Retirement Benefits

12 Months Ended

Dec. 31, 2012

Southern Company has a defined benefit, trusteed, pension plan covering substantially all employees. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). In December 2012, certain of the traditional operating companies and other subsidiaries contributed $445 million to the qualified pension plan. No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2013. Southern Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, Southern Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional operating companies fund related other postretirement trusts to the extent required by their respective regulatory commissions. For the year ending December 31, 2013, other postretirement trust contributions are expected to total approximately $28 million.

Actuarial Assumptions

The weighted average rates assumed in the actuarial calculations used to determine both the benefit obligations as of the measurement date and the net periodic costs for the pension and other postretirement benefit plans for the following year are presented below. Net periodic benefit costs were calculated in 2009 for the 2010 plan year using discount rates for the pension plans and the other postretirement benefit plans of 5.93% and 5.83%, respectively, and an annual salary increase of 4.18%.



	2012		2011		2010
Discount rate:
Pension plans	4.26	%	4.98	%	5.52	%
Other postretirement benefit plans	4.05		4.88		5.40
Annual salary increase	3.59		3.84		3.84
Long-term return on plan assets:
Pension plans	8.20		8.45		8.45
Other postretirement benefit plans	7.29		7.39		7.40

The Company estimates the expected rate of return on pension plan and other postretirement benefit plan assets using a financial model to project the expected return on each current investment portfolio. The analysis projects an expected rate of return on each of seven different asset classes in order to arrive at the expected return on the entire portfolio relying on each trust's target asset allocation and reasonable capital market assumptions. The financial model is based on four key inputs: anticipated returns by asset class (based in part on historical returns), each trust's target asset allocation, an anticipated inflation rate, and the projected impact of a periodic rebalancing of each trust's portfolio.

An additional assumption used in measuring the accumulated other postretirement benefit obligations (APBO) is the weighted average medical care cost trend rate. The weighted average medical care cost trend rates used in measuring the APBO as of December 31, 2012 were as follows:



	Initial Cost Trend Rate	Ultimate Cost Trend Rate	Year That Ultimate Rate Is Reached
Pre-65	8.00%	5.00%	2020
Post-65 medical	6.00	5.00	2020
Post-65 prescription	6.00	5.00	2020

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2012 as follows:



	1 Percent Increase		1 Percent Decrease
	(in millions)
Benefit obligation	$	126	$	(106	)
Service and interest costs	7		(6		)

Pension Plans

The total accumulated benefit obligation for the pension plans was $8.5 billion at December 31, 2012 and $7.4 billion at December 31, 2011. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2012 and 2011 were as follows:



	2012			2011
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	8,079		$	7,223
Service cost	198			184
Interest cost	393			389
Benefits paid	(336		)	(324		)
Actuarial loss	968			607
Balance at end of year	9,302			8,079
Change in plan assets
Fair value of plan assets at beginning of year	6,800			6,834
Actual return (loss) on plan assets	1,010			256
Employer contributions	479			34
Benefits paid	(336		)	(324		)
Fair value of plan assets at end of year	7,953			6,800
Accrued liability	$	(1,349	)	$	(1,279	)

At December 31, 2012, the projected benefit obligations for the qualified and non-qualified pension plans were $8.7 billion and $582 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's pension plans consist of the following:



	2012			2011
	(in millions)
Other regulatory assets, deferred	$	3,013		$	2,614
Other current liabilities	(37		)	(34		)
Employee benefit obligations	(1,312		)	(1,245		)
Accumulated OCI	125			109

Presented below are the amounts included in accumulated OCI and regulatory assets at December 31, 2012 and 2011 related to the defined benefit pension plans that had not yet been recognized in net periodic pension cost along with the estimated amortization of such amounts for 2013.



	Prior Service Cost		Net (Gain) Loss
	(in millions)
Balance at December 31, 2012:
Accumulated OCI	$	7	$	118
Regulatory assets	100		2,913
Total	$	107	$	3,031
Balance at December 31, 2011:
Accumulated OCI	$	7	$	102
Regulatory assets	128		2,486
Total	$	135	$	2,588
Estimated amortization in net periodic pension cost in 2013:
Accumulated OCI	$	1	$	8
Regulatory assets	26		192
Total	$	27	$	200

The components of OCI and the changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2012 and 2011 are presented in the following table:



	Accumulated OCI			Regulatory Assets
	(in millions)
Balance at December 31, 2010	$	68		$	1,749
Net (gain) loss	43			915
Change in prior service costs	—			1
Reclassification adjustments:
Amortization of prior service costs	(1		)	(31		)
Amortization of net gain (loss)	(1		)	(20		)
Total reclassification adjustments	(2		)	(51		)
Total change	41			865
Balance at December 31, 2011	$	109		$	2,614
Net (gain) loss	21			519
Change in prior service costs	—			—
Reclassification adjustments:
Amortization of prior service costs	(1		)	(29		)
Amortization of net gain (loss)	(4		)	(91		)
Total reclassification adjustments	(5		)	(120		)
Total change	16			399
Balance at December 31, 2012	$	125		$	3,013

Components of net periodic pension cost were as follows:



	2012			2011			2010
	(in millions)
Service cost	$	198		$	184		$	172
Interest cost	393			389			391
Expected return on plan assets	(581		)	(607		)	(552		)
Recognized net loss	95			21			10
Net amortization	30			32			33
Net periodic pension cost	$	135		$	19		$	54

Net periodic pension cost is the sum of service cost, interest cost, and other costs netted against the expected return on plan assets. The expected return on plan assets is determined by multiplying the expected rate of return on plan assets and the market-related value of plan assets. In determining the market-related value of plan assets, the Company has elected to amortize changes in the market value of all plan assets over five years rather than recognize the changes immediately. As a result, the accounting value of plan assets that is used to calculate the expected return on plan assets differs from the current fair value of the plan assets. Future benefit payments reflect expected future service and are estimated based on assumptions used to measure the projected benefit obligation for the pension plans. At December 31, 2012, estimated benefit payments were as follows:



	Benefit Payments
	(in millions)
2013	$	376
2014	397
2015	419
2016	440
2017	465
2018 to 2022	2,632

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2012 and 2011 were as follows:



	2012			2011
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	1,787		$	1,752
Service cost	21			21
Interest cost	85			92
Benefits paid	(99		)	(103		)
Actuarial loss	71			29
Plan amendments	—			(12		)
Retiree drug subsidy	7			8
Balance at end of year	1,872			1,787
Change in plan assets
Fair value of plan assets at beginning of year	765			802
Actual return on plan assets	93			4
Employer contributions	55			54
Benefits paid	(92		)	(95		)
Fair value of plan assets at end of year	821			765
Accrued liability	$	(1,051	)	$	(1,022	)

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's other postretirement benefit plans consist of the following:



	2012			2011
	(in millions)
Other regulatory assets, deferred	$	360		$	345
Other current liabilities	(3		)	(4		)
Employee benefit obligations	(1,048		)	(1,018		)
Accumulated OCI	7			6

Presented below are the amounts included in accumulated OCI and regulatory assets at December 31, 2012 and 2011 related to the other postretirement benefit plans that had not yet been recognized in net periodic other postretirement benefit cost along with the estimated amortization of such amounts for 2013.



