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Employee benefit plans

12 Months Ended

Dec. 31, 2018

Pension and other postretirement benefit plans

The Company has noncontributory qualified defined benefit pension plans and other postretirement benefit plans for certain eligible employees. The Company uses a measurement date of December 31 for all of its pension and postretirement benefit plans.

Prior to 2013, defined benefit pension plan benefits and accruals for all nonunion and certain union plans were frozen and on June 30, 2015, the remaining union plan was frozen. These employees were eligible to receive additional defined contribution plan benefits. In October 2018, the Company transferred the liability of certain participants in the defined benefit pension plan, who are currently receiving benefits, to an annuity company. The transfer of the benefit payments for these participants reduces the Company's liability and future premiums.

Effective January 1, 2010, eligibility to receive retiree medical benefits was modified at certain of the Company's businesses. Employees who had attained age 55 with 10 years of continuous service by December 31, 2010, will be provided the current retiree medical insurance benefits or can elect the new benefit, if desired, regardless of when they retire. All other current employees must meet the new eligibility criteria of age 60 and 10 years of continuous service at the time they retire. These employees will be eligible for a specified company funded Retiree Reimbursement Account. Employees hired after December 31, 2009, will not be eligible for retiree medical benefits at certain of the Company's businesses.

In 2012, the Company modified health care coverage for certain retirees. Effective January 1, 2013, post-65 coverage was replaced by a fixed-dollar subsidy for retirees and spouses to be used to purchase individual insurance through an exchange.

Changes in benefit obligation and plan assets for the years ended December 31, 2018 and 2017, and amounts recognized in the Consolidated Balance Sheets at December 31, 2018 and 2017, were as follows:



	Pension Benefits						Other Postretirement Benefits
	2018			2017			2018			2017
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	445,923		$	436,307		$	91,206		$	89,304
Service cost	—			—			1,494			1,508
Interest cost	14,591			16,207			2,899			3,265
Plan participants' contributions	—			—			1,282			1,368
Actuarial (gain) loss	(32,637		)	19,119			(10,115		)	1,781
Benefits paid	(36,275		)	(25,710		)	(5,565		)	(6,020		)
Benefit obligation at end of year	391,602			445,923			81,201			91,206
Change in net plan assets:
Fair value of plan assets at beginning of year	354,384			333,509			88,739			82,846
Actual gain (loss) on plan assets	(21,138		)	45,473			(2,781		)	9,612
Employer contribution	10,838			1,112			842			933
Plan participants' contributions	—			—			1,281			1,368
Benefits paid	(36,275		)	(25,710		)	(5,565		)	(6,020		)
Fair value of net plan assets at end of year	307,809			354,384			82,516			88,739
Funded status - over (under)	$	(83,793	)	$	(91,539	)	$	1,315		$	(2,467	)
Amounts recognized in the Consolidated Balance Sheets at December 31:
Deferred charges and other assets - other	$	—		$	—		$	20,843		19,114
Other accrued liabilities	—			—			660			612
Deferred credits and other liabilities - other	83,793			91,539			18,868			20,969
Benefit obligation assets (liabilities) - net amount recognized	$	(83,793	)	$	(91,539	)	$	1,315		$	(2,467	)
Amounts recognized in accumulated other comprehensive (income) loss or regulatory assets (liabilities) consist of:
Actuarial loss	$	188,735		$	186,486		$	10,316		$	13,423
Prior service credit	—			—			(10,238		)	(11,632		)
Total	$	188,735		$	186,486		$	78		$	1,791

Employer contributions and benefits paid in the preceding table include only those amounts contributed directly to, or paid directly from, plan assets. Accumulated other comprehensive (income) loss in the table above includes amounts related to regulated operations, which are recorded as regulatory assets (liabilities) and are expected to be reflected in rates charged to customers over time. For more information on regulatory assets (liabilities), see Note 6.

Unrecognized pension actuarial losses in excess of 10 percent of the greater of the projected benefit obligation or the market-related value of assets are amortized over the average life expectancy of plan participants for frozen plans. The market-related value of assets is determined using a five-year average of assets.

The pension plans all have accumulated benefit obligations in excess of plan assets. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for these plans at December 31 were as follows:



	2018		2017
	(In thousands)
Projected benefit obligation	$	391,602	$	445,923
Accumulated benefit obligation	$	391,602	$	445,923
Fair value of plan assets	$	307,809	$	354,384

Components of net periodic benefit cost (credit) for the Company's pension and other postretirement benefit plans for the years ended December 31 were as follows:



	Pension Benefits									Other Postretirement Benefits
	2018			2017			2016			2018			2017			2016
	(In thousands)
Components of net periodic benefit cost (credit):
Service cost	$	—		$	—		$	—		$	1,494		$	1,508		$	1,647
Interest cost	14,591			16,207			17,218			2,899			3,265			3,688
Expected return on assets	(20,753		)	(20,528		)	(20,924		)	(4,866		)	(4,641		)	(4,533		)
Amortization of prior service credit	—			—			—			(1,394		)	(1,371		)	(1,371		)
Recognized net actuarial loss	7,005			6,355			6,215			640			857			1,491
Net periodic benefit cost (credit), including amount capitalized	843			2,034			2,509			(1,227		)	(382		)	922
Less amount capitalized	—			310			381			153			(370		)	(52		)
Net periodic benefit cost (credit)	843			1,724			2,128			(1,380		)	(12		)	974
Other changes in plan assets and benefit obligations recognized in accumulated comprehensive (income) loss or regulatory assets (liabilities):
Net (gain) loss	9,254			(5,827		)	(3,789		)	(2,467		)	(3,190		)	(3,523		)
Amortization of actuarial loss	(7,005		)	(6,355		)	(6,215		)	(640		)	(857		)	(1,491		)
Amortization of prior service credit	—			—			—			1,394			1,371			1,371
Total recognized in accumulated other comprehensive (income) loss or regulatory assets (liabilities)	2,249			(12,182		)	(10,004		)	(1,713		)	(2,676		)	(3,643		)
Total recognized in net periodic benefit cost (credit), accumulated other comprehensive (income) loss and regulatory assets (liabilities)	$	3,092		$	(10,458	)	$	(7,876	)	$	(3,093	)	$	(2,688	)	$	(2,669	)

The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss and regulatory assets into net periodic benefit cost in 2019 is $5.6 million. The estimated net loss and prior service credit for the other postretirement benefit plans that will be amortized from accumulated other comprehensive loss and regulatory assets into net periodic benefit cost (credit) in 2019 are $500,000 and $1.4 million, respectively. Prior service cost is amortized on a straight line basis over the average remaining service period of active participants.

Weighted average assumptions used to determine benefit obligations at December 31 were as follows:



	Pension Benefits				Other Postretirement Benefits
	2018		2017		2018		2017
Discount rate	4.03	%	3.38	%	4.05	%	3.41	%
Expected return on plan assets	6.75	%	6.75	%	5.75	%	5.75	%
Rate of compensation increase	N/A		N/A		3.00	%	3.00	%

Weighted average assumptions used to determine net periodic benefit cost (credit) for the years ended December 31 were as follows:



	Pension Benefits				Other Postretirement Benefits
	2018		2017		2018		2017
Discount rate	3.38	%	3.83	%	3.41	%	3.86	%
Expected return on plan assets	6.75	%	6.75	%	5.75	%	5.75	%
Rate of compensation increase	N/A		N/A		3.00	%	3.00	%

The expected rate of return on pension plan assets is based on a targeted asset allocation range determined by the funded ratio of the plan. As of December 31, 2018, the expected rate of return on pension plan assets is based on the targeted asset allocation range of 40 percent to 50 percent equity securities and 50 percent to 60 percent fixed-income securities and the expected rate of return from these asset categories. The expected rate of return on other postretirement plan assets is based on the targeted asset allocation range of 25 percent to 30 percent equity securities and 70 percent to 75 percent fixed-income securities and the expected rate of return from these asset categories. The expected return on plan assets for other postretirement benefits reflects insurance-related investment costs.

Health care rate assumptions for the Company's other postretirement benefit plans as of December 31 were as follows:



	2018					2017
Health care trend rate assumed for next year	7.5	%	–	8.1	%	7.5	%	–	8.5	%
Health care cost trend rate - ultimate				4.5	%				4.5	%
Year in which ultimate trend rate achieved				2024					2024

The Company's other postretirement benefit plans include health care and life insurance benefits for certain retirees. The plans underlying these benefits may require contributions by the retiree depending on such retiree's age and years of service at retirement or the date of retirement. The accounting for the health care plans anticipates future cost-sharing changes that are consistent with the Company's expressed intent to generally increase retiree contributions each year by the excess of the expected health care cost trend rate over six percent.

Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A one percentage point change in the assumed health care cost trend rates would have had the following effects at December 31, 2018:



	1 Percentage Point Increase		1 Percentage Point Decrease
	(In thousands)
Effect on total of service and interest cost components	$	223	$	(184	)
Effect on postretirement benefit obligation	$	4,296	$	(3,622	)

Outside investment managers manage the Company's pension and postretirement assets. The Company's investment policy with respect to pension and other postretirement assets is to make investments solely in the interest of the participants and beneficiaries of the plans and for the exclusive purpose of providing benefits accrued and defraying the reasonable expenses of administration. The Company strives to maintain investment diversification to assist in minimizing the risk of large losses. The Company's policy guidelines allow for investment of funds in cash equivalents, fixed-income securities and equity securities. The guidelines prohibit investment in commodities and futures contracts, equity private placement, employer securities, leveraged or derivative securities, options, direct real estate investments, precious metals, venture capital and limited partnerships. The guidelines also prohibit short selling and margin transactions. The Company's practice is to periodically review and rebalance asset categories based on its targeted asset allocation percentage policy.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The fair value ASC establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs. The estimated fair values of the Company's pension plans' assets are determined using the market approach.

The carrying value of the pension plans' Level 2 cash equivalents approximates fair value and is determined using observable inputs in active markets or the net asset value of shares held at year end, which is determined using other observable inputs including pricing from outside sources.

