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EMPLOYEE BENEFIT PLANS | 12 Months Ended
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Dec. 31, 2018
Retirement Benefits [Abstract] |
Employee Benefit Plans | EMPLOYEE BENEFIT PLANS For our employee benefit plans, we:
▪ | recognize an asset for a plan’s overfunded status or a liability for a plan’s underfunded status in the statement of financial position;
▪ | measure a plan’s assets and its obligations that determine its funded status as of the end of the fiscal year; and
▪ | recognize changes in the funded status of pension and PBOP plans in the year in which the changes occur. Generally, those changes are reported in OCI and as a separate component of shareholders’ equity.
The detailed information presented below covers the employee benefit plans of primarily Sempra Energy and its consolidated subsidiaries. Sempra Energy has funded and unfunded noncontributory traditional defined benefit and cash balance plans, including separate plans for SDG&E and SoCalGas, which collectively cover all eligible employees, including members of the Sempra Energy board of directors who were participants in a predecessor plan on or before June 1, 1998. Pension benefits under the traditional defined benefit plans are based on service and final average earnings, while the cash balance plans provide benefits using a career average earnings methodology. IEnova has an unfunded noncontributory defined benefit plan covering all employees. Chilquinta Energía has an unfunded noncontributory defined benefit plan covering all employees hired before October 1, 1981 and an unfunded noncontributory termination indemnity plan covering represented employees. The plans generally provide defined benefits to retirees based on date of hire, years of service and final average earnings. Sempra Energy also has PBOP plans, including separate plans for SDG&E and SoCalGas, which collectively cover all domestic and certain foreign employees. The life insurance plans are both contributory and noncontributory, and the health care plans are contributory. Participants’ contributions are adjusted annually. Other postretirement benefits include medical benefits for retirees’ spouses. Chilquinta Energía also has two noncontributory postretirement benefit plans that cover represented employees – a health care plan and an energy subsidy plan that provides for reduced energy rates. The health care plan includes benefits for retirees’ spouses and dependents. Pension and other postretirement benefits costs and obligations are dependent on assumptions used in calculating such amounts. We review these assumptions on an annual basis and update them as appropriate. We consider current market conditions, including interest rates, in making these assumptions. We use a December 31 measurement date for all of our plans.RABBI TRUSTIn support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $416 million and $455 million at December 31, 2018 and 2017, respectively.PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS Benefit Plan Amendments Affecting 2018 In 2018, certain executive participants in a company nonqualified pension plan became eligible in this same plan for Supplemental Executive Retirement Plan benefits. This was treated as a plan amendment and increased the recorded pension liability by $12 million at Sempra Energy and $8 million at SDG&E. Sale of Qualified Pension Plan Annuity Contracts In March 2018, an insurance company purchased annuities for certain current annuitants in the SDG&E and SoCalGas qualified pension plans and assumed the obligation for payment of these annuities. At SDG&E in the first quarter of 2018 and at SoCalGas in the second quarter of 2018, the liability transferred for these annuities, plus the total year-to-date lump-sum payments, exceeded the settlement threshold, which triggered settlement accounting. This resulted in a reduction of the recorded pension liability and pension plan assets of $363 million at Sempra Energy Consolidated, including $132 million at SDG&E and $231 million at SoCalGas. This also resulted in settlement charges in net periodic benefit cost of $54 million at Sempra Energy Consolidated, including $22 million at SDG&E and $32 million at SoCalGas. The settlement charges were recorded as regulatory assets on the Consolidated Balance Sheets. Settlement Accounting for Lump Sum Payments In 2018, Sempra Energy Consolidated and SDG&E recorded settlement charges of $12 million and $4 million, respectively, and in 2017, Sempra Energy Consolidated recorded settlement charges of $8 million for lump sum payments from its non-qualified pension plans that were in excess of the respective plan’s service cost plus interest cost, thereby triggering settlement accounting. Acquisition On March 9, 2018, Sempra Energy completed the Merger, as we discuss in Note 5, and assumed unfunded other postretirement employee benefits obligations for health care and life insurance benefits, resulting in an increase of $21 million in the other postretirement benefit plan liability at Sempra Energy Consolidated. In 2018, we recorded $27 million in AOCI representing an actuarial loss related to Oncor’s pension plan. Special Termination Benefits Affecting 2018, 2017 and 2016 In 2018 and 2016, certain nonrepresented, and in 2017, certain represented, employees age 62 or older with 5 years of service or age 55 to 61 with 10 years of service that retired under the Voluntary Retirement Enhancement Program offered in these years received an additional postretirement health benefit in the form of a $100,000 Health Reimbursement Account. We treated the benefit obligation attributable to the Health Reimbursement Account as a special termination benefit. This resulted in increases to the recorded liability for PBOP and net periodic benefit cost of $5 million for Sempra Energy Consolidated, $3 million for SDG&E and $2 million for SoCalGas in 2018, $18 million for each of Sempra Energy Consolidated and SoCalGas in 2017, and $26 million for Sempra Energy Consolidated, $14 million for SDG&E and $11 million for SoCalGas in 2016. The Voluntary Retirement Enhancement Program resulted in a higher than expected number of