EMPLOYEE BENEFITS

Pension and Other Postretirement Plans

Defined Benefit Pension Plan—PGE sponsors a non-contributory defined benefit pension plan, which has been closed to most new employees since January 31, 2009 and to all new employees since January 1, 2012. No changes were made to the benefits provided to existing participants when the plan was closed to new employees.

The assets of the pension plan are held in a trust and are comprised of equity and debt instruments, all of which are recorded at fair value. Pension plan calculations include several assumptions that are reviewed annually and updated as appropriate.

PGE contributed $9 million to the pension plan in 2018, $2 million in 2017, and nothing in 2016. PGE does not expect to contribute to the pension plan in 2019.

Other Postretirement Benefits—PGE has non-contributory postretirement health and life insurance plans, as well as health reimbursement arrangements (HRAs) for its employees (collectively, “Other Postretirement Benefits” in the following tables). Participants are covered under a Defined Dollar Medical Benefit Plan, which limits PGE’s obligation pursuant to the postretirement health plan by establishing a maximum benefit per employee with employees responsible for the additional cost.

The assets of these plans are held in voluntary employees’ beneficiary association trusts and are comprised of money market funds, common stocks, common and collective trust funds, partnerships/joint ventures, and registered investment companies, all of which are recorded at fair value. Postretirement health and life insurance benefit plan calculations include several assumptions that are reviewed annually by PGE and updated as appropriate, with measurement dates of December 31.

Non-Qualified Benefit Plan—The NQBP in the following tables include obligations for a Supplemental Executive Retirement Plan and a directors pension plan, both of which were closed to new participants in 1997. The NQBP also includes pension make-up benefits for employees that participate in the unfunded Management Deferred Compensation Plan (MDCP). Investments in the NQBP trust, consisting of trust-owned life insurance policies and marketable securities, provide funding for the future requirements of these plans. The assets of such trust are included in the accompanying tables for informational purposes only and are not considered segregated and restricted under current accounting standards. The investments in marketable securities, consisting of money market, bond, and equity mutual funds, are classified as equity or trading debt securities and recorded at fair value. The measurement date for the NQBP is December 31.

Other NQBP—In addition to the NQBP discussed above, PGE provides certain employees and outside directors with deferred compensation plans, whereby participants may defer a portion of their earned compensation. These unfunded plans include the MDCP and the Outside Directors’ Deferred Compensation Plan. PGE holds investments in a NQBP trust that are intended to be a funding source for these plans.

Trust assets and plan liabilities related to the NQBP included in PGE’s consolidated balance sheets are as follows as of December 31 (in millions):



	2018						2017
	NQBP		Other NQBP		Total		NQBP		Other NQBP		Total
Non-qualified benefit plan trust	$	16	$	20	$	36	$	17	$	20	$	37
Non-qualified benefit plan liabilities *	22		81		103		25		81		106


*	For the NQBP, excludes the current portion of $2 million in 2018 and in 2017, which are classified in Other current liabilities in the consolidated balance sheets.

See “Trust Accounts” in Note 4, Balance Sheet Components, for information on the NQBP trust.

Investment Policy and Asset Allocation—The Board of Directors of PGE appoints an Investment Committee, which is comprised of certain members of management from the Company, and establishes the Company’s asset allocation. The Investment Committee is then responsible for implementation of the asset allocation and oversight of the benefit plan investments. The Company’s investment policy for its pension and other postretirement plans is to balance risk and return through a diversified portfolio of equity securities, fixed income securities, and other alternative investments. Asset classes are regularly rebalanced to ensure asset allocations remain within prescribed parameters.

