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Benefit Plans and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Benefit Plans and Other Postretirement Benefits and Postretirement Health Care Benefits
Xcel Energy has several noncontributory, defined benefit pension plans that cover almost all employees. Generally, benefits are based on a combination of years of service and average pay. Xcel Energy’s policy is to fully fund into an external trust the actuarially determined pension costs subject to the limitations of applicable employee benefit and tax laws.
In addition to the qualified pension plans, Xcel Energy maintains a SERP and a nonqualified pension plan. The SERP is maintained for certain executives that were participants in the plan in 2008, when the SERP was closed to new participants.
The nonqualified pension plan provides benefits for compensation that is in excess of the limits applicable to the qualified pension plans, with distributions funded by Xcel Energy’s consolidated operating cash flows.
Obligations of the SERP and nonqualified plan as of Dec. 31, 2019 and 2018 were $39 million and $33 million, respectively. Xcel Energy recognized net benefit cost for the SERP and nonqualified plans of $4 million in 2019 and in 2018.
Xcel Energy bases the investment-return assumption on expected long-term performance for each of the asset classes in its pension and postretirement health care portfolios. For pension assets, Xcel Energy considers the historical returns achieved by its asset portfolio over the past 20 years or longer period, as well as long-term projected return levels.
Pension cost determination assumes a forecasted mix of investment types over the long-term.
•
Investment returns in 2019 were above the assumed level of 6.87%;
•
Investment returns in 2018 were below the assumed level of 6.87%;
•
Investment returns in 2017 were above the assumed level of 6.87%; and
•
In 2020, expected investment-return assumption is 6.87%.
Pension plan and postretirement benefit assets are invested in a portfolio according to Xcel Energy’s return, liquidity and diversification objectives to provide a source of funding for plan obligations and minimize contributions to the plan, within appropriate levels of risk. The principal mechanism for achieving these objectives is the asset allocation given the long-term risk, return, correlation and liquidity characteristics of each particular asset class. There were no significant concentrations of risk in any industry, index, or entity. Market volatility can impact even well-diversified portfolios and significantly affect the return levels achieved by the assets in any year.
State agencies also have issued guidelines to the funding of postretirement benefit costs. SPS is required to fund postretirement benefit costs for Texas and New Mexico amounts collected in rates. PSCo is required to fund postretirement benefit costs in irrevocable external trusts that are dedicated to the payment of these postretirement benefits. These assets are invested in a manner consistent with the investment strategy for the pension plan.
Xcel Energy’s ongoing investment strategy is based on plan-specific investment recommendations that seek to minimize potential investment and interest rate risk as a plan’s funded status increases over time. The investment recommendations result in a greater percentage of long-duration fixed income securities being allocated to specific plans having relatively higher funded status ratios and a greater percentage of growth assets being allocated to plans having relatively lower funded status ratios.
Plan Assets
For each of the fair value hierarchy levels, Xcel Energy’s pension plan assets measured at fair value:
 
 
Dec. 31, 2019 (a)
 
Dec. 31, 2018 (a)
(Millions of Dollars)
 
Level 1
 
Level 2
 
Level 3
 
Measured at NAV
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Measured at NAV
 
Total
Cash equivalents
 
$
145

 
$
—

 
$
—

 
$
—

 
$
145

 
$
137

 
$
—

 
$
—

 
$
—

 
$
137

Commingled funds
 
1,408

 
—

 
—

 
1,031

 
2,439

 
914

 
—

 
—

 
987

 
1,901

Debt securities
 
—

 
645

 
4

 
—

 
649

 
—

 
621

 
—

 
—

 
621

Equity securities
 
86

 
—

 
—

 
—

 
86

 
106

 
—

 
—

 
—

 
106

Other
 
(120
)
 
5

 
—

 
(20
)
 
(135
)
 
2

 
5

 
—

 
(30
)
 
