Retirement benefits

6 Months Ended

Jun. 30, 2012

Retirement benefits

Retirement benefits

5 · Retirement benefits

Defined benefit pension and other postretirement benefit plans information. For the first six months of 2012, the Company contributed $53 million ($52 million by the utilities and $1 million by HEI) to its retirement benefit plans, compared to $38 million (primarily by the utilities) in the first six months of 2011. The Company’s current estimate of contributions to its retirement benefit plans in 2012 is $107 million ($104 million by the utilities and $3 million by HEI), compared to $75 million ($73 million by the utilities and $2 million by HEI) in 2011. In addition, the Company expects to pay directly $2 million ($1 million each by the utilities and HEI) of benefits in 2012, comparable to 2011.

On July 6, 2012, President Obama signed the Moving Ahead for Progress in the 21st Century Act (MAP-21), which included provisions related to the funding of pension plans. This law does not affect the Company’s accounting for pension benefits; therefore, the net periodic benefit costs disclosed for the plans were not affected.  MAP-21 is expected to reduce the minimum required funding for 2012 and 2013, but specific guidance is needed from the IRS to estimate the amount of the reduction.

The Pension Protection Act provides that if a pension plan’s funded status falls below certain levels, more conservative assumptions must be used to value obligations under the pension plan and restrictions on participant benefit accruals may be placed on the plan. The HEI Retirement Plan has fallen below these thresholds and the minimum required contribution estimated for 2012 incorporates the more conservative assumptions required. Other factors could cause changes to the required contribution levels.

Effective April 1, 2011, accelerated distribution options (the $50,000 single sum distribution option and a Social Security level income option) under the HEI Retirement Plan became subject to partial restrictions because the funded status of the HEI Retirement Plan was deemed to be less than 80%. Generally, while the partial restrictions are in effect, a retiring participant may only elect an accelerated distribution option for 50% of the participant’s total benefit. The partial restrictions are expected to continue through 2012.

The components of net periodic benefit cost for consolidated HEI were as follows:

	Three months ended June 30												Six months ended June 30
	Pension benefits						Other benefits						Pension benefits						Other benefits
(in thousands)	2012			2011			2012			2011			2012			2011			2012			2011
Service cost	$	11,397		$	8,824		$	1,008		$	1,173		$	21,588		$	17,741		$	2,104		$	2,440
Interest cost	16,973			16,271			2,223			2,417			33,744			32,580			4,504			4,878
Expected return on plan assets	(17,736		)	(17,172		)	(2,557		)	(2,657		)	(35,592		)	(34,273		)	(5,178		)	(5,305		)
Amortization of net transition obligation	—			—			—			—			—			1			—			—
Amortization of prior service gain	(82		)	(97		)	(449		)	(309		)	(163		)	(194		)	(897		)	(533		)
Amortization of net actuarial loss	6,403			4,314			299			40			12,826			8,719			752			55
Net periodic benefit cost	16,955			12,140			524			664			32,403			24,574			1,285			1,535
Impact of PUC D&Os	(4,977		)	(556		)	(416		)	1,734			(8,834		)	(2,100		)	(1,096		)	2,752
Net periodic benefit cost (adjusted for impact of PUC D&Os)	$	11,978		$	11,584		$	108		$	2,398		$	23,569		$	22,474		$	189		$	4,287

Consolidated HEI recorded retirement benefits expense of $17 million and $20 million in the first six months of 2012 and 2011, respectively, and charged the remaining amounts primarily to electric utility plant.

The utilities have implemented pension and OPEB tracking mechanisms under which all of their retirement benefit expenses (except for executive life and nonqualified pension plan expenses) determined in accordance with GAAP are recovered over time.

Defined contribution plans information.  For the first six months of 2012 and 2011, the Company’s expense for its defined contribution pension plans under the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP) and the ASB 401(k) Plan was $1.8 million and $1.7 million, respectively, and cash contributions were $2.7 million and $2.8 million, respectively.