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Postretirement Health Care and Life Insurance Benefits | 12 Months Ended
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Dec. 31, 2021
Retirement Benefits [Abstract] |
Compensation and Employee Benefit Plans | Postretirement Health Care and Life Insurance BenefitsThe Company currently provides health care and life insurance benefits to qualifying salaried and hourly retirees of its current and certain former subsidiaries and their dependents from benefit plans established by the Company. Plan coverage for health benefits is provided to future hourly and salaried retirees in accordance with the applicable plan document. Life insurance benefits are provided to future hourly retirees in accordance with the applicable labor agreement. Net periodic postretirement benefit (benefit) cost included the following components:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (Dollars in millions)
Service cost for benefits earned | $ | 1.0 |  |  | $ | 3.8 |  |  | $ | 4.8 |
Interest cost on accumulated postretirement benefit obligation | 10.5 |  |  | 20.2 |  |  | 25.1 |
Expected return on plan assets | (1.0) |  |  | (1.5) |  |  | (0.5) |
Amortization of prior service credit | (46.4) |  |  | (17.3) |  |  | (8.7) |
Net actuarial (gain) loss | (54.5) |  |  | 16.5 |  |  | 78.3 |
Net periodic postretirement benefit (benefit) cost | $ | (90.4) |  |  | $ | 21.7 |  |  | $ | 99.0 |
The actuarial gain for all benefit plans in 2021 was primarily due to the increase in the discount rate used to measure the benefit obligation, favorable impact of claims experience for the year, and updating the mortality base table and improvement scale to those published by the Society of Actuaries considering the plan’s experience for participants receiving medical benefits under the UMWA Coal Act design. The actuarial loss for all benefit plans in 2020 was primarily due to the decrease in the discount rate used to measure the benefit obligation offset by the favorable impact of claims experience for the year and updating the mortality base tables and improvement scales to those published by the Society of Actuaries for all participants except those receiving medical benefits under the UMWA Coal Act design. The actuarial loss for all benefit plans in 2019 was primarily due to the decrease in the discount rate used to measure the benefit obligation and unfavorable medical claims experience for the year. The following includes pre-tax amounts recorded in “Accumulated other comprehensive income”:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (Dollars in millions)
Prior service credit arising during year | $ | (139.5) |  |  | $ | (185.4) |  |  | $ | — |
Amortization: |  |  |  |  |
Prior service credit | 46.4 |  |  | 17.3 |  |  | 8.7 |
Total recorded in “Accumulated other comprehensive income” | $ | (93.1) |  |  | $ | (168.1) |  |  | $ | 8.7 |
The Company amortizes prior service credit over an amortization period of the average remaining service period to full eligibility for participating employees at the time of the plan change or the expected lifetime of participants in the plan. Prior service credits established during 2021 and 2020 are described below. The estimated prior service credit that will be amortized from accumulated other comprehensive income into net periodic postretirement benefit cost during the year ending December 31, 2022 is $53.8 million. The following table sets forth the plans’ funded status reconciled with the amounts shown in the consolidated balance sheets:
| December 31,
| 2021 |  | 2020
| (Dollars in millions)
Change in benefit obligation: |  |  |
Accumulated postretirement benefit obligation at beginning of period | $ | 476.6 |  |  | $ | 659.9 |
Service cost | 1.0 |  |  | 3.8 |
Interest cost | 10.5 |  |  | 20.2 |
Participant contributions | 0.1 |  |  | 2.4 |
Plan amendments | (139.5) |  |  | (185.4) |
Benefits paid and administrative fees (net of Medicare Part D reimbursements) | (34.5) |  |  | (42.9) |
Actuarial (gain) loss | (55.5) |  |  | 18.6 |
Accumulated postretirement benefit obligation at end of period | 258.7 |  |  | 476.6 |
Change in plan assets: |  |  |
Fair value of plan assets at beginning of period | 33.7 |  |  | 34.2 |
Actual return on plan assets | — |  |  | 3.6 |
Employer contributions | 26.8 |  |  | 36.4 |
Participant contributions | 0.1 |  |  | 2.4 |
Benefits paid and administrative fees (net of Medicare Part D reimbursements) | (34.5) |  |  | (42.9) |
Fair value of plan assets at end of period | 26.1 |  |  | 33.7 |
Funded status at end of period | (232.6) |  |  | (442.9) |
Less: Current portion (included in “Accounts payable and accrued expenses”) | 20.5 |  |  | 29.7 |
Noncurrent obligation (included in “Accrued postretirement benefit costs”) | $ | (212.1) |  |  | $ | (413.2) |
