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Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2022
Employee Benefit Plans [Abstract] |
Employee Benefit Plans | 11. Employee Benefit Plans Pensions The Company maintains a general and administrative and a union-represented defined benefit pension plan covering all of its employees hired prior to May 1, 2010. Employees hired after May 1, 2010 are eligible for an enhanced 401(k) plan rather than a defined benefit plan. The benefits under the defined benefit plans are based upon years of service and compensation near retirement. The Company amended its defined benefit pension plans in 2014, generally limiting the years of eligible service under the plans to 30 years. The Company’s funding policy is to contribute annually the amount permitted by the PPUC to be collected from customers in rates, but in no case less than the minimum Employee Retirement Income Security Act (ERISA) required contribution. The following table sets forth the plans’ funded status as of December 31, 2022 and 2021. The measurement of assets and obligations of the plans is as of December 31, 2022 and 2021.
Obligations and Funded Status At December 31 |  | 2022 |  |  | 2021 |
Change in Benefit Obligation |  |  |  |  |  |
Pension benefit obligation beginning of year |  | $ | 51,530 |  |  | $ | 54,106 |
Service cost |  |  | 1,025 |  |  |  | 1,086 |
Interest cost |  |  | 1,336 |  |  |  | 1,209 |
Actuarial gain |  |  | (13,431 | ) |  |  | (3,045 | )
Benefit payments |  |  | (1,743 | ) |  |  | (1,826 | )
Pension benefit obligation end of year |  |  | 38,717 |  |  |  | 51,530 |
Change in Plan Assets |  |  |  |  |  |  |  |
Fair value of plan assets beginning of year |  |  | 65,584 |  |  |  | 56,315 |
Actual return on plan assets |  |  | (10,334 | ) |  |  | 8,795 |
Employer contributions |  |  | 2,300 |  |  |  | 2,300 |
Benefits paid |  |  | (1,743 | ) |  |  | (1,826 | )
Fair value of plan assets end of year |  |  | 55,807 |  |  |  | 65,584 |
Funded Status of Plans at End of Year |  | $ | 17,090 |  |  | $ | 14,054 |
The accounting standards require that the funded status of defined benefit pension plans be fully recognized on the balance sheets. They also call for the unrecognized actuarial gain or loss, the unrecognized prior service cost, and the unrecognized transition costs to be adjustments to shareholders’ equity (accumulated other comprehensive income). Due to a rate order granted by the PPUC, the Company is permitted under the accounting standards to defer the charges otherwise recorded in accumulated other comprehensive income as a regulatory asset. Management believes these costs will be recovered in future rates charged to customers. The asset for the funded status of the Company’s pension plans as of December 31, 2022 and 2021 is recorded in “Prepaid pension cost” on its balance sheets. In 2022, the plans recognized a significant actuarial gain. In 2022, the Company recognized a 235 basis point increase in the discount rate. In 2021, the plans recognized a significant actuarial gain. The Company adopted the new mortality improvement scale (MP-2021) and recognized a 35 basis point increase in the discount rate. The Company uses the corridor method to amortize actuarial gains and losses. Gains and losses over 10% of the greater of pension benefit obligation or the market value of assets are amortized over the average future service of plan participants expected to receive benefits. Changes in plan assets and benefit obligations recognized in regulatory assets are as follows:
|  | 2022 |  |  | 2021 |
Net gain (loss) arising during the year |  | $ | 1,121 |  |  | $ | (8,189 | )
Recognized net actuarial loss |  |  | – |  |  |  | (483 | )
Recognized prior service credit |  |  | 13 |  |  |  | 13 |
Total changes in regulatory asset during the year |  | $ | 1,134 |  |  | $ | (8,659 | )
Amounts recognized in regulatory assets that have not yet been recognized as components of net periodic benefit cost consist of the following at December 31:
|  | 2022 |  |  | 2021 |
Net loss |  | $ | 2,946 |  |  | $ | 1,825 |
Prior service credit |  |  | (37 | ) |  |  | (50 | )
Regulatory asset |  | $ | 2,909 |  |  | $ | 1,775 |
Components of net periodic benefit cost are as follows:
|  | 2022 |  |  | 2021 |
Service cost |  | $ | 1,025 |  |  | $ | 1,086 |
Interest cost |  |  | 1,336 |  |  |  | 1,209 |
Expected return on plan assets |  |  | (4,218 | ) |  |  | (3,651 | )
Amortization of loss |  |  | – |  |  |  | 483 |
Amortization of prior service credit |  |  | (13 | ) |  |  | (13 | )
Rate-regulated adjustment |  |  | 4,170 |  |  |  | 3,186 |
Net periodic benefit cost |  | $ | 2,300 |  |  | $ | 2,300 |
