Pension Plans and Other Postretirement Benefits (Tables)

12 Months Ended

Dec. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Schedule of Benefit Obligations and Change in Plan Assets

(In thousands)		Pension Benefits				Other Postretirement Benefits
Change in Benefit Obligations:		2016		2015		2016		2015
Net benefit obligation at beginning of year	$	332,565	$	340,233	$	74,935	$	78,478
Service cost		5,365		7,263		1,271		1,559
Interest cost		12,393		13,766		2,681		3,075
Plan participants' contributions		-		-		767		741
Actuarial loss (gain)(a)		11,412		(17,576)		2,638		(5,828)
Gross benefits paid		(12,179)		(11,121)		(3,637)		(3,280)
Less: federal subsidy on benefits paid(b)		-		-		187		190
Benefit obligation at end of year	$	349,556	$	332,565	$	78,842	$	74,935
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	290,716	$	288,548	$	40,170	$	38,952
Actual return on plan assets		24,181		4,153		3,236		603
Employer contributions		9,215		9,136		2,641		3,154
Plan participants' contributions		-		-		767		741
Gross benefits paid		(12,179)		(11,121)		(3,637)		(3,280)
Fair value of plan assets at end of year	$	311,933	$	290,716	$	43,177	$	40,170
Funded Status at December 31	$	(37,623)	$	(41,849)	$	(35,665)	$	(34,765)

(a) In 2016, lower discount rates were the main driver of the actuarial loss.

(b) In 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law authorizing Medicare to provide prescription drug benefits to retirees. For the years ended December 31, 2016 and 2015, the subsidy due to MGE was $0.2 million.

Schedule of Amounts Recognized in the Consolidated Balance Sheet

The amounts recognized in the consolidated balance sheets to reflect the funded status of the plans at December 31 are as follows:

		Pension Benefits				Other Postretirement Benefits
(In thousands)		2016		2015		2016		2015
Long-term asset	$	2,020	$	-	$	-	$	-
Current liability		(972)		(966)		-		(52)
Long-term liability		(38,671)		(40,883)		(35,665)		(34,713)
Net liability	$	(37,623)	$	(41,849)	$	(35,665)	$	(34,765)

Amounts Recognized in Regulatory Asset

The following table shows the amounts that have not yet been recognized in our net periodic benefit cost as of December 31 and are recorded as regulatory assets in our consolidated balance sheets:

		Pension Benefits				Other Postretirement Benefits
(In thousands)		2016		2015		2016		2015
Net actuarial loss	$	84,656	$	80,660	$	14,728	$	13,086
Prior service benefit		(446)		(436)		(12,489)		(15,158)
Transition obligation		-		-		26		29
Total	$	84,210	$	80,224	$	2,265	$	(2,043)

Scehdule of Projected Benefit Obligations in Excess of Plan Assets

The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets were as follows:

(In thousands)		Pension Benefits
Projected Benefit Obligation in Excess of Plan Assets		2016		2015
Projected benefit obligation, end of year	$	227,739	$	332,565
Fair value of plan assets, end of year		188,096		290,716

Schedule of Accumulated Benefit Obligations in Excess of Plan Assets

The accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets were as follows:

(In thousands)		Pension Benefits
Accumulated Benefit Obligation in Excess of Plan Assets		2016		2015
Accumulated benefit obligation, end of year	$	26,927	$	24,606
Fair value of plan assets, end of year		-		-

Net Periodic Benefit Costs

(In thousands)		Pension Benefits						Other Postretirement Benefits
Components of Net Periodic Cost (Benefit):		2016		2015		2014		2016		2015		2014
Service cost	$	5,365	$	7,263	$	6,179	$	1,271	$	1,559	$	1,339
Interest cost		12,393		13,766		13,574		2,681		3,075		3,166
Expected return on assets		(22,365)		(22,682)		(22,051)		(2,829)		(2,812)		(2,615)
Amortization of:
Transition obligation		-		-		-		3		3		3
Prior service cost (benefit)		10		23		204		(2,669)		(2,669)		(2,669)
Actuarial loss		5,600		5,395		703		589		953		252
Net periodic cost (benefit)	$	1,003	$	3,765	$	(1,391)	$	(954)	$	109	$	(524)

