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EMPLOYEE BENEFITS
 12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
EMPLOYEE BENEFITS EMPLOYEE BENEFITS

Pension and Other Postretirement Employee Benefits

Through December 31, 2016, we participated in the Integrys Energy Group Retirement Plan, a noncontributory, qualified pension plan sponsored by WBS. We were responsible for our share of the plan assets and obligations. Effective January 1, 2017, the Integrys Energy Group Retirement Plan was split into six separate plans. As a result, we now have our own pension plan.

We serve as plan sponsor and administrator for certain OPEB plans. The benefits are funded through irrevocable trusts, as allowed for income tax purposes. Our balance sheets reflect only the liabilities associated with our past and current employees and our share of the plan assets and obligations. WEC Energy Group also offers medical, dental, and life insurance benefits to our active employees and their dependents. We expense the allocated costs of these benefits as incurred.

The defined benefit pension plans are closed to all new hires. In addition, the service accruals for the defined benefit pension plans were frozen for non-union employees as of January 1, 2013. These employees receive an annual company contribution to their
401(k) savings plan, which is calculated based on age, wages, and full years of vesting service as of December 31 each year.

We use a year-end measurement date to measure the funded status of all of the pension and OPEB plans. Due to the regulated nature of our business, we have concluded that substantially all of the unrecognized costs resulting from the recognition of the funded status of the pension and OPEB plans qualify as a regulatory asset.

The following tables provide a reconciliation of the changes in our share of the plans' benefit obligations and fair value of assets:
 
 
Pension Benefits
 
OPEB Benefits
(in millions)
 
2019
 
2018
 
2019
 
2018
Change in benefit obligation
 
 
 
 
 
 
 
 
Obligation at January 1
 
$
664.1

 
$
704.7

 
$
151.4

 
$
220.2

Service cost
 
8.7

 
10.4

 
4.1

 
6.1

Interest cost
 
28.2

 
26.0

 
6.5

 
8.2

Plan amendments
 
—

 
—

 
6.2

 
(1.5
)
Net transfer to/from affiliates
 
3.6

 
—

 
—

 
(0.1
)
Actuarial loss (gain)
 
64.4

 
(42.7
)
 
(13.3
)
 
(70.7
)
Participant contributions
 
—

 
—

 
1.0

 
1.2

Benefit payments
 
(35.0
)
 
(34.3
)
 
(8.7
)
 
(9.9
)
Transfer
 
—

 
—

 
—

 
(2.1
)
Obligation at December 31
 
$
734.0

 
$
664.1

 
$
147.2

 
$
151.4

 
 
 
 
 
 
 
 
 
Change in fair value of plan assets
 
 
 
 
 
 
 
 
Fair value at January 1
 
$
639.3

 
$
712.4

 
$
231.7

 
$
250.5

Actual return on plan assets
 
139.0

 
(39.4
)
 
38.6

 
(10.3
)
Employer contributions
 
0.6

 
0.6

 
—

 
0.1

Participant contributions
 
—

 
—

 
1.0

 
1.2

Benefit payments
 
(35.0
)
 
(34.3
)
 
(8.7
)
 
(9.9
)
Net transfer from affiliates
 
3.6

 
—

 
0.8

 
0.1

Fair value at December 31
 
$
747.5

 
$
639.3

 
$
263.4

 
$
231.7

Funded status at December 31
 
$
13.5

 
$
(24.8
)
 
$
116.2

 
$
80.3



The amounts recognized on our balance sheets at December 31 related to the funded status of the benefit plans were as follows:
 
 
Pension Benefits
 
OPEB Benefits
(in millions)
 
2019
 
2018
 
2019
 
2018
Pension and OPEB assets
 
$
20.8

 
$
—

 
$
127.5

 
$
92.8

Pension and OPEB obligations
 
7.3

 
24.8

 
11.3

 
12.5

Total net assets (liabilities)
 
$
13.5

 
$
(24.8
)

$
116.2


$
80.3



The accumulated benefit obligation for the defined benefit pension plans was $663.0 million and $594.1 million at December 31, 2019 and 2018, respectively.

The following table shows information for pension plans with an accumulated benefit obligation in excess of plan assets. There were no plan assets related to these pension plans. Amounts presented are as of December 31:
(in millions)
 
2019
 
2018
Projected benefit obligation
 
$
7.3

 
$
7.3

Accumulated benefit obligation
 
7.3

 
7.3



The following table shows the amounts that had not yet been recognized in our net periodic benefit cost as of December 31:
 
 
Pension Benefits
 
OPEB Benefits
(in millions)
 
2019
 
2018
 
2019
 
2018
Net regulatory assets (liabilities)
 
 
 
 
 
 
 
 
Net actuarial loss (gain)
 
$
176.1

 
$
220.4

 
$
(55.0
)
 
$
(17.9
)
Prior service credits
 
—

 
—

 
(65.1
)
 
(82.8
)
Total
 
$
176.1

 
$
220.4

 
$
(120.1
)
 
$
(100.7
)


