XML 44 R23.htm IDEA: XBRL DOCUMENT v3.22.4
Employee Benefits Plans
 12 Months Ended
Dec. 31, 2022
Retirement Benefits [Abstract]  
Employee Benefit Plans
(13)
EMPLOYEE BENEFIT PLANS

 

Defined Contribution Plans

 

We sponsor a 401(k) retirement savings plan (the 401(k) Plan). Participants in the 401(k) Plan may elect to invest a portion of their eligible compensation in the 401(k) Plan up to the maximum amounts established by the IRS. The 401(k) Plan provides employees the opportunity to invest up to 50% of their eligible compensation on a pre-tax or after-tax basis.

 

The 401(k) Plan provides a Company matching contribution for all eligible participants. Certain eligible participants who are not currently accruing a benefit in the Pension Plan also receive a Company retirement contribution based on the participant’s age and years of service. Vesting of all Company and matching contributions occurs at 20% per year with 100% vesting when the participant has 5 years of service with the Company.

 

Defined Benefit Pension Plan

 

We have one defined benefit pension plan, the Black Hills Retirement Plan (Pension Plan). The Pension Plan covers certain eligible employees of the Company. The benefits for the Pension Plan are based on years of service and calculations of average earnings during a specific time period prior to retirement. The Pension Plan is closed to new employees and frozen for certain employees who did not meet age and service-based criteria.

 

The Pension Plan assets are held in a Master Trust. Our Board of Directors has approved the Pension Plan’s investment policy. The objective of the investment policy is to manage assets in such a way that will allow the eventual settlement of our obligations to the Pension Plan’s beneficiaries. To meet this objective, our pension assets are managed by an outside adviser using a portfolio strategy that will provide liquidity to meet the Pension Plan’s benefit payment obligations. The Pension Plan’s assets consist primarily of equity, fixed income and hedged investments.

 

The expected rate of return on the Pension Plan assets is determined by reviewing the historical and expected returns of both equity and fixed income markets, taking into account asset allocation, the correlation between asset class returns and the mix of active and passive investments. The Pension Plan utilizes a dynamic asset allocation where the target range to return-seeking and liability-hedging assets is determined based on the funded status of the Plan. As of December 31, 2022, the expected rate of return on pension plan assets was based on the targeted asset allocation range of 20% to 28% return-seeking assets and 72% to 80% liability-hedging assets.

 

Our Pension Plan is funded in compliance with the federal government’s funding requirements.

 

Plan Assets

 

The percentages of total plan asset by investment category for our Pension Plan at December 31 were as follows:

 

Return-seeking Assets

 

2022

 

2021

Equity

 

14%

 

15%

Real estate

 

7%

 

7%

Fixed income

 

2%

 

3%

Hedge funds

 

3%

 

3%

Total

 

26%

 

28%

 

 

 

 

 

Liability-hedging Assets

 

2022

 

2021

Fixed income

 

72%

 

71%

Cash

 

2%

 

1%

Total

 

74%

 

72%

 

 

 

 

 

Total Assets

 

100%

 

100%

 

Supplemental Non-qualified Defined Benefit Plans

 

We have various supplemental retirement plans for key executives of the Company. The plans are non-qualified defined benefit and defined contribution plans (Supplemental Plans). The Supplemental Plans are subject to various vesting schedules and are funded on a cash basis as benefits are paid.

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

BHC sponsors a retiree healthcare plan (Healthcare Plan) for employees who meet certain age and service requirements at retirement. Healthcare Plan benefits are subject to premiums, deductibles, co-payment provisions and other limitations. A portion of the Healthcare Plan for participating business units are pre-funded via VEBA trusts. Pre-65 retirees as well as a grandfathered group of post-65 retirees receive their retiree medical benefits through the Black Hills self-insured retiree medical plans.

 

Healthcare coverage for post-65 Medicare-eligible retirees is provided through an individual market healthcare exchange.

We fund the Healthcare Plan on a cash basis as benefits are paid. The Healthcare Plan provides for partial pre-funding via VEBA trusts. Assets related to this pre-funding are held in trust and are for the benefit of the union and non-union employees located in the states of Arkansas, Iowa and Kansas. We do not pre-fund the Healthcare Plan for those employees outside Arkansas, Iowa and Kansas.

