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Pension and Postretirement Health and Life Benefits | 12 Months Ended
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Dec. 31, 2016
General Discussion of Pension and Other Postretirement Benefits [Abstract] |
Pension and Postretirement Health and Life Benefits | PENSION AND POSTRETIREMENT HEALTH AND LIFE BENEFITS There are approximately 5,000 employees and retirees covered by qualified defined benefit pension plans providing retirement benefits based on compensation and years of service, and approximately 4,000 employees, retirees and dependents covered by postretirement health and life benefit plans. DOE retained the obligation for postretirement health and life benefits for workers who retired prior to July 28, 1998. Pursuant to non-qualified supplemental pension plans, Centrus provides certain executive officers additional retirement benefits in excess of qualified plan limits imposed by tax law based on a targeted benefit objective. Employees hired on or after September 1, 2008 who are not covered by a collective bargaining agreement that provides for participation do not participate in a qualified defined benefit pension plan or postretirement health and life benefit plans. Changes in the projected benefit obligations and plan assets and the funded status of the plans follow (in millions):
| Defined Benefit Pension Plans |  | Postretirement Health and Life Benefit Plans
| Year Ended December 31, |  | Year Ended December 31,
| 2016 |  | 2015 |  | 2016 |  | 2015
Changes in Benefit Obligations: |  |  |  |  |  |  |
Obligations at beginning of period | $ | 832.8 |  |  | $ | 961.4 |  |  | $ | 203.5 |  |  | $ | 237.7 |
Actuarial (gains) losses, net | 19.1 |  |  | (55.2 | ) |  | (9.2 | ) |  | (30.2 | )
Service costs | 3.8 |  |  | 5.8 |  |  | — |  |  | 0.2 |
Interest costs | 35.4 |  |  | 36.9 |  |  | 8.2 |  |  | 8.8 |
Benefits paid | (60.9 | ) |  | (62.1 | ) |  | (13.3 | ) |  | (13.1 | )
Lump sum benefits paid | (12.2 | ) |  | (50.6 | ) |  | — |  |  | — |
Less federal subsidy on benefits paid | — |  |  | — |  |  | — |  |  | 0.1 |
Plan change | — |  |  | — |  |  | 3.6 |  |  | — |
Administrative expenses paid | (3.4 | ) |  | (3.4 | ) |  | — |  |  | — |
Obligations at end of period | 814.6 |  |  | 832.8 |  |  | 192.8 |  |  | 203.5 |
Changes in Plan Assets: |  |  |  |  |  |  |
Fair value of plan assets at beginning of period | 656.3 |  |  | 772.4 |  |  | 13.8 |  |  | 26.3 |
Actual return on plan assets | 50.2 |  |  | (8.0 | ) |  | 0.5 |  |  | 0.4 |
Company contributions | 4.1 |  |  | 8.0 |  |  | 6.7 |  |  | 0.2 |
Benefits paid | (60.9 | ) |  | (62.1 | ) |  | (13.3 | ) |  | (13.1 | )
Lump sum benefits paid | (12.2 | ) |  | (50.6 | ) |  | — |  |  | — |
Administrative expenses paid | (3.4 | ) |  | (3.4 | ) |  | — |  |  | — |
Fair value of plan assets at end of period | 634.1 |  |  | 656.3 |  |  | 7.7 |  |  | 13.8 |
(Unfunded) status at end of period | (180.5 | ) |  | (176.5 | ) |  | (185.1 | ) |  | (189.7 | )
Amounts recognized in assets and liabilities: |  |  |  |  |  |  |
Current liabilities | $ | (0.6 | ) |  | $ | (4.2 | ) |  | (13.8 | ) |  | (5.4 | )
Noncurrent liabilities | (179.9 | ) |  | (172.3 | ) |  | (171.3 | ) |  | (184.3 | )
| $ | (180.5 | ) |  | $ | (176.5 | ) |  | $ | (185.1 | ) |  | $ | (189.7 | )
Amounts in accumulated other comprehensive income (loss), pre-tax: |  |  |  |  |  |  |
Prior service cost (credit) | $ | — |  |  | $ | — |  |  | $ | (2.6 | ) |  | $ | (6.6 | )
Discount rate used to determine benefit obligations at end of period: | 4.1% |  | 4.5% |  | 3.9% |  | 4.2%
