Employee Postretirement Benefits

12 Months Ended

Dec. 31, 2015

5. Employee Postretirement Benefits

Pension Benefits

TECO Energy has a qualified, non-contributory defined benefit retirement plan that covers substantially all employees. Benefits are based on employees’ age, years of service and final average earnings.

Amounts disclosed for pension benefits in the following tables and discussion also include the fully-funded obligations for the SERP. The SERP is a non-qualified, non-contributory defined benefit retirement plan available to certain members of senior management.

TECO Coal participants ceased earning pension benefits on Sept. 21, 2015, the date of TECO Energy’s sale of TECO Coal. As a result of the sale, a curtailment loss in the Retirement Plan was recognized in the fourth quarter of 2014. See curtailment-related line items in tables below.

Other Postretirement Benefits

TECO Energy and its subsidiaries currently provide certain postretirement health care and life insurance benefits (Other Benefits or Other Postretirement Benefit Plan) for most employees retiring after age 50 meeting certain service requirements. Postretirement benefit levels are substantially unrelated to salary. The company reserves the right to terminate or modify the plans in whole or in part at any time.

MMA added prescription drug coverage to Medicare, with a 28% tax-free subsidy to encourage employers to retain their prescription drug programs for retirees, along with other key provisions. TECO Energy’s current retiree medical program for those eligible for Medicare (generally over age 65) includes coverage for prescription drugs. The company has determined that prescription drug benefits available to certain Medicare-eligible participants under its defined-dollar-benefit postretirement health care plan are at least “actuarially equivalent” to the standard drug benefits that are offered under Medicare Part D.

The FASB issued accounting guidance and disclosure requirements related to MMA. The guidance requires (a) that the effects of the federal subsidy be considered an actuarial gain and recognized in the same manner as other actuarial gains and losses and (b) certain disclosures for employers that sponsor postretirement health care plans that provide prescription drug benefits.

In March 2010, the Patient Protection and Affordable Care Act and a companion bill, the Health Care and Education Reconciliation Act, collectively referred to as the Health Care Reform Acts, were signed into law. Among other things, both acts reduce the tax benefits available to an employer that receives the Medicare Part D subsidy, resulting in a write-off of any associated deferred tax asset. As a result, TECO Energy reduced its deferred tax asset in 2010 and recorded a true up in 2013. TEC is amortizing the regulatory asset over the remaining average service life at the time of 12 years. Additionally, the Health Care Reform Acts contain other provisions that may impact TECO Energy’s obligation for retiree medical benefits. In particular, the Health Care Reform Acts include a provision that imposes an excise tax on certain high-cost plans beginning in 2018, whereby premiums paid over a prescribed threshold will be taxed at a 40% rate. TECO Energy does not currently believe the excise tax or other provisions of the Health Care Reform Acts will materially increase its PBO. TECO Energy will continue to monitor and assess the impact of the Health Care Reform Acts, including any clarifying regulations issued to address how the provisions are to be implemented, on its future results of operations, cash flows or financial position.

Effective Jan. 1, 2013, the company decided to implement an EGWP for its post-65 retiree prescription drug plan. The EGWP is a private Medicare Part D plan designed to provide benefits that are at least equivalent to Medicare Part D. The EGWP reduces net periodic benefit cost by taking advantage of rebate and discount enhancements provided under the Health Care Reform Acts, which are greater than the subsidy payments previously received by the company under Medicare Part D for its post-65 retiree prescription drug plan.

NMGC has a separate, partially-funded other postretirement benefit plan. It is not presented separately; rather, it is presented with TECO Energy’s plan in the tables and discussion below. Since NMGC is allowed to recover its other postretirement benefit costs through rates, the regulated asset established prior to the acquisition for pre-acquisition-related prior service cost, actuarial loss, and transition obligation was maintained after the acquisition. This regulated asset will be amortized. See “unrecognized costs in regulated asset acquired in business combination” line item in the “Amounts recognized in accumulated other comprehensive income, pretax, and regulatory assets” table below.

Effective Jan. 1, 2015, the TECO Coal participants were terminated from the Other Postretirement Benefit Plan. As a result, the other postretirement benefit obligation for TECO Coal was eliminated as of Dec. 31, 2014. See curtailment-related line items in tables below.

Obligations and Funded Status

TECO Energy recognizes in its statement of financial position the over-funded or under-funded status of its postretirement benefit plans. This status is measured as the difference between the fair value of plan assets and the PBO in the case of its defined benefit plan, or the APBO in the case of its other postretirement benefit plan. Changes in the funded status are reflected, net of estimated tax benefits, in the benefit liabilities and AOCI in the case of the unregulated companies, or the benefit liabilities and regulatory assets in the case of TEC and NMGC. The results of operations are not impacted.

The following table provides a detail of the change in benefit obligations and change in plan assets for combined pension plans (pension benefits) and combined other postretirement benefit plans (other benefits).

Obligations and Plan Assets	Pension Benefits						Other Benefits
(millions)	2015			2014			2015			2014
Change in benefit obligation
Net benefit obligation at beginning of year	$	728.9		$	666.0		$	201.5		$	208.1
Service cost		20.9			18.3			2.2			2.5
Interest cost		30.3			32.0			8.2			10.8
Plan participants’ contributions		0.0			0.0			2.0			2.8
Plan amendments		0.0			0.0			(3.7	)		(23.2	)
Actuarial loss (gain)		5.8			48.3			(0.4	)		1.5
Benefits paid		(53.0	)		(39.9	)		(14.6	)		(16.0	)
Transfer in due to the effect of business combination		0.0			0.0			0.0			26.7
Plan curtailment		0.0			4.0			0.0			(11.7	)
Special termination benefit		0.0			0.2			0.0			0.0
Net benefit obligation at end of year	$	732.9		$	728.9		$	195.2		$	201.5

Change in plan assets
Fair value of plan assets at beginning of year	$	648.0		$	593.0		$	18.8		$	0.0
Actual return on plan assets		(25.5	)		46.4			(0.6	)		0.1
Employer contributions		55.0			47.5			1.5			(1.0	)
Employer direct benefit payments		0.9			1.0			13.5			16.0
Plan participants’ contributions		0.0			0.0			2.0			2.8
Transfer in due to acquisition		0.0			0.0			0.0			16.9
Benefits paid		(53.0	)		(39.9	)		(14.6	)		(16.0	)
Fair value of plan assets at end of year ⁽¹⁾	$	625.4		$	648.0		$	20.6			18.8

(1)	The MRV of plan assets is used as the basis for calculating the EROA component of periodic pension expense. MRV reflects the fair value of plan assets adjusted for experience gains and losses (i.e. the differences between actual investment returns and expected returns) spread over five years.

