Pension and Other Postretirement Plans

6 Months Ended

Jun. 30, 2020

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Plans

Pension and Other Postretirement Plans - MGE Energy and MGE.

MGE maintains qualified and nonqualified pension plans, health care, and life insurance benefits and defined contribution 401(k) benefit plans for its employees and retirees.

The components of net periodic benefit cost, other than the service cost component, are recorded in "Other income, net" on the consolidated statements of income. The service cost component is recorded in "Other operations and maintenance" on the consolidated statements of income. MGE has regulatory treatment and recognizes regulatory assets or liabilities for timing differences between when net periodic benefit costs are recovered and when costs are recognized.

The following table presents the components of net periodic benefit costs recognized.

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(In thousands)		2020		2019		2020		2019
Pension Benefits
Components of net periodic benefit cost:
Service cost	$	1,332	$	1,221	$	2,648	$	2,362
Interest cost		3,082		3,742		6,105		7,194
Expected return on assets		(6,804)		(5,922)		(13,615)		(11,469)
Amortization of:
Prior service credit		(31)		(31)		(62)		(59)
Actuarial loss		1,392		1,985		2,678		3,714
Net periodic benefit (credit) cost	$	(1,029)	$	995	$	(2,246)	$	1,742
Postretirement Benefits
Components of net periodic benefit cost:
Service cost	$	321	$	334	$	632	$	553
Interest cost		566		865		1,139		1,442
Expected return on assets		(787)		(676)		(1,577)		(1,357)
Amortization of:
Transition obligation		1		1		1		2
Prior service credit		(667)		(662)		(1,334)		(1,330)
Actuarial loss		40		94		110		200
Net periodic benefit (credit) cost	$	(526)	$	(44)	$	(1,029)	$	(490)

As a result of lower investment returns in the fourth quarter of 2018, pension and postretirement benefit costs increased in 2019. In August 2019, the PSCW approved MGE's request to defer the difference between estimated pension and other postretirement costs included in the 2019 and 2020 rate settlement and actual expense incurred. MGE expects that the deferred cost for employee benefit plans will be factored into future rate proceedings. During 2019, MGE deferred approximately $6.2 million of pension and other post-retirement costs. MGE expects to over-collect benefit costs in 2020 rates, which will reduce the regulatory asset that MGE expects to be factored into future rate proceedings. During the three and six months ended June 30, 2020, MGE over-collected approximately $0.2 million and $0.6 million, respectively, of pension and other postretirement costs, which reduced the amount deferred in 2019. During the three and six months ended June 30, 2019, MGE deferred approximately $3 million of pension and postretirement costs. The impact of this deferral has not been reflected in the table above.