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RETIREMENT PLANS | 12 Months Ended
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Sep. 30, 2012
RETIREMENT PLANS |
RETIREMENT PLANS |
10. RETIREMENT PLANS Barnwell sponsors a noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all of its U.S. employees, with benefits based on years of service and the employee’s highest consecutive five-year average earnings. Barnwell’s funding policy is intended to provide for both benefits attributed to service to date and for those expected to be earned in the future. In addition, Barnwell sponsors a Supplemental Employee Retirement Plan (“SERP”), a noncontributory supplemental retirement benefit plan which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the defined benefit pension plan, and a postretirement medical insurance benefits plan (“Postretirement Medical”) covering U.S. employees who have attained at least 20 years of service with Barnwell and served at least 10 years at the position of Vice President or higher, their spouses and qualifying dependents. The following tables detail the changes in benefit obligations, fair values of plan assets and reconciliations of the funded status of the retirement plans:
|  | Pension |  |  |  | SERP |  |  |  | Postretirement Medical |
|  | September 30, |
|  | 2012 |  |  |  | 2011 |  |  |  | 2012 |  |  |  | 2011 |  |  |  | 2012 |  |  |  | 2011 |
Change in Projected Benefit Obligation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of year |  | $ 7,045,000 |  |  |  | $ 6,959,000 |  |  |  | $ 1,310,000 |  |  |  | $ 1,195,000 |  |  |  | $ 1,031,000 |  |  |  | $ 1,365,000 |
Service cost |  | 302,000 |  |  |  | 298,000 |  |  |  | 50,000 |  |  |  | 45,000 |  |  |  | 12,000 |  |  |  | 12,000 |
Interest cost |  | 323,000 |  |  |  | 311,000 |  |  |  | 61,000 |  |  |  | 58,000 |  |  |  | 49,000 |  |  |  | 51,000 |
Actuarial loss (gain) |  | 352,000 |  |  |  | (342,000 | ) |  |  | 97,000 |  |  |  | 18,000 |  |  |  | 150,000 |  |  |  | (397,000 | )
Benefits paid |  | (261,000 | ) |  |  | (174,000 | ) |  |  | (6,000 | ) |  |  | (6,000 | ) |  |  | - |  |  |  | - |
Administrative expenses paid |  | (8,000 | ) |  |  | (7,000 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Benefit obligation at end of year |  | 7,753,000 |  |  |  | 7,045,000 |  |  |  | 1,512,000 |  |  |  | 1,310,000 |  |  |  | 1,242,000 |  |  |  | 1,031,000 |
Change in Plan Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year |  | 4,214,000 |  |  |  | 4,123,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Actual return on plan assets |  | 773,000 |  |  |  | 22,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Employer contributions |  | 670,000 |  |  |  | 250,000 |  |  |  | 6,000 |  |  |  | 6,000 |  |  |  | - |  |  |  | - |
Benefits paid |  | (261,000 | ) |  |  | (174,000 | ) |  |  | (6,000 | ) |  |  | (6,000 | ) |  |  | - |  |  |  | - |
Administrative expenses paid |  | (8,000 | ) |  |  | (7,000 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Fair value of plan assets at end of year |  | 5,388,000 |  |  |  | 4,214,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Funded status |  | $ (2,365,000 | ) |  |  | $ (2,831,000 | ) |  |  | $ (1,512,000 | ) |  |  | $ (1,310,000 | ) |  |  | $ (1,242,000 | ) |  |  | $ (1,031,000 | )
|  | Pension |  |  |  | SERP |  |  |  | Postretirement Medical |
|  | September 30, |
|  | 2012 |  |  |  | 2011 |  |  |  | 2012 |  |  |  | 2011 |  |  |  | 2012 |  |  |  | 2011 |
Amounts recognized in the Consolidated Balance Sheets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noncurrent assets |  | $ - |  |  |  | $ - |  |  |  | $ - |  |  |  | $ - |  |  |  | $ - |  |  |  | $ - |
Current liabilities |  | - |  |  |  | - |  |  |  | (5,000 | ) |  |  | (5,000 | ) |  |  | - |  |  |  | - |
