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Retirement benefits - HECO | 9 Months Ended
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Sep. 30, 2012
Retirement benefits |
5 · Retirement benefits Defined benefit pension and other postretirement benefit plans information. For the first nine months of 2012, the Company contributed $64 million ($62 million by the utilities and $2 million by HEI) to its retirement benefit plans, compared to $56 million (primarily by the utilities) in the first nine months of 2011. The Company’s current estimate of contributions to its retirement benefit plans in 2012 is $78 million ($63 million by the utilities, $13 million by ASB (for its frozen defined benefit pension plan) and $2 million by HEI), compared to $75 million ($73 million by the utilities and $2 million by HEI) in 2011. In addition, the Company expects to pay directly $2 million ($1 million each by the utilities and HEI) of benefits in 2012, comparable to 2011. On July 6, 2012, President Obama signed the Moving Ahead for Progress in the 21 st Century Act (MAP-21), which included provisions related to the funding and administration of pension plans. This law does not affect the Company’s accounting for pension benefits; therefore, the net periodic benefit costs disclosed for the plans were not affected. The Company elected to apply MAP-21 for 2012, which reduced the 2012 minimum funding requirement and lifted the restrictions on accelerated distribution options (which restrictions were in effect April 1, 2011 to September 30, 2012) for HEI and HECO and its subsidiaries. If the Adjusted Funding Target Attainment Percentage falls below 80% in the future, the restrictions on accelerated distribution options may apply again. The Pension Protection Act provides that if a pension plan’s funded status falls below certain levels, more conservative assumptions must be used to value obligations under the pension plan. The HEI Retirement Plan fell below these thresholds in 2011 and the minimum required contribution for 2012 incorporates the more conservative assumptions required. Other factors could cause changes to the required contribution levels. The components of net periodic benefit cost for consolidated HEI were as follows:
|  | Three months ended September 30 |  | Nine months ended September 30 |
|  | Pension benefits |  | Other benefits |  | Pension benefits |  | Other benefits |
(in thousands) |  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011 |
Service cost |  | $ | 10,816 |  | $ | 8,525 |  | $ | 1,054 |  | $ | 868 |  | $ | 32,404 |  | $ | 26,266 |  | $ | 3,158 |  | $ | 3,308 |
Interest cost |  | 16,868 |  | 16,137 |  | 2,252 |  | 2,273 |  | 50,612 |  | 48,717 |  | 6,756 |  | 7,151 |
Expected return on plan assets |  | (17,796 | ) | (17,400 | ) | (2,579 | ) | (2,687 | ) | (53,388 | ) | (51,673 | ) | (7,757 | ) | (7,992 | )
Amortization of net transition obligation |  | 1 |  | 1 |  | — |  | — |  | 1 |  | 2 |  | — |  | — |
Amortization of prior service gain |  | (81 | ) | (98 | ) | (448 | ) | (587 | ) | (244 | ) | (292 | ) | (1,345 | ) | (1,120 | )
Amortization of net actuarial loss |  | 6,425 |  | 4,005 |  | 373 |  | 115 |  | 19,251 |  | 12,724 |  | 1,125 |  | 170 |
Net periodic benefit cost |  | 16,233 |  | 11,170 |  | 652 |  | (18 | ) | 48,636 |  | 35,744 |  | 1,937 |  | 1,517 |
Impact of PUC D&Os |  | (3,460 | ) | (713 | ) | (552 | ) | 327 |  | (12,294 | ) | (2,813 | ) | (1,648 | ) | 3,079 |
Net periodic benefit cost (adjusted for impact of PUC D&Os) |  | $ | 12,773 |  | $ | 10,457 |  | $ | 100 |  | $ | 309 |  | $ | 36,342 |  | $ | 32,931 |  | $ | 289 |  | $ | 4,596 |
Consolidated HEI recorded retirement benefits expense of $27 million and $28 million in the first nine months of 2012 and 2011, respectively, and charged the remaining amounts primarily to electric utility plant. The utilities have implemented pension and OPEB tracking mechanisms under which all of their retirement benefit expenses (except for executive life and nonqualified pension plan expenses) determined in accordance with GAAP are recovered over time. Defined contribution plans information. For the first nine months of 2012 and 2011, the Company’s expense for its defined contribution pension plans under the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP) and the ASB 401(k) Plan was $2.7 million and $2.6 million, respectively, and cash contributions were $3.2 million for both periods.