	Prior Service Cost		Net (Gain) Loss		Transition Obligation
			(in millions)
Balance at December 31, 2012:
Accumulated OCI	$	—	$	7	$	—
Regulatory assets	13		342		5
Total	$	13	$	349	$	5
Balance at December 31, 2011:
Accumulated OCI	$	—	$	6	$	—
Regulatory assets	17		314		14
Total	$	17	$	320	$	14
Estimated amortization as net periodic postretirement benefit cost in 2013:
Accumulated OCI	$	—	$	—	$	—
Regulatory assets	4		12		5
Total	$	4	$	12	$	5

The components of OCI, along with the changes in the balance of regulatory assets, related to the other postretirement benefit plans for the plan years ended December 31, 2012 and 2011 are presented in the following table:



	Accumulated OCI		Regulatory Assets
	(in millions)
Balance at December 31, 2010	$	3	$	292
Net (gain) loss	3		84
Change in prior service costs/transition obligation	—		(12		)
Reclassification adjustments:
Amortization of transition obligation	—		(10		)
Amortization of prior service costs	—		(5		)
Amortization of net gain (loss)	—		(4		)
Total reclassification adjustments	—		(19		)
Total change	3		53
Balance at December 31, 2011	$	6	$	345
Net (gain) loss	1		35
Change in prior service costs/transition obligation	—		—
Reclassification adjustments:
Amortization of transition obligation	—		(10		)
Amortization of prior service costs	—		(4		)
Amortization of net gain (loss)	—		(6		)
Total reclassification adjustments	—		(20		)
Total change	1		15
Balance at December 31, 2012	$	7	$	360

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2012			2011			2010
	(in millions)
Service cost	$	21		$	21		$	25
Interest cost	85			92			100
Expected return on plan assets	(60		)	(64		)	(63		)
Net amortization	20			20			20
Net postretirement cost	$	66		$	69		$	82

Future benefit payments, including prescription drug benefits, reflect expected future service and are estimated based on assumptions used to measure the APBO for the other postretirement benefit plans. Estimated benefit payments are reduced by drug subsidy receipts expected as a result of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 as follows:



	Benefit Payments		Subsidy Receipts			Total
	(in millions)
2013	$	110	$	(11	)	$	99
2014	116		(12		)	104
2015	122		(13		)	109
2016	127		(14		)	113
2017	130		(16		)	114
2018 to 2022	661		(88		)	573

Benefit Plan Assets

Pension plan and other postretirement benefit plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended (Internal Revenue Code). The Company's investment policies for both the pension plan and the other postretirement benefit plans cover a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily to gain efficient exposure to the various asset classes and as hedging tools. The Company minimizes the risk of large losses primarily through diversification but also monitors and manages other aspects of risk.

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2012 and 2011, along with the targeted mix of assets for each plan, is presented below:



	Target		2012		2011
Pension plan assets:
Domestic equity	26	%	28	%	29	%
International equity	25		24		25
Fixed income	23		27		23
Special situations	3		1		—
Real estate investments	14		13		14
Private equity	9		7		9
Total	100	%	100	%	100	%
Other postretirement benefit plan assets:
Domestic equity	40	%	38	%	39	%
International equity	21		24		18
Domestic fixed income	25		28		31
Global fixed income	4		3		4
Special situations	1		—		—
Real estate investments	6		5		5
Private equity	3		2		3
Total	100	%	100	%	100	%

The investment strategy for plan assets related to the Company's qualified pension plan is to be broadly diversified across major asset classes. The asset allocation is established after consideration of various factors that affect the assets and liabilities of the pension plan including, but not limited to, historical and expected returns, volatility, correlations of asset classes, the current level of assets and liabilities, and the assumed growth in assets and liabilities. Because a significant portion of the liability of the pension plan is long-term in nature, the assets are invested consistent with long-term investment expectations for return and risk. To manage the actual asset class exposures relative to the target asset allocation, the Company employs a formal rebalancing program. As additional risk management, external investment managers and service providers are subject to written guidelines to ensure appropriate and prudent investment practices.

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Trust-owned life insurance (TOLI). Investments of the Company's taxable trusts aimed at minimizing the impact of taxes on the portfolio.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Following are the fair value measurements for the pension plan and the other postretirement benefit plan assets as of December 31, 2012 and 2011. The fair values presented are prepared in accordance with GAAP. For purposes of determining the fair value of the pension plan and other postretirement benefit plan assets and the appropriate level designation, management relies on information provided by the plan's trustee. This information is reviewed and evaluated by management with changes made to the trustee information as appropriate.

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•

Investments in equity securities: Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.

•

Investments in fixed income securities: Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.


•	Investments in TOLI: Investments in TOLI policies are classified as Level 2 investments and are valued based on the underlying investments held in the policy's separate account. The underlying assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities.

•

Investments in private equity and real estate: Investments in private equity and real estate are generally classified as Level 3 as the underlying assets typically do not have observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. In the case of private equity, techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, and discounted cash flow analysis. Real estate managers generally use prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals to value underlying real estate investments. The fair value of partnerships is determined by aggregating the value of the underlying assets.

The fair values of pension plan assets as of December 31, 2012 and 2011 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investments sales, and payables related to pending investment purchases. Assets that are considered special situations investments, primarily real estate investments and private equities, are presented in the tables below based on the nature of the investment.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	1,163	$	670	$	—	$	1,833
International equity*	912		979		—		1,891
Fixed income:
U.S. Treasury, government, and agency bonds	—		516		—		516
Mortgage- and asset-backed securities	—		127		—		127
Corporate bonds	—		876		3		879
Pooled funds	—		399		—		399
Cash equivalents and other	5		548		—		553
Real estate investments	258		—		841		1,099
Private equity	—		—		593		593
Total	$	2,338	$	4,115	$	1,437	$	7,890



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	1,155	$	533	$	—	$	1,688
International equity*	1,187		340		—		1,527
Fixed income:
U.S. Treasury, government, and agency bonds	—		433		—		433
Mortgage- and asset-backed securities	—		135		—		135
Corporate bonds	—		832		3		835
Pooled funds	—		380		—		380
Cash equivalents and other	1		139		—		140
Real estate investments	220		—		782		1,002
Private equity	—		—		582		582
Total	$	2,563	$	2,792	$	1,367	$	6,722



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.

Changes in the fair value measurement of the Level 3 items in the pension plan assets valued using significant unobservable inputs for the years ended December 31, 2012 and 2011 were as follows:



	2012					2011
	Real Estate Investments		Private Equity			Real Estate Investments		Private Equity
	(in millions)
Beginning balance	$	782	$	582		$	674	$	638
Actual return on investments:
Related to investments held at year end	56		1			72		(12		)
Related to investments sold during the year	3		41			20		47
Total return on investments	59		42			92		35
Purchases, sales, and settlements	—		(31		)	16		(91		)
Transfers into/out of Level 3	—		—			—		—
Ending balance	$	841	$	593		$	782	$	582

The fair values of other postretirement benefit plan assets as of December 31, 2012 and 2011 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investments sales, and payables related to pending investment purchases. Assets that are considered special situations investments, primarily real estate investments and private equities, are presented in the tables below based on the nature of the investment.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)
	(in millions)
Assets:
Domestic equity*	$	140	$	43	$	—	$	183
International equity*	33		75		—		108
Fixed income:
U.S. Treasury, government, and agency bonds	—		24		—		24
Mortgage- and asset-backed securities	—		4		—		4
Corporate bonds	—		31		—		31
Pooled funds	—		42		—		42
Cash equivalents and other	—		44		—		44
Trust-owned life insurance	—		320		—		320
Real estate investments	10		—		30		40
Private equity	—		—		21		21
Total	$	183	$	583	$	51	$	817



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	156	$	38	$	—	$	194
International equity*	45		39		—		84
Fixed income:
U.S. Treasury, government, and agency bonds	—		24		—		24
Mortgage- and asset-backed securities	—		5		—		5
Corporate bonds	—		32		—		32
Pooled funds	—		48		—		48
Cash equivalents and other	—		46		—		46
Trust-owned life insurance	—		291		—		291
Real estate investments	9		—		30		39
Private equity	—		—		23		23
Total	$	210	$	523	$	53	$	786



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.

