Pension Plans and Other Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2023

Retirement Benefits, Description [Abstract]

Pension Plans and Other Postretirement Benefit Plans

NOTE 12. PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS

The pension and other postretirement benefit plans described below only relate to Avista Utilities. AEL&P participates in a defined contribution multiemployer plan for its union workers and a defined contribution money purchase pension plan for its nonunion workers. None of the subsidiary retirement plans, individually or in the aggregate, are significant to Avista Corp.

Avista Utilities

The Company has a defined benefit pension plan covering the majority of regular full-time non-union employees at Avista Utilities hired prior to January 1, 2014 and regular full-time union employees that were hired prior to January 1, 2024. Employees eligible for the plan continue to accrue benefits. Individual benefits under this plan are based upon the employee’s years of service, date of hire and average compensation as specified in the plan. Non-union employees hired on or after January 1, 2014 and union employees hired on or after January 1, 2024 participate in a defined contribution 401(k) plan in lieu of a defined benefit pension plan. The Company’s funding policy is to contribute at least the minimum amounts required to be funded under the Employee Retirement Income Security Act, but not more than the maximum amounts currently deductible for income tax purposes. The Company contributed $10.0 million in cash to the pension plan in 2023, and $42.0 million in 2022 and 2021. The Company expects to contribute $10.0 million in cash to the pension plan in 2024.

In 2022, the defined benefit pension plan lump sum payments exceeded the annual service and interest costs for the plan. This resulted in a partial settlement of the plan, and the Company recorded a settlement loss of $11.8 million for the previously unrecognized losses in the year ended December 31, 2022. This loss was deferred as a regulatory asset and is being amortized over 12 years in accordance with regulatory accounting orders.

The Company has a SERP providing additional pension benefits to certain executive officers and certain key employees of the Company. The SERP provides benefits to individuals whose benefits under the defined benefit pension plan are reduced due to

the application of Section 415 of the Internal Revenue Code of 1986 and the deferral of salary under deferred compensation plans. The liability and expense for this plan are included as pension benefits in the tables included in this Note.

The Company expects benefit payments under the pension plan and the SERP will total (dollars in thousands):

	2024		2025		2026		2027		2028		Total 2029- 2033
Expected benefit payments	$	41,562	$	42,123	$	42,941	$	43,517	$	44,700	$	232,345

The expected long-term rate of return on plan assets is based on past performance and economic forecasts for the types of investments held by the plan. In selecting a discount rate, the Company considers yield rates for highly rated corporate bond portfolios with maturities similar to that of the expected term of pension benefits.

The Company provides certain health care and life insurance benefits for eligible retired employees hired prior to January 1, 2014. The Company accrues the estimated cost of postretirement benefit obligations during the years employees provide services. The liability and expense of this plan are included as other postretirement benefits. Non-union employees hired on or after January 1, 2014, will have access to the retiree medical plan upon retirement; however, Avista Corp. will no longer provide a contribution toward their medical premium.

The Company has a Health Reimbursement Arrangement (HRA) to provide employees with tax-advantaged funds to pay for allowable medical expenses upon retirement. The amount earned by the employee is fixed on the retirement date based on the employee’s years of service and the ending salary. The liability and expense of the HRA are included as other postretirement benefits.

The Company provides death benefits to beneficiaries of executive officers who die during their term of office or after retirement. Under the plan, an executive officer’s designated beneficiary will receive a payment equal to twice the executive officer’s annual base salary at the time of death (or if death occurs after retirement, a payment equal to twice the executive officer’s total annual pension benefit). The liability and expense for this plan are included as other postretirement benefits.

The Company expects benefit payments under other postretirement benefit plans will total (dollars in thousands):

	2024		2025		2026		2027		2028		Total 2029- 2033
Expected benefit payments	$	7,084	$	7,266	$	7,436	$	7,608	$	7,822	$	40,805

The Company expects to contribute $7.1 million to other postretirement benefit plans in 2024. The Company uses a December 31 measurement date for its pension and other postretirement benefit plans.

The following table sets forth the pension and other postretirement benefit plan disclosures as of December 31, 2023 and 2022 and the components of net periodic benefit costs for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands):

