EMPLOYEE BENEFITS

A. Pension Benefits and Postretirement Benefits Other Than Pensions

Eversource provides defined benefit plans (the "Pension Plans") that cover eligible employees, including, among others, employees of CL&P, NSTAR Electric and PSNH. The Pension Plans are subject to the provisions of ERISA, as amended by the PPA of 2006. Eversource's policy is to annually fund the Pension Plans in an amount at least equal to an amount that will satisfy all federal funding requirements. In addition to the Pension Plans, Eversource maintains SERP Plans which provide benefits in excess of Internal Revenue Code limitations to eligible participants consisting of current and retired employees.

Eversource also provides defined benefit postretirement plans (the "PBOP Plans") that provided certain benefits, primarily medical, dental and life insurance to eligible employees that met certain age and service eligibility requirements. In August 2016, Eversource Service amended its PBOP Plan, which standardized separate benefit structures that existed within the plan and made other benefit changes. The new plan provides life insurance and a health reimbursement arrangement created for the purpose of reimbursing retirees and dependents for health insurance premiums and certain medical expenses. The benefits provided under the PBOP Plans are not vested, and the Company has the right to modify any benefit provision subject to applicable laws at that time. Eversource annually funds postretirement costs through tax deductible contributions to external trusts.

Because the regulated companies recover the retiree benefit costs from customers through rates, regulatory assets are recorded in lieu of recording an adjustment to Accumulated Other Comprehensive Income/(Loss) for the funded status of the Pension, SERP and PBOP Plans. Regulatory accounting is also applied to the portions of the Eversource Service costs that support the regulated companies, as these costs are also recovered from customers. Adjustments to the Pension and PBOP Plans funded status for the unregulated companies are recorded on an after-tax basis to Accumulated Other Comprehensive Income/(Loss). For further information, see Note 2, "Regulatory Accounting," and Note 15, "Accumulated Other Comprehensive Income/(Loss)," to the financial statements.

The difference between the actual return and calculated expected return on plan assets for the Pension and PBOP Plans is reflected as a component of unrecognized actuarial gains or losses, which are recorded in Regulatory Assets or Accumulated Other Comprehensive Income/(Loss). Unrecognized actuarial gains or losses are amortized as a component of pension and PBOP expense over the estimated average future employee service period.

Pension and SERP Plans: The Pension and SERP Plans are accounted for under the multiple-employer approach, with each operating company's balance sheet reflecting its share of the funded status of the plans. Although Eversource maintains marketable securities in a benefit trust, the SERP Plans do not contain any assets. For further information, see Note 5, "Marketable Securities," to the financial statements. The following table provides information on the Pension and SERP Plan benefit obligations, fair values of Pension Plan assets, and funded status:



	Pension and SERP
	As of December 31, 2017												As of December 31, 2016
(Millions of Dollars)	Eversource			CL&P			NSTAR Electric			PSNH			Eversource			CL&P			NSTAR Electric			PSNH
Change in Benefit Obligation:
Benefit Obligation as of Beginning of Year	$	(5,242.3	)	$	(1,170.2	)	$	(1,217.3	)	$	(572.2	)	$	(5,080.1	)	$	(1,157.6	)	$	(1,187.3	)	$	(547.6	)
Plan Amendment	—			—			—			—			(9.0		)	—			(2.8		)	—
Employee Transfers	—			8.2			5.5			(0.7		)	—			8.8			1.3			2.4
Service Cost	(71.3		)	(18.5		)	(15.5		)	(9.7		)	(75.0		)	(18.8		)	(16.3		)	(9.9		)
Interest Cost	(188.0		)	(41.6		)	(42.7		)	(21.2		)	(185.5		)	(41.6		)	(42.2		)	(20.7		)
Actuarial Loss	(548.7		)	(116.9		)	(143.5		)	(65.1		)	(151.8		)	(23.9		)	(37.2		)	(21.5		)
Benefits Paid - Pension	243.7			63.5			55.4			26.4			254.0			62.6			67.0			24.9
Benefits Paid - Lump Sum	18.4			—			6.8			—			—			—			—			—
Benefits Paid - SERP	20.4			0.3			0.3			0.3			5.1			0.3			0.2			0.2
Increase due to acquisition of Aquarion	(168.7		)	—			—			—			—			—			—			—
Benefit Obligation as of End of Year	$	(5,936.5	)	$	(1,275.2	)	$	(1,351.0	)	$	(642.2	)	$	(5,242.3	)	$	(1,170.2	)	$	(1,217.3	)	$	(572.2	)
Change in Pension Plan Assets:
Fair Value of Pension Plan Assets as of Beginning of Year	$	4,076.0		$	905.5		$	1,088.3		$	494.0		$	3,905.4		$	913.5		$	1,053.7		$	470.5
Employee Transfers	—			(8.2		)	(5.5		)	0.7			—			(8.8		)	(1.3		)	(2.4		)
Employer Contributions	235.2			2.5			85.4			0.8			146.2			0.4			28.4			17.1
Actual Return on Pension Plan Assets	589.7			126.7			154.8			70.4			278.4			63.0			74.5			33.7
Benefits Paid	(243.7		)	(63.5		)	(55.4		)	(26.4		)	(254.0		)	(62.6		)	(67.0		)	(24.9		)
Benefits Paid - Lump Sum	(18.4		)	—			(6.8		)	—			—			—			—			—
Increase due to acquisition of Aquarion	100.7			—			—			—			—			—			—			—
Fair Value of Pension Plan Assets as of End of Year	$	4,739.5		$	963.0		$	1,260.8		$	539.5		$	4,076.0		$	905.5		$	1,088.3		$	494.0
Funded Status as of December 31st	$	(1,197.0	)	$	(312.2	)	$	(90.2	)	$	(102.7	)	$	(1,166.3	)	$	(264.7	)	$	(129.0	)	$	(78.2	)

