Retirement benefits

6 Months Ended

Jun. 30, 2011

Retirement benefits

Retirement benefits

5 · Retirement benefits

Retirement benefit plan changes.  On March 11, 2011, the utilities’ union members ratified a new benefit agreement, which included changes to retirement benefits. Changes to retirement benefits for HEI and utility employees commencing employment after April 30, 2011 include a reduction of benefits provided through the defined benefit plan (the Retirement Plan for Employees of Hawaiian Electric Industries, Inc. and Participating Subsidiaries) and the addition of a 50% match by the applicable employer on the first 6% of employee deferrals through the defined contribution plan (under the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP)). In addition, new eligibility rules and contribution levels applicable to existing and new HEI and utility employees were adopted for postretirement welfare benefits.In general, defined pension benefits are based on the employees’ years of service and compensation.

Defined benefit plans. For the six months of 2011, HEI contributed $0.5 million (unconsolidated) to its retirement benefit plans, compared to $0.4 million in the first six months of 2010. HEI’s current estimate of contributions to its retirement benefit plans in 2011 is $2 million (unconsolidated), compared to $1 million in 2010. In addition, HEI expects to pay directly $1 million (unconsolidated) of benefits in 2011, comparable to 2010. For a discussion of HECO’s 2011 estimated contributions to the retirement benefit plans, see Note 4, “Retirement benefits,” of HECO’s Notes to Consolidated Financial Statements.

The components of net periodic benefit cost for consolidated HEI were as follows:

	Three months ended June 30												Six months ended June 30
	Pension benefits						Other benefits						Pension benefits						Other benefits
(in thousands)	2011			2010			2011			2010			2011			2010			2011			2010
Service cost	$	8,824		$	7,095		$	1,173		$	1,168		$	17,741		$	14,048		$	2,440		$	2,291
Interest cost	16,271			16,093			2,417			2,652			32,580			32,133			4,878			5,336
Expected return on plan assets	(17,172		)	(17,221		)	(2,657		)	(2,766		)	(34,273		)	(34,415		)	(5,305		)	(5,518		)
Amortization of unrecognized transition obligation	—			—			—			—			1			1			—			—
Amortization of prior service gain	(97		)	(97		)	(309		)	(52		)	(194		)	(194		)	(533		)	(104		)
Recognized actuarial loss (gain)	4,314			1,791			40			(2		)	8,719			3,507			55			(3		)
Net periodic benefit cost	12,140			7,661			664			1,000			24,574			15,080			1,535			2,002
Impact of PUC D&Os	(556		)	2,020			1,734			1,333			(2,100		)	5,028			2,752			2,621
Net periodic benefit cost (adjusted for impact of PUC D&Os)	$	11,584		$	9,681		$	2,398		$	2,333		$	22,474		$	20,108		$	4,287		$	4,623

Consolidated HEI recorded retirement benefits expense of $20 million and $19 million in the first six months of 2011 and 2010, respectively, and charged the remaining amounts primarily to electric utility plant.

Defined contribution plans.For the first six months of 2011 and 2010, ASB’s expense for its employees participating in the ASB 401(k) Plan was $1.7 million and $1.9 million, respectively. For the first six months of both 2011 and 2010, ASB’s cash contributions to the plan were $2.8 million.

For the first six months of 2011, the Company’s expense for matching contributions under the HEIRSP was immaterial.