Retirement Benefits

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements [Abstract]

Retirement Benefits

(6)   Retirement Benefits

PSE has a defined benefit pension plan covering substantially all PSE employees.  Pension benefits earned are a function of age, salary, years of service and, in the case of employees in the cash balance formula plan, the applicable annual interest crediting rates.  PSE also maintains a non-qualified Supplemental Executive Retirement Plan (SERP) for its key senior management employees.  In addition to providing pension benefits, PSE provides group health care and life insurance benefits for certain retired employees.  These benefits are provided principally through an insurance company.  The insurance premiums, paid primarily by retirees, are based on the benefits provided during the year.

The February 6, 2009 merger of Puget Energy with Puget Holdings triggered a new basis of accounting for PSE's retirement benefit plans in the Puget Energy consolidated financial statements.  Such purchase accounting adjustments associated with the remeasurement of the retirement plans are recorded at Puget Energy.

The following tables summarize the Company's net periodic benefit cost for the three and nine months ended September 30, 2011 and 2010:

Puget Energy	Qualified Pension Benefits						SERP Pension Benefits				Other Benefits
	Three Months Ended September 30,						Three Months Ended September 30,				Three Months Ended September 30,
(Dollars in Thousands)	2011			2010			2011		2010		2011			2010
Components of net periodic benefit cost:
Service cost	$	3,748		$	4,009		$	310	$	256	$	22		$	26
Interest cost		6,438			6,965			548		541		196			220
Expected return on plan assets		(8,788	)		(8,087	)		--		--		(126	)		(127	)
Amortization of prior service cost		(495	)		--			--		--		--			--
Amortization of net loss (gain)		--			--			90		--		(36	)		(17	)
Net periodic benefit cost	$	903		$	2,887		$	948	$	797	$	56		$	102

Puget Energy	Qualified Pension Benefits						SERP Pension Benefits				Other Benefits
	Nine Months Ended September 30,						Nine Months Ended September 30,				Nine Months Ended September 30,
(Dollars in Thousands)	2011			2010			2011		2010		2011			2010
Components of net periodic benefit cost:
Service cost	$	11,867		$	12,083		$	931	$	768	$	85		$	79
Interest cost		19,697			21,030			1,644		1,624		605			660
Expected return on plan assets		(26,508	)		(24,501	)		--		--		(377	)		(381	)
Amortization of prior service cost		(1,485	)		--			--		--		--			--
Amortization of net loss (gain)		--			--			270		--		(34	)		(51	)
Net periodic benefit cost	$	3,571		$	8,612		$	2,845	$	2,392	$	279		$	307

Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits				Other Benefits
	Three Months Ended September 30,						Three Months Ended September 30,				Three Months Ended September 30,
(Dollars in Thousands)	2011			2010			2011		2010		2011			2010
Components of net periodic benefit cost:
Service cost	$	3,748		$	4,009		$	310	$	256	$	22		$	26
Interest cost		6,438			6,965			548		541		196			220
Expected return on plan assets		(10,984	)		(10,875	)		--		--		(126	)		(127	)
Amortization of prior service cost		(393	)		185			141		141		16			33
Amortization of net loss (gain)		2,298			1,781			298		192		(144	)		(138	)
Amortization of transition obligation		--			--			--		--		12			12
Net periodic benefit cost	$	1,107		$	2,065		$	1,297	$	1,130	$	(24	)	$	26

Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits				Other Benefits
	Nine Months Ended September 30,						Nine Months Ended September 30,				Nine Months Ended September 30,
(Dollars in Thousands)	2011			2010			2011		2010		2011			2010
Components of net periodic benefit cost:
Service cost	$	11,867		$	12,083		$	931	$	768	$	85		$	79
Interest cost		19,697			21,030			1,644		1,624		605			660
Expected return on plan assets		(33,096	)		(32,864	)		--		--		(377	)		(381	)
Amortization of prior service cost		(1,180	)		555			422		422		47			99
Amortization of net loss (gain)		7,687			5,193			895		576		(361	)		(414	)
Amortization of transition obligation		--			--			--		--		37			36
Net periodic benefit cost	$	4,975		$	5,997		$	3,892	$	3,390	$	36		$	79

The following table summarizes the Company's change in benefit obligation for the periods ended September 30, 2011 and December 31, 2010:

Puget Energy and Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	September 30, 2011			December 31, 2010			September 30, 2011			December 31, 2010			September 30, 2011			December 31, 2010
Change in benefit obligation:
Benefit obligation at beginning of period	$	532,615		$	504,786		$	44,322		$	39,152		$	16,579		$	15,953
Beginning of year remeasurement		(3,755	)		--			--			--			(234	)		--
Service cost		11,867			16,089			931			1,024			85			106
Interest cost		19,697			27,975			1,644			2,165			605			880
Amendment		--			(21,866	)		--			--			--			--
Actuarial loss		--			32,163			--			3,663			--			867
Benefits paid		(28,350	)		(26,532	)		(1,599	)		(1,682	)		(1,344	)		(2,030	)
Medicare part D subsidiary received		--			--			--			--			408			803
Benefit obligation at end of period	$	532,074		$	532,615		$	45,298		$	44,322		$	16,099		$	16,579

The fair value of the Company's pension plan assets was $456.8 million and $526.5 million at September 30, 2011 and December 31, 2010, respectively.

The Company anticipates its aggregate contributions to fund the retirement plan, and payments to the SERP and the other post retirement plan to be at least $5.0 million, $3.5 million and $0.5 million, respectively, for the year ending December 31, 2011.  During the three months ended September 30, 2011, the Company contributed $0.4 million and $0.1 million to meet the SERP and the other postretirement obligations, respectively.  During the nine months ended September 30, 2011, the Company contributed $5.0 million, $1.6 million and $0.7 million to fund the qualified retirement plan, SERP and the other postretirement plan, respectively.

As a result of the Patient Protection and Affordable Care Act of 2010, PSE recorded a one-time tax expense of $0.8 million during the nine months ended September 30, 2010, related to a Medicare D subsidy that PSE receives.  These subsidies have been non-taxable in the past and will be subject to federal income taxes after 2012 as a result of the legislation.