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Estimated Future Benefit Payments: The following benefit payments, which reflect expected future service, are expected to be paid by
the Pension, SERP and PBOP Plans:
(Millions of Dollars)
Pension
NU Consolidated and SERP PBOP
2013 $ 238.0
$ 63.5
2014 257.3
65.0
2015 252.4
66.8
2016 261.2
68.2
2017 270.6
69.6
2018-2022 1,510.2
366.3
NSTAR Pension Plan
2013
$
77.7
N/A
2014
79.6
N/A
2015
82.6
N/A
2016
83.2
N/A
2017
85.1
N/A
2018-2022 462.2
N/A
Contributions: NU’s policy is to annually fund the NUSCO and NSTAR Pension Plans in an amount at least equal to an amount that will
satisfy federal requirements. NU contributed $197.4 million to the NUSCO Pension Plan in 2012, of which $87.7 million was
contributed by PSNH. NSTAR Electric contributed $25 million to the NSTAR Pension Plan for the year ended December 31, 2012.
Based on the current status of the NUSCO Pension Plan, NU anticipates making a contribution of approximately $203 million in 2013,
of which $107 million is required to meet minimum federal funding requirements. NSTAR Electric anticipates making a contribution of
approximately $82 million in 2013 to the NSTAR Pension Plan, of which $38 million is required to meet minimum federal funding
requirements.
For the PBOP Plans, it is NU’s policy to annually fund the NUSCO PBOP Plans in an amount equal to the PBOP Plans' postretirement
benefit cost, excluding curtailment and termination benefits. NU contributed $50 million to the NUSCO PBOP Plans in 2012 and
expects to make $25.7 million in contributions in 2013. NU contributes an amount that approximates annual benefit payments to the
NSTAR PBOP Plan. NU contributed $22.7 million to the NSTAR PBOP Plan for the period April 10, 2012 to December 31, 2012 and
expects to make $30 million in contributions in 2013.
Fair Value of Pension and PBOP Plan Assets: Pension and PBOP funds are held in external trusts. Trust assets, including
accumulated earnings, must be used exclusively for Pension and PBOP payments. NU's investment strategy for its Pension and PBOP
Plans is to maximize the long-term rates of return on these plans' assets within an acceptable level of risk. The investment strategy for
each asset category includes a diversification of asset types, fund strategies and fund managers and establishes target asset
allocations that are routinely reviewed and periodically rebalanced. In 2012, PBOP assets were comprised of specific assets within the
defined benefit pension plan trust (401(h) assets) as well as assets held in the PBOP Plans. The investment policy and strategy of the
401(h) assets is consistent with those of the defined benefit pension plans, which are detailed below. NU's expected long-term rates of
return on Pension and PBOP Plan assets are based on these target asset allocation assumptions and related expected long-term rates
of return. In developing its expected long-term rate of return assumptions for the Pension and PBOP Plans, NU evaluated input from
actuaries and consultants, as well as long-term inflation assumptions and historical returns. For the year ended December 31, 2012,
management has assumed long-term rates of return of 8.25 percent on NUSCO Pension and PBOP Plan assets and 7.30 percent on
the NSTAR Pension and PBOP Plan assets. These long-term rates of return are based on the assumed rates of return for the target
asset allocations as follows:
As of December 31,
2012 and 2011
2012
2011
2012
NUSCO Pension and PBOP
NSTAR Pension Plan
NSTAR Pension Plan
NSTAR PBOP Plan
Target
Assumed
Target
Assumed
Target
Assumed
Target
Assumed
Asset
Rate
Asset
Rate
Asset
Rate
Asset
Rate
Allocation
of Return
Allocation
of Return
Allocation
of Return
Allocation
of Return
Equity Securities:
United States
24%
9%
25%
8.3%
22%
8.6%
25%
8.3%
International 13%
9%
13%
8.6%
12%
8.9%
20%
8.6%
Emerging Markets
3%
10%
5%
8.8%
5%
8.8%
5%
8.8%
Private Equity
12%
13%
-
-
-
-
-
-
Debt Securities:
Fixed Income
20%
5%
21%
4.6%
15%
4.4%
30%
4.6%
High Yield Fixed Income
3.5%
7.5%
9%
6.5%
9%
6.2%
-
-
Emerging Markets Debt
3.5%
7.5%
4%
6.4%
3%
6.8%
-
-
Real Estate and Other Assets
8%
7.5%
10%
7.9%
11%
7.7%
10%
7.9%
Hedge Funds
13%
7%
13%
8.4%
23%
8.6%
10%
8.4%