Xcel Energy 2002 Annual Report Download - page 60

A comparison of the actuarially computed pension benefit obligation and plan assets, on a combined basis, is presented in the following table.
(Thousands of dollars) 2002 2001
Change in Benefit Obligation
Obligation at Jan. 1 $2,409,186 $2,254,138
Service cost 65,649 57,521
Interest cost 172,377 172,159
Acquisitions 7,848 –
Plan amendments 3,903 2,284
Actuarial loss 65,763 108,754
Settlements (994) –
Special termination benefits 4,445 –
Benefit payments (222,601) (185,670)
Obligation at Dec. 31 $2,505,576 $2,409,186
Change in Fair Value of Plan Assets
Fair value of plan assets at Jan. 1 $3,267,586 $3,689,157
Actual return on plan assets (404,940) (235,901)
Employer contributions – acquisitions 912 –
Settlements (994) –
Benefit payments (222,601) (185,670)
Fair value of plan assets at Dec. 31 $2,639,963 $3,267,586
Funded Status of Plans at Dec. 31
Net asset $ 134,387 $ 858,400
Unrecognized transition asset (2,003) (9,317)
Unrecognized prior service cost 224,651 242,313
Unrecognized (gain) loss 182,927 (712,571)
Net pension amounts recognized on Consolidated Balance Sheets $ 539,962 $ 378,825
Prepaid pension asset recorded $ 466,229 $ 378,825
Intangible asset recorded – prior service costs $ 6,943 $–
Minimum pension liability recorded $(106,897) $–
Accumulated other comprehensive income recorded – pretax $ 173,687 $–
Significant Assumptions
Discount rate for year-end valuation 6.75% 7.25%
Expected average long-term increase in compensation level 4.00% 4.50%
Expected average long-term rate of return on assets 9.50% 9.50%
The discount rate and compensation increase assumptions above affect the succeeding year’s pension costs. The rate of return assumption
affects the current year’s pension cost. The return assumption used for 2003 pension cost calculations will be 9.25 percent. Pension costs
include an expected return impact for the current year that may differ from actual investment performance in the plan. The cost calculation
uses a market-related valuation of pension assets, which reduces year-to-year volatility by recognizing the differences between assumed
and actual investment returns over a five-year period.
NRG offers another noncontributory, defined benefit pension plan sponsored by one of its affiliates. For the year ended Dec. 31, 2002,
the total assets of this plan were $20 million, and its benefit obligation was $30 million. The pension liability recorded by NRG for this
plan was $12 million, and its annual pension cost was $2 million.
During 2002, one of Xcel Energy’s pension plans, other than the NRG plan just described, became underfunded, with projected benefit
obligations of $590 million exceeding plan assets of $452 million on Dec. 31, 2002. All other Xcel Energy plans, excluding the NRG plan
just described, in the aggregate had plan assets of $2,188 million and projected benefit obligations of $1,916 million on Dec. 31,2002. A
minimum pension liability of $107 million was recorded related to the underfunded plan as of that date. A corresponding reduction in
Accumulated Other Comprehensive Income, a component of Stockholders’ Equity, was also recorded by Xcel Energy, as previously
recorded prepaid pension assets were reduced to record the minimum liability. Net of the related deferred income tax effects of the
adjustments, total Stockholders’ Equity was reduced by $108 million at Dec. 31, 2002, due to the minimum pension liability for the
underfunded plan.
page 74 xcel energy inc. and subsidiaries
notes to consolidated financial statements