Pension Plans and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2025

Retirement Benefits [Abstract]

Retirement Benefits [Text Block]

Pension Plans and Other Postretirement Benefits - MGE Energy and MGE.

MGE maintains qualified and nonqualified pension plans, health care, and life insurance benefits, and defined contribution 401(k) benefit plans for its employees and retirees. MGE's costs for the 401(k) plans were $6.9 million, $6.5 million, and $5.2 million for the years ended December 31, 2025, 2024, and 2023, respectively. A measurement date of December 31 is utilized for all pension and postretirement benefit plans.

All employees hired after December 31, 2006, have been enrolled in the defined contribution pension plan rather than the defined benefit pension plan previously in place.

a.Benefit Obligations and Plan Assets.

(In thousands)	Pension Benefits						Other Postretirement Benefits
Change in Benefit Obligations:	2025			2024			2025			2024
Net benefit obligation as of January 1,	$	326,937		$	346,460		$	59,184		$	64,973
Service cost		2,612			3,078			743			856
Interest cost		17,139			17,118			3,028			3,126
Plan participants' contributions		—			—			1,081			1,045
Actuarial loss (gain)(a)		11,028			(16,669	)		289			(3,769	)
Settlements(b)		—			—			—			(1,227	)
Gross benefits paid		(22,239	)		(23,050	)		(6,299	)		(6,171	)
Less: federal subsidy on benefits paid(c)		—			—			354			351
Benefit obligation as of December 31,	$	335,477		$	326,937		$	58,380		$	59,184
Change in Plan Assets:
Fair value of plan assets as of January 1,	$	424,468		$	404,735		$	41,321		$	43,149
Actual return on plan assets		57,886			40,608			5,999			4,131
Employer contributions		2,304			2,175			739			682
Plan participants' contributions		—			—			1,081			1,045
Settlements(b)		—			—			—			(1,515	)
Gross benefits paid		(22,239	)		(23,050	)		(6,299	)		(6,171	)
Fair value of plan assets at end of year		462,419			424,468			42,841			41,321
Funded Status as of December 31,	$	126,942		$	97,531		$	(15,539	)	$	(17,863	)

(a)Changes in discount rates were the primary driver of the actuarial loss (gain) in 2025 and 2024.

(b)In August 2024, MGE entered into an agreement to transfer the mortality and investment risk, as well as the administration of, its employer-paid life insurance plan to a third party. MGE accounted for the settlement under the scope of ASC 715.

(c)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 both the years ended December 31, 2025 and 2024, the subsidy due to MGE was $0.3 million.

The accumulated benefit obligation for the defined benefit pension plans as of December 31, 2025 and 2024, was $318.8 million and $311.0 million, respectively.

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

	Pension Benefits						Other Postretirement Benefits
(In thousands)	2025			2024			2025			2024
Long-term asset	$	162,493		$	131,418		$	2,492		$	846
Current liability		(2,477	)		(2,441	)		—			—
Long-term liability		(33,074	)		(31,446	)		(18,031	)		(18,709	)
Net asset (liability)	$	126,942		$	97,531		$	(15,539	)	$	(17,863	)

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 asset (liability) in the consolidated balance sheets:

	Pension Benefits					Other Postretirement Benefits
(In thousands)	2025			2024		2025			2024
Net actuarial loss (gain)	$	(14,444	)	$	3,699	$	(9,575	)	$	(7,191	)
Transition obligation		—			—		—			3
Total	$	(14,444	)	$	3,699	$	(9,575	)	$	(7,188	)

The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets as of December 31 are as follows:

(In thousands)	Pension Benefits
Projected Benefit Obligation in Excess of Plan Assets	2025		2024
Projected benefit obligation, end of year	$	35,551	$	33,887
Fair value of plan assets, end of year		—		—

The accumulated benefit obligation and fair value of plan assets with an accumulated benefit obligation in excess of plan assets as of December 31 are as follows:

(In thousands)	Pension Benefits				Other Postretirement Benefits
Accumulated Benefit Obligation in Excess of Plan Assets	2025		2024		2025		2024
Accumulated benefit obligation, end of year	$	33,553	$	32,463	$	44,007	$	43,882
Fair value of plan assets, end of year		—		—		25,976		25,172

b.Net Periodic Benefit Cost.

(In thousands)	Pension Benefits									Other Postretirement Benefits
Components of Net Periodic Benefit Cost:	2025			2024			2023			2025			2024			2023
Service cost	$	2,612		$	3,078		$	2,892		$	743		$	856		$	780
Interest cost		17,139			17,118			17,319			3,028			3,126			3,308
Expected return on assets		(29,014	)		(28,597	)		(25,248	)		(2,715	)		(2,725	)		(2,595	)
Settlement cost		—			—			—			—			288			—
Amortization of:
Transition obligation		—			—			—			3			3			3
Prior service credit		—			—			—			—			(242	)		—
Actuarial loss (gain)		299			859			1,760			(642	)		380			(190	)
Net periodic benefit cost (credit)	$	(8,964	)	$	(7,542	)	$	(3,277	)	$	417		$	1,686		$	1,306

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. 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 deferred costs have not been reflected in the table above. See Footnote 8 for further information.

c.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
	2025			2024			2025			2024
Discount rate		5.45	%		5.64	%		5.34	%		5.59	%
Rate of compensation increase		3.58	%		3.81	%	N/A			N/A
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year	N/A			N/A				7.25	%		7.50	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	N/A			N/A				4.75	%		4.75	%
Year that the rate reaches the ultimate trend rate	N/A			N/A			2036			2036

MGE uses individual spot rates, instead of a weighted average of the yield curve spot rates, for measuring the service cost and interest cost components of net periodic benefit cost.