	Pension Benefits						Other Post- retirement Benefits
	2023			2022			2023			2022
Change in benefit obligation:
Benefit obligation as of beginning of year	$	557,709		$	799,042		$	115,635		$	167,598
Service cost		14,350			23,877			2,394			4,369
Interest cost		33,245			26,536			6,766			5,503
Actuarial (gain)/loss		21,373			(204,775	)		4,799			(54,120	)
Plan change		—			3,302			—			—
Settlement		—			(60,206	)		—			—
Benefits paid		(41,432	)		(30,067	)		(7,210	)		(7,715	)
Benefit obligation as of end of year	$	585,245		$	557,709		$	122,384		$	115,635
Change in plan assets:
Fair value of plan assets as of beginning of year	$	540,703		$	750,963		$	49,472		$	59,544
Actual return on plan assets		78,838			(163,866	)		8,654			(10,072	)
Employer contributions		10,000			42,000			—			—
Settlement		—			(60,206	)		—			—
Benefits paid		(39,558	)		(28,188	)		—			—
Fair value of plan assets as of end of year	$	589,983		$	540,703		$	58,126		$	49,472
Funded status	$	4,738		$	(17,006	)	$	(64,258	)	$	(66,163	)
Amounts recognized in the Consolidated Balance Sheets:
Other non-current assets	$	32,997		$	13,382		$	—		$	—
Other current liabilities		(2,212	)		(1,934	)		(652	)		(706	)
Non-current liabilities		(26,047	)		(28,454	)		(63,606	)		(65,457	)
Net amount recognized	$	4,738		$	(17,006	)	$	(64,258	)	$	(66,163	)
Accumulated pension benefit obligation	$	514,295		$	495,654
Accumulated postretirement benefit obligation:
For retirees							$	68,087		$	61,984
For fully eligible employees							$	16,054		$	19,731
For other participants							$	38,243		$	33,920
Included in accumulated other comprehensive loss (income) (net of tax):
Unrecognized prior service cost (credit)	$	3,717		$	4,105		$	(1,081	)	$	(1,911	)
Unrecognized net actuarial loss		69,002			83,794			13,103			13,643
Total		72,719			87,899			12,022			11,732
Less regulatory asset		(71,983	)		(85,198	)		(12,401	)		(12,375	)
Accumulated other comprehensive loss for unfunded benefit    obligation for pensions and other postretirement benefit plans	$	736		$	2,701		$	(379	)	$	(643	)

	Pension Benefits						Other Post- retirement Benefits
	2023			2022			2023			2022
Weighted-average assumptions as of December 31:
Discount rate for benefit obligation		5.86	%		6.10	%		5.83	%		6.10	%
Discount rate for annual expense		6.10	%		3.39	%		6.10	%		3.40	%
Expected long-term return on plan assets		8.30	%		5.80	%		7.20	%		4.70	%
Rate of compensation increase		4.87	%		4.69	%
Medical cost trend pre-age 65 – initial								6.50	%		6.25	%
Medical cost trend pre-age 65 – ultimate								5.00	%		5.00	%
Ultimate medical cost trend year pre-age 65							2030			2028
Medical cost trend post-age 65 – initial								6.50	%		6.25	%
Medical cost trend post-age 65 – ultimate								5.00	%		5.00	%
Ultimate medical cost trend year post-age 65							2030			2028

	Pension Benefits									Other Post-retirement Benefits
	2023			2022			2021			2023			2022			2021
Components of net periodic benefit cost:
Service cost (1)	$	14,350		$	23,877		$	25,306		$	2,394		$	4,369		$	4,114
Interest cost		33,245			26,536			26,160			6,766			5,503			5,139
Expected return on plan assets		(43,656	)		(43,872	)		(39,088	)		(3,562	)		(2,799	)		(2,400	)
Amortization of prior service cost (credit)		491			257			257			(1,050	)		(1,050	)		(921	)
Net loss recognition		4,915			4,180			6,645			319			3,344			3,865
Settlement loss (2)		—			11,828			—			—			—			—
Net periodic benefit cost	$	9,345		$	22,806		$	19,280		$	4,867		$	9,367		$	9,797

(1)Total service costs in the table above are recorded to the same accounts as labor expense. Labor and benefits expense is recorded to various projects based on whether the work is a capital project or an operating expense. Approximately 40 percent of all labor and benefits is capitalized to utility property and 60 percent is expensed to utility other operating expenses.

(2)The settlement loss was deferred as a regulatory asset and is being amortized over 12 years in accordance with regulatory accounting orders.

Plan Assets

The Finance Committee of the Board of Directors approves investment policies, objectives and strategies that seek an appropriate return for the pension plan and other postretirement benefit plans and reviews and approves changes to the investment and funding policies.

The Company has contracted with investment consultants who are responsible for monitoring the individual investment managers. The investment managers’ performance and related individual fund performance is periodically reviewed by an internal benefits committee and by the Finance Committee to monitor compliance with investment policy objectives and strategies.

Pension plan assets are invested in mutual funds, and trusts and partnerships that hold marketable debt and equity securities and real estate. In seeking to obtain a return that aligns with the funded status of the pension plan, the investment consultant recommends allocation percentages by asset classes. These recommendations are reviewed by the internal benefits committee, which then recommends their adoption by the Finance Committee. The Finance Committee has established target investment allocation percentages by asset classes and investment ranges for each asset class. The target investment allocation percentages are typically the midpoint of the established range. The target investment allocation percentages by asset classes are indicated in the table below:

	2023			2022
Equity securities		55	%		55	%
Debt securities		40	%		40	%
Real estate		5	%		5	%

The fair value of pension plan assets invested in debt and equity securities was based primarily on fair value (market prices). The fair value of investment securities traded on a national securities exchange is determined based on the reported last sales price; securities traded in the over-the-counter market are valued at the last reported bid price. Investment securities for which market prices are not readily available or for which market prices do not represent the value at the time of pricing, the investment manager estimates fair value based upon other inputs (including valuations of securities comparable in coupon, rating, maturity and industry).