At Dec. 31, the aggregate financial position for pension plans and other postretirement plans with benefit obligations in excess of plan assets was as follows:

Funded Status	Pension Benefits						Other Benefits
(millions)	2015			2014			2015			2014
Benefit obligation (PBO/APBO)	$	732.9		$	728.9		$	195.2		$	201.5
Less: Fair value of plan assets		625.4			648.0			20.6			18.8
Funded status at end of year	$	(107.5	)	$	(80.9	)	$	(174.6	)	$	(182.7	)

The accumulated benefit obligation for all defined benefit pension plans was $686.9 million at Dec. 31, 2015 and $685.0 million at Dec. 31, 2014.

The amounts recognized in the Consolidated Balance Sheets for pension and other postretirement benefit obligations, plan assets, and unrecognized costs at Dec. 31 were as follows:

Amounts recognized in balance sheet	Pension Benefits						Other Benefits
(millions)	2015			2014			2015			2014
Regulatory assets	$	208.2		$	167.4		$	32.4		$	26.6
Accrued benefit costs and other current liabilities		(10.5	)		(4.9	)		(10.7	)		(10.7	)
Deferred credits and other liabilities		(97.0	)		(76.0	)		(163.9	)		(172.0	)
Accumulated other comprehensive loss (income), pretax		55.7			36.3			(41.6	)		(34.6	)
Net amount recognized at end of year	$	156.4		$	122.8		$	(183.8	)	$	(190.7	)

Unrecognized gains and losses and prior service credits and costs are recorded in accumulated other comprehensive income for the non-regulated companies and regulatory assets for the regulated companies. The following table provides a detail of the unrecognized gains and losses and prior service credits and costs.

Amounts recognized in accumulated other comprehensive income, pretax, and regulatory assets	Pension Benefits				Other Benefits
(millions)	2015		2014		2015			2014
Net actuarial loss	$	263.6	$	203.7	$	10.9		$	9.6
Prior service cost (credit)		0.3		0.0		(25.0	)		(23.6	)
Unrecognized costs in regulated asset acquired in business combination		0.0		0.0		4.9			6.0
Amount recognized, pretax	$	263.9	$	203.7	$	(9.2	)	$	(8.0	)

Assumptions used to determine benefit obligations at Dec. 31:

	Pension Benefits						Other Benefits
	2015			2014			2015			2014
Discount rate		4.688	%		4.258	%		4.669	%		4.211	%
Rate of compensation increase—weighted		3.87	%		3.87	%		2.50	%		3.86	%
Healthcare cost trend rate
Immediate rate	n/a			n/a				7.05	%		7.09	%
Ultimate rate	n/a			n/a				4.50	%		4.57	%
Year rate reaches ultimate	n/a			n/a			2038			2025

A one-percentage-point change in assumed health care cost trend rates would have the following effect on the benefit obligation:

		1%		1%
(millions)	Increase		Decrease
Effect on postretirement benefit obligation	$	9.0	$	(7.7	)

The discount rate assumption used to determine the Dec. 31, 2015 benefit obligation was based on a cash flow matching technique developed by outside actuaries and a review of current economic conditions. This technique constructs hypothetical bond portfolios using high-quality (AA or better by S&P) corporate bonds available from the Barclays Capital database at the measurement date to meet the plan’s year-by-year projected cash flows. The technique calculates all possible bond portfolios that produce adequate cash flows to pay the yearly benefits and then selects the portfolio with the highest yield and uses that yield as the recommended discount rate.

Amounts recognized in Net Periodic Benefit Cost, OCI and Regulatory Assets

(millions)	Pension Benefits									Other Benefits
	2015			2014			2013			2015			2014			2013

Service cost	$	20.9		$	18.3		$	18.2		$	2.2		$	2.5		$	2.5
Interest cost		30.3			32.0			28.9			8.2			10.8			9.3
Expected return on plan assets		(43.3	)		(41.8	)		(38.4	)		(1.1	)		(0.3	)		0.0
Amortization of:
Actuarial loss		15.1			13.5			20.5			0.0			0.2			1.0
Prior service (benefit) cost		(0.2	)		(0.4	)		(0.4	)		(2.4	)		(0.2	)		(0.4	)
Curtailment loss (gain)		0.0			3.9			0.0			0.0			(0.2	)		0.0
Special termination benefit		0.0			0.2			0.0			0.0			0.0			0.0
Settlement loss		0.0			0.0			1.0			0.0			0.0			0.0
Net periodic benefit cost	$	22.8		$	25.7		$	29.8		$	6.9		$	12.8		$	12.4

New prior service cost	$	0.0		$	0.0		$	0.0		$	(3.7	)	$	(23.6	)	$	0.0
Net loss (gain) arising during the year		74.5			44.1			(75.7	)		1.3			(9.9	)		(15.6	)
Unrecognized costs in regulated asset acquired in business combination		0.0			0.0			0.0			0.0			6.4			0.0
Amounts recognized as component of net periodic benefit cost:
Amortization of actuarial gain (loss)		(15.1	)		(13.5	)		(21.5	)		0.0			(0.2	)		(1.0	)
Amortization of prior service (benefit) cost		0.2		0.4				0.4			2.4			0.2			0.3
Total recognized in OCI and regulatory assets	$	59.6		$	31.0		$	(96.8	)	$	0.0		$	(27.1	)	$	(16.3	)
Total recognized in net periodic benefit cost, OCI and regulatory assets	$	82.4		$	56.7		$	(67.0	)	$	6.9		$	(14.3	)	$	(3.9	)

A curtailment loss and special termination benefits were recognized in 2014 for the Retirement Plan due to the expected sale of TECO Coal. The sale was completed in 2015. Additionally, a curtailment gain was recognized for the OPEB plan due to the termination of the TECO Coal plan effective Jan. 1, 2015.

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year are $3.5 million and $0.1 million, respectively. The estimated prior service cost for the other postretirement benefit plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year is $0.5 million.

In addition, the estimated net loss for the defined benefit pension plans that will be amortized from regulatory assets into net periodic benefit cost over the next fiscal year are $9.8 million. There will be an estimated $2.1 million prior service cost that will be amortized from regulatory assets into net periodic benefit cost over the next fiscal year for the other postretirement benefit plan. Additionally, $1.1 million of NMGC’s pre-acquisition regulated asset will be amortized from regulatory assets into net periodic benefit cost over the next fiscal year.