In 2017, there was a decrease to the discount rate used to calculate the funded status of the Eversource pension liability, which resulted in an increase to Eversource's pension liability of approximately $390 million as of December 31, 2017.

In 2016, there was a decrease in the discount rate used to calculate the funded status of the Eversource pension liability, which resulted in an increase to Eversource's pension liability of approximately $177 million, partially offset by a revised scale for the mortality table resulting in a decrease to Eversource's pension liability of approximately $32 million as of December 31, 2016. In December 2016, Eversource amended its pension plan to adjust the calculation of lump sum payments or annuity payments for certain employees. This amendment resulted in an increase to the liability of $9 million as of December 31, 2016.

The pension and SERP Plans' funded status includes the current portion of the SERP liability totaling $8.4 million and $24.8 million as of December 31, 2017 and 2016, respectively, which is included in Other Current Liabilities on the balance sheets.

As of December 31, 2017 and 2016, the accumulated benefit obligation for the Pension and SERP Plans is as follows:



(Millions of Dollars)	Eversource		CL&P		NSTAR Electric		PSNH
2017	$	5,583.6	$	1,179.2	$	1,260.1	$	597.2
2016	4,829.6		1,065.2		1,124.8		518.9

The following actuarial assumptions were used in calculating the Pension and SERP Plans' year end funded status:



	Pension and SERP
	As of December 31,
		2017			2016
Discount Rate		3.43%	—	3.75%	4.01%	—	4.33%
Compensation/Progression Rate		3.50%	—	4.00%	3.50%

Pension and SERP Expense: Eversource charges net periodic pension expense to its subsidiaries based on the actual participant demographic data for each subsidiary's participants. The actual investment return in the trust is allocated to each of the subsidiaries annually in proportion to the investment return expected to be earned during the year.

Effective January 1, 2016, the Company refined its method of estimating the discount rate for the service and interest cost components of Pension expense from the yield-curve approach to the spot rate methodology, which provides a more precise measurement by matching projected cash flows to the corresponding spot rates on the yield curve. Historically, these components were estimated using the same weighted-average discount rate as for the funded status. The total pre-tax benefit of this change on Pension expense, prior to the capitalized portion and amounts deferred and recovered through rate reconciliation mechanisms, for the year ended December 31, 2016 was approximately $46 million.

The components of net periodic benefit expense for the Pension and SERP Plans are shown below. The net periodic benefit expense and the intercompany allocations, less the capitalized portions of pension and SERP amounts, are included in Operations and Maintenance expense on the statements of income. Capitalized amounts relate to employees working on capital projects and are included in Property, Plant and Equipment, Net on the balance sheets. Pension and SERP expense reflected in the statements of cash flows for CL&P, NSTAR Electric and PSNH does not include the intercompany allocations or the corresponding capitalized portion, as these amounts are cash settled on a short-term basis.



	Pension and SERP
	For the Year Ended December 31, 2017
(Millions of Dollars)	Eversource			CL&P			NSTAR Electric			PSNH
Service Cost	$	71.3		$	18.5		$	15.5		$	9.7
Interest Cost	188.0			41.6			42.7			21.2
Expected Return on Pension Plan Assets	(334.1		)	(71.7		)	(87.6		)	(40.0		)
Actuarial Loss	135.2			27.7			41.1			11.6
Prior Service Cost	4.5			1.5			0.6			0.5
Total Net Periodic Benefit Expense	$	64.9		$	17.6		$	12.3		$	3.0
Intercompany Allocations	N/A			$	9.8		$	9.1		$	3.3
Capitalized Pension Expense	$	22.0		$	9.7		$	7.6		$	1.5