retirements in 2017 and 2016. As a result, the total lump-sum benefits paid from the Sempra Energy nonqualified and SoCalGas qualified pension plans in 2017, and the SDG&E qualified pension plan in 2016, exceeded the settlement threshold, which triggered settlement accounting. This resulted in a reduction of the recorded pension liability and pension plan assets of $194 million at Sempra Energy Consolidated and $175 million at SoCalGas in 2017, and $75 million at each of Sempra Energy Consolidated and SDG&E in 2016. This also resulted in settlement charges in net periodic benefit cost of $38 million at Sempra Energy Consolidated and $30 million at SoCalGas in 2017, and $16 million at each of Sempra Energy Consolidated and SDG&E in 2016. The settlement charges at SoCalGas in 2017, and at SDG&E in 2016, were recorded as regulatory assets on the Consolidated Balance Sheets. Measurement dates of December 31, 2017 and 2016 were used for the respective settlement accounting triggered in those years, as the year-to-date lump-sum benefit payments first exceeded the settlement threshold in December of those years. Benefit Obligations and Assets The following three tables provide a reconciliation of the changes in the plans’ projected benefit obligations and the fair value of assets during 2018 and 2017, and a statement of the funded status at December 31, 2018 and 2017:
PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
CHANGE IN PROJECTED BENEFIT OBLIGATION |  |  |  |  |  |  |
Net obligation at January 1 | $ | 3,857 |  |  | $ | 3,679 |  |  | $ | 963 |  |  | $ | 922 |
Service cost | 124 |  |  | 117 |  |  | 21 |  |  | 21 |
Interest cost | 141 |  |  | 151 |  |  | 36 |  |  | 39 |
Contributions from plan participants | — |  |  | — |  |  | 23 |  |  | 20 |
Actuarial (gain) loss | (269 | ) |  | 286 |  |  | (123 | ) |  | 6 |
Plan amendments | 12 |  |  | 1 |  |  | — |  |  | — |
Benefit payments | (115 | ) |  | (182 | ) |  | (74 | ) |  | (63 | )
Special termination benefits | — |  |  | — |  |  | 5 |  |  | 18 |
Acquisition | — |  |  | — |  |  | 21 |  |  | — |
Curtailments | — |  |  | (1 | ) |  | — |  |  | — |
Settlements | (394 | ) |  | (194 | ) |  | — |  |  | — |
Net obligation at December 31 | 3,356 |  |  | 3,857 |  |  | 872 |  |  | 963 |
CHANGE IN PLAN ASSETS |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at January 1 | 2,659 |  |  | 2,459 |  |  | 1,209 |  |  | 1,057 |
Actual return on plan assets | (180 | ) |  | 421 |  |  | (56 | ) |  | 185 |
Employer contributions | 190 |  |  | 155 |  |  | 6 |  |  | 10 |
Contributions from plan participants | — |  |  | — |  |  | 23 |  |  | 20 |
Benefit payments | (115 | ) |  | (182 | ) |  | (74 | ) |  | (63 | )
Settlements | (394 | ) |  | (194 | ) |  | — |  |  | — |
Fair value of plan assets at December 31 | 2,160 |  |  | 2,659 |  |  | 1,108 |  |  | 1,209 |
Funded status at December 31 | $ | (1,196 | ) |  | $ | (1,198 | ) |  | $ | 236 |  |  | $ | 246 |
Net recorded (liability) asset at December 31 | $ | (1,196 | ) |  | $ | (1,198 | ) |  | $ | 236 |  |  | $ | 246 |
PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
SAN DIEGO GAS & ELECTRIC COMPANY
(Dollars in millions)
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
CHANGE IN PROJECTED BENEFIT OBLIGATION |  |  |  |  |  |  |
Net obligation at January 1 | $ | 971 |  |  | $ | 935 |  |  | $ | 185 |  |  | $ | 190 |
Service cost | 30 |  |  | 29 |  |  | 5 |  |  | 5 |
Interest cost | 35 |  |  | 38 |  |  | 7 |  |  | 8 |
Contributions from plan participants | — |  |  | — |  |  | 8 |  |  | 7 |
Actuarial (gain) loss | (63 | ) |  | 50 |  |  | (17 | ) |  | (9 | )
Plan amendments | 8 |  |  | — |  |  | — |  |  | — |
Benefit payments | (22 | ) |  | (83 | ) |  | (21 | ) |  | (16 | )
Special termination benefits | — |  |  | — |  |  | 3 |  |  | — |
Settlements | (145 | ) |  | — |  |  | — |  |  | — |
Transfer of liability from other plans | — |  |  | 2 |  |  | — |  |  | — |
Net obligation at December 31 | 814 |  |  | 971 |  |  | 170 |  |  | 185 |
CHANGE IN PLAN ASSETS |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at January 1 | 776 |  |  | 714 |  |  | 195 |  |  | 169 |
Actual return on plan assets | (56 | ) |  | 120 |  |  | (12 | ) |  | 30 |
Employer contributions | 47 |  |  | 22 |  |  | 2 |  |  | 5 |
Contributions from plan participants | — |  |  | — |  |  | 8 |  |  | 7 |
Benefit payments | (22 | ) |  | (83 | ) |  | (21 | ) |  | (16 | )
Settlements | (145 | ) |  | — |  |  | — |  |  | — |
Transfer of assets from other plans | — |  |  | 3 |  |  | — |  |  | — |
Fair value of plan assets at December 31 | 600 |  |  | 776 |  |  | 172 |  |  | 195 |
Funded status at December 31 | $ | (214 | ) |  | $ | (195 | ) |  | $ | 2 |  |  | $ | 10 |
Net recorded (liability) asset at December 31 | $ | (214 | ) |  | $ | (195 | ) |  | $ | 2 |  |  | $ | 10 |
PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
SOUTHERN CALIFORNIA GAS COMPANY
(Dollars in millions)
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
CHANGE IN PROJECTED BENEFIT OBLIGATION |  |  |  |  |  |  |
Net obligation at January 1 | $ | 2,486 |  |  | $ | 2,343 |  |  | $ | 737 |  |  | $ | 691 |
Service cost | 81 |  |  | 76 |  |  | 15 |  |  | 14 |
Interest cost | 92 |  |  | 98 |  |  | 27 |  |  | 29 |
Contributions from plan participants | — |  |  | — |  |  | 14 |  |  | 13 |
Actuarial (gain) loss | (215 | ) |  | 216 |  |  | (100 | ) |  | 16 |
Benefit payments | (65 | ) |  | (73 | ) |  | (49 | ) |  | (44 | )
Special termination benefits | — |  |  | — |  |  | 2 |  |  | 18 |
Settlements | (231 | ) |  | (175 | ) |  | — |  |  | — |
Transfer of liability from other plans | — |  |  | 1 |  |  | — |  |  | — |
Net obligation at December 31 | 2,148 |  |  | 2,486 |  |  | 646 |  |  | 737 |
CHANGE IN PLAN ASSETS |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at January 1 | 1,694 |  |  | 1,579 |  |  | 993 |  |  | 870 |
Actual return on plan assets | (117 | ) |  | 269 |  |  | (43 | ) |  | 151 |
Employer contributions | 104 |  |  | 93 |  |  | 1 |  |  | 3 |
Contributions from plan participants | — |  |  | — |  |  | 14 |  |  | 13 |
Benefit payments | (65 | ) |  | (73 | ) |  | (49 | ) |  | (44 | )
Settlements | (231 | ) |  | (175 | ) |  | — |  |  | — |
Transfer of assets from other plans | — |  |  | 1 |  |  | — |  |  | — |