Hawaiian Electric Company, Inc. and Subsidiaries |
Retirement benefits |
4 · Retirement benefits Defined benefit pension and other postretirement benefit plans information. For the first nine months of 2012, HECO and its subsidiaries contributed $62 million to their retirement benefit plans, compared to $55 million in the first nine months of 2011. HECO and its subsidiaries’ current estimate of contributions to their retirement benefit plans in 2012 is $63 million, compared to contributions of $73 million in 2011. In addition, HECO and its subsidiaries expect to pay directly $0.8 million of benefits in 2012, compared to $1.3 million paid in 2011. On July 6, 2012, President Obama signed the Moving Ahead for Progress in the 21 st Century Act (MAP-21), which included provisions related to the funding and administration of pension plans. This law does not affect the utilities’ accounting for pension benefits; therefore, the net periodic benefit costs disclosed for the plans were not affected. The utilities elected to apply MAP-21 for 2012, which reduced the 2012 minimum funding requirement and lifted the restrictions on accelerated distribution options (which restrictions were in effect April 1, 2011 to September 30, 2012) for HECO and its subsidiaries. If the Adjusted Funding Target Attainment Percentage falls below 80% in the future, the restrictions on accelerated distribution options may apply again. The Pension Protection Act provides that if a pension plan’s funded status falls below certain levels, more conservative assumptions must be used to value obligations under the pension plan. The HEI Retirement Plan fell below these thresholds in 2011 and the minimum required contribution for 2012 incorporates the more conservative assumptions required. Other factors could cause changes to the required contribution levels. The components of net periodic benefit cost were as follows:
|  | Three months ended September 30 |  | Nine months ended September 30 |
|  | Pension benefits |  | Other benefits |  | Pension benefits |  | Other benefits |
(in thousands) |  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011 |
Service cost |  | $ | 10,400 |  | $ | 8,182 |  | $ | 1,003 |  | $ | 827 |  | $ | 31,202 |  | $ | 25,221 |  | $ | 3,010 |  | $ | 3,179 |
Interest cost |  | 15,364 |  | 14,656 |  | 2,175 |  | 2,197 |  | 46,090 |  | 44,308 |  | 6,527 |  | 6,921 |
Expected return on plan assets |  | (16,001 | ) | (15,574 | ) | (2,548 | ) | (2,655 | ) | (48,003 | ) | (46,210 | ) | (7,646 | ) | (7,881 | )
Amortization of net transition obligation |  | — |  | — |  | (2 | ) | (2 | ) | — |  | — |  | (6 | ) | (6 | )
Amortization of net prior service gain |  | (173 | ) | (187 | ) | (450 | ) | (590 | ) | (517 | ) | (561 | ) | (1,352 | ) | (1,129 | )
Amortization of net actuarial loss |  | 5,857 |  | 3,679 |  | 363 |  | 104 |  | 17,571 |  | 11,815 |  | 1,091 |  | 159 |
Net periodic benefit cost |  | 15,447 |  | 10,756 |  | 541 |  | (119 | ) | 46,343 |  | 34,573 |  | 1,624 |  | 1,243 |
Impact of PUC D&Os |  | (3,460 | ) | (713 | ) | (552 | ) | 327 |  | (12,294 | ) | (2,813 | ) | (1,648 | ) | 3,079 |
Net periodic benefit cost (adjusted for impact of PUC D&Os) |  | $ | 11,987 |  | $ | 10,043 |  | $ | (11 | ) | $ | 208 |  | $ | 34,049 |  | $ | 31,760 |  | $ | (24 | ) | $ | 4,322 |
HECO and its subsidiaries recorded retirement benefits expense of $24 million and $27 million for the first nine months of 2012 and 2011, respectively. The electric utilities charged a portion of the net periodic benefit cost to electric utility plant. The utilities have implemented pension and OPEB tracking mechanisms under which all of their retirement benefit expenses (except for executive life and nonqualified pension plan expenses) determined in accordance with GAAP are recovered over time. Defined contribution plan information. For the first nine months of 2012 and 2011, the utilities’ expense for its defined contribution pension plan was $0.2 million and de minimis, respectively.

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- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 158 -Paragraph 7, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Staff Position (FSP) -Number FAS106-2 -Paragraph 20, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Implementation Guide (Q and A) -Number FAS88 -Paragraph 63 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 106 -Paragraph 518 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5, 6, 7, 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph a -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph q -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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