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Note 12 - Employee Benefit Plans
 12 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Retirement Benefits [Text Block]

12.

EMPLOYEE BENEFIT PLANS

 

The Company sponsors both a noncontributory pension plan and a postretirement plan. The pension plan covers all employees hired prior to January 2017 and benefits fully vest after 5 years of credited service. Benefits paid to retirees are based on age at retirement, years of service and average compensation. Effective January 1, 2017, a "soft freeze" to the pension plan was implemented, and employees hired on or after that date are no longer eligible to participate. Commensurate with the "soft freeze" in the pension plan, the Company amended its 401(k) Plan, allowing management to authorize a discretionary contribution to the 401(k) account for those employees hired on or after January 1, 2017. The amount, if any, of this discretionary contribution would be determined each year and would be applied to the eligible employees in the following calendar year. This Company contribution would be in addition to any employee elected deferrals and employer match as provided for under the 401(k) Plan.

 

The postretirement plan provides certain health care, supplemental retirement and life insurance benefits to retired employees who meet specific age and service requirements. Employees hired prior to January 1, 2000 are eligible to participate in the postretirement plan. Employees must have a minimum of 10 years of service and retire after attaining the age of 55 in order to vest in the postretirement plan. Retiree contributions to the plan are based on the number of years of service to the Company as determined under the pension plan.

 

Employers who sponsor defined benefit plans must recognize the funded status of defined benefit pension and other postretirement plans as an asset or liability in their statements of financial position and recognize changes in that funded status in the year in which the changes occur through comprehensive income. For pension plans, the benefit obligation is the projected benefit obligation, and for other postretirement plans, the benefit obligation is the accumulated benefit obligation. The Company established a regulatory asset for the portion of the obligation expected to be recovered through rates in future periods. The regulatory asset is adjusted for the recognition of actuarial gains and losses. The portion of the obligation attributable to the unregulated operations of the holding company is recognized in other comprehensive income, with actuarial gains and losses recognized using the corridor method.

 

The following table sets forth the benefit obligation, fair value of plan assets, the funded status of the plans, and amounts recognized in the Company’s consolidated financial statements:

 

  

Pension Plan

  

Postretirement Plan

 
  

2024

  

2023

  

2024

  

2023

 

Accumulated benefit obligation

 $26,859,162  $24,449,856  $10,842,455  $11,248,448 

Change in benefit obligation:

                

Benefit obligation at beginning of year

 $26,747,624  $27,268,456  $11,248,448  $12,416,546 

Service cost

  324,265   366,537   30,398   45,897 

Interest cost

  1,468,822   1,372,098   613,477   620,622 

Actuarial loss (gain)

  2,613,621   (1,031,160)  (540,914)  (1,331,541)

Benefit payments, net of retiree contributions

  (1,280,904)  (1,228,307)  (508,954)  (503,076)

Benefit obligation at end of year

 $29,873,428  $26,747,624  $10,842,455  $11,248,448 

Change in fair value of plan assets:

                

Fair value of plan assets at beginning of year

 $26,878,661  $28,017,797  $13,019,313  $12,138,119 

Actual return on plan assets, net of taxes

  5,456,381   89,171   2,567,922   1,384,270 

Employer contributions

  —   —   —   — 

Benefit payments, net of retiree contributions

  (1,280,904)  (1,228,307)  (508,954)  (503,076)

Fair value of plan assets at end of year

 $31,054,138  $26,878,661  $15,078,281  $13,019,313 

Funded status

 $1,180,710  $131,037  $4,235,826  $1,770,865 

Amounts recognized in the consolidated balance sheet consist of:

                

Benefit plan assets under other non-current assets

 $1,180,710  $131,037  $4,235,826  $1,770,865 

Benefit plan liabilities under deferred credits and other non-current liabilities

  —   —   —   — 
                 

Amounts recognized in accumulated other comprehensive income:

                

Net actuarial loss (gain), net of tax

 $432,149  $1,168,687  $(227,071) $6,946 

Total amounts included in accumulated other comprehensive income, net of tax

 $432,149  $1,168,687  $(227,071) $6,946 

Amounts deferred to a regulatory asset (liability):

                

Net actuarial loss (gain)

 $3,041,666  $4,029,282  $(4,032,929) $(1,813,071)

Amounts recognized as regulatory assets (liabilities)

 $3,041,666  $4,029,282  $(4,032,929) $(1,813,071)

 

The Company expects that approximately $41,000, before tax, of AOCI will be recognized in net periodic benefit costs in fiscal 2025 and approximately $43,000 of amounts deferred as regulatory assets and approximately $174,000 of amounts deferred as regulatory liabilities will be amortized and recognized in net periodic benefit costs in fiscal 2025.

 

The changes in the benefit obligations for both the pension plan and postretirement plan was primarily attributed to actuarial gains and losses associated with the discount rate used to calculate the benefit obligations.

