such that company contributions under PSE’s applicable tax-qualified plan, which otherwise would have been earned if not for IRS limitations, are credited to an account with the Deferred Compensation Plan.

In addition to providing pension benefits, PSE provides legacy group health care and life insurance benefits (Other Benefits) for certain retired employees. These benefits are provided principally through an insurance company. The insurance premiums, paid primarily by retirees, are based on the benefits provided during the prior year. On June 11, 2019, the Welfare Benefits Committee approved the termination of the Plan effective December 31, 2019, and the creation of a Retiree Health Reimbursement Account (HRA) Plan effective January 1, 2020. No eligible individual may become a participant or covered dependent in the Plan on or after January 1, 2020, and no benefits will be payable under insurance contracts or the Plan on or after January 1, 2020. Effective January 1, 2020, assets in the 401(h) account will be allocated to the Retiree HRA instead of the Plan to cover the Company's portion of premiums for health benefits for retiree and their beneficiaries.

In March 2017, the FASB issued ASU 2017-07, requiring that an employer report the service cost component in the same line items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost (which include interest costs, expected return on plan assets, amortization of prior service cost or credits and actuarial gains and losses) are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. Pursuant to the standard, the Company has retrospectively included in the consolidated statements of income: (i) the components of service cost within utility operations and maintenance for PSE and within non-utility expense and other for Puget Energy, and (ii) all non-service cost components in other income.

The following tables summarize the Company’s change in benefit obligation, change in plan assets and amounts recognized in the Statements of Financial Position for the years ended December 31, 2019, and 2018:


Puget Energy and Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	2019		2018		2019		2018		2019		2018
Change in benefit obligation:
Benefit obligation at beginning of period	$	677,643	$	700,481	$	55,708	$	55,754	$	10,636	$	11,454
Amendments	—		—		—		1,446		9,049		—
Service cost	22,656		22,757		1,023		847		61		69
Interest cost	28,913		27,303		2,314		2,120		410		444
Curtailment Loss / (Gain)	—		—		—		—		(7,486)		—
Actuarial loss (gain)	84,272		(29,067)		6,756		1,122		(287)		(379)
Benefits paid	(36,740)		(42,662)		(2,801)		(5,581)		(982)		(1,037)
Medicare part D subsidy received	—		—		—		—		226		85
Administrative expense	(2,439)		(1,169)		—		—		—		—
Benefit obligation at end of period	$	774,305	$	677,643	$	63,000	$	55,708	$	11,627	$	10,636


Puget Energy and Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	2019		2018		2019		2018		2019		2018
Change in plan assets:
Fair value of plan assets at beginning of period	$	640,242	$	704,360	$	—	$	—	$	5,960	$	7,138
Actual return on plan assets	133,939		(38,379)		—		—		1,006		(395)
Employer contribution	18,000		18,000		2,801		5,581		305		254
Benefits paid	(36,740)		(42,662)		(2,801)		(5,581)		(982)		(1,037)
Administrative expense	(2,399)		(1,077)		—		—		—		—
Fair value of plan assets at end of period	$	753,042	$	640,242	$	—	$	—	$	6,289	$	5,960
Funded status at end of period	$	(21,263)	$	(37,401)	$	(63,000)	$	(55,708)	$	(5,338)	$	(4,676)


Puget Energy and Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	2019		2018		2019		2018		2019		2018
Amounts recognized in Consolidated Balance Sheet consist of:
Noncurrent assets	$	—	$	—	$	—	$	—	$	—	$	—
Current liabilities	—		—		(22,604)		(6,249)		(308)		(332)
Noncurrent liabilities	(21,263)		(37,401)		(40,396)		(49,459)		(5,030)		(4,344)
Net assets (liabilities)	$	(21,263)	$	(37,401)	$	(63,000)	$	(55,708)	$	(5,338)	$	(4,676)


Puget Energy and Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	2019		2018		2019		2018		2019		2018
Pension Plans with an Accumulated Benefit Obligation in excess of Plan Assets:
Projected benefit obligation	$	774,305	$	677,643	$	63,000	$	55,708	$	11,627	$	10,636
Accumulated benefit obligation	762,838		668,469		59,988		51,031		11,604		10,557
Fair value of plan assets	753,042		640,242		—		—		6,289		5,960