Assumptions used to determine net periodic benefit cost for years ended Dec. 31:

	Pension Benefits									Other Benefits
	2015			2014 ⁽¹⁾			2013			2015			2014			2013
Discount rate		4.258	%	5.118%/4.277%/4.331%				4.196	%		4.211	%		5.096	%		4.180	%
Expected long-term return on plan assets		7.00	%	7.25%/7.00%/7.00%				7.50	%		5.75			5.75		n/a
Rate of compensation increase		3.87	%		3.73	%		3.76	%		3.86	%		3.71	%		3.74	%
Healthcare cost trend rate
Initial rate	n/a			n/a			n/a				7.09	%		7.25	%		7.50	%
Ultimate rate	n/a			n/a			n/a				4.57	%		4.50	%		4.50	%
Year rate reaches ultimate	n/a			n/a			n/a			2025			2025			2025

(1)	TECO Energy performed a valuation as of Jan. 1, 2014. TECO remeasured its Retirement Plan on Sept. 2, 2014 for the acquisition of NMGC and on Oct. 31, 2014 for the expected curtailment of TECO Coal, resulting in the respective updated discount rates and EROAs.

The discount rate assumption used to determine the 2015 benefit cost was based on a cash flow matching technique developed by outside actuaries and a review of current economic conditions. This technique constructs hypothetical bond portfolios using high-quality (AA or better by S&P) corporate bonds available from the Barclays Capital database at the measurement date to meet the plan’s year-by-year projected cash flows. The technique calculates all possible bond portfolios that produce adequate cash flows to pay the yearly benefits and then selects the portfolio with the highest yield and uses that yield as the recommended discount rate.

The expected return on assets assumption was based on historical returns, fixed income spreads and equity premiums consistent with the portfolio and asset allocation at the measurement date. A change in asset allocations could have a significant impact on the expected return on assets. Additionally, expectations of long-term inflation, real growth in the economy and a provision for active management and expenses paid were incorporated in the assumption. For the year ended Dec. 31, 2015, TECO Energy’s pension plan assets decreased approximately 3.5%.

The compensation increase assumption was based on the same underlying expectation of long-term inflation together with assumptions regarding real growth in wages and company-specific merit and promotion increases.

A one-percentage-point change in assumed health care cost trend rates would have the following effect on expense:

		1%		1%
(millions)	Increase		Decrease
Effect on periodic cost	$	0.4	$	(0.3	)

Pension Plan Assets

Pension plan assets (plan assets) are primarily invested in a mix of equity and fixed income securities. The company’s investment objective is to obtain above-average returns while minimizing volatility of expected returns and funding requirements over the long term. The company’s strategy is to hire proven managers and allocate assets to reflect a mix of investment styles, emphasize preservation of principal to minimize the impact of declining markets, and stay fully invested except for cash to meet benefit payment obligations and plan expenses.

	Target Allocation			Actual Allocation, End of Year
Asset Category				2015			2014
Equity securities	47%-53%				53	%		50	%
Fixed income securities	47%-53%				47	%		50	%
Total		100	%		100	%		100	%

The company reviews the plan’s asset allocation periodically and re-balances the investment mix to maximize asset returns, optimize the matching of investment yields with the plan’s expected benefit obligations, and minimize pension cost and funding. The company will continue to monitor the matching of plan assets with plan liabilities.

The plan’s investments are held by a trust fund administered by JP Morgan Chase Bank, N.A. (JP Morgan). Investments are valued using quoted market prices on an exchange when available. Such investments are classified Level 1. In some cases where a market exchange price is available but the investments are traded in a secondary market, acceptable practical expedients are used to calculate fair value.

If observable transactions and other market data are not available, fair value is based upon third-party developed models that use, when available, current market-based or independently-sourced market parameters such as interest rates, currency rates or option volatilities. Items valued using third-party generated models are classified according to the lowest level input or value driver that is most significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable.

As required by the fair value accounting standards, the investments are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The plan’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. For cash equivalents, the cost approach was used in determining fair value. For bonds and U.S. government agencies, the income approach was used. For other investments, the market approach was used. The following table sets forth by level within the fair value hierarchy the plan’s investments as of Dec. 31, 2015 and 2014.

(millions)	At Fair Value as of Dec. 31, 2015
	Level 1			Level 2			Level 3		Using NAV ⁽¹⁾		Total
Net cash
Cash	$	1.9		$	0.0		$	0.0	$	0.0	$	1.9
Accounts receivable		14.3			0.0			0.0		0.0		14.3
Accounts payable		(27.2	)		0.0			0.0		0.0		(27.2	)
Total net cash		(11.0	)		0.0			0.0		0.0		(11.0	)
Cash equivalents
Money markets		0.0			0.2			0.0		0.0		0.2
Discounted notes		0.0			0.7			0.0		0.0		0.7
Short-term investment funds (STIFs) ⁽¹⁾		0.0			0.0			0.0		12.4		12.4
Total cash equivalents		0.0			0.9			0.0		12.4		13.3
Equity securities
Common stocks		90.9			0.0			0.0		0.0		90.9
American depository receipts (ADRs)		5.7			0.0			0.0		0.0		5.7
Real estate investment trusts (REITs)		4.8			0.0			0.0		0.0		4.8
Commingled fund		0.0			53.7			0.0		0.0		53.7
Mutual funds ⁽¹⁾		0.0			0.0			0.0		175.6		175.6
Total equity securities		101.4			53.7			0.0		175.6		330.7
Fixed income securities
Municipal bonds		0.0			5.0			0.0		0.0		5.0
Government bonds		0.0			56.2			0.0		0.0		56.2
Corporate bonds		0.0			32.2			0.0		0.0		32.2
Asset backed securities (ABS)		0.0			0.3			0.0		0.0		0.3
Mortgage-backed securities (MBS), net short sales		0.0			8.7			0.0		0.0		8.7
Collateralized mortgage obligations (CMOs)		0.0			1.5			0.0		0.0		1.5
Commingled fund ⁽¹⁾		0.0			0.0			0.0		117.9		117.9
Mutual fund ⁽¹⁾		0.0			0.0			0.0		71.3		71.3
Total fixed income securities		0.0			103.9			0.0		189.2		293.1
Derivatives
Swaps		0.0			(0.9	)		0.0		0.0		(0.9	)
Purchased options (swaptions)		0.0			1.1			0.0		0.0		1.1
Written options (swaptions)		0.0			(1.0	)		0.0		0.0		(1.0	)
Total derivatives		0.0			(0.8	)		0.0		0.0		(0.8	)
Miscellaneous		0.0			0.1			0.0		0.0		0.1
Total	$	90.4		$	157.8		$	0.0	$	377.2	$	625.4

(1)

In accordance with accounting standards, certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts in this table are to permit reconciliation of the fair value hierarchy to amounts presented in the Consolidated Balance Sheet.

