Pension plans

12 Months Ended

Dec. 31, 2020

Compensation And Retirement Disclosure [Abstract]

Pension plans

(24) Pension plans

Certain of our subsidiaries sponsor defined benefit pension plans. Benefits under the plans are generally based on years of service and compensation or fixed benefit rates. Plan sponsors may make contributions to the plans to meet regulatory requirements and may also make discretionary contributions. The components of our net periodic pension expense for each of the three years ending December 31, 2020 follow (in millions).

	2020			2019			2018
Service cost	$	235		$	224		$	271
Interest cost		510			618			593
Expected return on plan assets		(955	)		(936	)		(988	)
Amortization of actuarial losses and other		171			26			188
Net periodic pension expense	$	(39	)	$	(68	)	$	64

The projected benefit obligation (“PBO”) is the actuarial present value of benefits earned based upon service and compensation prior to the valuation date and, if applicable, includes assumptions regarding future compensation levels. Benefit obligations under qualified U.S. defined benefit pension plans are funded through assets held in trusts. Pension obligations under certain non-U.S. plans and non-qualified U.S. plans are unfunded and the aggregate PBOs of such plans were approximately $1.6 billion and $1.3 billion as of December 31, 2020 and 2019, respectively. The cost of pension plans covering employees of certain regulated subsidiaries of BHE are generally recoverable through the regulated rate making process.

The funded status at year end 2020 and 2019 and reconciliations of the changes in PBOs and plan assets related to BHE’s pension plans and all other pension plans for each of the two years ending December 31, 2020 follow (in millions).

	2020									2019
	BHE			Other			Total			BHE			Other			Total
Benefit obligations
PBO beginning of year	$	4,898		$	13,808		$	18,706		$	4,551		$	12,371		$	16,922
Service cost		33			202			235			32			192			224
Interest cost		133			377			510			161			457			618
Benefits paid		(285	)		(709	)		(994	)		(257	)		(776	)		(1,033	)
Settlements		(63	)		(12	)		(75	)		(121	)		(46	)		(167	)
Actuarial (gains) or losses and other		566			1,481			2,047			532			1,610			2,142
PBO end of year	$	5,282		$	15,147		$	20,429		$	4,898		$	13,808		$	18,706
Plan assets
Plan assets beginning of year	$	4,808		$	11,688		$	16,496		$	4,385		$	10,574		$	14,959
Employer contributions		69			127			196			68			131			199
Benefits paid		(285	)		(709	)		(994	)		(257	)		(776	)		(1,033	)
Actual return on plan assets		554			1,820			2,374			650			1,764			2,414
Settlements		(63	)		(12	)		(75	)		(121	)		(46	)		(167	)
Other		75			(134	)		(59	)		83			41			124
Plan assets end of year	$	5,158		$	12,780		$	17,938		$	4,808		$	11,688		$	16,496
Funded status – net liability	$	124		$	2,367		$	2,491		$	90		$	2,120		$	2,210

Notes to Consolidated Financial Statements (Continued)

(24) Pension plans (Continued)

The funded status reflected in assets was $1,351 million and in liabilities was $3,842 million at December 31, 2020. The funded status included in assets was $857 million and in liabilities was $3,067 million at December 31, 2019.

The accumulated benefit obligation (“ABO”) is the actuarial present value of benefits earned based on service and compensation prior to the valuation date. The ABO was $19.4 billion at December 31, 2020 and $17.5 billion at December 31, 2019. Information for plans with PBOs and ABOs in excess of plan assets as of December 31, 2020 and 2019 follows (in millions)

	2020		2019
PBOs	$	12,775	$	12,625
Plan assets		9,018		9,627
ABOs		10,875		10,617
Plan assets		7,820		8,367

Weighted average assumptions used in determining PBOs and net periodic pension expense follow.

	2020			2019			2018
Discount rate applicable to pension benefit obligations		2.3	%		3.1	%		3.9	%
Expected long-term rate of return on plan assets	6.2			6.4				6.4
Rate of compensation increase	2.6			2.5				2.6
Discount rate applicable to net periodic pension expense		3.1			4.0			3.4

Pension benefit payments expected over the next ten years are as follows (in millions): 2021 – $1,105; 2022 – $1,031; 2023 – $1,034; 2024 – $1,037; 2025 – $1,040; and 2026 to 2030 – $5,119. Sponsoring subsidiaries expect to contribute $202 million to the plans in 2021.

Fair value measurements of plan assets as of December 31, 2020 and 2019 follow (in millions).

	Fair Value								Investment funds and partnerships
	Total		Level 1		Level 2		Level 3		at net asset value
December 31, 2020
Cash and cash equivalents	$	383	$	243	$	140	$	—	$	—
Equity securities		11,383		10,123		851		409		—
Fixed maturity securities		3,173		2,214		926		33		—
Investment funds and other		2,999		198		398		56		2,347
	$	17,938	$	12,778	$	2,315	$	498	$	2,347
December 31, 2019
Cash and cash equivalents	$	412	$	309	$	103	$	—	$	—
Equity securities		11,105		9,860		836		409		—
Fixed maturity securities		2,328		1,593		704		31		—
Investment funds and other		2,651		143		358		40		2,110
	$	16,496	$	11,905	$	2,001	$	480	$	2,110

See Note 20 for a discussion of the three levels of fair value measurements. Plan assets are generally invested with the long-term objective of producing earnings to adequately cover expected benefit obligations, while assuming a prudent level of risk. Allocations may change due to changing market conditions and investment opportunities. The expected rates of return on plan assets reflect subjective assessments of expected long-term investment returns. Generally, past investment returns are not given significant consideration when establishing assumptions for expected long-term rates of return on plan assets. Actual experience will differ from the assumed rates of return.

Notes to Consolidated Financial Statements (Continued)

(24) Pension plans (Continued)

A reconciliation of the pre-tax accumulated other comprehensive income (loss) related to defined benefit pension plans for each of the two years ending December 31, 2020 follows (in millions).

	2020			2019
Balance beginning of year	$	(1,896	)	$	(1,184	)
Amount included in net periodic pension expense		141			94
Actuarial gains (losses) and other		(496	)		(806	)
Balance end of year	$	(2,251	)	$	(1,896	)

Several of our subsidiaries also sponsor defined contribution retirement plans, such as 401(k) or profit-sharing plans. Employee contributions are subject to regulatory limitations and the specific plan provisions. Several plans provide for employer matching contributions up to levels specified in the plans and provide for additional discretionary contributions as determined by management. Our defined contribution plan expense was approximately $1.4 billion in 2020, $1.2 billion in 2019 and $1.0 billion in 2018.