Employee Postretirement Benefits

9 Months Ended

Sep. 30, 2015

5. Employee Postretirement Benefits

Included in the table below is the periodic expense for pension and other postretirement benefits offered by the company. Amounts disclosed for pension benefits include the amounts related to the qualified pension plan and the non-qualified, non-contributory SERP.

Pension Expense
(millions)	Pension Benefits						Other Postretirement Benefits
Three months ended Sept. 30,	2015			2014			2015			2014
Components of net periodic benefit expense
Service cost	$	6.7		$	4.6		$	0.6		$	0.6
Interest cost		6.5			8.0			2.0			2.7
Expected return on assets		(9.1	)		(10.5	)		(0.3	)		(0.1	)
Amortization of:
Prior service (benefit) cost		(0.1	)		(0.1	)		(0.6	)		0.0
Actuarial loss		3.2			3.3			0.0			0.0
Regulatory asset		0.0			0.0			0.3			0.1
Net pension expense recognized in the TECO Energy Consolidated Condensed Statements of Income	$	7.2		$	5.3		$	2.0		$	3.3
Nine months ended Sept. 30,
Components of net periodic benefit expense
Service cost	$	17.6		$	12.9		$	1.7		$	1.8
Interest cost		22.6			24.4			6.1			7.9
Expected return on assets		(32.4	)		(31.2	)		(0.8	)		(0.1	)
Amortization of:
Prior service (benefit) cost		(0.2	)		(0.3	)		(1.8	)		(0.1	)
Actuarial loss		11.4			10.0			0.0			0.1
Regulatory asset		0.0			0.0			0.8			0.1
Net pension expense recognized in the TECO Energy Consolidated Condensed Statements of Income	$	19.0		$	15.8		$	6.0		$	9.7

For the fiscal 2015 plan year, TECO Energy is using an assumed long-term EROA of 7.00% and a discount rate of 4.256% for pension benefits under its qualified pension plan. For the Jan. 1, 2015 measurement of TECO Energy’s other postretirement benefits, TECO Energy assumed a discount rate of 4.206% for the Florida-based plan and 4.243% for the NMGC plan.

TECO Energy made contributions of $55.0 million and $47.5 million to its pension plan for the nine months ended Sept. 30, 2015 and 2014, respectively. Additionally, NMGC made contributions of $2.7 million to its other postretirement benefits plan for the nine months ended Sept. 30, 2015. In addition, in October 2015, TECO Energy made a contribution of $43.4 million to the SERP’s trust in order to fully fund its SERP obligation following the signing of the Merger Agreement with Emera. The execution of the Merger Agreement constituted a potential change in control under the trust; therefore, TECO Energy is required to maintain such funding as of the end of each calendar year, including 2015. The fully funded amount is equal to the aggregate present value of all benefits then in pay status under the SERP plus all benefits that would become payable under the SERP to current participants.

For the three and nine months ended Sept. 30, 2015, TECO Energy and its subsidiaries reclassified $0.2 million and $2.4 million, respectively, of pretax unamortized prior service benefit and actuarial losses from AOCI to net income as part of periodic benefit expense, compared with $0.7 million and $2.0 million for the three and nine months ended Sept. 30, 2014, respectively. In addition, during the three and nine months ended Sept. 30, 2015, the regulated companies reclassified $2.6 million and $7.8 million, respectively, of unamortized prior service benefit and actuarial losses from regulatory assets to net income as part of periodic benefit expense, compared with $2.7 million and $7.9 million during the three and nine months ended Sept. 30, 2014, respectively.

Black Lung Liability

As discussed in Note 15, TECO Diversified completed the sale of all of its ownership interest in TECO Coal to Cambrian Coal Corporation on Sept. 21, 2015. TECO Coal was required by federal and state statutes to provide benefits to terminated, retired or (under state statutes) qualifying active employees for benefits related to black lung disease. TECO Coal was self-insured for black lung related claims. TECO Coal applied the accounting guidance of ASC 715, Compensation – Retirement Benefits, and annual expense was recorded for black lung obligations as determined by an independent actuary at the present value of the actuarially-computed liability for such benefits over the employee’s applicable term of service. Expense related to the black lung liability recognized during the three and nine months ended Sept. 30, 2015 and 2014 was not material.

In accordance with ASC 715, an after-tax settlement charge of $7.7 million related to the unfunded black lung obligations recorded in AOCI was recognized as a loss from discontinued operations upon completion of the sale of TECO Coal.

Tampa Electric Company [Member]

Employee Postretirement Benefits

5. Employee Postretirement Benefits

TEC is a participant in the comprehensive retirement plans of TECO Energy. Amounts allocable to all participants of the TECO Energy retirement plans are found in Note 5, Employee Postretirement Benefits, in the TECO Energy, Inc. Notes to Consolidated Condensed Financial Statements. TEC’s portion of the net pension expense for the three months ended Sept. 30, 2015 and 2014, respectively, was $3.3 million and $3.6 million for pension benefits, and $1.4 million and $2.6 million for other postretirement benefits. TEC’s portion of the net pension expense for the nine months ended Sept. 30, 2015 and 2014, respectively, was $10.1 million and $11.3 million for pension benefits, and $4.3 million and $7.8 million for other postretirement benefits.

For the fiscal 2015 plan year, TECO Energy assumed a long-term EROA of 7.00% and a discount rate of 4.256%. For the Jan. 1, 2015 measurement of TECO Energy’s other postretirement benefits, TECO Energy used a discount rate of 4.206%. Additionally, TECO Energy made contributions of $55.0 million and $47.5 million to its pension plan in the nine months ended Sept. 30, 2015 and 2014, respectively. TEC’s portion of the contributions was $43.9 million and $38.2 million, respectively. In addition, in October 2015, TECO Energy made a contribution of $43.4 million to the SERP’s trust in order to fully fund its SERP obligation following the signing of the Merger Agreement with Emera. The execution of the Merger Agreement constituted a potential change in control under the trust; therefore, TECO Energy is required to maintain such funding as of the end of each calendar year, including 2015. The fully funded amount is equal to the aggregate present value of all benefits then in pay status under the SERP plus all benefits that would become payable under the SERP to current participants. TEC’s portion of the SERP contribution was $14.9 million.

Included in the benefit expenses discussed above, for the three and nine months ended Sept. 30, 2015, TEC reclassified $2.3 million and $7.0 million, respectively, of prior service benefit and actuarial losses from regulatory assets to net income, compared with $2.6 million and $7.8 million for the three and nine months ended Sept. 30, 2014, respectively.