Plan Assumptions

The weighted-average assumptions used to determine the benefit obligations were as follows for the years ended December 31:

	Pension Benefits		Other Postretirement Benefits
	2016	2015	2016	2015
Discount rate(a)	4.29%	4.51%	4.11%	4.32%
Rate of compensation increase	3.71%	3.78%	N/A	N/A
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year	N/A	N/A	6.25%	6.5%
Rate to which the cost trend rate is assumed to
decline (the ultimate trend rate)	N/A	N/A	5.0%	5.0%
Year that the rate reaches the ultimate trend rate	N/A	N/A	2022	2022

(a) In 2015, MGE refined its methodology for using discount rates to measure the components of net periodic benefit cost. The refined methodology uses individual spot rates, instead of a weighted average of the yield curve spot rates, for measuring the service cost and interest cost components.

The weighted-average assumptions used to determine the net periodic cost were as follows for the years ended December 31:

	Pension Benefits			Other Postretirement Benefits
	2016	2015	2014	2016	2015	2014
Discount rate	4.51%	4.11%	4.88%	4.32%	3.96%	4.69%
Expected rate of return on plan assets	7.65%	7.80%	8.10%	6.96%	7.06%	7.07%
Rate of compensation increase	3.76%	3.84%	3.93%	N/A	N/A	N/A

Effect of 1% Increase or Decrease in Health Care Costs

The following table shows how an assumed 1% increase or 1% decrease in health care cost trends could impact postretirement benefits in 2016 dollars:

(In thousands)		1% Increase		1% Decrease
Effect on other postretirement benefit obligation	$	1,175	$	(1,479)
Effect on total service and interest cost components		54		(67)

Fair Value of Plan Assets by Asset Category

The asset allocation for MGE's pension plans at the end of 2016 and 2015, and the target allocation for 2017, by asset category, follows:

	Target Allocation	Percentage of Plan Assets at Year End
		2016	2015
Equity securities(a)	63.0 %	65.0 %	63.0 %
Fixed income securities	30.0 %	27.0 %	29.0 %
Real estate	7.0 %	8.0 %	8.0 %
Total	100.0 %	100.0 %	100.0 %

(a) Target allocations for equity securities are broken out as follows: 45.5% United States equity,

17.5% non-United States equity.

All of the fair values of MGE's plan assets are measured using net asset value, except for cash and cash equivalents which are considered level 1 investments. The fair values of MGE's plan assets by asset category are as follows:

(In thousands)		2016		2015
Cash and Cash Equivalents	$	284	$	300
Equity Securities:
U.S. Large Cap		107,406		98,949
U.S. Mid Cap		25,966		22,446
U.S. Small Cap		33,836		27,561
International Blend		59,054		55,948
Fixed Income Securities:
Short-Term Fund		4,318		3,388
High Yield Bond		17,978		16,225
Long Duration Bond		71,512		73,112
Real Estate		29,441		27,231
Insurance Continuance Fund		1,514		1,518
Fixed Rate Fund		3,801		4,208
Total	$	355,110	$	330,886

Benefit Payments, Fiscal Year Maturity

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

		Pension		Other Postretirement Benefits
(In thousands)		Pension Benefits		Gross Postretirement Benefits		Expected Medicare Part D Subsidy		Net Postretirement Benefits
2017	$	13,468	$	3,623	$	(232)	$	3,391
2018		14,618		3,998		(252)		3,746
2019		15,632		4,442		(274)		4,168
2020		16,429		4,932		(302)		4,630
2021		17,263		5,442		(326)		5,116
2022 - 2026		99,725		31,065		(2,122)		28,943