The current liabilities reflect expected contributions for benefit payments for the non-qualified plans and the postretirement health and life benefit plans in the following year. The discount rates above, rounded to the nearest 0.1%, are the estimated rates at which the benefit obligations could be effectively settled on the measurement date and are based on yields of high quality fixed income investments whose cash flows match the timing and amount of expected benefit payments of the plans. Plan assets and benefit obligations are remeasured each year as of the balance sheet date resulting in differences between actual and projected results for the year. These actuarial gains and losses are recognized in the statement of operations in the fourth quarter. In addition, an interim remeasurement and recognition of gains or losses may be required for a plan during the year when lump-sum payments exceed, or are expected to exceed, the sum of the service cost and interest cost components of the annual net periodic benefit cost for that plan for the current year. The defined benefit pension plans currently allow for a lump sum payment option to (a) active employees who are terminated as a result of company reductions in force and (b) periodically to terminated vested participants. The lump sum payment option was most recently extended through September 2019 to those terminated vested participants who have not yet begun receiving their benefits and have been terminated as a result of a reduction in force by the Company, or due to voluntary termination or involuntary termination, other than involuntary termination as a termination for cause. Projected benefit obligations are based on actuarial assumptions including possible future increases in compensation. Accumulated benefit obligations are based on actuarial assumptions but do not include possible future increases in compensation. Effective August 2013, accrued benefits under the defined benefit pension plans are fixed and no longer increase to reflect changes in compensation or company service. Therefore, the accumulated benefit obligation equaled the projected benefit obligation of $814.6 million as of December 31, 2016, and $832.8 million as of December 31, 2015. As of December 31, 2016, none of Centrus’ plans had fair value of plan assets in excess of accumulated benefit obligations. Components of Net Periodic Benefit Costs and Other Amounts Recognized in Other Comprehensive Loss (in millions)
| Defined Benefit Pension Plans |  | Postretirement Health and Life Benefit Plans
| Year Ended December 31, |  | Year Ended December 31,
| 2016 |  | 2015 |  | 2016 |  | 2015
Net Periodic Benefit Costs |  |  |  |  |  |  |
Service costs | $ | 3.8 |  |  | $ | 5.8 |  |  | $ | — |  |  | $ | 0.2 |
Interest costs | 35.4 |  |  | 36.9 |  |  | 8.2 |  |  | 8.8 |
Expected return on plan assets (gains) | (42.0 | ) |  | (47.4 | ) |  | (0.3 | ) |  | (0.8 | )
Actuarial (gains) losses, net | 10.9 |  |  | 0.2 |  |  | (9.5 | ) |  | (29.8 | )
Amortization of prior service costs (credits), net | — |  |  | — |  |  | (0.3 | ) |  | (0.3 | )
Net periodic benefit costs (credits) | $ | 8.1 |  |  | $ | (4.5 | ) |  | $ | (1.9 | ) |  | $ | (21.9 | )
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss) |  |  |  |  |  |  |
Net prior service costs (credits) | — |  |  | — |  |  | 3.6 |  |  | — |
Amortization of prior service (costs) credits, net | — |  |  | — |  |  | 0.3 |  |  | 0.3 |
Total (gain) loss recognized in other comprehensive income (loss), pre-tax | $ | — |  |  | $ | — |  |  | $ | 3.9 |  |  | $ | 0.3 |
Total recognized in net periodic benefit costs (income) and other comprehensive income (loss), pre-tax | $ | 8.1 |  |  | $ | (4.5 | ) |  | $ | 2.0 |  |  | $ | (21.6 | )
| Defined Benefit Pension Plans |  | Postretirement Health and Life Benefit Plans
| Year Ended December 31, |  | Year Ended December 31,
| 2016 |  | 2015 |  | 2016 |  | 2015
Assumptions used to determine net periodic benefit costs: |  |  |  |  |  |  |
Discount rate | 4.1% |  | 4.5% |  | 3.9% |  | 4.2%
Expected return on plan assets | 6.8% |  | 6.8% |  | 5.0% |  | 5.3%
