XML 51 R17.htm IDEA: XBRL DOCUMENT

EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2019

For our employee benefit plans, we:


▪	recognize an asset for a plan’s overfunded status or a liability for a plan’s underfunded status in the balance sheet;


▪	measure a plan’s assets and its obligations that determine its funded status as of the end of the fiscal year; and


▪	recognize changes in the funded status of pension and PBOP plans in the year in which the changes occur. Generally, those changes are reported in OCI and as a separate component of shareholders’ equity.

The detailed information presented below covers the employee benefit plans of primarily Sempra Energy and its consolidated subsidiaries.

Sempra Energy has funded and unfunded noncontributory traditional defined benefit and cash balance plans, including separate plans for SDG&E and SoCalGas, which collectively cover all eligible employees, including members of the Sempra Energy board of directors who were participants in a predecessor plan on or before June 1, 1998. Pension benefits under the traditional defined benefit plans are based on service and final average earnings, while the cash balance plans provide benefits using a career average earnings methodology.

IEnova has an unfunded noncontributory defined benefit plan covering all employees that provides defined benefits to retirees based on date of hire, years of service and final average earnings.

Sempra Energy also has PBOP plans, including separate plans for SDG&E and SoCalGas, which collectively cover all domestic and certain foreign employees. The life insurance plans are both contributory and noncontributory, and the health care plans are contributory. Participants’ contributions are adjusted annually. Other postretirement benefits include medical benefits for retirees’ spouses.

Pension and other postretirement benefits costs and obligations are dependent on assumptions used in calculating such amounts. We review these assumptions on an annual basis and update them as appropriate. We consider current market conditions, including interest rates, in making these assumptions. We use a December 31 measurement date for all of our plans.

RABBI TRUST

In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $488 million and $416 million at December 31, 2019 and 2018, respectively.

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Benefit Plan Amendments Affecting 2019 and 2018

In 2019 and 2018, certain executive participants in a company nonqualified pension plan became eligible in this same plan for Supplemental Executive Retirement Plan benefits. This was treated as a plan amendment and increased the recorded pension liability by $5 million and $12 million at Sempra Energy and $3 million and $8 million at SDG&E in 2019 and 2018, respectively, and $2 million at SoCalGas in 2019.

Settlement Accounting for Lump Sum Payments

When applicable, we record settlement charges for lump sum payments from our nonqualified pension plans that are in excess of the respective plan’s service cost plus interest cost. Sempra Energy Consolidated recorded settlement charges of $24 million in 2019, Sempra Energy Consolidated and SDG&E recorded settlement charges of $12 million and $4 million, respectively, in 2018, and Sempra Energy Consolidated recorded settlement charges of $8 million in 2017.

Sale of Qualified Pension Plan Annuity Contracts

In March 2018, an insurance company purchased annuities for certain current annuitants in the SDG&E and SoCalGas qualified pension plans and assumed the obligation for payment of these annuities. At SDG&E in the first quarter of 2018 and at SoCalGas in the second quarter of 2018, the liability transferred for these annuities, plus the total year-to-date lump-sum payments, exceeded the settlement threshold, which triggered settlement accounting. This resulted in a reduction of the recorded pension liability and pension plan assets of $363 million at Sempra Energy Consolidated, including $132 million at SDG&E and $231 million at SoCalGas. This also resulted in settlement charges in net periodic benefit cost of $54 million at Sempra Energy Consolidated, including $22 million at SDG&E and $32 million at SoCalGas. The settlement charges were recorded as regulatory assets on the Consolidated Balance Sheets.

Acquisition

In March 2018, Sempra Energy completed the Merger, as we discuss in Note 5, and assumed unfunded other postretirement employee benefits obligations for health care and life insurance benefits, resulting in an increase of $21 million in the other postretirement benefit plan liability at Sempra Energy Consolidated.

In each of 2019 and 2018, we had $27 million in AOCI representing an actuarial loss related to Oncor’s pension plan.

Special Termination Benefits Affecting 2018 and 2017

In 2018, certain nonrepresented, and in 2017, certain represented, employees age 62 or older with 5 years of service or age 55 to 61 with 10 years of service that retired under the Voluntary Retirement Enhancement Program offered in these years received an additional postretirement health benefit in the form of a $100,000 Health Reimbursement Account. We treated the benefit obligation attributable to the Health Reimbursement Account as a special termination benefit. This resulted in increases to the recorded liability for PBOP and net periodic benefit cost of $5 million for Sempra Energy Consolidated, $3 million for SDG&E and $2 million for SoCalGas in 2018 and $18 million for each of Sempra Energy Consolidated and SoCalGas in 2017.

