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Retirement benefits - HECO | 9 Months Ended
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Sep. 30, 2013
Retirement benefits | Retirement benefits Defined benefit pension and other postretirement benefit plans information. For the first nine months of 2013, the Company contributed $62 million (primarily by the Utilities) to its pension and other postretirement benefit plans, compared to $64 million (primarily by the Utilities) in the first nine months of 2012. The Company’s current estimate of contributions to its pension and other postretirement benefit plans in 2013 is $83 million ($81 million by the Utilities, $2 million by HEI and nil by ASB), compared to $78 million ($63 million by the Utilities, $2 million by HEI and $13 million by ASB) in 2012. In addition, the Company expects to pay directly $2 million ($1 million each by the Utilities and HEI) of benefits in 2013, compared to $1 million paid in 2012. 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 improved the plans’ Adjusted Funding Target Attainment Percentage (AFTAP) for funding and benefit distribution purposes and thereby reduced the 2012 minimum funding requirement and lifted the restrictions on accelerated distribution options (which restrictions were in effect from April 1, 2011 to September 30, 2012) for HEI and Hawaiian Electric and its subsidiaries. The effects of MAP-21 are expected to cause the minimum required funding under the Employee Retirement Income Security Act of 1974, as amended (ERISA) to be less than the net periodic cost for 2013 and 2014; therefore, to satisfy the requirements of the Utilities pension and other postretirement benefits (OPEB) tracking mechanisms, the Utilities expect to contribute the net periodic cost for these years. 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 incorporated the more conservative assumptions required. However, the HEI Retirement Plan met the threshold requirements in each of 2012 and 2013 so that the more conservative assumptions do not apply for either the 2013 or 2014 valuation of plan liabilities for purposes of calculating the minimum required contribution. 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) |  | 2013 |  | 2012 |  | 2013 |  | 2012 |  | 2013 |  | 2012 |  | 2013 |  | 2012
Service cost |  | $ | 14,097 |  |  | $ | 10,816 |  |  | $ | 1,077 |  |  | $ | 1,054 |  |  | $ | 42,307 |  |  | $ | 32,404 |  |  | $ | 3,229 |  |  | $ | 3,158 |
Interest cost |  | 16,187 |  |  | 16,868 |  |  | 1,891 |  |  | 2,252 |  |  | 48,600 |  |  | 50,612 |  |  | 5,677 |  |  | 6,756 |
Expected return on plan assets |  | (18,134 | ) |  | (17,796 | ) |  | (2,531 | ) |  | (2,579 | ) |  | (54,401 | ) |  | (53,388 | ) |  | (7,614 | ) |  | (7,757 | )
Amortization of net transition obligation |  | — |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | — |  |  | — |
Amortization of net prior service gain |  | (24 | ) |  | (81 | ) |  | (448 | ) |  | (448 | ) |  | (73 | ) |  | (244 | ) |  | (1,345 | ) |  | (1,345 | )
Amortization of net actuarial loss |  | 9,560 |  |  | 6,425 |  |  | 398 |  |  | 373 |  |  | 28,878 |  |  | 19,251 |  |  | 1,203 |  |  | 1,125 |
Net periodic benefit cost |  | 21,686 |  |  | 16,233 |  |  | 387 |  |  | 652 |  |  | 65,311 |  |  | 48,636 |  |  | 1,150 |  |  | 1,937 |
Impact of PUC D&Os |  | (9,257 | ) |  | (3,460 | ) |  | (332 | ) |  | (552 | ) |  | (28,847 | ) |  | (12,294 | ) |  | (1,018 | ) |  | (1,648 | )
Net periodic benefit cost (adjusted for impact of PUC D&Os) |  | $ | 12,429 |  |  | $ | 12,773 |  |  | $ | 55 |  |  | $ | 100 |  |  | $ | 36,464 |  |  | $ | 36,342 |  |  | $ | 132 |  |  | $ | 289 |
Consolidated HEI recorded retirement benefits expense of $24 million and $27 million in the first nine months of 2013 and 2012, 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. Under the tracking mechanisms, these retirement benefit costs that are over/under amounts allowed in rates are charged/credited to a regulatory asset/liability. The regulatory asset/liability for each utility will be amortized over 5 years beginning with the respective utility’s next rate case. Defined contribution plans information. For the first nine months of 2013 and 2012, 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 $3.1 million and $2.7 million, respectively, and cash contributions were $3.7 million and $3.2 million, respectively.
