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Employee Benefit Plans
 12 Months Ended
Dec. 31, 2024
Retirement Benefits [Abstract]  
Employee Benefit Plans
(14) Employee Benefit Plans

Pension and Other Postretirement Benefit Plans

We sponsor and/or contribute to pension, postretirement health care and life insurance benefit plans for eligible employees. The pension plan for our South Dakota and Nebraska employees is referred to as the NorthWestern Energy SD/NE Plan (formerly known as the NorthWestern Corporation Plan), the pension plan for our Montana employees is referred to as the NorthWestern Energy MT Plan (formerly known as the NorthWestern Energy Plan), and collectively they are referred to as the Plans. We utilize a number of accounting mechanisms that reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are recognized into earnings only when the accumulated differences exceed 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets. If necessary, the excess is amortized over the average remaining service period of active employees. The Plans' funded status is recognized as an asset or liability in our Consolidated Financial Statements. See Note 4 - Regulatory Assets and Liabilities, for further discussion on how these costs are recovered through rates charged to our customers.
Benefit Obligations and Funded Status

Following is a reconciliation of the changes in plan benefit obligations and fair value of plan assets, and a statement of the funded status (in thousands):
 Pension BenefitsOther Postretirement Benefits
 December 31,December 31,
 2024202320242023
Change in benefit obligation:    
Obligation at beginning of period$473,988 $521,798 $13,708 $15,407 
Service cost5,592 5,646 308 333 
Interest cost22,944 25,852 557 674 
Actuarial (gain) loss(28,499)3,127 (2,514)(1,240)
Settlements(1)
(848)(51,942)— — 
Benefits paid(25,230)(30,493)(1,333)(1,466)
Benefit Obligation at End of Period$447,947 $473,988 $10,726 $13,708 
Change in fair value of plan assets:    
Fair value of plan assets at beginning of period$402,671 $441,539 $22,309 $20,055 
Return on plan assets9,411 34,367 3,177 3,334 
Employer contributions9,322 9,200 619 386 
Settlements(1)
(848)(51,942)— — 
Benefits paid(25,230)(30,493)(1,333)(1,466)
Fair value of plan assets at end of period$395,326 $402,671 $24,772 $22,309 
Funded Status$(52,621)$(71,317)$14,046 $8,601 
Amounts Recognized in the Balance Sheet Consist of:    
Noncurrent asset9,467 7,875 16,943 12,378 
Total Assets9,467 7,875 16,943 12,378 
Current liability(10,000)(11,200)(1,310)(1,355)
Noncurrent liability(52,088)(67,992)(1,587)(2,422)
Total Liabilities(62,088)(79,192)(2,897)(3,777)
Net amount recognized$(52,621)$(71,317)$14,046 $8,601 
Amounts Recognized in Regulatory Assets Consist of:    
Prior service credit— — — — 
Net actuarial (loss) gain(31,835)(44,453)3,716 15 
Amounts recognized in AOCL consist of:
    
Prior service cost— — — — 
Net actuarial gain— — 1,228 590 
Total$(31,835)$(44,453)$4,944 $605 
(1) In October 2023, we entered into a group annuity contract from an insurance company to provide for the payment of pension benefits to select NorthWestern Energy MT Pension Plan participants. We purchased the contract with $51.9 million of plan assets in 2023. A trailing premium of $0.8 million related to final data reconciliation was paid from plan assets in 2024, reflecting a final, annuitized participant count of 276. The insurance company took over the payments of these benefits starting January 1, 2024. This transaction settled $52.7 million of our NorthWestern Energy MT Pension Plan obligation. As a result of this transaction, during the twelve months ended December 31, 2023, we recorded a non-cash, non-operating settlement charge of $4.4 million. This charge is recorded within other income, net on the Consolidated Statements of Income. As discussed within Note 4 – Regulatory Assets and Liabilities, the MPSC allows recovery of pension costs on a cash funding basis. As such, this charge was deferred as a regulatory asset on the Consolidated Balance Sheets, with a corresponding decrease to operating and maintenance expense on the Consolidated Statements of Income.
The actuarial gain/loss is primarily due to the change in discount rate assumption and actual asset returns compared with expected amounts. The total projected benefit obligation and fair value of plan assets for the NorthWestern Energy MT Pension Plan with accumulated benefit obligations in excess of plan assets were as follows (in millions):
 NorthWestern Energy MT Pension Plan
 December 31,
20242023
Projected benefit obligation$404.8 $427.3 
Accumulated benefit obligation404.8 427.3 
Fair value of plan assets342.7 348.1 

    As of December 31, 2024, the fair value of the NorthWestern Energy SD/NE Pension Plan assets exceeds the total projected and accumulated benefit obligation and are therefore excluded from this table.

