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EMPLOYEE BENEFIT PLANS EMPLOYEE BENEFIT PLANS (Notes)

12 Months Ended

Dec. 31, 2019

Retirement and Other Postretirement Benefit Plans

Retirement Plans - We have a defined benefit pension plan covering certain employees and former employees hired prior to January 1, 2005. Employees hired after December 31, 2004, and employees who accepted a one-time opportunity to opt out of our defined benefit pension plan historically were covered by our Profit Sharing Plan, which was merged into our 401(k) Plan as of December 31, 2018. In addition, we have a supplemental executive retirement plan for the benefit of certain officers. No new participants in our supplemental executive retirement plan have been approved since 2005, and effective January 2014, the plan was formally closed to new participants. We fund our retirement costs at a level needed to maintain or exceed the minimum funding levels required by the Employee Retirement Income Security Act of 1974, as amended, and the Pension Protection Act of 2006.

Other Postretirement Benefit Plans - We sponsor health and welfare plans that provide postretirement medical and life insurance benefits to employees hired prior to 2017 who retire with at least five years of full-time service. The postretirement medical plan for pre-Medicare participants is contributory with retiree contributions adjusted periodically and contains other cost-sharing features such as deductibles and coinsurance. The postretirement medical plan for Medicare-eligible participants is an account-based plan under which participants may elect to purchase private insurance policies under a private exchange and/or seek reimbursement of other eligible medical expenses.

Obligations and Funded Status - The following table sets forth our retirement and other postretirement benefit plans benefit obligations and fair value of plan assets for the periods indicated:



	Retirement Benefits						Other Postretirement Benefits
	December 31,						December 31,
	2019			2018			2019			2018
Change in benefit obligation	(Thousands of dollars)
Benefit obligation, beginning of period	$	466,994		$	481,615		$	46,840		$	57,938
Service cost	7,825			7,339			468			845
Interest cost	20,528			17,659			2,038			2,108
Plan participants’ contributions	—			—			1,142			1,050
Actuarial loss (gain)	55,954			(24,345		)	5,101			(10,233		)
Benefits paid	(16,452		)	(15,274		)	(3,280		)	(4,868		)
Benefit obligation, end of period	534,849			466,994			52,309			46,840

Change in plan assets
Fair value of plan assets, beginning of period	290,684			306,008			30,800			34,133
Actual return on plan assets	58,060			(12,350		)	8,087			(998		)
Employer contributions	14,500			12,300			2,000			1,100
Plan participants’ contributions	—			—			1,142			1,050
Benefits paid	(16,452		)	(15,274		)	(2,969		)	(4,485		)
Fair value of plan assets, end of period	346,792			290,684			39,060			30,800
Balance at December 31	$	(188,057	)	$	(176,310	)	$	(13,249	)	$	(16,040	)

Current liabilities	$	(4,616	)	$	(4,514	)	$	—		$	—
Noncurrent liabilities	(183,441		)	(171,796		)	(13,249		)	(16,040		)
Balance at December 31	$	(188,057	)	$	(176,310	)	$	(13,249	)	$	(16,040	)

The table above includes the supplemental executive retirement plan obligation. ONEOK has investments included in other assets on the Consolidated Balance Sheets, which totaled $98.9 million and $87.7 million at December 31, 2019 and 2018, respectively, for the purpose of funding the obligation. These assets are not assets of the supplemental executive retirement plan and are excluded from the table above.

The accumulated benefit obligation for our retirement plans was $498.8 million and $434.4 million at December 31, 2019 and 2018, respectively.

The actuarial gains and losses impacting our benefit obligations for our retirement and other postretirement benefit plans are due primarily to changes in the discount rate assumptions discussed in the “Actuarial Assumptions” section below.

Components of Net Periodic Benefit Cost - The following table sets forth the components of net periodic benefit cost for our retirement and other postretirement benefit plans for the periods indicated:



	Retirement Benefits									Other Postretirement Benefits
	Years Ended December 31,									Years Ended December 31,
	2019			2018			2017			2019			2018			2017
	(Thousands of dollars)
Components of net periodic benefit cost
Service cost	$	7,825		$	7,339		$	6,896		$	468		$	845		$	662
Interest cost	20,528			17,659			18,645			2,038			2,108			2,261
Expected return on plan assets	(23,600		)	(23,917		)	(21,376		)	(2,285		)	(2,690		)	(2,257		)
Amortization of prior service credit	—			—			—			(227		)	(1,662		)	(1,662		)
Amortization of net loss	12,649			17,060			13,586			297			1,338			1,679
Net periodic benefit cost	$	17,402		$	18,141		$	17,751		$	291		$	(61	)	$	683

Other Comprehensive Income (Loss) - The following table sets forth the amounts recognized in other comprehensive income (loss) related to our retirement and other postretirement benefits for the periods indicated:



	Retirement Benefits									Other Postretirement Benefits
	Years Ended December 31,									Years Ended December 31,
	2019			2018			2017			2019			2018			2017
	(Thousands of dollars)
Net gain (loss)	$	(25,389	)	$	(16,351	)	$	(16,572	)	$	700		$	6,545		$	(328	)
Prior service cost	(601		)	—			—			—			—			—
Amortization of prior service credit	—			—			—			(227		)	(1,662		)	(1,662		)
Amortization of net loss	12,649			17,060			13,586			297			1,338			1,679
Deferred income taxes (a)	3,068			(18,928		)	(960		)	(177		)	(2,831		)	82
Total recognized in other comprehensive income (loss)	$	(10,273	)	$	(18,219	)	$	(3,946	)	$	593		$	3,390		$	(229	)

(a) - Year ended December 31, 2018, includes the impact of adopting ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”

The table below sets forth the amounts in accumulated other comprehensive loss that had not yet been recognized as components of net periodic benefit expense for the periods indicated:



	Retirement Benefits						Other Postretirement Benefits
	December 31,						December 31,
	2019			2018			2019			2018
	(Thousands of dollars)
Prior service credit (cost)	$	(601	)	$	—		$	—		$	227
Accumulated loss	(172,952		)	(160,212		)	(4,110		)	(5,108		)
Accumulated other comprehensive loss	(173,553		)	(160,212		)	(4,110		)	(4,881		)
Deferred income taxes	46,354			43,286			1,389			1,567
Accumulated other comprehensive loss, net of tax	$	(127,199	)	$	(116,926	)	$	(2,721	)	$	(3,314	)

Actuarial Assumptions - The following table sets forth the weighted-average assumptions used to determine benefit obligations for retirement and other postretirement benefits for the periods indicated:



	Retirement Benefits		Other Postretirement Benefits
	December 31,		December 31,
	2019	2018	2019	2018
Discount rate	3.50%	4.50%	3.50%	4.50%
Compensation increase rate	3.70%	3.65%	NA	NA

The following table sets forth the weighted-average assumptions used to determine net periodic benefit costs for the periods indicated:



	Years Ended December 31,
	2019	2018	2017
Discount rate - retirement plans	4.50%	3.75%	4.50%
Discount rate - other postretirement plans	4.50%	3.75%	4.25%
Expected long-term return on plan assets	7.50%	8.00%	7.75%
Compensation increase rate	3.65%	3.00%	3.10%

We determine our overall expected long-term rate of return on plan assets based on our review of historical returns and economic growth models.

We determine our discount rates annually utilizing portfolios of high quality bonds matched to the estimated benefit cash flows of our retirement and other postretirement benefit plans. Bonds selected to be included in the portfolios are only those rated by S&P or Moody’s as an AA or Aa2 rating or better and exclude callable bonds, bonds with less than a minimum issue size, yield outliers and other filtering criteria to remove unsuitable bonds.

Health Care Cost Trend Rates - The following table sets forth the assumed health care cost-trend rates for the periods indicated:



	2019	2018
Health care cost-trend rate assumed for next year	7.00%	6.50%
Rate to which the cost-trend rate is assumed to decline (the ultimate trend rate)	5.00%	5.00%
Year that the rate reaches the ultimate trend rate	2024	2022

Plan Assets - Our investment strategy is to invest plan assets in accordance with sound investment practices that emphasize long-term fundamentals. The goal of this strategy is to maximize investment returns while managing risk in order to meet the plan’s current and projected financial obligations. The investment policy for our defined benefit pension plan follows a glide path approach toward liability-driven investing that shifts a higher portfolio weighting to fixed income as the plan’s funded status increases. The purpose of liability-driven investing is to structure the asset portfolio to more closely resemble the pension liability and thereby more effectively hedge against changes in the liability. The plan’s current investments include a diverse blend of various domestic and international equities, investments in various classes of debt securities, real estate and hedge funds. The target allocation for the assets of our retirement plan as of December 31, 2019, is as follows:



Domestic and international equities	42	%
Long duration fixed income	30	%
Return-seeking credit	11	%
Hedge funds	10	%
Real estate funds	7	%
Total	100	%

As part of our risk management for the plans, minimums and maximums have been set for each of the asset classes listed above.

The following tables set forth the plan assets by fair value category as of the measurement date for our defined benefit pension and other postretirement benefit plans:



	Pension Benefits
	December 31, 2019
Asset Category	Level 1		Level 2		Level 3		Subtotal		Measured at NAV (d)		Total
	(Thousands of dollars)
Investments:
Equity securities (a)	$	47	$	—	$	—	$	47	$	149,985	$	150,032
Real estate funds	—		—		—		—		23,885		23,885
Government obligations	—		—		—		—		50,708		50,708
Corporate obligations (b)	—		—		—		—		85,898		85,898
Common/collective trusts	—		3,263		—		3,263		—		3,263
Cash	63		—		—		63		—		63
Other investments (c)	—		—		—		—		32,943		32,943
Fair value of plan assets	$	110	$	3,263	$	—	$	3,373	$	343,419	$	346,792

(a) - This category represents securities of the respective market sector from diverse industries.

