Xcel Energy 2004 Annual Report Download - page 69

NOTES to CONSOLIDATED FINANCIAL STATEMENTS
Xcel Energy Annual Report 2004
67
Plan Assets Certain state agencies that regulate Xcel Energy’s utility subsidiaries also have issued guidelines related to the funding of SFAS No. 106
costs. SPS is required to fund SFAS No. 106 costs for Texas and New Mexico jurisdictional amounts collected in rates, and PSCo is required to fund
SFAS No. 106 costs in irrevocable external trusts that are dedicated to the payment of these postretirement benefits. In 2004, the investment strategy
for the union asset fund was changed to increase the exposure to equity funds. Also, a portion of the assets contributed on behalf of nonbargaining retirees
has been funded into a sub-account of the Xcel Energy pension plans. These assets are invested in a manner consistent with the investment strategy for
the pension plan.
The actual composition of postretirement benefit plan assets at Dec. 31 was:
2004 2003
Fixed income/debt securities 21% 2%
Equity and equity mutual fund securities 54 14
Cash equivalents 25 84
100% 100%
Xcel Energy bases its investment-return assumption for the postretirement health care fund assets on expected long-term performance for each of the
investment types included in its postretirement health care asset portfolio. Given the fairly short time period in which funding has been required, Xcel Energy
does not consider the actual historical returns achieved by its postretirement health care fund asset portfolio to be significant in establishing long-term return
assumptions. Instead, Xcel Energy considers the long-term return levels projected and recommended by investment experts, weighted for the target mix
of asset categories in our portfolio. Investment-return volatility is not considered to be a material factor in postretirement health care costs.
Benefit Obligations A comparison of the actuarially computed benefit obligation and plan assets for Xcel Energy postretirement health care plans that
benefit employees of its utility subsidiaries is presented in the following table:
(Thousands of dollars) 2004 2003
Change in Benefit Obligation
Obligation at Jan. 1 $775,230 $767,975
Service cost 6,100 5,893
Interest cost 52,604 52,426
Acquisitions (divestitures) –(31,584)
Plan amendments (1,600) (33,304)
Plan participants’ contributions 9,532 16,577
Actuarial loss 148,341 122,864
Curtailments –(249)
Benefit payments (61,082) (60,754)
Impact of Medicare Prescription Drug, Improvement and Modernization Act of 2003 –(64,614)
Obligation at Dec. 31 $929,125 $775,230
Change in Fair Value of Plan Assets
Fair value of plan assets at Jan. 1 $285,861 $250,983
Actual return on plan assets 21,950 11,045
Plan participants’ contributions 9,532 16,577
Employer contributions 62,406 68,010
Benefit payments (61,082) (60,754)
Fair value of plan assets at Dec. 31 $318,667 $285,861
Funded Status at Dec. 31
Net obligation $610,458 $489,369
Unrecognized transition asset (obligation) (117,600) (133,778)
Unrecognized prior service cost 17,914 20,093
Unrecognized gain (loss) (383,026) (255,174)
Accrued benefit liability recorded (a) $127,746 $120,510
Measurement Date Dec. 31, 2004 Dec. 31, 2003
Significant Assumptions Used to Measure Benefit Obligations
Discount rate for year-end valuation 6.00% 6.25%
(a) $0.7 million of the 2004 accrued benefit liability and $1.1 million of the 2003 accrued benefit liability relate to Xcel Energy’s remaining obligation for companies that are
now classified as discontinued operations.