Employee Postretirement Benefits

9 Months Ended

Sep. 30, 2016

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,	2016			2015			2016			2015
Components of net periodic benefit expense
Service cost	$	4.9		$	6.7		$	0.5		$	0.6
Interest cost		7.2			6.5			2.0			2.0
Expected return on assets		(11.5	)		(9.1	)		(0.3	)		(0.3	)
Amortization of:
Prior service (benefit) cost		0.0			(0.1	)		(0.6	)		(0.6	)
Actuarial loss		4.8			3.2			0.1			0.0
Regulatory asset		0.0			0.0			0.3			0.3
Curtailment cost		0.0			0.0			0.0			0.0
Settlement cost		0.0			0.0			0.0			0.0
Net pension expense recognized in the TECO Energy Consolidated Condensed Statements of Income	$	5.4		$	7.2		$	2.0		$	2.0
Nine months ended Sept. 30,
Components of net periodic benefit expense
Service cost	$	13.9		$	17.6		$	1.4		$	1.7
Interest cost		23.6			22.6			6.4			6.1
Expected return on assets		(34.2	)		(32.4	)		(0.9	)		(0.8	)
Amortization of:
Prior service (benefit) cost		0.2			(0.2	)		(1.9	)		(1.8	)
Actuarial loss		11.7			11.4			0.1			0.0
Regulatory asset		0.0			0.0			0.8			0.8
Curtailment cost		1.3			0.0			0.0			0.0
Settlement cost		0.6			0.0			0.0			0.0
Net pension expense recognized in the TECO Energy Consolidated Condensed Statements of Income	$	17.1		$	19.0		$	5.9		$	6.0

For the Jan. 1, 2016 measurement, TECO Energy used an assumed long-term EROA of 7.00% and a discount rate of 4.685% for pension benefits under its qualified pension plan. For the Jan. 1, 2016 measurement of TECO Energy’s other postretirement benefits, TECO Energy assumed a discount rate of 4.667% for the Florida-based plan and 4.687% for the NMGC plan.

As a result of the Merger, TECO Energy remeasured its employee postretirement benefit plans on the Merger effective date, July 1, 2016. As part of the remeasurement, TECO Energy used an above-mean yield curve to determine its discount rate. The above-mean yield curve technique matches the yields from high-quality (AA-rated, non-callable) corporate bonds to the company’s projected cash flows for the plans to develop a present value that is converted to a discount rate assumption, which is subject to change each year. TECO Energy previously used a bond model matching technique to determine its discount rate. The change in discount rate resulting from the different methodology used to select a discount rate did not have a material impact on the company’s financial statements and provides consistency with Emera’s method for selecting a discount rate. For the July 1, 2016 measurement, TECO Energy used an assumed long-term EROA of 7.00% and a discount rate of 3.72% for pension benefits under its qualified pension plan. For the July 1, 2016 measurement of TECO Energy’s other postretirement benefits, TECO Energy assumed a discount rate of 3.85%.

As a result of the remeasurement, TECO Energy’s net periodic benefit expense increased by $0.6 million for pension benefits and zero for other postretirement benefits for the three- and nine-months ended Sept. 30, 2016. TECO Energy’s liability for pension benefits increased by $61.7 million and $17.6 million for other postretirement benefits. The associated regulatory asset increased $54.0 million for pension benefits and $14.1 million for other postretirement benefits. Accumulated other comprehensive income decreased $7.7 million for pension benefits and $3.5 million for other postretirement benefits.

TECO Energy made contributions of $37.4 million and $55.0 million to its qualified pension plan for the nine months ended Sept. 30, 2016 and 2015, respectively. Additionally, NMGC made contributions of $2.7 million to its other postretirement benefits plan for the nine months ended Sept. 30, 2016 and 2015.

For the three and nine months ended Sept. 30, 2016, TECO Energy and its subsidiaries reclassified $0.8 million and $1.8 million, respectively, of pretax unamortized prior service benefit and actuarial losses from AOCI to net income as part of periodic benefit expense, compared with $0.2 million and $2.4 million for the three and nine months ended Sept. 30, 2015, respectively. In addition, during the three and nine months ended Sept. 30, 2016, the regulated companies reclassified $3.8 million and $9.1 million, respectively, of unamortized prior service benefit and actuarial losses from regulatory assets to net income as part of periodic benefit expense, compared with $2.6 million and $7.8 million for the three and nine months ended Sept. 30, 2015, respectively.

The settlement cost recognized relates to the settlement of the SERP liability for the TECO Coal participants. An estimated curtailment loss for the SERP of $1.3 million was recognized in the second quarter of 2016 as a result of retirements expected in the third quarter of 2016 as a result of the Merger, which expected retirements occurred in the third quarter of 2016.

The company’s postretirement benefit plans were not explicitly impacted by the Merger. However, TECO Energy expects to recognize a settlement charge related to the SERP of approximately $8.0 million in the first quarter of 2017 due to retirements that have occurred as a result of the Merger.

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 Notes to Consolidated Condensed Financial Statements. TEC’s portion of the net pension expense for the three months ended Sept. 30, 2016 and 2015, respectively, was $3.5 million and $3.3 million for pension benefits, and $1.7 million and $1.4 million for other postretirement benefits. TEC’s portion of the net pension expense for the nine months ended Sept. 30, 2016 and 2015, respectively, was $9.6 million and $10.1 million for pension benefits, and $4.7 million and $4.3 million for other postretirement benefits.

For the Jan. 1, 2016 measurement, TECO Energy assumed a long-term EROA of 7.00% and a discount rate of 4.685% for pension benefits under its qualified pension plan. For the Jan. 1, 2016 measurement of TECO Energy’s other postretirement benefits, TECO Energy used a discount rate of 4.667%.

As a result of the remeasurement, TEC’s net periodic benefit expense increased by $0.8 million for pension benefits and $0.3 million for other postretirement benefits for the three- and nine-months ended Sept. 30, 2016. TEC’s liability and associated regulatory asset for pension benefits increased $53.3 million and $12.4 million for other postretirement benefits.

TECO Energy made contributions of $37.4 million and $55.0 million to its qualified pension plan in the nine months ended Sept. 30, 2016 and 2015, respectively. TEC’s portion of the contributions was $30.9 million and $43.9 million, respectively.

Included in the benefit expenses discussed above, for the three and nine months ended Sept. 30, 2016, TEC reclassified $2.8 million and $7.6 million, respectively, of unamortized prior service benefit and actuarial losses from regulatory assets to net income, compared with $2.3 million and $7.0 million for the three and nine months ended Sept. 30, 2015, respectively.