The asset allocations for the plans, and the target allocation, are as follows:



	As of December 31,
	2018				2017
	Actual		Target *		Actual		Target *
Defined Benefit Pension Plan:
Equity securities	65	%	67	%	68	%	67	%
Debt securities	35		33		32		33
Total	100	%	100	%	100	%	100	%
Other Postretirement Benefit Plans:
Equity securities	58	%	59	%	63	%	62	%
Debt securities	42		41		37		38
Total	100	%	100	%	100	%	100	%
Non-Qualified Benefits Plans:
Equity securities	16	%	13	%	18	%	12	%
Debt securities	10		13		6		12
Insurance contracts	74		74		76		76
Total	100	%	100	%	100	%	100	%

The target for the Defined Benefit Pension Plan represents the mid-point of the investment target range. Due to the nature of the investment vehicles in both the Other Postretirement Benefit Plans and the NQBP, these targets are the weighted average of the mid-point of the respective investment target ranges approved by the Investment Committee. Due to the method used to calculate the weighted average targets for the Other Postretirement Benefit Plans and NQBP, reported percentages are affected by the fair market values of the investments within the pools.

The Company’s overall investment strategy is to meet the goals and objectives of the individual plans through a wide diversification of asset types, fund strategies, and fund managers. Equity securities primarily include investments across the capitalization ranges and style biases, both domestically and internationally. Fixed income securities include, but are not limited to, corporate bonds of companies from diversified industries, mortgage-backed securities, and U.S. Treasuries. Other types of investments include investments in hedge funds and private equity funds that follow several different strategies.

Assets measured at NAV as a practical expedient are not categorized in the fair value hierarchy. These assets are listed in the totals of the fair value hierarchy to permit the reconciliation to amounts presented in the financial statements.

The fair values of the Company’s pension plan assets and other postretirement benefit plan assets by asset category are as follows (in millions):



	Level 1		Level 2		Level 3		Other *		Total
As of December 31, 2018:
Defined Benefit Pension Plan assets:
Equity securities—Domestic	$	67	$	—	$	—	$	—	$	67
Investments measured at NAV:
Money market funds	—		—		—		5		5
Collective trust funds	—		—		—		463		463
Private equity funds	—		—		—		11		11
	$	67	$	—	$	—	$	479	$	546
Other Postretirement Benefit Plans assets:
Money market funds	$	3	$	—	$	—	$	—	$	3
Equity securities:
Domestic	—		3		—		—		3
International	8		—		—		—		8
Debt securities—Domestic government	—		5		—		—		5
Investments measured at NAV:
Money market funds	—		—		—		4		4
Collective trust funds	—		—		—		7		7
	$	11	$	8	$	—	$	11	$	30
As of December 31, 2017:
Defined Benefit Pension Plan assets:
Equity securities—Domestic	$	83	$	—	$	—	$	—	$	83
Investments measured at NAV:
Money market funds	—		—		—		5		5
Collective trust funds	—		—		—		528		528
Private equity funds	—		—		—		13		13
	$	83	$	—	$	—	$	546	$	629
Other Postretirement Benefit Plans assets:
Money market funds	$	3	$	—	$	—	$	—	$	3
Equity securities:
Domestic	—		3		—		—		3
International	10		—		—		—		10
Debt securities—Domestic government	—		5		—		—		5
Investments measured at NAV:
Money market funds	—		—		—		4		4
Collective trust funds	—		—		—		8		8
	$	13	$	8	$	—	$	12	$	33


*	Assets are measured at NAV as a practical expedient and not subject to hierarchy level classification disclosure.

An overview of the identification of Level 1, 2, and 3 financial instruments is provided in Note 5, Fair Value of Financial Instruments. The following discussion provides information regarding the methods used in valuation of the various asset class investments held in the pension and other postretirement benefit plan trusts.

Money market funds—PGE invests in money market funds that seek to maintain a stable net asset value. These funds invest in high-quality, short-term, diversified money market instruments, short-term treasury bills, federal agency securities, or certificates of deposit. Some of the money market funds held in the trusts are classified as Level 1 instruments as pricing inputs are based on unadjusted prices in an active market. The remaining money market funds are valued at NAV as a practical expedient and are not classified in the fair value hierarchy.

Equity securities—Equity mutual fund and common stock securities are classified as Level 1 securities as pricing inputs are based on unadjusted prices in an active market. Principal markets for equity prices include published exchanges such as NASDAQ and NYSE. Mutual fund assets included in separately managed accounts are classified as Level 2 securities due to pricing inputs that are directly or indirectly observable in the marketplace.