 

Plan Contributions

 

Contributions to the Pension Plan are cash contributions made directly to the Master Trust. Healthcare and Supplemental Plan contributions are made in the form of benefit payments. Healthcare benefits include company and participant paid premiums.

 

Contributions for the years ended December 31 were as follows (in thousands):

 

 

 

2022

 

 

2021

 

Defined Contribution Plan

 

 

 

 

 

 

Company retirement contributions

 

$

11,885

 

 

$

11,332

 

Company matching contributions

 

$

16,187

 

 

$

15,938

 

 

 

 

2022

 

 

2021

 

Defined Benefit Plans

 

 

 

 

 

 

Defined Benefit Pension Plan

 

$

-

 

 

$

-

 

Non-Pension Defined Benefit Postretirement Healthcare Plan

 

$

6,131

 

 

$

6,432

 

Supplemental Non-Qualified Defined Benefit Plans

 

$

3,061

 

 

$

2,576

 

 

We do not have any required contributions to our Pension Plan in 2023 and do not intend to make any contributions.

 

Fair Value Measurements

 

The following tables set forth, by level within the fair value hierarchy, the assets that were accounted for at fair value on a recurring basis (in thousands):

 

Pension Plan

 

December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total Investments Measured at Fair Value

 

 

NAV (a)

 

 

Total Investments

 

Common Collective Trust - Cash and Cash Equivalents

 

$

-

 

 

$

6,374

 

 

$

-

 

 

$

6,374

 

 

$

-

 

 

$

6,374

 

Common Collective Trust - Equity

 

 

-

 

 

 

45,087

 

 

 

-

 

 

 

45,087

 

 

 

-

 

 

 

45,087

 

Common Collective Trust - Fixed Income

 

 

-

 

 

 

242,025

 

 

 

-

 

 

 

242,025

 

 

 

-

 

 

 

242,025

 

Common Collective Trust - Real Estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

21,572

 

 

 

21,572

 

Hedge Funds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,084

 

 

 

8,084

 

Total investments measured at fair value

 

$

-

 

 

$

293,486

 

 

$

-

 

 

$

293,486

 

 

$

29,656

 

 

$

323,142

 

 

Pension Plan

 

December 31, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total Investments Measured at Fair Value

 

 

NAV (a)

 

 

Total Investments

 

Common Collective Trust - Cash and Cash Equivalents

 

$

-

 

 

$

6,009

 

 

$

-

 

 

$

6,009

 

 

$

-

 

 

$

6,009

 

Common Collective Trust - Equity

 

 

-

 

 

 

70,262

 

 

 

-

 

 

 

70,262

 

 

 

-

 

 

 

70,262

 

Common Collective Trust - Fixed Income

 

 

-

 

 

 

339,219

 

 

 

-

 

 

 

339,219

 

 

 

-

 

 

 

339,219

 

Common Collective Trust - Real Estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

30,407

 

 

 

30,407

 

Hedge Funds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,490

 

 

 

12,490

 

Total investments measured at fair value

 

$

-

 

 

$

415,490

 

 

$

-

 

 

$

415,490

 

 

$

42,897

 

 

$

458,387

 

 

(a)
Certain investments that are measured at fair value using NAV per share (or its equivalent) for practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in these tables for these investments are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the reconciliation of changes in the plan’s benefit obligations and fair value of plan assets above.

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total Investments Measured at Fair Value

 

 

Total Investments

 

Cash and Cash Equivalents

 

$

7,752

 

 

$

-

 

 

$

-

 

 

$

7,752

 

 

$

7,752

 

Total investments measured at fair value

 

$

7,752

 

 

$

-

 

 

$

-

 

 

$

7,752

 

 

$

7,752

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

December 31, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total Investments Measured at Fair Value

 

 

Total Investments

 

Cash and Cash Equivalents

 

$

7,972

 

 

$

-

 

 

$

-

 

 

$

7,972

 

 

$

7,972

 

Total investments measured at fair value

 

$

7,972

 

 

$

-

 

 

$

-

 

 

$

7,972

 

 

$

7,972

 

 

Additional information about assets of the benefit plans, including methods and assumptions used to estimate the fair value of these assets, is as follows:

 

Pension Plan

 

Common Collective Trust Funds: These funds are valued based upon the redemption price of units held by the Pension Plan, which is based on the current fair value of the common collective trust funds’ underlying assets. Unit values are determined by the financial institution sponsoring such funds by dividing the fund’s net assets at fair value by its units outstanding at the valuation dates. The Pension Plan’s investments in common collective trust funds, with the exception of shares of the common collective trust-real estate are categorized as Level 2.

