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Retirement Benefit Plans
 12 Months Ended
Dec. 31, 2023
Retirement Benefits [Abstract]  
Retirement Benefit Plans

Note 9: Retirement Benefit Plans

The Company sponsors the following retirement benefit plans to provide certain pension and post-retirement benefits for its retirees and current employees as follows:

•
The Unitil Corporation Retirement Plan (Pension Plan)—The Pension Plan is a defined benefit pension plan. Under the Pension Plan, retirement benefits are based upon an employee’s level of compensation and length of service. Effective January 1, 2010, the Pension Plan was closed to new non-union employees. For union employees, the Pension Plan was closed on various dates between December 31, 2010 and June 1, 2013, depending on the various Collective Bargaining Agreements of each union.
•
The Unitil Retiree Health and Welfare Benefits Plan (PBOP Plan)—The PBOP Plan provides health care and life insurance benefits to retirees. The Company has established Voluntary Employee Benefit Trusts, into which it funds contributions to the PBOP Plan.
•
The Unitil Corporation Supplemental Executive Retirement Plan (SERP)—The SERP is a non-qualified retirement plan, with participation limited to executives selected by the Board of Directors.

The following table includes the key assumptions used in determining the Company’s benefit plan costs and obligations:

 

 

 

2023

 

 

2022

 

 

2021

 

Used to Determine Plan costs for years ended December 31:

 

 

 

 

 

 

 

 

 

Discount Rate

 

 

5.25

%

 

 

2.85

%

 

 

2.50

%

Rate of Compensation Increase

 

 

3.00

%

 

 

3.00

%

 

 

3.00

%

Expected Long-term rate of return on plan assets

 

 

7.50

%

 

 

7.50

%

 

 

7.50

%

Used to Determine Benefit Obligations at December 31:

 

 

 

 

 

 

 

 

 

Discount Rate

 

 

5.00

%

 

 

5.25

%

 

 

2.85

%

Rate of Compensation Increase

 

 

3.00

%

 

 

3.00

%

 

 

3.00

%

 

The health care cost trend rate used to determine plan costs for 2023 for pre-65 retirees is 8.00%, with an ultimate rate of 4.50% in 2030, and for post-65 retirees, the health care cost trend rate is 6.25%, with an ultimate rate of 4.50% in 2030. The health care cost trend rate used to determine plan costs for 2022 for both pre-65 retirees and post-65 retirees is 6.20%, with an ultimate rate of 4.50% in 2029. The health care cost trend rate used to determine plan costs for 2021 for both pre-65 retirees and post-65 retirees is 6.60%, with an ultimate rate of 4.50% in 2029.

 

The health care cost trend rate used to determine benefit obligations at December 31, 2023 for pre-65 retirees is 8.00%, with an ultimate rate of 4.50% in 2033, and for post-65 retirees, the health care cost trend rate is 6.00%, with an ultimate rate of 4.50% in 2033. The health care cost trend rate used to determine benefit obligations at December 31, 2022 for pre-65 retirees is 8.00%, with an ultimate rate of 4.50% in 2030, and for post-65 retirees, the health care cost trend rate is 6.25%, with an ultimate rate of 4.50% in 2030. The health care cost trend rate used to determine benefit obligations at December 31, 2021 for both pre-65 and post-65 retirees is 6.20%, with an ultimate rate 4.50% in 2029.

The Discount Rate assumptions used in determining retirement plan costs and retirement plan obligations are based on an assessment of current market conditions using high quality corporate bond interest rate indices and pension yield curves. For 2023, a change in the discount rate of 0.25% would have resulted in an increase or decrease of approximately $113,200 in the Net Periodic Benefit Cost (NPBC). The Rate of Compensation Increase assumption used for 2023 was based on the expected long-term increase in compensation costs for personnel covered by the plans.

The following table provides the components of the Company’s Retirement plan costs (000’s):

 

 

Pension Plan

 

 

PBOP Plan

 

 

SERP

 

 

 

2023

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Cost

 

$

2,091

 

 

$

3,165

 

 

$

3,472

 

 

$

1,493

 

 

$

2,890

 

 

$

3,034

 

 

$

250

 

 

$

273

 

 

$

354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Cost

 

 

7,480

 

 

 

5,486

 

 

 

5,003

 

 

 

2,899

 

 

 

3,194

 

 

 

2,740

 

 

 

754

 

 

 

472

 

 

 

458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expected Return on Plan Assets

 

 

(10,689

)

 

 

(10,883

)

 

 

(9,693

)

 

 

(3,408

)