Puget Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	2019		2018		2019		2018		2019		2018
Amounts recognized in Accumulated Other Comprehensive Income consist of:
Net loss (gain)	$	94,319	$	94,929	$	15,003	$	9,612	$	(197)	$	(2,564)
Prior service cost (credit)	(3,884)		(5,863)		1,276		1,607		—		—
Total	$	90,435	$	89,066	$	16,279	$	11,219	$	(197)	$	(2,564)


Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	2019		2018		2019		2018		2019		2018
Amounts recognized in Accumulated Other Comprehensive Income consist of:
Net loss (gain)	$	217,502	$	229,819	$	16,473	$	11,450	$	(364)	$	(3,857)
Prior service cost (credit)	(3,086)		(4,659)		1,276		1,609		—		—
Total	$	214,416	$	225,160	$	17,749	$	13,059	$	(364)	$	(3,857)


Puget Energy	Qualified Pension Benefits										SERP Pension Benefits								Other Benefits
(Dollars in Thousands)	2019		2018		2017		2019		2018		2017		2019		2018		2017
Components of net periodic benefit cost:
Service cost	$	22,656	$	22,757	$	20,081	$	1,023	$	847	$	913	$	61	$	69	$	72
Interest cost	28,913		27,303		28,373		2,314		2,120		2,285		410		444		500
Expected return on plan assets	(50,249)		(50,202)		(47,784)		—		—		—		(393)		(472)		(461)
Amortization of prior service cost (credit)	(1,980)		(1,980)		(1,980)		331		1,580		42		—		—		—
Amortization of net loss (gain)	1,151		2,187		—		1,365		42		1,077		(374)		(335)		(402)
Net periodic benefit cost	$	491	$	65	$	(1,310)	$	5,033	$	4,589	$	4,317	$	(296)	$	(294)	$	(291)


Puget Sound Energy	Qualified Pension Benefits										SERP Pension Benefits								Other Benefits
(Dollars in Thousands)	2019		2018		2017		2019		2018		2017		2019		2018		2017
Components of net periodic benefit cost:
Service cost	$	22,656	$	22,757	$	20,081	$	1,023	$	847	$	913	$	61	$	69	$	72
Interest cost	28,913		27,303		28,373		2,314		2,120		2,285		410		444		500
Expected return on plan assets	(50,267)		(50,240)		(47,862)		—		—		—		(393)		(472)		(461)
Amortization of prior service cost (credit)	(1,573)		(1,573)		(1,573)		333		44		44		—		—		—
Amortization of net loss (gain)	12,877		14,917		13,048		1,733		2,069		1,565		(562)		(556)		(641)
Net periodic benefit cost	$	12,606	$	13,164	$	12,067	$	5,403	$	5,080	$	4,807	$	(484)	$	(515)	$	(530)


Puget Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	2019		2018		2019		2018		2019		2018
Other changes (pre-tax) in plan assets and benefit obligations recognized in other comprehensive income:
Net loss (gain)	$	541	$	59,422	$	6,756	$	1,122	$	(900)	$	488
Amortization of net (loss) gain	(1,151)		(2,187)		(1,365)		(1,580)		374		335
Settlements, mergers, sales, and closures	—		—		—		(619)		2,892		—
Prior service cost (credit)	—		—		—		1,446		—		—
Amortization of prior service (cost) credit	1,980		1,980		(331)		(42)		—		—
Total change in other comprehensive income for year	$	1,370	$	59,215	$	5,060	$	327	$	2,366	$	823


Puget Sound Energy	Qualified Pension Benefit						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	2019		2018		2019		2018		2019		2018
Other changes (pre-tax) in plan assets and benefit obligations recognized in other comprehensive income:
Net loss (gain)	$	559	$	59,460	$	6,756	$	1,122	$	(900)	$	488
Amortization of net (loss) gain	(12,877)		(14,917)		(1,733)		(2,069)		562		556
Settlements, mergers, sales, and closures	—		—		—		(737)		3,832		—
Prior service cost (credit)	—		—		—		1,446		—		—
Amortization of prior service (cost) credit	1,573		1,573		(333)		(44)		—		—
Total change in other comprehensive income for year	$	(10,745)	$	46,116	$	4,690	$	(282)	$	3,494	$	1,044

