EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

EMPLOYEE BENEFIT PLANS

vings Plan

The Company sponsors a 401(k) qualified defined contribution savings plan that allows participants to contribute up to 20% of pre-tax compensation. Effective January 1, 2010, the Company matches 75 cents for each dollar contributed by the employee up to a maximum Company match of 6.0% of base salary. Company contributions were $6.5 million, $6.0 million, and $5.6 million, for the years 2019, 2018, and 2017, respectively.

Pension Plans

The Company provides a qualified, defined-benefit, non-contributory pension plan for substantially all employees. The accumulated benefit obligations of the pension plan are $615.5 million and $492.4 million as of December 31, 2019 and 2018, respectively. The fair value of pension plan assets was $573.6 million and $469.8 million as of December 31, 2019 and 2018, respectively.

Prior to 2010, pension payment obligations were generally funded by the purchase of an annuity from a life insurance company. Beginning in 2010, the pension plan trust pays monthly benefits to retirees, rather than the purchase of an annuity.

The Company also maintains an unfunded, non-qualified, supplemental executive retirement plan (SERP). The unfunded SERP accumulated benefit obligations were $71.8 million and $56.8 million as of December 31, 2019 and 2018, respectively. Benefit payments under the supplemental executive retirement plan are paid currently.

Expected payments to be made for the pension and SERP plans are shown in the table below:

Year Ending December 31,	Pension		SERP		Total
2020	$	13,765	$	2,086	$	15,851
2021	15,332		2,196		17,528
2022	16,992		2,336		19,328
2023	18,749		2,416		21,165
2024	20,517		2,415		22,932
2025-2029	130,341		12,907		143,248
Total payments	$	215,696	$	24,356	$	240,052

The expected benefit payments are based upon the same assumptions used to measure the Company's benefit obligation at December 31, 2019, and include estimated future employee service.

The costs of the pension and retirement plans are charged to expense and utility plant. The Company makes annual contributions to fund the amounts accrued for pension cost.

Other Postretirement Plan

The Company provides substantially all active, permanent employees with medical, dental, and vision benefits through a self-insured plan. Employees retiring at or after age 58, along with their spouses and dependents, continue participation in the plan by payment of a premium. Plan assets are invested in mutual funds, short-term money market instruments and commercial paper based upon a similar asset mix to the pension plan. Retired employees are also provided with a $10,000 dollar life insurance benefit.

The Company records the costs of postretirement benefits other than pensions (PBOP) during the employees' years of active service. Postretirement benefit expense recorded in 2019, 2018, and 2017, was $7.9 million, $8.8 million, and $8.5 million, respectively. The remaining net periodic benefit cost was $2.1 million at December 31, 2019, and is being recovered through future customer rates and is recorded as a regulatory asset.

The expected benefit payments, net of retiree premiums and Medicare Part D subsidies, are shown in the table below.

Year Ending December 31,	Expected Benefit Payments Before Medicare Part D Subsidy		Effect of Medicare Part D Subsidy on Expected Benefit Payments			Expected Benefit Payments Net of Medicare Part D Subsidy
2020	$	3,305	$	(267	)	$	3,038
2021	3,645		(301		)	3,344
2022	4,011		(336		)	3,675
2023	4,417		(371		)	4,046
2024	4,864		(404		)	4,460
2025-2029	29,403		(2,656		)	26,747
Total payments	$	49,645	$	(4,335	)	$	45,310

Benefit Plan Assets

The Company actively manages pensions and PBOP trust (Plan) assets. The Company's investment objectives are:

• Maximize the return on the assets, commensurate with the risk that the Company deems appropriate to meet the obligations of the Plans, minimize the volatility of the pension expense, and account for contingencies;

• Generate a rate of return for the total portfolio that equals or exceeds the actuarial investment rate assumption;

Additionally, the rate of return of the total fund is measured periodically against an index comprised of 35% of the Standard & Poor's Index, 15% of the Russell 2000 Index, 10% of the MSCI EAFE Index, and 40% of the Bloomberg Barclays U.S. Aggregate Bond Index. The index is consistent with the Company's rate of return objective and indicates the Company's long-term asset allocation objective.

The Company applies a risk management framework for managing the risks associated with employee benefit plan trust assets. The guiding principles of this risk management framework are the clear articulation of roles and responsibilities, appropriate delegation of authority, and proper accountability and documentation. Trust investment policies and investment manager guidelines include provisions to ensure prudent diversification, manage risk through appropriate use of physical direct asset holdings and derivative securities, and identify permitted and prohibited investments.

The Company's target asset allocation percentages for major categories of the pension plan are reflected in the table below:

	Minimum Exposure		Target		Maximum Exposure
Fixed Income	35	%	40	%	45	%
Total Domestic Equity:	40	%	50	%	60	%
Small/Mid Cap Stocks	10	%	15	%	20	%
Large Cap Stocks	30	%	35	%	45	%
Non-U.S. Equities	5	%	10	%	15	%

The fixed income category includes money market funds, short-term bond funds, and cash. The majority of fixed income investments range in maturities from less than 1 to 5 years.