 

The following investments are measured at NAV and are not classified in the fair value hierarchy, in accordance with accounting guidance:

 

Common Collective Trust-Real Estate Funds: These funds are valued based on various factors of the underlying real estate properties, including market rent, market rent growth, occupancy levels, etc. As part of the trustee’s valuation process, properties are externally appraised generally on an annual basis. The appraisals are conducted by reputable independent appraisal firms and signed by appraisers that are members of the Appraisal Institute, with professional designation of Member, Appraisal Institute. All external appraisals are performed in accordance with the Uniform Standards of Professional Appraisal Practices. We receive monthly statements from the trustee, along with the annual schedule of investments and rely on these reports for pricing the units of the fund.

 

Hedge Funds: These funds represent investments in other investment funds that seek a return utilizing a number of diverse investment strategies. The strategies, when combined, aim to reduce volatility and risk while attempting to deliver positive returns under all market conditions. Amounts are reported on a one-month lag. The fair value of hedge funds is determined using net asset value per share based on the fair value of the hedge fund’s underlying investments. 10% of the shares may be redeemed at the end of each month with a 15-day notice and full redemptions are available at the end of each quarter with 60-day notice and is limited to a percentage of the total net assets value of the fund. The net asset values are based on the fair value of each fund’s underlying investments. There are no unfunded commitments related to these hedge funds.

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

Cash and Cash Equivalents: This represents an investment in Northern Institutional Government Assets Portfolio, which is a government money market fund. As shares held reflect quoted prices in an active market, they are categorized as Level 1.

 

Other Plan Information

 

The following tables provide a reconciliation of the employee benefit plan obligations and fair value of employee benefit plan assets, amounts recognized in the Consolidated Balance Sheets, accumulated benefit obligation, and reconciliation of components of the net periodic expense and elements of AOCI (in thousands):

 

Employee Benefit Plan Obligations

 

 

 

Defined Benefit Pension Plan

 

 

Supplemental Non-qualified Defined
Benefit Plans

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

As of December 31,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Change in benefit obligation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected benefit obligation at beginning of year

 

$

478,262

 

 

$

514,008

 

 

$

55,260

 

 

$

55,054

 

 

$

63,484

 

 

$

70,238

 

Service cost (a)

 

 

3,927

 

 

 

5,038

 

 

 

(801

)

 

 

3,149

 

 

 

1,968

 

 

 

2,237

 

Interest cost

 

 

10,819

 

 

 

9,313

 

 

 

834

 

 

 

706

 

 

 

1,285

 

 

 

1,058

 

Actuarial (gain) loss

 

 

(97,960

)

 

 

(14,037

)

 

 

(7,007

)

 

 

(1,073

)

 

 

(12,300

)

 

 

(5,165

)

Amendments

 

 

-

 

 

 

(561

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Benefits paid

 

 

(36,663

)

 

 

(35,499

)

 

 

(3,061

)

 

 

(2,576

)

 

 

(6,131

)

 

 

(6,432

)

Plan participants’ contributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,419

 

 

 

1,548

 

Projected benefit obligation at end of year

 

$

358,385

 

 

$

478,262

 

 

$

45,225

 

 

$

55,260

 

 

$

49,725

 

 

$

63,484

 

 

 

Fair Value Employee Benefit Plan Assets

 

 

 

Defined Benefit
Pension Plan

 

 

Supplemental Non-qualified Defined
Benefit Plans

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan (a)

 

As of December 31,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Change in fair value of plan assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning fair value of plan assets

 

$

458,387

 

 

$

473,721

 

