RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

Pension Plan Benefits

We have a qualified defined benefit pension plan (“retirement plan”) for eligible employees, comprised of a traditional final average pay plan and a cash balance plan. The traditional final average pay plan is noncontributory, covers select employees and provides retirement benefits based on years of benefit service, average final compensation and age at retirement. The cash balance plan is also noncontributory, covers substantially all employees and provides retirement benefits based on eligible compensation and interest credits. Our funding practice for the retirement plan is to contribute amounts necessary to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus additional amounts as we determine appropriate. We made contributions of $4.1 million, $3.8 million and $6.9 million to the retirement plan in 2015, 2014 and 2013, respectively. We expect to contribute up to $2.8 million to the retirement plan in 2016.

We also have two supplemental nonqualified, noncontributory, defined benefit pension plans for selected management employees (the “supplemental benefit plans” and collectively with the retirement plan, the “pension plans”). The supplemental benefit plans provide for benefits that supplement those provided by the retirement plan. The obligations under these supplemental benefit plans are included in the pension benefit obligation calculations below. The investments held in trust for the supplemental benefit plans of $35.6 million and $26.5 million at December 31, 2015 and 2014, respectively, are not included in the plan asset amounts presented below, but are included in other assets on our consolidated statement of financial position. For the years ended December 31, 2015, 2014 and 2013, we contributed $9.4 million, $5.1 million and $0.6 million, respectively, to these supplemental benefit plans.

Our investments held for the supplemental benefit plans are classified as available-for-sale securities and the net unrealized loss of $0.2 million through December 31, 2015 and net unrealized gain of $0.1 million through December 31, 2014 were recognized in the accumulated other comprehensive income component of equity.

The plan assets of the retirement plan consisted of the following assets by category:



Asset Category	2015		2014
Fixed income securities	50.4	%	48.8	%
Equity securities	49.6	%	51.2	%
Total	100.0	%	100.0	%

Net periodic benefit cost for the pension plans during 2015, 2014 and 2013 was as follows by component:



(In thousands)	2015			2014			2013
Service cost	$	6,496		$	5,066		$	5,261
Interest cost	3,696			3,603			2,792
Expected return on plan assets	(3,838		)	(3,541		)	(2,868		)
Amortization of prior service credit	(42		)	(42		)	(42		)
Amortization of unrecognized loss	4,243			1,545			2,714
Net pension cost	$	10,555		$	6,631		$	7,857

The following table reconciles the obligations, assets and funded status of the pension plans as well as the presentation of the funded status of the pension plans in the consolidated statements of financial position as of December 31, 2015 and 2014:



(In thousands)	2015			2014
Change in Benefit Obligation:
Beginning projected benefit obligation	$	(95,740	)	$	(73,468	)
Service cost	(6,496		)	(5,066		)
Interest cost	(3,696		)	(3,603		)
Actuarial net gain (loss)	5,869			(14,937		)
Benefits paid	2,747			1,334
Other	128			—
Ending projected benefit obligation	$	(97,188	)	$	(95,740	)
Change in Plan Assets:
Beginning plan assets at fair value	$	56,390		$	48,894
Actual return on plan assets	(129		)	4,851
Employer contributions	4,102			3,822
Benefits paid	(2,108		)	(1,177		)
Other	(128		)	—
Ending plan assets at fair value	$	58,127		$	56,390
Funded status, underfunded	$	(39,061	)	$	(39,350	)
Accumulated benefit obligation:
Retirement plan	$	(49,169	)	$	(48,571	)
Supplemental benefit plans	(40,830		)	(35,962		)
Total accumulated benefit obligation	$	(89,999	)	$	(84,533	)
Amounts recorded as:
Funded Status:
Accrued pension liabilities	$	(45,322	)	$	(44,033	)
Other non-current assets	6,408			4,683
Other current liabilities	(147		)	—
Total	$	(39,061	)	$	(39,350	)
Unrecognized Amounts in Non-current Regulatory Assets:
Net actuarial loss	$	18,724		$	24,868
Prior service credit	66			25
Total	$	18,790		$	24,893

The unrecognized amounts that otherwise would have been charged and/or credited to accumulated other comprehensive income in accordance with the FASB guidance on accounting for retirement benefits are recorded as a regulatory asset on our consolidated statements of financial position as discussed in Note 5. The amounts recorded as a regulatory asset represent a net periodic benefit cost to be recognized in our operating income in future periods.

The actuarial net loss in 2014 includes the impact of a change in our mortality assumption, which generally assumes longer life expectancies for plan participants as compared with our prior assumption. Additionally the reduction in our discount rate assumption contributed to the actuarial net loss in 2014. The actuarial net gain in 2015 resulted primarily from an increase in discount rates.

