18. Employee benefit plans

Defined benefit pension plan

We sponsor and operate a defined benefit pension plan that is available to certain legacy employees of Atlantic Power Limited. The Atlantic Power Services Canada LP Pension Plan (the “Plan”) is maintained solely for certain eligible legacy Partnership participants. The Plan is a defined benefit pension plan that allows for employee contributions. We expect to contribute $0.4 million to the pension plan in 2020.

The net annual periodic pension cost related to the pension plan for the years ended December 31, 2019, 2018 and 2017 includes the following components:


	2019		2018		2017
Service cost benefits earned	$	0.3	$	0.3	$	0.5
Interest cost on benefit obligation		0.5		0.5		0.6
Expected return on plan assets		(0.7)		(0.7)		(0.9)
Settlements		0.3		—		—
Net period benefit cost	$	0.4	$	0.1	$	0.2

A comparison of the pension benefit obligation and related plan assets for the pension plan at December 31 is as follows:


	2019		2018
Projected benefit obligation at January 1	$	(13.2)	$	(15.8)
Service cost		(0.3)		(0.3)
Interest cost		(0.5)		(0.5)
Actuarial (gain) loss		(2.0)		1.4
Employee contributions		(0.1)		(0.1)
Benefits paid		0.2		0.8
Settlements		2.4		—
Foreign currency adjustment		(0.6)		1.3
Projected benefit obligation at December 31		(14.1)		(13.2)
Fair value of plan assets at January 1	$	12.0	$	13.9
Actual return on plan assets		2.0		(0.4)
Employer contributions		0.8		0.4
Employee contributions		0.1		0.1
Benefits paid		(0.2)		(0.8)
Settlements		(2.4)		—
Foreign currency adjustment		0.6		(1.2)
Fair value of plan assets at December 31		12.9		12.0
Funded status at December 31-excess of obligation over assets	$	(1.2)	$	(1.2)

Amounts recognized in the balance sheet at December 31 were as follows:


	2019		2018
Non-current liabilities	$	1.2	$	1.2

Amounts recognized in accumulated OCL that have not yet been recognized as components of net periodic benefit cost were as follows, net of tax:


	2019		2018
Unrecognized (gain) loss	$	(1.7)	$	1.4

We estimate that there will be no amortization of net loss for the pension plan from accumulated OCI to net periodic cost over the next fiscal year.

The following table presents the balances of significant components of the pension plan:


	2019		2018
Projected benefit obligation	$	14.1	$	13.2
Accumulated benefit obligation		12.9		12.2
Fair value of plan assets		12.9		12.0

The market‑related value of the pension plan’s assets is the fair value of the assets. Plan assets are invested in a common collective trust which totaled $12.9 million and $12.0 million for the years ended December 31, 2019 and 2018, respectively.

We determine the level in the fair value hierarchy within which the fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement in its entirety. The fair value of the common/collective trust is valued at a fair value which is equal to the sum of the market value of the fund’s investments, and is categorized as Level 2. There are no investments categorized as Level 1 or 3.

The following table presents the significant assumptions used to calculate our benefit obligations:


	2019		2018
Weighted-Average Assumptions
Discount rate	3.25	%	4.0	%
Rate of compensation increase	2.0	%	2.0	%

The following table presents the significant assumptions used to calculate our benefit expense:


	2019		2018		2017
Weighted-Average Assumptions
Discount rate	4.0	%	3.5	%	4.0	%
Rate of return on plan assets	5.8	%	5.8	%	5.8	%
Rate of compensation increase	2.0	%	2.0	%	2.0	%

We use December 31 as the measurement date for the Plan, and we set the discount rate assumptions on an annual basis on the measurement date. This rate is determined by management based on information agreed with our actuary. The discount rate assumptions reflect the current rate at which the associated liabilities could be effectively settled at the end of the year. The discount rate assumptions used to determine future pension obligations as of the year ended December 31, 2019, 2018 and 2017, were based on the CIA / Fiera curve, which was designed by the Canadian Institute of Actuaries and Fiera Capital Investment Management Inc. to provide a means for sponsors of Canadian plans to value the liabilities of their pension and postretirement benefit plans. The CIA / Fiera curve is a hypothetical yield curve represented by extrapolating the corporate AA‑rated yield curve beyond 10 years using yields on provincial AA bonds with a spread added to the provincial AA yields to approximate the difference between corporate AA and provincial AA credit risk. The CIA / Fiera curve utilizes this approach because there are very few corporate bonds rated AA or above with maturities of 10 years or more in Canada.

We employ a balanced total return investment approach, whereby a mix of equities and fixed income investments are used to maximize the long‑term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, and the plan’s funded status. Plan assets in the common collective trust are currently invested in a diversified blend of equity and fixed‑income investments. Furthermore, equity investments are diversified across Canadian, U.S. and other international equities, as well as among growth, value and small and large capitalization stocks.

The pension plan assets weighted average allocations in the common collective trust were as follows:


	2019		2018
Canadian equity	30	%	29	%
U.S. equity	14	%	14	%
International equity	14	%	13	%
Canadian fixed income	39	%	41	%
Real estate equities	3	%	3	%
	100	%	100	%

Our expected future benefit payments for each of the next five years and in the aggregate for the five years thereafter, are as follows in Cdn$:


Years ending December 31,
2020	Cdn$	0.4
2021		0.5
2022		0.6
2023		0.7
2024		0.8
2025-2029		4.7

Defined Contribution Plans

We maintain a 401(k) retirement savings plan, registered retirement savings plan, and another defined contribution plan for the benefit of our eligible employees. Substantially all of our employees who meet certain service and age requirements are eligible to participate in these plans. Our plan documents provide that any matching contributions by us are discretionary. We have made or accrued matching contributions to these plans of $1.3 million, $1.4 million, and $1.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.