	Pension and SERP
	For the Year Ended December 31, 2016
(Millions of Dollars)	Eversource			CL&P			NSTAR Electric			PSNH
Service Cost	$	75.0		$	18.8		$	16.3		$	9.9
Interest Cost	185.5			41.6			42.2			20.7
Expected Return on Pension Plan Assets	(317.9		)	(72.1		)	(85.1		)	(38.6		)
Actuarial Loss	125.7			25.4			39.9			9.9
Prior Service Cost	3.6			1.5			0.3			0.5
Total Net Periodic Benefit Expense	$	71.9		$	15.2		$	13.6		$	2.4
Intercompany Allocations	N/A			$	13.8		$	11.4		$	4.0
Capitalized Pension Expense	$	22.1		$	9.3		$	8.0		$	1.4



	Pension and SERP
	For the Year Ended December 31, 2015
(Millions of Dollars)	Eversource ⁽¹⁾			CL&P			NSTAR Electric			PSNH ⁽¹⁾
Service Cost	$	91.4		$	24.7		$	19.2		$	12.1
Interest Cost	227.0			51.1			50.6			24.3
Expected Return on Pension Plan Assets	(335.9		)	(78.9		)	(88.9		)	(40.4		)
Actuarial Loss	148.5			32.2			42.2			11.6
Prior Service Cost	3.7			1.5			0.2			0.5
Total Net Periodic Benefit Expense	$	134.7		$	30.6		$	23.3		$	8.1
Intercompany Allocations	N/A			$	22.5		$	18.0		$	6.7
Capitalized Pension Expense	$	41.0		$	18.8		$	13.3		$	3.5


⁽¹⁾	Amounts exclude $3.2 million for the year ended December 31, 2015 that represent amounts included in other deferred debits.

The following actuarial assumptions were used to calculate Pension and SERP expense amounts:



	Pension and SERP
	For the Years Ended December 31,
	2017			2016			2015
Discount Rate	3.20%	—	3.90%	3.27%	—	4.89%	4.20	%
Expected Long-Term Rate of Return	8.25%			8.25%			8.25	%
Compensation/Progression Rate	3.50%			3.50%			3.50	%

The following is a summary of the changes in plan assets and benefit obligations recognized in Regulatory Assets and Other Comprehensive Income ("OCI") as well as amounts in Regulatory Assets and OCI that were reclassified as net periodic benefit expense during the years presented:



	Regulatory Assets						OCI
	For the Years Ended December 31,
(Millions of Dollars)	2017			2016			2017			2016
Actuarial Losses Arising During the Year	$	333.0		$	184.6		$	9.3		$	6.8
Actuarial Losses Reclassified as Net Periodic Benefit Expense	(129.5		)	(119.9		)	(5.7		)	(5.8		)
Prior Service Cost/(Credit) Arising During the Year	1.0			7.1			(0.4		)	1.9
Prior Service Cost Reclassified as Net Periodic Benefit Expense	(4.1		)	(3.4		)	(0.4		)	(0.2		)

The following is a summary of the remaining Regulatory Assets and Accumulated Other Comprehensive Loss amounts that have not been recognized as components of net periodic benefit expense as of December 31, 2017 and 2016, as well as the amounts that are expected to be recognized as components in 2018:



	Regulatory Assets as of December 31,				Expected 2018 Expense		AOCL as of December 31,				Expected 2018 Expense
(Millions of Dollars)	2017		2016		Expected 2018 Expense		2017		2016		Expected 2018 Expense
Actuarial Loss	$	1,935.8	$	1,732.3	$	141.8	$	85.7	$	82.1	$	5.8
Prior Service Cost	10.3		13.4		4.2		1.5		2.3		0.3

PBOP Plans: The PBOP Plans are accounted for under the multiple-employer approach, with each operating company's balance sheet reflecting its share of the funded status of the plans. The following table provides information on the PBOP Plan benefit obligations, fair values of plan assets, and funded status:



	PBOP
	As of December 31,
	2017												2016
(Millions of Dollars)	Eversource			CL&P			NSTAR Electric			PSNH			Eversource			CL&P			NSTAR Electric			PSNH
Change in Benefit Obligation:
Benefit Obligation as of Beginning of Year	$	(810.0	)	$	(165.0	)	$	(270.0	)	$	(89.7	)	$	(1,051.4	)	$	(164.0	)	$	(447.2	)	$	(88.5	)
Plan Amendment	—			—			—			—			244.0			(12.5		)	193.6			(6.7		)
Employee Transfers	—			2.4			1.5			0.2			—			1.3			0.5			0.3
Service Cost	(9.5		)	(1.9		)	(1.7		)	(1.3		)	(12.2		)	(2.0		)	(3.4		)	(1.3		)
Interest Cost	(27.1		)	(5.3		)	(8.7		)	(3.0		)	(32.9		)	(5.3		)	(13.3		)	(2.9		)
Actuarial Gain/(Loss)	(81.8		)	(18.5		)	(13.2		)	(11.9		)	(17.7		)	3.6			(23.5		)	3.6
Benefits Paid	41.5			9.9			13.5			4.6			60.2			13.9			23.3			5.8
Increase due to acquisition of Aquarion	(61.7		)	—			—			—			—			—			—			—
Benefit Obligation as of End of Year	$	(948.6	)	$	(178.4	)	$	(278.6	)	$	(101.1	)	$	(810.0	)	$	(165.0	)	$	(270.0	)	$	(89.7	)
Change in Plan Assets:
Fair Value of Plan Assets as of Beginning of Year	$	815.8		$	129.2		$	361.6		$	73.2		$	812.2		$	136.7		$	352.0		$	75.8
Employee Transfers	—			(1.5		)	(0.8		)	—			—			(0.8		)	(0.6		)	(0.2		)
Actual Return on Plan Assets	118.0			18.1			52.9			10.4			51.3			7.2			24.6			3.4
Employer Contributions	7.6			—			5.3			—			12.5			—			8.9			—
Benefits Paid	(41.5		)	(9.9		)	(13.5		)	(4.6		)	(60.2		)	(13.9		)	(23.3		)	(5.8		)
Increase due to acquisition of Aquarion	22.3			—			—			—			—			—			—			—
Fair Value of Plan Assets as of End of Year	$	922.2		$	135.9		$	405.5		$	79.0		$	815.8		$	129.2		$	361.6		$	73.2
Funded Status as of December 31st	$	(26.4	)	$	(42.5	)	$	126.9		$	(22.1	)	$	5.8		$	(35.8	)	$	91.6		$	(16.5	)

The Eversource funded status includes a prepaid asset of $13.1 million recorded in Other Long-Term Assets and a liability of $39.5 million included in Accrued Pension, SERP and PBOP on the balance sheet.

As of December 31, 2017, there was a decrease in the discount rate used to calculate the funded status, as compared to the discount rate as of December 31, 2016, resulting in an increase to the Eversource PBOP liability of approximately $64 million.

The August 2016 PBOP plan amendment resulted in a reduction to Eversource's accumulated benefit liability of approximately $244 million. As of December 31, 2016, there was a decrease in the discount rate used to calculate the funded status, as compared to the discount rate as of December 31, 2015, resulting in an increase to the Eversource liability of approximately $75 million, which was partially offset by a decrease of approximately $52 million from changes in mortality and other assumptions.

The following actuarial assumptions were used in calculating the PBOP Plans' year end funded status:



	PBOP
	As of December 31,
	2017			2016
Discount Rate	3.55%	—	3.70%	4.21%

For the Eversource Service PBOP Plan, effective with the plan amendment that standardized plan designs and made benefit changes in August 2016, the health care cost trend rate is no longer applicable.

PBOP Expense: Eversource charges net periodic postretirement benefits expense to its subsidiaries based on the actual participant demographic data for each subsidiary's participants. The actual investment return in the trust each year is allocated to each of the subsidiaries annually in proportion to the investment return expected to be earned during the year.

Effective January 1, 2016, the Company refined its method of estimating the discount rate for the service and interest cost components of PBOP expense from the yield-curve methodology to the spot rate methodology, which provides a more precise measurement by matching projected cash flows to the corresponding spot rates on the yield curve. Historically these components were estimated using the same weighted-average discount rate as for the funded status. The total pre-tax benefit of this change on PBOP expense, prior to the capitalized portion and amounts deferred and recovered through rate reconciliation mechanisms, for the year ended December 31, 2016 was approximately $10 million.

The August 2016 PBOP Plan amendment resulted in a remeasurement of the benefit obligation and annual expense using assumptions at that point in time, including updated discount rates and asset values. The remeasurement resulted in a decrease in net periodic benefit costs for PBOP benefits, prior to the capitalized portion and amounts deferred and recovered through rate reconciliation mechanisms, of approximately $10 million, which was recorded in 2016, and most of this amount will be deferred for future refund to customers.

The components of net periodic benefit expense for the PBOP Plans are shown below. The net periodic benefit expense and the intercompany allocations, less the capitalized portion of PBOP, are included in Operations and Maintenance expense on the statements of income. Capitalized PBOP amounts relate to employees working on capital projects and are included in Property, Plant and Equipment, Net on the balance sheets. PBOP expense reflected in the statements of cash flows for CL&P, NSTAR Electric and PSNH does not include the intercompany allocations or the corresponding capitalized portion, as these amounts are cash settled on a short-term basis.



