XML 108 R18.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Benefit Plans and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Benefit Plans and Other Postretirement Benefits nsion and Postretirement Health Care Benefits
Xcel Energy, which includes SPS, 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, of which $2 million was attributable to SPS in both years. In 2019 and 2018, Xcel Energy recognized net benefit cost for the SERP and nonqualified plans of $4 million in 2019 and 2018, of which immaterial amounts were attributable to SPS.
Xcel Energy, which includes SPS, 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. Xcel Energy and SPS continually review pension assumptions.
Pension cost determination assumes a forecasted mix of investment types over the long-term.
•
Investment returns in 2019 were above the assumed level of 6.78%;
•
Investment returns in 2018 were below the assumed level of 6.78%;
•
Investment returns in 2017 were above the assumed level of 6.78%; and
•
In 2020, Xcel Energy’s expected investment-return assumption is 6.78%.
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. 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, SPS’ 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
 
$
18.9

 
$
—

 
$
—

 
$
—

 
$
18.9

 
$
21.6

 
$
—

 
$
—

 
$
—

 
$
21.6

Commingled funds
 
202.5

 
—

 
—

 
144.8

 
347.3

 
128.6

 
—

 
—

 
132.5

 
261.1

Debt securities
 
—

 
98.2

 
0.6

 
—

 
98.8

 
—

 
98.1

 
—

 
—

 
98.1

Equity securities
 
12.1

 
—

 
—

 
—

 
12.1

 
14.4

 
—

 
—

 
—

 
14.4

Other
 
(16.8
)
 
0.7

 
—

 
(2.8
)
 
(18.9
)
 
0.2

 
0.8

 
—

 
(4.0
)
 
(3.0
)
Total
 
$
216.7

 
$
98.9

 
$
0.6

 
$
142.0

 
$
458.2

 
$
164.8

 
$
98.9

 
$
—

 
$
128.5

 
$
392.2


(a) 
See Note 8 for further information on fair value measurement inputs and methods.
For each of the fair value hierarchy levels, SPS’ proportionate allocation of the total 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
 
$
2.2

 
$
—

 
$
—

 
$
—

 
$
2.2

 
$
1.8

 
$
—

 
$
—

 
$
—

 
$
1.8

Insurance contracts
 
—

 
4.9

 
—

 
—

 
4.9

 
—

 
4.3

 
—

 
—

 
4.3

Commingled funds:
 
6.7

 
—

 
—

 
7.4

 
14.1

 
12.8

 
—

 
—

 
3.8

 
16.6

Debt securities:
 
—

 
22.1

 
0.1

 
—

 
22.2

 
—

 
17.2

 
—

 
—

 
17.2

Equity securities:
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Other
 
—

 
0.2

 
—

 
—

 
0.2

 
—

 
0.1

 
—

 
—

 
0.1

Total
 
$
8.9

 
$
27.2

 
$
0.1

 
$
7.4

 
$
43.6

 
$
14.6

 
$
21.6

 
$
—

 
$
3.8

 
$
40.0

(a) 
See Note 8 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 presented in the following table:
 
 
Pension Benefits
 
Postretirement Benefits
(Millions of Dollars)
 
2019
 
2018
 
2019
 
2018
Change in Benefit Obligation:
 
 
 
 
 
 
 
 
Obligation at Jan. 1
 
$
477.8

 
$
515.9

 
$
41.8

 
$
47.0

Service cost
 
8.8

 
9.7

 
0.9

 
1.1

Interest cost
 
20.1

 
18.4

 
1.7

 
1.6

Plan amendments
 
—

 
—

 
—

 
—

Actuarial loss (gain)
 
44.2

 
(34.8
)
 
0.4

 
(5.1
)
Plan participants’ contributions
 
—

 
—

 
0.6

 
0.6

Benefit payments (a)
 
(32.1
)
 
(31.4
)
 
(2.2
)
 
(3.4
)
Obligation at Dec. 31
 
$
518.8

 
$
477.8

 
$
43.2

 
$
41.8

Change in Fair Value of Plan Assets:
 
 
 
 
 
 
 
 
Fair value of plan assets at Jan. 1
 
$
392.2

 
$
433.2

 
$
40.0

 
$
44.1

Actual return on plan assets
 
80.2

 
(17.6
)
 
5.1

 
(1.3
)
Employer contributions
 
17.9

 
8.0

 
0.1

 
—

Plan participants’ contributions
 
—

 
—

 
0.6

 
0.6

Benefit payments
 
(32.1
)
 
(31.4
)
 
(2.2
)
 
(3.4
)
Fair value of plan assets at Dec. 31
 
$
458.2

 
$
392.2

 
$
43.6

 
$
40.0

Funded status of plans at Dec. 31
 
$
(60.6
)
 
$
(85.6
)
 
$
0.4

 
$
(1.8
)
Amounts recognized in the Balance Sheet at Dec. 31:
 
 
 
 
 
 
 
 
Noncurrent assets
 
—

 
—

 
0.4

 
—

Noncurrent liabilities
 
(60.6
)
 
(85.6
)
 
—

 
(1.8
)
Net amounts recognized
 
$
(60.6
)
 
$
(85.6
)
 
$
0.4

 
$
(1.8
)
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

(a) 
Includes approximately $6.8 million in 2019 and $6.9 million in 2018, of lump-sum benefit payments used in the determination of a settlement charge.
Accumulated benefit obligation for the pension plan was $481.1 million and $445.8 million as of Dec. 31, 2019 and 2018, respectively.