(millions)	At Fair Value as of Dec. 31, 2014
	Level 1			Level 2			Level 3		Using NAV ⁽¹⁾		Total
Net cash
Cash	$	0.4		$	0.0		$	0.0	$	0.0	$	0.4
Accounts receivable		1.4			0.0			0.0		0.0		1.4
Accounts payable		(5.3	)		0.0			0.0		0.0		(5.3	)
Total net cash		(3.5	)		0.0			0.0		0.0		(3.5	)
Cash equivalents
Treasury bills (T bills)		0.0			0.2			0.0		0.0		0.2
Discounted notes		0.0			8.8			0.0		0.0		8.8
Short-term investment funds (STIFs) ⁽¹⁾		0.0			0.0			0.0		7.6		7.6
Total cash equivalents		0.0			9.0			0.0		7.6		16.6
Equity securities
Common stocks		98.0			0.0			0.0		0.0		98.0
American depository receipts (ADRs)		1.3			0.0			0.0		0.0		1.3
Real estate investment trusts (REITs)		2.5			0.0			0.0		0.0		2.5
Preferred stock		0.8			0.0			0.0		0.0		0.8
Commingled fund		0.0			45.6			0.0		0.0		45.6
Mutual funds ⁽¹⁾		0.0			0.0			0.0		171.3		171.3
Total equity securities		102.6			45.6			0.0		171.3		319.5
Fixed income securities
Municipal bonds		0.0			6.1			0.0		0.0		6.1
Government bonds		0.0			47.9			0.0		0.0		47.9
Corporate bonds		0.0			22.0			0.0		0.0		22.0
Asset backed securities (ABS)		0.0			0.3			0.0		0.0		0.3
Mortgage-backed securities (MBS), net short sales		0.0			9.6			0.0		0.0		9.6
Collateralized mortgage obligations (CMOs)		0.0			2.0			0.0		0.0		2.0
Commingled fund ⁽¹⁾		0.0			0.0			0.0		129.2		129.2
Mutual fund ⁽¹⁾		0.0			0.0			0.0		98.6		98.6
Total fixed income securities		0.0			87.9			0.0		227.8		315.7
Derivatives
Short futures		0.0			(0.3	)		0.0		0.0		(0.3	)
Purchased options (swaptions)		0.0			0.7			0.0		0.0		0.7
Written options (swaptions)		0.0			(0.8	)		0.0		0.0		(0.8	)
Total derivatives		0.0			(0.4	)		0.0		0.0		(0.4	)
Miscellaneous		0.0			0.1			0.0		0.0		0.1
Total	$	99.1		$	142.2		$	0.0	$	406.7	$	648.0

(1)

The following list details the pricing inputs and methodologies used to value the investments in the pension plan:

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The primary pricing inputs in determining the fair value of the Level 1 assets are closing quoted prices in active markets.

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The methodology and inputs used to value the investment in the equity commingled fund are broker dealer quotes sourced by State Street Custody System. The fund holds primarily international equity securities that are actively traded in over-the-counter markets. The fund honors subscription and redemption activity on an “as of” basis.

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The money markets are valued at cost due to their short-term nature. Discounted notes are valued at amortized cost.

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The primary pricing inputs in determining the fair value Level 2 municipal bonds are benchmark yields, historical spreads, sector curves, rating updates, and prepayment schedules. The primary pricing inputs in determining the fair value of government bonds are the U.S. treasury curve, CPI, and broker quotes, if available. The primary pricing inputs in determining the fair value of corporate bonds are the U.S. treasury curve, base spreads, YTM, and benchmark quotes. ABS and CMO are priced using TBA prices, treasury curves, swap curves, cash flow information, and bids and offers as inputs. MBS are priced using TBA prices, treasury curves, average lives, spreads, and cash flow information.

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Futures are valued using futures data, cash rate data, swap rates, and cash flow analyses.

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Swaps are valued using benchmark yields, swap curves, and cash flow analyses.

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Options are valued using the bid-ask spread and the last price.

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The STIF is valued at NAV as determined by JP Morgan. The funds are open-end investments. Additionally, shares may be redeemed any business day at the NAV calculated after the order is accepted. The NAV is validated with purchases and sales at NAV.

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The primary pricing inputs in determining the equity mutual funds are the mutual funds’ NAVs. The funds are registered open-ended mutual funds and the NAVs are validated with purchases and sales at NAV.

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The primary pricing input in determining the fair value of the fixed asset mutual fund is its NAV. It is an unregistered open-ended mutual fund.

—

The fixed income commingled fund is a private fund valued at NAV. The fund invests in long duration U.S. investment-grade fixed income assets and seeks to increase return through active management of interest rate and credit risks. The NAV is calculated based on bid prices of the underlying securities. The fund honors subscription activity on the first business day of the month and the first business day following the 15^th calendar day of the month. Redemptions are honored on the 15^th or last business day of the month, providing written notice is given at least ten business days prior to withdrawal date.

Additionally, the unqualified SERP had $43.5 million and $0.9 million of assets as of Dec. 31, 2015 and 2014, respectively. Since the plan is unqualified, its assets are included in the “Deferred charges and other assets” line item in TECO Energy’s Consolidated Balance Sheets rather than being netted with the related liability. The fund holds investments in a money market fund, which is valued at cost due to its short-term nature, making this a level 2 asset. The SERP was fully funded as of Dec. 31, 2015.

Other Postretirement Benefit Plan Assets

NMGC’s other postretirement benefits plan had $20.6 million and $18.8 million of assets as of Dec. 31, 2015 and 2014, respectively. The majority of the assets are valued at the cash surrender value of NMGC participant life insurance policies and are considered Level 2 assets. In accordance with NMPRC requirements, NMGC must fund to a trust, on an annual basis, an amount equal to the other postretirement expense allowed in its last base rate case.

Contributions

The Pension Protection Act became effective Jan. 1, 2008 and requires companies to, among other things, maintain certain defined minimum funding thresholds (or face plan benefit restrictions), pay higher premiums to the PBGC if they sponsor defined benefit plans, amend plan documents and provide additional plan disclosures in regulatory filings and to plan participants.

WRERA was signed into law on Dec. 23, 2008. WRERA grants plan sponsors relief from certain funding requirements and benefits restrictions, and also provides some technical corrections to the Pension Protection Act. There are two primary provisions that impact funding results for TECO Energy. First, for plans funded less than 100%, required shortfall contributions were based on a percentage of the funding target until 2013, rather than the funding target of 100%. Second, one of the technical corrections, referred to as asset smoothing, allows the use of asset averaging subject to certain limitations in the determination of funding requirements. TECO Energy utilizes asset smoothing in determining funding requirements.

In August 2014, the President signed into law HAFTA, which modified MAP-21. HAFTA and MAP-21 provide funding relief for pension plan sponsors by stabilizing discount rates used in calculating the required minimum pension contributions and increasing PBGC premium rates to be paid by plan sponsors. The company expects the required minimum pension contributions to be lower than the levels previously projected; however, the company plans on funding at levels above the required minimum pension contributions under HAFTA and MAP-21. In November 2015, the President signed into law the Bipartisan Budget Act of 2015, which extended pension funding relief of MAP-21 and HAFTA through 2022.