The estimated fair value of the pension plans' Level 1 equity securities is based on the closing price reported on the active market on which the individual securities are traded. The estimated fair value of the pension plans' Level 1 and Level 2 collective and mutual funds are based on the net asset value of shares held at year end, based on either published market quotations on active markets or other known sources including pricing from outside sources. The estimated fair value of the pension plans' Level 2 corporate and municipal bonds is determined using other observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers, future cash flows and other reference data. The estimated fair value of the pension plans' Level 1 U.S. Government securities are valued based on quoted prices on an active market.

The estimated fair value of the pension plans' Level 2 U.S. Government securities are valued mainly using other observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers, to be announced prices, future cash flows and other reference data. Some of these securities are valued using pricing from outside sources.

Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value. For the years ended December 31, 2018 and 2017, there were no transfers between Levels 1 and 2.

The fair value of the Company's pension plans' assets (excluding cash) by class were as follows:



	Fair Value Measurements at December 31, 2018, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2018
	(In thousands)
Assets:
Cash equivalents	$	—	$	4,930	$	—	$	4,930
Equity securities:
U.S. companies	11,038		—		—		11,038
International companies	—		967		—		967
Collective and mutual funds*	145,960		51,600		—		197,560
Corporate bonds	—		73,110		—		73,110
Municipal bonds	—		10,624		—		10,624
U.S. Government securities	479		5,896		—		6,375
Total assets measured at fair value	$	157,477	$	147,127	$	—	$	304,604


*	Collective and mutual funds invest approximately 27 percent in common stock of international companies, 31 percent in corporate bonds, 18 percent in common stock of large-cap U.S. companies, 5 percent in cash equivalents and 19 percent in other investments.



	Fair Value Measurements at December 31, 2017, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2017
	(In thousands)
Assets:
Cash equivalents	$	—	$	3,814	$	—	$	3,814
Equity securities:
U.S. companies	13,345		—		—		13,345
International companies	1,766		—		—		1,766
Collective and mutual funds*	171,822		67,749		—		239,571
Corporate bonds	—		74,956		—		74,956
Municipal bonds	—		8,546		—		8,546
U.S. Government securities	1,038		8,293		—		9,331
Total assets measured at fair value	$	187,971	$	163,358	$	—	$	351,329


*	Collective and mutual funds invest approximately 31 percent in common stock of international companies, 28 percent in corporate bonds, 19 percent in common stock of large-cap U.S. companies, 7 percent in cash equivalents, 1 percent in U.S. Government securities and 14 percent in other investments.

The estimated fair values of the Company's other postretirement benefit plans' assets are determined using the market approach.

The estimated fair value of the other postretirement benefit plans' Level 2 cash equivalents is valued at the net asset value of shares held at year end, based on published market quotations on active markets, or using other known sources including pricing from outside sources. The estimated fair value of the other postretirement benefit plans' Level 1 equity securities is based on the closing price reported on the active market on which the individual securities are traded. The estimated fair value of the other postretirement benefit plans' Level 2 insurance contract is based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are valued based on other observable inputs or corroborated market data.

The fair value of the Company's other postretirement benefit plans' assets (excluding cash) by asset class were as follows:



	Fair Value Measurements at December 31, 2018, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2018
	(In thousands)
Assets:
Cash equivalents	$	—	$	3,866	$	—	$	3,866
Equity securities:
U.S. companies	1,767		—		—		1,767
International companies	—		2		—		2
Insurance contract*	1		76,880		—		76,881
Total assets measured at fair value	$	1,768	$	80,748	$	—	$	82,516


*	The insurance contract invests approximately 51 percent in corporate bonds, 23 percent in common stock of large-cap U.S. companies, 7 percent in U.S. Government securities, 7 percent in common stock of small-cap U.S. companies and 12 percent in other investments.



	Fair Value Measurements at December 31, 2017, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2017
	(In thousands)
Assets:
Cash equivalents	$	—	$	4,815	$	—	$	4,815
Equity securities:
U.S. companies	2,316		—		—		2,316
International companies	4		—		—		4
Insurance contract*	3		81,601		—		81,604
Total assets measured at fair value	$	2,323	$	86,416	$	—	$	88,739


*	The insurance contract invests approximately 38 percent in corporate bonds, 23 percent in common stock of large-cap U.S. companies, 21 percent in U.S. Government securities, 9 percent in mortgage-backed securities and 9 percent in other investments.

The Company expects to contribute approximately $4.0 million to its defined benefit pension plans and approximately $700,000 to its postretirement benefit plans in 2019.

The following benefit payments, which reflect future service, as appropriate, and expected Medicare Part D subsidies at December 31, 2018, are as follows:



Years	Pension Benefits		Other Postretirement Benefits		Expected Medicare Part D Subsidy
			(In thousands)
2019	$	24,026	$	5,332	$	117
2020	24,287		5,232		112
2021	24,633		5,201		105
2022	24,929		5,259		98
2023	25,173		5,270		90
2024 - 2028	124,688		25,851		320