Net Periodic Benefit Cost (Credit) — Net periodic benefit cost (credit) other than service cost component is included in other income in the statement of income.
Components of net periodic benefit cost (credit) and the amounts recognized in other comprehensive income and regulatory assets and liabilities are as follows:
 
 
Pension Benefits
 
Postretirement Benefits
(Millions of Dollars)
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Service cost
 
$
8.8

 
$
9.7

 
$
9.8

 
$
0.9

 
$
1.1

 
$
0.9

Interest cost
 
20.1

 
18.4

 
19.7

 
1.7

 
1.6

 
1.7

Expected return on plan assets
 
(28.6
)
 
(28.3
)
 
(27.9
)
 
(2.0
)
 
(2.5
)
 
(2.4
)
Amortization of prior service credit
 
(0.1
)
 
(0.1
)
 
—

 
(0.5
)
 
(0.4
)
 
(0.4
)
Amortization of net loss
 
11.3

 
14.1

 
13.0

 
(0.4
)
 
(0.4
)
 
(0.6
)
Settlement charge (a)
 
2.4

 
3.2

 
—

 
—

 
—

 
—

Net periodic pension cost (credit)
 
13.9

 
17.0

 
14.6

 
(0.3
)
 
(0.6
)
 
(0.8
)
Costs not recognized due to effects of regulation
 
0.9

 
(2.2
)
 
0.3

 
—

 
—

 
—

Net benefit cost (credit) recognized for financial reporting
 
$
14.8

 
$
14.8

 
$
14.9

 
$
(0.3
)
 
$
(0.6
)
 
$
(0.8
)
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
 
6.78

 
6.78

 
6.78

 
5.30

 
5.80

 
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, SPS recorded a total pension settlement charge of $2.4 million and $3.2 million in 2019 and 2018, respectively. A total of $0.6 million and $0.7 million of that amount was recorded in the income statement 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
 
$
209.7

 
$
230.9

 
$
(11.9
)
 
$
(9.6
)
Prior service credit
 
(1.1
)
 
(1.2
)
 
(1.4
)
 
(1.8
)
Total
 
$
208.6

 
$
229.7

 
$
(13.3
)
 
$
(11.4
)
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
 
$
11.0

 
$
12.9

 
$
—

 
$
—

Noncurrent regulatory assets
 
197.6

 
216.8

 
—

 
—

Current regulatory liabilities
 
—

 
—

 
(0.8
)
 
(0.9
)
Noncurrent regulatory liabilities
 
—

 
—

 
(12.5
)
 
(10.5
)
Total
 
$
208.6

 
$
229.7

 
$
(13.3
)
 
$
(11.4
)
Measurement date
 
Dec. 31, 2019
 
Dec. 31, 2018
 
Dec. 31, 2019
 
Dec. 31, 2018


Cash Flows — Cash funding requirements can be impacted by changes to actuarial assumptions, actual asset levels and other calculations prescribed by the funding requirements of income tax and other pension-related regulations. Required contributions were made in 2017 - 2020 to meet minimum funding requirements.
Total voluntary and required pension funding contributions across all four of Xcel Energy’s pension plans were as follows:
•
$150 million in January 2020, of which $14 million was attributable to SPS;
•
$154 million in 2019, of which $18 million was attributable to SPS;
•
$150 million in 2018, of which $8 million was attributable to SPS; and
•
$162 million in 2017, of which $24 million was attributable to SPS.
For future years, Xcel Energy and SPS anticipate contributions will be made as necessary.
The postretirement health care plans have no funding requirements under income tax and other retirement-related regulations 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. Xcel Energy’s voluntary postretirement funding contributions were as follows:
•
Expects to contribute approximately $10 million during 2020;
•
$15 million during 2019;
•
$11 million during 2018;
•
$20 million during 2017; and
•
Amounts attributable to SPS were immaterial.
Target asset allocations:
 
 
Pension Benefits
 
Postretirement Benefits
 
 
2019
 
2018
 
2019
 
2018
Domestic and international equity securities
 
37
%
 
35
%
 
15
%
 
18
%
Long-duration fixed income securities
 
30

 
32

 
—

 
—

Short-to-intermediate fixed income securities
 
14

 
16

 
72

 
70

Alternative investments
 
17

 
15

 
9

 
8

Cash
 
2

 
2

 
4

 
4

Total
 
100
%
 
100
%
 
100
%
 
100
%

Plan Amendments — Xcel Energy, which includes SPS, amended the Xcel Energy Inc. Nonbargaining Pension Plan (South) 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 2019 and 2018, there were no plan amendments made which affected the benefit obligation.
Projected Benefit Payments
SPS’ 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
 
$
30.7

 
$
2.9

 
$
—

 
$
2.9

2021
 
29.4

 
2.9

 
—

 
2.9

2022
 
30.3

 
2.9

 
—

 
2.9

2023
 
30.4

 
2.9

 
—

 
2.9

2024
 
30.4

 
2.8

 
—

 
2.8

2025-2029
 
153.5

 
13.2

 
0.1

 
13.1


Defined Contribution Plans
Xcel Energy, which includes SPS, maintains 401(k) and other defined contribution plans that cover most employees. The expense to these plans for SPS was approximately $3 million in 2019, 2018 and 2017.