The Voluntary Retirement Enhancement Program resulted in a higher than expected number of retirements in 2017. As a result, the total lump-sum benefits paid from the Sempra Energy nonqualified and SoCalGas qualified pension plans in 2017 exceeded the settlement threshold, which triggered settlement accounting. This resulted in a reduction of the recorded pension liability and pension plan assets of $194 million at Sempra Energy Consolidated and $175 million at SoCalGas. This also resulted in settlement charges in net periodic benefit cost of $38 million at Sempra Energy Consolidated and $30 million at SoCalGas. The settlement charges at SoCalGas were recorded as regulatory assets on the Consolidated Balance Sheets. A measurement date of December 31, 2017 was used for the respective settlement accounting triggered as the year-to-date lump-sum benefit payments first exceeded the settlement threshold in December.

Benefit Obligations and Assets

The following three tables provide a reconciliation of the changes in the plans’ projected benefit obligations and the fair value of assets during 2019 and 2018, and a statement of the funded status at December 31, 2019 and 2018:



PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Pension benefits						Other postretirement benefits
	2019			2018			2019			2018
CHANGE IN PROJECTED BENEFIT OBLIGATION
Net obligation at January 1	$	3,339		$	3,841		$	868		$	959
Service cost	110			124			17			21
Interest cost	139			140			36			36
Contributions from plan participants	—			—			21			23
Actuarial loss (gain)	445			(271		)	45			(123		)
Plan amendments	5			12			—			—
Benefit payments	(93		)	(113		)	(72		)	(74		)
Special termination benefits	—			—			—			5
Acquisition	—			—			—			21
Settlements	(177		)	(394		)	(2		)	—
Net obligation at December 31	3,768			3,339			913			868

CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	2,160			2,659			1,108			1,209
Actual return on plan assets	496			(180		)	218			(56		)
Employer contributions	276			188			8			6
Contributions from plan participants	—			—			21			23
Benefit payments	(93		)	(113		)	(72		)	(74		)
Settlements	(177		)	(394		)	(2		)	—
Fair value of plan assets at December 31	2,662			2,160			1,281			1,108
Funded status at December 31	$	(1,106	)	$	(1,179	)	$	368		$	240
Net recorded (liability) asset at December 31	$	(1,106	)	$	(1,179	)	$	368		$	240



PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
SAN DIEGO GAS & ELECTRIC COMPANY
(Dollars in millions)
	Pension benefits						Other postretirement benefits
	2019			2018			2019			2018
CHANGE IN PROJECTED BENEFIT OBLIGATION
Net obligation at January 1	$	814		$	971		$	170		$	185
Service cost	30			30			4			5
Interest cost	34			35			7			7
Contributions from plan participants	—			—			7			8
Actuarial loss (gain)	61			(63		)	7			(17		)
Plan amendments	3			8			—			—
Benefit payments	(18		)	(22		)	(18		)	(21		)
Special termination benefits	—			—			—			3
Settlements	(39		)	(145		)	—			—
Transfer of liability from other plans	10			—			—			—
Net obligation at December 31	895			814			177			170

CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	600			776			172			195
Actual return on plan assets	135			(56		)	36			(12		)
Employer contributions	52			47			—			2
Contributions from plan participants	—			—			7			8
Benefit payments	(18		)	(22		)	(18		)	(21		)
Settlements	(39		)	(145		)	—			—
Transfer of assets from other plans	9			—			—			—
Fair value of plan assets at December 31	739			600			197			172
Funded status at December 31	$	(156	)	$	(214	)	$	20		$	2
Net recorded (liability) asset at December 31	$	(156	)	$	(214	)	$	20		$	2



PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
SOUTHERN CALIFORNIA GAS COMPANY
(Dollars in millions)
	Pension benefits						Other postretirement benefits
	2019			2018			2019			2018
CHANGE IN PROJECTED BENEFIT OBLIGATION
Net obligation at January 1	$	2,148		$	2,486		$	646		$	737
Service cost	68			81			12			15
Interest cost	91			92			27			27
Contributions from plan participants	—			—			13			14
Actuarial loss (gain)	345			(215		)	39			(100		)
Plan amendments	2			—			—			—
Benefit payments	(59		)	(65		)	(49		)	(49		)
Special termination benefits	—			—			—			2
Settlements	(65		)	(231		)	—			—
Transfer of liability to other plans	(4		)	—			—			—
Net obligation at December 31	2,526			2,148			688			646

CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	1,385			1,694			916			993
Actual return on plan assets	320			(117		)	178			(43		)
Employer contributions	152			104			1			1
Contributions from plan participants	—			—			13			14
Benefit payments	(59		)	(65		)	(49		)	(49		)
Settlements	(65		)	(231		)	—			—
Transfer of assets from other plans	4			—			—			—
Fair value of plan assets at December 31	1,737			1,385			1,059			916
Funded status at December 31	$	(789	)	$	(763	)	$	371		$	270
Net recorded (liability) asset at December 31	$	(789	)	$	(763	)	$	371		$	270

Actuarial losses (gains) fluctuate based on changes in assumptions that we describe below in “Assumptions for Pension and Other Postretirement Benefit Plans” and updates to census data. In 2019, 2018 and 2017, the Society of Actuaries released updated mortality improvement projection scales, reflecting changes to projected observed longevity improvements in its mortality tables. We have incorporated these assumptions, adjusted for the Sempra Energy companies’ actual mortality experience, in our calculations for each of those years. Actuarial losses in pension plans at Sempra Energy Consolidated in 2019 were driven primarily by a decrease in discount rates and updated census data at Sempra Energy, SDG&E and SoCalGas, a decrease in the lump-sum conversion rate at SDG&E and updated salary scale assumptions at SoCalGas. These actuarial losses were partially offset by actuarial gains at SDG&E and SoCalGas due to a decrease in the interest crediting rate for the cash balance plans. Actuarial losses in PBOP plans at Sempra Energy Consolidated in 2019 were driven primarily by a decrease in discount rates at SDG&E and SoCalGas. These actuarial losses were partially offset by actuarial gains at SoCalGas, due to a reduction in the 2020 expected health care costs.