Collective trust funds—Domestic and international mutual fund assets included in commingled trusts or separately managed accounts are valued at NAV as a practical expedient and not included in the fair value hierarchy.

Debt securities, including municipal debt and corporate credit securities, mortgage-backed securities, and asset-backed securities included in commingled trusts are valued at NAV as a practical expedient and not included in the fair value hierarchy.

Private equity funds—PGE invests in a combination of primary and secondary fund-of-funds, which hold ownership positions in privately held companies across the major domestic and international private equity sectors, including but not limited to, partnerships, joint ventures, venture capital, buyout, and special situations. Private equity investments are valued at NAV as a practical expedient.

The following tables provide certain information with respect to the Company’s defined benefit pension plan, other postretirement benefits, and NQBP as of and for the years ended December 31, 2018 and 2017. Information related to the Other NQBP is not included in the following tables (dollars in millions):



	Defined Benefit Pension Plan						Other Postretirement Benefits						Non-Qualified Benefit Plans
	2018			2017			2018			2017			2018			2017
Benefit obligation:
As of January 1	$	869		$	797		$	78		$	73		$	27		$	27
Service cost	19			17			2			2			—			—
Interest cost	32			33			3			3			1			1
Participants’ contributions	—			—			2			2			—			—
Actuarial loss (gain)	(67		)	60			(7		)	3			(1		)	1
Contractual termination benefits	—			—			—			1			—			—
Benefit payments	(39		)	(36		)	(6		)	(6		)	(3		)	(2		)
Administrative expenses	(3		)	(2		)	—			—			—			—
As of December 31	$	811		$	869		$	72		$	78		$	24		$	27
Fair value of plan assets:
As of January 1	$	629		$	559		$	33		$	30		$	17		$	16
Actual return on plan assets	(50		)	106			(2		)	4			(1		)	1
Company contributions	9			2			3			3			3			2
Participants’ contributions	—			—			2			2			—			—
Benefit payments	(39		)	(36		)	(6		)	(6		)	(3		)	(2		)
Administrative expenses	(3		)	(2		)	—			—			—			—
As of December 31	$	546		$	629		$	30		$	33		$	16		$	17
Unfunded position as of December 31	$	(265	)	$	(240	)	$	(42	)	$	(45	)	$	(8	)	$	(10	)
Accumulated benefit plan obligation as of December 31	$	734		$	778		N/A			N/A			$	24		$	27
Classification in consolidated balance sheet:
Noncurrent asset	$	—		$	—		$	—		$	—		$	16		$	17
Current liability	—			—			—			—			(2		)	(2		)
Noncurrent liability	(265		)	(240		)	(42		)	(45		)	(22		)	(25		)
Net liability	$	(265	)	$	(240	)	$	(42	)	$	(45	)	$	(8	)	$	(10	)
Amounts included in comprehensive income:
Net actuarial loss (gain)	$	25		$	(4	)	$	(4	)	$	—		$	(1	)	$	1
Amortization of net actuarial loss	(17		)	(13		)	—			—			(1		)	(1		)
	$	8		$	(17	)	$	(4	)	$	—		$	(2	)	$	—
Amounts included in AOCL*:
Net actuarial loss (gain)	$	226		$	218		$	(4	)	$	(1	)	$	11		$	13
Prior service cost	—			—			—			—			—			—
	$	226		$	218		$	(4	)	$	(1	)	$	11		$	13



	Defined Benefit Pension Plan				Other Postretirement Benefits						Non-Qualified Benefit Plans
	2018		2017		2018			2017			2018		2017
Assumptions used:
Discount rate for benefit obligation	4.25	%	3.65	%	4.10	%	-	3.42	%	-	4.25	%	3.65	%
					4.26	%		3.70	%
Discount rate for benefit cost	3.65	%	4.17	%	3.42	%	-	3.75	%	-	3.65	%	4.17	%
					3.70	%		4.23	%
Weighted average rate of compensation increase for benefit obligation	3.65	%	3.65	%	4.58	%		4.58	%		N/A		N/A
Weighted average rate of compensation increase for benefit cost	3.65	%	3.65	%	4.58	%		4.58	%		N/A		N/A
Long-term rate of return on plan assets for benefit cost	7.00	%	7.50	%	6.20	%		6.26	%		N/A		N/A

* Amounts included in AOCL related to the Company’s defined benefit pension plan and other postretirement benefits are transferred to Regulatory assets due to the future recoverability from retail customers. Accordingly, as of the balance sheet date, such amounts are included in Regulatory assets.