Fair value of plan assets at December 31 | 1,385 |  |  | 1,694 |  |  | 916 |  |  | 993 |
Funded status at December 31 | $ | (763 | ) |  | $ | (792 | ) |  | $ | 270 |  |  | $ | 256 |
Net recorded (liability) asset at December 31 | $ | (763 | ) |  | $ | (792 | ) |  | $ | 270 |  |  | $ | 256 |
Actuarial (gains) losses fluctuate based on changes in assumptions that we describe below in “Assumptions for Pension and Other Postretirement Benefit Plans” and updates to census data. In 2018, 2017 and 2016, the Society of Actuaries released updated mortality improvement projection scales, reflecting changes to projected observed longevity improvements in its mortality tables. We have incorporated these assumptions, adjusted for the Sempra Energy companies’ actual mortality experience, in our calculations for each of those years. Actuarial gains in pension plans at Sempra Energy Consolidated in 2018 were driven primarily by an increase in discount rates at SDG&E, SoCalGas and Sempra Energy and, additionally at SDG&E, due to updated census data, and at SoCalGas, due to a decrease in the conversion rate used to determine lump-sum distributions. The actuarial gains were partially offset by actuarial losses at SoCalGas and Sempra Energy due to updated census data and, additionally at SDG&E and SoCalGas, due to an increase in the interest crediting rate for the cash balance plans. Actuarial gains in PBOP plans at Sempra Energy Consolidated in 2018 were driven primarily by an increase in discount rates at SDG&E and SoCalGas and, additionally at SoCalGas, due to a reduction in the 2019 expected health care costs. Net Assets and Liabilities The assets and liabilities of the pension and PBOP plans are affected by changing market conditions as well as when actual plan experience is different than assumed. Such events result in investment gains and losses, which we defer and recognize in pension and other postretirement benefit costs over a period of years. Our funded pension and PBOP plans use the asset smoothing method, except for those at SDG&E. This method develops an asset value that recognizes realized and unrealized investment gains and losses over a three-year period. This adjusted asset value, known as the market-related value of assets, is used in conjunction with an expected long-term rate of return to determine the expected return-on-assets component of net periodic benefit cost. SDG&E does not use the asset smoothing method, but rather recognizes realized and unrealized investment gains and losses during the current year. The 10-percent corridor accounting method is used at Sempra Energy Consolidated, SDG&E and SoCalGas. Under the corridor accounting method, if as of the beginning of a year unrecognized net gain or loss exceeds 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets, the excess is amortized over the average remaining service period of active participants. The asset smoothing and 10-percent corridor accounting methods help mitigate volatility of net periodic benefit costs from year to year. We recognize the overfunded or underfunded status of defined benefit pension and other postretirement plans as assets or liabilities, respectively; unrecognized changes in these assets and/or liabilities are normally recorded in AOCI on the balance sheet. The California Utilities record regulatory assets and liabilities that offset the funded pension and other postretirement plans’ assets or liabilities, as these costs are expected to be recovered in future utility rates based on decisions by regulatory agencies. The California Utilities record annual pension and other postretirement net periodic benefit costs equal to the contributions to their qualified plans as authorized by the CPUC. The annual contributions to the pension plans are limited to a minimum required funding amount as determined by the IRS. The annual contributions to PBOP plans are equal to the lesser of the maximum tax deductible amount or the net periodic cost calculated in accordance with U.S. GAAP for pension and PBOP plans. Any differences between booked net periodic benefit cost and amounts contributed to the pension and other postretirement plans for the California Utilities are disclosed as regulatory adjustments in accordance with U.S. GAAP for rate-regulated entities. The net (liability) asset is included in the following categories on the Consolidated Balance Sheets at December 31:
PENSION AND OTHER POSTRETIREMENT BENEFIT OBLIGATIONS, NET OF PLAN ASSETS
(Dollars in millions)
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
Sempra Energy Consolidated: |  |  |  |  |  |  |
Noncurrent assets | $ | — |  |  | $ | — |  |  | $ | 272 |  |  | $ | 266 |
Current liabilities | (65 | ) |  | (69 | ) |  | (6 | ) |  | (1 | )
Noncurrent liabilities | (1,131 | ) |  | (1,129 | ) |  | (30 | ) |  | (19 | )
Net recorded (liability) asset | $ | (1,196 | ) |  | $ | (1,198 | ) |  | $ | 236 |  |  | $ | 246 |
SDG&E: |  |  |  |  |  |  |  |  |  |  |
Noncurrent assets | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | 10 |
Current liabilities | (2 | ) |  | (13 | ) |  | — |  |  | — |
Noncurrent liabilities | (212 | ) |  | (182 | ) |  | — |  |  | — |
Net recorded (liability) asset | $ | (214 | ) |  | $ | (195 | ) |  | $ | 2 |  |  | $ | 10 |
SoCalGas: |  |  |  |  |  |  |  |  |  |  |
Noncurrent assets | $ | — |  |  | $ | — |  |  | $ | 270 |  |  | $ | 256 |
Current liabilities | (3 | ) |  | (3 | ) |  | — |  |  | — |
Noncurrent liabilities | (760 | ) |  | (789 | ) |  | — |  |  | — |
Net recorded (liability) asset | $ | (763 | ) |  | $ | (792 | ) |  | $ | 270 |  |  | $ | 256 |
Amounts recorded in AOCI at December 31, net of income tax effects and amounts recorded as regulatory assets, are as follows:
AMOUNTS IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
Sempra Energy Consolidated: |  |  |  |  |  |  |
Net actuarial (loss) gain | $ | (114 | ) |  | $ | (84 | ) |  | $ | 8 |  |  | $ | 4 |
Prior service cost | (12 | ) |  | (4 | ) |  | — |  |  | — |
Total | $ | (126 | ) |  | $ | (88 | ) |  | $ | 8 |  |  | $ | 4 |
SDG&E: |  |  |  |  |  |  |  |  |  |  |
Net actuarial loss | $ | (4 | ) |  | $ | (8 | ) |  |  |  |  |  |
Prior service cost | (6 | ) |  | — |  |  |  |  |