Noncurrent liabilities |  | (2,365,000 | ) |  |  | (2,831,000 | ) |  |  | (1,507,000 | ) |  |  | (1,305,000 | ) |  |  | (1,242,000 | ) |  |  | (1,031,000 | )
Net amount |  | $ (2,365,000 | ) |  |  | $ (2,831,000 | ) |  |  | $ (1,512,000 | ) |  |  | $ (1,310,000 | ) |  |  | $ (1,242,000 | ) |  |  | $ (1,031,000 | )
Amounts recognized in accumulated other comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net actuarial loss (gain) |  | $ 2,559,000 |  |  |  | $ 2,765,000 |  |  |  | $ 514,000 |  |  |  | $ 434,000 |  |  |  | $ (30,000 | ) |  |  | $ (191,000 | )
Prior service cost (credit) |  | 93,000 |  |  |  | 98,000 |  |  |  | (92,000 | ) |  |  | (93,000 | ) |  |  | 148,000 |  |  |  | 284,000 |
Accumulated other comprehensive loss |  | $ 2,652,000 |  |  |  | $ 2,863,000 |  |  |  | $ 422,000 |  |  |  | $ 341,000 |  |  |  | $ 118,000 |  |  |  | $ 93,000 |
Barnwell estimates that it will make approximately $250,000 in contributions to the pension plan during fiscal 2013. The SERP and Postretirement Medical plans are unfunded and Barnwell will fund benefits when payments are made. Barnwell does not expect to make any benefit payments under the Postretirement Medical plan during fiscal 2013 and expected payments under the SERP for fiscal 2013 are not significant. Fluctuations in actual market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods. The following table presents the weighted-average assumptions used to determine benefit obligations and net benefit costs:
|  | Pension |  | SERP |  | Postretirement Medical |
|  | Year ended September 30, |
|  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011 |
Assumptions used to determine fiscal year-end benefit obligations: |  |  |  |  |  |  |
Discount rate |  | 4.00% |  | 4.75% |  | 4.00% |  | 4.75% |  | 4.00% |  | 4.75% |
Rate of compensation increase |  | 4.00% |  | 5.00% |  | 4.00% |  | 5.00% |  | N/A |  | N/A |
Assumptions used to determine net benefit costs (years ended): |  |  |  |  |  |  |
Discount rate |  | 4.75% |  | 5.00% |  | 4.75% |  | 5.00% |  | 4.75% |  | 5.00% |
Expected return on plan assets |  | 7.00% |  | 7.00% |  | N/A |  | N/A |  | N/A |  | N/A |
Rate of compensation increase |  | 5.00% |  | 5.00% |  | 5.00% |  | 5.00% |  | N/A |  | N/A |
We select a discount rate by reference to yields available on the Citigroup Pension Liability Index at our balance sheet date. The expected return on plan assets is primarily based on historical rates of return. The components of net periodic benefit cost are as follows:
|  | Pension |  | SERP |  | Postretirement Medical |
|  | Year ended September 30, |
|  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011 |
Net periodic benefit cost for the year: |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  |  | $ 302,000 |  |  |  | $ 298,000 |  |  |  | $ 50,000 |  |  |  | $ 45,000 |  |  |  | $ 12,000 |  |  |  | $ 12,000 |  |
Interest cost |  |  | 323,000 |  |  |  | 311,000 |  |  |  | 61,000 |  |  |  | 58,000 |  |  |  | 49,000 |  |  |  | 51,000 |  |
Expected return on plan assets |  |  | (327,000 | ) |  |  | (296,000 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |
Amortization of prior service cost (credit) |  |  | 5,000 |  |  |  | 5,000 |  |  |  | (1,000 | ) |  |  | 4,000 |  |  |  | 136,000 |  |  |  | 136,000 |  |
Amortization of net actuarial loss (gain) |  |  | 112,000 |  |  |  | 85,000 |  |  |  | 17,000 |  |  |  | 14,000 |  |  |  | (11,000 | ) |  |  | (5,000 | ) |
Net periodic benefit cost |  |  | $ 415,000 |  |  |  | $ 403,000 |  |  |  | $ 127,000 |  |  |  | $ 121,000 |  |  |  | $186,000 |  |  |  | $194,000 |  |
The amounts that are estimated to be amortized from accumulated other comprehensive income into net periodic benefit cost in the next fiscal year are as follows:
|  |  |  |  |  | Postretirement |
|  | Pension |  | SERP |  | Medical |
Prior service cost (credit) |  |  | $ | 5,000 |  |  |  | $ | (5,000 | ) |  |  | $ | 136,000 |  |
