Eversource 2013 Annual Report Download - page 102

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10. EMPLOYEE BENEFITS
A. Pension Benefits and Postretirement Benefits Other Than Pensions
NUSCO sponsors a defined benefit retirement plan that covers most employees, including CL&P, PSNH, and WMECO employees,
hired before 2006 (or as negotiated, for bargaining unit employees), referred to as the NUSCO Pension Plan. NSTAR Electric acts as
plan sponsor for a defined benefit retirement plan that covers most employees of NSTAR Electric and certain affiliates, hired before
October 1, 2012, or as negotiated by bargaining unit employees, referred to as the NSTAR Pension Plan. Both plans are subject to the
provisions of ERISA, as amended by the PPA of 2006. NUSCO also maintains non-qualified defined benefit retirement plans (herein
collectively referred to as the SERP Plans), which provide benefits in excess of Internal Revenue Code limitations to eligible current and
retired participants.
NUSCO also sponsors defined benefit postretirement plans that provide certain retiree health care benefits, primarily medical and
dental, and life insurance benefits to retiring employees that meet certain age and service eligibility requirements (NUSCO PBOP Plans
and NSTAR PBOP Plan). Under certain circumstances, eligible retirees are required to contribute to the costs of postretirement
benefits. The benefits provided under the NUSCO and NSTAR PBOP Plans are not vested and the Company has the right to modify
any benefit provision subject to applicable laws at that time.
The funded status of the Pension, SERP and PBOP 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 Regulated companies recover
the retiree benefit costs from customers through rates, regulatory assets are recorded in lieu of an adjustment to Accumulated Other
Comprehensive Income/(Loss). Regulatory accounting was also applied to the portions of the NUSCO costs that support the
Regulated companies, as these costs are also recovered from customers. Adjustments to the Pension and PBOP funded status for the
unregulated companies are recorded on an after-tax basis to Accumulated Other Comprehensive Income/(Loss). For further
information, see Note 3, "Regulatory Accounting," and Note 15, "Accumulated Other Comprehensive Income/(Loss)," to the financial
statements. The SERP Plans do not have plan assets.
For the NUSCO Pension and PBOP Plans, 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 years in which they occur. Investment gains or losses for this purpose are the difference
between the calculated expected return and the actual return. As investment gains and losses are reflected in the average plan asset
fair values, they are subject to amortization with other unrecognized actuarial gains or losses. For the NSTAR Pension and PBOP
Plans, the entire difference between the actual return and calculated expected return on plan assets is reflected as a component of
unrecognized actuarial gain or loss. Unrecognized actuarial gains or losses are amortized as a component of Pension and PBOP
expense over the estimated average future employee service period.
Pension and SERP Plans: The funded status of each of the plans is recorded on the respective acting sponsor's balance sheet:
NUSCO (NUSCO Pension, NUSCO SERP and NSTAR SERP) and NSTAR Electric (NSTAR Pension). The NUSCO plans are
accounted for under the multiple-employer approach while the NSTAR plans are accounted for under the multi-employer approach.
Accordingly, the balance sheet of NSTAR Electric reflects the full funded status of the NSTAR Pension Plan.
The following tables provide information on the Pension and SERP Plan benefit obligations, fair values of Pension Plan assets, and
funded status:
Pension and SERP
NU
As of December 31,
(Millions of Dollars)
2013
2012 (1)
Change in Benefit Obligation
Benefit Obligation as of Beginning of Year
$
(5,022.8)
$
(3,098.9)
Liabilities Assumed from Merger with NSTAR
-
(1,409.7)
Service Cost
(102.3)
(84.3)
Interest Cost
(206.7)
(198.3)
Actuarial Gain/(Loss)
433.6
(429.7)
Benefits Paid – Pension
216.6
187.7
Benefits Paid – SERP
5.1
4.2
SERP Curtailment
-
6.2
Benefit Obligation as of End of Year
$
(4,676.5)
$
(5,022.8)
Change in Pension Plan Assets
Fair Value of Plan Assets as of Beginning of Year
$
3,411.3
$
2,005.9
Assets Assumed from Merger with NSTAR
-
984.7
Employer Contributions
284.7
222.4
Actual Return on Plan Assets
506.5
386.0
Benefits Paid
(216.6)
(187.7)
Fair Value of Plan Assets as of End of Year
$
3,985.9
$
3,411.3
Funded Status as of December 31st
$
(690.6)
$
(1,611.5)