Pension service cost is recorded in operating expenses. All other components of net periodic pension cost are recorded as other pension costs in other income (expenses). The rate-regulated adjustment set forth above is required in order to reflect pension expense for the Company in accordance with the method used in establishing water rates. The Company is permitted by rate order of the PPUC to expense pension costs to the extent of contributions and defer the remaining expense to regulatory assets to be collected in rates at a later date as additional contributions are made. During 2022, the deferral decreased by $4,170. The estimated costs for the defined benefit pension plans relating to the December 31, 2022 balance sheet that will be amortized from regulatory assets into net periodic benefit cost over the next fiscal year are as follows:
Net loss |  | $ | – |
Net prior service credit |  |  | (13 | )
|  | $ | (13 | )
The Company plans to contribute $1,680 to the plans in 2023. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid in each of the next five years and the subsequent five years in the aggregate:
2023 |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  |  |  | 2028–2032 |
| $ | 2,090 |  |  | $ | 2,207 |  |  | $ | 2,200 |  |  | $ | 2,285 |  |  | $ | 2,358 |  |  | $ | 13,362 |
The following tables show the projected benefit obligation, the accumulated benefit obligation, and the fair value of plan assets as of December 31:
|  | 2022 |  |  | 2021 |
Projected benefit obligation |  | $ | 38,717 |  |  | $ | 51,530 |
Fair value of plan assets |  |  | 55,807 |  |  |  | 65,584 |
|  | 2022 |  |  | 2021 |
Accumulated benefit obligation |  | $ | 37,040 |  |  | $ | 48,464 |
Fair value of plan assets |  |  | 55,807 |  |  |  | 65,584 |
Weighted-average assumptions used to determine benefit obligations at December 31:
| 2022 |  | 2021
Discount rate | 5.00% |  | 2.65%
Rate of compensation increase | 2.50% – 3.00% |  | 2.50% – 3.00%
Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31:
| 2022 |  | 2021
Discount rate | 2.65% |  | 2.30%
Expected long-term return on plan assets | 6.50% |  | 6.50%
Rate of compensation increase | 2.50% – 3.00% |  | 2.50% – 3.00%
The selected long-term rate of return on plan assets was primarily based on the asset allocation of each of the plan’s assets (approximately 50% to 70% equity securities and 30% to 50% fixed income securities). Analysis of the historic returns of these asset classes and projections of expected future returns were considered in setting the long-term rate of return. The investment objective of the Company’s defined benefit pension plans is that of Growth and Income. The weighted-average target asset allocations are 50% to 70% equity securities, 30% to 50% fixed income securities, and 0% to 10% reserves (cash and cash equivalents). Within the equity category, the Company’s target allocation is approximately 60-95% large cap, 0-25% mid cap, 0-10% small cap, 0-25% International Developed Nations, and 0-10% International Emerging Nations. Within the fixed income category, its target allocation is approximately 15-55% U.S. Treasuries, 0-22% Federal Agency securities, 0-40% corporate bonds, 15-55% mortgage-backed securities, 0-20% international, and 0-20% high yield bonds. The Company’s investment performance objectives over a three to five year period are to exceed the annual rate of inflation as measured by the Consumer Price Index by 3%, and to exceed the annualized total return of specified benchmarks applicable to the funds within the asset categories. Further guidelines within equity securities include: (1) holdings in any one company cannot exceed 5% of the portfolio; (2) a minimum of 20 individual stocks must be included in the domestic stock portfolio; (3) a minimum of 30 individual stocks must be included in the international stock portfolio; (4) equity holdings in any one industry cannot exceed 20-25% of the portfolio; and (5) only U.S.-denominated currency securities are permitted. Further guidelines for fixed income securities include: (1) fixed income holdings in a single issuer are limited to 5% of the portfolio; (2) acceptable investments include money market securities, U.S. Government and its agencies and sponsored entities’ securities, mortgage-backed and asset-backed securities, corporate securities and mutual funds offering high yield bond portfolios; (3) purchases must be limited to investment grade or higher; (4) non-U.S. dollar denominated securities are not permissible; and (5) high risk derivatives are prohibited. The fair values of the Company’s pension plan assets at December 31, 2022 and 2021 by asset category and fair value hierarchy level are as follows. The majority of the valuations are based on quoted prices on active markets (Level 1), with the remaining valuations based on broker/dealer quotes, active market makers, models, and yield curves (Level 2).