The following table shows the estimated amounts that will be amortized into net periodic benefit cost during 2020:
(in millions)
 
Pension Benefits
 
OPEB Benefits
Net actuarial loss (gain)
 
$
23.1

 
$
(1.4
)
Prior service credits
 
—

 
(10.5
)
Total 2020 – estimated amortization
 
$
23.1

 
$
(11.9
)


The components of net periodic benefit cost (credit) (including amounts capitalized to our balance sheets) for the years ended December 31 were as follows:
 
 
Pension Benefits
 
OPEB Benefits
(in millions)
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Service cost
 
$
8.7

 
$
10.4

 
$
9.0

 
$
4.1

 
$
6.1

 
$
6.2

Interest cost
 
28.2

 
26.0

 
26.7

 
6.5

 
8.2

 
9.1

Expected return on plan assets
 
(48.0
)
 
(48.3
)
 
(46.4
)
 
(16.5
)
 
(17.8
)
 
(16.7
)
Amortization of prior service credit
 
—

 
—

 
—

 
(11.5
)
 
(11.3
)
 
(9.8
)
Amortization of net actuarial loss
 
17.8

 
21.1

 
17.3

 
1.7

 
2.5

 
2.5

Net periodic benefit cost (credit)
 
$
6.7

 
$
9.2

 
$
6.6

 
$
(15.7
)
 
$
(12.3
)
 
$
(8.7
)


The weighted-average assumptions used to determine the benefit obligations for the plans were as follows for the years ended December 31:
 
 
Pension Benefits
 
OPEB Benefits
 
 
2019
 
2018
 
2019
 
2018
Discount rate
 
3.45%
 
4.30%
 
3.48%
 
4.29%
Rate of compensation increase
 
4.00%
 
4.00%
 
N/A
 
N/A
Assumed medical cost trend rate (Pre 65)
 
N/A
 
N/A
 
6.00%
 
6.25%
Ultimate trend rate (Pre 65)
 
N/A
 
N/A
 
5.00%
 
5.00%
Year ultimate trend rate is reached (Pre 65)
 
N/A
 
N/A
 
2028
 
2024
Assumed medical cost trend rate (Post 65)
 
N/A
 
N/A
 
5.80%
 
5.90%
Ultimate trend rate (Post 65)
 
N/A
 
N/A
 
5.00%
 
5.00%
Year ultimate trend rate is reached (Post 65)
 
N/A
 
N/A
 
2028
 
2028

The weighted-average assumptions used to determine net periodic benefit cost for the plans were as follows for the years ended December 31:
 
 
Pension Benefits
 
 
2019
 
2018
 
2017
Discount rate
 
4.30%
 
3.70%
 
4.19%
Expected return on assets
 
7.25%
 
7.25%
 
7.25%
Rate of compensation increase
 
4.00%
 
4.00%
 
4.00%

 
 
OPEB Benefits
 
 
2019
 
2018
 
2017
Discount rate
 
4.29%
 
3.67%
 
4.11%
Expected return on assets
 
7.25%
 
7.25%
 
7.25%
Assumed medical cost trend rate (Pre 65)
 
6.25%
 
6.50%
 
7.00%
Ultimate trend rate (Pre 65)
 
5.00%
 
5.00%
 
5.00%
Year ultimate trend rate is reached (Pre 65)
 
2024
 
2024
 
2021
Assumed medical cost trend rate (Post 65)
 
5.90%
 
6.00%
 
7.00%
Ultimate trend rate (Post 65)
 
5.00%
 
5.00%
 
5.00%
Year ultimate trend rate is reached (Post 65)
 
2028
 
2028
 
2021


WEC Energy Group consults with its investment advisors on an annual basis to help forecast expected long-term returns on plan assets by reviewing historical returns as well as calculating expected total trust returns using the weighted-average of long-term market returns for each of the major target asset categories utilized in the fund. For 2020, the expected return on asset assumption for the pension plan and OPEB plans is 7.00%.

Assumed health care cost trend rates have a significant effect on the amounts reported by us for the health care plans. For the year ended December 31, 2019, a one-percentage-point change in assumed health care cost trend rates would have had the following effects:
(in millions)
 
1% Increase
 
1% Decrease
Effect on total of service and interest cost components of net periodic postretirement health care benefit cost
 
$
1.5

 
$
(1.1
)
Effect on the health care component of the accumulated postretirement benefit obligation
 
18.1

 
(14.6
)


Plan Assets

Current pension trust assets and amounts which are expected to be contributed to the trusts in the future are expected to be adequate to meet pension payment obligations to current and future retirees.

The Investment Trust Policy Committee oversees investment matters related to all of our funded benefit plans. The Committee works with external actuaries and investment consultants on an on-going basis to establish and monitor investment strategies and target asset allocations. Forecasted cash flows for plan liabilities are regularly updated based on annual valuation results. Target allocations are determined utilizing projected benefit payment cash flows and risk analyses of appropriate investments. They are intended to reduce risk, provide long-term financial stability for the plans and maintain funded levels which meet long-term plan obligations while preserving sufficient liquidity for near-term benefit payments.