(23
)
Total
 
$
1,519

 
$
650

 
$
4

 
$
1,011

 
$
3,184

 
$
1,159

 
$
626

 
$
—

 
$
957

 
$
2,742


(a) 
See Note 10 for further information regarding fair value measurement inputs and methods.
For each of the fair value hierarchy levels, Xcel Energy’s postretirement benefit plan assets that were measured at fair value:
 
 
Dec. 31, 2019 (a)
 
Dec. 31, 2018 (a)
(Millions of Dollars)
 
Level 1
 
Level 2
 
Level 3
 
Measured at NAV
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Measured at NAV
 
Total
Cash equivalents
 
$
23

 
$
—

 
$
—

 
$
—

 
$
23

 
$
19

 
$
—

 
$
—

 
$
—

 
$
19

Insurance contracts
 
—

 
51

 
—

 
—

 
51

 
—

 
45

 
—

 
—

 
45

Commingled funds
 
69

 
—

 
—

 
76

 
145

 
133

 
—

 
—

 
40

 
173

Debt securities
 
—

 
228

 
1

 
—

 
229

 
—

 
179

 
—

 
—

 
179

Other
 
—

 
1

 
—

 
—

 
1

 
—

 
1

 
—

 
—

 
1

Total
 
$
92

 
$
280

 
$
1

 
$
76

 
$
449

 
$
152

 
$
225

 
$
—

 
$
40

 
$
417

(a) 
See Note 10 for further information on fair value measurement inputs and methods.
Immaterial assets were transferred in or out of Level 3 for 2019. No assets were transferred in or out of Level 3 for 2018.
Funded Status — Comparisons of the actuarially computed benefit obligation, changes in plan assets and funded status of the pension and postretirement health care plans for Xcel Energy are as follows:
 
 
Pension Benefits
 
Postretirement Benefits
(Millions of Dollars)
 
2019
 
2018
 
2019
 
2018
Change in Benefit Obligation:
 
 
 
 
 
 
 
 
Obligation at Jan. 1
 
$
3,477

 
$
3,828

 
$
542

 
$
621

Service cost
 
86

 
94

 
2

 
2

Interest cost
 
145

 
133

 
22

 
22

Plan amendments
 
1

 
—

 
—

 
—

Actuarial loss (gain)
 
273

 
(224
)
 
19

 
(62
)
Plan participants’ contributions
 
—

 
—

 
8

 
8

Medicare subsidy reimbursements
 
—

 
—

 
1

 
1

Benefit payments (a)
 
(281
)
 
(354
)
 
(47
)
 
(50
)
Obligation at Dec. 31
 
$
3,701

 
$
3,477

 
$
547

 
$
542

Change in Fair Value of Plan Assets:
 
 
 
 
 
 
 
 
Fair value of plan assets at Jan. 1
 
$
2,742

 
$
3,088

 
$
417

 
$
461

Actual return on plan assets
 
568

 
(142
)
 
56

 
(13
)
Employer contributions
 
155

 
150

 
15

 
11

Plan participants’ contributions
 
—

 
—

 
8

 
8

Benefit payments
 
(281
)
 
(354
)
 
(47
)
 
(50
)
Fair value of plan assets at Dec. 31
 
$
3,184

 
$
2,742

 
$
449

 
$
417

Funded status of plans at Dec. 31
 
$
(517
)
 
$
(735
)
 
$
(98
)
 
$
(125
)
Amounts recognized in the Consolidated Balance Sheet at Dec. 31:
 
 
 
 
 
 
 
 
Noncurrent assets
 
$
—

 
$
—

 
$
21

 
$
—

Current liabilities
 
—

 
—

 
(6
)
 
(7
)
Noncurrent liabilities
 
(517
)
 
(735
)
 
(113
)
 
(118
)
Net amounts recognized
 
$
(517
)
 
$
(735
)
 
$
(98
)
 
$
(125
)
(a) 
Includes approximately $20 million in 2019 and $198 million in 2018 of lump-sum benefit payments used in the determination of a settlement charge.
 