Net Assets and Liabilities

The assets and liabilities of the pension and PBOP plans are affected by changing market conditions as well as when actual plan experience is different than assumed. Such events result in investment gains and losses, which we defer and recognize in pension and other postretirement benefit costs over a period of years. Our funded pension and PBOP plans use the asset smoothing method, except for those at SDG&E. This method develops an asset value that recognizes realized and unrealized investment gains and losses over a three-year period. This adjusted asset value, known as the market-related value of assets, is used in conjunction with an expected long-term rate of return to determine the expected return-on-assets component of net periodic benefit cost. SDG&E does not use the asset smoothing method, but rather recognizes realized and unrealized investment gains and losses during the current year.

The 10% corridor accounting method is used at Sempra Energy Consolidated, SDG&E and SoCalGas. Under the corridor accounting method, if as of the beginning of a year unrecognized net gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets, the excess is amortized over the average remaining service period of

active participants. The asset smoothing and 10% corridor accounting methods help mitigate volatility of net periodic benefit costs from year to year.

We recognize the overfunded or underfunded status of defined benefit pension and other postretirement plans as assets or liabilities, respectively; unrecognized changes in these assets and/or liabilities are normally recorded in AOCI on the balance sheet. The California Utilities record regulatory assets and liabilities that offset the funded pension and other postretirement plans’ assets or liabilities, as these costs are expected to be recovered in future utility rates based on decisions by regulatory agencies.

The California Utilities record annual pension and other postretirement net periodic benefit costs equal to the contributions to their qualified plans as authorized by the CPUC. The annual contributions to the pension plans are the greater of:


▪	a minimum required funding amount as required by the IRS;


▪	the amount required to maintain an 85% Adjusted Funding Target Attainment Percentage as defined by the Pension Protection Act of 2006, as amended; or

▪

beginning January 1, 2019 and for the duration of the 2019 GRC cycle, a fixed amount equal to the estimated annual service cost as defined by U.S. GAAP plus one year of a 14-year amortization of the unfunded projected benefit obligation of the pension plan as of January 1, 2019, and limited to an annual amount that keeps the fair value of the pension plan assets from exceeding 110% of the pension benefit obligation of the plan.

The annual contributions to PBOP plans are equal to the lesser of the maximum tax deductible amount or the net periodic cost calculated in accordance with U.S. GAAP for pension and PBOP plans. Any differences between booked net periodic benefit cost and amounts contributed to the pension and other postretirement plans for the California Utilities are disclosed as regulatory adjustments in accordance with U.S. GAAP for rate-regulated entities.

The net (liability) asset is included in the following categories on the Consolidated Balance Sheets at December 31:



PENSION AND OTHER POSTRETIREMENT BENEFIT OBLIGATIONS, NET OF PLAN ASSETS
(Dollars in millions)
	Pension benefits						Other postretirement benefits
	2019			2018			2019			2018
Sempra Energy Consolidated:
Noncurrent assets	$	—		$	—		$	391		$	272
Current liabilities	(59		)	(62		)	(3		)	(6		)
Noncurrent liabilities	(1,047		)	(1,117		)	(20		)	(26		)
Net recorded (liability) asset	$	(1,106	)	$	(1,179	)	$	368		$	240
SDG&E:
Noncurrent assets	$	—		$	—		$	20		$	2
Current liabilities	(3		)	(2		)	—			—
Noncurrent liabilities	(153		)	(212		)	—			—
Net recorded (liability) asset	$	(156	)	$	(214	)	$	20		$	2
SoCalGas:
Noncurrent assets	$	—		$	—		$	371		$	270
Current liabilities	(4		)	(3		)	—			—
Noncurrent liabilities	(785		)	(760		)	—			—
Net recorded (liability) asset	$	(789	)	$	(763	)	$	371		$	270

Amounts recorded in AOCI at December 31, net of income tax effects and amounts recorded as regulatory assets, are as follows:



AMOUNTS IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Pension benefits						Other postretirement benefits
	2019			2018			2019		2018
Sempra Energy Consolidated⁽¹⁾:
Net actuarial (loss) gain	$	(113	)	$	(114	)	$	10	$	8
Prior service cost	(14		)	(12		)	—		—
Total	$	(127	)	$	(126	)	$	10	$	8
SDG&E:
Net actuarial loss	$	(9	)	$	(4	)
Prior service cost	(7		)	(6		)
Total	$	(16	)	$	(10	)
SoCalGas:
Net actuarial loss	$	(7	)	$	(6	)
Prior service cost	(3		)	(2		)
Total	$	(10	)	$	(8	)

⁽¹⁾

Includes discontinued operations.

