XML 146 R38.htm IDEA: XBRL DOCUMENT

EMPLOYEE BENEFIT PLANS (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Amounts Recognized in Balance Sheet

The pension and other retiree benefit related amounts (excluding tax balances) included on the UNS Energy balance sheet are:



	Pension Benefits						Other Retiree Benefits
	Years Ended December 31,
	2013			2012			2013			2012
	Millions of Dollars
Regulatory Pension Asset Included in Other Regulatory Assets	$	75		$	129		$	4		$	10
Accrued Benefit Liability Included in Accrued Employee Expenses	(1		)	(1		)	(2		)	(2		)
Accrued Benefit Liability Included in Pension and Other Retiree Benefits	(28		)	(90		)	(63		)	(69		)
Accumulated Other Comprehensive Loss (related to SERP)	2			4			—			—
Net Amount Recognized	$	48		$	42		$	(61	)	$	(61	)

The table above includes accrued pension benefit liabilities for UNS Electric and UNS Gas of approximately $5 million at December 31, 2013 and $9 million at December 31, 2012. The table also includes an other retiree benefit liability of $1 million for UNS Electric and UNS Gas for each period presented.

Schedule of Changes in Projected Benefit Obligations

We measured the actuarial present values of all pension benefit obligations and other retiree benefit plans at December 31, 2013 and December 31, 2012. The table below includes TEP’s, UNS Electric’s, and UNS Gas’ plans. All plans have projected benefit obligations in excess of fair value of plan assets for each period presented. The status of our pension benefit and other retiree benefit plans are summarized below:



	Pension Benefits						Other Retiree Benefits
	Years Ended December 31,
	2013			2012			2013			2012
	Millions of Dollars
Change in Projected Benefit Obligation
Benefit Obligation at Beginning of Year	$	380		$	319		$	78		$	73
Actuarial (Gain) Loss	(38		)	51			(5		)	3
Interest Cost	15			15			3			3
Service Cost	13			10			3			3
Benefits Paid	(18		)	(15		)	(4		)	(4		)
Projected Benefit Obligation at End of Year	352			380			75			78
Change in Plan Assets
Fair Value of Plan Assets at Beginning of Year	289			245			7			5
Actual Return on Plan Assets	29			36			1			1
Benefits Paid	(18		)	(15		)	(4		)	(4		)
Employer Contributions ⁽¹⁾	23			23			6			5
Fair Value of Plan Assets at End of Year	323			289			10			7
Funded Status at End of Year	$	(29	)	$	(91	)	$	(65	)	$	(71	)


⁽¹⁾	TEP made $22 million in pension contributions and $6 million in other retiree benefits contributions in 2013 and $20 million in pension contributions and $5 million of other retiree benefits contributions in 2012. In 2014, UNS Energy expects to contribute $10 million to the pension plans, including $9 million in contributions by TEP.

The table above includes the following for UNS Electric and UNS Gas:


•	Pension benefit obligations of $21 million at December 31, 2013 and $23 million at December 31, 2012;


•	Plan assets of $16 million at December 31, 2013 and $14 million at December 31, 2012; and


•	A retiree benefit obligation of $1 million at December 31, 2013 and December 31, 2012.

Schedule of Net Periodic Benefit Cost Not yet Recognized

The following table provides the components of UNS Energy’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 Retiree Benefits
	Years Ended December 31,
	2013		2012		2013			2012
	Millions of Dollars
Net Loss	$	77	$	133	$	7		$	13
Prior Service Cost (Benefit)	—		1		(3		)	(3		)

Schedule of Accumulated Benefit Obligations in Excess of Fair Value of Plan Assets

The accumulated benefit obligation aggregated for all pension plans is $314 million at December 31, 2013 and $334 million at December 31, 2012.



Information for Pension Plans with Accumulated Benefit Obligations in excess of Pension Plan Assets:
	December 31,
	2013	2012
	Millions of Dollars
Accumulated Benefit Obligation at End of Year	30	334
Fair Value of Plan Assets at End of Year	16	289

At December 31, 2012, all four UNS Energy defined benefit pension plans had accumulated benefit obligations in excess of plan assets. Due to 2013 contributions, returns on plan assets, and the favorable impact of the increase in the discount rate on the accumulated benefit obligations, only the SERP, which is unfunded, and the UES plan have accumulated benefit obligations in excess of plan assets at December 31, 2013.