	PBOP
	For the Year Ended December 31, 2017
(Millions of Dollars)	Eversource			CL&P			NSTAR Electric			PSNH
Service Cost	$	9.5		$	1.9		$	1.7		$	1.3
Interest Cost	27.1			5.3			8.7			3.0
Expected Return on Plan Assets	(63.7		)	(9.7		)	(28.6		)	(5.5		)
Actuarial Loss	9.1			1.0			3.4			0.6
Prior Service (Credit)/Cost	(21.6		)	1.1			(17.0		)	0.6
Total Net Periodic Benefit Expense/(Income)	$	(39.6	)	$	(0.4	)	$	(31.8	)	$	—
Intercompany Allocations	N/A			$	(0.7	)	$	(1.1	)	$	(0.5	)
Capitalized PBOP Expense/(Income)	$	(19.1	)	$	(0.5	)	$	(16.2	)	$	0.2



	PBOP
	For the Year Ended December 31, 2016
(Millions of Dollars)	Eversource			CL&P			NSTAR Electric			PSNH
Service Cost	$	12.2		$	2.0		$	3.4		$	1.3
Interest Cost	32.9			5.3			13.3			2.9
Expected Return on Plan Assets	(62.9		)	(10.1		)	(28.1		)	(5.5		)
Actuarial Loss	9.0			1.5			3.3			0.7
Prior Service (Credit)/Cost	(9.1		)	0.5			(7.1		)	0.2
Total Net Periodic Benefit Income	$	(17.9	)	$	(0.8	)	$	(15.2	)	$	(0.4	)
Intercompany Allocations	N/A			$	0.3		$	(0.1	)	$	(0.1	)
Capitalized PBOP Expense/(Income)	$	(8.0	)	$	(0.5	)	$	(6.7	)	$	0.1



	PBOP
	For the Year Ended December 31, 2015
(Millions of Dollars)	Eversource			CL&P			NSTAR Electric			PSNH
Service Cost	$	16.3		$	2.1		$	5.8		$	1.4
Interest Cost	47.2			7.2			20.5			3.9
Expected Return on Plan Assets	(67.4		)	(11.1		)	(29.8		)	(6.0		)
Actuarial Loss	6.8			0.7			2.3			0.5
Prior Service Credit	(0.5		)	—			(0.2		)	—
Total Net Periodic Benefit Expense/(Income)	$	2.4		$	(1.1	)	$	(1.4	)	$	(0.2	)
Intercompany Allocations	N/A			$	1.9		$	1.1		$	0.4
Capitalized PBOP Expense/(Income)	$	0.1		$	(0.2	)	$	(0.4	)	$	0.2

The following actuarial assumptions were used to calculate PBOP expense amounts:



	PBOP
	For the Years Ended December 31,
	2017			2016			2015
Discount Rate	3.48%	—	4.64%	2.88%	—	4.09%	4.22%
Expected Long-Term Rate of Return	8.25%			8.25%			8.25%

The health care cost trend rate assumption used to calculate the PBOP expense amount for the Eversource PBOP Plan was 6.25 percent and 6.5 percent for the years ended December 31, 2016 and 2015, respectively. Effective January 1, 2017, the health care trend rate no longer has an impact on the PBOP expense on the Eversource Service PBOP Plan due to the benefit design changes effective with the 2016 plan amendment.

The following is a summary of the changes in plan assets and benefit obligations recognized in Regulatory Assets and OCI as well as amounts recognized in Regulatory Assets and OCI that were reclassified as net periodic benefit (expense)/income during the years presented:



	Regulatory Assets						OCI
	For the Years Ended December 31,
(Millions of Dollars)	2017			2016			2017			2016
Actuarial Losses/(Gains) Arising During the Year	$	44.8		$	32.4		$	2.6		$	(2.0	)
Actuarial (Losses)/Gains Reclassified as Net Periodic Benefit (Expense)/Income	(8.6		)	(9.2		)	(0.5		)	0.2
Prior Service (Credit)/Cost Arising During the Year	(4.0		)	(247.9		)	(0.1		)	4.0
Prior Service Credit/(Cost) Reclassified as Net Periodic Benefit Income/(Expense)	22.3			9.7			(0.7		)	(0.6		)



	Regulatory Assets as of December 31,						Expected 2018 Expense			AOCL as of December 31,				Expected 2018 Expense
(Millions of Dollars)	2017			2016			Expected 2018 Expense			2017		2016		Expected 2018 Expense
Actuarial Loss	$	211.6		$	175.4		$	8.8		$	6.6	$	4.5	$	0.3
Prior Service (Credit)/Cost	(221.2		)	(239.5		)	(21.7		)	2.6		3.4		0.2

Estimated Future Benefit Payments: The following benefit payments, which reflect expected future service, are expected to be paid by the Pension, SERP and PBOP Plans:



(Millions of Dollars)	2018		2019		2020		2021		2022		2023 - 2027
Pension and SERP	$	296.5	$	304.7	$	311.1	$	320.8	$	329.4	$	1,739.7
PBOP	56.8		57.1		57.3		57.5		57.4		279.3

Eversource Contributions: Based on the current status of the Pension Plans and federal pension funding requirements, Eversource currently expects to make contributions of approximately $180 million in 2018, of which approximately $82 million and $6 million, will be contributed by CL&P and PSNH, respectively. The remaining $92 million is expected to be contributed by other Eversource subsidiaries, primarily Eversource Service. Eversource expects to make approximately $10 million in contributions to the PBOP Plan in 2018, of which approximately $5 million will be contributed by NSTAR Electric.

Fair Value of Pension and PBOP Plan Assets: Pension and PBOP funds are held in external trusts. Trust assets, including accumulated earnings, must be used exclusively for Pension and PBOP payments. Eversource's investment strategy for its Pension and PBOP Plans is to maximize the long-term rates of return on these plans' assets within an acceptable level of risk. The investment strategy for each asset category includes a diversification of asset types, fund strategies and fund managers and it establishes target asset allocations that are routinely reviewed and periodically rebalanced. PBOP assets are comprised of assets held in the PBOP Plan, as well as specific assets within the Pension Plan trust (401(h) assets). The investment policy and strategy of the 401(h) assets is consistent with that of the defined benefit pension plan. Eversource's expected long-term rates of return on Pension and PBOP Plan assets are based on target asset allocation assumptions and related expected long-term rates of return. In developing its expected long-term rate of return assumptions for the Pension and PBOP Plans, Eversource evaluated input from consultants, as well as long-term inflation assumptions and historical returns. For the year ended December 31, 2017, management has assumed long-term rates of return of 8.25 percent for the Eversource Pension and PBOP Plan assets. These long-term rates of return are based on the assumed rates of return for the target asset allocations as follows:



	As of December 31,
	2017				2016
	Eversource Pension Plan and Tax-Exempt Assets Within PBOP Plan				Eversource Pension Plan and Tax-Exempt Assets Within PBOP Plan
	Target Asset Allocation		Assumed Rate of Return		Target Asset Allocation		Assumed Rate of Return
Equity Securities:
United States	21.5	%	8.5	%	22.0	%	8.5	%
International	11.0	%	8.5	%	13.0	%	8.5	%
Emerging Markets	4.5	%	10.0	%	5.0	%	10.0	%
Private Equity	15.0	%	12.0	%	12.0	%	12.0	%
Debt Securities:
Fixed Income	11.0	%	4.0	%	12.0	%	4.5	%
Public High Yield Fixed Income	4.0	%	6.5	%	3.0	%	7.0	%
Private Debt	15.0	%	9.0	%	10.0	%	9.0	%
Emerging Markets Debt	2.0	%	6.5	%	5.0	%	7.5	%
Real Estate and Other Assets	12.0	%	7.5	%	10.0	%	7.5	%
Hedge Funds	4.0	%	6.0	%	8.0	%	7.0	%

The taxable assets within the Eversource PBOP Plan have a target asset allocation of 70 percent equity securities and 30 percent fixed income securities.

The following table presents, by asset category, the Pension and PBOP Plan assets recorded at fair value on a recurring basis by the level in which they are classified within the fair value hierarchy:



	Pension Plan
	Fair Value Measurements as of December 31,
(Millions of Dollars)	2017									2016
Asset Category:	Level 1		Level 2		Uncategorized		Total			Level 1		Level 2		Uncategorized		Total
Equity Securities⁽¹⁾	$	535.4	$	—	$	1,653.3	$	2,188.7		$	455.5	$	—	$	1,279.7	$	1,735.2
Private Equity	11.2		—		641.8		653.0			6.0		—		518.4		524.4
Fixed Income ⁽²⁾	56.6		215.9		1,218.3		1,490.8			—		183.0		1,099.4		1,282.4
Real Estate and Other Assets	101.6		—		374.4		476.0			77.2		—		325.9		403.1
Hedge Funds	—		—		165.5		165.5			—		—		335.0		335.0
Total	$	704.8	$	215.9	$	4,053.3	$	4,974.0		$	538.7	$	183.0	$	3,558.4	$	4,280.1
Less: 401(h) PBOP Assets⁽³⁾							(234.5		)							(204.1		)
Total Pension Assets							$	4,739.5								$	4,076.0