The qualified pension plan’s actuarial value of assets, including credit balance, was 120.1% of the Pension Protection Act funded target as of Jan. 1, 2015 and is estimated at 114.1% of the Pension Protection Act funded target as of Jan. 1, 2016.

The company’s policy is to fund the qualified pension plan at or above amounts determined by its actuaries to meet ERISA guidelines for minimum annual contributions and minimize PBGC premiums paid by the plan. The company made $55.0 million and $47.5 million of contributions to this plan in 2015 and 2014, respectively, which met the minimum funding requirements for both 2015 and 2014. These amounts are reflected in the “Other” line on the Consolidated Statements of Cash Flows. The company estimates its contribution in 2016 to be $37.4 million and expects to make contributions from 2017 to 2020 in the range of $12.2 to $44.6 million per year based on current assumptions. These contributions are in excess of the minimum required contribution under ERISA guidelines.

The company made contributions of $43.4 million and $1.2 million to the SERP in 2015 and 2014, respectively. The company’s contribution in October 2015 to the SERP’s trust was made 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 the current value of benefits that would become payable under the SERP to current participants. Since the SERP is fully funded, the company does not expect to make significant contributions to this plan in 2016.

The company funds its other postretirement benefits periodically to meet benefit obligations. The company’s contribution toward health care coverage for most employees who retired after the age of 55 between Jan. 1, 1990 and Jun. 30, 2001 is limited to a defined dollar benefit based on service. The company’s contribution toward pre-65 and post-65 health care coverage for most employees retiring on or after July 1, 2001 is limited to a defined dollar benefit based on an age and service schedule. In 2016, the company expects to make contributions of about $14.3 million. This includes $3.6 million that NMGC is required to fund to its trust in accordance with NMPRC requirements. Postretirement benefit levels are substantially unrelated to salary.

Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Expected Benefit Payments

(including projected service and net of employee contributions)

			Other
	Pension		Postretirement
(millions)	Benefits		Benefits
2016	$	77.8	$	11.5
2017		49.5		11.9
2018		52.7		12.5
2019		59.2		13.0
2020		54.9		13.3
2021-2025		299.1		68.6

Defined Contribution Plan

The company has a defined contribution savings plan covering substantially all employees of TECO Energy and its subsidiaries that enables participants to save a portion of their compensation up to the limits allowed by IRS guidelines. The company and its subsidiaries match up to 6% of the participant’s payroll savings deductions. Effective Jan. 1, 2015, employer matching contributions were 70% of eligible participant contributions with additional incentive match of up to 30% of eligible participant contributions based on the achievement of certain operating company financial goals. During the period from April 2013 to December 2014, employer matching contributions were 65% of eligible participant contributions with additional incentive match of up to 35% of eligible participant contributions based on the achievement of certain operating company financial goals. Prior to this, the employer matching contributions were 60% of eligible participant contributions, with an additional incentive match of up to 40%. For the years ended Dec. 31, 2015, 2014 and 2013, the company and its subsidiaries recognized expense totaling $11.1 million, $13.1 million and $11.3 million, respectively, related to the matching contributions made to this plan.

Tampa Electric Company [Member]

Employee Postretirement Benefits

5. Employee Postretirement Benefits

Pension Benefits

TEC is a participant in the comprehensive retirement plans of TECO Energy, including a qualified, non-contributory defined benefit retirement plan that covers substantially all employees. Benefits are based on the employees’ age, years of service and final average earnings. Where appropriate and reasonably determinable, the portion of expenses, income, gains or losses allocable to TEC are presented. Otherwise, such amounts presented reflect the amount allocable to all participants of the TECO Energy retirement plans.

Amounts disclosed for pension benefits in the following tables and discussion also include the fully-funded obligations for the SERP. This is a non-qualified, non-contributory defined benefit retirement plan available to certain members of senior management.

Other Postretirement Benefits

TECO Energy and its subsidiaries currently provide certain postretirement health care and life insurance benefits (Other Benefits) for most employees retiring after age 50 meeting certain service requirements. Where appropriate and reasonably determinable, the portion of expenses, income, gains or losses allocable to TEC are presented. Otherwise, such amounts presented reflect the amount allocable to all participants of the TECO Energy postretirement health care and life insurance plans. Postretirement benefit levels are substantially unrelated to salary. TECO Energy reserves the right to terminate or modify the plans in whole or in part at any time.

The FASB issued accounting guidance and disclosure requirements related to the MMA. The guidance requires (a) that the effects of the federal subsidy be considered an actuarial gain and recognized in the same manner as other actuarial gains and losses and (b) certain disclosures for employers that sponsor postretirement health care plans that provide prescription drug benefits.

In March 2010, the Patient Protection and Affordable Care Act and a companion bill, the Health Care and Education Reconciliation Act, collectively referred to as the Health Care Reform Acts, were signed into law. Among other things, both acts reduced the tax benefits available to an employer that receives the Medicare Part D subsidy, resulting in a write-off of any associated deferred tax asset. As a result, TEC reduced its deferred tax asset and recorded a corresponding regulatory asset in 2010. This amount was trued up in 2013. TEC is amortizing the regulatory asset over the remaining average service life at the time of 12 years. Additionally, the Health Care Reform Acts contain other provisions that may impact TECO Energy’s obligation for retiree medical benefits. In particular, the Health Care Reform Acts include a provision that imposes an excise tax on certain high-cost plans beginning in 2018, whereby premiums paid over a prescribed threshold will be taxed at a 40% rate. TECO Energy does not currently believe the excise tax or other provisions of the Health Care Reform Acts will materially increase its PBO. TECO Energy will continue to monitor and assess the impact of the Health Care Reform Acts, including any clarifying regulations issued to address how the provisions are to be implemented, on its future results of operations, cash flows or financial position.

Effective Jan. 1, 2013, the company implemented an EGWP for its post-65 retiree prescription drug plan. The EGWP is a private Medicare Part D plan designed to provide benefits that are at least equivalent to Medicare Part D. The EGWP reduces net periodic benefit cost by taking advantage of rebate and discount enhancements provided under the Health Care Reform Acts, which are greater than the subsidy payments previously received by the company under Medicare Part D for its post-65 retiree prescription drug plan.

Obligations and Funded Status

TEC recognizes in its statement of financial position the over-funded or under-funded status of its postretirement benefit plans. This status is measured as the difference between the fair value of plan assets and the PBO in the case of its defined benefit plan, or the APBO in the case of its other postretirement benefit plan. Changes in the funded status are reflected, net of estimated tax benefits, in benefit liabilities and regulatory assets. The results of operations are not impacted.

The following table provides a detail of the change in TECO Energy’s benefit obligations and change in plan assets for combined pension plans (pension benefits) and combined other postretirement benefit plans (other benefits).