Pension plan and other postretirement plan assets with fair values are measured using net asset value (NAV) are excluded from the fair value hierarchy and included as reconciling items in the tables below.

The plan's investments in common/collective trusts have redemption limitations that permit quarterly redemptions following notice requirements of 45 to 60 days. Most of the plan's investments in closely held investments and partnership interests have redemption limitations ranging from bi-monthly to semi-annually following redemption notice requirements of 60 to 90 days.

The following table discloses by level within the fair value hierarchy (see Note 18 for a description of the fair value hierarchy) of the pension plan’s assets measured and reported as of December 31, 2023 at fair value (dollars in thousands):

	Level 1		Level 2		Level 3		Total
Cash equivalents	$	—	$	6,984	$	—	$	6,984
Fixed income securities:
U.S. government issues		—		19,293		—		19,293
Corporate issues		—		175,460		—		175,460
International issues		—		27,052		—		27,052
Municipal issues		—		13,772		—		13,772
Mutual funds:
U.S. equity securities		169,993		—		—		169,993
International equity securities		74,749		—		—		74,749
Plan assets measured at NAV (not subject to hierarchy    disclosure)
Common/collective trusts: real estate		—		—		—		25,284
Partnership/closely held investments:
International equity securities		—		—		—		70,652
Real estate		—		—		—		6,744
Total	$	244,742	$	242,561	$	—	$	589,983

The following table discloses by level within the fair value hierarchy (see Note 18 for a description of the fair value hierarchy) of the pension plan’s assets measured and reported as of December 31, 2022 at fair value (dollars in thousands):

	Level 1		Level 2		Level 3		Total
Cash equivalents	$	—	$	5,110	$	—	$	5,110
Fixed income securities:
U.S. government issues		—		16,732		—		16,732
Corporate issues		—		161,180		—		161,180
International issues		—		23,108		—		23,108
Municipal issues		—		13,427		—		13,427
Mutual funds:
U.S. equity securities		154,442		—		—		154,442
International equity securities		58,933		—		—		58,933
Plan assets measured at NAV (not subject to hierarchy    disclosure)
Common/collective trusts: real estate		—		—		—		30,406
Partnership/closely held investments:
International equity securities		—		—		—		69,792
Real estate		—		—		—		7,573
Total	$	213,375	$	219,557	$	—	$	540,703

The fair value of other postretirement plan assets invested in debt and equity securities was based primarily on market prices. The fair value of investment securities traded on a national securities exchange is determined based on the last reported sales price; securities traded in the over-the-counter market are valued at the last reported bid price. For investment securities for which market prices are not readily available, the investment manager determines fair value based upon other inputs (including valuations of securities comparable in coupon, rating, maturity and industry). The target asset allocation was 60 percent equity securities and 40 percent debt securities in both 2023 and 2022.

The fair value of other postretirement plan assets was determined to be $58.1 million and $49.5 million as of December 31, 2023 and 2022, respectively. The assets consist of a balanced index mutual fund, which is a single mutual fund that includes a percentage of U.S. equity and fixed income securities and International equity and fixed income securities. This mutual fund is classified as Level 1 in the fair value hierarchy (see Note 18 for a description of the fair value hierarchy).

401(k) Plans and Executive Deferral Plan

Avista Utilities has a salary deferral 401(k) plan that is a defined contribution plan and covers substantially all employees. Employees can make contributions to their respective accounts in the plans on a pre-tax basis up to the maximum amount permitted by law. The Company matches a portion of the salary deferred by each participant according to the schedule in the respective plan.

Employer matching contributions were as follows for the years ended December 31 (dollars in thousands):

	2023		2022		2021
Employer 401(k) matching contributions	$	15,022	$	13,258	$	11,671

The Company has an Executive Deferral Plan. This plan allows executive officers and other key employees the opportunity to defer until the earlier of their retirement, termination, disability or death, up to 75 percent of their base salary and/or up to 100 percent of their incentive payments. Deferred compensation funds are held by the Company in a Rabbi Trust.

There were deferred compensation assets included in other property and investments-net and corresponding deferred compensation liabilities included in other non-current liabilities and deferred credits on the Consolidated Balance Sheets of the following amounts as of December 31 (dollars in thousands):

	2023		2022
Deferred compensation assets and liabilities	$	7,794	$	7,541