(b) - This category represents bonds from diverse industries.

(c) - This category represents alternative investments in limited partnerships, which can be redeemed with a 30-day notice with no further restrictions. There are no unfunded capital commitments.

(d) - Plan asset investments measured at fair value using the net asset value per share.



	Pension Benefits
	December 31, 2018
Asset Category	Level 1		Level 2		Level 3		Subtotal		Measured at NAV (d)		Total
	(Thousands of dollars)
Investments:
Equity securities (a)	$	58	$	—	$	—	$	58	$	116,790	$	116,848
Real estate funds	—		—		—		—		20,569		20,569
Government obligations	—		—		—		—		48,913		48,913
Corporate obligations (b)	—		—		—		—		69,377		69,377
Common/collective trusts	—		3,961		—		3,961		—		3,961
Cash	95		—		—		95		—		95
Other investments (c)	—		—		—		—		30,921		30,921
Fair value of plan assets	$	153	$	3,961	$	—	$	4,114	$	286,570	$	290,684

(a) - This category represents securities of the respective market sector from diverse industries.

(b) - This category represents bonds from diverse industries.

(c) - This category represents alternative investments in limited partnerships, which can be redeemed with a 30-day notice with no further restrictions. There are no unfunded capital commitments.

(d) - Plan asset investments measured at fair value using the net asset value per share.



	Other Postretirement Benefits
	December 31, 2019
Asset Category	Level 1		Level 2		Level 3		Total
	(Thousands of dollars)
Investments:
Equity securities (a)	$	2,043	$	—	$	—	$	2,043
Money market funds	—		2,428		—		2,428
Insurance and group annuity contracts	—		34,589		—		34,589
Fair value of plan assets	$	2,043	$	37,017	$	—	$	39,060

(a) - This category represents securities of the respective market sector from diverse industries.



	Other Postretirement Benefits
	December 31, 2018
Asset Category	Level 1		Level 2		Level 3		Total
	(Thousands of dollars)
Investments:
Equity securities (a)	$	1,792	$	—	$	—	$	1,792
Money market funds	1		413		—		414
Insurance and group annuity contracts	—		28,594		—		28,594
Fair value of plan assets	$	1,793	$	29,007	$	—	$	30,800

(a) - This category represents securities of the respective market sector from diverse industries.

Contributions - During 2019, we made $14.5 million in contributions to our defined benefit pension plan and $2.0 million in contributions to our other postretirement benefit plans. We contributed $12.1 million to our defined benefit pension plan in January 2020 and expect to make $2.0 million in contributions to our other postretirement plans in the remainder of 2020.

Pension and Other Postretirement Benefit Payments - Benefit payments for our defined benefit pension and other postretirement benefit plans for the period ending December 31, 2019, were $16.5 million and $3.3 million, respectively. The following table sets forth the defined benefit pension and other postretirement benefits payments expected to be paid in 2020 through 2029:



	Pension Benefits		Other Postretirement Benefits
Benefits to be paid in:	(Thousands of dollars)
2020	$	18,277	$	3,422
2021	$	19,252	$	3,399
2022	$	20,202	$	3,519
2023	$	21,170	$	3,454
2024	$	22,228	$	3,446
2025 through 2029	$	123,959	$	16,385

The expected benefits to be paid are based on the same assumptions used to measure our benefit obligation at December 31, 2019, and include estimated future employee service.

Other Employee Benefit Plans

401(k) Plan - We have a 401(k) Plan covering all employees, and employee contributions are discretionary. We historically maintained a profit-sharing plan for all employees hired after December 31, 2004, which was merged into our 401(k) Plan as of December 31, 2018, and ceased to exist as a separate plan. We match 100% of employee 401(k) contributions up to 6% of each participant’s eligible compensation, subject to certain limits, and generally make a quarterly profit sharing contribution equal to 1% of each profit-sharing participant’s eligible compensation during the quarter and an annual discretionary profit-sharing contribution. Our contributions made to the plan, including profit-sharing contributions, were $30.4 million, $28 million and $21.1 million in 2019, 2018 and 2017, respectively.

Nonqualified Deferred Compensation Plan - The 2019 Nonqualified Deferred Compensation Plan and its predecessor nonqualified deferred compensation plans (collectively, the NQDC Plan) provide select employees, as approved by our Chief Executive Officer, with the option to defer portions of their compensation and provide nonqualified deferred compensation benefits that are not available due to limitations on employer and employee contributions to qualified defined contribution plans under the federal tax laws. The NQDC Plan also provides benefits in excess of applicable tax limits for certain participants in the defined benefit pension plan who are not participants in the supplemental executive retirement plan. Our contributions to the plan were not material in 2019, 2018 and 2017.