Employee Benefit Plans

Defined Benefit Plans

We and our subsidiaries maintain a noncontributory, qualified pension plan covering the majority of our employees, as well as several unfunded nonqualified retirement plans. In addition, we and our subsidiaries offer multiple other postretirement benefit plans to employees. The benefits for a portion of these plans are funded through irrevocable trusts, as allowed for income tax purposes. Our defined benefit pension plans were closed to all new hires as of February 16, 2012. In addition, the service accruals for the defined benefit pension plans were frozen for non-union employees as of January 1, 2013.

We also offer medical, dental, and life insurance benefits to active employees and their dependents. We expense the costs of these benefits as incurred.

The following tables provide a reconciliation of the changes in our plans' benefit obligations and fair value of assets:



	Pension Benefits						Other Benefits
(Millions)	2013			2012			2013			2012
Change in benefit obligation
Obligation at January 1	$	1,784.9		$	1,563.1		$	621.0		$	576.8
Service cost	30.2			46.0			24.9			20.8
Interest cost	71.2			78.0			24.8			28.5
Plan amendments	—			—			0.2			—
Actuarial (gain) loss, net	(153.1		)	196.6			(73.4		)	14.3
Participant contributions	—			—			10.6			10.6
Benefit payments	(91.5		)	(98.8		)	(34.0		)	(32.1		)
Federal subsidy on benefits paid	—			—			2.2			2.1
Obligation at December 31	$	1,641.7		$	1,784.9		$	576.3		$	621.0

Change in fair value of plan assets
Fair value of plan assets at January 1	$	1,348.1		$	1,099.5		$	424.4		$	285.5
Actual return on plan assets	205.4			173.6			57.8			46.3
Employer contributions	65.7			173.8			11.3			114.1
Participant contributions	—			—			10.6			10.6
Benefit payments	(91.5		)	(98.8		)	(34.0		)	(32.1		)
Fair value of plan assets at December 31	$	1,527.7		$	1,348.1		$	470.1		$	424.4
Funded Status at December 31	$	(114.0	)	$	(436.8	)	$	(106.2	)	$	(196.6	)

The amounts recognized on our balance sheets at December 31 related to the funded status of the benefit plans were as follows:



	Pension Benefits				Other Benefits
(Millions)	2013		2012		2013		2012
Current liabilities	$	9.0	$	7.9	$	0.2	$	0.3
Long-term liabilities	105.0		428.9		106.0		196.3
Total liabilities	$	114.0	$	436.8	$	106.2	$	196.6

The accumulated benefit obligation for the defined benefit pension plans was $1,489.1 million and $1,594.7 million at December 31, 2013, and 2012, respectively.

Information for the qualified pension plans with an accumulated benefit obligation in excess of plan assets is presented in the following table as of December 31:



(Millions)	2013		2012
Projected benefit obligation	$	65.4	$	1,784.9
Accumulated benefit obligation	63.0		1,594.7
Fair value of plan assets	—		1,348.1

The following table shows the amounts that had not yet been recognized in our net periodic benefit cost as of December 31:



	Pension Benefits				Other Benefits
(Millions)	2013		2012		2013			2012
Accumulated other comprehensive loss (pre-tax) ⁽¹⁾
Net actuarial loss	$	33.3	$	59.1	$	0.7		$	1.3
Prior service costs (credits)	—		0.2		(0.2		)	(0.6		)
Total	$	33.3	$	59.3	$	0.5		$	0.7

Net regulatory assets ⁽²⁾
Net actuarial loss	$	399.3	$	683.1	$	8.9		$	117.3
Prior service costs (credits)	2.4		6.2		(12.0		)	(14.3		)
Total	$	401.7	$	689.3	$	(3.1	)	$	103.0


⁽¹⁾	Amounts related to the nonregulated entities are included in accumulated other comprehensive loss.


⁽²⁾	Amounts related to the regulated utilities are recorded as regulatory assets or liabilities.