Actuarial assumptions used to determine the benefit obligation for the pension plans at December 31, 2015, 2014 and 2013 are as follows:



	2015	2014	2013
Discount rate	4.01 - 4.44%	3.75 - 4.05%	4.60 - 5.10%
Annual rate of salary increases	4.00%	4.00%	4.00 - 6.00%

Actuarial assumptions used to determine the benefit cost for the pension plans for the years ended December 31, 2015, 2014 and 2013 are as follows:



	2015	2014	2013
Discount rate	3.75 - 4.05%	4.60 - 5.10%	3.70 - 4.45%
Annual rate of salary increases	4.00%	4.00 - 6.00%	5.00 - 6.00%
Expected long-term rate of return on plan assets	6.70%	6.75%	7.00%

At December 31, 2015, the projected benefit payments for the pension plans calculated using the same assumptions as those used to calculate the benefit obligation described above are as follows:



(In thousands)
2016	$	1,716
2017	5,259
2018	5,548
2019	5,878
2020	6,551
2021 through 2025	38,681

Investment Objectives and Fair Value Measurement

The general investment objectives of the retirement plan include maximizing the return within reasonable and prudent levels of risk and controlling administrative and management costs. The targeted asset allocation is weighted equally between equity and fixed income investments. Investment decisions are made by our retirement benefits board as delegated by our board of directors. Equity investments may include various types of U.S. and international equity securities, such as large-cap, mid-cap and small-cap stocks. Fixed income investments may include cash and short-term instruments, U.S. Government securities, corporate bonds, mortgages and other fixed income investments. No investments are prohibited for use in the retirement plan, including derivatives, but our exposure to derivatives currently is not material. We intend that the long-term capital growth of the retirement plan, together with employer contributions, will provide for the payment of the benefit obligations.

We determine our expected long-term rate of return on plan assets based on the current and expected target allocations of the retirement plan investments and considering historical and expected long-term rates of returns on comparable fixed income investments and equity investments.

The measurement of fair value is based on a three-tier hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. For the years ended December 31, 2015 and 2014, there were no transfers between levels.

The fair value measurement of the retirement plan assets as of December 31, 2015, was as follows:



	Fair Value Measurements at Reporting Date Using
	Quoted Prices in		Significant		Significant
	Active Markets for		Other Observable		Unobservable
(In thousands)	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Mutual funds — U.S. equity securities	$	23,427	$	—	$	—
Mutual funds — international equity securities	5,409		—		—
Mutual funds — fixed income securities	29,291		—		—
Total	$	58,127	$	—	$	—

The fair value measurement of the retirement plan assets as of December 31, 2014, was as follows:



	Fair Value Measurements at Reporting Date Using
	Quoted Prices in		Significant		Significant
	Active Markets for		Other Observable		Unobservable
(In thousands)	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Mutual funds — U.S. equity securities	$	23,770	$	—	$	—
Mutual funds — international equity securities	5,096		—		—
Mutual funds — fixed income securities	23,783		—		—
Guaranteed deposit fund	—		3,741		—
Total	$	52,649	$	3,741	$	—

The mutual funds consist primarily of publicly traded mutual funds and are recorded at fair value based on observable trades for identical securities in an active market. The guaranteed deposit fund was a group annuity contract and was valued at estimated fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations that were quoted in active markets, which represented the net asset value as of December 31, 2014. As of December 31, 2014, there were no unfunded commitments for the guaranteed deposit fund and the investment allowed a daily redemption with a one day notice.

Other Postretirement Benefits

We provide certain postretirement health care, dental and life insurance benefits for eligible employees. We contributed $9.1 million, $6.3 million and $1.5 million to the postretirement benefit plan in 2015, 2014 and 2013, respectively. We expect to contribute up to $9.2 million to the plan in 2016.

The plan assets consisted of the following assets by category:



Asset Category	2015		2014
Fixed income securities	50.0	%	57.2	%
Equity securities	50.0	%	42.8	%
Total	100.0	%	100.0	%

Our measurement of the accumulated postretirement benefit obligation as of December 31, 2015 and 2014 does not reflect the potential receipt of any subsidies under the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

Net postretirement benefit plan cost for 2015, 2014 and 2013 was as follows by component:



(In thousands)	2015			2014			2013
Service cost	$	8,486		$	5,846		$	5,774
Interest cost	2,477			1,991			1,562
Expected return on plan assets	(1,852		)	(1,361		)	(1,415		)
Amortization of unrecognized loss	499			—			220
Net postretirement cost	$	9,610		$	6,476		$	6,141

The following table reconciles the obligations, assets and funded status of the plan as well as the amounts recognized as accrued postretirement liability in the consolidated statements of financial position as of December 31, 2015 and 2014:



(In thousands)	2015			2014
Change in Benefit Obligation:
Beginning accumulated postretirement obligation	$	(57,927	)	$	(42,706	)
Service cost	(8,486		)	(5,846		)
Interest cost	(2,477		)	(1,991		)
Actuarial net gain (loss)	10,265			(7,695		)
Benefits paid	662			311
Other	8			—
Ending accumulated postretirement obligation	$	(57,955	)	$	(57,927	)
Change in Plan Assets:
Beginning plan assets at fair value	$	32,397		$	24,004
Actual return on plan assets	155			2,107
Employer contributions	9,122			6,286
Employer provided retiree premiums	662			311
Benefits paid	(662		)	(311		)
Other	(6		)	—
Ending plan assets at fair value	$	41,668		$	32,397
Funded status, underfunded	$	(16,287	)	$	(25,530	)
Amounts recorded as:
Funded Status:
Accrued postretirement liabilities	$	(16,287	)	$	(25,530	)
Total	$	(16,287	)	$	(25,530	)
Unrecognized Amounts in Non-current Regulatory Assets:
Net actuarial loss	$	191		$	9,258
Total	$	191		$	9,258