|  | Total Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |
Asset Category |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Cash and Money Market Funds (a) |  | $ | 6,108 |  |  | $ | 671 |  |  | $ | 6,108 |  |  | $ | 671 |  |  | $ | – |  |  | $ | – |
Equity Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common Equity Securities (b) |  |  | 17,792 |  |  |  | – |  |  |  | 17,792 |  |  |  | – |  |  |  | – |  |  |  | – |
Equity Mutual Funds (c) |  |  | 13,542 |  |  |  | 43,178 |  |  |  | 13,542 |  |  |  | 43,178 |  |  |  | – |  |  |  | – |
Fixed Income Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury Obligations |  |  | – |  |  |  | 621 |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | 621 |
Corporate and Foreign Bonds (d) |  |  | – |  |  |  | 4,580 |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | 4,580 |
Fixed Income Mutual Funds (e) |  |  | 18,365 |  |  |  | 16,534 |  |  |  | 18,365 |  |  |  | 16,534 |  |  |  | – |  |  |  | – |
Total Plan Assets |  | $ | 55,807 |  |  | $ | 65,584 |  |  | $ | 55,807 |  |  | $ | 60,383 |  |  | $ | – |  |  | $ | 5,201 |
(a) | The portfolios are designed to keep up to one year of distributions in immediately available funds. The Company was more heavily-weighted in cash as of December 31, 2022 due to the timing of employer contributions and market volatility.
(b) | This category currently includes investments in U.S. common stocks and foreign stocks trading in the U.S. widely distributed among consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, real estate, telecommunication, and utilities.
(c) | This category currently includes a majority of investments in exchange traded funds as well as domestic equity mutual funds and international mutual funds which give the portfolio exposure to mid and large cap index funds as well as international diversified index funds.
(d) | This category included only U.S. corporate bonds and notes widely distributed among consumer discretionary, consumer staples, healthcare, information technology, energy, transportation, and financial services.
(e) | This category includes fixed income investments in mutual funds which include government and corporate securities of both the U.S. and other countries. The non-U.S. corporate and sovereign investments add further diversity to the fixed income portion of the portfolio.
Defined Contribution Plan The Company has a savings plan pursuant to the provisions of section 401(k) of the Internal Revenue Code. For employees hired before May 1, 2010, this plan provides for elective employee contributions of up to 15% of compensation and Company matching contributions of 100% of the participant’s contribution, up to a maximum annual Company contribution of $2.8 for each employee. Employees hired after May 1, 2010 are entitled to an enhanced feature of the plan. This feature provides for elective employee contributions of up to 15% of compensation and Company matching contributions of 100% of the participant’s contribution, up to a maximum of 4% of the employee’s compensation. In addition, the Company will make an annual contribution of $1.2 to each employee’s account whether or not they defer their own compensation. Employees eligible for this enhanced 401(k) plan feature are not eligible for the defined benefit plans. As of December 31, 2022, 67 employees were participating in the enhanced feature of the plan. The Company’s contributions to both portions of the plan amounted to $345 in 2022 and $340 in 2021. Deferred Compensation The Company has non-qualified deferred compensation and supplemental retirement agreements with certain members of management. The future commitments under these arrangements are offset by corporate-owned life insurance policies. At December 31, 2022 and 2021, the present value of the future obligations included in “Accrued compensation and benefits” and “Deferred employee benefits” was approximately $4,067 and $4,762, respectively. The insurance policies included in “Other assets” had a total cash value of approximately $4,306 and $4,090 at December 31, 2022 and 2021, respectively. The Company’s net (income) expenses under the plans amounted to $(385) in 2022 and $131 in 2021. Other The Company has a retiree life insurance program which pays the beneficiary of a retiree $2 upon the retiree’s death. At December 31, 2022 and 2021, the present value of the future obligations was approximately $91 and $152, respectively. There is no trust or insurance covering this future liability, instead the Company will pay these benefits out of its general assets. The Company’s net income under the plan amounted to $58 in 2022 and $9 in 2021.

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