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Pension and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2023
Retirement Benefits [Abstract]  
Pension and Other Postretirement Benefits Pension and Other Postretirement Benefits
PNMR and its subsidiaries maintain qualified defined benefit pension plans, postretirement benefit plans providing medical and dental benefits, and executive retirement programs (collectively, the “PNM Plans” and “TNMP Plans”). PNMR maintains the legal obligation for the benefits owed to participants under these plans. The periodic costs or income of the PNM Plans and TNMP Plans are included in regulated rates to the extent attributable to regulated operations. PNM and TNMP receive a regulated return on the amounts funded for pension and OPEB plans in excess of the periodic cost or income to the extent included in retail rates (a “prepaid pension asset”).
Participants in the PNM Plans include eligible employees and retirees of PNMR and PNM. Participants in the TNMP Plans include eligible employees and retirees of TNMP. The PNM pension plan was frozen at the end of 1997 with regard to new participants, salary levels, and benefits. Through December 31, 2007, additional credited service could be accrued under the PNM pension plan up to a limit determined by age and service. The TNMP pension plan was frozen at December 31, 2005 with regard to new participants, salary levels, and benefits.
A plan sponsor is required to (a) recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year; and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur.
Unrecognized prior service costs and unrecognized gains or losses are required to be recorded in AOCI and subsequently amortized. To the extent the amortization of these items will ultimately be recovered or returned through future rates, PNM and TNMP record the costs as a regulatory asset or regulatory liability. The amortization of these incurred costs is included as pension and postretirement benefit periodic cost or income in subsequent years.
The Company maintains trust funds for the pension and OPEB plans from which benefits are paid to eligible employees and retirees. The Company’s funding policy is to make contributions to the trusts, as determined by an independent actuary, that comply with minimum guidelines of the Employee Retirement Income Security Act and the IRC. Information concerning the fair value of investments is contained in Note 9. The Company has in place a policy that defines the investment objectives, establishes performance goals of asset managers, and provides procedures for the manner in which investments are to be reviewed. The plans implement investment strategies to achieve the following objectives:
 
•Implement investment strategies commensurate with the risk that the Corporate Investment Committee deems appropriate to meet the obligations of the pension plans and OPEB plans, minimize the volatility of expense, and account for contingencies
•Transition asset mix over the long-term to a higher proportion of high-quality fixed income investments as the plans’ funded statuses improve

Management is responsible for the determination of the asset target mix and the expected rate of return. The target asset allocations are determined based on consultations with external investment advisors. The expected long-term rate of return on pension and postretirement plan assets is calculated on the market-related value of assets. Actual gains and losses on pension and OPEB plan assets are recognized in the market-related value of assets equally over a period of not more than five years, which reduces year-to-year volatility. For the PNM Plans and TNMP Plans, the market-related value of assets is equal to the prior year’s market-related value of assets adjusted for contributions, benefit payments and investment gains and losses that are within a corridor of plus or minus 4.0% around the expected return on market value. Gains and losses that are outside the corridor are amortized over five years.

Pension Plans
For defined benefit pension plans, including the executive retirement plans, the PBO represents the actuarial present value of all benefits attributed by the pension benefit formula to employee service rendered prior to that date using assumptions regarding future compensation levels. The ABO represents the PBO without considering future compensation levels. Since the pension plans are frozen, the PBO and ABO are equal.
The following table presents information about the PBO, fair value of plan assets, and funded status of the plans:
 PNMTNMP
 Year Ended December 31,Year Ended December 31,
 2023202220232022
 (In thousands)
PBO at beginning of year$433,645 $584,061 $43,961 $59,609 
Service cost— — — — 
Interest cost23,653 16,857 2,402 1,720 
Actuarial (gain) loss
4,290 (118,552)1,261 (11,711)
Benefits paid(42,931)(48,721)(5,042)(3,403)
Settlements— — — (2,254)
PBO at end of year418,657 433,645 42,582 43,961 
Fair value of plan assets at beginning of year410,463 576,707 43,447 62,942 
Actual return on plan assets39,679 (117,523)2,948 (13,838)
Employer contributions— — — — 
Benefits paid(42,931)(48,721)(5,042)(3,403)
Settlements— — — (2,254)
Fair value of plan assets at end of year407,211 410,463 41,353 43,447 
Funded status – asset (liability) for pension benefits$(11,446)$(23,182)$(1,229)$(514)