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
	2025			2024			2023			2025			2024			2023
Discount rate		5.64	%		5.10	%		5.47	%		5.59	%		5.11	%		5.45	%
Expected rate of return on plan assets		7.00	%		7.24	%		7.00	%		7.00	%		6.81	%		6.59	%
Rate of compensation increase		3.83	%		4.32	%		3.28	%	N/A			N/A			N/A

MGE employs a building-block approach in determining the expected long-term rate of return for asset classes. Historical markets are studied and long-term historical relationships among asset classes are analyzed, consistent with the widely

accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors, such as interest rates and dividend yields, are evaluated before long-term capital market assumptions are determined.

The expected long-term nominal rate of return for plan assets is primarily a function of expected long-term real rates of return for component asset classes and the plan's target asset allocation in conjunction with an inflation assumption. Peer data and historical returns are reviewed to check for appropriateness.

d.Investment Strategy.

MGE employs a total return investment approach whereby a mix of equities, fixed income, and real estate investments are used to maximize the expected long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan-funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity, fixed income, and real estate investments. Investment risk is measured and monitored on an ongoing basis through periodic investment portfolio reviews and liability measurements.

Pension Plan Assets

The asset allocation for MGE's pension plans as of December 31, 2025 and 2024, and the target allocation for 2026, by asset category, follows:

	Target			Percentage of Plan Assets at Year End
	Allocation(b)			2025			2024
Equity securities(a)		45	%		48	%		56	%
Fixed income securities		50	%		47	%		38	%
Real estate		5	%		5	%		6	%

(a)Target allocations for equity securities are broken out as follows: 32% United States equity and 13% non-United States equity.

(b)The target allocation for MGE's pension plans were approved to be rebalanced in December 2025. The trades happened in two steps, the first in December 2025 and the second in January 2026.

Other Postretirement Plan Assets

Other Postretirement plan assets are comprised of specific assets within certain defined benefit pension plans (401(h) assets) as well as assets held in VEBA trusts. The asset allocation for MGE's 401(h) assets as of December 31, 2025 and 2024, and the target allocation for 2026, by asset category, follows:

	Target			Percentage of Plan Assets at Year End
	Allocation			2025			2024
Equity securities(a)		63	%		65	%		66	%
Fixed income securities		30	%		29	%		28	%
Real estate		7	%		6	%		6	%

(a)Target allocations for equity securities are broken out as follows: 45.5% United States equity and 17.5% non-United States equity.

The target asset allocation for the VEBA trusts are established based on a similar investment strategy as the 401(h) assets, with consideration for liquidity needs in the VEBA trusts.

e.Concentrations of Credit Risk.

MGE evaluated its pension and other postretirement benefit plans' asset portfolios for the existence of significant concentrations of credit risk as of December 31, 2025. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, and foreign country. As of December 31, 2025, there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in MGE pension and postretirement benefit plan assets.

f.Fair Value Measurements of Plan Assets.

Pension and other postretirement benefit plan investments are recorded at fair value. See Footnote 19 for more information regarding the fair value hierarchy.

The following descriptions are the categories of underlying plan assets held within the pension and other postretirement benefit plans as of December 31, 2025:

Cash and Cash Equivalents – This category includes highly liquid investments with maturities of less than three months which are traded in active markets.

Equity Securities – These securities consist of U.S. and international stock funds. The U.S. stock funds are primarily invested in domestic equities. Securities in these funds are typically priced using the closing price from the applicable exchange, NYSE, Nasdaq, etc. The international funds are composed of international equities. Securities are priced using the closing price from the appropriate local stock exchange.

Fixed Income Securities – These securities consist of U.S. bond funds and short-term funds. U.S. bond funds are priced by a pricing agent using inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. The short-term funds are valued initially at cost and adjusted for amortization of any discount or premium.

Real Estate – Real estate funds are funds with a direct investment in pools of real estate properties. These funds are valued by investment managers on a periodic basis using pricing models that use independent appraisals.

Fixed Rate Fund – The Fixed Rate fund is supported by an underlying portfolio of fixed income securities, including public bonds, commercial mortgages, and private placement bonds. Public market data and GAAP reported market values are used when available to determine fair value.

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 as of December 31 are as follows:

(In thousands)	2025		2024
Cash and Cash Equivalents	$	695	$	772
Equity Securities:
U.S. Large Cap		118,871		128,262
U.S. Mid Cap		23,180		27,960
U.S. Small Cap		32,676		37,222
International Blend		72,948		73,444
Fixed Income Securities:
Short-Term Fund		18,467		7,231
High Yield Bond		25,154		24,231
Long Duration Bond		185,688		139,631
Real Estate		27,012		26,146
Fixed Rate Fund		569		890
Total	$	505,260	$	465,789

g.Expected Cash Flows.

MGE does not expect to need to make any required contributions to the qualified plans for 2026. The contributions for years after 2026 are not yet currently estimated. MGE has adopted the asset smoothing as permitted in accordance with the Pension Protection Act of 2006, including modifications made by WRERA.

Due to uncertainties in the future economic performance of plan assets, discount rates, and other key assumptions, estimated contributions are subject to change. MGE may also elect to make additional discretionary contributions.

MGE expects to contribute $2.5 million and $0.5 million to the pension and other postretirement benefit plans respectively in 2026.

h.Benefit Payments.

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
2026	$	22,689	$	5,404	$	(461	)	$	4,943
2027		22,878		5,415		(504	)		4,911
2028		23,123		5,383		(541	)		4,842
2029		23,297		5,311		(577	)		4,734
2030		23,392		5,247		(608	)		4,639
2031 - 2035		118,606		24,843		(3,410	)		21,433