TECO Energy	Pension Benefits						Other Benefits
Obligations and Funded Status
(millions)	2015			2014			2015			2014
Change in benefit obligation
Net benefit obligation at beginning of year	$	728.9		$	666.0		$	201.5		$	208.1
Service cost		20.9			18.3			2.2			2.5
Interest cost		30.3			32.0			8.2			10.8
Plan participants’ contributions		0.0			0.0			2.0			2.8
Plan amendments		0.0			0.0			(3.7	)		(23.2	)
Actuarial loss (gain)		5.8			48.3			(0.4	)		1.5
Benefits paid		(53.0	)		(39.9	)		(14.6	)		(16.0	)
Transfer in due to the effect of business combination		0.0			0.0			0.0			26.7
Plan curtailment		0.0			4.0			0.0			(11.7	)
Special termination benefit		0.0			0.2			0.0			0.0
Net benefit obligation at end of year	$	732.9		$	728.9		$	195.2		$	201.5

Change in plan assets
Fair value of plan assets at beginning of year	$	648.0		$	593.0		$	18.8		$	0.0
Actual return on plan assets		(25.5	)		46.4			(0.6	)		0.1
Employer contributions		55.0			47.5			1.5			(1.0	)
Employer direct benefit payments		0.9			1.0			13.5			16.0
Plan participants’ contributions		0.0			0.0			2.0			2.8
Transfer in due to acquisition		0.0			0.0			0.0			16.9
Benefits paid		(53.0	)		(39.9	)		(14.6	)		(16.0	)
Fair value of plan assets at end of year ⁽¹⁾	$	625.4		$	648.0		$	20.6			18.8

(1)	The MRV of plan assets is used as the basis for calculating the EROA component of periodic pension expense. MRV reflects the fair value of plan assets adjusted for experience gains and losses (i.e. the differences between actual investment returns and expected returns) spread over five years.

At Dec. 31, the aggregate financial position for TECO Energy pension plans and other postretirement plans with benefit obligations in excess of plan assets was as follows:

Funded Status	Pension Benefits						Other Benefits
(millions)	2015			2014			2015			2014
Benefit obligation (PBO/APBO)	$	732.9		$	728.9		$	195.2		$	201.5
Less: Fair value of plan assets		625.4			648.0			20.6			18.8
Funded status at end of year	$	(107.5	)	$	(80.9	)	$	(174.6	)	$	(182.7	)

The accumulated benefit obligation for TECO Energy consolidated defined benefit pension plans was $686.9 million at Dec. 31, 2015 and $685.0 million at Dec. 31, 2014.

The amounts recognized in TEC’s Consolidated Balance Sheets for pension and other postretirement benefit obligations, plan assets, and unrecognized costs at Dec. 31 were as follows:

Tampa Electric Company	Pension Benefits						Other Benefits
Amounts recognized in balance sheet
(millions)	2015			2014			2015			2014
Regulatory assets	$	208.2		$	167.4		$	30.2		$	20.4
Accrued benefit costs and other current liabilities		(0.6	)		(0.6	)		(9.2	)		(9.1	)
Deferred credits and other liabilities		(69.3	)		(53.5	)		(142.3	)		(137.1	)
	$	138.3		$	113.3		$	(121.3	)	$	(125.8	)

Unrecognized gains and losses and prior service credits and costs are recorded in regulatory assets for TEC. The following table provides a detail of the unrecognized gains and losses and prior service credits and costs.

Amounts recognized in regulatory assets	Pension Benefits					Other Benefits
(millions)	2015		2014			2015			2014
Net actuarial loss (gain)	$	208.2	$	167.7		$	47.2		$	39.5
Prior service cost (credit)		0.0		(0.3	)		(17.0	)		(19.1	)
Amount recognized	$	208.2	$	167.4		$	30.2		$	20.4

Assumptions used to determine benefit obligations at Dec. 31:

	Pension Benefits						Other Benefits
	2015			2014			2015			2014
Discount rate		4.688	%		4.258	%		4.669	%		4.211	%
Rate of compensation increase-weighted average		3.87	%		3.87	%		2.50	%		3.86	%
Healthcare cost trend rate
Immediate rate	n/a			n/a				7.05	%		7.09	%
Ultimate rate	n/a			n/a				4.50	%		4.57	%
Year rate reaches ultimate	n/a			n/a			2038			2025

A one-percentage-point change in assumed health care cost trend rates would have the following effect on TEC’s benefit obligation:

(millions)		1% Increase				1 % Decrease
Effect on postretirement benefit obligation		$	6.1			$	(5.2	)

Amounts recognized in Net Periodic Benefit Cost, OCI, and Regulatory Assets

TECO Energy	Pension Benefits									Other Benefits
	2015			2014			2013			2015			2014			2013
(millions)
Service cost	$	20.9		$	18.3		$	18.2		$	2.2		$	2.5		$	2.5
Interest cost		30.3			32.0			28.9			8.2			10.8			9.3
Expected return on plan assets		(43.3	)		(41.8	)		(38.4	)		(1.1	)		(0.3	)		0.0
Amortization of:
Actuarial loss		15.1			13.5			20.5			0.0			0.2			1.0
Prior service (benefit) cost		(0.2	)		(0.4	)		(0.4	)		(2.4	)		(0.2	)		(0.4	)
Curtailment loss (gain)		0.0			3.9			0.0			0.0			(0.2	)		0.0
Special termination benefit		0.0			0.2			0.0			0.0			0.0			0.0
Settlement loss		0.0			0.0			1.0			0.0			0.0			0.0
Net periodic benefit cost	$	22.8		$	25.7		$	29.8		$	6.9		$	12.8		$	12.4

New prior service cost	$	0.0		$	0.0		$	0.0		$	(3.7	)	$	(23.6	)	$	0.0
Net loss (gain) arising during the year		74.5			44.1			(75.7	)		1.3			(9.9	)		(15.6	)
Unrecognized costs in regulated asset acquired in business combination		0.0			0.0			0.0			0.0			6.4			0.0
Amounts recognized as component of net periodic benefit cost:
Amortization of actuarial gain (loss)		(15.1	)		(13.5	)		(21.5	)		0.0			(0.2	)		(1.0	)
Amortization of prior service (benefit) cost		0.2		0.4				0.4			2.4			0.2			0.3
Total recognized in OCI and regulatory assets	$	59.6		$	31.0		$	(96.8	)	$	0.0		$	(27.1	)	$	(16.3	)
Total recognized in net periodic benefit cost, OCI and regulatory assets	$	82.4		$	56.7		$	(67.0	)	$	6.9		$	(14.3	)	$	(3.9	)

TEC’s portion of the net periodic benefit costs for pension benefits was $13.5 million, $14.8 million and $21.7 million for 2015, 2014 and 2013, respectively. TEC’s portion of the net periodic benefit costs for other benefits was $5.7 million, $10.4 million and $10.0 million for 2015, 2014 and 2013, respectively.

