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Retirement benefits - HECO
 9 Months Ended
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 21st 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 21st 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.