 

The following table details the actuarial assumptions used in determining the projected benefit obligations and net benefit cost of the pension plan and the accumulated benefit obligations and net benefit cost of the postretirement plan:

 

  

Pension Plan

  

Postretirement Plan

 
  

2024

  

2023

  

2024

  

2023

 

Assumptions used to determine benefit obligations:

                

Discount rate

  4.83%  5.63%  4.83%  5.63%

Expected rate of compensation increase

  4.00%  4.00%  N/A   N/A 

Assumptions used to determine benefit costs:

                

Discount rate

  5.63%  5.15%  5.63%  5.16%

Expected long-term rate of return on plan assets

  4.50%  4.50%  4.21%  3.95%

Expected rate of compensation increase

  4.00%  4.00%  N/A   N/A 

 

To develop the expected long-term rate of return on plan assets assumption, the Company, with input from the Plans' actuaries and investment advisors, considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of each plan’s portfolio.

 

Components of net periodic benefit cost are as follows:

 

  

Pension Plan

  

Postretirement Plan

 
  

2024

  

2023

  

2024

  

2023

 

Service cost

 $324,265  $366,537  $30,398  $45,897 

Interest cost

  1,468,822   1,372,098   613,477   620,622 

Expected return on plan assets

  (1,179,830)  (1,232,597)  (533,249)  (464,046)

Recognized loss (gain)

  316,522   316,724   (40,597)  — 

Net periodic benefit cost

 $929,779  $822,762  $70,029  $202,473 

 

Service cost is included in operations and maintenance expense in the consolidated statements of income. All other components of net periodic benefit costs are included in other income, net in the consolidated statements of income.

 

The assumed health care cost trend rates used in measuring the accumulated benefit obligation for the postretirement plan are presented below:

 

  

Pre 65

  

Post 65

 
  

2024

  

2023

  

2024

  

2023

 

Health care cost trend rate assumed for next year

  7.00%  6.30%  5.60%  5.20%

Rate to which the cost trend is assumed to decline (the ultimate trend rate)

  4.00%  3.94%  4.00%  3.94%

Year that the rate reaches the ultimate trend rate

 

2075

  

2075

  

2075

  

2075

 

 

The health care cost trend rate assumptions could have a significant effect on the amounts reported. A change of 1% would have the following effects: 

 

  

1% Increase

  

1% Decrease

 

Effect on total service and interest cost components

 $71,000  $(61,000)

Effect on accumulated postretirement benefit obligation

  1,204,000   (1,031,000)

 

The primary objectives of both plans' investment policies are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the corresponding actuarial assumptions and will provide for future benefits. The Company's pension plan allocation approach seeks to match the duration of the fixed income portion of the portfolio with the duration of the plan's liabilities. Such allocation is designed to reduce the overall volatility in the pension plan relative to the funded status. The equity allocations in both plans provide for potential returns to offset growth in the corresponding liabilities.

 

Based on its most recent evaluation of returns for the asset classes within each plan's investment portfolio, the Company set the expected long-term rate of return for both the pension plan and the postretirement plan for fiscal 2025 at 4.95%.

 

The Company’s ultimate target and actual asset allocation in the pension and postretirement plans as of September 30, 2024 and 2023 were: 

 

  

Pension Plan

  

Postretirement Plan

 
  

Target

  

2024

  

2023

  

Target

  

2024

  

2023

 

Asset category:

                        

Equity securities

  25%  25%  27%  30%  48%  43%

Debt securities

  75%  75%  72%  70%  36%  37%

Cash

  —%  —%  1%  —%  16%  20%

 

The Company uses the fair value hierarchy described in Note 1 to classify these assets. The mutual funds are included under Level 1 in the fair value hierarchy as their fair values are based on quoted net asset values of the shares held in the investments in the plans.  The bond funds are included under Level 2 as these investments have observable Level 2 pricing inputs, including quoted prices for similar assets in active or non-active markets. While the underlying asset values are quoted prices, the net asset value of a unit in these funds is not publicly quoted.  The following tables contain the fair value classifications of the plans' assets:

 

      

Pension Plan

 
      

Fair Value Measurements - September 30, 2024

 
  

Fair Value

  

Level 1

  

Level 2

  

Level 3

 

Asset Class:

                

Cash

 $142,921  $142,921  $—  $— 

Common and Collective Trust and Pooled Funds:

                

Bond Funds

  19,505,237   —   19,505,237   — 

Mutual Funds:

                

Domestic Fixed Income

  3,791,697   3,791,697   —   — 

Equities

                

Domestic Large Cap Growth

  2,073,092   2,073,092   —   — 

Domestic Large Cap Value

  2,469,045   2,469,045   —   — 

Domestic Small/Mid Cap Core

  1,297,579   1,297,579   —   — 

Foreign Large Cap Growth

  498,732   498,732   —   — 

Foreign Large Cap Value

  482,222   482,222   —   — 

Foreign Large Cap Core

  793,613   793,613   —   — 

Total

 $31,054,138  $11,548,901  $19,505,237  $— 

 

      

Pension Plan

 
      

Fair Value Measurements - September 30, 2023

 
  

Fair Value

  

Level 1

  

Level 2

  

Level 3

 

Asset Class:

