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RETIREMENT PLANS | 12 Months Ended
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Sep. 30, 2014
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 Pension Plan, and a postretirement medical insurance benefits plan (“Postretirement Medical”) covering officers of Barnwell Industries, Inc., the parent company, who have attained at least 20 years of service of which at least 10 years were 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,
|  | 2014 |  | 2013 |  | 2014 |  | 2013 |  | 2014 |  | 2013
Change in Projected Benefit Obligation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of year |  |  | $ | 6,858,000 |  |  |  | $ | 7,753,000 |  |  |  | $ | 1,322,000 |  |  |  | $ | 1,512,000 |  |  |  | $ | 1,073,000 |  |  |  | $ | 1,242,000 |
Service cost |  |  | 156,000 |  |  |  | 272,000 |  |  |  | 47,000 |  |  |  | 52,000 |  |  |  | 12,000 |  |  |  | 14,000 |
Interest cost |  |  | 322,000 |  |  |  | 299,000 |  |  |  | 67,000 |  |  |  | 58,000 |  |  |  | 54,000 |  |  |  | 50,000 |
Actuarial loss (gain) |  |  | 1,186,000 |  |  |  | (1,289,000 | ) |  |  | 337,000 |  |  |  | (294,000 | ) |  |  | 88,000 |  |  |  | (233,000 | )
Benefits paid |  |  | (213,000 | ) |  |  | (169,000 | ) |  |  | (6,000 | ) |  |  | (6,000 | ) |  |  | - |  |  |  | - |
Administrative expenses paid |  |  | (10,000 | ) |  |  | (8,000 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Benefit obligation at end of year |  |  | 8,299,000 |  |  |  | 6,858,000 |  |  |  | 1,767,000 |  |  |  | 1,322,000 |  |  |  | 1,227,000 |  |  |  | 1,073,000 |
Change in Plan Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year |  |  | 6,111,000 |  |  |  | 5,388,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Actual return on plan assets |  |  | 784,000 |  |  |  | 300,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Employer contributions |  |  | 350,000 |  |  |  | 600,000 |  |  |  | 6,000 |  |  |  | 6,000 |  |  |  | - |  |  |  | - |
Benefits paid |  |  | (213,000 | ) |  |  | (169,000 | ) |  |  | (6,000 | ) |  |  | (6,000 | ) |  |  | - |  |  |  | - |
Administrative expenses paid |  |  | (10,000 | ) |  |  | (8,000 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Fair value of plan assets at end of year |  |  | 7,022,000 |  |  |  | 6,111,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Funded status |  |  | $ | (1,277,000 | ) |  |  | $ | (747,000 | ) |  |  | $ | (1,767,000 | ) |  |  | $ | (1,322,000 | ) |  |  | $ | (1,227,000 | ) |  |  | $ | (1,073,000 | )
|  | Pension |  | SERP |  | Postretirement Medical
|  | September 30,
|  | 2014 |  | 2013 |  | 2014 |  | 2013 |  | 2014 |  | 2013
Amounts recognized in the Consolidated Balance Sheets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  | $ | - |  |  |  | $ | - |  |  |  | $ | (5,000 | ) |  |  | $ | (5,000 | ) |  |  | $ | - |  |  |  | $ | - |
Noncurrent liabilities |  |  | (1,277,000 | ) |  |  | (747,000 | ) |  |  | (1,762,000 | ) |  |  | (1,317,000 | ) |  |  | (1,227,000 | ) |  |  | (1,073,000 | )
Net amount |  |  | $ | (1,277,000 | ) |  |  | $ | (747,000 | ) |  |  | $ | (1,767,000 | ) |  |  | $ | (1,322,000 | ) |  |  | $ | (1,227,000 | ) |  |  | $ | (1,073,000 | )
Amounts recognized in accumulated other comprehensive (loss) income: |  |  |  |  |  |  |  |  |  |  |  |  |
Net actuarial loss (gain) |  |  | $ | 2,068,000 |  |  |  | $ | 1,254,000 |  |  |  | $ | 530,000 |  |  |  | $ | 200,000 |  |  |  | $ | (155,000 | ) |  |  | $ | (263,000 | )
Prior service cost (credit) |  |  | 81,000 |  |  |  | 88,000 |  |  |  | (80,000 | ) |  |  | (87,000 | ) |  |  | - |  |  |  | 12,000 |
Accumulated other comprehensive loss (income) |  |  | $ | 2,149,000 |  |  |  | $ | 1,342,000 |  |  |  | $ | 450,000 |  |  |  | $ | 113,000 |  |  |  | $ | (155,000 | ) |  |  | $ | (251,000 | )