Actuarial (gain) loss results from changes in:
PNMTNMP
Year Ended December 31,Year Ended December 31,
2023202220232022
(in thousands)
Discount rates$8,806 $(111,478)$969 $(11,697)
Demographic experience (gain) loss
(1,777)(7,074)538 (742)
Mortality rate(2,739)— (239)— 
Other assumptions and experience— — (7)728 
$4,290 $(118,552)$1,261 $(11,711)

The following table presents pre-tax information about net actuarial (gain) loss in AOCI as of December 31, 2023.
 PNMTNMP
 (In thousands)
Amounts in AOCI not yet recognized in net periodic benefit cost (income) at beginning of year
$110,345 $— 
Experience (gain) loss
(6,193)1,005 
Regulatory asset (liability) adjustment4,629 (1,005)
Amortization recognized in net periodic benefit (income)(4,713)— 
Amounts in AOCI not yet recognized in net periodic benefit cost at end of year$104,068 $— 
The following table presents the components of net periodic benefit cost (income):
 Year Ended December 31,
 202320222021
 (In thousands)
PNM
Service cost$— $— $— 
Interest cost23,653 16,857 16,143 
Expected return on plan assets(29,196)(28,563)(28,531)
Amortization of net loss10,583 15,794 18,166 
Amortization of prior service cost— — — 
Net periodic benefit cost$5,040 $4,088 $5,778 
TNMP
Service cost$— $— $— 
Interest cost2,402 1,720 1,741 
Expected return on plan assets(2,697)(2,472)(3,181)
Amortization of net loss439 932 1,247 
Amortization of prior service cost— — — 
Settlement loss— 1,033 746 
Net periodic benefit cost$144 $1,213 $553 

The following significant weighted-average assumptions were used to determine the PBO and net periodic benefit cost (income). Should actual experience differ from actuarial assumptions, the PBO and net periodic benefit cost (income) would be affected.
 Year Ended December 31,
PNM202320222021
Discount rate for determining December 31 PBO5.46 %5.74 %3.00 %
Discount rate for determining net periodic benefit cost5.74 3.00 2.66 
Expected return on plan assets6.30 5.50 5.50 
Rate of compensation increaseN/AN/AN/A
TNMP
Discount rate for determining December 31 PBO5.47 %5.75 %3.01 %
Discount rate for determining net periodic benefit cost5.75 3.01 2.69 
Expected return on plan assets5.50 4.40 5.50 
Rate of compensation increaseN/AN/AN/A
The assumed discount rate for determining the PBO was determined based on a review of long-term high-grade bonds and management’s expectations. The expected long-term rate of return on plan assets reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits included in the PBO. Factors that are considered include, but are not limited to, historic returns on plan assets, current market information on long-term returns (e.g., long-term bond rates) and current and target asset allocations between asset categories. If all other factors were to remain unchanged, a 1% decrease in the expected long-term rate of return would cause PNM’s and TNMP’s 2024 net periodic benefit cost to increase $4.5 million and $0.5 million (analogous changes would result from a 1% increase). The actual rate of return for the PNM and TNMP pension plans was 10.20% and 7.22% for the year ended December 31, 2023.