Net periodic benefit costs include service and interest costs of providing pension benefits that are accrued over the years employees render service. Prior service costs or credits are amortized over the employees’ average remaining years of service from age 40 until the date of full benefit eligibility or the average expected future lifetime of all plan participants, as applicable. Participants in the postretirement health and life benefit plans are generally eligible for benefits at retirement after age 50 with 10 years of continuous credited service at the time of retirement. The expected return on plan assets is based on the weighted average of long-term return expectations for the composition of the plans’ equity and debt securities. Expected returns on equity securities are based on historical long-term returns of equity markets. Expected returns on debt securities are based on the current interest rate environment. Benefit obligations and prior service costs for the postretirement health and life benefit plans increased $3.6 million in 2016 as a result of a plan change increasing the stipend amount provided by Centrus to Medicare-eligible participants. Net periodic benefit costs and actuarial gains and losses are allocated to cost of sales for the LEU segment and to selling, general and administrative expense. Healthcare cost trend rates used to measure postretirement health benefit obligations follow:
| December 31,
| 2016 |  | 2015
Healthcare cost trend rate for the following year | 7% |  | 7.5%
Long-term rate that the healthcare cost trend rate gradually declines to | 5% |  | 5%
Year that the healthcare cost trend rate is expected to reach the long-term rate | 2021 |  | 2021
A one-percentage-point change in the assumed healthcare cost trend rates would have an effect on the postretirement health benefit obligation and costs of the Successor Company, as follows (in millions):
| One Percentage Point
| Increase |  | Decrease
Postretirement health benefit obligation | $ | 4.0 |  |  | $ | (3.8 | )
Net periodic benefit costs (service and interest cost components only) | $ | 0.3 |  |  | $ | (0.3 | )
Benefit Plan Assets Independent advisors manage investment assets of Centrus’ defined benefit pension plans and postretirement health and life benefit plans. Centrus has the fiduciary responsibility for reviewing performance of the various investment advisors. The investment policy of the plans is to maximize portfolio returns within reasonable and prudent levels of risk in order to meet projected liabilities and maintain sufficient cash to make timely payments of all participant benefits. Risk is reduced by diversifying plan assets in a broad mix of asset classes and by following a strategic asset allocation approach. Asset classes and target weights are adjusted periodically to optimize the long-term portfolio risk/return tradeoff, to provide liquidity for benefit payments, and to align portfolio risk with the underlying obligations. The investment policy of the plans prohibits the use of leverage, direct investments in tangible assets, or any investment prohibited by applicable laws or regulations. The allocation of plan assets between equity and debt securities and the target allocation range by asset category follows:
| December 31, |  |
| 2016 |  | 2015 |  | 2017 Target
Defined Benefit Pension Plans: |  |  |  |  |  |  |
Equity securities | 41 | % |  | 47 | % |  | 40 | - | 60%
Debt securities | 59 |  |  | 53 |  |  | 40 | - | 60
| 100 | % |  | 100 | % |  |  |  |
Postretirement Health and Life Benefit Plans: |  |  |  |  |  |  |
Equity securities | 100 | % |  | 64 | % |  | 85 | - | 100%
Debt securities | 0 |  |  | 36 |  |  | 0 | - | 15
| 100 | % |  | 100 | % |  |  |  |
Plan assets are measured at fair value. Following are the plan investments as of December 31, 2016, and December 31, 2015, categorized by the fair value hierarchy levels described in Note 10, Fair Value Measurements, (in millions):
| Defined Benefit Pension Plans
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015
U.S. government securities | $ | — |  |  | $ | — |  |  | $ | 84.7 |  |  | $ | 61.8 |  |  | $ | — |  |  | $ | — |  |  | $ | 84.7 |  |  | $ | 61.8 |