Net Periodic Cost (Credit)

The components of the net costs (credits) for our pension and other postretirement plans are as follows (in thousands):
 Pension BenefitsOther Postretirement Benefits
 December 31,December 31,
 202420232022202420232022
Components of net periodic benefit cost      
Service cost$5,592 $5,646 $10,223 $308 $333 $351 
Interest cost22,944 25,852 18,787 557 674 359 
Expected return on plan assets(25,325)(25,932)(24,173)(1,280)(1,096)(1,047)
Amortization of prior service cost (credit)— — — — 116 (1,891)
Recognized actuarial loss (gain)33 228 383 (73)(672)(897)
Settlement loss recognized(1)
— 4,395 — — — — 
Net Periodic Benefit Cost (Credit)$3,244 $10,189 $5,220 $(488)$(645)$(3,125)
Regulatory deferral of net periodic benefit cost(2)
4,850 (1,814)2,307 — — — 
Previously deferred costs recognized(2)
75 210 — 181 550 292 
Net Periodic Benefit Cost (Credit) Recognized$8,169 $8,585 $7,527 $(307)$(95)$(2,833)
(1) Settlement loss is related to partial annuitization of NorthWestern Energy MT Pension Plan effective October 24, 2023.
(2) Net periodic benefit costs for pension and postretirement benefit plans are recognized for financial reporting based on the authorization of each regulatory jurisdiction in which we operate. A portion of these costs are recorded in regulatory assets and recognized in the Consolidated Statements of Income as those costs are recovered through customer rates.

For the years ended December 31, 2024, 2023, and 2022, Service costs were recorded in Operations and maintenance expense while non-service costs were recorded in Other income, net on the Consolidated Statements of Income.

For purposes of calculating the expected return on pension plan assets, the market-related value of assets is used, which is based upon fair value. The difference between actual plan asset returns and estimated plan asset returns are amortized equally over a period not to exceed five years.
Actuarial Assumptions

The measurement dates used to determine pension and other postretirement benefit measurements for the plans are December 31, 2024 and 2023. The actuarial assumptions used to compute net periodic pension cost and postretirement benefit cost are based upon information available as of the beginning of the year, specifically, market interest rates, past experience and management's best estimate of future economic conditions. Changes in these assumptions may impact future benefit costs and obligations. In computing future costs and obligations, we must make assumptions about such things as employee mortality and turnover, expected salary and wage increases, discount rate, expected return on plan assets, and expected future cost increases. Two of these assumptions have the most impact on the level of cost: (1) discount rate and (2) expected rate of return on plan assets. During 2022, the plan's actuary conducted an experience study to review five years of plan experience and update these assumptions.

On an annual basis, we set the discount rate using a yield curve analysis. This analysis includes constructing a hypothetical bond portfolio whose cash flow from coupons and maturities matches the year-by-year, projected benefit cash flow from our plans. The increase in the discount rate during 2024 decreased our projected benefit obligation by approximately $29.6 million.

In determining the expected long-term rate of return on plan assets, we review historical returns, the future expectations for returns for each asset class weighted by the target asset allocation of the pension and postretirement portfolios, and long-term inflation assumptions. Based on the target asset allocation for our pension assets and future expectations for asset returns, we decreased our long term rates of return on asset assumptions for the NorthWestern Energy MT Pension Plan and the NorthWestern Energy SD/NE Pension Plan to 6.17 percent and 4.58 percent, respectively, for 2025.

