EMPLOYEE BENEFITS

A. Pension Benefits and Postretirement Benefits Other Than Pension

Eversource provides defined benefit retirement plans ("Pension Plans") that cover eligible employees and 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 non-qualified defined benefit retirement plans ("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 ("PBOP Plans") that provide life insurance and a health reimbursement arrangement created for the purpose of reimbursing retirees and dependents for health insurance premiums and certain medical expenses to eligible employees that met certain age and service eligibility requirements. 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.

The Pension, SERP and PBOP Plans cover eligible employees, including, among others, employees of the regulated companies. Because the regulated companies recover 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 retiree benefit 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 16, "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 unamortized actuarial gains or losses, which are recorded in Regulatory Assets or Accumulated Other Comprehensive Income/(Loss). Unamortized 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, 2018												As of December 31, 2017
(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	$	(5,936.5	)	$	(1,275.2	)	$	(1,351.0	)	$	(642.2	)	$	(5,242.3	)	$	(1,170.2	)	$	(1,217.3	)	$	(572.2	)
Service Cost	(84.8		)	(21.4		)	(17.4		)	(11.2		)	(71.3		)	(18.5		)	(15.5		)	(9.7		)
Interest Cost	(196.4		)	(41.8		)	(43.5		)	(22.0		)	(188.0		)	(41.6		)	(42.7		)	(21.2		)
Actuarial Gain/(Loss)	414.9			106.1			98.6			39.2			(548.7		)	(116.9		)	(143.5		)	(65.1		)
Benefits Paid - Pension	261.8			59.6			66.9			26.2			243.7			63.5			55.4			26.4
Benefits Paid - Lump Sum	14.2			—			7.1			—			18.4			—			6.8			—
Benefits Paid - SERP	6.8			0.3			0.3			0.2			20.4			0.3			0.3			0.3
Employee Transfers	—			12.0			2.5			(0.9		)	—			8.2			5.5			(0.7		)
Increase due to acquisition of Aquarion	—			—			—			—			(168.7		)	—			—			—
Benefit Obligation as of End of Year	$	(5,520.0	)	$	(1,160.4	)	$	(1,236.5	)	$	(610.7	)	$	(5,936.5	)	$	(1,275.2	)	$	(1,351.0	)	$	(642.2	)
Change in Pension Plan Assets:
Fair Value of Pension Plan Assets as of Beginning of Year	$	4,739.5		$	963.0		$	1,260.8		$	539.5		$	4,076.0		$	905.5		$	1,088.3		$	494.0
Employer Contributions	185.6			41.2			56.5			—			235.2			2.5			85.4			0.8
Actual Return on Pension Plan Assets	(75.2		)	(14.2		)	(18.7		)	(7.6		)	589.7			126.7			154.8			70.4
Benefits Paid - Pension	(261.8		)	(59.6		)	(66.9		)	(26.2		)	(243.7		)	(63.5		)	(55.4		)	(26.4		)
Benefits Paid - Lump Sum	(14.2		)	—			(7.1		)	—			(18.4		)	—			(6.8		)	—
Employee Transfers	—			(12.0		)	(2.5		)	0.9			—			(8.2		)	(5.5		)	0.7
Increase due to acquisition of Aquarion	—			—			—			—			100.7			—			—			—
Fair Value of Pension Plan Assets as of End of Year	$	4,573.9		$	918.4		$	1,222.1		$	506.6		$	4,739.5		$	963.0		$	1,260.8		$	539.5
Funded Status as of December 31st	$	(946.1	)	$	(242.0	)	$	(14.4	)	$	(104.1	)	$	(1,197.0	)	$	(312.2	)	$	(90.2	)	$	(102.7	)

In 2018, there was an increase to the discount rate used to calculate the funded status of the Eversource pension liability, which resulted in a decrease to Eversource's pension liability of approximately $465 million as of December 31, 2018, which was partially offset by changes in actual plan experience and changes in other assumptions.

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.

The pension and SERP Plans' funded status includes the current portion of the SERP liability totaling $8.9 million and $8.4 million as of December 31, 2018 and 2017, respectively, which is included in Other Current Liabilities on the balance sheets.