Hawaiian Electric Company, Inc. and Subsidiaries |
Retirement benefits | Retirement benefits Defined benefit pension and other postretirement benefit plans information. For the first nine months of 2013, Hawaiian Electric and its subsidiaries contributed $61 million to their pension and other postretirement benefit plans, compared to $62 million in the first nine months of 2012. Hawaiian Electric and its subsidiaries’ current estimate of contributions to their pension and other postretirement benefit plans in 2013 is $81 million, compared to $63 million in 2012. In addition, Hawaiian Electric and its subsidiaries expect to pay directly $1.0 million of benefits in 2013, compared to $0.5 million paid in 2012. On July 6, 2012, President Obama signed the 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 improved the plan’s AFTAP for funding and benefit distribution purposes and thereby reduced the 2012 minimum funding requirement and lifted the restrictions on accelerated distribution options (which restrictions were in effect from April 1, 2011 to September 30, 2012) for Hawaiian Electric and its subsidiaries. The effects of MAP-21 are expected to cause the minimum required funding under ERISA to be less than the net periodic cost for 2013 and 2014; therefore, to satisfy the requirements of the pension and OPEB tracking mechanisms, the Utilities expect to contribute the net periodic cost for these years. 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 incorporated the more conservative assumptions required. However, the HEI Retirement Plan met the threshold requirements in each of 2012 and 2013 so that the more conservative assumptions do not apply for either the 2013 or 2014 valuation of plan liabilities for purposes of calculating the minimum required contribution. Other factors could cause changes to the required contribution levels. The components of net periodic benefit cost for the Utilities were as follows:
|  | Three months ended September 30 |  | Nine months ended September 30
|  | Pension benefits |  | Other benefits |  | Pension benefits |  | Other benefits
(in thousands) |  | 2013 |  | 2012 |  | 2013 |  | 2012 |  | 2013 |  | 2012 |  | 2013 |  | 2012
Service cost |  | $ | 13,620 |  |  | $ | 10,400 |  |  | $ | 1,041 |  |  | $ | 1,003 |  |  | $ | 40,861 |  |  | $ | 31,202 |  |  | $ | 3,122 |  |  | $ | 3,010 |
Interest cost |  | 14,780 |  |  | 15,364 |  |  | 1,822 |  |  | 2,175 |  |  | 44,339 |  |  | 46,090 |  |  | 5,466 |  |  | 6,527 |
Expected return on plan assets |  | (16,138 | ) |  | (16,001 | ) |  | (2,502 | ) |  | (2,548 | ) |  | (48,413 | ) |  | (48,003 | ) |  | (7,502 | ) |  | (7,646 | )
Amortization of net transition obligation |  | — |  |  | — |  |  | — |  |  | (2 | ) |  | — |  |  | — |  |  | — |  |  | (6 | )
Amortization of net prior service gain |  | (116 | ) |  | (173 | ) |  | (451 | ) |  | (450 | ) |  | (348 | ) |  | (517 | ) |  | (1,353 | ) |  | (1,352 | )
Amortization of net actuarial loss |  | 8,649 |  |  | 5,857 |  |  | 387 |  |  | 363 |  |  | 25,948 |  |  | 17,571 |  |  | 1,159 |  |  | 1,091 |
Net periodic benefit cost |  | 20,795 |  |  | 15,447 |  |  | 297 |  |  | 541 |  |  | 62,387 |  |  | 46,343 |  |  | 892 |  |  | 1,624 |
Impact of PUC D&Os |  | (9,257 | ) |  | (3,460 | ) |  | (332 | ) |  | (552 | ) |  | (28,847 | ) |  | (12,294 | ) |  | (1,018 | ) |  | (1,648 | )
Net periodic benefit cost (adjusted for impact of PUC D&Os) |  | $ | 11,538 |  |  | $ | 11,987 |  |  | $ | (35 | ) |  | $ | (11 | ) |  | $ | 33,540 |  |  | $ | 34,049 |  |  | $ | (126 | ) |  | $ | (24 | )
Hawaiian Electric and its subsidiaries recorded retirement benefits expense of $21 million and $24 million in the first nine months of 2013 and 2012, 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. Under the tracking mechanisms, these retirement benefit costs that are over/under amounts allowed in rates are charged/credited to a regulatory asset/liability. The regulatory asset/liability for each utility will be amortized over 5 years beginning with the respective utility’s next rate case. Accumulated other comprehensive income. Reclassifications out of AOCI were as follows:
|  | Amount reclassified from AOCI |  |
|  | Three months ended September 30 |  | Nine months ended September 30 |  |
(in thousands) |  | 2013 |  | 2012 |  | 2013 |  | 2012 |  |
Retirement benefit plan items |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost |  | $ | 5,173 |  |  | $ | 3,419 |  |  | $ | 15,520 |  |  | $ | 10,255 |  |  | See above
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets |  | (5,156 | ) |  | (3,342 | ) |  | (15,468 | ) |  | (10,026 | ) |  | See above
Total reclassifications |  | $ | 17 |  |  | $ | 77 |  |  | $ | 52 |  |  | $ | 229 |  |  |
Defined contribution plan information. For the first nine months of 2013 and 2012, the Utilities’ expense for its defined contribution pension plan was $0.4 million and 0.2 million, 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 Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 Reference 2: 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 3: 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. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 03-2 -Paragraph 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. Reference 5: 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 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 87 -Paragraph 264 -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 7: 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 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph b -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 9: 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 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph h -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 11: 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. Reference 12: 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 13: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 30 -Paragraph 26 -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 8 -Subparagraph m -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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