Retirement benefits

9 Months Ended

Sep. 30, 2012

Retirement benefits

Retirement benefits

5 · Retirement benefits

Defined benefit pension and other postretirement benefit plans information. For the first nine months of 2012, the Company contributed $64 million ($62 million by the utilities and $2 million by HEI) to its retirement benefit plans, compared to $56 million (primarily by the utilities) in the first nine months of 2011. The Company’s current estimate of contributions to its retirement benefit plans in 2012 is $78 million ($63 million by the utilities, $13 million by ASB (for its frozen defined benefit pension plan) and $2 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 and administration 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. The Company elected to apply MAP-21 for 2012, which reduced the 2012 minimum funding requirement and lifted the restrictions on accelerated distribution options (which restrictions were in effect April 1, 2011 to September 30, 2012) for HEI and HECO and its subsidiaries. If the Adjusted Funding Target Attainment Percentage falls below 80% in the future, the restrictions on accelerated distribution options may apply again.

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. The HEI Retirement Plan fell below these thresholds in 2011 and the minimum required contribution for 2012 incorporates the more conservative assumptions required. Other factors could cause changes to the required contribution levels.

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

	Three months ended September 30												Nine months ended September 30
	Pension benefits						Other benefits						Pension benefits						Other benefits
(in thousands)	2012			2011			2012			2011			2012			2011			2012			2011
Service cost	$	10,816		$	8,525		$	1,054		$	868		$	32,404		$	26,266		$	3,158		$	3,308
Interest cost	16,868			16,137			2,252			2,273			50,612			48,717			6,756			7,151
Expected return on plan assets	(17,796		)	(17,400		)	(2,579		)	(2,687		)	(53,388		)	(51,673		)	(7,757		)	(7,992		)
Amortization of net transition obligation	1			1			—			—			1			2			—			—
Amortization of prior service gain	(81		)	(98		)	(448		)	(587		)	(244		)	(292		)	(1,345		)	(1,120		)
Amortization of net actuarial loss	6,425			4,005			373			115			19,251			12,724			1,125			170
Net periodic benefit cost	16,233			11,170			652			(18		)	48,636			35,744			1,937			1,517
Impact of PUC D&Os	(3,460		)	(713		)	(552		)	327			(12,294		)	(2,813		)	(1,648		)	3,079
Net periodic benefit cost (adjusted for impact of PUC D&Os)	$	12,773		$	10,457		$	100		$	309		$	36,342		$	32,931		$	289		$	4,596

Consolidated HEI recorded retirement benefits expense of $27 million and $28 million in the first nine 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 nine 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 $2.7 million and $2.6 million, respectively, and cash contributions were $3.2 million for both periods.