Net actuarial loss |  |  | 105,000 |  |  |  | 21,000 |  |  |  | - |  |
|  |  | $ | 110,000 |  |  |  | $ | 16,000 |  |  |  | $ | 136,000 |  |
The accumulated benefit obligation differs from the projected benefit obligation in that it assumes future compensation levels will remain unchanged. The accumulated benefit obligation for the pension plan was $6,263,000 and $5,284,000 at September 30, 2012 and 2011, respectively. The accumulated benefit obligation for the SERP was $1,075,000 and $879,000 at September 30, 2012 and 2011, respectively. The benefits expected to be paid under the retirement plans as of September 30, 2012 are as follows:
|  |  |  |  |  | Postretirement
|  | Pension |  | SERP |  | Medical
Expected Benefit Payments: |  |  |  |  |  |
Fiscal year ending September 30, 2013 |  | $ | 156,000 |  | $ | 5,000 |  | $ | -
Fiscal year ending September 30, 2014 |  | $ | 206,000 |  | $ | 4,000 |  | $ | -
Fiscal year ending September 30, 2015 |  | $ | 194,000 |  | $ | 4,000 |  | $ | -
Fiscal year ending September 30, 2016 |  | $ | 182,000 |  | $ | 3,000 |  | $ | -
Fiscal year ending September 30, 2017 |  | $ | 256,000 |  | $ | 2,000 |  | $ | -
Fiscal years ending September 30, 2018 through 2022 |  | $ | 1,751,000 |  | $ | 236,000 |  | $ | 276,000
The following table provides the assumed health care cost trend rates related to the measurement of Barnwell’s postretirement medical obligations.
|  | Year ended September 30, |
|  | 2012 |  | 2011 |
Health care cost trend rates assumed for next year |  | 8.5% |  |  | 9.0% |  |
Ultimate cost trend rate |  | 5.0% |  |  | 5.0% |  |
Year that the rate reaches the ultimate trend rate |  | 2020 |  |  | 2020 |  |
The assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement medical obligations. A one-percentage-point change in the assumed health care cost trend rates would have the following effects:
|  | 1-Percentage |  | 1-Percentage |
|  | Point Increase |  | Point (Decrease) |
Effect on total service and interest cost components |  | $ 14,000 |  | $ (11,000) |
Effect on accumulated postretirement benefit obligations |  | $ 280,000 |  | $ (220,000) |
Plan Assets Management communicates periodically with its professional investment advisors to establish investment policies, direct investments and select investment options. The overall investment objective of the Pension Plan is to attain a diversified combination of investments that provides long-term growth in the assets of the plan to fund future benefit obligations while managing risk in order to meet current benefit obligations. Generally, principal repayments and interest received on government mortgage securities provide cash flows to fund current benefit obligations. Longer-term obligations are generally estimated to be provided for by growth in equity securities. The Company’s investment policy permits investments in a diversified mix of U.S. and international equities, fixed income securities and cash equivalents. Barnwell’s investments in fixed income securities include corporate bonds, U.S. treasuries and preferred securities. The Company’s investments in equity securities primarily include large, small, domestic, and international companies. Plan assets include $8,000 of Barnwell’s stock at September 30, 2012. We believe that there are no significant concentrations of risk within our plan assets as of September 30, 2012. The Company’s year-end target allocation, by asset category, and the actual asset allocations were as follows:
|  | Target |  | September 30, |
Asset Category |  | Allocation |  | 2012 |  | 2011 |
Cash and other |  | 0% - 30% |  | 1% |  | 15% |
Fixed income securities |  | 20% - 60% |  | 30% |  | 20% |
Equity securities |  | 30% - 70% |  | 69% |  | 65% |