 

 

(3,415

)

 

 

(2,508

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior Service Cost Amortization

 

 

356

 

 

 

356

 

 

 

301

 

 

 

794

 

 

 

1,092

 

 

 

1,208

 

 

 

55

 

 

 

55

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial Loss Amortization

 

 

—

 

 

 

5,507

 

 

 

8,089

 

 

 

(1,464

)

 

 

1,020

 

 

 

1,045

 

 

 

—

 

 

 

794

 

 

 

1,489

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total

 

 

(762

)

 

 

3,631

 

 

 

7,172

 

 

 

314

 

 

 

4,781

 

 

 

5,519

 

 

 

1,059

 

 

 

1,594

 

 

 

2,357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts Capitalized or Deferred

 

 

1,598

 

 

 

(1,085

)

 

 

(3,384

)

 

 

555

 

 

 

(2,388

)

 

 

(3,136

)

 

 

(327

)

 

 

(472

)

 

 

(712

)

NPBC Recognized

 

$

836

 

 

$

2,546

 

 

$

3,788

 

 

$

869

 

 

$

2,393

 

 

$

2,383

 

 

$

732

 

 

$

1,122

 

 

$

1,645

 

 

The Company bases the actuarial determination of pension expense on a market-related valuation of assets, which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a three-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the fair value of assets. Since the market-related value of assets recognizes gains or losses over a three-year period, the future value of the market-related assets will be affected as previously deferred gains or losses are recognized. Had the Company used the fair value of assets instead of the market-related value, pension expense for the years 2023, 2022 and 2021 would have been $2.8 million, $2.4 million and $6.1 million respectively, prior to amounts capitalized or deferred.

The following table represents information on the plans’ assets, projected benefit obligations (PBO), and funded status (000’s):

 

 

Pension Plan

 

 

PBOP Plan

 

 

SERP

 

Change in Plan Assets:

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan Assets at Beginning of Year

 

$

126,098

 

 

$

152,006

 

 

$

44,770

 

 

$

42,651

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual Return on Plan Assets

 

 

16,822

 

 

 

(19,984

)

 

 

6,865

 

 

 

(6,810

)

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employer Contributions

 

 

3,850

 

 

 

3,800

 

 

 

2,790

 

 

 

12,153

 

 

 

665

 

 

 

637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Participant Contributions

 

 

—

 

 

 

—

 

 

 

234

 

 

 

279

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits Paid

 

 

(8,877

)

 

 

(9,724

)

 

 

(2,767

)

 

 

(3,503

)

 

 

(665

)

 

 

(637

)

Plan Assets at End of Year

 

$

137,893

 

 

$

126,098

 

 

$

51,892

 

 

$

44,770

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in PBO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PBO at Beginning of Year

 

$

146,953

 

 

$

199,418

 

 

$

56,510

 

 

$

112,087

 

 

$

14,810

 

 

$

17,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Cost

 

 

2,091

 

 

 

3,165

 

 

 

1,493

 

 

 

2,890

 

 

 

250

 

 

 

273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Cost

 

 

7,480

 

 

 

5,486

 

 

 

2,899

 

 

 

3,194

 

 

 

754

 

 

 

472

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Participant Contributions

 

 

—

 

 

 

—

 

 

 

234

 

 

 

279

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan Amendments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits Paid

 

 

(8,877

)

 

 

(9,724

)

 

 

(2,767

)

 

 

(3,503

)

 

 

(665

)

 

 

(637

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial (Gain) or Loss

 

 

6,920

 

 

 

(51,392

)

 

 

8,322

 

 

 

(58,437

)

 

 

(295

)

 

 

(3,012

)

PBO at End of Year

 

$

154,567

 

 

$

146,953

 

 

$

66,691

 

 

$

56,510

 

 

$

14,854

 

 

$

14,810

 

Funded Status: Assets vs PBO

 

$

(16,674

)

 

$

(20,855

)

 

$

(14,799

)

 

$

(11,740

)

 

$

(14,854

)

 

$

(14,810

)

 

The increase in the PBO for the Pension, PBOP and SERP plans as of December 31, 2023 compared to December 31, 2022 primarily reflects a decrease in the assumed discount rate as of December 31, 2023 and normal changes in service cost, interest cost and demographic data.

The funded status of the Pension, PBOP and SERP Plans is calculated based on the difference between the benefit obligation and the fair value of plan assets and is recorded on the balance sheets as an asset or a liability. Because the Company recovers the retiree benefit costs from customers through rates, regulatory assets are recorded in lieu of an adjustment to Accumulated Other Comprehensive Income/(Loss).

