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Retirement and Other Benefit Plans | 12 Months Ended
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Sep. 30, 2016
Retirement Plans [Abstract] |
RETIREMENT PLANS |
12. | Retirement and Other Benefit Plans
Substantially all domestic employees were covered by a defined contribution pension plan maintained by the Company. Effective December 31, 2003, the Company’s defined benefit plan was frozen and no additional benefits have been accrued after that date. As a result, the accumulated benefit obligation and projected benefit obligation are equal. These frozen retirement income benefits are provided to employees under defined benefit pay-related and flat-dollar plans, which are noncontributory. The annual contributions to the defined benefit retirement plan equal or exceed the minimum funding requirements of the Employee Retirement Income Security Act. In addition to providing retirement income benefits, the Company provides unfunded postretirement health and life insurance benefits to certain retirees. To qualify, an employee must retire at age 55 or later and the employee’s age plus service must equal or exceed 75. Retiree contributions are defined as a percentage of medical premiums. Consequently, retiree contributions increase with increases in the medical premiums. The life insurance plans are noncontributory and provide coverage of a flat dollar amount for qualifying retired employees. Effective December 31, 2004, no new retirees were eligible for life insurance benefits. The Company uses a measurement date of September 30 for its pension and other postretirement benefit plans. The Company has an accrued benefit liability of $0.7 million and $0.9 million at September 30, 2016 and 2015, respectively, related to its other postretirement benefit obligations. All other information related to its postretirement benefit plans is not considered material to the Company’s results of operations or financial condition. The following tables provide a reconciliation of the changes in the pension plans and fair value of assets over the two-year period ended September 30, 2016, and a statement of the funded status as of September 30, 2016 and 2015:
(Dollars in millions) |  |  |  |  |
Reconciliation of benefit obligation |  | 2016 |  | 2015 |
Net benefit obligation at beginning of year |  | $ | 93.6 |  |  | 92.5 |
Interest cost |  |  | 3.9 |  |  | 3.8 |
Actuarial loss |  |  | 11.1 |  |  | 4.5 |
Gross benefits paid |  |  | (7.8) |  |  | (7.2) |
Settlements |  |  | (0.2) |  |  | – |
Net benefit obligation at end of year |  | $ | 100.6 |  |  | 93.6 |
(Dollars in millions) |  |  |  |  |
Reconciliation of fair value of plan assets |  | 2016 |  | 2015 |
Fair value of plan assets at beginning of year |  | $ | 63.0 |  |  | 73.0 |
Actual return on plan assets |  |  | 5.1 |  |  | (3.7) |
Employer contributions |  |  | 0.5 |  |  | 0.9 |
Gross benefits paid |  |  | (7.8) |  |  | (7.2) |
Settlements |  |  | (0.2) |  |  | – |
Fair value of plan assets at end of year |  | $ | 60.6 |  |  | 63.0 |
(Dollars in millions) |  |  |  |  |
Funded Status |  | 2016 |  | 2015 |
Funded status at end of year |  | $ | (40.0) |  |  | (30.6) |
Accrued benefit cost |  |  | (40.0) |  |  | (30.6) |
Amounts recognized in the Balance Sheet consist of: |  |  |  |  |  |  |
Current liability |  |  | (0.2) |  |  | (0.2) |
Noncurrent liability |  |  | (39.8) |  |  | (30.4) |
Accumulated other comprehensive (income)/loss (before tax effect) |  |  | 56.0 |  |  | 47.6 |
Amounts recognized in accumulated other comprehensive (income)/loss consist of: |  |  |  |  |  |  |
Net actuarial loss |  |  | 56.0 |  |  | 47.6 |
Accumulated other comprehensive (income)/loss (before tax effect) |  | $ | 56.0 |  |  | 47.6 |
The estimated amount that will be amortized from accumulated other comprehensive (income) loss into net periodic benefit cost (income) in 2017 is $2.5 million. The following table provides the components of net periodic benefit cost for the plans for 2016, 2015 and 2014:
(Dollars in millions) |  | 2016 |  | 2015 |  | 2014 |
Service cost |  | $ | – |  |  | – |  |  | – |
Interest cost |  |  | 3.9 |  |  | 3.8 |  |  | 4.0 |
Expected return on plan assets |  |  | (4.4) |  |  | (4.5) |  |  | (4.4) |
Net actuarial loss |  |  | 2.0 |  |  | 1.8 |  |  | 1.6 |
Settlement gain |  |  | – |  |  | – |  |  | – |
Net periodic benefit cost |  |  | 1.5 |  |  | 1.1 |  |  | 1.2 |
Defined contribution plans |  |  | 3.5 |  |  | 3.4 |  |  | 3.3 |
