PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS

The pension and other postretirement benefit plans described below only relate to Avista Utilities. AEL&P (not discussed below) participates in a defined contribution multiemployer plan for its union workers and a defined contribution money purchase pension plan for its nonunion workers. METALfx (not discussed below) has a defined contribution 401(k) savings plan. None of the subsidiary retirement plans, individually or in the aggregate, are significant to Avista Corp.

Avista Utilities

The Company has a defined benefit pension plan covering the majority of all regular full-time employees at Avista Utilities that were hired prior to January 1, 2014. 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. Non-union employees hired on or after January 1, 2014 participate in a defined contribution 401(k) plan in lieu of a defined benefit pension 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 $12.0 million in cash to the pension plan for the nine months ended September 30, 2015 and expects to make no further contributions in 2015. The Company contributed $32.0 million in cash to the pension plan in 2014.

The Company also has a Supplemental Executive Retirement Plan (SERP) that provides additional pension benefits to executive officers and certain key employees of the Company. The SERP is intended to provide benefits to individuals whose benefits under the defined benefit pension plan are reduced due to the application of Section 415 of the Internal Revenue Code of 1986 and the deferral of salary under deferred compensation plans. The liability and expense for the SERP 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 that were hired prior to January 1, 2014. The Company accrues the estimated cost of postretirement benefit obligations during the years that employees provide services. The liability and expense of this plan are included as other postretirement benefits. Non-union employees hired on or after January 1, 2014, will have access to the retiree medical plan upon retirement; however, Avista Corp. will no longer provide a contribution toward their medical premium.

The Company has a Health Reimbursement Arrangement (HRA) 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 the HRA 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 defined benefit 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
	2015			2014			2015			2014
Three months ended September 30:
Service cost	$	4,984		$	3,868		$	721		$	499
Interest cost	6,531			6,706			1,292			1,353
Expected return on plan assets	(7,075		)	(8,110		)	(500		)	(472		)
Amortization of prior service cost	6			6			(287		)	(43		)
Net loss recognition	2,397			1,163			1,324			826
Net periodic benefit cost	$	6,843		$	3,633		$	2,550		$	2,163
Nine months ended September 30:
Service cost	$	14,917		$	12,754		$	2,141		$	1,972
Interest cost	19,734			20,118			3,915			4,059
Expected return on plan assets	(21,566		)	(24,330		)	(1,431		)	(1,416		)
Amortization of prior service cost	18			18			(853		)	(129		)
Net loss recognition	7,425			2,334			3,879			2,001
Net periodic benefit cost	$	20,528		$	10,894		$	7,651		$	6,487