The weighted-average assumptions used in calculating the preceding information are as follows:
 Pension BenefitsOther Postretirement Benefits
 December 31,December 31,
 202420232022202420232022
Discount rate5.50-5.60%4.95-5.005.20 %5.30-5.45%4.85-4.90%5.15-5.20%
Expected rate of return on assets5.15-6.654.83-6.442.66-4.265.84 5.62 4.23 
Long-term rate of increase in compensation levels (non-union)4.00 4.00 4.00 4.00 4.00 4.00 
Long-term rate of increase in compensation levels (union)4.00 4.00 4.00 4.00 4.00 4.00 
Interest crediting rate3.3-6.03.30-6.003.30-6.00N/AN/AN/A

The postretirement benefit obligation is calculated assuming that health care costs increase by a 5.00 percent fixed rate. The company contribution toward the premium cost is capped, therefore future health care cost trend rates are expected to have a minimal impact on company costs and the accumulated postretirement benefit obligation.

Investment Strategy

Our investment goals with respect to managing the pension and other postretirement assets are to meet current and future benefit payment needs while maximizing total investment returns (income and appreciation) after inflation within the constraints of diversification, prudent risk taking, Prudent Man Rule of the Employee Retirement Income Security Act of 1974 and liability-based considerations. Each plan is diversified across asset classes to achieve optimal balance between risk and return and between income and growth through capital appreciation. Our investment philosophy is based on the following:

•Each plan should be substantially invested as long-term cash holdings reduce long-term rates of return;
•Pension plan portfolio risk is described by volatility in the funded status of the Plans;
•It is prudent to diversify each plan across the major asset classes;
•Equity investments provide greater long-term returns than fixed income investments, although with greater short-term volatility;
•Fixed income investments of the plans should strongly correlate with the interest rate sensitivity of the plan’s aggregate liabilities in order to hedge the risk of change in interest rates negatively impacting the pension plans overall funded status, (such assets will be described as Liability Hedging Fixed Income assets);
•Allocation to foreign equities increases the portfolio diversification and thereby decreases portfolio risk while providing for the potential for enhanced long-term returns;
•Private real estate and broad global opportunistic fixed income asset classes can provide diversification to both equity and liability hedging fixed income investments and that a moderate allocation to each can potentially improve the expected risk-adjusted return for the NorthWestern Energy MT Pension Plan investments over full market cycles;
•Active management can reduce portfolio risk and potentially add value through security selection strategies;
•A portion of plan assets should be allocated to passive, indexed management funds to provide for greater diversification and lower cost; and
•It is appropriate to retain more than one investment manager, provided that such managers offer asset class or style diversification.

Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and periodic asset/liability studies.

The most important component of an investment strategy is the portfolio asset mix, or the allocation between the various classes of securities available. The mix of assets is based on an optimization study that identifies asset allocation targets in order to achieve the maximum return for an acceptable level of risk, while minimizing the expected contributions and pension and postretirement expense. In the optimization study, assumptions are formulated about characteristics, such as expected asset class investment returns, volatility (risk), and correlation coefficients among the various asset classes, and making adjustments to reflect future conditions expected to prevail over the study period. Based on this, the target asset allocation established, within an allowable range of plus or minus 5 percent, is as follows:
 NorthWestern Energy MT PensionNorthWestern Energy SD/NE PensionNorthWestern Energy
Health and Welfare
 December 31,December 31,December 31,
 202420232024202320242023
Fixed income securities45.0 %45.0 %90.0 %90.0 %40.0 %40.0 %
Non-U.S. fixed income securities— — — — — — 
Opportunistic fixed income11.0 11.0 3.0 3.0 — — 
Global equities38.5 38.5 7.0 7.0 60.0 60.0 
Private real estate5.5 5.5 — — — — 

The actual allocation by plan is as follows:
 NorthWestern Energy MT PensionNorthWestern Energy SD/NE PensionNorthWestern Energy
Health and Welfare
 December 31,December 31,December 31,
202420232024202320242023
Cash and cash equivalents— %— %0.8 %1.5 %0.3 %0.2 %
Fixed income securities(1)
43.7 45.3 89.4 88.7 32.2 35.1 
Non-U.S. fixed income securities— — — — — — 
Opportunistic fixed income11.1 10.6 2.9 2.9 — — 
Global equities(1)
39.0 37.6 6.9 6.9 67.5 64.7 
Private real estate6.2 6.5 — — — — 
 100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %
(1) While the NorthWestern Energy Health and Welfare plan allocation of assets as of December 31, 2024, between Fixed income securities and Global equities is greater than 5 percent different from the target allocation, the plan Investment Manager has 60 days to correct this deviation from the plan.