The Company’s long-term pension investment strategy is to invest in assets whose interest rate sensitivity is correlated with the pension liability. The Company uses an investment strategy, known as Liability Driven Investing, that increases the liability matching investments as the funded status of the pension plans improve. The Company’s investment allocation targets consist of 35% equities, 15% alternative investments (both of which are considered return generating), and 50% liability matching securities that are primarily bonds and other fixed income investments. Equity investments are primarily in domestic securities that include large-, mid-, and small-capitalization companies. The pension plans have a 13% targeted allocation to equities of companies domiciled primarily in developed countries outside of the U.S. The equity investments category includes active and passive managed domestic equity securities that are benchmarked against a variety of style indices. Fixed income investments are primarily corporate bonds of companies from diversified industries and government securities. Alternative investments include investments in hedge funds, real estate funds, and private equity funds. The private equity funds are structured as multi-manager multi-strategy fund of funds to achieve a diversified position in these asset classes. The hedge
funds use multi-strategies that pursue various absolute return strategies such as relative value, merger arbitrage, event driven equities, and structured credit. The real estate investments are commingled real estate portfolios that invest in a diversified portfolio of assets including commercial property, infrastructure, storage facilities and multi-family housing. See Note 9 for fair value information concerning assets held by the pension plans.

The following pension benefit payments are expected to be paid:

PNMTNMP
 (In thousands)
2024$41,797 $4,219 
202540,901 4,183 
202639,447 4,169 
202738,563 3,982 
202837,245 3,897 
2029 - 2033
167,079 16,789 

Based on current law, funding requirements, and estimates of portfolio performance, the Company does not expect to make any cash contributions to the pension plans in 2024 through 2027. PNM does not expect to make any cash contribution in 2028. TNMP expects to make a cash contribution of $0.2 million in 2028. The funding assumptions were developed using discount a rate of 5.47%. Actual amounts to be funded in the future will be dependent on the actuarial assumptions at that time, including the appropriate discount rates. PNM and TNMP may make additional contributions at their discretion.
Other Postretirement Benefit Plans
For postretirement benefit plans, the APBO is the actuarial present value of all future benefits attributed under the terms of the postretirement benefit plan to employee service rendered to date. The following table presents information about the APBO, the fair value of plan assets, and the funded status of the plans:
 PNMTNMP
 Year Ended December 31,Year Ended December 31,
 2023202220232022
 (In thousands)
APBO at beginning of year$49,950 $66,984 $7,705 $10,570 
Service cost— 10 21 38 
Interest cost2,703 1,914 425 307 
Participant contributions1,592 1,431 359 219 
Actuarial (gain)(1,608)(14,829)(282)(2,788)
Benefits paid(6,420)(6,396)(897)(641)
Curtailment loss— 836 — — 
APBO at end of year46,217 49,950 7,331 7,705 
Fair value of plan assets at beginning of year70,301 95,805 8,718 12,593 
Actual return on plan assets7,762 (23,156)173 (3,453)
Employer contributions157 2,617 — — 
Participant contributions1,592 1,431 359 219 
Benefits paid(6,420)(6,396)(897)(641)
Fair value of plan assets at end of year73,392 70,301 8,353 8,718 
Funded status – asset$27,175 $20,351 $1,022 $1,013 
 
As of December 31, 2023, the fair value of plan assets exceeds the APBO for both PNM’s and TNMP’s OPEB Plans and the resulting net asset is presented in other deferred charges on the Consolidated Balance Sheets.
Actuarial (gain) loss results from changes in:
PNMTNMP
Year Ended December 31,Year Ended December 31,
2023202220232022
(in thousands)
Discount rates$868 $(11,876)$174 $(2,469)
Claims, contributions, and demographic experience(2,171)(2,985)(423)(319)
Assumed participation rate— — — — 
Mortality rate(305)— (33)— 
Dental trend assumption— 32 — — 
$(1,608)$(14,829)$(282)$(2,788)

In the year ended December 31, 2023, actuarial gains of $4.4 million were recorded as adjustments to regulatory assets for the PNM OPEB plan. For the TNMP OPEB plan, actuarial losses of less than $0.1 million were recorded as adjustments to regulatory liabilities.