Changes in the fair value measurement of the Level 3 items in the other postretirement benefit plan assets valued using significant unobservable inputs for the years ended December 31, 2012 and 2011 were as follows:



	2012					2011
	Real Estate Investments		Private Equity			Real Estate Investments		Private Equity
	(in millions)
Beginning balance	$	30	$	23		$	26	$	23
Actual return on investments:
Related to investments held at year end	—		—			3		—
Related to investments sold during the year	—		1			1		2
Total return on investments	—		1			4		2
Purchases, sales, and settlements	—		(3		)	—		(2		)
Transfers into/out of Level 3	—		—			—		—
Ending balance	$	30	$	21		$	30	$	23

Employee Savings Plan

Southern Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides an 85% matching contribution on up to 6% of an employee's base salary. Total matching contributions made to the plan for 2012, 2011, and 2010 were $82 million, $78 million, and $76 million, respectively.

Alabama Power [Member]

RETIREMENT BENEFITS

The Company has a defined benefit, trusteed, pension plan covering substantially all employees. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the qualified pension plan were made for the year ended December 31, 2012. No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2013. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds its other postretirement trusts to the extent required by the Alabama PSC and the FERC. For the year ending December 31, 2013, other postretirement trust contributions are expected to total approximately $4 million.

Actuarial Assumptions

The weighted average rates assumed in the actuarial calculations used to determine both the benefit obligations as of the measurement date and the net periodic costs for the pension and other postretirement benefit plans for the following year are presented below. Net periodic benefit costs were calculated in 2009 for the 2010 plan year using discount rates for the pension plans and the other postretirement benefit plans of 5.93% and 5.84%, respectively, and an annual salary increase of 4.18%.



	2012		2011		2010
Discount rate:
Pension plans	4.27	%	4.98	%	5.52	%
Other postretirement benefit plans	4.06		4.88		5.41
Annual salary increase	3.59		3.84		3.84
Long-term return on plan assets:
Pension plans	8.20		8.45		8.45
Other postretirement benefit plans	7.19		7.39		7.43



	Initial Cost Trend Rate	Ultimate Cost Trend Rate	Year That Ultimate Rate Is Reached
Pre-65	8.00%	5.00%	2020
Post-65 medical	6.00	5.00	2020
Post-65 prescription	6.00	5.00	2020

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2012 as follows:



	1 Percent Increase		1 Percent Decrease
	(in millions)
Benefit obligation	$	32	$	(27	)
Service and interest costs	2		(1		)

Pension Plans

The total accumulated benefit obligation for the pension plans was $2.0 billion at December 31, 2012 and $1.8 billion at December 31, 2011. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2012 and 2011 were as follows:



	2012			2011
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	1,932		$	1,779
Service cost	44			43
Interest cost	94			96
Benefits paid	(90		)	(88		)
Actuarial loss	238			102
Balance at end of year	2,218			1,932
Change in plan assets
Fair value of plan assets at beginning of year	1,885			1,933
Actual return on plan assets	274			32
Employer contributions	8			8
Benefits paid	(90		)	(88		)
Fair value of plan assets at end of year	2,077			1,885
Accrued liability	$	(141	)	$	(47	)

At December 31, 2012, the projected benefit obligations for the qualified and non-qualified pension plans were $2.1 billion and $121 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's pension plans consist of the following:



	2012			2011
	(in millions)
Prepaid pension costs	$	—		$	59
Other regulatory assets, deferred	822			727
Other current liabilities	(8		)	(7		)
Employee benefit obligations	(133		)	(99		)

Presented below are the amounts included in regulatory assets at December 31, 2012 and 2011 related to the defined benefit pension plans that had not yet been recognized in net periodic pension cost along with the estimated amortization of such amounts for 2013.



	2012		2011		Estimated Amortization in 2013
			(in millions)
Prior service cost	$	26	$	33	$	7
Net (gain) loss	796		694		52
Other regulatory assets, deferred	$	822	$	727

The changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2012 and 2011 are presented in the following table:



	Regulatory Assets
	(in millions)
Balance at December 31, 2010	$	497
Net (gain) loss	243
Change in prior service costs	—
Reclassification adjustments:
Amortization of prior service costs	(9		)
Amortization of net gain (loss)	(4		)
Total reclassification adjustments	(13		)
Total change	230

Balance at December 31, 2011	$	727
Net (gain) loss	125
Change in prior service costs	—
Reclassification adjustments:
Amortization of prior service costs	(7		)
Amortization of net gain (loss)	(23		)
Total reclassification adjustments	(30		)
Total change	95
Balance at December 31, 2012	$	822

Components of net periodic pension cost (income) were as follows:



	2012			2011			2010
	(in millions)
Service cost	$	44		$	43		$	41
Interest cost	94			96			97
Expected return on plan assets	(162		)	(173		)	(168		)
Recognized net (gain) loss	23			4			2
Net amortization	7			9			9
Net periodic pension cost (income)	$	6		$	(21	)	$	(19	)

Net periodic pension cost (income) is the sum of service cost, interest cost, and other costs netted against the expected return on plan assets. The expected return on plan assets is determined by multiplying the expected rate of return on plan assets and the market-related value of plan assets. In determining the market-related value of plan assets, the Company has elected to amortize changes in the market value of all plan assets over five years rather than recognize the changes immediately. As a result, the accounting value of plan assets that is used to calculate the expected return on plan assets differs from the current fair value of the plan assets.

Future benefit payments reflect expected future service and are estimated based on assumptions used to measure the projected benefit obligation for the pension plans. At December 31, 2012, estimated benefit payments were as follows:



	Benefit Payments
	(in millions)
2013	$	99
2014	104
2015	108
2016	112
2017	117
2018 to 2022	637

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2012 and 2011 were as follows:



	2012			2011
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	470		$	454
Service cost	5			5
Interest cost	22			24
Benefits paid	(24		)	(27		)
Actuarial loss	15			11
Plan amendments	—			—
Retiree drug subsidy	2			3
Balance at end of year	490			470
Change in plan assets
Fair value of plan assets at beginning of year	315			323
Actual return on plan assets	39			5
Employer contributions	11			11
Benefits paid	(22		)	(24		)
Fair value of plan assets at end of year	343			315
Accrued liability	$	(147	)	$	(155	)

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's other postretirement benefit plans consist of the following:



	2012			2011
	(in millions)
Regulatory assets	$	89		$	96
Employee benefit obligations	(147		)	(155		)

Presented below are the amounts included in regulatory assets at December 31, 2012 and 2011 related to the other postretirement benefit plans that had not yet been recognized in net periodic other postretirement benefit cost along with the estimated amortization of such amounts for 2013.