	PBOP Plan
	Fair Value Measurements as of December 31,
(Millions of Dollars)	2017								2016
Asset Category:	Level 1		Level 2		Uncategorized		Total		Level 1		Level 2		Uncategorized		Total
Equity Securities ⁽¹⁾	$	115.3	$	—	$	241.9	$	357.2	$	88.6	$	—	$	214.1	$	302.7
Private Equity	—		—		31.3		31.3		—		—		32.2		32.2
Fixed Income⁽²⁾	23.4		44.0		133.9		201.3		9.5		44.8		132.3		186.6
Real Estate and Other Assets	22.4		—		29.0		51.4		15.5		—		27.5		43.0
Hedge Funds	—		—		46.5		46.5		—		—		47.2		47.2
Total	$	161.1	$	44.0	$	482.6	$	687.7	$	113.6	$	44.8	$	453.3	$	611.7
Add: 401(h) PBOP Assets⁽³⁾							234.5								204.1
Total PBOP Assets							$	922.2							$	815.8


⁽¹⁾	United States, International and Emerging Markets equity securities that are uncategorized include investments in commingled funds and hedge funds that are overlayed with equity index swaps and futures contracts.


⁽²⁾	Fixed Income investments that are uncategorized include investments in commingled funds, fixed income funds that invest in a variety of opportunistic fixed income strategies, and hedge funds that are overlayed with fixed income futures.


⁽³⁾	The assets of the Pension Plan include a 401(h) account that has been allocated to provide health and welfare postretirement benefits under the PBOP Plan.

The Company values assets based on observable inputs when available. Equity securities, exchange traded funds and futures contracts classified as Level 1 in the fair value hierarchy are priced based on the closing price on the primary exchange as of the balance sheet date.

Fixed income securities, such as government issued securities, corporate bonds and high yield bond funds, are included in Level 2 and are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The pricing models utilize observable inputs such as recent trades for the same or similar instruments, yield curves, discount margins and bond structures. Swaps are valued using pricing models that incorporate interest rates and equity and fixed income index closing prices to determine a net present value of the cash flows.

Certain investments, such as commingled funds, private equity investments, real estate funds and hedge funds are valued using the NAV as a practical expedient. These investments are structured as investment companies offering shares or units to multiple investors for the purpose of providing a return. Commingled funds are recorded at NAV provided by the asset manager, which is based on the market prices of the underlying equity securities. Hedge Funds are recorded at NAV based on the values of the underlying assets. Private Equity investments, Fixed Income partnership funds and Real Estate and Other Assets are valued using the NAV provided by the partnerships, which are based on discounted cash flows of the underlying investments, real estate appraisals or public market comparables of the underlying investments. The Company has retrospectively adopted new accounting guidance that eliminates the requirement to classify assets valued at NAV, as a practical expedient, within the fair value hierarchy. Prior to the adoption of this guidance, these investments were classified as Level 2 or Level 3 in the fair value hierarchy. The adoption of this guidance changes fair value measurement disclosures, but does not impact the methodology for valuing the investments or financial statement results.

Share-Based Payments

Share-based compensation awards are recorded using a fair-value based method at the date of grant. Eversource, CL&P, NSTAR Electric and PSNH record compensation expense related to these awards, as applicable, for shares issued or sold to their respective employees and officers, as well as for the allocation of costs associated with shares issued or sold to Eversource's service company employees and officers that support CL&P, NSTAR Electric and PSNH.

Eversource Incentive Plans: Eversource maintains long-term equity-based incentive plans in which Eversource, CL&P, NSTAR Electric and PSNH employees, officers and board members are eligible to participate. The incentive plans authorize Eversource to grant up to 8,000,000 new shares for various types of awards, including RSUs and performance shares, to eligible employees, officers, and board members. As of December 31, 2017 and 2016, Eversource had 2,445,110 and 2,692,350 common shares, respectively, available for issuance under these plans.

Eversource accounts for its various share-based plans as follows:


•	RSUs - Eversource records compensation expense, net of estimated forfeitures, on a straight-line basis over the requisite service period based upon the fair value of Eversource's common shares at the date of grant. The par value of RSUs is reclassified to Common Stock from APIC as RSUs become issued as common shares.

•

Performance Shares - Eversource records compensation expense, net of estimated forfeitures, on a straight-line basis over the requisite service period. Performance shares vest based upon the extent to which Company goals are achieved. Vesting of outstanding performance shares is based upon both the Company's EPS growth over the requisite service period and the total shareholder return as compared to the Edison Electric Institute ("EEI") Index during the requisite service period. The fair value of performance shares is determined at the date of grant using a lattice model.


•	Stock Options - All outstanding stock options were exercised during 2017.

