Retirement Benefits

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements [Abstract]

Retirement Benefits

(6)   Retirement Benefits

PSE has a defined benefit pension plan covering substantially all PSE employees.  Pension benefits earned are a function of age, salary, years of service and, in the case of employees in the cash balance formula plan, the applicable annual interest crediting rates.  PSE also maintains a non-qualified Supplemental Executive Retirement Plan (SERP) for its key senior management employees.  In addition to providing pension benefits, PSE provides health care and life insurance benefits for certain retired employees.  These benefits are provided principally through an insurance company.  The insurance premiums are based on the benefits provided during the year and are paid primarily by retirees.

The February 6, 2009 merger of Puget Energy with Puget Holdings triggered a new basis of accounting for PSE's retirement benefit plans in the Puget Energy consolidated financial statements.  Such purchase accounting adjustments associated with the remeasurement of the retirement plans are recorded at Puget Energy.

The following tables summarize the Company's net periodic benefit cost for the three and six months ended June 30, 2011 and 2010:

Puget Energy	Qualified Pension Benefits						SERP Pension Benefits					Other Benefits
	Three Months Ended June 30,						Three Months Ended June 30,					Three Months Ended June 30,
(Dollars in Thousands)	2011			2010			2011		2010			2011			2010
Components of net periodic benefit cost:
Service cost	$	4,059		$	4,037		$	310	$	267		$	31		$	12
Interest cost		6,630			7,032			548		555			204			208
Expected return on plan assets		(8,860	)		(8,207	)		--		--			(125	)		(130	)
Amortization of prior service cost		(495	)		--			--		--			--			--
Amortization of net loss (gain)		--			--			90		(1	)		1			(31	)
Net periodic benefit cost	$	1,334		$	2,862		$	948	$	821		$	111		$	59

Puget Energy	Qualified Pension Benefits						SERP Pension Benefits					Other Benefits
	Six Months Ended June 30,						Six Months Ended June 30,					Six Months Ended June 30,
(Dollars in Thousands)	2011			2010			2011		2010			2011			2010
Components of net periodic benefit cost:
Service cost	$	8,119		$	8,074		$	620	$	523		$	62		$	42
Interest cost		13,259			14,064			1,096		1,096			409			426
Expected return on plan assets		(17,720	)		(16,413	)		--		--			(250	)		(254	)
Amortization of prior service cost		(990	)		--			--		--			--			--
Amortization of net loss (gain)		--			--			180		(1	)		1			(33	)
Net periodic benefit cost	$	2,668		$	5,725		$	1,896	$	1,618		$	222		$	181

Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits				Other Benefits
	Three Months Ended June 30,						Three Months Ended June 30,				Three Months Ended June 30,
(Dollars in Thousands)	2011			2010			2011		2010		2011			2010
Components of net periodic benefit cost:
Service cost	$	4,059		$	4,037		$	310	$	267	$	31		$	12
Interest cost		6,629			7,032			548		555		204			208
Expected return on plan assets		(11,056	)		(10,994	)		--		--		(125	)		(130	)
Amortization of prior service cost		(393	)		185			141		175		16			(1	)
Amortization of net loss (gain)		2,695			1,706			298		154		(109	)		(120	)
Amortization of transition obligation		--			--			--		--		13			12
Net periodic benefit cost	$	1,934		$	1,966		$	1,297	$	1,151	$	30		$	(19	)

Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits				Other Benefits
	Six Months Ended June 30,						Six Months Ended June 30,				Six Months Ended June 30,
(Dollars in Thousands)	2011			2010			2011		2010		2011			2010
Components of net periodic benefit cost:
Service cost	$	8,119		$	8,074		$	621	$	523	$	62		$	42
Interest cost		13,259			14,064			1,096		1,096		409			426
Expected return on plan assets		(22,112	)		(21,988	)		--		--		(250	)		(254	)
Amortization of prior service cost		(786	)		370			281		316		31			32
Amortization of net loss (gain)		5,389			3,412			597		346		(217	)		(239	)
Amortization of transition obligation		--			--			--		--		25			24
Net periodic benefit cost	$	3,869		$	3,932		$	2,595	$	2,281	$	60		$	31

The following table summarizes the Company's change in benefit obligation for the periods ended June 30, 2011 and December 31, 2010:

Puget Energy and Puget Sound Energy	Qualified Pension Benefits						SERP Pension Benefits						Other Benefits
(Dollars in Thousands)	June 30, 2011			December 31, 2010			June 30, 2011			December 31, 2010			June 30, 2011			December 31, 2010
Change in benefit obligation:
Benefit obligation at beginning of period	$	532,615		$	504,786		$	44,322		$	39,152		$	16,579		$	15,953
Service cost		8,118			16,089			620			1,024			62			106
Interest cost		13,259			27,975			1,096			2,165			409			880
Amendment		--			(21,866	)		--			--			--			--
Actuarial loss		--			32,163			--			3,663			--			867
Benefits paid		(17,700	)		(26,532	)		(1,176	)		(1,682	)		(921	)		(2,030	)
Medicare part D subsidiary received		--			--			--			--			2			803
Benefit obligation at end of period	$	536,292		$	532,615		$	44,862		$	44,322		$	16,131		$	16,579

The fair value of the Company's pension plan assets was $541.7 million and $526.5 million at June 30, 2011 and December 31, 2010, respectively.

The Company anticipates its aggregate contributions to fund the retirement plan, and payments to the SERP and the other post retirement plan to be at least $5.0 million, $3.5 million and $0.5 million, respectively, for the year ending December 31, 2011.  During the three months ended June 30, 2011, the Company contributed $0.8 million and $0.3 million to meet the SERP and the other postretirement obligations, respectively.  During the six months ended June 30, 2011, the Company contributed $5.0 million, $1.2 million and $0.6 million to fund the qualified retirement plan, SERP and the other postretirement plan, respectively.

As a result of the Patient Protection and Affordable Care Act of 2010, PSE recorded a one-time tax expense of $0.8 million during the six months ended June 30, 2010, related to a Medicare D subsidy that PSE receives.  These subsidies have been non-taxable in the past and will be subject to federal income taxes after 2012 as a result of the legislation.