The estimated net loss for the defined benefit pension plans that will be amortized by TEC from regulatory assets into net periodic benefit cost over the next fiscal year are $9.8 million. There will be an estimated $1.9 million prior service credit that will be amortized from regulatory assets into net periodic benefit cost over the next fiscal year for the other postretirement benefit plan.

Assumptions used to determine net periodic benefit cost for years ended Dec. 31:

	Pension Benefits									Other Benefits
	2015			2014 ⁽¹⁾			2013			2015			2014			2013
Discount rate		4.258	%	5.118%/4.277%/4.331%				4.196	%		4.211	%		5.096	%		4.180	%
Expected long-term return on plan assets		7.00	%	7.25%/7.00%/7.00%				7.50	%		5.75			5.75		n/a
Rate of compensation increase		3.87	%		3.73	%		3.76	%		3.86	%		3.71	%		3.74	%
Healthcare cost trend rate
Initial rate	n/a			n/a			n/a				7.09	%		7.25	%		7.50	%
Ultimate rate	n/a			n/a			n/a				4.57	%		4.50	%		4.50	%
Year rate reaches ultimate	n/a			n/a			n/a			2025			2025			2025
(1)TECO Energy performed a valuation as of Jan. 1, 2014. TECO remeasured its Retirement Plan on Sept. 2, 2014 for the acquisition of NMGC and on Oct. 31, 2014 for the expected curtailment of TECO Coal, resulting in the respective updated discount rates and EROAs.

The expected return on assets assumption was based on historical returns, fixed income spreads and equity premiums consistent with the portfolio and asset allocation. A change in asset allocations could have a significant impact on the expected return on assets. Additionally, expectations of long-term inflation, real growth in the economy and a provision for active management and expenses paid were incorporated in the assumption. For the year ended Dec. 31, 2015, TECO Energy’s pension plan’s assets decreased approximately 3.5%.

A one-percentage-point change in assumed health care cost trend rates would have the following effect on TEC’s expense:

(millions)		1% Increase				1% Decrease
Effect on periodic cost		$	0.2			$	(0.2	)

Pension Plan Assets

Pension plan assets (plan assets) are invested in a mix of equity and fixed income securities. TECO Energy’s investment objective is to obtain above-average returns while minimizing volatility of expected returns and funding requirements over the long term. TECO Energy’s strategy is to hire proven managers and allocate assets to reflect a mix of investment styles, emphasize preservation of principal to minimize the impact of declining markets, and stay fully invested except for cash to meet benefit payment obligations and plan expenses.

	Target Allocation		Actual Allocation, End of Year
Asset Category			2015			2014
Equity securities	47%-53%			53	%		50	%
Fixed income securities	47%-53%			47	%		50	%
Total		100%		100	%		100	%

TECO Energy reviews the plan’s asset allocation periodically and re-balances the investment mix to maximize asset returns, optimize the matching of investment yields with the plan’s expected benefit obligations, and minimize pension cost and funding. TECO Energy, Inc. expects to take additional steps to more closely match plan assets with plan liabilities.

Pension Plan Investments

(millions)	At Fair Value as of Dec. 31, 2015
	Level 1			Level 2			Level 3		Using NAV ⁽¹⁾		Total
Net cash
Cash	$	1.9		$	0.0		$	0.0	$	0.0	$	1.9
Accounts receivable		14.3			0.0			0.0		0.0		14.3
Accounts payable		(27.2	)		0.0			0.0		0.0		(27.2	)
Total net cash		(11.0	)		0.0			0.0		0.0		(11.0	)
Cash equivalents
Money markets		0.0			0.2			0.0		0.0		0.2
Discounted notes		0.0			0.7			0.0		0.0		0.7
Short-term investment funds (STIFs) ⁽¹⁾		0.0			0.0			0.0		12.4		12.4
Total cash equivalents		0.0			0.9			0.0		12.4		13.3
Equity securities
Common stocks		90.9			0.0			0.0		0.0		90.9
American depository receipts (ADRs)		5.7			0.0			0.0		0.0		5.7
Real estate investment trusts (REITs)		4.8			0.0			0.0		0.0		4.8
Commingled fund		0.0			53.7			0.0		0.0		53.7
Mutual funds ⁽¹⁾		0.0			0.0			0.0		175.6		175.6
Total equity securities		101.4			53.7			0.0		175.6		330.7
Fixed income securities
Municipal bonds		0.0			5.0			0.0		0.0		5.0
Government bonds		0.0			56.2			0.0		0.0		56.2
Corporate bonds		0.0			32.2			0.0		0.0		32.2
Asset backed securities (ABS)		0.0			0.3			0.0		0.0		0.3
Mortgage-backed securities (MBS), net short sales		0.0			8.7			0.0		0.0		8.7
Collateralized mortgage obligations (CMOs)		0.0			1.5			0.0		0.0		1.5
Commingled fund ⁽¹⁾		0.0			0.0			0.0		117.9		117.9
Mutual fund ⁽¹⁾		0.0			0.0			0.0		71.3		71.3
Total fixed income securities		0.0			103.9			0.0		189.2		293.1
Derivatives
Swaps		0.0			(0.9	)		0.0		0.0		(0.9	)
Purchased options (swaptions)		0.0			1.1			0.0		0.0		1.1
Written options (swaptions)		0.0			(1.0	)		0.0		0.0		(1.0	)
Total derivatives		0.0			(0.8	)		0.0		0.0		(0.8	)
Miscellaneous		0.0			0.1			0.0		0.0		0.1
Total	$	90.4		$	157.8		$	0.0	$	377.2	$	625.4

(1)