The following table shows the estimated amounts that will be amortized into net periodic benefit cost during 2014:



(Millions)	Pension Benefits		Other Benefits
Net actuarial losses	$	34.6	$	2.5
Prior service costs (credits)	0.6		(2.4		)
Total 2014 – estimated amortization	$	35.2	$	0.1

The following table shows the components of net periodic benefit cost (including amounts capitalized to our balance sheets) for our benefit plans:



	Pension Benefits									Other Benefits
(Millions)	2013			2012			2011			2013			2012			2011
Service cost	$	30.2		$	46.0		$	41.4		$	24.9		$	20.8		$	19.0
Interest cost	71.2			78.0			80.1			24.8			28.5			29.5
Expected return on plan assets	(105.5		)	(107.9		)	(100.0		)	(30.6		)	(28.2		)	(21.4		)
Amortization of transition obligation	—			—			—			—			0.3			0.3
Amortization of prior service cost (credit)	4.0			5.0			5.3			(2.5		)	(3.4		)	(3.9		)
Amortization of net actuarial loss	56.7			34.0			18.1			8.4			6.6			4.0
Net periodic benefit cost	$	56.6		$	55.1		$	44.9		$	25.0		$	24.6		$	27.5

Assumptions – Pension and Other Postretirement Benefit Plans

The weighted-average assumptions used to determine the benefit obligations for the plans were as follows for the years ended December 31:



	Pension Benefits		Other Benefits
	2013	2012	2013	2012
Discount rate	4.92%	4.07%	4.83%	3.96%
Rate of compensation increase	4.24%	4.25%	N/A	N/A
Assumed medical cost trend rate	N/A	N/A	6.50%	7.00%
Ultimate trend rate	N/A	N/A	5.00%	5.00%
Year ultimate trend rate is reached	N/A	N/A	2019	2019
Assumed dental cost trend rate	N/A	N/A	5.00%	5.00%

The weighted-average assumptions used to determine the net periodic benefit cost for the plans were as follows for the years ended December 31:



	Pension Benefits
	2013	2012	2011
Discount rate	4.07%	5.10%	5.80%
Expected return on assets	8.00%	8.25%	8.25%
Rate of compensation increase	4.25%	4.25%	4.26%



	Other Benefits
	2013	2012	2011
Discount rate	3.96%	4.94%	5.66%
Expected return on assets	8.00%	8.25%	8.25%
Assumed medical cost trend rate (under age 65)	7.00%	7.00%	7.50%
Ultimate trend rate	5.00%	5.00%	5.00%
Year ultimate trend rate is reached	2019	2016	2016
Assumed medical cost trend rate (over age 65)	7.00%	7.50%	8.00%
Ultimate trend rate	5.00%	5.50%	5.50%
Year ultimate trend rate is reached	2019	2016	2016
Assumed dental cost trend rate	5.00%	5.00%	5.00%

We establish our expected return on assets assumption based on consideration of historical and projected asset class returns, as well as the target allocations of the benefit trust portfolios. For 2014, the expected return on assets assumption for the plans is 8.00%.

Assumed health care cost trend rates have a significant effect on the amounts reported by us for our health care plans. For the year ended December 31, 2013, a one-percentage-point change in assumed health care cost trend rates would have had the following effects:



	One-Percentage-Point
(Millions)	Increase		Decrease
Effect on total of service and interest cost components of net periodic postretirement health care benefit cost	$	8.2	$	(6.5	)
Effect on the health care component of the accumulated postretirement benefit obligation	80.6		(65.5		)

Pension and Other Postretirement Benefit Plan Assets

Our investment policy includes various guidelines and procedures designed to ensure assets are invested in an appropriate manner to meet expected future benefits to be earned by participants. The investment guidelines consider a broad range of economic conditions. Our policy is established and administered in a manner that is compliant at all times with applicable regulations.

Central to our policy are target allocation ranges by major asset categories. The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters and to achieve asset returns that meet or exceed the plans' actuarial assumptions and that are competitive with like instruments employing similar investment strategies. The portfolio diversification provides protection against significant concentrations of risk in the plan assets. The target asset allocations for pension and other postretirement benefit plans that have significant assets are: 70% equity securities and 30% fixed income securities. Equity securities primarily include investments in large-cap and small-cap companies. Fixed income securities primarily include corporate bonds of companies from diversified industries, United States government securities, and mortgage-backed securities.