Actual investment allocations may vary from our target allocations from time to time due to prevailing market conditions. We periodically review our actual investment allocations and rebalance our investments to our target allocations as dictated by current and anticipated market conditions and required cash flows. We categorize plan assets into three levels based upon the assumptions used to price the assets. Level 1 provides the most reliable measure of fair value, whereas Level 3 requires significant management judgment in determining the fair value. Equity securities are valued by obtaining quoted prices on recognized and highly liquid exchanges. Fixed income securities are valued based upon the closing price reported in the active market in which the security is traded. All of our plan assets are categorized as Level 1 assets, and as such, the actual market value is used to determine the fair value of assets. The following tables set forth by level, within the fair value hierarchy, pension plan assets at their fair value:
|  |  |  | Fair Value Measurements Using:
|  | Carrying |  | Quoted |  | Significant |  |
|  | Amount |  | Prices in |  | Other |  | Significant
|  | as of |  | Active |  | Observable |  | Unobservable
|  | September 30, |  | Markets |  | Inputs |  | Inputs
|  | 2012 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Financial Assets: |  |  |  |  |  |  |  |
Cash |  |  | $ | 72,000 |  |  |  | $ | 72,000 |  |  |  | $ | - |  |  |  | $ | - |
U.S. government bonds |  |  |  | 100,000 |  |  |  |  | 100,000 |  |  |  |  | - |  |  |  |  | - |
Corporate bonds |  |  |  | 400,000 |  |  |  |  | 400,000 |  |  |  |  | - |  |  |  |  | - |
Fixed income exchange-traded funds |  |  |  | 850,000 |  |  |  |  | 850,000 |  |  |  |  | - |  |  |  |  | - |
Preferred securities |  |  |  | 232,000 |  |  |  |  | 232,000 |  |  |  |  | - |  |  |  |  | - |
Equities |  |  |  | 3,734,000 |  |  |  |  | 3,734,000 |  |  |  |  | - |  |  |  |  | - |
Total |  |  | $ | 5,388,000 |  |  |  | $ | 5,388,000 |  |  |  | $ | - |  |  |  | $ | - |
|  |  |  | Fair Value Measurements Using:
|  | Carrying |  | Quoted |  | Significant |  |
|  | Amount |  | Prices in |  | Other |  | Significant
|  | as of |  | Active |  | Observable |  | Unobservable
|  | September 30, |  | Markets |  | Inputs |  | Inputs
|  | 2011 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Financial Assets: |  |  |  |  |  |  |  |
Cash |  |  | $ | 625,000 |  |  |  | $ | 625,000 |  |  |  | $ | - |  |  |  | $ | - |
U.S. government bonds |  |  |  | 303,000 |  |  |  |  | 303,000 |  |  |  |  | - |  |  |  |  | - |
Corporate bonds |  |  |  | 366,000 |  |  |  |  | 366,000 |  |  |  |  | - |  |  |  |  | - |
Preferred securities |  |  |  | 197,000 |  |  |  |  | 197,000 |  |  |  |  | - |  |  |  |  | - |
Equities |  |  |  | 2,723,000 |  |  |  |  | 2,723,000 |  |  |  |  | - |  |  |  |  | - |
Total |  |  | $ | 4,214,000 |  |  |  | $ | 4,214,000 |  |  |  | $ | - |  |  |  | $ | - |

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- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 158 -Paragraph 7, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Staff Position (FSP) -Number FAS106-2 -Paragraph 20, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Implementation Guide (Q and A) -Number FAS88 -Paragraph 63 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 106 -Paragraph 518 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5, 6, 7, 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 8 -Subparagraph m -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 87 -Paragraph 264 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 30 -Paragraph 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 03-2 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph h -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph a -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph q -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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