Components of Net Periodic Benefit Cost

UNS Energy’s net periodic benefit plan cost, comprised primarily of TEP's cost, includes the following components:



	Pension Benefits									Other Retiree Benefits
	Years Ended December 31,
	2013			2012			2011			2013			2012		2011
	Millions of Dollars
Service Cost	$	13		$	10		$	10		$	4		$	3	$	3
Interest Cost	15			16			15			3			3		4
Expected Return on Plan Assets	(20		)	(17		)	(16		)	(1		)	—		—
Prior Service Cost Amortization	—			—			—			(1		)	—		(1		)
Actuarial Loss Amortization	9			7			6			1			—		—
Net Periodic Benefit Cost	$	17		$	16		$	15		$	6		$	6	$	6

Approximately 21% of the net periodic benefit cost was capitalized as a cost of construction and the remainder was included in income.

Schedule of Defined Benefit Plan Amounts Recognized in Other Comprehensive Income (Loss)

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



	Pension Benefits
	2013						2012					2011
	Regulatory Asset			AOCI			Regulatory Asset			AOCI		Regulatory Asset			AOCI
	Millions of Dollars
Current Year Actuarial (Gain) Loss	$	(46	)	$	(1	)	$	30		$	1	$	25		$	(2	)
Amortization of Actuarial Gain (Loss)	(8		)	—			(7		)	—		(5		)	—
Total Recognized (Gain) Loss	$	(54	)	$	(1	)	$	23		$	1	$	20		$	(2	)



	Other Retiree Benefits
	2013			2012		2011
	Regulatory Asset			Regulatory Asset		Regulatory Asset
	Millions of Dollars
Prior Service Cost (Credit)	$	—		$	—	$	(2	)
Current Year Actuarial (Gain) Loss	(6		)	2		—
Amortization of Actuarial (Gain) Loss	(1		)	—		—
Amortization of Prior Service (Cost) Credit	1			—		1
Total Recognized (Gain) Loss	$	(6	)	$	2	$	(1	)

For all pension plans, we amortize prior service costs on a straight-line basis over the average remaining service period of employees expected to receive benefits under the plan. We will amortize $4 million estimated net loss and less than $1 million prior service cost from other regulatory assets and less than $1 million prior service cost from AOCI into net periodic benefit cost in 2014. The estimated prior service benefit for the other retiree benefit plan that will be amortized from other regulatory assets into net periodic benefit cost in 2014 is less than $1.0 million.

Schedule Of Weighted Average Assumptions Used To Determine Benefit Obligations At Year End Table



	Pension Benefits		Other Retiree Benefits
	2013	2012	2013	2012
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31,
Discount Rate	5.0% - 5.2%	4.1%-4.3%	4.7%	3.8%
Rate of Compensation Increase	3.0%	3.0%	N/A	N/A

Schedule Of Weighted Average Assumptions Used To Determine Net Periodic Benefit Cost Table



	Pension Benefits			Other Retiree Benefits
	2013	2012	2011	2013	2012	2011
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31,
Discount Rate	4.1%-4.3%	4.9% - 5.0%	5.5% - 5.6%	3.8%	4.7%	5.2%
Rate of Compensation Increase	3.0%	3.0%	3.0% - 5.0%	N/A	N/A	N/A
Expected Return on Plan Assets	7.0%	7.0%	7.0%	7.0%	7.0%	5.1%

Schedule of Health Care Cost Trend Rates

The assumed health care cost trend rates follow:



	December 31,
	2013	2012
Health Care Cost Trend Rate Assumed for Next Year	6.7%	6.9%
Ultimate Health Care Cost Trend Rate Assumed	4.5%	4.5%
Year that the Rate Reaches the Ultimate Trend Rate	2027	2027

Schedule of Effect of One-Percentage-Point Change in Assumed Health Care Cost Trend Rates

Assumed health care cost trend rates significantly affect the amounts reported for health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects on the December 31, 2013, amounts:



	One-Percentage- Point Increase		One-Percentage- Point Decrease
	Millions of Dollars
Effect on Total Service and Interest Cost Components	$	1	$	(1	)
Effect on Retiree Benefit Obligation	6		(5		)

Schedule of Allocation of Plan Assets

The current target allocation percentages for the major asset categories of the plan as of December 31, 2013 follow. Each plan allows a variance of +/- 2% from these targets before funds are automatically rebalanced.