The estimated net (loss) gain and prior service cost (credit) for the pension plans that will be amortized from AOCI into net periodic benefit cost in 2020 by PSE include a $18.6 million net loss and a $1.6 million credit, respectively. The estimated net (loss) gain and prior service cost (credit) for the SERP that will be amortized from AOCI into net periodic benefit cost in 2020 is a $2.6 million net loss and a $0.3 million net loss, respectively. The estimated net (loss) gain and prior service cost (credit) for the other postretirement plans that will be amortized from AOCI into net periodic benefit cost in 2020 is a net loss of $0.2 million. For Puget Energy, the overall amounts expected to be amortized from AOCI into net period benefit cost in 2020 is a net loss of $8.4 million.

The aggregate expected contributions by the Company to fund the qualified pension plan, SERP and the other postretirement plans for the year ending December 31, 2020, are expected to be at least $18.0 million, $22.6 million and $0.1 million, respectively.


	Qualified Pension Benefits										SERP Pension Benefits								Other Benefits
Benefit Obligation Assumptions	2019		2018		2017		2019		2018		2017		2019		2018		2017
Discount rate	3.35	%	4.40	%	4.00	%	3.35	%	4.40	%	4.00	%	3.35	%	4.40	%	4.00	%
Rate of compensation increase	4.50		4.50		4.50		4.50		4.50		4.50		4.50		4.50		4.50
Medical trend rate¹	—		—		—		—		—		—		N/A		7.60		6.80
Benefit Cost Assumptions
Discount rate	4.40		4.40		4.50		4.40		4.40		4.50		4.40		4.40		4.50
Return on plan assets	7.50		7.50		7.45		—		—		—		7.00		7.00		6.75
Rate of compensation increase	4.50		4.50		4.50		4.50		4.50		4.50		4.50		4.50		4.50
Medical trend rate¹	—		—		—		—		—		—		N/A		7.60		9.50

^1.As of December 31,2019, PSE terminated the previous group retiree medical plan and created an HRA. As a result, medical inflation is no longer applicable in accounting for the related benefit obligation.

The Company has selected the expected return on plan assets based on a historical analysis of rates of return and the Company’s investment mix, market conditions, inflation and other factors. The expected rate of return is reviewed annually based on these factors. The Company’s accounting policy for calculating the market-related value of assets for the Company’s retirement plan is based on a five-year smoothing of asset gains (losses) measured from the expected return on market-related assets. This is a calculated value that recognizes changes in fair value in a systematic and rational manner over five years. The same manner of calculating market-related value is used for all classes of assets, and is applied consistently from year to year.

Puget Energy’s pension and other postretirement benefits income or costs depend on several factors and assumptions, including plan design, timing and amount of cash contributions to the plan, earnings on plan assets, discount rate, expected long-term rate of return, and mortality trends. Changes in any of these factors or assumptions will affect the amount of income or expense that Puget Energy records in its financial statements in future years and its projected benefit obligation. Puget Energy has selected an expected return on plan assets based on a historical analysis of rates of return and Puget Energy’s investment mix, market conditions, inflation and other factors. As required by merger accounting rules, market-related value was reset to market value effective with the merger.

The discount rates were determined by using market interest rate data and the weighted-average discount rate from Citigroup Pension Liability Index Curve. The Company also takes into account in determining the discount rate the expected changes in market interest rates and anticipated changes in the duration of the plan liabilities.


(Dollars in Thousands)	2020		2021		2022		2023		2024		2025-2029
Qualified Pension total benefits	$	45,000	$	45,200	$	46,200	$	47,900	$	48,800	$	253,400
SERP Pension total benefits	22,604		1,940		5,792		3,663		6,290		21,283
Other Benefits total with Medicare Part D subsidy	843		826		972		937		901		4,053
Other Benefits total without Medicare Part D subsidy	1,055		1,007		972		937		901		4,053

Plan contributions and the actuarial present value of accumulated plan benefits are prepared based on certain assumptions pertaining to interest rates, inflation rates and employee demographics, all of which are subject to change. Due to uncertainties inherent in the estimations and assumptions process, changes in these estimates and assumptions in the near term may be material to the financial statements.