Net periodic benefit cost consists of the following for the years ended December 31 (in millions):



	Defined Benefit Pension Plan									Other Postretirement Benefits									Non-Qualified Benefit Plans
	2018			2017			2016			2018			2017			2016			2018		2017		2016
Service cost	$	19		$	17		$	16		$	2		$	2		$	2		$	—	$	—	$	—
Interest cost on benefit obligation	32			33			33			3			3			4			1		1		1
Expected return on plan assets	(42		)	(42		)	(40		)	(1		)	(2		)	(2		)	—		—		—
Amortization of prior service cost	—			—			—			—			—			1			—		—		—
Amortization of net actuarial loss	17			13			14			—			—			—			1		1		1
Net periodic benefit cost	$	26		$	21		$	23		$	4		$	3		$	5		$	2	$	2	$	2

The portion of non-service costs attributable to expense related to the pension and other postretirement benefit plans, is classified as Miscellaneous income (expense), net within Other income on the Company’s consolidated statements of income. PGE estimates that $11 million will be amortized from AOCL into net periodic benefit cost in 2019, consisting of a net actuarial loss of $10 million for pension benefits and $1 million for non-qualified benefits. Amounts related to the pension and other postretirement benefits are offset with the amortization of the corresponding regulatory asset.

The following table summarizes the benefits expected to be paid to participants in each of the next five years and in the aggregate for the five years thereafter (in millions):



	Payments Due
	2019		2020		2021		2022		2023		2024 - 2028
Defined benefit pension plan	$	41	$	42	$	44	$	45	$	45	$	238
Other postretirement benefits	5		5		5		5		6		22
Non-qualified benefit plans	2		2		2		2		2		10
Total	$	48	$	49	$	51	$	52	$	53	$	270

All of the plans develop expected long-term rates of return for the major asset classes using long-term historical returns, with adjustments based on current levels and forecasts of inflation, interest rates, and economic growth. Also included are incremental rates of return provided by investment managers whose returns are expected to be greater than the markets in which they invest.

For measurement purposes, the assumed health care cost trend rates, which can affect amounts reported for the health care plans, were as follows:


•	For 2018, 6.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2019 and 2020, then decreasing 0.25% per year thereafter, reaching 5.0% in 2026;


•	For 2017, 6.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2018, decreasing to 6.0% in 2019, then decreasing 0.25% per year thereafter, reaching 5.0% in 2023; and


•	For 2016, 7% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2017, decreasing to 6.5% in 2018, 6.0% in 2019, then decreasing 0.25% per year thereafter, reaching 5.0% in 2023.

A one percentage point increase or decrease in the above health care cost assumption would have no material impact on total service or interest cost, or on the postretirement benefit obligation.

401(k) Retirement Savings Plan

PGE sponsors a 401(k) Plan that covers substantially all employees. For eligible employees who are covered by PGE’s defined benefit pension plan, the Company matches employee contributions up to 6% of the employee’s base pay. For eligible employees who are not covered by PGE’s defined benefit pension plan, the Company contributes 5% of the employee’s base salary, whether or not the employee contributes to the 401(k) Plan, and also matches employee contributions up to 5% of the employee’s base pay.

For the majority of bargaining employees who are subject to the International Brotherhood of Electrical Workers Local 125 agreements the Company contributes an additional 1% of the employee’s base salary, whether or not the employee contributes to the 401(k) Plan.

All contributions are invested in accordance with employees’ elections, limited to investment options available under the 401(k) Plan. PGE made contributions to employee accounts of $23 million in 2018, $21 million in 2017, and $19 million in 2016.