 

$

-

 

 

$

-

 

 

$

7,972

 

 

$

8,165

 

Investment income (loss)

 

 

(98,585

)

 

 

20,165

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

(35

)

Employer contributions

 

 

-

 

 

 

-

 

 

 

3,061

 

 

 

2,576

 

 

 

4,488

 

 

 

4,726

 

Retiree contributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,419

 

 

 

1,548

 

Benefits paid

 

 

(36,661

)

 

 

(35,499

)

 

 

(3,061

)

 

 

(2,576

)

 

 

(6,131

)

 

 

(6,432

)

Ending fair value of plan assets

 

$

323,141

 

 

$

458,387

 

 

$

-

 

 

$

-

 

 

$

7,752

 

 

$

7,972

 

 

(a)
Assets of VEBA trusts.

 

In 2012, we froze our Pension Plan and closed it to new participants. Since then, we have implemented various de-risking strategies including lump sum buyouts, the purchase of annuities and the reduction of return-seeking assets over time to a more liability-hedged portfolio. As a result, capital markets volatility had a limited impact to our unfunded status.

 

Amounts Recognized in the Consolidated Balance Sheets

 

 

 

Defined Benefit
Pension Plan

 

 

Supplemental
Non-qualified Defined Benefit Plans

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

As of December 31,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Regulatory assets

 

$

78,654

 

 

$

67,403

 

 

$

-

 

 

$

-

 

 

$

3,788

 

 

$

11,660

 

Current liabilities

 

$

-

 

 

$

-

 

 

$

2,231

 

 

$

2,156

 

 

$

4,427

 

 

$

4,584

 

Non-current assets

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

959

 

 

$

-

 

Non-current liabilities

 

$

35,243

 

 

$

19,872

 

 

$

42,994

 

 

$

53,104

 

 

$

38,505

 

 

$

50,949

 

Regulatory liabilities

 

$

2,804

 

 

$

3,830

 

 

$

-

 

 

$

-

 

 

$

6,198

 

 

$

2,447

 

 

Accumulated Benefit Obligation

 

 

 

Defined Benefit
Pension Plan

 

 

Supplemental
Non-qualified Defined Benefit Plans

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

As of December 31,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Accumulated Benefit Obligation

 

$

350,187

 

 

$

466,505

 

 

$

45,225

 

 

$

55,260

 

 

$

49,725

 

 

$

63,484

 

 

Components of Net Periodic Expense

 

 

 

Defined Benefit
Pension Plan

 

 

Supplemental
Non-qualified Defined Benefit Plans

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

For the years ended December 31,

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

Service cost

 

$

3,927

 

 

$

5,038

 

 

$

5,411

 

 

$

(801

)

 

$

3,149

 

 

$

1,579

 

 

$

1,968

 

 

$

2,237

 

 

$

2,056

 

Interest cost

 

 

10,819

 

 

 

9,313

 

 

 

13,426

 

 

 

834

 

 

 

706

 

 

 

1,099

 

 

 

1,285

 

 

 

1,058

 

 

 

1,649

 

Expected return on assets

 

 

(18,523

)

 

 

(20,876

)

 

 

(22,591

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(125

)

 

 

(136

)

 

 

(182

)

Net amortization of prior service cost

 

 

(68

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2

 

 

 

(289

)

 

 

(434

)

 

 

(546

)

Recognized net actuarial loss (gain)

 

 

6,092

 

 

 

7,315

 

 

 

8,372

 

 

 

276

 

 

 

1,754

 

 

 

1,702

 

 

 

64

 

 

 

466

 

 

 

20

 

Net periodic expense

 

$

2,247

 

 

$

790

 

 

$

4,618

 

 

$

309

 

 

$

5,609

 

 

$

4,382

 

 

$

2,903

 

 

$

3,191

 

 

$

2,997

 

 

Service costs are recorded in Operations and maintenance expense while nonservice costs were recorded in Other expense on the Consolidated Statements of Income.

 

Actuarial gains and losses are amortized using a straight-line method over the average remaining service period of active plan participants or over the average remaining lifetime of the remaining plan participants if the plan is viewed as “all or almost all” inactive participants.

