Pension and Other Postretirement Plans

6 Months Ended

Jun. 30, 2019

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Plans

Pension and Other Postretirement Plans - MGE Energy and MGE.

MGE maintains qualified and nonqualified pension plans, health care, and life insurance benefits. Additionally, MGE has defined contribution 401(k) benefit plans.

The components of net periodic benefit cost, other than the service cost component, are recorded in "Other income, net" on the consolidated statements of income. The service cost component is recorded in "Other operations and maintenance" on the consolidated statements of income. The service cost component of net periodic benefit cost is eligible for capitalization within the consolidated balance sheets. MGE has regulatory treatment and recognizes regulatory assets or liabilities for timing differences between when net periodic benefit costs are recovered and when costs are recognized.

The following table presents the components of net periodic benefit costs recognized.

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(In thousands)		2019		2018		2019		2018
Pension Benefits
Components of net periodic benefit cost:
Service cost	$	1,221	$	1,404	$	2,362	$	2,861
Interest cost		3,742		3,222		7,194		6,430
Expected return on assets		(5,922)		(6,552)		(11,469)		(13,120)
Amortization of:
Prior service credit		(31)		(11)		(59)		(22)
Actuarial loss		1,985		1,341		3,714		2,639
Net periodic benefit (credit) cost	$	995	$	(596)	$	1,742	$	(1,212)
Postretirement Benefits
Components of net periodic benefit cost:
Service cost	$	334	$	310	$	553	$	642
Interest cost		865		648		1,442		1,306
Expected return on assets		(676)		(814)		(1,357)		(1,616)
Amortization of:
Transition obligation		1		-		2		1
Prior service credit		(662)		(667)		(1,330)		(1,334)
Actuarial loss		94		116		200		244
Net periodic benefit (credit) cost	$	(44)	$	(407)	$	(490)	$	(757)

As a result of lower investment returns in the fourth quarter of 2018, pension and postretirement benefit costs increased in 2019. In July 2019, the PSCW approved MGE’s request to defer the difference between estimated pension and other postretirement costs included in the 2019 and 2020 rate settlement and actual expense incurred up to $5.9 million. MGE expects that the deferred cost for employee benefit plans will be factored into future rate actions starting in 2021. For the three and six months ended June 30, 2019, MGE has deferred approximately $3million of pension and other postretirement costs. This amount is not reflected in the table above.