2020, Fiscal 2019 and Fiscal 2018, we made cash contributions to the U.S. Pension Plan of $13, $12 and $15, respectively. The minimum required contributions in Fiscal 2021 are not expected to be material.

UGI Utilities has established a VEBA trust to pay retiree health care and life insurance benefits by depositing into the VEBA the annual amount of postretirement benefits costs, if any. We do not expect to be required to make any contributions to the VEBA during Fiscal 2021.

Expected payments for postretirement benefits over the next 10 years are not material. Expected payments for pension benefits are as follows:

	Pension Benefits
Fiscal 2021	$	33
Fiscal 2022	$	32
Fiscal 2023	$	34
Fiscal 2024	$	36
Fiscal 2025	$	38
Fiscal 2026 - 2030	$	203

We also sponsor unfunded and non-qualified supplemental executive defined benefit retirement plans. At September 30, 2020 and 2019, the PBOs of these plans, including obligations for amounts held in grantor trusts, totaled $59 and $53, respectively. Costs associated with these plans were not material for all periods presents and are excluded from the tables above. Amounts recorded in UGI’s stockholders’ equity for these plans include pre-tax losses of $12 and $9 at September 30, 2020 and 2019, respectively, principally representing unrecognized actuarial losses. In Fiscal 2021, the estimated amount that will be amortized from such pre-tax actuarial losses into retiree benefit cost is not material. During Fiscal 2020, Fiscal 2019 and Fiscal 2018, the payments the Company made with respect to the supplemental executive defined benefit retirement plans were not material. The total fair value of the grantor trust investment assets associated with the supplemental executive defined benefit retirement plans, which are included in “Other assets” on the Consolidated Balance Sheets, totaled $35 and $34 at September 30, 2020 and 2019, respectively.

U.S. Pension Plan Assets

The assets of the U.S. Pension Plan 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. In Fiscal 2020, the Company transitioned its investment strategy to minimize projected funded status volatility by more closely aligning the duration of the U.S. Pension Plan’s fixed income portfolio to the duration of its liabilities. The proportion of plan assets allocated to fixed income investments will increase as the funded status increases. To achieve the stated objective, beginning in October 2019, investments are made principally in common collective trust funds that consists of equity index investments, bond index investments and a short-term investments, and, to a much less extent, UGI Common Stock. Previously, investments were made principally in publicly traded, diversified equity and fixed income index mutual funds. Assets associated with the VEBA and the UGI International plans are excluded from the tables below as such assets are not material.

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

	Actual				Target Asset Allocation				Permitted Range
	2020		2019		2020		2019		September 30, 2020
Equity investments:
U.S. equities	26.5	%	54.8	%	29.0	%	52.5	%	24.0% - 34.0%
Non-U.S. equities	25.0	%	11.8	%	24.5	%	12.5	%	19.5% - 29.5%
Global equities (a)	12.3	%	—	%	11.5	%	—	%	6.5% - 16.5%
Total	63.8	%	66.6	%	65.0	%	65.0	%	60.0% - 70.0%
Fixed income funds & cash equivalents	36.2	%	33.4	%	35.0	%	35.0	%	30.0% - 40.0%
Total	100.0	%	100.0	%	100.0	%	100.0	%

(a)    Comprises investment funds that consist of a mix of U.S. and Non-U.S. equity securities.

Common collective trust funds in the U.S. Pension Plan primarily include investments in U.S., Non-U.S. and global (a mix of U.S. and Non-U.S.) equities, fixed income and short-term investments. The fair values of common collective trust funds and cash equivalents are valued at NAV of units of the collective trusts. The NAVs, as provided by the trustee, are used as a practical expedient to estimate fair value based on the fair values of the underlying investments held by the funds less their liabilities. The fair values of the U.S. Pension Plan trust assets by asset class and level within the fair value hierarchy, as described in Note 2, as of September 30, 2020 and 2019 are as follows:

	U.S. Pension Plan
	Level 1		Level 2		Level 3		Other (a)		Total
September 30, 2020:
Domestic equity investments:
UGI Corporation Common Stock	$	27	$	—	$	—	$	—	$	27
Total domestic equity investments	27		—		—		—		27
Common collective trust funds:
U.S. equity index investments	—		—		—		123		123
Non-U.S. equity index investments	—		—		—		141		141
Global equity index investments	—		—		—		70		70
Bond index investments	—		—		—		200		200
Cash equivalents	—		—		—		5		5
Total common collective trust funds	—		—		—		539		539
Total	$	27	$	—	$	—	$	539	$	566
September 30, 2019:
Domestic equity investments:
S&P 500 Index equity mutual funds	$	176	$	—	$	—	$	—	$	176
Small and midcap equity mutual funds	73		—		—		—		73
UGI Corporation Common Stock	41		—		—		—		41
Total domestic equity investments	290		—		—		—		290
International index equity mutual funds	62		—		—		—		62
Fixed income investments:
Bond index mutual funds	171		—		—		—		171
Cash equivalents	—		—		—		6		6
Total fixed income investments	171		—		—		6		177
Total	$	523	$	—	$	—	$	6	$	529

(a)    Assets measured at NAV and therefore excluded from the fair value hierarchy.

The expected long-term rates of return on U.S. Pension Plan 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 $21 in Fiscal 2020, $19 in Fiscal 2019 and $17 in Fiscal 2018. The Company also sponsors certain nonqualified supplemental defined contribution executive retirement plans. These plans generally provide supplemental benefits to certain executives that would otherwise be provided under retirement plans but are prohibited due to limitations imposed by the IRC. The Company makes payments to self-directed grantor trusts with respect to these supplemental defined contribution plans. Such payments during Fiscal 2020, Fiscal 2019 and Fiscal 2018 were not material. At September 30, 2020 and 2019, the total fair values of these grantor trust investment assets, which amounts are included in “Other assets” on the Consolidated Balance Sheets, were $7 and $6, respectively.