The Company has a Retirement Plan Committee that establishes investment policies, objectives and strategies designed to balance expected return with a prudent level of risk. All changes to the investment policies are reviewed and approved by the Retirement Plan Committee prior to being implemented.

The Retirement Plan Committee invests trust assets with investment managers who have historically achieved above-median long-term investment performance within the risk and asset allocation limits that have been established. Interim evaluations are routinely performed with the assistance of an outside investment consultant.


	Allocation
Asset Class	Minimum		Target		Maximum
Domestic large cap equity	25	%	31	%	40	%
Domestic small cap equity	—		9		15
Non-U.S. equity	10		25		30
Fixed income	15		25		30
Real estate	—		—		10
Absolute return	5		10		15
Cash	—		—		5

ASC 715, “Compensation – Retirement Benefits” (ASC 715) directs companies to provide additional disclosures about plan assets of a defined benefit pension or other postretirement plan. The objectives of the disclosures are to disclose the following: (i) how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies; (ii) major categories of plan assets; (iii) inputs and valuation techniques used to measure the fair value of plan assets; (iv) effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and (v) significant concentrations of risk within plan assets.

ASC 820 allows the reporting entity, as a practical expedient, to measure the fair value of investments that do not have readily determinable fair values on the basis of the net asset value per share of the investment if the net asset value of the investment is calculated in a matter consistent with ASC 946, “Financial Services – Investment Companies”. The standard requires disclosures about the nature and risk of the investments and whether the investments are probable of being sold at amounts different from the net asset value per share.


	Recurring Fair Value Measures										Recurring Fair Value Measures
	December 31, 2019										December 31, 2018
(Dollars in Thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Mutual Funds	$	91,658	$	—	$	91,658	$	103,661	$	—	$	103,661
Common Stock	224,146		—		224,146		177,949		—		177,949
Government Securities	34,916		—		34,916		—		—		—
Corporate Bonds	—		—		—		—		—		—
Cash and cash equivalents	—		150		150		—		702		702
Subtotal	$	350,720	$	150	$	350,870	$	281,610	$	702	$	282,312
Investments measured at NAV¹					401,668						356,586
Net (payable) receivable					505						1,345
Total assets					$	753,043					$	640,243

^1.In accordance with ASU 2015-07, "Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent)", certain investments that are measured at NAV per share (or its equivalent) are not classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of net assets available for benefits. Investments measured at NAV primarily consist of common/collective trust funds and two partnerships held as of December 31, 2019, and 2018.

Mesirow Institutional Multi-Strategy Fund Partnership, L.P. utilizes a combination of long and short strategies through investments in investment funds. The major strategy allocations of the investment funds include (1) Investments in debt obligations of public and private entities; typically, in financial duress, and (2) Investments in equity positions on a global basis utilizing fundamental analysis.

Grosvenor Institutional Partners Fund, L.P invests substantially all of the fund assets available in the Grosvenor Master Fund, a Cayman Islands exempted company which is sponsored, managed and has the same investment objective as the Partnership fund. In addition to the Master Fund, investments are made primarily in offshore investment funds, investment partnerships, and pooled investment vehicles; collectively referred to as Portfolio Funds, which generally implement "nontraditional" or "alternative" investment strategies.


	Recurring Fair Value Measures										Recurring Fair Value Measures
	December 31, 2019										December 31, 2018
(Dollars in Thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Mutual fund¹	$	6,201	$	—	$	6,201	$	5,910	$	—	$	5,910
Investments measured at NAV²					88						50
Total assets					$	6,289					$	5,960

^1.This is a publicly traded balanced mutual fund. The fund seeks regular income, conservation of principal, and an opportunity for long-term growth of principal and income. The fair value is determined by taking the number of shares owned by the plan, and multiplying by the market price as of December 31, 2019, and 2018.