 
Pension Benefits
 
Postretirement Benefits
(Millions of Dollars)
 
2019
 
2018
 
2019
 
2018
Significant Assumptions Used to Measure Benefit Obligations:
 
 
 
 
 
 
 
 
Discount rate for year-end valuation
 
3.49
%
 
4.31
%
 
3.47
%
 
4.32
%
Expected average long-term increase in compensation level
 
3.75

 
3.75

 
N/A

 
N/A

Mortality table
 
PRI-2012

 
RP-2014

 
PRI-2012

 
RP-2014

Health care costs trend rate — initial: Pre-65
 
N/A

 
N/A

 
6.00
%
 
6.50
%
Health care costs trend rate — initial: Post-65
 
N/A

 
N/A

 
5.10
%
 
5.30
%
Ultimate trend assumption — initial: Pre-65
 
N/A

 
N/A

 
4.50
%
 
4.50
%
Ultimate trend assumption — initial: Post-65
 
N/A

 
N/A

 
4.50
%
 
4.50
%
Years until ultimate trend is reached
 
N/A

 
N/A

 
3

 
4

Accumulated benefit obligation for the pension plan was $3,465 million and $3,275 million as of Dec. 31, 2019 and 2018, respectively.
Net Periodic Benefit Cost (Credit) — Net periodic benefit cost (credit), other than the service cost component, is included in other income in the consolidated statements of income.
Components of net periodic benefit cost (credit) and amounts recognized in other comprehensive income and regulatory assets and liabilities:
 
 
Pension Benefits
 
Postretirement Benefits
(Millions of Dollars)
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Service cost
 
$
86

 
$
94

 
$
94

 
$
2

 
$
2

 
$
2

Interest cost
 
145

 
133

 
147

 
22

 
22

 
24

Expected return on plan assets
 
(203
)
 
(209
)
 
(209
)
 
(21
)
 
(26
)
 
(25
)
Amortization of prior service credit
 
(5
)
 
(5
)
 
(2
)
 
(10
)
 
(11
)
 
(11
)
Amortization of net loss
 
87

 
111

 
107

 
5

 
8

 
7

Settlement charge (a)
 
6

 
91

 
81

 
—

 
—

 
—

Net periodic pension cost (credit)
 
116

 
215

 
218

 
(2
)
 
(5
)
 
(3
)
Costs not recognized due to effects of regulation
 
(1
)
 
(75
)
 
(79
)
 
1

 
2

 
—

Net benefit cost (credit) recognized for financial reporting
 
$
115

 
$
140

 
$
139

 
$
(1
)
 
$
(3
)
 
$
(3
)
Significant Assumptions Used to Measure Costs:
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
 
4.31
%
 
3.63
%
 
4.13
%
 
4.32
%
 
3.62
%
 
4.13
%
Expected average long-term increase in compensation level
 
3.75

 
3.75

 
3.75

 
—

 
—

 
—

Expected average long-term rate of return on assets
 
6.87

 
6.87

 
6.87

 
4.50

 
5.30

 
5.80

(a) 
A settlement charge is required when the amount of all lump-sum distributions during the year is greater than the sum of the service and interest cost components of the annual net periodic pension cost. In 2019 and 2018, as a result of lump-sum distributions during the 2019 and 2018 plan years, Xcel Energy recorded a total pension settlement charge of $6 million in 2019 and $91 million in 2018, the majority of which was not recognized due to the effects of regulation. A total of $1 million and $11 million was recorded in the consolidated statements of income in 2019 and 2018, respectively.
 
 
Pension Benefits
 
Postretirement Benefits
(Millions of Dollars)
 
2019
 
2018
 
2019
 
2018
Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost:
 
 
 
 
 
 
 
 
Net loss
 
$
1,447

 
$
1,633

 
$
95

 
$
116

Prior service credit
 
(15
)
 
(20
)
 
(23
)
 
(33
)
Total
 
$
1,432

 
$
1,613

 
$
72

 
$
83

Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost Have Been Recorded as Follows Based Upon Expected Recovery in Rates:
 
 
 
 
 
 
 