Our pension trust target asset allocation is 45% equity investments, 45% fixed income investments, and 10% private equity and real estate investments. The OPEB trust has a target asset allocation of 45% equity investments and 55% fixed income investments. Equity securities include investments in large-cap, mid-cap, and small-cap companies. Fixed income securities include corporate bonds of companies from diversified industries, mortgage and other asset backed securities, commercial paper, and United States Treasuries.

Pension and OPEB plan investments are recorded at fair value. See Note 1(o), Fair Value Measurements, for more information regarding the fair value hierarchy and the classification of fair value measurements based on the types of inputs used.

The following tables provide the fair values of our investments by asset class:
 
 
December 31, 2019
 
 
Pension Plan Assets
 
OPEB Assets
(in millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Class
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States equity
 
$
96.5

 
$
—

 
$
—

 
$
96.5

 
$
30.5

 
$
—

 
$
—

 
$
30.5

International equity
 
92.9

 
0.4

 
—

 
93.3

 
32.7

 
0.2

 
—

 
32.9

Fixed income securities: *
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States bonds
 
13.2

 
140.3

 
—

 
153.5

 
44.7

 
38.7

 
—

 
83.4

International bonds
 
6.5

 
23.4

 
—

 
29.9

 
7.9

 
1.4

 
—

 
9.3

 
 
$
209.1

 
$
164.1

 
$
—

 
$
373.2

 
$
115.8

 
$
40.3

 
$
—

 
$
156.1

Investments measured at net asset value
 
 
 
 
 
 
 
$
374.3

 
 
 
 
 
 
 
$
107.3

Total
 
$
209.1

 
$
164.1

 
$
—

 
$
747.5

 
$
115.8

 
$
40.3

 
$
—

 
$
263.4


*
This category represents investment grade bonds of United States and foreign issuers denominated in United States dollars from diverse industries.
 
 
December 31, 2018
 
 
Pension Plan Assets
 
OPEB Assets
(in millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Class
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States equity
 
$
79.0

 
$
—

 
$
—

 
$
79.0

 
$
24.0

 
$
—

 
$
—

 
$
24.0

International equity
 
80.1

 
0.3

 
—

 
80.4

 
27.0

 
0.2

 
—

 
27.2

Fixed income securities: *
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States bonds
 
16.3

 
119.1

 
—

 
135.4

 
46.9

 
37.0

 
—

 
83.9

International bonds
 
2.3

 
21.0

 
—

 
23.3

 
2.5

 
1.6

 
—

 
4.1

 
 
$
177.7

 
$
140.4

 
$
—

 
$
318.1

 
$
100.4

 
$
38.8

 
$
—

 
$
139.2

Investments measured at net asset value
 
 
 
 
 
 
 
$
321.2

 
 
 
 
 
 
 
$
92.5

Total
 
$
177.7

 
$
140.4

 
$
—

 
$
639.3

 
$
100.4

 
$
38.8

 
$
—

 
$
231.7


*
This category represents investment grade bonds of United States and foreign issuers denominated in United States dollars from diverse industries.

The following table sets forth a reconciliation of changes in the fair value of pension and OPEB plan assets categorized as Level 3 in the fair value hierarchy:
 
 
Private Equity and
Real Estate
 
International Equity
(in millions)
 
Pension
 
OPEB
 
Pension
 
OPEB
Beginning balance at January 1, 2018
 
$
12.5

 
$
0.1

 
$
0.4

 
$
0.2

Realized and unrealized losses
 
0.7

 
—

 
(0.1
)
 
—

Purchases
 
2.4

 
—

 
—

 
—

Transfers out of level 3
 
(15.6
)
 
(0.1
)
 
(0.3
)
 
(0.2
)
Ending balance at December 31, 2018
 
$
—

 
$
—

 
$
—

 
$
—


Cash Flows

We expect to contribute $0.7 million to the pension plans and $0.1 million to the OPEB plans in 2020, dependent upon various factors affecting us, including our liquidity position and the effects of the Tax Legislation.

The following table shows the payments, reflecting expected future service, that we expect to make for pension and OPEB over the next 10 years:
(in millions)
 
Pension Benefits
 
OPEB Benefits
2020
 
$
35.6

 
$
8.9

2021
 
36.3

 
8.0

2022
 
36.5

 
8.3

2023
 
37.4

 
8.6

2024
 
37.5

 
8.7

2025-2029
 
190.3

 
46.0



Savings Plans

WEC Energy Group sponsors a 401(k) savings plan that allows substantially all of our full-time employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan-specified guidelines. A percentage of employee contributions are matched by us through a contribution into the employee's savings plan account, up to certain limits. The 401(k) savings plans include an Employee Stock Ownership Plan. Certain employees receive an employer retirement contribution, which amounts are contributed to an employee's savings plan account based on the employee's wages, age, and years of service. Our share of the total costs incurred under all of these plans was $10.4 million in 2019, $9.9 million in 2018, and $9.6 million in 2017.