Sempra Energy, SDG&E and SoCalGas each have a funded pension plan. The following table shows the obligations of funded pension plans with benefit obligations in excess of plan assets at December 31:



OBLIGATIONS OF FUNDED PENSION PLANS
(Dollars in millions)
	2019		2018
Sempra Energy Consolidated:
Projected benefit obligation	$	3,578	$	3,130
Accumulated benefit obligation	3,229		2,894
Fair value of plan assets	2,662		2,160
SDG&E:
Projected benefit obligation	$	861	$	788
Accumulated benefit obligation	818		762
Fair value of plan assets	739		600
SoCalGas:
Projected benefit obligation	$	2,505	$	2,123
Accumulated benefit obligation	2,208		1,919
Fair value of plan assets	1,737		1,385

We also have unfunded pension plans at Sempra Energy, SDG&E, SoCalGas and IEnova. The following table shows the obligations of unfunded pension plans at December 31:



OBLIGATIONS OF UNFUNDED PENSION PLANS
(Dollars in millions)
	2019		2018
Sempra Energy Consolidated:
Projected benefit obligation	$	190	$	209
Accumulated benefit obligation	158		186
SDG&E:
Projected benefit obligation	$	34	$	26
Accumulated benefit obligation	27		19
SoCalGas:
Projected benefit obligation	$	21	$	25
Accumulated benefit obligation	17		21

Sempra Energy, SDG&E and SoCalGas each have a funded other postretirement benefit plan. The following table shows the obligations of funded other postretirement benefit plans with accumulated postretirement benefit obligations in excess of plan assets at December 31:



OBLIGATIONS OF FUNDED OTHER POSTRETIREMENT BENEFIT PLANS
(Dollars in millions)
	2019		2018
Sempra Energy Consolidated:
Accumulated postretirement benefit obligation	$	32	$	30
Fair value of plan assets	25		20

We also have unfunded other postretirement benefit plans at Sempra Energy. The following table shows the obligations of unfunded other postretirement benefit plans at December 31:



OBLIGATIONS OF UNFUNDED OTHER POSTRETIREMENT BENEFIT PLANS
(Dollars in millions)
	2019		2018
Sempra Energy Consolidated:
Accumulated postretirement benefit obligation	$	16	$	22

Net Periodic Benefit Cost

The following tables provide the components of net periodic benefit cost and pretax amounts recognized in OCI for the years ended December 31:



NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OCI
SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Pension benefits									Other postretirement benefits
	2019			2018			2017			2019			2018			2017
NET PERIODIC BENEFIT COST
Service cost	$	110		$	124		$	117		$	17		$	21		$	21
Interest cost	139			140			150			36			36			39
Expected return on assets	(144		)	(157		)	(161		)	(71		)	(70		)	(66		)
Amortization of:
Prior service cost	12			11			11			—			1			1
Actuarial loss (gain)	36			22			35			(10		)	(6		)	(4		)
Settlement charges	28			66			38			—			—			—
Special termination benefits	—			—			—			—			5			18
Net periodic benefit cost	181			206			190			(28		)	(13		)	9
Regulatory adjustment	77			(30		)	(42		)	29			17			—
Total expense recognized	258			176			148			1			4			9

CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OCI⁽¹⁾
Net loss (gain)	17			56			—			(3		)	(4		)	(2		)
Prior service cost	5			12			1			—			—			—
Amortization of actuarial loss	(13		)	(12		)	(10		)	—			—			—
Amortization of prior service cost	(3		)	(2		)	(1		)	—			—			—
Settlements	(28		)	(12		)	(8		)	—			—			—
Total recognized in OCI	(22		)	42			(18		)	(3		)	(4		)	(2		)
Total recognized in net periodic benefit cost and OCI	$	236		$	218		$	130		$	(2	)	$	—		$	7


⁽¹⁾	Includes discontinued operations.



NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OCI
SAN DIEGO GAS & ELECTRIC COMPANY
(Dollars in millions)
	Pension benefits									Other postretirement benefits
	2019			2018			2017			2019			2018			2017
NET PERIODIC BENEFIT COST
Service cost	$	30		$	30		$	29		$	4		$	5		$	5
Interest cost	34			35			38			7			7			8
Expected return on assets	(38		)	(47		)	(47		)	(11		)	(13		)	(11		)
Amortization of:
Prior service cost	3			2			1			2			3			3
Actuarial loss (gain)	11			1			9			(2		)	(3		)	—
Settlement charges	—			26			—			—			—			—
Special termination benefits	—			—			—			—			3			—
Net periodic benefit cost	40			47			30			—			2			5
Regulatory adjustment	14			(8		)	(8		)	—			—			—
Total expense recognized	54			39			22			—			2			5

CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OCI
Net loss (gain)	5			(1		)	2			—			—			—
Prior service cost	2			8			—			—			—			—
Amortization of actuarial loss	—			(1		)	(1		)	—			—			—
Amortization of prior service cost	(1		)	—			—			—			—			—
Settlements	—			(4		)	—			—			—			—
Total recognized in OCI	6			2			1			—			—			—
Total recognized in net periodic benefit cost and OCI	$	60		$	41		$	23		$	—		$	2		$	5



NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OCI
SOUTHERN CALIFORNIA GAS COMPANY
(Dollars in millions)
	Pension benefits									Other postretirement benefits
	2019			2018			2017			2019			2018			2017
NET PERIODIC BENEFIT COST
Service cost	$	68		$	81		$	76		$	12		$	15		$	14
Interest cost	91			92			98			27			27			29
Expected return on assets	(94		)	(98		)	(103		)	(58		)	(56		)	(53		)
Amortization of:
Prior service cost (credit)	8			8			9			(2		)	(3		)	(3		)
Actuarial loss (gain)	16			13			19			(8		)	(2		)	(3		)
Settlement charges	—			32			30			—			—			—
Special termination benefits	—			—			—			—			2			18
Net periodic benefit cost	89			128			129			(29		)	(17		)	2
Regulatory adjustment	63			(22		)	(34		)	29			17			—
Total expense recognized	152			106			95			—			—			2

CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OCI
Net loss	2			1			—			—			—			—
Prior service cost	3			—			—			—			—			—
Transfer of actuarial loss	(4		)	—			—			—			—			—
Transfer of prior service cost	(1		)	—			—			—			—			—
Amortization of actuarial loss	(1		)	—			—			—			—			—
Amortization of prior service cost	—			(1		)	(1		)	—			—			—
Total recognized in OCI	(1		)	—			(1		)	—			—			—
Total recognized in net periodic benefit cost and OCI	$	151		$	106		$	94		$	—		$	—		$	2

Assumptions for Pension and Other Postretirement Benefit Plans

Benefit Obligation and Net Periodic Benefit Cost

Except for the IEnova plans, we develop the discount rate assumptions using a bond selection-settlement portfolio approach. This approach develops a discount rate by selecting a portfolio of high quality corporate bonds that generate sufficient cash flows to provide for projected benefit payments of the plan. The selected bond portfolio is derived from a universe of corporate bonds with a Bloomberg Composite of AA or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plans’ projected benefit payments discounted at this rate with the market value of the bonds selected.

We develop the discount rate assumptions for the plans at IEnova by constructing a synthetic government zero coupon bond yield curve from the available market data, based on duration matching, and we add a risk spread to allow for the yields of high-quality corporate bonds. Such method is required when there is no deep market for high quality corporate bonds.

Long-term return on assets is based on the weighted-average of the plans’ investment allocation as of the measurement date and the expected returns for those asset types.

Interest crediting rate is based on an average 30-year Treasury bond from the month of November of the preceding year.

We amortize prior service cost using straight line amortization over average future service (or average expected lifetime for plans where participants are substantially inactive employees), which is an alternative method allowed under U.S. GAAP.

The significant assumptions affecting benefit obligation and net periodic benefit cost are as follows:



WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATION
AT DECEMBER 31
	Pension benefits				Other postretirement benefits
	2019		2018		2019		2018
Sempra Energy Consolidated:
Discount rate	3.49	%	4.29	%	3.54	%	4.29	%
Interest crediting rate⁽¹⁾⁽²⁾	2.28		3.36		2.28		3.36
Rate of compensation increase	2.70-10.00		2.00-10.00		2.70-10.00		2.00-10.00
SDG&E:
Discount rate	3.44	%	4.29	%	3.55	%	4.30	%
Interest crediting rate⁽¹⁾⁽²⁾	2.28		3.36		2.28		3.36
Rate of compensation increase	2.70-10.00		2.00-10.00		2.70-10.00		2.00-10.00
SoCalGas:
Discount rate	3.50	%	4.30	%	3.55	%	4.30	%
Interest crediting rate⁽¹⁾⁽²⁾	2.28		3.36		2.28		3.36
Rate of compensation increase	2.70-10.00		2.00-10.00		2.70-10.00		2.00-10.00

⁽¹⁾ Interest crediting rate for pension benefits applies only to funded cash balance plans.

⁽²⁾ Interest crediting rate for other postretirement benefits applies only to interest bearing health retirement accounts at SDG&E and SoCalGas.



WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST
YEARS ENDED DECEMBER 31
	Pension benefits						Other postretirement benefits
	2019		2018		2017		2019		2018		2017
Sempra Energy Consolidated:
Discount rate	4.29	%	3.64	%	4.07	%	4.29	%	3.68	%	4.18	%
Expected return on plan assets	7.00		7.00		7.00		6.48		6.49		6.47
Interest crediting rate⁽¹⁾⁽²⁾	3.36		2.80		2.86		3.36		2.80		2.86
Rate of compensation increase	2.00-10.00		2.00-10.00		2.00-10.00		2.00-10.00		2.00-10.00		2.00-10.00
SDG&E:
Discount rate	4.29	%	3.64	%	4.08	%	4.30	%	3.65	%	4.15	%
Expected return on plan assets	7.00		7.00		7.00		6.92		6.94		6.91
Interest crediting rate⁽¹⁾⁽²⁾	3.36		2.80		2.86		3.36		2.80		2.86
Rate of compensation increase	2.00-10.00		2.00-10.00		2.00-10.00		2.00-10.00		2.00-10.00		2.00-10.00
SoCalGas:
Discount rate	4.30	%	3.65	%	4.10	%	4.30	%	3.70	%	4.20	%
Expected return on plan assets	7.00		7.00		7.00		6.38		6.38		6.37
Interest crediting rate⁽¹⁾⁽²⁾	3.36		2.80		2.86		3.36		2.80		2.86
Rate of compensation increase	2.00-10.00		2.00-10.00		2.00-10.00		2.00-10.00		2.00-10.00		2.00-10.00

⁽¹⁾ Interest crediting rate for pension benefits applies only to funded cash balance plans.

⁽²⁾ Interest crediting rate for other postretirement benefits applies only to interest bearing health retirement accounts at SDG&E and SoCalGas.

Health Care Cost Trend Rates

Assumed health care cost trend rates have a significant effect on the amounts that we report for the health care plan costs. Following are the health care cost trend rates applicable to our postretirement benefit plans:



ASSUMED HEALTH CARE COST TREND RATES
AT DECEMBER 31
	Other postretirement benefit plans
	Pre-65 retirees						Retirees aged 65 years and older
	2019		2018		2017		2019		2018		2017
Health care cost trend rate assumed for next year	6.25	%	6.50	%	7.00	%	4.75	%	4.75	%	5.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend)	4.75	%	4.75	%	5.00	%	4.50	%	4.50	%	4.50	%
Year the rate reaches the ultimate trend	2025		2025		2022		2022		2022		2022

Plan Assets

Investment Allocation Strategy for Sempra Energy’s Pension Master Trust

Sempra Energy’s pension master trust holds the investments for our pension plans and a portion of the investments for our PBOP plans. We maintain additional trusts, as we discuss below, for certain of the California Utilities’ PBOP plans. Other than through indexing strategies, the trusts do not invest in securities of Sempra Energy.

The current asset allocation objective for the pension master trust is to protect the funded status of the plans while generating sufficient returns to cover future benefit payments and accruals. We assess the portfolio performance by comparing actual returns with relevant benchmarks. Currently, the pension plans’ target asset allocations are:


▪	35% domestic equity


▪	24% international equity


▪	18% long credit


▪	8% ultra-long duration government securities


▪	5% global real estate investment trusts


▪	5% return-seeking credit


▪	5% real assets

The asset allocation of the plans is reviewed by our Plan Funding Committee and our Pension and Benefits Investment Committee (the Committees) on a regular basis. When evaluating strategic asset allocations, the Committees consider many variables, including:


▪	long-term cost


▪	variability and level of contributions


▪	funded status


▪	a range of expected outcomes over varying confidence levels

This allocation results in a 74% target allocation to return-seeking assets and a 26% target allocation to risk-mitigating assets. We maintain asset allocations at strategic levels with reasonable bands of variance.

In accordance with the Sempra Energy pension investment guidelines, derivative financial instruments may be used by the pension master trust’s equity and fixed income portfolio investment managers to equitize cash, hedge certain exposures, and as substitutes for certain types of fixed income securities.

Rate of Return Assumption

The expected return on assets in our pension and PBOP plans is based on the weighted-average of the plans’ investment allocations to specific asset classes as of the measurement date. We arrive at a 7% expected return on assets by considering both the historical and forecasted long-term rates of return on those asset classes. We expect a return of between 5% and 9% on return-seeking assets and between 1% and 4% for risk-mitigating assets. Certain trusts that hold assets for the SDG&E other postretirement benefit plan are subject to taxation, which impacts the expected after-tax return on assets in the plan.

Concentration of Risk

Plan assets are diversified across global equity and bond markets, and concentration of risk in any one economic, industry, maturity or geographic sector is limited.

Investment Strategy for SDG&E’s and SoCalGas’ Other Postretirement Benefit Plans

SDG&E’s and SoCalGas’ PBOP plans are funded by cash contributions from SDG&E and SoCalGas and their current retirees. The assets of these plans are placed into the pension master trust and other Voluntary Employee Beneficiary Association trusts. Certain assets of SDG&E’s and SoCalGas’ PBOP plans are held in the pension master trust, which invests a portion of the assets in completion portfolios that aim to reduce interest rate risk, thereby resulting in an overall target allocation of 38% to return-seeking assets and 62% to risk-mitigating assets for these well-funded plans. Certain of SoCalGas’ PBOP plans are held in a Voluntary Employee Benefit Association trust that also utilizes a completion portfolio, resulting in a target allocation of 25% to return-seeking assets and 75% to risk-mitigating assets. SDG&E’s and SoCalGas’ assets held in other Voluntary Employee Beneficiary Association trusts are invested in accordance with a de-risking glidepath that reduces the assets’ exposure to risk as the trusts become better funded. These specific allocations are periodically reviewed to ensure that plan assets are best positioned to meet plan obligations.