Total | $ | (10 | ) |  | $ | (8 | ) |  |  |  |
SoCalGas: |  |  |  |  |  |  |  |  |  |  |
Net actuarial loss | $ | (6 | ) |  | $ | (6 | ) |  |  |  |  |  |
Prior service cost | (2 | ) |  | (2 | ) |  |  |  |  |  |
Total | $ | (8 | ) |  | $ | (8 | ) |  |  |  |  |  |
Sempra Energy, SDG&E and SoCalGas each have a funded pension plan. The following table shows the obligations of funded pension plans with benefit obligations in excess of plan assets at December 31:
OBLIGATIONS OF FUNDED PENSION PLANS
(Dollars in millions)
| 2018 |  | 2017
Sempra Energy Consolidated: |  |  |
Projected benefit obligation | $ | 3,130 |  |  | $ | 3,623 |
Accumulated benefit obligation | 2,894 |  |  | 3,334 |
Fair value of plan assets | 2,160 |  |  | 2,659 |
SDG&E: |  |  |  |
Projected benefit obligation | $ | 788 |  |  | $ | 939 |
Accumulated benefit obligation | 762 |  |  | 900 |
Fair value of plan assets | 600 |  |  | 776 |
SoCalGas: |  |  |  |  |
Projected benefit obligation | $ | 2,123 |  |  | $ | 2,462 |
Accumulated benefit obligation | 1,919 |  |  | 2,220 |
Fair value of plan assets | 1,385 |  |  | 1,694 |
We also have unfunded pension plans at Sempra Energy, SDG&E, SoCalGas, IEnova and Chilquinta Energía. The following table shows the obligations of unfunded pension plans at December 31:
OBLIGATIONS OF UNFUNDED PENSION PLANS
(Dollars in millions)
| 2018 |  | 2017
Sempra Energy Consolidated: |  |  |
Projected benefit obligation | $ | 226 |  |  | $ | 234 |
Accumulated benefit obligation | 201 |  |  | 215 |
SDG&E: |  |  |  |
Projected benefit obligation | $ | 26 |  |  | $ | 32 |
Accumulated benefit obligation | 19 |  |  | 30 |
SoCalGas: |  |  |  |  |
Projected benefit obligation | $ | 25 |  |  | $ | 24 |
Accumulated benefit obligation | 21 |  |  | 21 |
Sempra Energy, SDG&E and SoCalGas each have a funded other postretirement benefit plan. The following table shows the obligations of funded other postretirement benefit plans with accumulated postretirement benefit obligations in excess of plan assets at December 31:
OBLIGATIONS OF FUNDED OTHER POSTRETIREMENT BENEFIT PLANS
(Dollars in millions)
| 2018 |  | 2017
Sempra Energy Consolidated: |  |  |
Accumulated postretirement benefit obligation | $ | 30 |  |  | $ | 32 |
Fair value of plan assets | 20 |  |  | 21 |
We also have unfunded other postretirement benefit plans at Sempra Energy and Chilquinta Energía. The following table shows the obligations of unfunded other postretirement benefit plans at December 31:
OBLIGATIONS OF UNFUNDED OTHER POSTRETIREMENT BENEFIT PLANS
(Dollars in millions)
| 2018 |  | 2017
Sempra Energy Consolidated: |  |  |
Accumulated postretirement benefit obligation | $ | 26 |  |  | $ | 9 |
Net Periodic Benefit Cost The following tables provide the components of net periodic benefit cost and pretax amounts recognized in OCI for the years ended December 31:
NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OCI
SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
NET PERIODIC BENEFIT COST |  |  |  |  |  |  |  |  |  |  |
Service cost | $ | 124 |  |  | $ | 117 |  |  | $ | 107 |  |  | $ | 21 |  |  | $ | 21 |  |  | $ | 20 |
Interest cost | 141 |  |  | 151 |  |  | 160 |  |  | 36 |  |  | 39 |  |  | 42 |
Expected return on assets | (157 | ) |  | (161 | ) |  | (166 | ) |  | (70 | ) |  | (66 | ) |  | (69 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prior service cost | 11 |  |  | 11 |  |  | 11 |  |  | 1 |  |  | 1 |  |  | — |
Actuarial loss (gain) | 23 |  |  | 36 |  |  | 30 |  |  | (6 | ) |  | (4 | ) |  | (1 | )
Settlement charges | 66 |  |  | 38 |  |  | 16 |  |  | — |  |  | — |  |  | — |
Special termination benefits | — |  |  | — |  |  | — |  |  | 5 |  |  | 18 |  |  | 26 |
Net periodic benefit cost | 208 |  |  | 192 |  |  | 158 |  |  | (13 | ) |  | 9 |  |  | 18 |
Regulatory adjustment | (30 | ) |  | (42 | ) |  | (57 | ) |  | 17 |  |  | — |  |  | (11 | )
Total expense recognized | 178 |  |  | 150 |  |  | 101 |  |  | 4 |  |  | 9 |  |  | 7 |
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RECOGNIZED IN OCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) | 56 |  |  | — |  |  | 26 |  |  | (4 | ) |  | (2 | ) |  | (2 | )
Prior service cost | 12 |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of actuarial loss | (12 | ) |  | (10 | ) |  | (10 | ) |  | — |  |  | — |  |  | — |
Amortization of prior service cost | (2 | ) |  | (1 | ) |  | (1 | ) |  | — |  |  | — |  |  | — |
Settlements | (12 | ) |  | (8 | ) |  | — |  |  | — |  |  | — |  |  | — |
Total recognized in OCI | 42 |  |  | (18 | ) |  | 15 |  |  | (4 | ) |  | (2 | ) |  | (2 | )
Total recognized in net periodic benefit cost and OCI | $ | 220 |  |  | $ | 132 |  |  | $ | 116 |  |  | $ | — |  |  | $ | 7 |  |  | $ | 5 |
NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OCI
SAN DIEGO GAS & ELECTRIC COMPANY
(Dollars in millions)
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
NET PERIODIC BENEFIT COST |  |  |  |  |  |  |  |  |  |  |
Service cost | $ | 30 |  |  | $ | 29 |  |  | $ | 29 |  |  | $ | 5 |  |  | $ | 5 |  |  | $ | 5 |
Interest cost | 35 |  |  | 38 |  |  | 41 |  |  | 7 |  |  | 8 |  |  | 7 |
Expected return on assets | (47 | ) |  | (47 | ) |  | (49 | ) |  | (13 | ) |  | (11 | ) |  | (12 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prior service cost | 2 |  |  | 1 |  |  | 1 |  |  | 3 |  |  | 3 |  |  | 3 |
Actuarial loss (gain) | 1 |  |  | 9 |  |  | 10 |  |  | (3 | ) |  | — |  |  | (1 | )
Settlement charges | 26 |  |  | — |  |  | 16 |  |  | — |  |  | — |  |  | — |
Special termination benefits | — |  |  | — |  |  | — |  |  | 3 |  |  | — |  |  | 14 |
Net periodic benefit cost | 47 |  |  | 30 |  |  | 48 |  |  | 2 |  |  | 5 |  |  | 16 |
Regulatory adjustment | (8 | ) |  | (8 | ) |  | (45 | ) |  | — |  |  | — |  |  | (14 | )
Total expense recognized | 39 |  |  | 22 |  |  | 3 |  |  | 2 |  |  | 5 |  |  | 2 |
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RECOGNIZED IN OCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net (gain) loss | (1 | ) |  | 2 |  |  | 1 |  |  | — |  |  | — |  |  | — |
Prior service cost | 8 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of actuarial loss | (1 | ) |  | (1 | ) |  | (1 | ) |  | — |  |  | — |  |  | — |