The Company has recorded on its consolidated balance sheets as a liability the underfunded status of its and its subsidiaries’ retirement benefit obligations based on the projected benefit obligation. The Company has recognized Regulatory Assets, net of deferred tax benefits, of $29.8 million and $29.1 million at December 31, 2023 and 2022, respectively, to account for the future collection of these plan obligations in electric and gas rates. These amounts are recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans.

The Accumulated Benefit Obligation (ABO) is required to be disclosed for all plans where the ABO is in excess of plan assets. The difference between the PBO and the ABO is that the PBO includes projected compensation increases. The ABO for the Pension Plan was $146.3 million and $138.3 million as of December 31, 2023 and 2022, respectively. The ABO for the SERP was $14.4 million and $13.9 million as of December 31, 2023 and 2022, respectively. For the PBOP Plan, the ABO and PBO are the same. (See Note 1 (Summary of Significant Accounting Policies) for further discussion of SERP funding.)

The Company, along with its subsidiaries, expects to continue to make contributions to its Pension Plan in 2024 and future years at minimum required and discretionary funding levels consistent with the amounts recovered in the distribution utilities’ rates for these Pension Plan costs.

The following table represents employer contributions, participant contributions and benefit payments (000’s).

 

 

 

Pension Plan

 

 

PBOP Plan

 

 

SERP

 

 

 

2023

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2021

 

Employer Contributions

 

$

3,850

 

 

$

3,800

 

 

$

4,100

 

 

$

2,790

 

 

$

12,153

 

 

$

8,903

 

 

$

665

 

 

$

637

 

 

$

637

 

Participant Contributions

 

$

—

 

 

$

—

 

 

$

—

 

 

$

234

 

 

$

279

 

 

$

220

 

 

$

—

 

 

$

—

 

 

$

—

 

Benefit Payments

 

$

8,877

 

 

$

9,724

 

 

$

6,489

 

 

$

(2,767

)

 

$

3,503

 

 

$

2,905

 

 

$

665

 

 

$

637

 

 

$

637

 

 

The following table represents estimated future benefit payments (000’s).

 

Estimated Future Benefit Payments

 

 

 

Pension

 

 

PBOP

 

 

SERP

 

2024

 

$

8,006

 

 

$

3,197

 

 

$

679

 

2025

 

 

8,678

 

 

 

3,466

 

 

 

1,173

 

2026

 

 

9,162

 

 

 

3,698

 

 

 

1,167

 

2027

 

 

10,210

 

 

 

3,789

 

 

 

1,160

 

2028

 

 

10,309

 

 

 

3,803

 

 

 

1,153

 

2029-2033

 

 

57,049

 

 

 

20,913

 

 

 

5,607

 

 

The Expected Long-Term Rate of Return on Pension Plan assets assumption used by the Company is developed based on input from actuaries and investment managers. The Company’s Expected Long-Term Rate of Return on Pension Plan assets is based on target investment allocation of 58% in common stock equities, 37% in fixed income securities and 5% in real estate securities. The Company’s Expected Long-Term Rate of Return on PBOP Plan assets is based on target investment allocation of 55% in common stock equities and 45% in fixed income securities. The actual investment allocations are shown in the following tables.

 

Pension Plan

 

Target
Allocation

 

 

Actual Allocation at
December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

Equity Funds

 

 

58

%

 

 

57

%

 

 

53

%

 

 

57

%

Debt Funds

 

 

37

%

 

 

36

%

 

 

38

%

 

 

38

%

Real Estate Fund

 

 

5

%

 

 

6

%

 

 

7

%

 

 

4

%

Other(1)

 

 

—

 

 

 

1

%

 

 

2

%

 

 

1

%

Total

 

 

 

 

 

100

%

 

 

100

%

 

 

100

%

(1)
Represents investments being held in cash equivalents as of December 31, 2023, December 31, 2022 and December 31, 2021 pending payment of benefits.

 

PBOP Plan

 

Target
Allocation

 

 

Actual Allocation at
December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

Equity Funds

 

 

55

%

 

 

56

%

 

 

55

%

 

 

56

%

Debt Funds

 

 

45

%

 

 

44

%

 

 

45

%

 

 

44

%

Total

 

 

 

 

 

100

%

 

 

100

%

 

 

100

%

 

The combination of these target allocations and expected returns resulted in the overall assumed long-term rate of return of 7.50% for 2023. The Company evaluates the actuarial assumptions, including the expected rate of return, at least annually. The primary financial objective of the plans is to earn their expected long-term returns without assuming undue risks of funded status volatility. The target rate of return for the Plans has been based upon an analysis of historical returns supplemented with an economic and structural review for each asset class.