                

Cash

 $202,218  $202,218  $—  $— 

Common and Collective Trust and Pooled Funds:

                

Bond Funds

  16,446,813   —   16,446,813   — 

Mutual Funds:

                

Domestic Fixed Income

  3,000,525   3,000,525   —   — 

Equities

                

Domestic Large Cap Growth

  2,256,767   2,256,767   —   — 

Domestic Large Cap Value

  2,222,733   2,222,733   —   — 

Domestic Small/Mid Cap Core

  1,082,801   1,082,801   —   — 

Foreign Large Cap Growth

  481,309   481,309   —   — 

Foreign Large Cap Value

  463,907   463,907   —   — 

Foreign Large Cap Core

  721,588   721,588   —   — 

Total

 $26,878,661  $10,431,848  $16,446,813  $— 

 

      

Postretirement Plan

 
      

Fair Value Measurements - September 30, 2024

 
  

Fair Value

  

Level 1

  

Level 2

  

Level 3

 

Asset Class:

                

Cash

 $2,381,909  $2,381,909  $—  $— 

Mutual Funds:

                

Bonds

                

Domestic Fixed Income

  5,457,976   5,457,976   —   — 

Equities

                

Domestic Large Cap Growth

  2,412,824   2,412,824   —   — 

Domestic Large Cap Value

  1,996,262   1,996,262   —   — 

Domestic Small/Mid Cap Core

  738,393   738,393   —   — 

Foreign Large Cap Growth

  532,391   532,391   —   — 

Foreign Large Cap Value

  652,023   652,023   —   — 

Foreign Large Cap Core

  906,503   906,503   —   — 

Total

 $15,078,281  $15,078,281  $—  $— 

 

      

Postretirement Plan

 
      

Fair Value Measurements - September 30, 2023

 
  

Fair Value

  

Level 1

  

Level 2

  

Level 3

 

Asset Class:

                

Cash

 $2,640,622  $2,640,622  $—  $— 

Mutual Funds:

                

Bonds

                

Domestic Fixed Income

  4,841,048   4,841,048   —   — 

Foreign Fixed Income

  —   —   —   — 

Equities

                

Domestic Large Cap Growth

  1,693,422   1,693,422   —   — 

Domestic Large Cap Value

  1,570,538   1,570,538   —   — 

Domestic Small/Mid Cap Growth

  —   —   —   — 

Domestic Small/Mid Cap Value

  —   —   —   — 

Domestic Small/Mid Cap Core

  588,898   588,898   —   — 

Foreign Large Cap Growth

  433,886   433,886   —   — 

Foreign Large Cap Value

  526,364   526,364   —   — 

Foreign Large Cap Core

  724,535   724,535   —   — 

Total

 $13,019,313  $13,019,313  $—  $— 

 

Each mutual fund or common collective trust fund has been categorized based on its primary investment strategy.

 

Annual funding contributions to the pension plan and postretirement plan are made under advisement from the Company's actuaries and investment advisor based upon ERISA funding requirements. For the years ended September 30, 2024 and 2023, no contributions were made to the pension plan or postretirement plan.  At this time, the Company is not currently anticipating making any funding contributions to the pension plan or postretirement plan in fiscal 2025.

 

The following table reflects expected future benefit payments:

 

   

Pension

  

Postretirement

 

Fiscal year ending September 30

  

Plan

  

Plan

 

2025

  $1,361,000  $682,000 

2026

   1,446,000   698,000 

2027

   1,554,000   730,000 

2028

   1,639,000   734,000 

2029

   1,712,000   766,000 
2030 - 2034   9,483,000   3,830,000 

 

The Company established an NQDC Plan in fiscal 2021. The NQDC Plan is an unfunded, nonqualified benefit plan offered to select members of senior management not eligible to participate in the pension plan.  Under the NQDC Plan, participants have the right to defer a percentage of base salary as well as receive discretionary credits from the Company. The Company's discretionary credits vest over time.  Any benefits distributed from the NQDC Plan are paid from the general assets of the Company.  As the plan is unfunded, the balance reflected in the table below is a noncurrent liability included in benefit plan liabilities on the consolidated balance sheet. 

 

  

2024

  

2023

 

Beginning deferred compensation balance

 $47,674  $59,108 

Employer contributions

  52,400   — 

Earnings

  13,526   6,787 

Forfeitures

  —   (18,221)

Ending deferred compensation balance

 $113,600  $47,674 

 

The Company sponsors a 401(k) Plan covering all eligible employees who elect to participate. Employees may contribute from 1% to 50% of their annual compensation to the 401(k) Plan, either on a pre-tax or post-tax basis, limited to a maximum annual amount as set periodically by the IRS. The Company matches 100% of the participant’s first 4% of contributions and 50% of the next 2% of contributions. The 401(k) Plan also provides for discretionary contributions for employees hired on or after January 1, 2017. The following table reflects the Company's contributions:

 

  

Years Ended September 30

 
  

2024

  

2023

 

Matching contribution

 $427,022  $388,616 

Discretionary contribution

  112,207   75,899