Actuarial assumptions used to determine the benefit obligation at December 31, 2015, 2014 and 2013 are as follows:



	2015	2014	2013
Discount rate	4.62%	4.20%	5.15%
Annual rate of salary increases	4.00%	4.00%	4.00%
Health care cost trend rate assumed for next year	7.15%	7.25%	7.50%
Rate to which the cost trend rate is assumed to decline	5.00%	5.00%	5.00%
Year that the rate reaches the ultimate trend rate	2022	2022	2022
Annual rate of increase in dental benefit costs	5.00%	5.00%	5.00%

Actuarial assumptions used to determine the benefit cost for the years ended December 31, 2015, 2014 and 2013 are as follows:



	2015	2014	2013
Discount rate	4.20%	5.15%	4.20%
Annual rate of salary increases	4.00%	4.00%	5.00%
Health care cost trend rate assumed for next year	7.25%	7.50%	8.00%
Rate to which the cost trend rate is assumed to decline	5.00%	5.00%	5.00%
Year that the rate reaches the ultimate trend rate	2022	2022	2017
Expected long-term rate of return on plan assets	5.20%	5.50%	7.00%

At December 31, 2015, the projected benefit payments for the postretirement benefit plan calculated using the same assumptions as those used to calculate the benefit obligations listed above are as follows:



(In thousands)
2016	$	636
2017	734
2018	967
2019	1,241
2020	1,603
2021 through 2025	13,245

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point increase or decrease in assumed health care cost trend rates would have the following effects on costs for 2015 and the postretirement benefit obligation at December 31, 2015:



	One-Percentage-		One-Percentage-
(In thousands)	Point Increase		Point Decrease
Effect on total of service and interest cost	$	3,288	$	(2,282	)
Effect on postretirement benefit obligation	13,452		(9,869		)

Investment Objectives and Fair Value Measurement

The general investment objectives of the other postretirement benefit plan include maximizing the return within reasonable and prudent levels of risk and controlling administrative and management costs. The targeted asset allocation is weighted equally between equity and fixed income investments. Investment decisions are made by our retirement benefits board as delegated by our board of directors. Equity investments may include various types of U.S. and international equity securities, such as large-cap, mid-cap and small-cap stocks. Fixed income investments may include cash and short-term instruments, U.S. Government securities, corporate bonds, mortgages and other fixed income investments. No investments are prohibited for use in the other postretirement benefit plan, including derivatives, but our exposure to derivatives currently is not material. We intend that the long-term capital growth of the other postretirement benefit plan, together with employer contributions, will provide for the payment of the benefit obligations.

We determine our expected long-term rate of return on plan assets based on the current target allocations of the retirement plan investments as well as consider historical returns on comparable fixed income investments and equity investments.

The fair value measurement of the other postretirement benefit plan assets as of December 31, 2015, was as follows:



	Fair Value Measurements at Reporting Date Using
	Quoted Prices in		Significant		Significant
	Active Markets for		Other Observable		Unobservable
(In thousands)	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash and cash equivalents	$	30	$	—	$	—
Mutual funds — U.S. equity securities	19,981		—		—
Mutual funds — international equity securities	863		—		—
Mutual funds — fixed income securities	20,794		—		—
Total	$	41,668	$	—	$	—

The fair value measurement of the other postretirement benefit plan assets as of December 31, 2014, was as follows:



	Fair Value Measurements at Reporting Date Using
	Quoted Prices in		Significant		Significant
	Active Markets for		Other Observable		Unobservable
(In thousands)	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash and cash equivalents	$	5,099	$	—	$	—
Mutual funds — U.S. equity securities	13,070		—		—
Mutual funds — international equity securities	785		—		—
Mutual funds — fixed income securities	12,790		—		—
Guaranteed deposit fund	—		653		—
Total	$	31,744	$	653	$	—

Our investments included in cash equivalents consist of money market mutual funds and common and collective trusts that are administered similar to money market funds recorded at cost plus accrued interest to approximate fair value. Our mutual fund investments consist primarily of publicly traded mutual funds and are recorded at fair value based on observable trades for identical securities in an active market. The guaranteed deposit fund was a group annuity contract and was valued at estimated fair value based on the underlying assets of the fund by discounting the related cash flows based on current yields of similar instruments with comparable durations, which represented the net asset value as of December 31, 2014. As of December 31, 2014, there were no unfunded commitments for the guaranteed deposit fund and the investment allowed a daily redemption with a one day notice.

Defined Contribution Plan

We also sponsor a defined contribution retirement savings plan. Participation in this plan is available to substantially all employees. We match employee contributions up to certain predefined limits based upon eligible compensation and the employee’s contribution rate. The cost of this plan was $4.6 million, $4.5 million and $4.5 million in 2015, 2014 and 2013, respectively.