Total |  | $ | 5.0 |  |  | 4.5 |  |  | 4.5 |
The discount rate used in measuring the Company’s pension obligations was developed by matching yields of actual high-quality corporate bonds to expected future pension plan cash flows (benefit payments). Over 400 Aa-rated, non-callable bonds with a wide range of maturities were used in the analysis. After using the bond yields to determine the present value of the plan cash flows, a single representative rate that resulted in the same present value was developed. The expected long-term rate of return on plan assets assumption was determined by reviewing the actual investment return of the plans since inception and evaluating those returns in relation to expectations of various investment organizations to determine whether long-term future returns are expected to differ significantly from the past. The following weighted-average assumptions were used to determine the net periodic benefit cost for the pension plans:
|  | 2016 |  | 2015 |  | 2014 |
Discount rate |  |  | 4.25 | % |  | 4.25 | % |  | 4.75 | %
Rate of increase in compensation levels |  |  | N/A |  |  | N/A |  |  | N/A |
Expected long-term rate of return on assets |  |  | 6.75 | % |  | 6.75 | % |  | 7.00 | %
The following weighted-average assumptions were used to determine the net periodic benefit obligations for the pension plans:
|  | 2016 |  | 2015 |
Discount rate |  |  | 3.25 | % |  | 4.25 | %
Rate of increase in compensation levels |  |  | N/A |  |  | N/A |
The assumed rate of increase in compensation levels is not applicable in 2016, 2015 and 2014 as the plan was frozen in earlier years. The asset allocation for the Company’s pension plans at the end of 2016 and 2015, the Company’s acceptable range and the target allocation for 2017, by asset category, are as follows:
|  | Target |  |  |  |  | Percentage of Plan Assets |
|  | Allocation |  | Acceptable |  | at Year-end |
Asset Category |  | 2017 |  | Range |  | 2016 |  | 2015 |
Return seeking |  |  | 60 | % |  | 55-65 | % |  | 59 | % |  | 62 | %
Liability hedging |  |  | 40 | % |  | 35-45 | % |  | 38 | % |  | 37 | %
Cash/cash equivalents |  |  | – |  |  | 0-5 | % |  | 3 | % |  | 1 | %
The Company’s pension plan assets are managed by outside investment managers and assets are rebalanced when the target ranges are exceeded. Pension plan assets consist principally of funds which invest in marketable securities including common stocks, bonds, and interest-bearing deposits. The Company’s investment strategy with respect to pension assets is to achieve a total rate of return (income and capital appreciation) that is sufficient to accomplish the purpose of providing retirement benefits to all eligible and future retirees of the pension plan. The Company regularly monitors performance and compliance with investment guidelines. Fair Value of Financial Measurements The fair values of the Company’s defined benefit plan investments as of September 30, 2016 and 2015, by asset category, were as follows:
(Dollars in millions) |  | 2016 |  | 2015 |
Investments at fair value: |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1.6 |  |  | 0.8 |
Common and preferred stock funds: |  |  |  |  |  |  |
Domestic large capitalization |  |  | 8.9 |  |  | 9.9 |
Domestic small/mid capitalization |  |  | 2.7 |  |  | 3.3 |
International funds |  |  | 12.3 |  |  | 13.5 |
Fixed income funds |  |  | 30.6 |  |  | 31.1 |
Real estate investment funds |  |  | 4.5 |  |  | 4.4 |
Total investments at fair value |  | $ | 60.6 |  |  | 63.0 |
The following methods were used to estimate the fair value of each class of financial instrument: Cash and cash equivalents: The carrying value of cash represents fair value as it consists of actual currency. Investment Funds: The fair value of the investment funds, which offer daily redemptions, is determined based on the published net asset value of the funds as a practical expedient for fair value. Expected Cash Flows Information about the expected cash flows for the pension and other postretirement benefit plans follows:
|  | Pension |  | Other |
(Dollars in millions) |  | Benefits |  | Benefits |
Expected Employer Contributions — 2017 |  | $ | 2.9 |  |  | 0.1 |
Expected Benefit Payments: |  |  |  |  |  |  |
2017 |  |  | 4.8 |  |  | 0.1 |
2018 |  |  | 4.9 |  |  | 0.1 |
2019 |  |  | 5.1 |  |  | 0.1 |
2020 |  |  | 5.7 |  |  | 0.1 |
2021 |  |  | 5.4 |  |  | 0.1 |
2022-2026 |  | $ | 28.9 |  |  | 0.4 |

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