As of December 31, 2018 and 2017, the accumulated benefit obligation for the Pension and SERP Plans is as follows:



(Millions of Dollars)	Eversource		CL&P		NSTAR Electric		PSNH
2018	$	5,070.8	$	1,031.0	$	1,144.7	$	543.1
2017	5,583.6		1,179.2		1,260.1		597.2

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



	Pension and SERP
	As of December 31,
		2018			2017
Discount Rate		4.22%	—	4.45%	3.43%	—	3.75%
Compensation/Progression Rate		3.50%			3.50%

The compensation rate for the Aquarion Plans was 4 percent as of December 31, 2018 and 2017.

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. The Company utilizes the spot rate methodology to estimate the discount rate for the service and interest cost components of pension expense, which provides a more precise measurement by matching projected cash flows to the corresponding spot rates on the yield curve.

The components of net periodic benefit expense for the Pension and SERP Plans, prior to amounts capitalized as Property, Plant and Equipment or deferred as regulatory assets for future recovery, are shown below. The service cost component of net periodic benefit expense and the intercompany allocations, less the capitalized portions, are included in Operations and Maintenance expense on the statements of income. The remaining components of net periodic benefit costs are included in Other Income, Net on the statements of income. 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 and deferred portion, as these amounts are cash settled on a short-term basis.



	Pension and SERP
	For the Year Ended December 31, 2018
(Millions of Dollars)	Eversource			CL&P			NSTAR Electric			PSNH
Service Cost	$	84.8		$	21.4		$	17.4		$	11.2
Interest Cost	196.4			41.8			43.5			22.0
Expected Return on Pension Plan Assets	(391.6		)	(79.1		)	(104.9		)	(43.6		)
Actuarial Loss	145.7			29.1			41.1			11.6
Prior Service Cost	4.3			1.1			0.2			0.4
Total Net Periodic Benefit Expense/(Income)	$	39.6		$	14.3		$	(2.7	)	$	1.6
Intercompany Allocations	N/A			$	6.1		$	6.5		$	1.9



	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



	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

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



	Pension and SERP
	For the Years Ended December 31,
	2018			2017			2016
Discount Rate	3.85%	—	4.62%	3.20%	—	3.90%	3.27%	—	4.89%
Expected Long-Term Rate of Return	8.25%			8.25%			8.25%
Compensation/Progression Rate	3.50%			3.50%			3.50%

For the Aquarion Plans, the long-term expected rate of return was 7 percent and the compensation rate was 4 percent for the year ended December 31, 2018.

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,						For the Years Ended December 31,
(Millions of Dollars)	2018			2017			2018			2017
Actuarial Losses Arising During the Year	$	48.6		$	333.0		$	0.7		$	9.3
Actuarial Losses Reclassified as Net Periodic Benefit Expense	(140.1		)	(129.5		)	(5.6		)	(5.7		)
Actuarial Losses Securitized as Stranded Costs ⁽¹⁾	(36.7		)	—			—			—
Prior Service Cost/(Credit) Arising During the Year	—			1.0			—			(0.4		)
Prior Service Cost Reclassified as Net Periodic Benefit Expense	(3.9		)	(4.1		)	(0.4		)	(0.4		)
Prior Service Cost Securitized as Stranded Costs ⁽¹⁾	(0.1		)	—			—			—

⁽¹⁾ These amounts were reclassified to securitized regulatory assets in connection with the divestiture of PSNH's generation business. For further information see Note 2, "Regulatory Accounting" to the financial statements.

The following is a summary of the remaining Regulatory Assets and Accumulated Other Comprehensive Income amounts that have not been recognized as components of net periodic benefit expense as of December 31, 2018 and 2017, as well as the amounts that are expected to be recognized as components in 2019:



	Regulatory Assets as of December 31,				Expected 2019 Expense		AOCI as of December 31,				Expected 2019 Expense
(Millions of Dollars)	2018		2017		Expected 2019 Expense		2018		2017		Expected 2019 Expense
Actuarial Loss	$	1,807.6	$	1,935.8	$	140.6	$	80.8	$	85.7	$	5.6
Prior Service Cost	6.3		10.3		0.9		1.1		1.5		0.2

