PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS

Avista Utilities

Avista Utilities’ pension and other postretirement plans have not changed during the six months ended June 30, 2018. The Company’s funding policy is to contribute at least the minimum amounts that are required to be funded under the Employee Retirement Income Security Act, but not more than the maximum amounts that are currently deductible for income tax purposes. The Company contributed $14.6 million in cash to the pension plan for the six months ended June 30, 2018 and expects to contribute a total of $22.0 million in 2018.

The Company uses a December 31 measurement date for its defined benefit pension and other postretirement benefit plans. The following table sets forth the components of net periodic benefit costs for the three and six months ended June 30 (dollars in thousands):



	Pension Benefits						Other Postretirement Benefits
	2018			2017			2018			2017
Three months ended June 30:
Service cost (a)	$	5,450		$	5,092		$	804		$	799
Interest cost	6,466			6,976			1,197			1,374
Expected return on plan assets	(8,250		)	(7,900		)	(500		)	(475		)
Amortization of prior service cost	75			—			209			(312		)
Net loss recognition	1,842			2,317			562			1,320
Net periodic benefit cost	$	5,583		$	6,485		$	2,272		$	2,706
Six months ended June 30:
Service cost (a)	$	10,900		$	10,134		$	1,608		$	1,623
Interest cost	12,932			13,927			2,394			2,773
Expected return on plan assets	(16,500		)	(15,800		)	(1,000		)	(950		)
Amortization of prior service cost	150			—			(606		)	(624		)
Net loss recognition	3,930			4,863			2,217			2,593
Net periodic benefit cost	$	11,412		$	13,124		$	4,613		$	5,415


(a)	Total service costs in the table above are recorded to the same accounts as labor expense. Labor and benefits expense is recorded to various projects based on whether the work is a capital project or an operating expense. Approximately 40 percent of all labor and benefits is capitalized to utility property and 60 percent is expensed to utility other operating expenses.

See Note 3 for discussion regarding the adoption of ASU No. 2017-07 and its impact to the presentation of pension and other postretirement benefits in the Condensed Consolidated Statements of Income and the Condensed Consolidated Balance Sheets.