 

AOCI Amounts (After-Tax)

 

 

 

Defined Benefit
Pension Plan

 

 

Supplemental
Non-qualified Defined Benefit Plans

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

As of December 31,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net (gain) loss

 

$

5,179

 

 

$

4,398

 

 

$

1,565

 

 

$

7,159

 

 

$

(667

)

 

$

(308

)

Prior service cost (gain)

 

 

(39

)

 

 

(46

)

 

 

-

 

 

 

-

 

 

 

74

 

 

 

(27

)

Total amounts included in AOCI, after-tax not yet recognized as components of net periodic expense

 

$

5,140

 

 

$

4,352

 

 

$

1,565

 

 

$

7,159

 

 

$

(593

)

 

$

(335

)

 

Assumptions

 

 

 

Defined Benefit
Pension Plan

 

 

Supplemental
Non-qualified Defined Benefit Plans

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

Weighted-average assumptions used to determine benefit obligations:

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

Discount rate

 

 

5.17

%

 

 

2.88

%

 

 

2.56

%

 

 

5.13

%

 

 

2.77

%

 

 

2.41

%

 

 

5.14

%

 

 

2.79

%

 

 

2.41

%

Rate of increase in compensation levels

 

 

3.06

%

 

 

3.08

%

 

 

3.34

%

 

 

—

 

 

 

5.00

%

 

 

5.00

%

 

N/A

 

 

N/A

 

 

N/A

 

 

 

 

Defined Benefit
Pension Plan

 

 

Supplemental
Non-qualified Defined Benefit Plans

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

Weighted-average assumptions used to determine net periodic benefit cost for plan year:

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

Discount rate (a)

 

 

2.88

%

 

 

2.56

%

 

 

3.27

%

 

 

2.77

%

 

 

2.41

%

 

 

3.14

%

 

 

2.79

%

 

 

2.41

%

 

 

3.15

%

Expected long-term rate of return on assets (b)

 

 

4.25

%

 

 

4.50

%

 

 

5.25

%

 

N/A

 

 

N/A

 

 

N/A

 

 

 

1.70

%

 

 

1.80

%

 

 

2.35

%

Rate of increase in compensation levels

 

 

3.08

%

 

 

3.34

%

 

 

3.49

%

 

 

—

 

 

 

5.00

%

 

 

5.00

%

 

N/A

 

 

N/A

 

 

N/A

 

 

(a)
The estimated discount rate for the Defined Benefit Pension Plan is 5.2% for the calculation of the 2023 net periodic pension costs.
(b)
The expected rate of return on plan assets for the Defined Benefit Pension Plan is 6.0% for the calculation of the 2023 net periodic pension cost.

 

The healthcare benefit obligation at December 31 was determined as follows:

 

 

 

2022

 

 

2021

 

Trend Rate - Medical

 

 

 

 

 

 

Pre-65 for next year - All Plans

 

 

7.00

%

 

 

6.05

%

Pre-65 Ultimate trend rate - Black Hills Corp

 

 

4.50

%

 

 

4.50

%

Trend Year

 

2031

 

 

2030

 

 

 

 

 

 

 

 

Post-65 for next year - All Plans

 

 

6.00

%

 

 

5.10

%

Post-65 Ultimate trend rate - Black Hills Corp

 

 

4.50

%

 

 

4.50

%

Trend Year

 

2031

 

 

2030

 

 

The following benefit payments to employees, which reflect future service, are expected to be paid (in thousands):

 

 

 

Defined Benefit Pension Plan

 

 

Supplemental Non-qualified Defined Benefit Plans

 

 

Non-pension Defined Benefit Postretirement Healthcare Plan

 

2023

 

$

26,889

 

 

$

2,231

 

 

$

5,600

 

2024

 

$

26,882

 

 

$

2,417

 

 

$

5,313

 

2025

 

$

27,870

 

 

$

2,764

 

 

$

5,022

 

2026

 

$

28,182

 

 

$

2,790

 

 

$

4,883

 

2027

 

$

28,166

 

 

$

2,727

 

 

$

4,769

 

2028 -2032

 

$

140,416

 

 

$

12,184

 

 

$

21,147