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,
	2018												2017
(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	$	(948.6	)	$	(178.4	)	$	(278.6	)	$	(101.1	)	$	(810.0	)	$	(165.0	)	$	(270.0	)	$	(89.7	)
Service Cost	(10.0		)	(1.9		)	(2.0		)	(1.1		)	(9.5		)	(1.9		)	(1.7		)	(1.3		)
Interest Cost	(30.7		)	(5.8		)	(8.7		)	(3.4		)	(27.1		)	(5.3		)	(8.7		)	(3.0		)
Actuarial Gain/(Loss)	102.5			14.4			28.4			8.6			(81.8		)	(18.5		)	(13.2		)	(11.9		)
Benefits Paid	45.3			10.1			14.5			4.9			41.5			9.9			13.5			4.6
Employee Transfers	—			(0.1		)	0.1			0.2			—			2.4			1.5			0.2
Increase due to acquisition of Aquarion	—			—			—			—			(61.7		)	—			—			—
Benefit Obligation as of End of Year	$	(841.5	)	$	(161.7	)	$	(246.3	)	$	(91.9	)	$	(948.6	)	$	(178.4	)	$	(278.6	)	$	(101.1	)
Change in Plan Assets:
Fair Value of Plan Assets as of Beginning of Year	$	922.2		$	135.9		$	405.5		$	79.0		$	815.8		$	129.2		$	361.6		$	73.2
Actual Return on Plan Assets	(36.6		)	(5.2		)	(17.4		)	(2.9		)	118.0			18.1			52.9			10.4
Employer Contributions	9.3			—			5.2			—			7.6			—			5.3			—
Benefits Paid	(45.3		)	(10.1		)	(14.5		)	(4.9		)	(41.5		)	(9.9		)	(13.5		)	(4.6		)
Employee Transfers	—			—			0.3			—			—			(1.5		)	(0.8		)	—
Increase due to acquisition of Aquarion	—			—			—			—			22.3			—			—			—
Fair Value of Plan Assets as of End of Year	$	849.6		$	120.6		$	379.1		$	71.2		$	922.2		$	135.9		$	405.5		$	79.0
Funded Status as of December 31st	$	8.1		$	(41.1	)	$	132.8		$	(20.7	)	$	(26.4	)	$	(42.5	)	$	126.9		$	(22.1	)

The Eversource funded status includes prepaid assets of $33.4 million and $13.1 million recorded in Other Long-Term Assets and liabilities of $25.3 million and $39.5 million included in Accrued Pension, SERP and PBOP on the balance sheets as of December 31, 2018 and 2017, respectively.

As of December 31, 2018, there was an increase in the discount rate used to calculate the funded status, resulting in a decrease in the Eversource PBOP liability of approximately $88 million.

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



	PBOP
	As of December 31,
	2018			2017
Discount Rate	4.38%	—	4.41%	3.55%	—	3.70%

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. For the Aquarion PBOP Plan, the health care trend rate is a range of 3.5 percent to 6.75 percent, with an ultimate rate of 3.5 percent to 5 percent in 2019 and 2023, for post-65 and pre-65 retirees, respectively.

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. The Company utilizes the spot rate methodology to estimate the discount rate for the service and interest cost components of PBOP expense, which provides a more precise measurement by matching projected cash flows to the corresponding spot rates on the yield curve.

The components of net periodic benefit expense for the PBOP Plans, prior to amounts capitalized as Property, Plant and Equipment or deferred as regulatory assets on the balance sheets, are shown below. The service cost component of net periodic benefit expense and the intercompany allocations, less the capitalized portions, are included in Operations and Maintenance expense on the statements of income. The remaining components of net periodic benefit costs are included in Other Income, Net on the statements of income. 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, 2018
(Millions of Dollars)	Eversource			CL&P			NSTAR Electric			PSNH
Service Cost	$	10.0		$	1.9		$	2.0		$	1.1
Interest Cost	30.7			5.8			8.7			3.4
Expected Return on Plan Assets	(72.4		)	(10.4		)	(32.5		)	(6.0		)
Actuarial Loss	10.3			1.6			2.3			0.7
Prior Service (Credit)/Cost	(23.6		)	1.1			(16.9		)	0.5
Total Net Periodic Benefit Income	$	(45.0	)	$	—		$	(36.4	)	$	(0.3	)
Intercompany Allocations	N/A			$	(1.0	)	$	(1.3	)	$	(0.4	)



	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 Income	$	(39.6	)	$	(0.4	)	$	(31.8	)	$	—
Intercompany Allocations	N/A			$	(0.7	)	$	(1.1	)	$	(0.5	)



	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	)

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



	PBOP
	For the Years Ended December 31,
	2018			2017			2016
Discount Rate	3.28%	—	3.94%	3.48%	—	4.64%	2.88%	—	4.09%
Expected Long-Term Rate of Return	8.25%			8.25%			8.25%

For the Aquarion Plan, the expected long-term rate of return was 7 percent and the health care trend rate was 7 percent for the year ended December 31, 2018.