Fair Value of Pension and Other Postretirement Benefit Plan Assets

We classify the investments in Sempra Energy’s pension master trust and the trusts for the California Utilities’ PBOP plans based on the fair value hierarchy, except for certain investments measured at NAV.

The following are descriptions of the valuation methods and assumptions we use to estimate the fair values of investments held by pension and other postretirement benefit plan trusts.

Equity Securities – Equity securities are valued using quoted prices listed on nationally recognized securities exchanges.

Fixed Income Securities – Certain fixed income securities are valued at the closing price reported in the active market in which the security is traded. Other fixed income securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar securities, the security is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. Certain high yield fixed-income securities are valued by applying a price adjustment to the bid side to calculate a mean and ask value. Adjustments can vary based on maturity, credit standing, and reported trade frequencies. The bid to ask spread is determined by the investment manager based on the review of the available market information.

Registered Investment Companies – Investments in mutual funds sponsored by a registered investment company are valued based on exchange listed prices. Where the value is a quoted price in an active market, the investment is classified within Level 1 of the fair value hierarchy. Investments in certain fixed income securities are valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks for the remaining fixed income securities.

Common/Collective Trusts – Investments in common/collective trust funds are valued based on the NAV of units owned, which is based on the current fair value of the funds’ underlying assets.

Private Equity Funds – These funds consist of investments in private equities that are held by limited partnerships following various strategies, including private equity and corporate finance. These partnerships generally have limited lives of 10 years, after which liquidating distributions will be received. The value is determined based on the NAV of the proportionate share of an ownership interest in partners’ capital. Holdings in these types of private equity funds are negligible, as the funds are well past their expected investment term and have distributed the bulk of proceeds from investment sales.

Derivative Financial Instruments – Futures contracts that are publicly traded in active markets are valued at closing prices as of the last business day of the year. Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies, and unrealized gain (loss) is recorded daily. Fixed income futures and options are marked to market daily. Equity index futures contracts are valued at the last sales price quoted on the exchange on which they primarily trade.

While management believes the valuation methods described above are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

We provide more discussion of fair value measurements in Notes 1 and 12. The following tables set forth by level within the fair value hierarchy a summary of the investments in our pension and other postretirement benefit plan trusts measured at fair value on a recurring basis.

SDG&E and SoCalGas each hold a proportionate share of investment assets in the pension master trust at Sempra Energy Consolidated. The fair values of our pension plan assets by asset category are as follows:



FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF PENSION PLANS
(Dollars in millions)
	Fair value at December 31, 2019
	Level 1		Level 2		Total
Sempra Energy Consolidated:
Cash and cash equivalents	$	17	$	—	$	17
Equity securities:
Domestic	923		—		923
International	555		1		556
Registered investment companies	96		—		96
Fixed income securities:
Domestic government bonds	228		39		267
International government bonds	—		9		9
Domestic corporate bonds	—		346		346
International corporate bonds	—		62		62
Registered investment companies	—		2		2
Total investment assets in the fair value hierarchy	$	1,819	$	459	2,278
Accounts receivable/payable, net					(38		)
Investments measured at NAV:
Common/collective trusts					417
Private equity funds					5
Total investment assets					$	2,662
SDG&E’s proportionate share of investment assets					$	739
SoCalGas’ proportionate share of investment assets					$	1,737

	Fair value at December 31, 2018
	Level 1		Level 2		Total
Sempra Energy Consolidated:
Cash and cash equivalents	$	14	$	—	$	14
Equity securities:
Domestic	727		—		727
International	437		—		437
Registered investment companies	74		—		74
Fixed income securities:
Domestic government bonds	197		29		226
International government bonds	—		8		8
Domestic corporate bonds	—		311		311
International corporate bonds	—		53		53
Registered investment companies	—		1		1
Total investment assets in the fair value hierarchy	$	1,449	$	402	1,851
Accounts receivable/payable, net					(21		)
Investments measured at NAV:
Common/collective trusts					326
Private equity funds					4
Total investment assets					$	2,160
SDG&E’s proportionate share of investment assets					$	600
SoCalGas’ proportionate share of investment assets					$	1,385

The fair values by asset category of the PBOP plan assets held in the pension master trust and in the additional trusts for SoCalGas’ PBOP plans and SDG&E’s PBOP plan trusts are as follows:



FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF OTHER POSTRETIREMENT BENEFIT PLANS
(Dollars in millions)
	Fair value at December 31, 2019
	Level 1		Level 2		Total
SDG&E:
Equity securities:
Domestic	$	21	$	—	$	21
International	13		—		13
Registered investment companies	68		—		68
Fixed income securities:
Domestic government bonds	32		1		33
Domestic corporate bonds	—		8		8
International corporate bonds	—		1		1
Registered investment companies	—		8		8
Total investment assets in the fair value hierarchy	134		18		152
Accounts receivable/payable, net					(2		)
Investments measured at NAV – Common/collective trusts					47
Total investment assets					197

SoCalGas:
Cash and cash equivalents	3		—		3
Equity securities:
Domestic	78		—		78
International	48		—		48
Registered investment companies	52		—		52
Fixed income securities:
Domestic government bonds	267		21		288
International government bonds	1		10		11
Domestic corporate bonds	—		309		309
International corporate bonds	—		40		40
Registered investment companies	—		75		75
Derivative financial instruments	3		—		3
Total investment assets in the fair value hierarchy	452		455		907
Accounts receivable/payable, net					(5		)
Investments measured at NAV – Common/collective trusts					157
Total investment assets					1,059

Other Sempra Energy:
Equity securities:
Domestic	9		—		9
International	4		—		4
Fixed income securities:
Domestic government bonds	3		1		4
Domestic corporate bonds	—		3		3
International corporate bonds	—		1		1
Total investment assets in the fair value hierarchy	16		5		21
Investments measured at NAV – Common/collective trusts					4
Total other Sempra Energy investment assets					25

Total Sempra Energy Consolidated investment assets in the fair value hierarchy	$	602	$	478
Total Sempra Energy Consolidated investment assets					$	1,281



FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF OTHER POSTRETIREMENT BENEFIT PLANS
(Dollars in millions)
	Fair value at December 31, 2018
	Level 1			Level 2		Total
SDG&E:
Cash and cash equivalents	$	1		$	—	$	1
Equity securities:
Domestic	37			—		37
International	22			—		22
Registered investment companies	59			—		59
Fixed income securities:
Domestic government bonds	10			1		11
Domestic corporate bonds	—			16		16
International corporate bonds	—			3		3
Registered investment companies	—			7		7
Total investment assets in the fair value hierarchy	129			27		156
Accounts receivable/payable, net						(1		)
Investments measured at NAV – Common/collective trusts						17
Total investment assets						172

SoCalGas:
Cash and cash equivalents	6			—		6
Equity securities:
Domestic	66			—		66
International	39			—		39
Registered investment companies	62			—		62
Fixed income securities:
Domestic government bonds	236			13		249
International government bonds	1			4		5
Domestic corporate bonds	—			175		175
International corporate bonds	—			21		21
Registered investment companies	—			64		64
Derivative financial instruments	(4		)	—		(4		)
Total investment assets in the fair value hierarchy	406			277		683
Accounts receivable/payable, net						(4		)
Investments measured at NAV – Common/collective trusts						237
Total investment assets						916

Other Sempra Energy:
Equity securities:
Domestic	6			—		6
International	4			—		4
Fixed income securities:
Domestic government bonds	2			—		2
Domestic corporate bonds	—			2		2
Registered investment companies	—			1		1
Total investment assets in the fair value hierarchy	12			3		15
Investments measured at NAV – Common/collective trusts						4
Private equity funds						1
Total other Sempra Energy investment assets						20

Total Sempra Energy Consolidated investment assets in the fair value hierarchy	$	547		$	307
Total Sempra Energy Consolidated investment assets						$	1,108

Future Payments

We expect to contribute the following amounts to our pension and PBOP plans in 2020:



EXPECTED CONTRIBUTIONS
(Dollars in millions)
	Sempra Energy Consolidated		SDG&E		SoCalGas
Pension plans	$	268	$	53	$	154
Other postretirement benefit plans	7		1		1

The following table shows the total benefits we expect to pay for the next 10 years to current employees and retirees from the plans or from company assets.



EXPECTED BENEFIT PAYMENTS
(Dollars in millions)
	Sempra Energy Consolidated				SDG&E				SoCalGas
	Pension benefits		Other postretirement benefits		Pension benefits		Other postretirement benefits		Pension benefits		Other postretirement benefits
2020	$	410	$	50	$	115	$	10	$	229	$	35
2021	263		48		69		10		166		35
2022	258		48		64		10		162		35
2023	243		48		64		10		156		35
2024	239		48		62		10		153		35
2025-2029	1,128		240		283		48		725		176

SAVINGS PLANS

Sempra Energy Consolidated, SDG&E and SoCalGas offer trusteed savings plans to all employees. Employee participation, employee contributions and employer matching contributions are subject to the provisions of the respective plans, and for employee contributions, limits imposed by the respective governmental authorities.

Employer contributions to the savings plans were as follows:



EMPLOYER CONTRIBUTIONS TO SAVINGS PLANS
(Dollars in millions)
	2019		2018		2017
Sempra Energy Consolidated	$	44	$	43	$	41
SDG&E	15		15		14
SoCalGas	24		23		22

The market value of Sempra Energy common stock held by the savings plans was $1.3 billion and $1.0 billion at December 31, 2019 and 2018, respectively.