Settlements | (4 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total recognized in OCI | 2 |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | — |
Total recognized in net periodic benefit cost and OCI | $ | 41 |  |  | $ | 23 |  |  | $ | 3 |  |  | $ | 2 |  |  | $ | 5 |  |  | $ | 2 |
NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OCI
SOUTHERN CALIFORNIA GAS COMPANY
(Dollars in millions)
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
NET PERIODIC BENEFIT COST |  |  |  |  |  |  |  |  |  |  |
Service cost | $ | 81 |  |  | $ | 76 |  |  | $ | 67 |  |  | $ | 15 |  |  | $ | 14 |  |  | $ | 14 |
Interest cost | 92 |  |  | 98 |  |  | 101 |  |  | 27 |  |  | 29 |  |  | 32 |
Expected return on assets | (98 | ) |  | (103 | ) |  | (103 | ) |  | (56 | ) |  | (53 | ) |  | (56 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prior service cost (credit) | 8 |  |  | 9 |  |  | 9 |  |  | (3 | ) |  | (3 | ) |  | (4 | )
Actuarial loss (gain) | 13 |  |  | 19 |  |  | 11 |  |  | (2 | ) |  | (3 | ) |  | — |
Settlement charges | 32 |  |  | 30 |  |  | — |  |  | — |  |  | — |  |  | — |
Special termination benefits | — |  |  | — |  |  | — |  |  | 2 |  |  | 18 |  |  | 11 |
Net periodic benefit cost | 128 |  |  | 129 |  |  | 85 |  |  | (17 | ) |  | 2 |  |  | (3 | )
Regulatory adjustment | (22 | ) |  | (34 | ) |  | (12 | ) |  | 17 |  |  | — |  |  | 3 |
Total expense recognized | 106 |  |  | 95 |  |  | 73 |  |  | — |  |  | 2 |  |  | — |
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RECOGNIZED IN OCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss | 1 |  |  | — |  |  | 4 |  |  | — |  |  | — |  |  | — |
Prior service cost | — |  |  | — |  |  | 2 |  |  | — |  |  | — |  |  | — |
Amortization of prior service cost | (1 | ) |  | (1 | ) |  | — |  |  | — |  |  | — |  |  | — |
Total recognized in OCI | — |  |  | (1 | ) |  | 6 |  |  | — |  |  | — |  |  | — |
Total recognized in net periodic benefit cost and OCI | $ | 106 |  |  | $ | 94 |  |  | $ | 79 |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |
Assumptions for Pension and Other Postretirement Benefit Plans Benefit Obligation and Net Periodic Benefit Cost Except for the IEnova and Chilquinta Energía plans, we develop the discount rate assumptions based on the results of a third party modeling tool that matches each plan’s expected cash flows to interest rates and expected maturity values of individually selected bonds in a hypothetical portfolio. The model controls the level of accumulated surplus that may result from the selection of bonds based solely on their premium yields by limiting the number of years to look back for selection to 3 years for pre-30-year and 6 years for post-30-year benefit payments. Additionally, the model ensures that an adequate number of bonds are selected in the portfolio by limiting the amount of the plan’s benefit payments that can be met by a single bond to 7.5 percent. We selected individual bonds from a universe of Bloomberg AA-rated bonds that:
▪ | have an outstanding issue of at least $50 million;
▪ | are non-callable (or callable with make-whole provisions);
▪ | exclude collateralized bonds; and
▪ | exclude the top and bottom 10 percent of yields to avoid relying on bonds that might be mispriced or misgraded.
This selection methodology also mitigates the impact of market volatility on the portfolio by excluding bonds with the following characteristics:
▪ | the issuer is on review for downgrade by a major rating agency if the downgrade would eliminate the issuer from the portfolio;
▪ | recent events have caused significant price volatility to which rating agencies have not reacted; and
▪ | lack of liquidity is causing price quotes to vary significantly from broker to broker.
We believe that this bond selection approach provides the best estimate of discount rates to estimate settlement values for our plans’ benefit obligations as required by applicable U.S. GAAP. We develop the discount rate assumptions for the plans at IEnova by constructing a synthetic government zero coupon bond yield curve from the available market data, based on duration matching, and we add a risk spread to allow for the yields of high-quality corporate bonds. We develop the discount rate assumptions for the plans at Chilquinta Energía based on 10-year Chilean government bond yields and the expected local long-term rate of inflation. These methods for developing the discount rate are required when there is no deep market for high quality corporate bonds. Long-term return on assets is based on the weighted-average of the plans’ investment allocation as of the measurement date and the expected returns for those asset types. Interest crediting rate is based on an average 30-year Treasury bond from the month of November of the preceding year. We amortize prior service cost using straight line amortization over average future service (or average expected lifetime for plans where participants are substantially inactive employees), which is an alternative method allowed under U.S. GAAP. The significant assumptions affecting benefit obligation and net periodic benefit cost are as follows:
WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATION
AT DECEMBER 31 |  |  |
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
Sempra Energy Consolidated: |  |  |  |  |  |  |
Discount rate | 4.30 | % |  | 3.65 | % |  | 4.30 | % |  | 3.70 | %
Interest crediting rate(1)(2) | 3.36 |  |  | 2.80 |  |  | 3.36 |  |  | 2.80 |
Rate of compensation increase | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |
SDG&E: |  |  |  |  |  |  |
Discount rate | 4.29 | % |  | 3.64 | % |  | 4.30 | % |  | 3.65 | %
Interest crediting rate(1)(2) | 3.36 |  |  | 2.80 |  |  | 3.36 |  |  | 2.80 |
Rate of compensation increase | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |
SoCalGas: |  |  |  |  |  |  |
Discount rate | 4.30 | % |  | 3.65 | % |  | 4.30 | % |  | 3.70 | %
Interest crediting rate(1)(2) | 3.36 |  |  | 2.80 |  |  | 3.36 |  |  | 2.80 |
Rate of compensation increase | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |
(1) Interest crediting rate for pension benefits applies only to funded cash balance plans. (2) Interest crediting rate for other postretirement benefits applies only to interest bearing health retirement accounts at SDG&E and SoCalGas.
WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST
YEARS ENDED DECEMBER 31 |  |  |
| Pension benefits |  | Other postretirement benefits
| 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
Sempra Energy Consolidated: |  |  |  |  |  |  |  |  |  |  |
Discount rate | 3.65 | % |  | 4.08 | % |  | 4.46 | % |  | 3.70 | % |  | 4.19 | % |  | 4.49 | %
Expected return on plan assets | 7.00 |  |  | 7.00 |  |  | 7.00 |  |  | 6.49 |  |  | 6.47 |  |  | 6.98 |
Interest crediting rate(1)(2) | 2.80 |  |  | 2.86 |  |  | 3.03 |  |  | 2.80 |  |  | 2.86 |  |  | 3.03 |
Rate of compensation increase | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |
SDG&E: |  |  |  |  |  |  |  |  |  |  |
Discount rate | 3.64 | % |  | 4.08 | % |  | 4.35 | % |  | 3.65 | % |  | 4.15 | % |  | 4.50 | %
Expected return on plan assets | 7.00 |  |  | 7.00 |  |  | 7.00 |  |  | 6.94 |  |  | 6.91 |  |  | 6.90 |
Interest crediting rate(1)(2) | 2.80 |  |  | 2.86 |  |  | 3.03 |  |  | 2.80 |  |  | 2.86 |  |  | 3.03 |
Rate of compensation increase | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |
SoCalGas: |  |  |  |  |  |  |  |  |  |  |
Discount rate | 3.65 | % |  | 4.10 | % |  | 4.50 | % |  | 3.70 | % |  | 4.20 | % |  | 4.50 | %
Expected return on plan assets | 7.00 |  |  | 7.00 |  |  | 7.00 |  |  | 6.38 |  |  | 6.37 |  |  | 7.00 |
Interest crediting rate(1)(2) | 2.80 |  |  | 2.86 |  |  | 3.03 |  |  | 2.80 |  |  | 2.86 |  |  | 3.03 |
Rate of compensation increase | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |  |  | 2.00-10.00 |
(1) Interest crediting rate for pension benefits applies only to funded cash balance plans. (2) Interest crediting rate for other postretirement benefits applies only to interest bearing health retirement accounts at SDG&E and SoCalGas. Health Care Cost Trend Rates Assumed health care cost trend rates have a significant effect on the amounts that we report for the health care plan costs. Following are the health care cost trend rates applicable to our postretirement benefit plans:
ASSUMED HEALTH CARE COST TREND RATES
AT DECEMBER 31 |  |  |  |  |  |  |  |  |  |  |
| Other postretirement benefit plans
| Pre-65 retirees |  | Retirees aged 65 years and older
| 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
Health care cost trend rate assumed for next year | 6.50 | % |  | 7.00 | % |  | 8.00 | % |  | 4.75 | % |  | 5.00 | % |  | 5.50 | %
Rate to which the cost trend rate is assumed to decline (the ultimate trend) | 4.75 | % |  | 5.00 | % |  | 5.00 | % |  | 4.50 | % |  | 4.50 | % |  | 4.50 | %
Year the rate reaches the ultimate trend | 2025 |  |  | 2022 |  |  | 2022 |  |  | 2022 |  |  | 2022 |  |  | 2022 |
Plan Assets Investment Allocation Strategy for Sempra Energy’s Pension Master Trust Sempra Energy’s pension master trust holds the investments for our pension plans and a portion of the investments for our PBOP plans. We maintain additional trusts, as we discuss below, for certain of the California Utilities’ PBOP plans. Other than through indexing strategies, the trusts do not invest in securities of Sempra Energy. The current asset allocation objective for the pension master trust is to protect the funded status of the plans while generating sufficient returns to cover future benefit payments and accruals. We assess the portfolio performance by comparing actual returns with relevant benchmarks. Currently, the pension plans’ target asset allocations are:
▪ | 35 percent domestic equity;
▪ | 24 percent international equity;
▪ | 18 percent long credit;
▪ | 8 percent ultra-long duration government securities;
▪ | 5 percent global real estate investment trusts;
▪ | 5 percent return-seeking credit; and
▪ | 5 percent real assets.
The asset allocation of the plans is reviewed by our Plan Funding Committee and our Pension and Benefits Investment Committee (the Committees) on a regular basis. When evaluating strategic asset allocations, the Committees consider many variables, including:
▪ | long-term cost;
▪ | variability and level of contributions;
▪ | funded status; and
▪ | a range of expected outcomes over varying confidence levels.
We maintain asset allocations at strategic levels with reasonable bands of variance. In accordance with the Sempra Energy pension investment guidelines, derivative financial instruments may be used by the pension master trust’s equity and fixed income portfolio investment managers to equitize cash, hedge certain exposures, and as substitutes for certain types of fixed income securities. Rate of Return Assumption The expected return on assets in our pension and PBOP plans is based on the weighted-average of the plans’ investment allocations to specific asset classes as of the measurement date. We arrive at a 7-percent expected return on assets by considering both the historical and forecasted long-term rates of return on those asset classes. We expect a return of between 7 percent and 9 percent on return-seeking assets and between 3 percent and 5 percent for risk-mitigating assets. Certain trusts that hold assets for the SDG&E other postretirement benefit plan are subject to taxation, which impacts the expected after-tax return on assets in the plan. Concentration of Risk Plan assets are diversified across global equity and bond markets, and concentration of risk in any one economic, industry, maturity or geographic sector is limited. I nvestment Strategy for SDG&E’s and SoCalGas’ Other Postretirement Benefit Plans SDG&E’s and SoCalGas’ PBOP plans are funded by cash contributions from SDG&E and SoCalGas and their current retirees. The assets of these plans are placed into the pension master trust and other Voluntary Employee Beneficiary Association trusts. Certain assets of SoCalGas’ PBOP plans, which are held in the pension master trust, are invested based on an allocation that seeks to mitigate risks for the assets of these plans, with 38 percent invested in return-seeking and 62 percent invested in risk-mitigating assets. The assets in the Voluntary Employee Beneficiary Association trusts are invested at an allocation similar to the pension master trust, with 74 percent invested in return-seeking and 26 percent invested in risk-mitigating assets. These allocations are periodically reviewed to ensure that plan assets are best positioned to meet plan obligations.Fair Value of Pension and Other Postretirement Benefit Plan Assets We classify the investments in Sempra Energy’s pension master trust and the trusts for the California Utilities’ PBOP plans based on the fair value hierarchy, except for certain investments measured at NAV. The following are descriptions of the valuation methods and assumptions we use to estimate the fair values of investments held by pension and other postretirement benefit plan trusts. Equity Securities – Equity securities are valued using quoted prices listed on nationally recognized securities exchanges. Fixed Income Securities – Certain fixed income securities are valued at the closing price reported in the active market in which the security is traded. Other fixed income securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar securities, the security is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. Certain high yield fixed-income securities are valued by applying a price adjustment to the bid side to calculate a mean and ask value. Adjustments can vary based on maturity, credit standing, and reported trade frequencies. The bid to ask spread is determined by the investment manager based on the review of the available market information. Registered Investment Companies – Investments in mutual funds sponsored by a registered investment company are valued based on