Barnwell estimates that it will make approximately $250,000 in contributions to the Pension Plan during fiscal 2015. 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 2015 and expected payments under the SERP for fiscal 2015 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, |
|  | 2014 |  | 2013 |  | 2014 |  | 2013 |  | 2014 |  | 2013 |
Assumptions used to determine fiscal year-end benefit obligations: |  |  |  |  |  |  |  |
Discount rate |  | 4.25% |  | 5.00% |  | 4.25% |  | 5.00% |  | 4.25% |  | 5.00% |
Rate of compensation increase |  | 4.00% |  | 4.00% |  | 4.00% |  | 4.00% |  | N/A |  | N/A |
Assumptions used to determine net benefit costs (years ended): |  |  |  |  |  |  |
Discount rate |  | 5.00% |  | 4.00% |  | 5.00% |  | 4.00% |  | 5.00% |  | 4.00% |
Expected return on plan assets |  | 7.00% |  | 7.00% |  | N/A |  | N/A |  | N/A |  | N/A |
Rate of compensation increase |  | 4.00% |  | 4.00% |  | 4.00% |  | 4.00% |  | N/A |  | N/A |
The components of net periodic benefit cost are as follows:
|  | Pension |  | SERP |  | Postretirement Medical
|  | Year ended September 30,
|  | 2014 |  | 2013 |  | 2014 |  | 2013 |  | 2014 |  | 2013
Net periodic benefit cost for the year: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  |  | $ | 156,000 |  |  |  | $ | 272,000 |  |  |  | $ | 47,000 |  |  |  | $ | 52,000 |  |  |  | $ | 12,000 |  |  |  | $ | 14,000 |
Interest cost |  |  | 322,000 |  |  |  | 299,000 |  |  |  | 67,000 |  |  |  | 58,000 |  |  |  | 54,000 |  |  |  | 50,000 |
Expected return on plan assets |  |  | (429,000 | ) |  |  | (387,000 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Amortization of prior service cost (credit) |  |  | 5,000 |  |  |  | 5,000 |  |  |  | (5,000 | ) |  |  | (5,000 | ) |  |  | 12,000 |  |  |  | 136,000 |
Amortization of net actuarial loss (gain) |  |  | 20,000 |  |  |  | 103,000 |  |  |  | 5,000 |  |  |  | 20,000 |  |  |  | (21,000 | ) |  |  | - |
Net periodic benefit cost |  |  | $ | 74,000 |  |  |  | $ | 292,000 |  |  |  | $ | 114,000 |  |  |  | $ | 125,000 |  |  |  | $ | 57,000 |  |  |  | $ | 200,000 |
The amounts that are estimated to be amortized from accumulated other comprehensive loss 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 | ) |  |  | $ | - |
Net actuarial loss (gain) |  |  | 84,000 |  |  |  | 24,000 |  |  |  | (5,000 | )
|  |  | $ | 89,000 |  |  |  | $ | 19,000 |  |  |  | $ | (5,000 | )
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 $7,217,000 and $5,772,000 at September 30, 2014 and 2013, respectively. The accumulated benefit obligation for the SERP was $1,349,000 and $1,006,000 at September 30, 2014 and 2013, respectively. The benefits expected to be paid under the retirement plans as of September 30, 2014 are as follows:
|  |  |  |  |  |  |  | Postretirement
|  | Pension |  | SERP |  | Medical
Expected Benefit Payments: |  |  |  |  |  |  |  |  |  |  |  |
Fiscal year ending September 30, 2015 |  |  | $ | 207,000 |  |  |  | $ | 5,000 |  |  |  | $ | - |
Fiscal year ending September 30, 2016 |  |  | $ | 192,000 |  |  |  | $ | 4,000 |  |  |  | $ | - |
Fiscal year ending September 30, 2017 |  |  | $ | 256,000 |  |  |  | $ | 3,000 |  |  |  | $ | - |
Fiscal year ending September 30, 2018 |  |  | $ | 274,000 |  |  |  | $ | 3,000 |  |  |  | $ | 25,000 |
Fiscal year ending September 30, 2019 |  |  | $ | 262,000 |  |  |  | $ | 2,000 |  |  |  | $ | 28,000 |
Fiscal years ending September 30, 2020 through 2024 |  |  | $ | 2,219,000 |  |  |  | $ | 539,000 |  |  |  | $ | 258,000 |
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, |
|  | 2014 |  | 2013 |
Health care cost trend rates assumed for next year |  | 7.5% |  | 8.0% |
Ultimate cost trend rate |  | 5.0% |  | 5.0% |
Year that the rate reaches the ultimate trend rate |  | 2020 |  | 2020 |