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,						For the Years Ended December 31,
(Millions of Dollars)	2018			2017			2018			2017
Actuarial Losses/(Gains) Arising During the Year	$	6.4		$	44.8		$	(1.2	)	$	2.6
Actuarial Losses Reclassified as Net Periodic Benefit Expense	(9.9		)	(8.6		)	(0.4		)	(0.5		)
Actuarial Losses Securitized as Stranded Costs ⁽¹⁾	(0.8		)	—			—			—
Prior Service (Credit)/Cost Arising During the Year	1.3			(4.0		)	—			(0.1		)
Prior Service Credit/(Cost) Reclassified as Net Periodic Benefit Income/(Expense)	23.6			22.3			—			(0.7		)
Prior Service Cost Securitized as Stranded Costs ⁽¹⁾	(1.3		)	—			—			—



	Regulatory Assets as of December 31,						Expected 2019 Expense			AOCI as of December 31,				Expected 2019 Expense
(Millions of Dollars)	2018			2017			Expected 2019 Expense			2018		2017		Expected 2019 Expense
Actuarial Loss	$	207.3		$	211.6		$	9.9		$	5.0	$	6.6	$	0.3
Prior Service (Credit)/Cost	(197.6		)	(221.2		)	(23.6		)	2.6		2.6		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)	2019		2020		2021		2022		2023		2024 - 2028
Pension and SERP	$	308.5	$	310.4	$	318.8	$	326.6	$	335.6	$	1,764.1
PBOP	58.4		58.5		58.6		58.3		57.8		277.4

Eversource Contributions: Based on the current status of the Pension Plans and federal pension funding requirements, Eversource currently expects to make contributions of approximately $112 million in 2019, of which approximately $44 million and $10 million will be contributed by CL&P and PSNH, respectively. The remaining $46 million is expected to be contributed by other Eversource subsidiaries, primarily Eversource Service. Eversource expects to make approximately $11 million in contributions to the PBOP Plan in 2019, of which approximately $6 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 trust, 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, 2018, management has assumed long-term rates of return of 8.25 percent for the Eversource Service Pension and PBOP Plan assets. Management has assumed a 7 percent long-term rate of return for the Aquarion Plans.

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,
	2018				2017
	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	15.0	%	8.5	%	21.5	%	8.5	%
Global	10.0	%	8.75	%	—	%	—	%
Non-United States	8.0	%	8.5	%	11.0	%	8.5	%
Emerging Markets	4.0	%	10.0	%	4.5	%	10.0	%
Debt Securities:
Fixed Income	13.0	%	4.0	%	11.0	%	4.0	%
Public High Yield Fixed Income	4.0	%	6.5	%	4.0	%	6.5	%
Private Debt	15.0	%	9.0	%	15.0	%	9.0	%
Emerging Markets Debt	—	%	—	%	2.0	%	6.5	%
Private Equity	15.0	%	12.0	%	15.0	%	12.0	%
Real Assets	16.0	%	7.5	%	12.0	%	7.5	%
Hedge Funds	—	%	—	%	4.0	%	6.0	%

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 target asset allocation for the Aquarion Pension Plans is 59 percent equity, 36 percent debt and 5 percent other. The target asset allocation for the Aquarion PBOP Plan is 59 percent equity and 41 percent debt.

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)	2018									2017
Asset Category:	Level 1		Level 2		Uncategorized		Total			Level 1		Level 2		Uncategorized		Total
Equity Securities⁽¹⁾	$	443.4	$	—	$	1,377.8	$	1,821.2		$	535.4	$	—	$	1,653.3	$	2,188.7
Fixed Income ⁽²⁾	85.5		160.8		1,265.5		1,511.8			56.6		215.9		1,218.3		1,490.8
Private Equity	6.1		—		834.0		840.1			11.2		—		641.8		653.0
Real Assets ⁽³⁾	62.9		—		569.1		632.0			101.6		—		539.9		641.5
Total	$	597.9	$	160.8	$	4,046.4	$	4,805.1		$	704.8	$	215.9	$	4,053.3	$	4,974.0
Less: 401(h) PBOP Assets⁽⁴⁾							(231.2		)							(234.5		)
Total Pension Assets							$	4,573.9								$	4,739.5