The following table presents the components of net periodic benefit cost (income):
 Year Ended December 31,
 202320222021
 (In thousands)
PNM
Service cost$— $10 $23 
Interest cost2,703 1,914 1,907 
Expected return on plan assets(4,969)(4,351)(4,167)
Amortization of net loss— — — 
Curtailment loss$— $836 $— 
Net periodic benefit (income)$(2,266)$(1,591)$(2,237)
TNMP
Service cost$21 $38 $45 
Interest cost425 307 308 
Expected return on plan assets(481)(418)(407)
Amortization of net (gain)(760)(520)(322)
Net periodic benefit (income)$(795)$(593)$(376)

The following significant weighted-average assumptions were used to determine the APBO and net periodic benefit cost. Should actual experience differ from actuarial assumptions, the APBO and net periodic benefit cost would be affected.
 Year Ended December 31,
PNM202320222021
Discount rate for determining December 31 APBO5.48 %5.75 %2.99 %
Discount rate for determining net periodic benefit cost5.75 2.99 2.65 
Expected return on plan assets5.90 4.75 4.75 
Rate of compensation increaseN/AN/AN/A
TNMP
Discount rate for determining December 31 APBO5.48 %5.75 %2.99 %
Discount rate for determining net periodic benefit cost5.75 2.99 2.65 
Expected return on plan assets4.70 3.80 3.80 
Rate of compensation increaseN/AN/AN/A
The assumed discount rate for determining the APBO was determined based on a review of long-term high-grade bonds and management’s expectations. The expected long-term rate of return on plan assets reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits included in the APBO. Factors that are considered include, but are not limited to, historic returns on plan assets, current market information on long-term returns (e.g., long-term bond rates), and current and target asset allocations between asset categories. If all other factors were to remain unchanged, a
1% decrease in the expected long-term rate of return would cause PNM’s and TNMP’s 2024 net periodic benefit cost to increase $0.8 million and $0.1 million (analogous changes would result from a 1% increase). The actual rate of return for the PNM and TNMP OPEB plans was 11.4% and 2.0% for the year ended December 31, 2023.
The following table shows the assumed health care cost trend rates for the PNM OPEB plan: 
 PNM
 December 31,
 20232022
Health care cost trend rate assumed for next year6.00 %6.25 %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)4.75 4.75 
Year that the rate reaches the ultimate trend rate20292029
 
TNMP’s exposure to cost increases in the OPEB plan is minimized by a provision that limits TNMP’s share of costs under the plan. Costs of the plan in excess of the limit, which was reached at the end of 2001, are wholly borne by the participants. As a result, a one-percentage-point change in assumed health care cost trend rates would have no effect on either the net periodic expense or the year-end APBO. Effective January 1, 2018, the PNM OPEB plan was amended to limit the annual increase in the Company’s costs to 5%. Increases in excess of the limit are born by the PNM OPEB plan participants.

The Company’s OPEB plans invest in a portfolio that is diversified by asset class and style strategies. The OPEB plans generally use the same pension fixed income and equity investment managers and utilize the same overall investment strategy as described above for the pension plans, except there is no allocation to alternative investments. The OPEB plans have a target asset allocation of 30% equities and 70% fixed income. See Note 9 for fair value information concerning assets held by the other postretirement benefit plans. The following OPEB payments, which reflect expected future service and are net of participant contributions, are expected to be paid:
PNMTNMP
 (In thousands)
2024$5,305 $611 
20254,948 612 
20264,710 620 
20274,438 609 
20284,213 603 
2029 - 2033
17,817 2,745 

PNM and TNMP made no cash contributions to the OPEB trusts in 2023 or 2022 and PNM and TNMP does not expect to make cash contributions to the OPEB trusts in 2024-2028. However, a portion of the disbursements attributable to the OPEB trust are paid by PNM and are therefore considered to be contributions to the PNM OPEB plan. Payments by PNM on behalf of the PNM OPEB plan are expected to be $0.2 million in 2024 and $10.1 million in 2025-2028.