Generally, the asset mix will be rebalanced to the target mix as individual portfolios approach their minimum or maximum levels. The guidelines allow for a transition to targets over time as assets are reallocated to newly-approved asset classes of opportunistic fixed income and private real estate. Debt securities consist of U.S. and international instruments including emerging markets and high yield instruments, as well as government, corporate, asset backed and mortgage backed securities. While the portfolio may invest in high yield securities, the average quality must be rated at least “investment grade" by rating agencies. Equity, real estate and fixed income portfolios may be comprised of both active and passive management strategies. Performance of fixed income investments is measured by both traditional investment benchmarks as well as relative changes in the present value of the plan's liabilities. Equity investments consist primarily of U.S. stocks including large, mid and small cap stocks. We also invest in global equities with exposure to developing and emerging markets. Equity investments may also be diversified across investment styles such as growth and value. Derivatives, options and futures are permitted for the purpose of
reducing risk but may not be used for speculative purposes. Real estate investments will consist of global equity or debt interests in tangible property consisting of land, buildings, and other improvements in commercial and residential sectors.

Our plan assets are primarily invested in common collective trusts (CCTs), which are invested in equity and fixed income securities. In accordance with our investment policy, these pooled investment funds must have an adequate asset base relative to their asset class and be invested in a diversified manner and have a minimum of three years of verified investment performance experience or verified portfolio manager investment experience in a particular investment strategy and have management and oversight by an investment advisor registered with the SEC. Investments in a collective investment vehicle are valued by multiplying the investee company’s net asset value per share with the number of units or shares owned at the valuation date. Net asset value per share is determined by the trustee. Investments held by the CCT, including collateral invested for securities on loan, are valued on the basis of valuations furnished by a pricing service approved by the CCT’s investment manager, which determines valuations using methods based on quoted closing market prices on national securities exchanges, or at fair value as determined in good faith by the CCT’s investment manager if applicable. The funds do not contain any redemption restrictions. The direct holding of NorthWestern Energy Group stock is not permitted; however, any holding in a diversified mutual fund or collective investment fund is permitted.

Cash Flows

In accordance with the Pension Protection Act of 2006 (PPA), and the relief provisions of the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), we are required to meet minimum funding levels in order to avoid required contributions and benefit restrictions. We have elected to use asset smoothing provided by the WRERA, which allows the use of asset averaging, including expected returns (subject to certain limitations), for a 24-month period in the determination of funding requirements. Additional funding relief was passed in the American Rescue Plan Act of 2021, providing for longer amortization and interest rate smoothing, which we elected to use. We expect to continue to make contributions to the pension plans in 2024 and future years that reflect the minimum requirements and discretionary amounts consistent with the amounts recovered in rates. Additional legislative or regulatory measures, as well as fluctuations in financial market conditions, may impact our funding requirements.

Due to the regulatory treatment of pension costs in Montana, pension costs for 2024, 2023 and 2022 were based on actual contributions to the NorthWestern Energy MT Pension Plan. Annual contributions to each of the pension plans are as follows (in thousands):
 202420232022
NorthWestern Energy MT Pension Plan$8,122 $8,000 $7,000 
NorthWestern Energy SD/NE Pension Plan1,200 1,200 1,200 
 $9,322 $9,200 $8,200 

We estimate the plans will make future benefit payments to participants as follows (in thousands):
 Pension BenefitsOther Postretirement Benefits
202528,549 1,919 
202629,467 1,216 
202730,393 1,064 
202831,155 1,015 
202932,218 935 
2030-2034166,566 4,329 

Defined Contribution Plan
Our defined contribution plan permits employees to defer receipt of compensation as provided in Section 401(k) of the Internal Revenue Code. Under the plan, employees may elect to direct a percentage of their gross compensation to the plan. We also contribute various percentages of employees' gross compensation to the plan. Company contributions for the years ended December 31, 2024, 2023 and 2022 totaled $14.7 million, $13.2 million, and $12.3 million, respectively.