	PBOP Plan
	Fair Value Measurements as of December 31,
(Millions of Dollars)	2018								2017
Asset Category:	Level 1		Level 2		Uncategorized		Total		Level 1		Level 2		Uncategorized		Total
Equity Securities ⁽¹⁾	$	91.9	$	—	$	210.5	$	302.4	$	115.3	$	—	$	241.9	$	357.2
Fixed Income⁽²⁾	22.0		40.3		123.0		185.3		23.4		44.0		133.9		201.3
Private Equity	—		—		32.7		32.7		—		—		31.3		31.3
Real Assets ⁽³⁾	27.5		—		70.5		98.0		22.4		—		75.5		97.9
Total	$	141.4	$	40.3	$	436.7	$	618.4	$	161.1	$	44.0	$	482.6	$	687.7
Add: 401(h) PBOP Assets⁽⁴⁾							231.2								234.5
Total PBOP Assets							$	849.6							$	922.2


⁽¹⁾	United States, Global, Non-United States 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 and fixed income strategies, and hedge funds that are overlayed with fixed income futures.


⁽³⁾	Real assets include real estate funds and hedge funds.


⁽⁴⁾	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. Private Equity investments, Fixed Income partnership funds and Real 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, or the NAV of underlying assets held in hedge funds. Assets valued at NAV are uncategorized in the fair value hierarchy.

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 6,700,000 new shares for various types of awards, including RSUs and performance shares, to eligible employees, officers, and board members. As of December 31, 2018 and 2017, Eversource had 3,720,650 and 2,445,110 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.

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, 2017	717,039		$	49.29
Granted	286,315		$	56.69
Shares Issued	(201,386	)	$	55.35
Forfeited	(19,603	)	$	56.78
Outstanding as of December 31, 2018	782,365		$	50.25

The weighted average grant-date fair value of RSUs granted for the years ended December 31, 2018, 2017 and 2016 was $56.69, $55.97 and $54.67, respectively. As of December 31, 2018 and 2017, the number and weighted average grant-date fair value of unvested RSUs was 424,119 and $56.57 per share, and 388,269 and $56.15 per share, respectively. During 2018, there were 216,572 RSUs at a weighted average grant-date fair value of $56.72 per share that vested during the year and were either paid or deferred. As of December 31, 2018, 358,246 RSUs were fully vested and deferred and an additional 402,913 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, 2017	510,565		$	55.45
Granted	184,355		$	56.77
Shares Issued	(178,258	)	$	54.98
Forfeited	(17,098	)	$	56.18
Outstanding as of December 31, 2018	499,564		$	56.08

The weighted average grant-date fair value of performance shares granted for the years ended December 31, 2018, 2017 and 2016 was $56.77, $55.70 and $53.64, respectively. As of December 31, 2018 and 2017, the number and weighted average grant-date fair value of unvested performance shares was 366,995 and $56.17 per share, and 331,207 and $55.79 per share, respectively. During 2018, there were 131,349 performance shares at a weighted average grant-date fair value of $56.08 per share that vested during the year and were either paid or deferred. As of December 31, 2018, 132,569 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)	2018		2017		2016
Compensation Expense	$	21.4	$	19.7	$	23.6
Future Income Tax Benefit	5.4		8.0		9.6



	For the Years Ended December 31,
	2018						2017						2016
(Millions of Dollars)	CL&P		NSTAR Electric		PSNH		CL&P		NSTAR Electric		PSNH		CL&P		NSTAR Electric		PSNH
Compensation Expense	$	7.8	$	7.7	$	2.9	$	7.0	$	7.0	$	3.2	$	9.1	$	8.2	$	3.5
Future Income Tax Benefit	2.0		1.9		0.7		2.9		2.8		1.3		3.7		3.3		1.4

As of December 31, 2018, there was $22.3 million of total unrecognized compensation expense related to nonvested share-based awards for Eversource, including $8.1 million for CL&P, $8.0 million for NSTAR Electric and $2.8 million for PSNH. This cost is expected to be recognized ratably over a weighted-average period of 1.73 years for Eversource and CL&P, and 1.72 years for NSTAR Electric and PSNH.

An income tax rate of 25 percent was used to estimate the tax effect on total share-based payments determined under the fair-value based method for all awards. During both 2018 and 2017, the Company generally settled fully vested RSUs and performance shares with the issuance of common shares purchased in the open market.

For the years ended December 31, 2018, 2017 and 2016, excess tax benefits associated with the distribution of stock compensation awards reduced income tax expense by $1.5 million, $2.9 million, and $19.1 million, respectively, which increased cash flows from operating activities on the statements of cash flows.