Entergy 2012 Annual Report Download - page 91

Entergy Corporation and Subsidiaries 2012
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Subsidiary are increased for investment income and contributions,
and decreased for benefit payments. A plan’s investment net income/
(loss) (i.e. interest and dividends, realized gains and losses and
expenses) is allocated to the Registrant Subsidiaries participating in
that plan based on the value of assets for each Registrant Subsidiary
at the beginning of the quarter adjusted for contributions and benefit
payments made during the quarter.
Entergy Corporation and its subsidiaries fund pension costs in
accordance with contribution guidelines established by the Employee
Retirement Income Security Act of 1974, as amended, and the Inter-
nal Revenue Code of 1986, as amended. The assets of the plans
include common and preferred stocks, fixed-income securities, inter-
est in a money market fund, and insurance contracts. The Registrant
Subsidiaries’ pension costs are recovered from customers as a compo-
nent of cost of service in each of their respective jurisdictions.
Components of Qualified Net Pension Cost
and Other Amounts Recognized as a Regulatory
Asset and/or Accumulated Other Comprehensive
Income (AOCI)
Entergy Corporation and its subsidiaries’ total 2012, 2011, and 2010
qualified pension costs and amounts recognized as a regulatory asset
and/or other comprehensive income, including amounts capitalized,
included the following components (in thousands):
2012 2011 2010
Net periodic pension cost:
Service cost - benefits earned
during the period $ 150,763 $ 121,961 $ 104,956
Interest cost on projected
benefit obligation 260,929 236,992 231,206
Expected return on assets (317,423) (301,276) (259,608)
Amortization of prior
service cost 2,733 3,350 4,658
Recognized net loss 167,279 92,977 65,901
Net periodic pension costs $ 264,281 $ 154,004 $ 147,113
Other changes in plan assets
and benefit obligations
recognized as a regulatory asset
and/or AOCI (before tax)
Arising this period:
Net loss $ 552,303 $1,045,624 $ 232,279
Amounts reclassified from
regulatory asset and/or AOCI
to net periodic pension cost in
the current year:
Amortization of prior
service cost (2,733) (3,350) (4,658)
Amortization of net loss (167,279) (92,977) (65,901)
Total $ 382,291 $ 949,297 $ 161,720
Total recognized as net periodic
pension cost, regulatory asset,
and/or AOCI (before tax) $ 646,572 $1,103,301 $ 308,833
Estimated amortization
amounts from regulatory
asset and/or AOCI to net
periodic cost in
the following year
Prior service cost $ 2,268 $ 2,733 $ 3,350
Net loss $ 219,805 $ 169,064 $ 92,977
Qualified Pension Obligations, Plan Assets, Funded
Status, Amounts Recognized in the Balance Sheet
for Entergy Corporation and Its Subsidiaries as of
December 31, 2012 and 2011 (in thousands):
2012 2011
Change in Projected Benefit Obligation (PBO)
Balance at beginning of year $ 5,187,635 $ 4,301,218
Service cost 150,763 121,961
Interest cost 260,929 236,992
Actuarial loss 693,017 703,895
Employee contributions 789 828
Benefits paid (196,494) (177,259)
Balance at end of year $ 6,096,639 $ 5,187,635
Change in Plan Assets
Fair value of assets at beginning of year $ 3,399,916 $ 3,216,268
Actual return on plan assets 458,137 (40,453)
Employer contributions 170,512 400,532
Employee contributions 789 828
Benefits paid (196,494) (177,259)
Fair value of assets at end of year $ 3,832,860 $ 3,399,916
Funded status $(2,263,779) $(1,787,719)
Amount recognized in the balance sheet
Non-current liabilities $(2,263,779) $(1,787,719)
Amount recognized as a regulatory asset
Prior service cost $ 308 $ 9,836
Net loss 2,352,234 2,048,743
$ 2,352,542 $ 2,058,579
Amount recognized as AOCI (before tax)
Prior service cost $ 9,444 $ 2,648
Net loss 633,146 551,613
$ 642,590 $ 554,261
Other Postretirement Benefits
Entergy also currently provides health care and life insurance benefits
for retired employees. Substantially all employees may become eli-
gible for these benefits if they reach retirement age and meet certain
eligibility requirements while still working for Entergy. Entergy uses
a December 31 measurement date for its postretirement benefit plans.
Effective January 1, 1993, Entergy adopted an accounting stan-
dard requiring a change from a cash method to an accrual method
of accounting for postretirement benefits other than pensions. At
January 1, 1993, the actuarially determined accumulated postretire-
ment benefit obligation (APBO) earned by retirees and active employ-
ees was estimated to be approximately $241.4 million for Entergy
(other than the former Entergy Gulf States) and $128 million for
the former Entergy Gulf States (now split into Entergy Gulf States
Louisiana and Entergy Texas). Such obligations are being amortized
over a 20-year period that began in 1993 and ended in 2012. For the
most part, the Registrant Subsidiaries recover accrued other postre-
tirement benefit costs from customers and are required to contribute
the other postretirement benefits collected in rates to an external trust.
Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and
Entergy Texas have received regulatory approval to recover accrued
other postretirement benefit costs through rates. Entergy Arkansas
began recovery in 1998, pursuant to an APSC order. This order also
allowed Entergy Arkansas to amortize a regulatory asset (represent-
ing the difference between other postretirement benefit costs and cash
expenditures for other postretirement benefits incurred from 1993
through 1997) over a 15-year period that began in January 1998 and
ended in December 2012.
The LPSC ordered Entergy Gulf States Louisiana and Entergy Lou-
isiana to continue the use of the pay-as-you-go method for ratemak-
ing purposes for postretirement benefits other than pensions. How-
ever, the LPSC retains the flexibility to examine individual companies’
accounting for other postretirement benefits to determine if special
exceptions to this order are warranted.
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