RSUs: Eversource granted RSUs under the annual long-term incentive programs that are subject to three-year graded vesting schedules for employees, and one-year graded vesting schedules, or immediate vesting, for board members. RSUs are paid in shares, reduced by amounts sufficient to satisfy withholdings for income taxes, subsequent to vesting. A summary of RSU transactions is as follows:



	RSUs (Units)		Weighted Average Grant-Date Fair Value
Outstanding as of December 31, 2016	724,270		$	47.86
Granted	299,285		$	55.97
Shares Issued	(289,635	)	$	52.26
Forfeited	(16,881	)	$	55.60
Outstanding as of December 31, 2017	717,039		$	49.29

The weighted average grant-date fair value of RSUs granted for the years ended December 31, 2017, 2016 and 2015 was $55.97, $54.67 and $54.57, respectively. As of December 31, 2017 and 2016, the number and weighted average grant-date fair value of unvested RSUs was 388,269 and $56.15 per share, and 322,158 and $53.47 per share, respectively. During 2017, there were 306,087 RSUs at a weighted average grant-date fair value of $52.75 per share that vested during the year and were either paid or deferred. As of December 31, 2017, 328,770 RSUs were fully vested and deferred and an additional 368,856 are expected to vest.

Performance Shares: Eversource granted performance shares under the annual long-term incentive programs that vest based upon the extent to which Company goals are achieved at the end of three-year performance measurement periods. Performance shares are paid in shares, after the performance measurement period. A summary of performance share transactions is as follows:



	Performance Shares (Units)		Weighted Average Grant-Date Fair Value
Outstanding as of December 31, 2016	522,934		$	51.09
Granted	180,032		$	55.70
Shares Issued	(173,914	)	$	43.48
Forfeited	(18,487	)	$	47.06
Outstanding as of December 31, 2017	510,565		$	55.45

The weighted average grant-date fair value of performance shares granted for the years ended December 31, 2017, 2016 and 2015 was $55.70, $53.64 and $55.04, respectively. As of December 31, 2017 and 2016, the number and weighted average grant-date fair value of unvested performance shares was 331,207 and $55.79 per share, and 301,363 and $51.52 per share, respectively. During 2017, there were 131,308 performance shares at a weighted average grant-date fair value of $47.12 per share that vested during the year and were either paid or deferred. As of December 31, 2017, 179,358 performance shares were fully vested and deferred.

Compensation Expense: The total compensation expense and associated future income tax benefits recognized by Eversource, CL&P, NSTAR Electric and PSNH for share-based compensation awards were as follows:



Eversource	For the Years Ended December 31,
(Millions of Dollars)	2017		2016		2015
Compensation Expense	$	19.7	$	23.6	$	23.1
Future Income Tax Benefit	8.0		9.6		9.4



	For the Years Ended December 31,
	2017						2016						2015
(Millions of Dollars)	CL&P		NSTAR Electric		PSNH		CL&P		NSTAR Electric		PSNH		CL&P		NSTAR Electric		PSNH
Compensation Expense	$	7.0	$	7.0	$	3.2	$	9.1	$	8.2	$	3.5	$	9.3	$	7.5	$	3.2
Future Income Tax Benefit	2.9		2.8		1.3		3.7		3.3		1.4		3.8		3.1		1.3

As of December 31, 2017, there was $20.1 million of total unrecognized compensation expense related to nonvested share-based awards for Eversource, including $7.3 million for CL&P, $7.1 million for NSTAR Electric and $3.1 million for PSNH. This cost is expected to be recognized ratably over a weighted-average period of 1.83 years for Eversource and NSTAR Electric, 1.84 years for CL&P and 1.82 years for PSNH.

An income tax rate of 40 percent was used to estimate the tax effect on total share-based payments determined under the fair-value based method for all awards. The Company generally settles fully vested RSUs and performance shares with the issuance of common shares purchased in the open market.

In 2016, the Company adopted new accounting guidance, which prospectively changed the accounting for excess tax benefits associated with the distribution of stock compensation awards and also changed the presentation of excess tax benefits on the statement of cash flows from a financing activity to an operating activity. For the years ended December 31, 2017 and 2016, the impact of the ASU was to reduce income tax expense by $2.9 million and $19.1 million, respectively, which increased cash flows from operating activities on the statement of cash flows. For the year ended December 31, 2015, changes in excess tax benefits totaling $9.5 million increased cash flows from financing activities.

Stock Options: All remaining outstanding stock options under the NSTAR Incentive Plan were exercised during 2017. A summary of stock option transactions is as follows:



	Options		Weighted Average Exercise Price		Intrinsic Value (Millions)
Outstanding and Exercisable - December 31, 2016	124,640		$	25.84	$	3.7
Exercised	(124,640	)	$	25.84	$	4.4
Outstanding and Exercisable - December 31, 2017	—		$	—	$	—

Cash received for options exercised during the year ended December 31, 2017 totaled $3.2 million. The tax benefit realized from stock options exercised totaled $1.8 million for the year ended December 31, 2017.