In October 2021, the Company announced changes to its postretirement health care benefit plan for certain represented retirees. Effective January 1, 2022, the Company will no longer provide medical coverage to certain existing retirees but will continue to offer a life insurance benefit to eligible retirees. The impact of the changes on future benefits reduced the Company’s accumulated postretirement benefit obligation by $139.5 million. The reduction was attributable to the elimination of health care benefits for certain represented retirees. The reduction in liability was recorded with an offsetting balance in “Accumulated other comprehensive income” and is being amortized to earnings based upon the estimated remaining life expectancies of certain plan participants (14.2 years was the amortization period when it was established on October 1, 2021). In September 2020, the Company announced changes to its postretirement health care benefit plans for non-represented employees and retirees. Effective January 1, 2021, the Company no longer subsidizes medical costs for Medicare eligible individuals or provides life insurance to salaried and hourly non-union retirees. The Company provides non-Medicare eligible salaried and hourly non-union retirees and eligible dependents a health reimbursement arrangement. There were no changes to benefits for represented participants. The impact of the changes on future benefits reduced the Company’s accumulated postretirement benefit obligation by $185.4 million. The reduction was attributable to the elimination of health care benefits upon covered individuals’ attainment of Medicare eligibility and the elimination of life insurance benefits for certain non-represented participants. The reduction in liability was recorded with an offsetting balance in “Accumulated other comprehensive income.” The $174.5 million reduction for elimination of health care benefits upon attainment of Medicare eligibility for salaried and non-union hourly retirees and eligible dependents is being amortized to earnings over an average remaining service period to full eligibility for participating employees (3.9 years and 4.9 years were the remaining amortization periods at January 1, 2022 and 2021, respectively). The remaining $10.9 million for the elimination of life insurance benefits and elimination of health care benefits upon attainment of Medicare eligibility for select non-union retirees is being amortized to earnings over the average remaining life expectancy of the affected plan (9.5 years and 10.5 years were the remaining amortization periods at January 1, 2022 and 2021, respectively). A prior service credit established in December 2018 is being amortized to earnings over an average remaining service period to full eligibility for participating employees (2.9 years and 3.9 years were the remaining amortization periods at January 1, 2022 and 2021, respectively). The weighted-average assumptions used to determine the benefit obligations for the plans as of the end of each year were as follows:
| December 31,
| 2021 |  | 2020
Discount rate | 2.84 | % |  | 2.55 | %
Measurement date | December 31, 2021 |  | December 31, 2020
The weighted-average assumptions used to determine net periodic benefit (benefit) cost for the plans during each period were as follows:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Discount rate | 2.55 | % |  | 3.40 | % |  | 4.35 | %
Expected long-term return on plan assets (pre-tax) | 5.75 | % |  | 7.00 | % |  | 5.00 | %
Measurement date | December 31, 2020 |  | December 31, 2019 |  | December 31, 2018
The expected rate of return on plan assets is determined by taking into consideration expected long-term returns associated with each major asset class based on long-term historical ranges, inflation assumptions and the expected net value from active management of the assets based on actual results. The asset allocation of plan assets and long-term capital market expectations remain unchanged from December 31, 2020 therefore the Company’s expected pre-tax rate of return on plan assets will remain at 5.75% for 2022. The accumulated postretirement benefit obligation exceeded plan assets for all plans as of December 31, 2021 and 2020. The accumulated postretirement benefit obligation for all plans was $258.7 million and $476.6 million as of December 31, 2021 and 2020, respectively. The following presents information about the assumed health care cost trend rate:
| Year Ended December 31,
| 2021 |  | 2020
Pre-Medicare: |  |  |
Health care cost trend rate assumed for next year | 6.00 | % |  | 6.00 | %
Rate to which the cost trend is assumed to decline (the ultimate trend rate) | 4.75 | % |  | 4.75 | %
Year that the rate reaches the ultimate trend rate | 2027 |  | 2026
Post-Medicare: |  |  |
Health care cost trend rate assumed for next year | 5.75 | % |  | 5.75 | %
Rate to which the cost trend is assumed to decline (the ultimate trend rate) | 4.75 | % |  | 4.75 | %
Year that the rate reaches the ultimate trend rate | 2027 |  | 2026
Plan Assets The Company has established two Voluntary Employees Beneficiary Association (VEBA) trusts to pre-fund a portion of benefits for non-represented and represented retirees. Assets of the Peabody Investments Corp. Non-Represented Retiree VEBA Trust (the Non-Represented Trust) are invested in accordance with the investment policy established by the Peabody VEBA Retirement Committee after consultation with outside investment advisors and actuaries. As of December 31, 2021 and 2020, the asset allocation strategy for the Non-Represented Trust is 30% in equity and 70% in fixed income assets. The asset strategy may vary over time based on changes in the status of the Non-Represented Plan, the Company’s risk posture and other factors. In 2021 the Peabody Holding Company LLC Represented Retiree VEBA Trust (the Represented Trust) was terminated. At December 31, 2020 assets of the Represented Trust were invested in cash funds. A financial instrument’s level within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation techniques and inputs used for investments measured at fair value, including the general classification of such investments pursuant to the valuation hierarchy. U.S. equity securities. The Non-Represented Trust invests in U.S. equity securities for growth and diversification. Investment vehicles include various domestic large-cap publicly traded common stocks and mutual funds. All common stocks are traded on a national securities exchange and are valued at quoted market prices in active markets and accordingly classified within Level 1 of the valuation hierarchy. The mutual funds are traded on a national securities exchange in an active market, are valued using daily publicly quoted net asset value (NAV) prices and accordingly classified within Level 1 of the valuation hierarchy. International equity securities. The Non-Represented Trust invests in international equity securities for growth and diversification. Investment vehicles include various international publicly traded common stocks, exchange traded funds and mutual funds. All common stocks are traded on a national securities exchange and are valued at quoted market prices in active markets and accordingly classified within Level 1 of the valuation hierarchy. The exchange traded funds and mutual funds are traded on a national securities exchange in an active market, are valued using daily publicly quoted NAV prices and accordingly classified within Level 1 of the valuation hierarchy. Corporate bonds. The Non-Represented Trust invests in corporate bonds for diversification, volatility reduction of equity securities and to provide a hedge to interest rate movements affecting liabilities. Investment types are predominantly investment-grade corporate bonds. Fair value for these securities is provided by a third-party pricing service that utilizes various inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. Corporate bonds are classified within the Level 2 valuation hierarchy since fair value inputs are derived prices in active markets and the bonds are not traded on a national securities exchange. U.S. government securities. The Non-Represented Trust invests in U.S. government securities for diversification, volatility reduction of equity securities and to provide a hedge to interest rate movements affecting liabilities. Investment types are predominantly U.S. government bonds, notes, agency securities and municipal bonds. Fair value for these securities is provided by a third-party pricing service that utilizes various inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. If fair value is based on quoted prices in active markets and traded on a national securities exchange, U.S. government securities are classified within the Level 1 valuation hierarchy; otherwise, U.S. government securities are classified within the Level 2 valuation hierarchy. Cash funds. The Non-Represented and Represented Trusts invest in cash funds to manage liquidity resulting from payment of participant benefits and certain administrative fees. The investments consist of non-interest bearing cash funds and U.S. Government money market fund which are classified within the Level 1 valuation hierarchy. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. The following tables present the fair value of assets in the Non-Represented and Represented Trusts by asset category and by fair value hierarchy:
| December 31, 2021
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (Dollars in millions)
U.S. equity securities | $ | 5.7 |  |  | $ | — |  |  | $ | — |  |  | $ | 5.7 |
International equity securities | 2.0 |  |  | — |  |  | — |  |  | 2.0 |
Corporate bonds | — |  |  | 10.1 |  |  | — |  |  | 10.1 |
U.S. government securities | 3.1 |  |  | 3.8 |  |  | — |  |  | 6.9 |
Cash funds | 1.4 |  |  | — |  |  | — |  |  | 1.4 |
Total assets at fair value | $ | 12.2 |  |  | $ | 13.9 |  |  | $ | — |  |  | $ | 26.1 |
| December 31, 2020
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (Dollars in millions)
U.S. equity securities | $ | 10.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 10.5 |
International equity securities | 2.0 |  |  | — |  |  | — |  |  | 2.0 |
Corporate bonds | — |  |  | 9.6 |  |  | — |  |  | 9.6 |
U.S. government securities | 1.0 |  |  | 4.2 |  |  | — |  |  | 5.2 |
Cash funds | 6.4 |  |  | — |  |  | — |  |  | 6.4 |
Total assets at fair value | $ | 19.9 |  |  | $ | 13.8 |  |  | $ | — |  |  | $ | 33.7 |
Contributions Annual contributions to the Non-Represented and Represented Trusts are discretionary. During the year ended December 31, 2021, the Company made no contributions to either trust. Estimated Future Benefit Payments The following benefit payments (net of retiree contributions and Medicare Part D reimbursements), which reflect expected future service, as appropriate, are expected to be paid by the Company or satisfied from Non-Represented Trust assets:
| Postretirement Benefits
| (Dollars in millions)
2022 | $ | 28.9 |
2023 | 25.8 |
2024 | 24.3 |
2025 | 22.7 |
2026 | 20.8 |
Years 2027-2031 | 81.5 |

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- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 712 -URI http://asc.fasb.org/topic&trid=2197446 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 710 -URI http://asc.fasb.org/topic&trid=2127225 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 + Details
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