	2012		2011		Estimated Amortization in 2013
	(in millions)
Prior service cost	$	22	$	26	$	4
Net (gain) loss	67		68		2
Transition obligation	—		2		—
Regulatory assets	$	89	$	96

The changes in the balance of regulatory assets related to the other postretirement benefit plans for the plan years ended December 31, 2012 and 2011 are presented in the following table:



	Regulatory Assets
	(in millions)
Balance at December 31, 2010	$	72
Net (gain) loss	31
Change in prior service costs/transition obligation	—
Reclassification adjustments:
Amortization of transition obligation	(3		)
Amortization of prior service costs	(4		)
Amortization of net gain (loss)	—
Total reclassification adjustments	(7		)
Total change	24
Balance at December 31, 2011	$	96
Net (gain) loss	(1		)
Change in prior service costs/transition obligation	—
Reclassification adjustments:
Amortization of transition obligation	(2		)
Amortization of prior service costs	(4		)
Amortization of net gain (loss)	—
Total reclassification adjustments	(6		)
Total change	(7		)
Balance at December 31, 2012	$	89

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2012			2011			2010
	(in millions)
Service cost	$	5		$	5		$	6
Interest cost	22			24			26
Expected return on plan assets	(23		)	(25		)	(25		)
Net amortization	6			7			7
Net postretirement cost	$	10		$	11		$	14



	Benefit Payments		Subsidy Receipts			Total
	(in millions)
2013	$	30	$	(3	)	$	27
2014	32		(4		)	28
2015	33		(4		)	29
2016	34		(4		)	30
2017	35		(5		)	30
2018 to 2022	176		(26		)	150

Benefit Plan Assets

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2012 and 2011, along with the targeted mix of assets for each plan, is presented below:



	Target		2012		2011
Pension plan assets:
Domestic equity	26	%	28	%	29	%
International equity	25		24		25
Fixed income	23		27		23
Special situations	3		1		—
Real estate investments	14		13		14
Private equity	9		7		9
Total	100	%	100	%	100	%
Other postretirement benefit plan assets:
Domestic equity	44	%	46	%	41	%
International equity	20		20		14
Domestic fixed income	24		28		38
Special situations	1		—		—
Real estate investments	8		4		4
Private equity	3		2		3
Total	100	%	100	%	100	%

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Trust-owned life insurance (TOLI). Investments of the Company's taxable trusts aimed at minimizing the impact of taxes on the portfolio.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•


•	Investments in TOLI: Investments in TOLI policies are classified as Level 2 investments and are valued based on the underlying investments held in the policy's separate account. The underlying assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities.

•



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	304	$	175	$	—	$	479
International equity*	238		256		—		494
Fixed income:
U.S. Treasury, government, and agency bonds	—		135		—		135
Mortgage- and asset-backed securities	—		33		—		33
Corporate bonds	—		230		1		231
Pooled funds	—		104		—		104
Cash equivalents and other	1		143		—		144
Real estate investments	67		—		220		287
Private equity	—		—		155		155
Total	$	610	$	1,076	$	376	$	2,062



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	320	$	148	$	—	$	468
International equity*	329		94		—		423
Fixed income:
U.S. Treasury, government, and agency bonds	—		120		—		120
Mortgage- and asset-backed securities	—		37		—		37
Corporate bonds	—		232		1		233
Pooled funds	—		105		—		105
Cash equivalents and other	—		39		—		39
Real estate investments	61		—		217		278
Private equity	—		—		161		161
Total	$	710	$	775	$	379	$	1,864



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.

Changes in the fair value measurement of the Level 3 items in the pension plan assets valued using significant unobservable inputs for the years ended December 31, 2012 and 2011 were as follows:



	2012					2011
	Real Estate Investments		Private Equity			Real Estate Investments		Private Equity
	(in millions)
Beginning balance	$	217	$	161		$	191	$	180
Actual return on investments:
Related to investments held at year end	2		—			16		(3		)
Related to investments sold during the year	1		2			6		9
Total return on investments	3		2			22		6
Purchases, sales, and settlements	—		(8		)	4		(25		)
Transfers into/out of Level 3	—		—			—		—
Ending balance	$	220	$	155		$	217	$	161



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	62	$	9	$	—	$	71
International equity*	12		13		—		25
Fixed income:
U.S. Treasury, government, and agency bonds	—		7		—		7
Mortgage- and asset-backed securities	—		2		—		2
Corporate bonds	—		11		—		11
Pooled funds	—		5		—		5
Cash equivalents and other	—		19		—		19
Trust-owned life insurance	—		178		—		178
Real estate investments	4		—		11		15
Private equity	—		—		8		8
Total	$	78	$	244	$	19	$	341



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	57	$	8	$	—	$	65
International equity*	17		5		—		22
Fixed income:
U.S. Treasury, government, and agency bonds	—		9		—		9
Mortgage- and asset-backed securities	—		2		—		2
Corporate bonds	—		12		—		12
Pooled funds	—		5		—		5
Cash equivalents and other	—		19		—		19
Trust-owned life insurance	—		160		—		160
Real estate investments	4		—		11		15
Private equity	—		—		8		8
Total	$	78	$	220	$	19	$	317



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	2012				2011
	Real Estate Investments		Private Equity		Real Estate Investments		Private Equity
	(in millions)
Beginning balance	$	11	$	8	$	10	$	9
Actual return on investments:
Related to investments held at year end	—		—		1		—
Related to investments sold during the year	—		—		—		—
Total return on investments	—		—		1		—
Purchases, sales, and settlements	—		—		—		(1		)
Transfers into/out of Level 3	—		—		—		—
Ending balance	$	11	$	8	$	11	$	8

Employee Savings Plan

The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides an 85% matching contribution on up to 6% of an employee's base salary. Total matching contributions made to the plan for 2012, 2011, and 2010 were $19 million, $18 million, and $18 million, respectively.

Georgia Power [Member]

RETIREMENT BENEFITS

The Company has a defined benefit, trusteed, pension plan covering substantially all employees. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the qualified pension plan were made for the year ended December 31, 2012. No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2013. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds its other postretirement trusts to the extent required by the Georgia PSC and the FERC. For the year ending December 31, 2013, other postretirement trust contributions are expected to total approximately $24 million.

Actuarial Assumptions



	2012		2011		2010
Discount rate:
Pension plans	4.27	%	4.98	%	5.52	%
Other postretirement benefit plans	4.04		4.87		5.40
Annual salary increase	3.59		3.84		3.84
Long-term return on plan assets:
Pension plans	8.20		8.45		8.45
Other postretirement benefit plans	7.24		7.25		7.24



	Initial Cost Trend Rate	Ultimate Cost Trend Rate	Year That Ultimate Rate Is Reached
Pre-65	8.00%	5.00%	2020
Post-65 medical	6.00	5.00	2020
Post-65 prescription	6.00	5.00	2020

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2012 as follows:



	1 Percent Increase		1 Percent Decrease
	(in millions)
Benefit obligation	$	61	$	(52	)
Service and interest costs	3		(3		)

Pension Plans

The total accumulated benefit obligation for the pension plans was $3.1 billion at December 31, 2012 and $2.7 billion at December 31, 2011. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2012 and 2011 were as follows:



	2012			2011
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	2,909		$	2,674
Service cost	60			57
Interest cost	141			144
Benefits paid	(136		)	(132		)
Actuarial loss	338			166
Balance at end of year	3,312			2,909
Change in plan assets
Fair value of plan assets at beginning of year	2,575			2,621
Actual return on plan assets	377			76
Employer contributions	11			10
Benefits paid	(136		)	(132		)
Fair value of plan assets at end of year	2,827			2,575
Accrued liability	$	(485	)	$	(334	)

At December 31, 2012, the projected benefit obligations for the qualified and non-qualified pension plans were $3.1 billion and $165 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's pension plans consist of the following:



	2012			2011
	(in millions)
Other regulatory assets, deferred	$	1,132		$	995
Current liabilities, other	(11		)	(10		)
Employee benefit obligations	(474		)	(324		)



	2012		2011		Estimated Amortization in 2013
	(in millions)
Prior service cost	$	37	$	48	$	10
Net (gain) loss	1,095		947		74
Other regulatory assets, deferred	$	1,132	$	995

The changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2012 and 2011 are presented in the following table:



	Regulatory Assets
	(in millions)
Balance at December 31, 2010	$	689
Net (gain) loss	324
Change in prior service costs	—
Reclassification adjustments:
Amortization of prior service costs	(12		)
Amortization of net gain (loss)	(6		)
Total reclassification adjustments	(18		)
Total change	306
Balance at December 31, 2011	$	995
Net (gain) loss	182
Change in prior service costs	—
Reclassification adjustments:
Amortization of prior service costs	(12		)
Amortization of net gain (loss)	(33		)
Total reclassification adjustments	(45		)
Total change	137
Balance at December 31, 2012	$	1,132

Components of net periodic pension cost (income) were as follows:



	2012			2011			2010
	(in millions)
Service cost	$	60		$	57		$	54
Interest cost	141			144			145
Expected return on plan assets	(221		)	(234		)	(220		)
Recognized net loss	33			6			2
Net amortization	12			12			13
Net periodic pension cost (income)	$	25		$	(15	)	$	(6	)



	Benefit Payments
	(in millions)
2013	$	148
2014	154
2015	160
2016	166
2017	173
2018 to 2022	952

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2012 and 2011 were as follows:



	2012			2011
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	774		$	786
Service cost	7			7
Interest cost	37			41
Benefits paid	(46		)	(48		)
Actuarial (gain) loss	25			(4		)
Plan amendments	—			(12		)
Retiree drug subsidy	3			4
Balance at end of year	800			774
Change in plan assets
Fair value of plan assets at beginning of year	365			393
Actual return (loss) on plan assets	43			(4		)
Employer contributions	17			20
Benefits paid	(43		)	(44		)
Fair value of plan assets at end of year	382			365
Accrued liability	$	(418	)	$	(409	)

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's other postretirement benefit plans consist of the following:



	2012			2011
	(in millions)
Regulatory assets	$	187		$	186
Employee benefit obligations	(418		)	(409		)



	2012			2011			Estimated Amortization in 2013
	(in millions)
Prior service cost	$	(4	)	$	(4	)	$	—
Net (gain) loss	186			179			7
Transition obligation	5			11			4
Regulatory assets	$	187		$	186

The changes in the balance of regulatory assets related to the other postretirement benefit plans for the plan years ended December 31, 2012 and 2011 are presented in the following table:



	Regulatory Assets
	(in millions)
Balance at December 31, 2010	$	179
Net (gain) loss	29
Change in prior service costs/transition obligation	(12		)
Reclassification adjustments:
Amortization of transition obligation	(6		)
Amortization of prior service costs	(1		)
Amortization of net gain (loss)	(3		)
Total reclassification adjustments	(10		)
Total change	7
Balance at December 31, 2011	$	186
Net (gain) loss	11
Change in prior service costs/transition obligation	—
Reclassification adjustments:
Amortization of transition obligation	(6		)
Amortization of prior service costs	—
Amortization of net gain (loss)	(4		)
Total reclassification adjustments	(10		)
Total change	1
Balance at December 31, 2012	$	187

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2012			2011			2010
	(in millions)
Service cost	$	7		$	7		$	9
Interest cost	37			41			44
Expected return on plan assets	(29		)	(30		)	(30		)
Net amortization	10			11			10
Net postretirement cost	$	25		$	29		$	33



	Benefit Payments		Subsidy Receipts			Total
	(in millions)
2013	$	49	$	(5	)	$	44
2014	51		(5		)	46
2015	53		(5		)	48
2016	55		(6		)	49
2017	56		(7		)	49
2018 to 2022	282		(36		)	246

Benefit Plan Assets

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2012 and 2011, along with the targeted mix of assets for each plan, is presented below:



	Target		2012		2011
Pension plan assets:
Domestic equity	26	%	28	%	29	%
International equity	25		24		25
Fixed income	23		27		23
Special situations	3		1		—
Real estate investments	14		13		14
Private equity	9		7		9
Total	100	%	100	%	100	%
Other postretirement benefit plan assets:
Domestic equity	41	%	34	%	39	%
International equity	21		27		22
Domestic fixed income	24		27		26
Global fixed income	8		7		8
Special situations	1		—		—
Real estate investments	3		3		3
Private equity	2		2		2
Total	100	%	100	%	100	%

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Trust-owned life insurance (TOLI). Investments of the Company's taxable trusts aimed at minimizing the impact of taxes on the portfolio.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•


•	Investments in TOLI: Investments in TOLI policies are classified as Level 2 investments and are valued based on the underlying investments held in the policy's separate account. The underlying assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities.

•



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	413	$	238	$	—	$	651
International equity*	324		348		—		672
Fixed income:
U.S. Treasury, government, and agency bonds	—		183		—		183
Mortgage- and asset-backed securities	—		45		—		45
Corporate bonds	—		312		1		313
Pooled funds	—		142		—		142
Cash equivalents and other	2		195		—		197
Real estate investments	92		—		299		391
Private equity	—		—		211		211
Total	$	831	$	1,463	$	511	$	2,805



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	437	$	202	$	—	$	639
International equity*	449		129		—		578
Fixed income:
U.S. Treasury, government, and agency bonds	—		164		—		164
Mortgage- and asset-backed securities	—		51		—		51
Corporate bonds	—		316		1		317
Pooled funds	—		144		—		144
Cash equivalents and other	—		53		—		53
Real estate investments	83		—		296		379
Private equity	—		—		220		220
Total	$	969	$	1,059	$	517	$	2,545



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.

Changes in the fair value measurement of the Level 3 items in the pension plan assets valued using significant unobservable inputs for the years ended December 31, 2012 and 2011 were as follows:



	2012					2011
	Real Estate Investments		Private Equity			Real Estate Investments		Private Equity
	(in millions)
Beginning balance	$	296	$	220		$	258	$	245
Actual return on investments:
Related to investments held at year end	2		—			24		(5		)
Related to investments sold during the year	1		2			8		14
Total return on investments	3		2			32		9
Purchases, sales, and settlements	—		(11		)	6		(34		)
Transfers into/out of Level 3	—		—			—		—
Ending balance	$	299	$	211		$	296	$	220



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	65	$	27	$	—	$	92
International equity*	10		51		—		61
Fixed income:
U.S. Treasury, government, and agency bonds	—		6		—		6
Mortgage- and asset-backed securities	—		1		—		1
Corporate bonds	—		10		—		10
Pooled funds	—		32		—		32
Cash equivalents and other	—		18		—		18
Trust-owned life insurance	—		142		—		142
Real estate investments	3		—		10		13
Private equity	—		—		7		7
Total	$	78	$	287	$	17	$	382



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Domestic equity*	$	85	$	24	$	—	$	109
International equity*	15		31		—		46
Fixed income:
U.S. Treasury, government, and agency bonds	—		5		—		5
Mortgage- and asset-backed securities	—		1		—		1
Corporate bonds	—		10		—		10
Pooled funds	—		38		—		38
Cash equivalents and other	—		26		—		26
Trust-owned life insurance	—		131		—		131
Real estate investments	3		—		9		12
Private equity	—		—		7		7
Total	$	103	$	266	$	16	$	385



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	2012				2011
	Real Estate Investments		Private Equity		Real Estate Investments		Private Equity
	(in millions)
Beginning balance	$	9	$	7	$	8	$	8
Actual return on investments:
Related to investments held at year end	1		—		1		—
Related to investments sold during the year	—		—		—		—
Total return on investments	1		—		1		—
Purchases, sales, and settlements	—		—		—		(1		)
Transfers into/out of Level 3	—		—		—		—
Ending balance	$	10	$	7	$	9	$	7

Employee Savings Plan

The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides an 85% matching contribution on up to 6% of an employee's base salary. Total matching contributions made to the plan for 2012, 2011, and 2010 were $24 million, $24 million, and $23 million, respectively.