Executive Retirement Programs

For the executive retirement programs, the following table presents information about the PBO and funded status of the plans:
 PNMTNMP
 Year Ended December 31,Year Ended December 31,
 2023202220232022
 (In thousands)
PBO at beginning of year$10,042 $12,612 $344 $406 
Service cost— — — — 
Interest cost540 362 18 11 
Actuarial (gain) loss
411 (1,628)13 (2)
Benefits paid(1,279)(1,304)(59)(71)
PBO at end of year – funded status9,714 10,042 316 344 
Less current liability1,210 1,217 64 66 
Non-current liability$8,504 $8,825 $252 $278 
 
The following table presents pre-tax information about net actuarial loss in AOCI as of December 31, 2023.
 December 31, 2023
 PNMTNMP
 (In thousands)
Amount in AOCI not yet recognized in net periodic benefit cost at beginning of year
$995 $— 
Experience (gain)411 13 
Regulatory asset adjustment(238)(13)
Amortization recognized in net periodic benefit (income)(64)— 
Amount in AOCI not yet recognized in net periodic benefit cost at end of year$1,104 $— 

The following table presents the components of net periodic benefit cost:
 Year Ended December 31,
 202320222021
 (In thousands)
PNM
Service cost$— $— $— 
Interest cost540 362 363 
Amortization of net loss152 327 395 
Amortization of prior service cost— — — 
Net periodic benefit cost$692 $689 $758 
TNMP
Service cost$— $— $— 
Interest cost18 11 17 
Amortization of net loss— — 33 
Amortization of prior service cost— — — 
Net periodic benefit cost$18 $11 $50 

The following significant weighted-average assumptions were used to determine the PBO and net periodic benefit cost. Should actual experience differ from actuarial assumptions, the PBO and net periodic benefit cost would be affected.
 Year Ended December 31,
PNM202320222021
Discount rate for determining December 31 PBO5.45 %5.73 %3.02 %
Discount rate for determining net periodic benefit cost5.73 3.02 2.68 
Long-term rate of return on plan assetsN/AN/AN/A
Rate of compensation increaseN/AN/AN/A
TNMP
Discount rate for determining December 31 PBO5.47 %5.75 %3.01 %
Discount rate for determining net periodic benefit cost5.75 3.01 2.69 
Long-term rate of return on plan assetsN/AN/AN/A
Rate of compensation increaseN/AN/AN/A
 
The assumed discount rate for determining the PBO was determined based on a review of long-term high-grade bonds and management’s expectations. The impacts of changes in assumptions or experience were not significant.

Disbursements under the executive retirement program, funded by PNM and TNMP, which are considered to be contributions to the plan were $1.3 million and $0.1 million in the year ended December 31, 2023 and $1.3 million and $0.1 million for the year ended December 31, 2022.
The following executive retirement plan payments, which reflect expected future service, are expected:
PNMTNMP
 (In thousands)
2024$1,243 $66 
20251,193 58 
20261,136 51 
20271,073 44 
20281,006 37 
2029 - 2033
3,987 104 

Other Retirement Plans

PNMR sponsors a 401(k) defined contribution plan for eligible employees, including those of its subsidiaries. PNMR’s contributions to the 401(k) plan consist of a discretionary matching contribution equal to 75% of the first 6% of eligible compensation contributed by the employee on a before-tax basis. PNMR also makes a non-matching contribution ranging from 3% to 10% of eligible compensation based on the eligible employee’s age. PNMR also provides executive deferred compensation benefits through an unfunded, non-qualified plan. The purpose of this plan is to permit certain key employees of PNMR who participate in the 401(k) defined contribution plan to defer compensation and receive credits without reference to the certain limitations on contributions.

A summary of expenses for these other retirement plans is as follows:
 Year Ended December 31,
 202320222021
 (In thousands)
PNMR
401(k) plan$16,118 $15,844 $16,648 
Non-qualified plan$1,197 $(1,027)$3,594 
PNM
401(k) plan$10,839 $11,067 $11,826 
Non-qualified plan$825 $(721)$2,622 
TNMP
401(k) plan$5,279 $4,776 $4,823 
Non-qualified plan$372 $(305)$972