The Board of Directors established the Employee Benefits Administrator Committee (composed of members of management) to manage the operations and administration of all benefit plans and trusts. The committee monitors the asset allocation, and the portfolio is rebalanced when necessary.

Pension and other postretirement benefit plan investments are recorded at fair value. See Note 1(v), Fair Value, for more information regarding the fair value hierarchy and the classification of fair value measurements based on the types of inputs used.

The following table provides the fair values of our investments by asset class:



	December 31, 2013
	Pension Plan Assets												Other Benefit Plan Assets
(Millions)	Level 1			Level 2			Level 3			Total			Level 1		Level 2		Level 3		Total
Asset Class
Cash and cash equivalents	$	2.0		$	36.6		$	—		$	38.6		$	—	$	4.0	$	—	$	4.0
Equity securities:
United States equity	100.4			445.1			—			545.5			21.4		132.2		—		153.6
International equity	114.1			429.0			—			543.1			19.5		125.5		—		145.0
Fixed income securities:
United States government	—			93.6			—			93.6			121.2		0.7		—		121.9
Foreign government	—			16.9			2.4			19.3			—		—		—		—
Corporate debt	—			250.0			1.3			251.3			—		—		—		—
Asset-backed securities	—			61.8			—			61.8			—		—		—		—
Other	—			17.4			—			17.4			1.0		—		—		1.0
	216.5			1,350.4			3.7			1,570.6			163.1		262.4		—		425.5
401(h) other benefit plan assets invested as pension assets ⁽¹⁾	(6.1		)	(37.9		)	(0.1		)	(44.1		)	6.1		37.9		0.1		44.1
Total ⁽²⁾	$	210.4		$	1,312.5		$	3.6		$	1,526.5		$	169.2	$	300.3	$	0.1	$	469.6


⁽¹⁾	Pension trust assets are used to pay other postretirement benefits as allowed under Internal Revenue Code Section 401(h).


⁽²⁾	Investments do not include accruals or pending transactions that are included in the table reconciling the change in fair value of plan assets.



	December 31, 2012
	Pension Plan Assets												Other Benefit Plan Assets
(Millions)	Level 1			Level 2			Level 3			Total			Level 1		Level 2		Level 3		Total
Asset Class
Cash and cash equivalents	$	6.4		$	25.3		$	—		$	31.7		$	—	$	9.5	$	—	$	9.5
Equity securities:
United States equity	167.9			403.0			—			570.9			27.8		129.0		—		156.8
International equity	96.0			300.4			—			396.4			15.6		92.9		—		108.5
Fixed income securities:
United States government	—			100.3			—			100.3			112.7		—		—		112.7
Foreign government	—			20.4			4.1			24.5			—		—		—		—
Corporate debt	—			197.3			1.0			198.3			—		—		—		—
Asset-backed securities	—			56.5			0.1			56.6			—		—		—		—
Other	—			11.3			—			11.3			1.1		—		—		1.1
	270.3			1,114.5			5.2			1,390.0			157.2		231.4		—		388.6
401(h) other benefit plan assets invested as pension assets ⁽¹⁾	(7.1		)	(29.3		)	(0.1		)	(36.5		)	7.1		29.3		0.1		36.5
Total ⁽²⁾	$	263.2		$	1,085.2		$	5.1		$	1,353.5		$	164.3	$	260.7	$	0.1	$	425.1


⁽¹⁾	Pension trust assets are used to pay other postretirement benefits as allowed under Internal Revenue Code Section 401(h).


⁽²⁾	Investments do not include accruals or pending transactions that are included in the table reconciling the change in fair value of plan assets.

