PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS

The pension and other postretirement benefit plans described below only relate to Avista Utilities and AEL&P. Most other subsidiary employees have salary deferral 401(k) savings plans that are defined contribution plans and these have historically not been significant to the Company.

Avista Utilities

The Company has a defined benefit pension plan covering substantially all regular full-time employees at Avista Utilities. Individual benefits under this plan are based upon the employee’s years of service, date of hire and average compensation as specified in the plan. The Company’s funding policy is to contribute at least the minimum amounts that are required to be funded under the Employee Retirement Income Security Act, but not more than the maximum amounts that are currently deductible for income tax purposes. The Company contributed $32.0 million in cash to the pension plan for the nine months ended September 30, 2014 and does not expect to contribute anything further in 2014. The Company contributed $44.3 million in cash to the pension plan in 2013.

In October 2013, the Company revised its defined benefit pension plan such that as of January 1, 2014 the plan is closed to non-union employees hired or rehired by the Company on or after January 1, 2014. Actively employed non-union employees that were hired prior to January 1, 2014 and who were at that date covered under the defined benefit pension plan will continue accruing benefits as originally specified in the plan. A new and separate defined contribution 401(k) plan replaced the defined benefit pension plan for all non-union employees hired or rehired on or after January 1, 2014. Under the new defined contribution plan, the Company provides a non-elective contribution as a percentage of each employee's pay based on his or her age. This new defined contribution plan is in addition to the existing 401(k) plan in which the Company matches a portion of the pay deferred by each participant. In addition to the changes above, the Company revised the lump sum calculation for non-union participants who retire under the defined benefit pension plan on or after January 1, 2014 to provide retiring employees the election of a lump sum amount equivalent to the present value of the benefits based upon applicable discount rates. In April 2014, the local union in Oregon for the International Brotherhood of Electrical Workers (IBEW) accepted the above plan changes in the latest collective bargaining agreement, and the plan changes are effective for Oregon union workers hired or rehired on or after April 1, 2014.

The Company also has a Supplemental Executive Retirement Plan (SERP) that provides additional pension benefits to executive officers of the Company. The SERP is intended to provide benefits to executive officers whose benefits under the pension plan are reduced due to the application of Code Section 415 and the deferral of salary under deferred compensation plans. The liability and expense for this plan are included as pension benefits in the tables included in this Note.

The Company provides certain health care and life insurance benefits for eligible retired employees. The Company accrues the estimated cost of postretirement benefit obligations during the years that employees provide services. In October 2013, the Company revised the health care benefit plan such that beginning on January 1, 2020, the methods for calculating health insurance premiums for non-union retirees under age 65 and active Company employees were revised to establish separate health insurance premiums for each group. In addition, for non-union employees hired or rehired on or after January 1, 2014, upon retirement the Company will provide access to its retiree medical plan, but will no longer contribute towards their medical premiums and each employee would pay the full cost of premiums upon retirement. In April 2014, the local union in Oregon for the IBEW accepted the above plan changes in the latest collective bargaining agreement, and the plan changes are effective for Oregon union workers hired or rehired on or after April 1, 2014.

The Company has a Health Reimbursement Arrangement to provide employees with tax-advantaged funds to pay for allowable medical expenses upon retirement. The amount earned by the employee is fixed on the retirement date based on the employee’s years of service and the ending salary. The liability and expense of this plan are included as other postretirement benefits.

The Company provides death benefits to beneficiaries of executive officers who die during their term of office or after retirement. Under the plan, an executive officer’s designated beneficiary will receive a payment equal to twice the executive officer’s annual base salary at the time of death (or if death occurs after retirement, a payment equal to twice the executive officer’s total annual pension benefit). The liability and expense for this plan are included as other postretirement benefits.

The Company uses a December 31 measurement date for its pension and other postretirement benefit plans. The following table sets forth the components of net periodic benefit costs for the three and nine months ended September 30 (dollars in thousands):



	Pension Benefits						Other Post-retirement Benefits
	2014			2013			2014			2013
Three months ended September 30:
Service cost	$	3,868		$	4,743		$	499		$	971
Interest cost	6,706			5,978			1,353			1,373
Expected return on plan assets	(8,110		)	(6,900		)	(472		)	(402		)
Amortization of prior service cost	6			75			(43		)	(37		)
Net loss recognition	1,163			3,220			826			1,395
Net periodic benefit cost	$	3,633		$	7,116		$	2,163		$	3,300
Nine months ended September 30:
Service cost	$	12,754		$	14,229		$	1,972		$	3,035
Interest cost	20,118			17,934			4,059			4,153
Expected return on plan assets	(24,330		)	(20,700		)	(1,416		)	(1,202		)
Amortization of prior service cost	18			225			(129		)	(111		)
Net loss recognition	2,334			9,989			2,001			4,342
Net periodic benefit cost	$	10,894		$	21,677		$	6,487		$	10,217

AEL&P

Union Employees

Pension benefits for all union employees of AEL&P are provided through the Alaska Electrical Pension Fund Retirement Plan, a multiemployer plan to which AEL&P pays a defined contribution amount per union employee pursuant to a collective bargaining agreement with the IBEW.

AEL&P also participates in a multiemployer plan that provides substantially all union workers with health care and other welfare benefits during their working lives and after retirement. AEL&P pays a defined contribution amount per union employee pursuant to a collective bargaining agreement with the IBEW.

Non-Union Employees

AEL&P has a defined contribution money purchase pension plan covering all employees of AEL&P that are not covered by a collective bargaining agreement. Contributions to the plan are made based on a percentage of each employee's compensation.

AEL&P also has a noncontributory 401(k) savings plan, which covers substantially all nonunion employees who have completed 1,000 hours of service during a 12-month period. Employees who elect to participate may contribute up to the Internal Revenue Service's maximum amount.

The pension and other postretirement plans described above for AEL&P are not significant to Avista Corp.