Gulf Power [Member]

RETIREMENT BENEFITS

The Company has a defined benefit, trusteed, pension plan covering substantially all employees. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). In December 2012, the Company contributed $13.4 million to the qualified pension plan. No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2013. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds its other postretirement trusts to the extent required by the FERC. For the year ending December 31, 2013, no other postretirement trust contributions are expected.

Actuarial Assumptions

The weighted average rates assumed in the actuarial calculations used to determine both the benefit obligations as of the measurement date and the net periodic costs for the pension and other postretirement benefit plans for the following year are presented below. Net periodic benefit costs were calculated in 2009 for the 2010 plan year using discount rates for the pension plans and the other postretirement benefit plans of 5.93% and 5.84%, respectively, and an annual salary increase of 4.18%.



	2012		2011		2010
Discount rate:
Pension plans	4.27	%	4.98	%	5.53	%
Other postretirement benefit plans	4.06		4.88		5.41
Annual salary increase	3.59		3.84		3.84
Long-term return on plan assets:
Pension plans	8.20		8.45		8.45
Other postretirement benefit plans	8.02		8.11		8.18



	Initial Cost Trend Rate		Ultimate Cost Trend Rate		Year That Ultimate Rate Is Reached
Pre-65	8.00	%	5.00	%	2020
Post-65 medical	6.00		5.00		2020
Post-65 prescription	6.00		5.00		2020

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2012 as follows:



	1 Percent Increase		1 Percent Decrease
	(in thousands)
Benefit obligation	$	3,399	$	(2,897	)
Service and interest costs	198		(169		)

Pension Plans

The total accumulated benefit obligation for the pension plans was $371 million at December 31, 2012 and $321 million at December 31, 2011. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2012 and 2011were as follows:



	2012			2011
	(in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	352,834		$	316,286
Service cost	9,101			8,431
Interest cost	17,199			17,074
Benefits paid	(14,046		)	(13,807		)
Plan amendments	426			—
Actuarial loss	47,987			24,850
Balance at end of year	413,501			352,834
Change in plan assets
Fair value of plan assets at beginning of year	304,324			307,828
Actual return on plan assets	45,762			9,552
Employer contributions	14,220			751
Benefits paid	(14,046		)	(13,807		)
Fair value of plan assets at end of year	350,260			304,324
Accrued liability	$	(63,241	)	$	(48,510	)

At December 31, 2012, the projected benefit obligations for the qualified and non-qualified pension plans were $393 million and $20 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's pension plans consist of the following:



	2012			2011
	(in thousands)
Other regulatory assets	$	139,261		$	115,853
Current liabilities, other	(855		)	(794		)
Employee benefit obligations	(62,386		)	(47,716		)



	2012		2011		Estimated Amortization in 2013
	(in thousands)
Prior service cost	$	5,565	$	6,402	$	1,164
Net (gain) loss	133,696		109,451		8,385
Other regulatory assets	$	139,261	$	115,853

The changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2012 and 2011 are presented in the following table:



	Regulatory Assets
	(in thousands)
Balance at December 31, 2010	$	75,096
Net (gain) loss	42,531
Change in prior service costs	—
Reclassification adjustments:
Amortization of prior service costs	(1,262		)
Amortization of net gain (loss)	(512		)
Total reclassification adjustments	(1,774		)
Total change	40,757
Balance at December 31, 2011	$	115,853
Net (gain) loss	28,157
Change in prior service costs	426
Reclassification adjustments:
Amortization of prior service costs	(1,262		)
Amortization of net gain (loss)	(3,913		)
Total reclassification adjustments	(5,175		)
Total change	23,408
Balance at December 31, 2012	$	139,261

Components of net periodic pension cost were as follows:



	2012			2011			2010
	(in thousands)
Service cost	$	9,101		$	8,431		$	7,853
Interest cost	17,199			17,074			17,305
Expected return on plan assets	(25,932		)	(27,232		)	(24,695		)
Recognized net (gain) loss	3,913			512			398
Net amortization	1,262			1,262			1,302
Net periodic pension cost	$	5,543		$	47		$	2,163



	Benefit Payments
	(in thousands)
2013	$	15,767
2014	16,606
2015	17,427
2016	18,272
2017	19,383
2018 to 2022	113,108

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2012 and 2011 were as follows:



	2012			2011
	(in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	70,923		$	69,617
Service cost	1,167			1,132
Interest cost	3,367			3,658
Benefits paid	(3,854		)	(4,189		)
Actuarial loss	3,468			292
Plan amendments	—			—
Retiree drug subsidy	324			413
Balance at end of year	75,395			70,923
Change in plan assets
Fair value of plan assets at beginning of year	14,978			15,697
Actual return on plan assets	2,131			514
Employer contributions	2,648			2,543
Benefits paid	(3,530		)	(3,776		)
Fair value of plan assets at end of year	16,227			14,978
Accrued liability	$	(59,168	)	$	(55,945	)

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's other postretirement benefit plans consist of the following:



	2012			2011
	(in thousands)
Regulatory assets	$	2,169		$	239
Current liabilities, other	(661		)	(624		)
Employee benefit obligations	(58,507		)	(55,321		)



	2012		2011			Estimated Amortization in 2013
	(in thousands)
Prior service cost	$	324	$	510		$	186
Net (gain) loss	1,845		(464		)	—
Transition obligation	—		193			—
Regulatory assets (liabilities)	$	2,169	$	239

The changes in the balance of regulatory assets and regulatory liabilities related to the other postretirement benefit plans for the plan years ended December 31, 2012 and 2011 are presented in the following table:



	Regulatory Assets			Regulatory Liabilities
	(in thousands)
Balance at December 31, 2010	$	—		$	(166	)
Net (gain) loss	635			166
Change in prior service costs/transition obligation	—			—
Reclassification adjustments:
Amortization of transition obligation	(257		)	—
Amortization of prior service costs	(186		)	—
Amortization of net gain (loss)	47			—
Total reclassification adjustments	(396		)	—
Total change	239			166
Balance at December 31, 2011	$	239		$	—
Net (gain) loss	2,309			—
Change in prior service costs/transition obligation	—			—
Reclassification adjustments:
Amortization of transition obligation	(193		)	—
Amortization of prior service costs	(186		)	—
Amortization of net gain (loss)	—			—
Total reclassification adjustments	(379		)	—
Total change	1,930			—
Balance at December 31, 2012	$	2,169		$	—

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2012			2011			2010
	(in thousands)
Service cost	$	1,167		$	1,132		$	1,304
Interest cost	3,367			3,658			4,121
Expected return on plan assets	(1,311		)	(1,445		)	(1,481		)
Net amortization	379			396			406
Net postretirement cost	$	3,602		$	3,741		$	4,350



	Benefit Payments		Subsidy Receipts			Total
	(in thousands)
2013	$	4,473	$	(488	)	$	3,985
2014	4,707		(537		)	4,170
2015	4,903		(589		)	4,314
2016	5,117		(643		)	4,474
2017	5,211		(705		)	4,506
2018 to 2022	26,913		(3,804		)	23,109

Benefit Plan Assets

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2012 and 2011, along with the targeted mix of assets for each plan, is presented below:



	Target		2012		2011
Pension plan assets:
Domestic equity	26	%	28	%	29	%
International equity	25		24		25
Fixed income	23		27		23
Special situations	3		1		—
Real estate investments	14		13		14
Private equity	9		7		9
Total	100	%	100	%	100	%
Other postretirement benefit plan assets:
Domestic equity	25	%	27	%	28	%
International equity	24		23		24
Domestic fixed income	25		29		26
Special situations	3		1		—
Real estate investments	14		13		13
Private equity	9		7		9
Total	100	%	100	%	100	%

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Domestic equity*	$	51,215	$	29,499	$	—	$	80,714
International equity*	40,166		43,120		—		83,286
Fixed income:
U.S. Treasury, government, and agency bonds	—		22,724		—		22,724
Mortgage- and asset-backed securities	—		5,594		—		5,594
Corporate bonds	—		38,534		139		38,673
Pooled funds	—		17,581		—		17,581
Cash equivalents and other	208		24,148		—		24,356
Real estate investments	11,362		—		37,039		48,401
Private equity	—		—		26,129		26,129
Total	$	102,951	$	181,200	$	63,307	$	347,458



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Domestic equity*	$	51,686	$	23,857	$	—	$	75,543
International equity*	53,130		15,223		—		68,353
Fixed income:
U.S. Treasury, government, and agency bonds	—		19,375		—		19,375
Mortgage- and asset-backed securities	—		6,047		—		6,047
Corporate bonds	—		37,274		120		37,394
Pooled funds	—		16,998		—		16,998
Cash equivalents and other	30		6,228		—		6,258
Real estate investments	9,838		—		34,989		44,827
Private equity	—		—		26,053		26,053
Total	$	114,684	$	125,002	$	61,162	$	300,848



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.