The Company's target allocation percentages for the PBOP trust is similar to the pension plan.

The Company uses the following criteria to select investment funds:

• Fund past performance;

• Fund meets criteria of Employee Retirements Income Security Act (ERISA);

• Timeliness and completeness of fund communications and reporting to investors;

• Stability of fund management company;

• Fund management fees; and

• Administrative costs incurred by the Plan.

Plan Fair Value Measurements

The fair value measurements standard establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the standard are described below:

Level 1—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

Level 2—Inputs to the valuation methodology include:

• Quoted market prices for similar assets or liabilities in active markets;

• Quoted prices for identical or similar assets or liabilities in inactive markets;

• Inputs other than quoted prices that are observable for the asset or liability; and

• Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following tables present the fair value of plan assets by major asset category at December 31, 2019 and 2018:

	December 31,2019
	Pension Benefits								Other Benefits
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Fixed Income	$	91,231	$	—	$	—	$	91,231	$	50,277	$	—	$	—	$	50,277
Domestic Equity: Small/Mid Cap Stocks	43,238		—		—		43,238		—		—		—		—
Domestic Equity: Large Cap Stocks	155,645		—		—		155,645		78,277		—		—		78,277
Non U.S. Equities	28,874		—		—		28,874		—		—		—		—
Assets measured at net asset value (NAV)							254,587								—
Total Plan Assets	$	318,988	$	—	$	—	$	573,575	$	128,554	$	—	$	—	$	128,554

	December 31,2018
	Pension Benefits								Other Benefits
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Fixed Income	$	188,934	$	—	$	—	$	188,934	$	45,446	$	—	$	—	$	45,446
Domestic Equity: Small/Mid Cap Stocks	68,843		—		—		68,843		—		—		—		—
Domestic Equity: Large Cap Stocks	165,862		—		—		165,862		57,179		—		—		57,179
Non U.S. Equities	46,135		—		—		46,135		—		—		—
Assets measured at NAV							—								—
Total Plan Assets	$	469,774	$	—	$	—	$	469,774	$	102,625	$	—	$	—	$	102,625

The pension benefits fixed income category includes $8.9 million and $5.0 million of money market fund investments as of December 31, 2019 and 2018, respectively. The other benefits fixed income category includes $4.5 million and $9.8 million of money market fund investments as of December 31, 2019 and 2018, respectively.

Assets measured at NAV include investments in commingled funds that are comprised of fixed income and equity securities. These commingled funds are not publicly traded, and therefore no publicly quoted market price is readily available. The values of the commingled funds are measured at estimated fair value, which is determined based on the unit value of the funds and have not been classified in the fair value hierarchy tables above. There are no restrictions on the terms and conditions upon which the investments may be redeemed.

Changes in Plan Assets, Benefits Obligations, and Funded Status

The following table reconciles the funded status of the plans with the accrued pension liability and the net postretirement benefit liability as of December 31, 2019 and 2018:

	Pension Benefits						Other Benefits
	2019			2018			2019			2018
Change in projected benefit obligation:
Beginning of year	$	639,921		$	671,334		$	127,204		$	143,368
Service cost	26,718			29,027			7,475			8,317
Interest cost	26,966			23,994			5,441			4,873
Assumption change	122,779			(80,192		)	13,695			(21,672		)
Plan amendment	—			—			—			2,203
Experience loss (gain)	10,451			8,523			(1,994		)	(8,226		)
Benefits paid, net of retiree premiums	(14,806		)	(12,765		)	(1,306		)	(1,659		)
End of year	$	812,029		$	639,921		$	150,515		$	127,204
Change in plan assets:
Fair value of plan assets at beginning of year	$	469,774		$	460,878		$	102,625		$	100,563
Actual return on plan assets	97,811			(22,576		)	19,730			(4,320		)
Employer contributions	20,796			44,237			7,505			8,041
Retiree contributions and Medicare part D subsidies	—			—			1,874			2,025
Benefits paid	(14,806		)	(12,765		)	(3,180		)	(3,684		)
Fair value of plan assets at end of year	$	573,575		$	469,774		$	128,554		$	102,625
Funded status(1)	$	(238,454	)	$	(170,147	)	$	(21,961	)	$	(24,579	)
Unrecognized actuarial loss	177,750			117,973			15,822			18,618
Unrecognized prior service cost	10,242			15,290			2,129			2,326
Net amount recognized	$	(50,462	)	$	(36,884	)	$	(4,010	)	$	(3,635	)

_______________________________________________________________________________

(1) The short-term portion of the pension benefits was $2.1 million as of December 31, 2019 and $1.9 million as of December 31, 2018 and is recorded as part of other accrued liabilities on the Company's 2019 and 2018 Consolidated Balance Sheets.