Corporate debt | — |  |  | — |  |  | 217.0 |  |  | 206.9 |  |  | — |  |  | — |  |  | 217.0 |  |  | 206.9 |
Municipal bonds | — |  |  | — |  |  | 6.2 |  |  | 6.8 |  |  | — |  |  | — |  |  | 6.2 |  |  | 6.8 |
Mortgage and asset backed securities | — |  |  | — |  |  | 5.4 |  |  | — |  |  | — |  |  | — |  |  | 5.4 |  |  | — |
Fair value of investments by hierarchy level | $ | — |  |  | $ | — |  |  | $ | 313.3 |  |  | $ | 275.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 313.3 |  |  | $ | 275.5 |
Investments measured at NAV (a) |  |  |  |  |  |  |  |  |  |  |  |  | 318.3 |  |  | 377.2 |
Accrued interest receivable |  |  |  |  |  |  |  |  |  |  |  |  | 3.5 |  |  | 3.5 |
Unsettled transactions |  |  |  |  |  |  |  |  |  |  |  |  | (1.0 | ) |  | 0.1 |
Plan assets |  |  |  |  |  |  |  |  |  |  |  |  | $ | 634.1 |  |  | $ | 656.3 |
| Postretirement Health and Life Benefit Plans
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015
Money market funds | $ | 0.2 |  |  | $ | 1.0 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 0.2 |  |  | $ | 1.0 |
Bond mutual funds | 7.5 |  |  | 4.0 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7.5 |  |  | 4.0 |
Equity mutual funds | — |  |  | 8.8 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 8.8 |
Fair value of investments by hierarchy level | $ | 7.7 |  |  | $ | 13.8 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 7.7 |  |  | $ | 13.8 |
(a) Equity, bond and money market investments held in collective trusts are valued based on the net asset value (“NAV”) provided by the administrator of the funds. The NAV for each fund is based on the underlying assets owned by the fund, less any expenses accrued against the fund, divided by the number of fund shares outstanding. While the underlying investments are traded on an exchange, the funds are not. Fair values for the collective trust investments are measured using the NAVs as a practical expedient and are not categorized in the fair value hierarchy. Level 1 assets consist of mutual funds and money market funds having a publicly available NAV. Level 2 assets include investments in U.S. government agency securities, corporate and municipal debt that are valued based on estimated prices using observable, market-based inputs. Benefit Plan Cash Flows Centrus expects to contribute $1.1 million to the qualified defined benefit pension plans, $0.6 million to the non-qualified defined benefit pension plans and $13.8 million to the postretirement health and life benefit plans in 2017. There is no required contribution for the postretirement health and life benefit plans under Employee Retirement Income Security Act (“ERISA”). Estimated future benefit plan payments follow (in millions):
| Defined Benefit Pension Plans |  | Postretirement Health and Life Benefit Plans
2017 | $ | 60.4 |  |  | $ | 21.5 |
2018 | 59.4 |  |  | 20.4 |
2019 | 58.0 |  |  | 19.0 |
2020 | 56.1 |  |  | 17.2 |
2021 | 55.0 |  |  | 15.8 |
2022 to 2026 | 258.9 |  |  | 61.3 |
Other Plans Centrus sponsors a 401(k) defined contribution plan for employees. Employee contributions are matched at established rates. Amounts contributed are invested in a range of investment options available to participants and the funds are administered by an independent trustee. Matching cash contributions by the Company amounted to $2.4 million in 2016 and $3.0 million in 2015. Under the Executive Deferred Compensation Plan, qualified employees may defer compensation on a tax-deferred basis subject to plan limitations. Any matching contributions under the Company’s 401(k) plan that are foregone due to annual compensation limitations of the Internal Revenue Code are eligible to be received from the Company under the Executive Deferred Compensation Plan, provided that the employee deferred the maximum allowable pre-tax contribution in the 401(k) plan. Centrus matching contributions amounted to less than $0.1 million in 2016 and 2015.

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