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2023 and 2022. Please also see Note 1 (Summary of Significant Accounting Policies) for a discussion of the Company’s fair value accounting policy.

 

Equity, Fixed Income, Index and Asset Allocation Funds

These investments are valued based on quoted prices from active markets. These securities are categorized in Level 1 as they are actively traded and no valuation adjustments have been applied.

Cash Equivalents

These investments are valued at cost, which approximates fair value, and are categorized in Level 1.

Real Estate Fund

These investments are valued at net asset value per unit based on a combination of market- and income-based models utilizing market discount rates, projected cash flows and the estimated value into perpetuity. In accordance with FASB Codification Topic 820, “Fair Value Measurement”, these investments have not been classified in the fair value hierarchy. The fair value amounts presented in the tables below for the Real Estate Fund are intended to permit reconciliation of the fair value hierarchy to the “Plan Assets at End of Year” line item shown in the “Change in Plan Assets” table above.

Assets measured at fair value on a recurring basis for the Pension Plan as of December 31, 2023 and 2022 are as follows (000’s):

 

 

 

Fair Value Measurements at Reporting Date Using

 

Description

 

Balance as of
December 31,

 

 

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

Pension Plan Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds:

 

 

 

 

 

 

 

 

 

 

 

 

Equity Funds

 

$

78,522

 

 

$

78,522

 

 

$

—

 

 

$

—

 

Fixed Income Funds

 

 

49,359

 

 

 

49,359

 

 

 

—

 

 

 

—

 

Total Mutual Funds

 

 

127,881

 

 

 

127,881

 

 

 

—

 

 

 

—

 

Cash Equivalents

 

 

2,266

 

 

 

2,266

 

 

 

 

 

 

 

Total Assets in the Fair Value Hierarchy

 

$

130,147

 

 

$

130,147

 

 

$

—

 

 

$

—

 

Real Estate Fund–Measured at Net Asset Value

 

 

7,746

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

137,893

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

Pension Plan Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds:

 

 

 

 

 

 

 

 

 

 

 

 

Equity Funds

 

$

67,332

 

 

$

67,332

 

 

$

—

 

 

$

—

 

Fixed Income Funds

 

 

47,646

 

 

 

47,646

 

 

 

—

 

 

 

—

 

Total Mutual Funds

 

 

114,978

 

 

 

114,978

 

 

 

—

 

 

 

—

 

Cash Equivalents

 

 

2,598

 

 

 

2,598

 

 

 

 

 

 

 

Total Assets in the Fair Value Hierarchy

 

$

117,576

 

 

$

117,576

 

 

$

—

 

 

$

—

 

Real Estate Fund–Measured at Net Asset Value

 

 

8,522

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

126,098

 

 

 

 

 

 

 

 

 

 

 

Redemptions of the Real Estate Fund are subject to a sixty-five day notice period and the fund is valued quarterly. There are no unfunded commitments.

Assets measured at fair value on a recurring basis for the PBOP Plan as of December 31, 2023 and 2022 are as follows (000’s):

 

 

 

Fair Value Measurements at Reporting Date Using

 

Description

 

Balance as of
December 31,

 

 

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

PBOP Plan Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Income Funds

 

$

23,025

 

 

$

23,025

 

 

$

—

 

 

$

—

 

Equity Funds

 

 

28,867

 

 

 

28,867

 

 

 

—

 

 

 

—

 

Total Assets

 

$

51,892

 

 

$

51,892

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

PBOP Plan Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Income Funds

 

$

20,156

 

 

$

20,156

 

 

$

—

 

 

$

—

 

Equity Funds

 

 

24,614

 

 

 

24,614

 

 

 

—

 

 

 

—

 

Total Assets

 

$

44,770

 

 

$

44,770

 

 

$

—

 

 

$

—

 

 

Employee 401(k) Tax Deferred Savings Plan—The Company sponsors the Unitil Corporation Tax Deferred Savings and Investment Plan (the 401(k) Plan) under Section 401(k) of the Internal Revenue Code and covering substantially all of the Company’s employees. Participants may elect to defer current compensation by contributing to the plan. Employees may direct, at their sole discretion, the investment of their savings plan balances (both the employer and employee portions) into a variety of investment options, including a Company common stock fund.

The Company’s contributions to the 401(k) Plan were $4.0 million, $3.5 million and $3.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.