exchange listed prices. Where the value is a quoted price in an active market, the investment is classified within Level 1 of the fair value hierarchy. Investments in certain fixed income securities are valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks for the remaining fixed income securities. Common/Collective Trusts – Investments in common/collective trust funds are valued based on the NAV of units owned, which is based on the current fair value of the funds’ underlying assets. Private Equity Funds – These funds consist of investments in private equities that are held by limited partnerships following various strategies, including private equity and corporate finance. These partnerships generally have limited lives of 10 years, after which liquidating distributions will be received. The value is determined based on the NAV of the proportionate share of an ownership interest in partners’ capital. Holdings in these types of private equity funds are negligible, as the funds are well past their expected investment term and have distributed the bulk of proceeds from investment sales. Derivative Financial Instruments – Futures contracts that are publicly traded in active markets are valued at closing prices as of the last business day of the year. Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies, and unrealized gain (loss) is recorded daily. Fixed income futures and options are marked to market daily. Equity index futures contracts are valued at the last sales price quoted on the exchange on which they primarily trade. While management believes the valuation methods described above are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. We provide more discussion of fair value measurements in Notes 1 and 12. The following tables set forth by level within the fair value hierarchy a summary of the investments in our pension and other postretirement benefit plan trusts measured at fair value on a recurring basis. SDG&E and SoCalGas each hold a proportionate share of investment assets in the pension master trust at Sempra Energy Consolidated. The fair values of our pension plan assets by asset category are as follows:
FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF PENSION PLANS
(Dollars in millions)
| Fair value at December 31, 2018
| Level 1 |  | Level 2 |  | Total
Sempra Energy Consolidated: |  |  |  |  |
Equity securities: |  |  |  |  |
Domestic | $ | 727 |  |  | $ | — |  |  | $ | 727 |
International | 437 |  |  | — |  |  | 437 |
Registered investment companies | 74 |  |  | — |  |  | 74 |
Fixed income securities: |  |  |  |  |  |  |  |
Domestic government bonds | 197 |  |  | 29 |  |  | 226 |
International government bonds | — |  |  | 8 |  |  | 8 |
Domestic corporate bonds | — |  |  | 311 |  |  | 311 |
International corporate bonds | — |  |  | 53 |  |  | 53 |
Registered investment companies | — |  |  | 1 |  |  | 1 |
Total investment assets in the fair value hierarchy | $ | 1,435 |  |  | $ | 402 |  |  | 1,837 |
Investments measured at NAV: |  |  |  |  |
Common/collective trusts |  |  |  |  | 326 |
Private equity funds |  |  |  |  | 4 |
Total investment assets(1) |  |  |  |  |  |  | $ | 2,167 |
SDG&E’s proportionate share of investment assets |  |  |  |  | $ | 602 |
SoCalGas’ proportionate share of investment assets |  |  |  |  | $ | 1,389 |
| Fair value at December 31, 2017
| Level 1 |  | Level 2 |  | Total
Sempra Energy Consolidated: |  |  |  |  |
Equity securities: |  |  |  |  |  |  |  |
Domestic | $ | 946 |  |  | $ | — |  |  | $ | 946 |
International | 538 |  |  | — |  |  | 538 |
Registered investment companies | 102 |  |  | — |  |  | 102 |
Fixed income securities: |  |  |  |  |  |  |  |
Domestic government bonds | 242 |  |  | 27 |  |  | 269 |
International government bonds | — |  |  | 12 |  |  | 12 |
Domestic corporate bonds | — |  |  | 338 |  |  | 338 |
International corporate bonds | — |  |  | 64 |  |  | 64 |
Registered investment companies | — |  |  | 6 |  |  | 6 |
Other | — |  |  | 1 |  |  | 1 |
Total investment assets in the fair value hierarchy | $ | 1,828 |  |  | $ | 448 |  |  | 2,276 |
Investments measured at NAV: |  |  |  |  |
Common/collective trusts |  |  |  |  | 384 |
Private equity funds |  |  |  |  | 4 |
Total investment assets(2) |  |  |  |  | $ | 2,664 |
SDG&E’s proportionate share of investment assets |  |  |  |  | $ | 777 |
SoCalGas’ proportionate share of investment assets |  |  |  |  | $ | 1,697 |
(1) | Excludes cash and cash equivalents of $14 million and accounts payable of $21 million.
(2) | Excludes cash and cash equivalents of $13 million and accounts payable of $18 million.
The fair values by asset category of the PBOP plan assets held in the pension master trust and in the additional trusts for SoCalGas’ PBOP plans and SDG&E’s PBOP plan trusts are as follows:
FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF OTHER POSTRETIREMENT BENEFIT PLANS
(Dollars in millions)
| Fair value at December 31, 2018
| Level 1 |  | Level 2 |  | Total
SDG&E: |  |  |  |  |
Equity securities: |  |  |  |  |
Domestic | $ | 37 |  |  | $ | — |  |  | $ | 37 |
International | 22 |  |  | — |  |  | 22 |
Registered investment companies | 59 |  |  | — |  |  | 59 |
Fixed income securities: |  |  |  |  |  |  |  |
Domestic government bonds | 10 |  |  | 1 |  |  | 11 |
Domestic corporate bonds | — |  |  | 16 |  |  | 16 |
International corporate bonds | — |  |  | 3 |  |  | 3 |
Registered investment companies | — |  |  | 7 |  |  | 7 |
Total investment assets in the fair value hierarchy | 128 |  |  | 27 |  |  | 155 |
Investments measured at NAV – Common/collective trusts |  |  |  |  | 17 |
Total investment assets(1) |  |  |  |  | 172 |
SoCalGas: |  |  |  |  |  |  |  |
Equity securities: |  |  |  |  |  |  |  |
Domestic | 66 |  |  | — |  |  | 66 |
International | 39 |  |  | — |  |  | 39 |
Registered investment companies | 62 |  |  | — |  |  | 62 |
Fixed income securities: |  |  |  |  |  |  |  |
Domestic government bonds | 236 |  |  | 13 |  |  | 249 |
International government bonds | 1 |  |  | 4 |  |  | 5 |
Domestic corporate bonds | — |  |  | 175 |  |  | 175 |
International corporate bonds | — |  |  | 21 |  |  | 21 |
Registered investment companies | — |  |  | 64 |  |  | 64 |
Derivative financial instruments | (4 | ) |  | — |  |  | (4 | )
Total investment assets in the fair value hierarchy | 400 |  |  | 277 |  |  | 677 |
Investments measured at NAV – Common/collective trusts |  |  |  |  | 237 |
Total investment assets(2) |  |  |  |  | 914 |
Other Sempra Energy: |  |  |  |  |  |  |  |
Equity securities: |  |  |  |  |  |  |  |
Domestic | 6 |  |  | — |  |  | 6 |
International | 4 |  |  | — |  |  | 4 |
Fixed income securities: |  |  |  |  |  |  |  |
Domestic government bonds | 2 |  |  | — |  |  | 2 |
Domestic corporate bonds | — |  |  | 2 |  |  | 2 |
Registered investment companies | — |  |  | 1 |  |  | 1 |
Total investment assets in the fair value hierarchy | 12 |  |  | 3 |  |  | 15 |
Investments measured at NAV – Common/collective trusts |  |  |  |  | 4 |
Private equity funds |  |  |  |  | 1 |
Total other Sempra Energy investment assets |  |  |  |  | 20 |
Total Sempra Energy Consolidated investment assets in the fair value hierarchy | $ | 540 |  |  | $ | 307 |  |  |
Total Sempra Energy Consolidated investment assets(3) |  |  |  |  |  |  | $ | 1,106 |
(1) | Excludes cash and cash equivalents of $1 million and accounts payable of $1 million held in SDG&E PBOP plan trusts.
(2) | Excludes cash and cash equivalents of $6 million and accounts payable of $4 million held in SoCalGas PBOP plan trusts.
(3) | Excludes cash and cash equivalents of $7 million and accounts payable of $5 million at Sempra Energy Consolidated.
FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF OTHER POSTRETIREMENT BENEFIT PLANS
(Dollars in millions)
| Fair value at December 31, 2017
| Level 1 |  | Level 2 |  | Total
SDG&E: |  |  |  |  |
Equity securities: |  |  |  |  |
Domestic | $ | 46 |  |  | $ | — |  |  | $ | 46 |
International | 26 |  |  | — |  |  | 26 |
Registered investment companies | 52 |  |  | — |  |  | 52 |
Fixed income securities: |  |  |  |  |  |  |  |
Domestic government bonds | 12 |  |  | 1 |  |  | 13 |
International government bonds | — |  |  | 1 |  |  | 1 |
Domestic corporate bonds | — |  |  | 17 |  |  | 17 |
International corporate bonds | — |  |  | 3 |  |  | 3 |
Registered investment companies | — |  |  | 17 |  |  | 17 |
Total investment assets in the fair value hierarchy | 136 |  |  | 39 |  |  | 175 |
Investments measured at NAV – Common/collective trusts |  |  |  |  | 20 |
Total investment assets(1) |  |  |  |  | 195 |
SoCalGas: |  |  |  |  |  |  |  |
Equity securities: |  |  |  |  |  |  |  |
Domestic | 78 |  |  | — |  |  | 78 |
International | 44 |  |  | — |  |  | 44 |
Registered investment companies | 41 |  |  | — |  |  | 41 |
Fixed income securities: |  |  |  |  |  |  |  |
Domestic government bonds | 125 |  |  | 13 |  |  | 138 |
International government bonds | — |  |  | 7 |  |  | 7 |
Domestic corporate bonds | — |  |  | 164 |  |  | 164 |
International corporate bonds | — |  |  | 28 |  |  | 28 |
Registered investment companies | — |  |  | 85 |  |  | 85 |
Total investment assets in the fair value hierarchy | 288 |  |  | 297 |  |  | 585 |
Investments measured at NAV – Common/collective trusts |  |  |  |  | 406 |
Total investment assets(2) |  |  |  |  | 991 |
Other Sempra Energy: |  |  |  |  |  |  |  |
Equity securities: |  |  |  |  |  |  |  |
Domestic | 7 |  |  | — |  |  | 7 |
International | 5 |  |  | — |  |  | 5 |
Registered investment companies | 1 |  |  | — |  |  | 1 |
Fixed income securities: |  |  |  |  |  |  |  |
Domestic government bonds | 1 |  |  | 1 |  |  | 2 |
Domestic corporate bonds | — |  |  | 2 |  |  | 2 |
International corporate bonds | — |  |  | 1 |  |  | 1 |
Total investment assets in the fair value hierarchy | 14 |  |  | 4 |  |  | 18 |
Investments measured at NAV – Common/collective trusts |  |  |  |  | 2 |
Private equity funds |  |  |  |  | 1 |
Total other Sempra Energy investment assets |  |  |  |  | 21 |
Total Sempra Energy Consolidated investment assets in the fair value hierarchy | $ | 438 |  |  | $ | 340 |  |  |
Total Sempra Energy Consolidated investment assets(3) |  |  |  |  |  |  | $ | 1,207 |
(1) | Excludes cash and cash equivalents of $1 million and accounts payable of $1 million held in SDG&E PBOP plan trusts.
(2) | Excludes cash and cash equivalents of $4 million and accounts payable of $2 million held in SoCalGas PBOP plan trusts.
(3) Excludes cash and cash equivalents of $5 million and accounts payable of $3 million at Sempra Energy Consolidated.Future Payments We expect to contribute the following amounts to our pension and PBOP plans in 2019:
EXPECTED CONTRIBUTIONS |  |  |  |  |
(Dollars in millions) |  |  |  |  |
| Sempra Energy Consolidated |  | SDG&E |  | SoCalGas
Pension plans | $ | 228 |  |  | $ | 40 |  |  | $ | 118 |
Other postretirement benefit plans | 10 |  |  | — |  |  | 1 |
The following table shows the total benefits we expect to pay for the next 10 years to current employees and retirees from the plans or from company assets.
EXPECTED BENEFIT PAYMENTS
(Dollars in millions)
| Sempra Energy Consolidated |  | SDG&E |  | SoCalGas
| Pension benefits |  | Other postretirement benefits |  | Pension benefits |  | Other postretirement benefits |  | Pension benefits |  | Other postretirement benefits
2019 | $ | 416 |  |  | $ | 54 |  |  | $ | 109 |  |  | $ | 10 |  |  | $ | 207 |  |  | $ | 36 |
2020 | 270 |  |  | 51 |  |  | 69 |  |  | 10 |  |  | 159 |  |  | 36 |
2021 | 268 |  |  | 52 |  |  | 64 |  |  | 10 |  |  | 154 |  |  | 37 |
2022 | 246 |  |  | 52 |  |  | 61 |  |  | 11 |  |  | 152 |  |  | 37 |
2023 | 236 |  |  | 52 |  |  | 62 |  |  | 11 |  |  | 149 |  |  | 38 |
2024-2028 | 1,097 |  |  | 257 |  |  | 282 |  |  | 51 |  |  | 698 |  |  | 187 |
PROFIT SHARING PLANS Under Chilean law, Chilquinta Energía is required to pay all employees either (1) 30 percent of Chilquinta Energía’s taxable income after deducting a 10-percent ROE, allocated in proportion to the annual salary of each employee or (2) 25 percent of each employee’s annual salary, with a maximum mandatory profit sharing of 4.75 months of Chile’s legal minimum salary. Chilquinta Energía has elected the second option but calculates the profit sharing amounts with actual employee salaries instead of the legal minimum salary, resulting in a higher cost. The amounts are paid out each pay period. Chilquinta Energía recorded annual profit sharing expense of $7 million, $7 million and $5 million in 2018, 2017 and 2016, respectively, related to this plan. Under Peruvian law, Luz del Sur is required to pay their employees 5 percent of Luz del Sur’s taxable income, paid once a year and allocated as follows: 50 percent based on each employee’s annual hours worked and 50 percent based on each employee’s annual salary. Luz del Sur recorded annual profit sharing expense of $13 million, $12 million and $10 million in 2018, 2017 and 2016, respectively, related to this plan. SAVINGS PLANS Sempra Energy offers trusteed savings plans to all domestic employees, all employees in Mexico and certain employees in Chile. Employee participation, employee contributions and employer matching contributions are subject to the provisions of the respective plans, and for employee contributions, limits imposed by the respective governmental authorities. Employer contributions to the savings plans were as follows:
EMPLOYER CONTRIBUTIONS TO SAVINGS PLANS
(Dollars in millions)
| 2018 |  | 2017 |  | 2016
Sempra Energy Consolidated | $ | 43 |  |  | $ | 41 |  |  | $ | 42 |
SDG&E | 15 |  |  | 14 |  |  | 15 |
SoCalGas | 23 |  |  | 22 |  |  | 22 |
The market value of Sempra Energy common stock held by the savings plans was $1.0 billion and $1.1 billion at December 31, 2018 and 2017, respectively.

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