(millions)	At Fair Value as of Dec. 31, 2014
	Level 1			Level 2			Level 3		Using NAV ⁽¹⁾		Total
Net cash
Cash	$	0.4		$	0.0		$	0.0	$	0.0	$	0.4
Accounts receivable		1.4			0.0			0.0		0.0		1.4
Accounts payable		(5.3	)		0.0			0.0		0.0		(5.3	)
Total net cash		(3.5	)		0.0			0.0		0.0		(3.5	)
Cash equivalents
Treasury bills (T bills)		0.0			0.2			0.0		0.0		0.2
Discounted notes		0.0			8.8			0.0		0.0		8.8
Short-term investment funds (STIFs) ⁽¹⁾		0.0			0.0			0.0		7.6		7.6
Total cash equivalents		0.0			9.0			0.0		7.6		16.6
Equity securities
Common stocks		98.0			0.0			0.0		0.0		98.0
American depository receipts (ADRs)		1.3			0.0			0.0		0.0		1.3
Real estate investment trusts (REITs)		2.5			0.0			0.0		0.0		2.5
Preferred stock		0.8			0.0			0.0		0.0		0.8
Commingled fund		0.0			45.6			0.0		0.0		45.6
Mutual funds ⁽¹⁾		0.0			0.0			0.0		171.3		171.3
Total equity securities		102.6			45.6			0.0		171.3		319.5
Fixed income securities
Municipal bonds		0.0			6.1			0.0		0.0		6.1
Government bonds		0.0			47.9			0.0		0.0		47.9
Corporate bonds		0.0			22.0			0.0		0.0		22.0
Asset backed securities (ABS)		0.0			0.3			0.0		0.0		0.3
Mortgage-backed securities (MBS), net short sales		0.0			9.6			0.0		0.0		9.6
Collateralized mortgage obligations (CMOs)		0.0			2.0			0.0		0.0		2.0
Commingled fund ⁽¹⁾		0.0			0.0			0.0		129.20		129.2
Mutual fund ⁽¹⁾		0.0			0.0			0.0		98.6		98.6
Total fixed income securities		0.0			87.9			0.0		227.8		315.7
Derivatives
Short futures		0.0			(0.3	)		0.0		0.0		(0.3	)
Purchased options (swaptions)		0.0			0.7			0.0		0.0		0.7
Written options (swaptions)		0.0			(0.8	)		0.0		0.0		(0.8	)
Total derivatives		0.0			(0.4	)		0.0		0.0		(0.4	)
Miscellaneous		0.0			0.1			0.0		0.0		0.1
Total	$	99.1		$	142.2		$	0.0	$	406.7	$	648.0

(1)

The following list details the pricing inputs and methodologies used to value the investments in the pension plan:

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The primary pricing inputs in determining the fair value of the Level 1 assets are closing quoted prices in active markets.

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The money markets are valued at cost due to their short-term nature. Discounted notes are valued at amortized cost.

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Futures are valued using futures data, cash rate data, swap rates, and cash flow analyses.

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Swaps are valued using benchmark yields, swap curves, and cash flow analyses.

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Options are valued using the bid-ask spread and the last price.

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The primary pricing input in determining the fair value of the fixed asset mutual fund is its NAV. It is an unregistered open-ended mutual fund.

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Other Postretirement Benefit Plan Assets

There are no assets associated with TECO Energy’s other postretirement benefits plan. Asset amounts shown in the tables above relate to a separate NMGC other postretirement benefit plan.

Contributions

WRERA was signed into law on Dec. 23, 2008. WRERA grants plan sponsors relief from certain funding requirements and benefits restrictions, and also provides some technical corrections to the Pension Protection Act. There are two primary provisions that impact funding results for TECO Energy. First, for plans funded less than 100%, required shortfall contributions will be based on a percentage of the funding target until 2013, rather than the funding target of 100%. Second, one of the technical corrections, referred to as asset smoothing, allows the use of asset averaging subject to certain limitations in the determination of funding requirements. TECO Energy utilizes asset smoothing in determining funding requirements.

In August 2014, the President signed into law HAFTA, which modified MAP-21. HAFTA and MAP-21 provide funding relief for pension plan sponsors by stabilizing discount rates used in calculating the required minimum pension contributions and increasing PBGC premium rates to be paid by plan sponsors. TECO Energy expects the required minimum pension contributions to be lower than the levels previously projected; however, TECO Energy plans on funding at levels above the required minimum pension contributions under HAFTA and MAP-21. In November 2015, the President signed into law the Bipartisan Budget Act of 2015, which extended pension funding relief of MAP-21 and HAFTA through 2022.

TECO Energy’s policy is to fund the qualified pension plan at or above amounts determined by its actuaries to meet ERISA guidelines for minimum annual contributions and minimize PBGC premiums paid by the plan. TECO Energy made $55.0 million of contributions to this plan in 2015 and $47.5 million in 2014, which met the minimum funding requirements for both 2015 and 2014. TEC’s portion of the contribution in 2015 was $43.9 million and in 2014 was $38.2 million. These amounts are reflected in the “Other” line on the Consolidated Statements of Cash Flows. TECO Energy estimates its contribution in 2016 to be $37.4 million, with TEC’s portion being $30.9 million. TECO Energy estimates it will make annual contributions from 2017 to 2020 ranging from $12.2 to $44.6 million per year based on current assumptions, with TEC’s portion to range from $8.0 million to $35.0 million. These amounts are in excess of the minimum funding required under ERISA guidelines.

TECO Energy made contributions of $43.4 million and $1.2 million to the SERP in 2015 and 2014, respectively. TEC’s portion of the contributions in 2015 and 2014 were $14.9 million and $0.8 million, respectively. TECO Energy’s contribution in October 2015 to the SERP’s trust was made 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 the current value of benefits that would become payable under the SERP to current participants. Since the SERP is fully funded, TECO Energy does not expect to make significant contributions to this plan in 2016.

The other postretirement benefits are funded annually to meet benefit obligations. TECO Energy’s contribution toward health care coverage for most employees who retired after the age of 55 between Jan. 1, 1990 and Jun. 30, 2001 is limited to a defined dollar benefit based on service. TECO Energy’s contribution toward pre-65 and post-65 health care coverage for most employees retiring on or after July 1, 2001 is limited to a defined dollar benefit based on an age and service schedule. In 2016, TECO Energy expects to make a contribution of about $14.3 million. TEC’s portion of the expected contribution is $9.3 million. Postretirement benefit levels are substantially unrelated to salary.

Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Expected Benefit Payments—TECO Energy

(including projected service and net of employee contributions)			Other
	Pension		Postretirement
(millions)	Benefits		Benefits
2016	$	77.8	$	11.5
2017		49.5		11.9
2018		52.7		12.5
2019		59.2		13.0
2020		54.9		13.3
2021-2025		299.1		68.6

Defined Contribution Plan

TECO Energy has a defined contribution savings plan covering substantially all employees of TECO Energy and its subsidiaries that enables participants to save a portion of their compensation up to the limits allowed by IRS guidelines. TECO Energy and its subsidiaries match up to 6% of the participant’s payroll savings deductions. Effective Jan. 1, 2015, the employer matching contributions were 70% of eligible participant contributions with additional incentive match of up to 30% of eligible participant contributions based on the achievement of certain operating company financial goals. During the period from April 2013 to December 2014, employer matching contributions were 65% of eligible participant contributions with additional incentive match of up to 35% of eligible participant contributions based on the achievement of certain operating company financial goals. Prior to this, the employer matching contributions were 60% of eligible participant contributions with additional incentive match of up to 40%. For the years ended Dec. 31, 2015, 2014 and 2013, TECO Energy and its subsidiaries recognized expense totaling $11.1 million, $13.1 million and $11.3 million, respectively, related to the matching contributions made to this plan. TEC’s portion of expense totaled $7.5 million, $10.2 million and $9.1 million for 2015, 2014 and 2013, respectively.