
	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. Beginning January 1, 2014, all new UA employees and those new non-represented employees who elect to accumulate the Company contribution in the Cash Balance pension, will receive annual pay credits of 4% each year. They will also receive interest credits like other participants in the Cash Balance pension, which are at least 1% per quarter. When a newly-hired employee with a vested Cash Balance benefit leaves PSE, he or she will have annuity and lump sum options for distribution, with annuities calculated according to the Pension Protection Act. Those who select the lump sum option will receive their current cash balance amount. Participation by continuing employees in the Cash Balance pension plan is not affected. 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 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 re-measurement of the retirement plans are recorded at Puget Energy.

The following tables summarize the Company’s net periodic benefit cost for the three and six months ended June 30, 2014 and 2013:



Puget Energy	Qualified Pension Benefits						SERP Pension Benefits					Other Benefits
	Three Months Ended June 30,
(Dollars in Thousands)	2014			2013			2014		2013			2014			2013
Components of net periodic benefit cost:
Service cost	$	4,206		$	4,934		$	261	$	375		$	26		$	32
Interest cost	6,965			6,182			577		511			159			155
Expected return on plan assets	(10,511		)	(9,696		)	—		—			(134		)	(109		)
Amortization of prior service cost	(495		)	(495		)	11		(4		)	—			—
Amortization of net loss (gain)	—			794			228		365			(130		)	18
Net periodic benefit cost	$	165		$	1,719		$	1,077	$	1,247		$	(79	)	$	96




Puget Energy	Qualified Pension Benefits						SERP Pension Benefits					Other Benefits
	Six Months Ended June 30,
(Dollars in Thousands)	2014			2013			2014		2013			2014			2013
Components of net periodic benefit cost:
Service cost	$	8,718		$	9,643		$	521	$	749		$	56		$	67
Interest cost	14,020			12,377			1,155		1,022			342			332
Expected return on plan assets	(21,232		)	(19,548		)	—		—			(267		)	(218		)
Amortization of prior service cost	(990		)	(990		)	22		(9		)	(197		)	—
Amortization of net loss (gain)	—			1,444			456		731			—			34
Net periodic benefit cost	$	516		$	2,926		$	2,154	$	2,493		$	(66	)	$	215



Puget Sound Energy	Qualified						SERP					Other
	Pension Benefits						Pension Benefits					Benefits
	Three Months Ended June 30,
(Dollars in Thousands)	2014			2013			2014		2013			2014			2013
Components of net periodic benefit cost:
Service cost	$	4,206		$	4,934		$	261	$	375		$	26		$	32
Interest cost	6,965			6,182			577		511			159			155
Expected return on plan assets	(10,708		)	(10,094		)	—		—			(134		)	(109		)
Amortization of prior service cost	(393		)	(393		)	11		(4		)	1			8
Amortization of net loss (gain)	3,359			5,221			365		548			(208		)	(108		)
Net periodic benefit cost	$	3,429		$	5,850		$	1,214	$	1,430		$	(156	)	$	(22	)



Puget Sound Energy	Qualified						SERP					Other
	Pension Benefits						Pension Benefits					Benefits
	Six Months Ended June 30,
(Dollars in Thousands)	2014			2013			2014		2013			2014			2013
Components of net periodic benefit cost:
Service cost	$	8,718		$	9,643		$	521	$	749		$	56		$	67
Interest cost	14,020			12,377			1,155		1,022			342			332
Expected return on plan assets	(21,626		)	(20,343		)	—		—			(267		)	(218		)
Amortization of prior service cost	(786		)	(787		)	22		(8		)	2			14
Amortization of net loss (gain)	6,597			10,306			730		1,096			(352		)	(142		)
Net periodic benefit cost	$	6,923		$	11,196		$	2,428	$	2,859		$	(219	)	$	53

The following table summarizes the Company’s change in benefit obligation for the periods ended June 30, 2014 and December 31, 2013:



Puget Energy and Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
	Six Months Ended			Year Ended			Six Months Ended			Year Ended			Six Months Ended			Year Ended
(Dollars in Thousands)	June 30, 2014			December 31, 2013			June 30, 2014			December 31, 2013			June 30, 2014			December 31, 2013
Change in benefit obligation:
Benefit obligation at beginning of period	$	573,317		$	616,290		$	47,279		$	51,795		$	14,939		$	17,672
Service cost	8,718			19,285			521			1,498			56			134
Interest cost	14,020			24,754			1,155			2,045			342			664
Amendment	—			—			—			478			—			—
Actuarial Net loss/(gain) BOY Census, remeasurement	1,878			(48,559		)	—			(1,687		)	(932		)	(2,240		)
Benefits paid	(25,408		)	(38,453		)	(942		)	(6,850		)	(739		)	(1,536		)
Medicare part D subsidy received	—			—			—						117			245
Benefit obligation at end of period	$	572,525		$	573,317		$	48,013		$	47,279		$	13,783		$	14,939

The aggregate expected contributions by the Company to fund the qualified pension plan, SERP and the other postretirement plans for the year ending December 31, 2014 are expected to be at least $12.0 million, $4.0 million and $0.3 million, respectively. During the three months ended June 30, 2014, the Company contributed $3.0 million, $0.5 million, and $0.1 million to fund the qualified pension plan, SERP and the other postretirement plan, respectively. During the six months ended June 30, 2014, the Company contributed $6.0 million, $0.9 million, and $0.3 million to fund the qualified pension plan, SERP and the other postretirement plan, respectively.