 
Current regulatory assets
 
$
78

 
$
94

 
$
—

 
$
—

Noncurrent regulatory assets
 
1,285

 
1,446

 
80

 
89

Current regulatory liabilities
 
—

 
—

 
(1
)
 
(1
)
Noncurrent regulatory liabilities
 
—

 
—

 
(12
)
 
(10
)
Deferred income taxes
 
18

 
19

 
1

 
1

Net-of-tax accumulated other comprehensive income
 
51

 
54

 
4

 
4

Total
 
$
1,432

 
$
1,613

 
$
72

 
$
83


Measurement date
 
Dec. 31, 2019
 
Dec. 31, 2018
 
Dec. 31, 2019
 
Dec. 31, 2018


Cash Flows — Funding requirements can be impacted by changes to actuarial assumptions, actual asset levels and other calculations prescribed by the requirements of income tax and other pension-related regulations. Required contributions were made in 2017 — 2020 to meet minimum funding requirements.
Voluntary and required pension funding contributions:
•
$150 million in January 2020;
•
$154 million in 2019;
•
$150 million in 2018; and
•
$162 million in 2017.

The postretirement health care plans have no funding requirements other than fulfilling benefit payment obligations, when claims are presented and approved. Additional cash funding requirements are prescribed by certain state and federal rate regulatory authorities.
Voluntary postretirement funding contributions:
•
$10 million during 2020;
•
$15 million during 2019;
•
$11 million during 2018; and
•
$20 million during 2017.
Targeted asset allocations:
 
 
Pension Benefits
 
Postretirement Benefits
 
 
2019
 
2018
 
2019
 
2018
Domestic and international equity securities
 
37
%
 
36
%
 
15
%
 
18
%
Long-duration fixed income securities
 
30

 
30

 
—

 
—

Short-to-intermediate fixed income securities
 
14

 
17

 
72

 
70

Alternative investments
 
17

 
15

 
9

 
8

Cash
 
2

 
2

 
4

 
4

Total
 
100
%
 
100
%
 
100
%
 
100
%

Plan Amendments — The Xcel Energy Pension Plan and Xcel Energy Inc. Nonbargaining Pension Plan (South) were amended in 2017 to reduce supplemental benefits for non-bargaining participants as well as to allow the transfer of a portion of non-qualified pension obligations into the qualified plans.
In 2018, the PSCo postretirement plan was amended to add the 5% cash balance formula.
In 2019, the Pension Protection Act measurement concept was extended beyond 2019 for NSP bargaining terminations and retirements to Dec. 31, 2022.
There were no plan amendments made in 2019 which affected the postretirement benefit obligation.
Projected Benefit Payments
Xcel Energy’s projected benefit payments:
(Millions of Dollars)
 
Projected
Pension Benefit
Payments
 
Gross Projected
Postretirement
Health Care
Benefit Payments
 
Expected
Medicare Part D
Subsidies
 
Net Projected
Postretirement
Health Care
Benefit Payments
2020
 
$
278

 
$
44

 
$
2

 
$
42

2021
 
263

 
43

 
2

 
41

2022
 
262

 
42

 
2

 
40

2023
 
260

 
41

 
2

 
39

2024
 
255

 
40

 
2

 
38

2025-2029
 
1,205

 
181

 
13

 
168


Defined Contribution Plans
Xcel Energy maintains 401(k) and other defined contribution plans that cover most employees. Total expense to these plans was approximately $39 million in 2019, $38 million in 2018 and $37 million in 2017.
Multiemployer Plans
NSP-Minnesota and NSP-Wisconsin each contribute to several union multiemployer pension and other postretirement benefit plans, none of which are individually significant. These plans provide pension and postretirement health care benefits to certain union employees who may perform services for multiple employers and do not participate in the NSP-Minnesota and NSP-Wisconsin sponsored pension and postretirement health care plans.
Contributing to these types of plans creates risk that differs from providing benefits under NSP-Minnesota and NSP-Wisconsin sponsored plans, in that if another participating employer ceases to contribute to a multiemployer plan, additional unfunded obligations may need to be funded over time by remaining participating employers.