A 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for fiscal 2014. This assumption is based on the plans’ recent experience. It is assumed that the rate will decrease gradually to 5% for fiscal 2020 and remain level thereafter. 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 |  | $ | 80,000 |  |  |  | $ | (55,000 | )
Effect on accumulated postretirement benefit obligations |  | $ | 270,000 |  |  |  | $ | (211,000 | )
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, interest and dividends received 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, preferred securities, and fixed income exchange-traded funds. The Company’s investments in equity securities primarily include domestic and international large-cap companies, as well as, domestic and international equity securities exchange-traded funds. Plan assets include $6,000 of Barnwell’s stock at September 30, 2014. The Company’s year-end target allocation, by asset category, and the actual asset allocations were as follows:
|  | Target |  | September 30, |
Asset Category |  | Allocation |  | 2014 |  | 2013 |
Cash and other |  | 0% - 30% |  | 12% |  | 5% |
Fixed income securities |  | 20% - 60% |  | 20% |  | 25% |
Equity securities |  | 30% - 70% |  | 68% |  | 70% |
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 and exchange-traded funds 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
|  | 2014 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Financial Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  |  | $ | 817,000 |  |  |  | $ | 817,000 |  |  |  | $ | - |  |  |  | $ | - |
Corporate bonds |  |  | 660,000 |  |  |  | 660,000 |  |  |  | - |  |  |  | - |
Fixed income exchange- traded funds |  |  | 521,000 |  |  |  | 521,000 |  |  |  | - |  |  |  | - |
Preferred securities |  |  | 232,000 |  |  |  | 232,000 |  |  |  | - |  |  |  | - |
Equity securities exchange- traded funds |  |  | 758,000 |  |  |  | 758,000 |  |  |  | - |  |  |  | - |
Equities |  |  | 4,034,000 |  |  |  | 4,034,000 |  |  |  | - |  |  |  | - |
Total |  |  | $ | 7,022,000 |  |  |  | $ | 7,022,000 |  |  |  | $ | - |  |  |  | $ | - |
|  |  |  | Fair Value Measurements Using:
|  | Carrying |  | Quoted |  | Significant |  |
|  | Amount |  | Prices in |  | Other |  | Significant
|  | as of |  | Active |  | Observable |  | Unobservable
|  | September 30, |  | Markets |  | Inputs |  | Inputs
|  | 2013 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Financial Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  |  | $ | 316,000 |  |  |  | $ | 316,000 |  |  |  | $ | - |  |  |  | $ | - |
U.S. government bonds |  |  | 97,000 |  |  |  | 97,000 |  |  |  | - |  |  |  | - |
Corporate bonds |  |  | 710,000 |  |  |  | 710,000 |  |  |  | - |  |  |  | - |
Fixed income exchange- traded funds |  |  | 458,000 |  |  |  | 458,000 |  |  |  | - |  |  |  | - |
Preferred securities |  |  | 226,000 |  |  |  | 226,000 |  |  |  | - |  |  |  | - |
Equity securities exchange- traded funds |  |  | 634,000 |  |  |  | 634,000 |  |  |  | - |  |  |  | - |
Equities |  |  | 3,670,000 |  |  |  | 3,670,000 |  |  |  | - |  |  |  | - |
Total |  |  | $ | 6,111,000 |  |  |  | $ | 6,111,000 |  |  |  | $ | - |  |  |  | $ | - |

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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 Accounting Standards Codification -Topic 715 -SubTopic 70 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6414718&loc=d3e28014-114942 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35743120&loc=d3e2410-114920 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -SubTopic 80 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=35742057&loc=SL14450702-114947 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -SubTopic 60 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6414199&loc=d3e39622-114963 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -SubTopic 60 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6414203&loc=d3e39675-114964 + Details
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