	TEP Plan	UNS Electric and UNS Gas Plan	VEBA Trust
Fixed Income	41%	42%	38%
United States Large Cap	24%	24%	39%
Non-United States Developed	15%	14%	7%
Real Estate	8%	10%	—%
United States Small Cap	5%	5%	5%
Non-United States Emerging	5%	5%	9%
Private Equity	2%	—%	—%
Cash/Treasury Bills	—%	—%	2%
Total	100%	100%	100%

We calculate the fair value of plan assets on December 31, the measurement date. Pension plan asset allocations, by asset category, on the measurement date were as follows:



	TEP Plan Assets				UNS Electric and UNS Gas Plan Assets
	2013		2012		2013		2012
Asset Category
Equity Securities	50	%	50	%	50	%	56	%
Fixed Income Securities	40		41	%	40		33
Real Estate	7		7	%	10		11
Other	3		2	%	—		—
Total	100	%	100	%	100	%	100	%

FV Measurements of Pension Plan Assets by FV Hierarchy

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



	Fair Value Measurements of Pension Assets December 31, 2013
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	Millions of Dollars
Asset Category
Cash Equivalents	$	1	$	—	$	—	$	1
Equity Securities:
United States Large Cap	—		80		—		80
United States Small Cap	—		17		—		17
Non-United States	—		65		—		65
Fixed Income	—		130		—		130
Real Estate	—		9		14		23
Private Equity	—		—		7		7
Total	$	1	$	301	$	21	$	323
	Fair Value Measurements of Pension Assets December 31, 2012
	Level 1		Level 2		Level 3		Total
	Millions of Dollars
Asset Category
Cash Equivalents	$	1	$	—	$	—	$	1
Equity Securities:
United States Large Cap	—		71		—		71
United States Small Cap	—		15		—		15
Non-United States	—		59		—		59
Fixed Income	—		116		—		116
Real Estate	—		8		13		21
Private Equity	—		—		6		6
Total	$	1	$	269	$	19	$	289

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 were valued using a real estate index value. The real estate index value was developed based on appraisals comprising 85% of real estate assets tracked by the index in 2013 and comprising 87% in 2012.

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

The tables above reflecting the fair value measurements of pension plan assets include Level 2 assets for the UNS Electric and UNS Gas pension plan of $16 million at December 31, 2013 and $14 million at December 31, 2012.

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

Schedule of Changes in Fair Value of Plan Assets

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



	Year Ended December 31, 2013
	Private Equity		Real Estate		Total
	Millions of Dollars
Beginning Balance at January 1, 2013	$	6	$	13	$	19
Actual Return on Plan Assets:
Assets Held at Reporting Date	1		1		2
Purchases, Sales, and Settlements	—		—		—
Ending Balance at December 31, 2013	$	7	$	14	$	21



	Year Ended December 31, 2012
	Private Equity		Real Estate		Total
	Millions of Dollars
Beginning Balance at January 1, 2012	$	4	$	11	$	15
Actual Return on Plan Assets:
Assets Held at Reporting Date	1		2		3
Purchases, Sales, and Settlements	1		—		1
Ending Balance at December 31, 2012	$	6	$	13	$	19

Schedule of Expected Benefit Payments

ESTIMATED FUTURE BENEFIT PAYMENTS

TEP expects the following benefit payments to be made by the defined benefit pension plans and other retiree benefit plan, which reflect future service, as appropriate.



	2014		2015		2016		2017		2018		2019-2023
	Millions of Dollars
Pension Benefits	$	15	$	16	$	17	$	18	$	20	$	114
Other Retiree Benefits	5		5		5		5		5		29

One of TEP’s noncontributory defined benefit pension plans was amended in 2012 to allow terminated participants to elect early retirement benefits equal to the actuarial equivalent of the participant’s termination retirement benefit. The impact of the amendment on estimated future benefit payments was approximately $5 million in total, and the effect on the pension benefit obligation was less than $1 million.

UNS Electric and UNS Gas expect annual benefit payments, made by the defined benefit pension and retiree plans, to be approximately $7 million in 2014 through 2018, and $9 million in 2019 through 2023