Changes in the fair value measurement of the Level 3 items in the pension plan assets valued using significant unobservable inputs for the years ended December 31, 2012 and 2011 were as follows:



	2012					2011
	Real Estate Investments		Private Equity			Real Estate Investments		Private Equity
	(in thousands)
Beginning balance	$	34,989	$	26,053		$	30,355	$	28,727
Actual return on investments:
Related to investments held at year end	1,918		44			3,021		(538		)
Related to investments sold during the year	132		1,396			896		1,941
Total return on investments	2,050		1,440			3,917		1,403
Purchases, sales, and settlements	—		(1,364		)	717		(4,077		)
Transfers into/out of Level 3	—		—			—		—
Ending balance	$	37,039	$	26,129		$	34,989	$	26,053



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Domestic equity*	$	2,290	$	1,319	$	—	$	3,609
International equity*	1,795		1,928		—		3,723
Fixed income:
U.S. Treasury, government, and agency bonds	—		1,016		—		1,016
Mortgage- and asset-backed securities	—		250		—		250
Corporate bonds	—		1,722		6		1,728
Pooled funds	—		1,298		—		1,298
Cash equivalents and other	9		1,078		—		1,087
Real estate investments	508		—		1,667		2,175
Private equity	—		15		1,155		1,170
Total	$	4,602	$	8,626	$	2,828	$	16,056



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Domestic equity*	$	2,445	$	1,128	$	—	$	3,573
International equity*	2,511		719		—		3,230
Fixed income:
U.S. Treasury, government, and agency bonds	—		918		—		918
Mortgage- and asset-backed securities	—		286		—		286
Corporate bonds	—		1,761		—		1,761
Pooled funds	—		1,328		—		1,328
Cash equivalents and other	1		295		—		296
Real estate investments	466		—		1,657		2,123
Private equity	—		—		1,232		1,232
Total	$	5,423	$	6,435	$	2,889	$	14,747



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	2012						2011
	Real Estate Investments			Private Equity			Real Estate Investments		Private Equity
	(in thousands)
Beginning balance	$	1,657		$	1,232		$	1,452	$	1,375
Actual return on investments:
Related to investments held at year end	107			(1		)	129		(26		)
Related to investments sold during the year	6			80			42		77
Total return on investments	113			79			171		51
Purchases, sales, and settlements	(103		)	(156		)	34		(194		)
Transfers into/out of Level 3	—			—			—		—
Ending balance	$	1,667		$	1,155		$	1,657	$	1,232

Employee Savings Plan

The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides an 85% matching contribution on up to 6% of an employee's base salary. Total matching contributions made to the plan for 2012, 2011, and 2010 were $4.0 million, $3.7 million, and $3.6 million, respectively.

Mississippi Power [Member]

RETIREMENT BENEFITS

The Company has a defined benefit, trusteed, pension plan covering substantially all employees. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). In December 2012, the Company contributed $43.0 million to the qualified pension plan. No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2013. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds its other postretirement trusts to the extent required by the FERC. For the year ending December 31, 2013, other postretirement trust contributions are expected to be less than $1 million.

Actuarial Assumptions

The weighted average rates assumed in the actuarial calculations used to determine both the benefit obligations as of the measurement date and the net periodic costs for the pension and other postretirement benefit plans for the following year are presented below. Net periodic benefit costs were calculated in 2009 for the 2010 plan year using discount rates for the pension plans and the other postretirement benefit plans of 5.92% and 5.83%, respectively, and an annual salary increase of 4.18%.



	2012		2011		2010
Discount rate:
Pension plans	4.26	%	4.98	%	5.51	%
Other postretirement benefit plans	4.04		4.87		5.39
Annual salary increase	3.59		3.84		3.84
Long-term return on plan assets:
Pension plans	8.20		8.45		8.45
Other postretirement benefit plans	6.96		7.53		7.65



	Initial Cost Trend Rate	Ultimate Cost Trend Rate	Year That Ultimate Rate Is Reached
Pre-65	8.00%	5.00%	2020
Post-65 medical	6.00	5.00	2020
Post-65 prescription	6.00	5.00	2020

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2012 as follows:



	1 Percent Increase		1 Percent Decrease
	(in thousands)
Benefit obligation	$	6,000	$	(5,099	)
Service and interest costs	316		(268		)

Pension Plans

The total accumulated benefit obligation for the pension plans was $392 million at December 31, 2012 and $339 million at December 31, 2011. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2012 and 2011 were as follows:



	2012			2011
	(in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	369,680		$	330,315
Service cost	9,416			8,838
Interest cost	18,019			17,827
Benefits paid	(14,949		)	(14,587		)
Plan amendments	—			—
Actuarial loss	50,387			27,287
Balance at end of year	432,553			369,680
Change in plan assets
Fair value of plan assets at beginning of year	282,100			283,698
Actual return on plan assets	39,668			10,805
Employer contributions	44,930			2,184
Benefits paid	(14,949		)	(14,587		)
Fair value of plan assets at end of year	351,749			282,100
Accrued liability	$	(80,804	)	$	(87,580	)

At December 31, 2012, the projected benefit obligations for the qualified and non-qualified pension plans were $400 million and $32 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's pension plans consist of the following:



	2012			2011
	(in thousands)
Other regulatory assets, deferred	$	146,838		$	117,354
Other current liabilities	(2,087		)	(1,652		)
Employee benefit obligations	(78,717		)	(85,928		)



	2012		2011		Estimated Amortization in 2013
	(in thousands)
Prior service cost	$	5,261	$	6,570	$	1,143
Net (gain) loss	141,577		110,784		9,461
Other regulatory assets, deferred	$	146,838	$	117,354

The changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2012 and 2011 are presented in the following table:



	Regulatory Assets
	(in thousands)
Balance at December 31, 2010	$	78,130
Net (gain) loss	41,647
Change in prior service costs	—
Reclassification adjustments:
Amortization of prior service costs	(1,309		)
Amortization of net gain (loss)	(1,114		)
Total reclassification adjustments	(2,423		)
Total change	39,224
Balance at December 31, 2011	$	117,354
Net (gain) loss	34,893
Change in prior service costs	—
Reclassification adjustments:
Amortization of prior service costs	(1,309		)
Amortization of net gain (loss)	(4,100		)
Total reclassification adjustments	(5,409		)
Total change	29,484
Balance at December 31, 2012	$	146,838

Components of net periodic pension cost were as follows:



	2012			2011			2010
	(in thousands)
Service cost	$	9,416		$	8,838		$	8,300
Interest cost	18,019			17,827			17,916
Expected return on plan assets	(24,121		)	(25,166		)	(21,451		)
Recognized net (gain) loss	4,100			1,114			634
Net amortization	1,309			1,309			1,391
Net periodic pension cost	$	8,723		$	3,922		$	6,790



	Benefit Payments
	(in thousands)
2013	$	16,282
2014	17,121
2015	17,947
2016	18,886
2017	20,001
2018 to 2022	117,471

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2012 and 2011 were as follows:



	2012			2011
	(in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	87,447		$	81,688
Service cost	1,038			1,012
Interest cost	4,155			4,292
Benefits paid	(4,432		)	(4,094		)
Actuarial loss	3,166			4,073
Plan amendments	—			—
Retiree drug subsidy	409			476
Balance at end of year	91,783			87,447
Change in plan assets
Fair value of plan assets at beginning of year	20,534			20,955
Actual return on plan assets	2,427			720
Employer contributions	3,052			2,477
Benefits paid	(4,023		)	(3,618		)
Fair value of plan assets at end of year	21,990			20,534
Accrued liability	$	(69,793	)	$	(66,913	)

Amounts recognized in the balance sheets at December 31, 2012 and 2011 related to the Company's other postretirement benefit plans consist of the following:



	2012			2011
	(in thousands)
Other regulatory assets, deferred	$	15,454		$	13,324
Employee benefit obligations	(69,793		)	(66,913		)



	2012			2011			Estimated Amortization in 2013
	(in thousands)
Prior service cost	$	(2,498	)	$	(2,686	)	$	(188	)
Net (gain) loss	17,952			15,839			659
Transition obligation	—			171			—
Other regulatory assets, deferred	$	15,454		$	13,324

The changes in the balance of regulatory assets related to the other postretirement benefit plans for the plan years ended December 31, 2012 and 2011 are presented in the following table:



	Regulatory Assets
	(in thousands)
Balance at December 31, 2010	$	8,618
Net (gain) loss	4,980
Change in prior service costs/transition obligation	—
Reclassification adjustments:
Amortization of transition obligation	(228		)
Amortization of prior service costs	188
Amortization of net gain (loss)	(234		)
Total reclassification adjustments	(274		)
Total change	4,706
Balance at December 31, 2011	$	13,324
Net (gain) loss	2,600
Change in prior service costs/transition obligation	—
Reclassification adjustments:
Amortization of transition obligation	(171		)
Amortization of prior service costs	188
Amortization of net gain (loss)	(487		)
Total reclassification adjustments	(470		)
Total change	2,130
Balance at December 31, 2012	$	15,454

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2012			2011			2010
	(in thousands)
Service cost	$	1,038		$	1,012		$	1,305
Interest cost	4,155			4,292			4,763
Expected return on plan assets	(1,552		)	(1,763		)	(1,826		)
Net amortization	470			274			574
Net postretirement cost	$	4,111		$	3,815		$	4,816



	Benefit Payments		Subsidy Receipts			Total
	(in thousands)
2013	$	5,174	$	(601	)	$	4,573
2014	5,442		(663		)	4,779
2015	5,754		(720		)	5,034
2016	5,995		(782		)	5,213
2017	6,280		(845		)	5,435
2018 to 2022	33,822		(4,414		)	29,408

Benefit Plan Assets

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2012 and 2011, along with the targeted mix of assets for each plan, is presented below:



	Target		2012		2011
Pension plan assets:
Domestic equity	26	%	28	%	29	%
International equity	25		24		25
Fixed income	23		27		23
Special situations	3		1		—
Real estate investments	14		13		14
Private equity	9		7		9
Total	100	%	100	%	100	%
Other postretirement benefit plan assets:
Domestic equity	21	%	22	%	22	%
International equity	20		19		20
Fixed income	39		42		40
Special situations	2		1		—
Real estate investments	11		10		11
Private equity	7		6		7
Total	100	%	100	%	100	%

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Domestic equity*	$	51,433	$	29,624	$	—	$	81,057
International equity*	40,337		43,303		—		83,640
Fixed income:
U.S. Treasury, government, and agency bonds	—		22,820		—		22,820
Mortgage- and asset-backed securities	—		5,618		—		5,618
Corporate bonds	—		38,696		140		38,836
Pooled funds	—		17,656		—		17,656
Cash equivalents and other	209		24,251		—		24,460
Real estate investments	11,410		—		37,196		48,606
Private equity	—		—		26,240		26,240
Total	$	103,389	$	181,968	$	63,576	$	348,933



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Domestic equity*	$	47,911	$	22,115	$	—	$	70,026
International equity*	49,250		14,111		—		63,361
Fixed income:
U.S. Treasury, government, and agency bonds	—		17,960		—		17,960
Mortgage- and asset-backed securities	—		5,605		—		5,605
Corporate bonds	—		34,552		112		34,664
Pooled funds	—		15,757		—		15,757
Cash equivalents and other	28		5,773		—		5,801
Real estate investments	9,119		—		32,434		41,553
Private equity	—		—		24,151		24,151
Total	$	106,308	$	115,873	$	56,697	$	278,878



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.

Changes in the fair value measurement of the Level 3 items in the pension plan assets valued using significant unobservable inputs for the years ended December 31, 2012 and 2011 were as follows:



	2012					2011
	Real Estate Investments		Private Equity			Real Estate Investments		Private Equity
	(in thousands)
Beginning balance	$	32,434	$	24,151		$	27,976	$	26,475
Actual return on investments:
Related to investments held at year end	4,629		44			2,964		(498		)
Related to investments sold during the year	133		3,415			830		1,951
Total return on investments	4,762		3,459			3,794		1,453
Purchases, sales, and settlements	—		(1,370		)	664		(3,777		)
Transfers into/out of Level 3	—		—			—		—
Ending balance	$	37,196	$	26,240		$	32,434	$	24,151



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2012:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Domestic equity*	$	2,561	$	1,475	$	—	$	4,036
International equity*	2,008		2,156		—		4,164
Fixed income:
U.S. Treasury, government, and agency bonds	—		5,187		—		5,187
Mortgage- and asset-backed securities	—		280		—		280
Corporate bonds	—		1,925		7		1,932
Pooled funds	—		879		—		879
Cash equivalents and other	11		1,612		—		1,623
Real estate investments	569		—		1,865		2,434
Private equity	—		14		1,293		1,307
Total	$	5,149	$	13,528	$	3,165	$	21,842



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Domestic equity*	$	2,733	$	1,260	$	—	$	3,993
International equity*	2,807		804		—		3,611
Fixed income:
U.S. Treasury, government, and agency bonds	—		4,796		—		4,796
Mortgage- and asset-backed securities	—		320		—		320
Corporate bonds	—		1,968		—		1,968
Pooled funds	—		898		—		898
Cash equivalents and other	1		987		—		988
Real estate investments	520		—		1,851		2,371
Private equity	—		—		1,377		1,377
Total	$	6,061	$	11,033	$	3,228	$	20,322



*	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk.



	2012						2011
	Real Estate Investments			Private Equity			Real Estate Investments		Private Equity
	(in thousands)
Beginning balance	$	1,851		$	1,377		$	1,625	$	1,538
Actual return on investments:
Related to investments held at year end	119			(1		)	141		(29		)
Related to investments sold during the year	7			90			47		85
Total return on investments	126			89			188		56
Purchases, sales, and settlements	(112		)	(173		)	38		(217		)
Ending balance	$	1,865		$	1,293		$	1,851	$	1,377

Employee Savings Plan

The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides an 85% matching contribution on up to 6% of an employee's base salary. Total matching contributions made to the plan for 2012, 2011, and 2010 were $3.9 million, $3.8 million, and $3.8 million, respectively.

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References

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