The following table sets forth a reconciliation of changes in the fair value of pension plan assets categorized as Level 3 in the fair value hierarchy:



(Millions)	Foreign Government Debt			Corporate Debt			Asset-Backed Securities			Total
Beginning balance at January 1, 2013	$	4.1		$	1.0		$	0.1		$	5.2
Net realized and unrealized losses	(0.3		)	(0.4		)	—			(0.7		)
Purchases	0.6			—			—			0.6
Sales	(2.0		)	(0.4		)	—			(2.4		)
Transfers into Level 3	—			1.4			—			1.4
Transfers out of Level 3	—			(0.3		)	(0.1		)	(0.4		)
Ending balance at December 31, 2013	$	2.4		$	1.3		$	—		$	3.7

Net unrealized losses related to assets still held at the end of the period	$	(0.2	)	$	(0.3	)	$	—		$	(0.5	)



(Millions)	Foreign Government Debt			Corporate Debt			Asset-Backed Securities		Total
Beginning balance at January 1, 2012	$	5.7		$	2.1		$	—	$	7.8
Net realized and unrealized gains (losses)	0.5			0.2			—		0.7
Purchases	1.2			0.5			—		1.7
Sales	(2.0		)	(0.4		)	—		(2.4		)
Transfers into Level 3	—			—			0.1		0.1
Transfers out of Level 3	(1.3		)	(1.4		)	—		(2.7		)
Ending balance at December 31, 2012	$	4.1		$	1.0		$	0.1	$	5.2

Net unrealized losses related to assets still held at the end of the period	$	0.3		$	0.1		$	—	$	0.4

Cash Flows Related to Pension and Other Postretirement Benefit Plans

Our funding policy is to contribute at least the minimum amounts that are required to be funded under the Employee Retirement Income Security Act, but not more than the maximum amounts that are currently deductible for income tax purposes. We expect to contribute $72.3 million to our pension plans and $11.9 million to our other postretirement benefit plans in 2014, dependent upon various factors affecting us, including our liquidity position and tax law changes.

The following table shows the payments, reflecting expected future service, that we expect to make for pension and other postretirement benefits. In addition, the table shows the expected federal subsidies, provided under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which will partially offset other postretirement benefits.



(Millions)	Pension Benefits		Other Benefits		Federal Subsidies
2014	$	125.1	$	30.0	$	2.2
2015	123.3		32.5		2.3
2016	126.1		35.0		2.5
2017	129.3		37.5		2.6
2018	125.9		39.9		2.7
2019 through 2023	657.6		234.1		15.8

Defined Contribution Benefit Plans

We maintain 401(k) Savings Plans for substantially all of our full-time employees. A percentage of employee contributions are matched through an employee stock ownership plan (ESOP) contribution or cash contribution up to certain limits. Certain union employees receive a contribution to their ESOP account regardless of their participation in the 401(k) Savings Plan. The ESOP held 3.8 million shares of our common stock (market value of $206.4 million) at December 31, 2013. Certain employees participate in a defined contribution pension plan, in which certain amounts are contributed to an employee's account based on the employee's wages, age, and years of service. Total costs incurred under all of these plans were $36.4 million in 2013, $19.1 million in 2012, and $17.0 million in 2011.

We maintain deferred compensation plans that enable certain key employees and nonemployee directors to defer payment of a portion of their compensation or fees on a pre-tax basis. Nonemployee directors can defer up to 100% of their director fees. Compensation is generally deferred in the form of cash and is indexed to certain investment options or our common stock. The deemed dividends paid on our common stock are automatically reinvested.

The deferred compensation arrangements for which distributions are made solely in our common stock are classified as an equity instrument on the balance sheets. Changes in the fair value of this portion of the deferred compensation obligation are not recognized. The deferred compensation obligation classified as an equity instrument was $24.8 million at December 31, 2013, and $23.9 million at December 31, 2012.

The portion of the deferred compensation obligation that is indexed to various investment options and allows for distributions in cash is classified as a liability on the balance sheets. The liability is adjusted, with a charge or credit to expense, to reflect changes in the fair value of the deferred compensation obligation. The obligation classified within other long-term liabilities was $53.4 million at December 31, 2013, and $42.9 million at December 31, 2012. The costs incurred under this arrangement were $6.5 million in 2013, $3.1 million in 2012, and $2.1 million in 2011.

The deferred compensation programs are partially funded through shares of our common stock that are held in a rabbi trust. The common stock held in the rabbi trust is classified as a reduction of equity in a manner similar to accounting for treasury stock. The total cost of our common stock held in the rabbi trust was $23.0 million at December 31, 2013, and $17.7 million at December 31, 2012.