Eversource 2009 Annual Report Download - page 143

FS-58
NU For the Years Ended December 31,
(Millions of Dollars) 2009 2008 2007
Total pension expense $ 39.7 $2.4 $ 17.1
Income/(expense) capitalized as utility plant (6.2) 4.9 1.0
Total pension expense, net of amounts capitalized $ 33.5 $7.3 $ 18.1
CL&P For the Years Ended December 31,
(Millions of Dollars) 2009 2008 2007
Total pension income $ (5.7) $(21.3) $ (15.6)
Income capitalized as utility plant 2.6 9.4 7.3
Total pension income, net of amounts capitalized $ (3.1) $(11.9) $ (8.3)
PSNH For the Years Ended December 31,
(Millions of Dollars) 2009 2008 2007
Total pension expense $ 23.3 $18.1 $ 19.5
Expense capitalized as utility plant (6.0) (4.2) (4.8)
Total pension expense, net of amounts capitalized $ 17.3 $13.9 $ 14.7
WMECO For the Years Ended December 31,
(Millions of Dollars) 2009 2008 2007
Total pension income $ (2.9) $(6.1) $ (5.0)
Income capitalized as utility plant 1.2 2.1 1.9
Total pension income, net of amounts capitalized $ (1.7) $(4.0) $ (3.1)
Pension Plan COLA: On May 4, 2007, NU's Board of Trustees approved a cost of living adjustment (COLA) that increased retiree
pension benefits for certain participants in the Pension Plan. The COLA was announced on May 8, 2007 at the annual meeting of NU's
shareholders, which resulted in a plan amendment in 2007 and a remeasurement of the Pension Plan's benefit obligation as of May 8,
2007. The COLA increased the Pension Plan's benefit obligation by $40 million and was reflected as a prior service cost and as a
decrease in the funded status of the Pension Plan. This amount is being amortized over a 12-year period representing average
remaining service lives of employees.
Actuarial Determination of Expense: Pension and PBOP expense consists of the service cost and prior service cost determined by
actuaries, the interest cost based on the discounting of the obligations and the amortization of the net transition obligation, offset by the
expected return on plan assets. Pension and PBOP expense also includes amortization of actuarial gains and losses, which represent
differences between assumptions and actual or updated information.
The expected return on plan assets is calculated by applying the assumed rate of return to a four-year rolling average of plan asset fair
values, which reduces year-to-year volatility. This calculation recognizes investment gains or losses over a four-year period from the
year in which they occur. Investment gains or losses for this purpose are the difference between the calculated expected return and the
actual return based on the change in the fair value of assets during the year. As investment gains and losses are reflected in the
average plan asset fair values, they are subject to amortization with other unrecognized gains/losses. Unrecognized gains/losses are
amortized as a component of pension and PBOP expense over approximately 12 years, which is the average future service period of
the employees.
SERP: NU has maintained a SERP since 1987. The SERP provides its eligible participants, who are officers of NU, with benefits that
would have been provided to them under the Pension Plan if certain Internal Revenue Code limitations were not imposed. NU allocates
net periodic SERP benefit costs to its subsidiaries based upon actuarial calculations by participant.
Although the Company maintains a trust to support the SERP with marketable securities held in the NU supplemental benefit trust, the
plan itself does not contain any assets. For information regarding the investments in the NU supplemental benefit trust that are used to
support the SERP liability, see Note 9, "Marketable Securities," to the consolidated financial statements.
PBOP Plan: On behalf of NU's retirees, NUSCO also sponsors plans that provide certain retiree health care benefits, primarily medical
and dental, and life insurance benefits through a PBOP Plan. These benefits are available for employees retiring from NU who have
met specified service requirements. For current employees and certain retirees, the total benefit is limited to two times the 1993 per
retiree health care cost. These costs are charged to expense over the estimated work life of the employee. NU uses a December 31st
measurement date for the PBOP Plan.
NU annually funds postretirement costs through external trusts with amounts that have been and will continue to be recovered in rates
and that are tax deductible.
NU allocates net periodic postretirement benefits expense to its subsidiaries based on the actual participant demographic data for each
subsidiary's participants. Benefit payments to participants and contributions are also tracked for each subsidiary. The actual
investment return for the trust each year is allocated to each of the subsidiaries in proportion to the investment return expected to be
earned during the year.