Amounts recognized on the balance sheet consist of:

	Pension Benefits						Other Benefits
	2019			2018			2019			2018
Accrued benefit costs	$	62		$	62		$	(2,441	)	$	(2,802	)
Accrued benefit liability	(238,454		)	(170,147		)	(21,961		)	(24,579		)
Regulatory asset	187,930			133,201			20,392			23,746
Net amount recognized	$	(50,462	)	$	(36,884	)	$	(4,010	)	$	(3,635	)

Valuation Assumptions

Below are the actuarial assumptions used in determining the benefit obligation for the benefit plans:

	Pension Benefits				Other Benefits
	2019		2018		2019		2018
Weighted average assumptions as of December 31:
Discount rate	3.20	%	4.20	%	3.25	%	4.25	%
Long-term rate of return on plan assets	6.25	%	6.50	%	5.50	%	5.50	%
Rate of compensation increases - pension plan	3.25	%	3.25	%	—		—
Rate of compensation increases - SERP	3.75	%	3.75	%	—		—
Cost of living adjustment	2.50	%	2.50	%	—		—

The discount rate was derived from the FTSE Pension Discount Curve using the expected payouts for the plan. The long-term rate of return assumption is the expected rate of return on a balanced portfolio invested roughly 60% in equities and 40% in fixed income securities. Returns on equity investments were estimated based on estimates of dividend yield and real earnings added to a 2.50% long-term inflation rate. For the pension plans, the assumed returns were 7.25% for domestic equities and 8.56% for foreign equities. For the other benefits plan, the assumed returns was 6.88% for domestic equities. Returns on fixed-income investments were projected based on investment maturities and credit spreads added to a 2.50% long-term inflation rate. For the pension and other benefit plans, the assumed returns were 3.97% for fixed income investments and 2.34% for short-term cash investments. The average return for the pension and other benefit plans for the last 5 and 10 years was 7.60% and 8.60%, respectively. The Company is using a long-term rate of return of 6.25% for the pension plan and 5.50% for the other benefit plan, which is between the 25th and 75th percentile of expected results.

In 2019, the Company used the Society of Actuaries' Pri-2012 Total Dataset Mortality Tables for private-sector retirement plans in the United States and Mortality Improvement Scale (MP-2019) for measuring retirement plan obligations.

Components of Net Periodic Benefit Cost

Net periodic benefit costs for the pension and other postretirement plans for the years ended December 31, 2019 and 2018, included the following components:

	Pension Plan									Other Benefits
	2019			2018			2017			2019			2018			2017
Service cost	$	26,718		$	29,027		$	23,801		$	7,475		$	8,317		$	7,152
Interest cost	26,966			23,994			23,256			5,441			4,873			4,988
Expected return on plan assets	(30,285		)	(27,702		)	(24,119		)	(5,794		)	(5,639		)	(4,875		)
Net amortization and deferral	10,975			16,233			12,962			758			1,281			1,186
Net periodic benefit cost	$	34,374		$	41,552		$	35,900		$	7,880		$	8,832		$	8,451

Service cost portion of the pension plan and other postretirement benefits is recognized in administrative and general within the Consolidated Statements of Income. Other components of net periodic benefit costs include interest costs, expected return on plan assets, amortization of prior service costs, and recognized net actuarial loss and are reported together as other components of net periodic benefit cost within the Consolidated Statements of Income.

Below are the actuarial assumptions used in determining the net periodic benefit costs for the benefit plans, which uses the end of the prior year as the measurement date:

	Pension Benefits				Other Benefits
	2019		2018		2019		2018
Weighted average assumptions as of December 31:
Discount rate	4.20	%	3.60	%	4.25	%	3.65	%
Long-term rate of return on plan assets	6.50	%	6.50	%	5.50	%	5.50	%
Rate of compensation increases - pension plan	3.25	%	3.25	%	—		—
Rate of compensation increases - SERP	3.75	%	3.75	%	—		—
Cost of living adjustment	2.50	%	2.50	%

The health care cost trend rate assumption has a significant effect on the amounts reported. For 2019 measurement purposes, the Company assumed a 7.0% annual rate of increase in the per capita cost of covered benefits with the rate decreasing to 5.3% by 2022, then gradually grading down to 4.3% over the next 50 years. A 1-percentage point change in assumed health care cost trends is estimated to have the following effect:

	1-Percentage Point Increase		1-Percentage Point (Decrease)
Effect on total service and interest costs	$	3,610	$	(2,650	)
Effect on accumulated postretirement benefit obligation	$	33,945	$	(25,757	)

The Company intends to make annual contributions that meet the funding requirements of ERISA. The Company estimates in 2020 that the annual contribution to the pension plans will be $38.0 million and the annual contribution to the other postretirement plan will be $7.5 million.