EMPLOYEE BENEFIT PLANS (Tables)

12 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

Schedule of pension and other postretirement benefit amounts

The following table presents pension and other postretirement benefit amounts (excluding tax balances) included in the balance sheet:

	Pension Benefits						Other Postretirement Benefits
	December 31,
(in millions)	2019			2018			2019			2018
Regulatory Assets	$	135		$	126		$	—		$	—
Regulatory Liabilities	—			—			(1		)	(3		)
Accrued Employee Expenses	(2		)	(1		)	(2		)	(3		)
Pension and Other Postretirement Benefits	(77		)	(63		)	(56		)	(54		)
Accumulated Other Comprehensive Loss, SERP	10			6			—			—
Net Amount Recognized	$	66		$	68		$	(59	)	$	(60	)

Schedule of changes in funded status

All plans had projected benefit obligations in excess of the fair value of plan assets for each period presented:

	Pension Benefits						Other Postretirement Benefits
	Years Ended December 31,
(in millions)	2019			2018			2019			2018
Change in Benefit Obligation
Beginning of Period	$	440		$	475		$	74		$	82
Actuarial (Gain) Loss	76			(42		)	4			(8		)
Interest Cost	18			16			3			2
Service Cost	13			15			4			5
Benefits Paid	(23		)	(23		)	(6		)	(5		)
Plan Amendments	1			(1		)	—			(2		)
End of Period	525			440			79			74
Change in Fair Value of Plan Assets
Beginning of Period	376			403			17			17
Actual Return on Plan Assets	81			(25		)	4			(1		)
Benefits Paid	(22		)	(23		)	(6		)	(5		)
Employer Contributions (1)	11			21			6			6
End of Period	446			376			21			17
Funded Status at End of Period	$	(79	)	$	(64	)	$	(58	)	$	(57	)

⁽¹⁾ 

TEP expects to contribute $11 million to the pension plans and $1 million to the VEBA trust in 2020.

Schedule of net periodic benefit cost not yet recognized

The following table provides the components of TEP’s regulatory assets and accumulated other comprehensive loss that have not been recognized as components of net periodic benefit cost as of the dates presented:

	Pension Benefits				Other Postretirement Benefits
	Years Ended December 31,
(in millions)	2019		2018		2019			2018
Net (Gain) Loss	$	145	$	133	$	1		$	(1	)
Prior Service Cost (Benefit)	—		—		(2		)	(2		)

Schedule of information for the pension plans with accumulated benefit obligations in excess of pension plan

The following table includes information for the pension plans with accumulated benefit obligations in excess of pension plan assets:

	December 31,
(in millions)	2019		2018
Accumulated Benefit Obligation	$	476	$	230
Fair Value of Plan Assets	446		202

Components of net periodic benefit plan cost

Net periodic benefit plan cost includes the following components:

	Pension Benefits									Other Postretirement Benefits
	Years Ended December 31,
(in millions)	2019			2018			2017			2019			2018			2017
Service Cost	$	13		$	15		$	13		$	4		$	5		$	4
Non-Service Cost
Interest Cost	18			16			15			3			2			2
Expected Return on Plan Assets	(26		)	(28		)	(25		)	(2		)	(1		)	(1		)
Amortization of Net (Gain) Loss	8			7			8			—			—			—
Net Periodic Benefit Cost	$	13		$	10		$	11		$	5		$	6		$	5

Schedule of the changes in plan assets and benefit obligations recognized as regulatory assets or in AOCI

The changes in plan assets and benefit obligations recognized as regulatory assets or in AOCI were as follows:

	Pension Benefits																	Other Postretirement Benefits
	Regulatory Asset									AOCI								Regulatory Asset
(in millions)	2019			2018			2017			2019			2018			2017		2019		2018			2017
Current Year Actuarial (Gain) Loss	$	16		$	12		$	5		$	4		$	(1	)	$	3	$	1	$	(6	)	$	(1	)
Amortization of Net Loss	(8		)	(7		)	(7		)	(1		)	—			—		—		—			—
Prior Service Credit (Cost)	—			—			—			1			(1		)	—		—		(2		)	—
Total Recognized (Gain) Loss	$	8		$	5		$	(2	)	$	4		$	(2	)	$	3	$	1	$	(8	)	$	(1	)

Schedule of weighted average assumptions used to determine benefit obligations

The following table includes the weighted average assumptions used to determine benefit obligations:

	Pension Benefits		Other Postretirement Benefits
	2019	2018	2019	2018
Discount Rate	3.6%	4.5%	3.3%	4.3%
Rate of Compensation Increase	2.8%	2.8%	N/A	N/A

Schedule of weighted average assumptions used to determine net periodic benefit costs

The following table includes the weighted average assumptions used to determine net periodic benefit costs:

	Pension Benefits			Other Postretirement Benefits
	2019	2018	2017	2019	2018	2017
Discount Rate, Service Cost	4.7%	3.8%	4.4%	4.5%	3.8%	4.3%
Discount Rate, Interest Cost	4.2%	3.4%	3.7%	4.0%	3.2%	3.3%
Rate of Compensation Increase	2.8%	2.8%	2.8%	N/A	N/A	N/A
Expected Return on Plan Assets	7.0%	7.0%	7.0%	7.0%	7.0%	7.0%

Schedule of healthcare cost trend rates

Healthcare cost trend rates are assumed to decrease gradually from next year to the year the ultimate rate is reached:

	December 31,
	2019	2018
Next Year (Pre-65)	6.3%	6.5%
Next Year (Post-65)	7.5%	7.8%
Ultimate Rate Assumed (Pre-65 and Post-65)	4.5%	4.5%
Year Ultimate Rate is Reached (Pre-65)	2037	2037
Year Ultimate Rate is Reached (Post-65)	2037	2037

Schedule of asset allocations, by asset category, on the measurement date

Asset allocations, by asset category, on the measurement date were as follows:

	Pension				Other Postretirement Benefits
	2019		2018		2019		2018
Asset Category
Equity Securities	46	%	45	%	65	%	60	%
Fixed Income Securities	45	%	45	%	33	%	38	%
Real Estate	8	%	8	%	—	%	—	%
Other	1	%	2	%	2	%	2	%
Total	100	%	100	%	100	%	100	%

Schedule of fair value measurements of pension plan assets by level

The following tables present the fair value measurements of pension plan assets by level within the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
(in millions)	December 31, 2019
Asset Category
Cash Equivalents	$	2	$	—	$	—	$	2
Equity Securities:
United States Large Cap	—		55		—		55
United States Small Cap	—		21		—		21
Non-United States	—		80		—		80
Global	—		51		—		51
Fixed Income	—		199		—		199
Real Estate	—		10		23		33
Private Equity	—		—		5		5
Total	$	2	$	416	$	28	$	446

	December 31, 2018
Asset Category
Cash Equivalents	$	1	$	—	$	—	$	1
Equity Securities:
United States Large Cap	—		45		—		45
United States Small Cap	—		17		—		17
Non-United States	—		67		—		67
Global	—		42		—		42
Fixed Income	—		167		—		167
Real Estate	—		9		22		31
Private Equity	—		—		6		6
Total	$	1	$	347	$	28	$	376

• Level 1 cash equivalents are based on observable market prices and are comprised of the fair value of commercial paper, money market funds, and certificates of deposit.

• Level 2 investments comprise amounts held in commingled equity funds, United States bond funds, and real estate funds. Valuations are based on active market quoted prices for assets held by each respective fund.

• Level 3 real estate investments values are generally determined by appraisals conducted in accordance with accepted appraisal guidelines, including consideration of projected income and expenses of the property as well as recent sales of similar properties.

•

Level 3 private equity funds are classified as funds-of-funds. They are valued based on individual fund manager valuation models.

Schedule of reconciliation of changes in the fair value of pension plan assets classified as Level 3 in the fair value hierarchy

The following table presents a reconciliation of changes in the fair value of pension plan assets classified as Level 3 in the fair value hierarchy. There were no transfers in or out of Level 3.

(in millions)	Private Equity			Real Estate		Total
Balance as of December 31, 2017	$	6		$	21	$	27
Actual Return on Plan Assets:
Assets Held at Reporting Date	2			1		3
Purchases, Sales, and Settlements	(2		)	—		(2		)
Balance as of December 31, 2018	6			22		28
Actual Return on Plan Assets:
Assets Held at Reporting Date	1			1		2
Purchases, Sales, and Settlements	(2		)	—		(2		)
Balance as of December 31, 2019	$	5		$	23	$	28

Schedule of target allocation percentages for the major asset categories of the plan

The current target allocation percentages for the major asset categories of the plan follow. Each plan allows a variance of +/- 2% from targets before funds are automatically rebalanced.

	Pension	Other Postretirement Benefits
	December 31, 2019
Cash/Treasury Bills	—%	2%
Equity Securities:
United States Large Cap	12%	39%
United States Small Cap	5%	5%
Non-United States Developed	—%	7%
Non-United States Emerging	—%	9%
Global Equity	26%	—%
Global Infrastructure	3%	—%
Fixed Income	45%	38%
Real Estate	8%	—%
Private Equity	1%	—%
Total	100%	100%

Schedule of expected benefit payments

TEP expects the following benefit payments to be made by the plans, which reflect future service, as appropriate.

(in millions)	2020		2021		2022		2023		2024		2025-2029
Pension Benefits	$	26	$	26	$	26	$	27	$	28	$	147
Other Postretirement Benefits	5		5		5		5		5		25