| 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 group health care and life insurance benefits for certain retired employees. These benefits are provided principally through an insurance company. The insurance premiums, paid primarily by retirees, are based on the benefits provided during the year. The 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 nine months ended September 30, 2013 and 2012: | | | | | | | | | | | | | | | | | | | | Puget Energy | | | | Three Months Ended September 30, | Qualified
Pension Benefits | SERP
Pension Benefits | Other
Benefits | (Dollars in Thousands) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | Components of net periodic benefit cost: | | | | | | | Service cost | $ | 4,822 |
| $ | 4,232 |
| $ | 375 |
| $ | 268 |
| $ | 34 |
| $ | 35 |
| Interest cost | 6,188 |
| 6,496 |
| 511 |
| 538 |
| 166 |
| 188 |
| Expected return on plan assets | (9,774 | ) | (9,051 | ) | — |
| — |
| (109 | ) | (109 | ) | Amortization of prior service
cost | (495 | ) | (495 | ) | (4 | ) | — |
| — |
| — |
| Amortization of net loss
(gain) | 722 |
| 192 |
| 365 |
| 176 |
| 17 |
| 13 |
| Net periodic benefit cost | $ | 1,463 |
| $ | 1,374 |
| $ | 1,247 |
| $ | 982 |
| $ | 108 |
| $ | 127 |
|
| | | | | | | | | | | | | | | | | | | | Puget Energy | | | | Nine Months Ended September 30, | Qualified
Pension Benefits | SERP
Pension Benefits | Other
Benefits | (Dollars in Thousands) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | Components of net periodic benefit cost: | | | | | | | Service cost | $ | 14,464 |
| $ | 12,695 |
| $ | 1,123 |
| $ | 805 |
| $ | 100 |
| $ | 105 |
| Interest cost | 18,565 |
| 19,490 |
| 1,534 |
| 1,614 |
| 498 |
| 563 |
| Expected return on plan assets | (29,321 | ) | (27,153 | ) | — |
| — |
| (327 | ) | (327 | ) | Amortization of prior service
cost | (1,485 | ) | (1,485 | ) | (13 | ) | — |
| — |
| — |
| Amortization of net loss
(gain) | 2,167 |
| 576 |
| 1,096 |
| 527 |
| 52 |
| 40 |
| Net periodic benefit cost | $ | 4,390 |
| $ | 4,123 |
| $ | 3,740 |
| $ | 2,946 |
| $ | 323 |
| $ | 381 |
|
| | | | | | | | | | | | | | | | | | | | Puget Sound Energy | | | | Three Months Ended September 30, | Qualified | SERP | Other | Pension Benefits | Pension Benefits | Benefits | (Dollars in Thousands) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | Components of net periodic benefit cost: | |
| |
| |
| |
| |
| |
| Service cost | $ | 4,822 |
| $ | 4,232 |
| $ | 375 |
| $ | 268 |
| $ | 34 |
| $ | 35 |
| Interest cost | 6,188 |
| 6,496 |
| 511 |
| 538 |
| 166 |
| 188 |
| Expected return on plan assets | (10,172 | ) | (10,384 | ) | — |
| — |
| (109 | ) | (109 | ) | Amortization of prior service
cost | (393 | ) | (393 | ) | (4 | ) | 74 |
| 7 |
| 9 |
| Amortization of net loss
(gain) | 5,153 |
| 3,754 |
| 548 |
| 358 |
| (71 | ) | (61 | ) | Amortization of transition
obligation | — |
| — |
| — |
| — |
| — |
| 12 |
| Net periodic benefit cost | $ | 5,598 |
| $ | 3,705 |
| $ | 1,430 |
| $ | 1,238 |
| $ | 27 |
| $ | 74 |
|
| | | | | | | | | | | | | | | | | | | | Puget Sound Energy | | | | Nine Months Ended September 30, | Qualified | SERP | Other | Pension Benefits | Pension Benefits | Benefits | (Dollars in Thousands) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | Components of net periodic benefit cost: | | | | | | | Service cost | $ | 14,464 |
| $ | 12,695 |
| $ | 1,123 |
| $ | 805 |
| $ | 100 |
| $ | 105 |
| Interest cost | 18,565 |
| 19,490 |
| 1,534 |
| 1,614 |
| 498 |
| 563 |
| Expected return on plan assets | (30,514 | ) | (31,150 | ) | — |
| — |
| (327 | ) | (327 | ) | Amortization of prior service
cost | (1,180 | ) | (1,180 | ) | (13 | ) | 220 |
| 22 |
| 27 |
| Amortization of net loss
(gain) | 15,459 |
| 11,261 |
| 1,645 |
| 1,074 |
| (213 | ) | (184 | ) | Amortization of transition
obligation | — |
| — |
| — |
| — |
| — |
| 37 |
| Net periodic benefit cost | $ | 16,794 |
| $ | 11,116 |
| $ | 4,289 |
| $ | 3,713 |
| $ | 80 |
| $ | 221 |
|
The following table summarizes the Company’s change in benefit obligation for the periods ended September 30, 2013 and December 31, 2012:
| | | | | | | | | | | | | | | | | | | | Puget Energy and Puget Sound Energy | Qualified Pension Benefits | SERP Pension Benefits | Other Benefits | | Nine Months Ended | Year
Ended | Nine Months Ended | Year
Ended | Nine Months Ended | Year
Ended | (Dollars in Thousands) | September 30,
2013 | December 31,
2012 | September 30,
2013 | December 31,
2012 | September 30,
2013 | December 31,
2012 | Change in benefit obligation: |
|
|
|
|
|
| Benefit obligation at beginning of period | $ | 616,290 |
| $ | 565,997 |
| $ | 51,795 |
| $ | 48,370 |
| $ | 17,672 |
| $ | 16,436 |
| Service cost | 14,464 |
| 16,926 |
| 1,123 |
| 1,073 |
| 100 |
| 139 |
| Interest cost | 18,565 |
| 25,986 |
| 1,534 |
| 2,152 |
| 498 |
| 751 |
| Amendment | — |
| — |
| — |
| (122 | ) | — |
| — |
| Actuarial loss/(gain) | 3,436 |
| 40,914 |
| — |
| 5,483 |
| (1,055 | ) | 1,199 |
| Benefits paid | (34,875 | ) | (33,533 | ) | (5,061 | ) | (5,161 | ) | (1,202 | ) | (1,523 | ) | Medicare part D subsidiary
received | — |
| — |
| — |
| — |
| 125 |
| 670 |
| Benefit obligation at end of period | $ | 617,880 |
| $ | 616,290 |
| $ | 49,391 |
| $ | 51,795 |
| $ | 16,138 |
| $ | 17,672 |
|
The fair value of the Company’s qualified pension plan assets was $585.1 million and $531.2 million at September 30, 2013 and December 31, 2012, respectively. The aggregate expected contributions by the Company to fund the qualified pension plan, SERP and the other postretirement plans for the year ending December 31, 2013 are expected to be at least $20.4 million, $5.0 million and $0.8 million, respectively. During the three months ended September 30, 2013, the Company contributed $5.1 million, $1.9 million, and $0.1 million to fund the qualified pension plan, SERP and the other postretirement plan, respectively. During the nine months ended September 30, 2013, the Company contributed $15.3 million, $5.1 million and $0.8 million to fund the qualified pension plan, SERP and the other postretirement plan, respectively. |