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Pension Plans and Other Postretirement Benefits (Tables)
 12 Months Ended
Dec. 31, 2020
Compensation and Retirement Disclosure [Abstract]  
Schedule of Benefit Obligations and Change in Plan Assets

 

(In thousands)

 

Pension Benefits

 

Other Postretirement Benefits

 

 

Change in Benefit Obligations:

 

2020

 

2019

 

2020

 

2019

 

 

Net benefit obligation as of January 1,

$

410,651

$

360,288

$

80,901

$

75,161

 

 

Service cost

 

5,296

 

4,692

 

1,264

 

1,110

 

 

Interest cost

 

12,210

 

14,302

 

2,278

 

2,893

 

 

Plan participants' contributions

 

-

 

-

 

1,009

 

969

 

 

Actuarial loss(a)

 

50,325

 

47,671

 

5,907

 

5,045

 

 

Gross benefits paid

 

(17,267)

 

(16,302)

 

(5,245)

 

(4,497)

 

 

Less: federal subsidy on benefits paid(b)

 

-

 

-

 

246

 

220

 

 

Benefit obligation as of December 31,

$

461,215

$

410,651

$

86,360

$

80,901

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Plan Assets:

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets as of January 1,

$

386,033

$

323,780

$

48,889

$

42,521

 

 

Actual return on plan assets

 

58,935

 

76,766

 

6,514

 

9,277

 

 

Employer contributions

 

1,837

 

1,789

 

568

 

619

 

 

Plan participants' contributions

 

-

 

-

 

1,009

 

969

 

 

Gross benefits paid

 

(17,267)

 

(16,302)

 

(5,245)

 

(4,497)

 

 

Fair value of plan assets at end of year

 

429,538

 

386,033

 

51,735

 

48,889

 

 

Funded Status as of December 31,

$

(31,677)

$

(24,618)

$

(34,625)

$

(32,012)

 

(a)In 2020 and 2019, lower discount rates were the primary driver of the actuarial loss.

 

(b)In 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law authorizing Medicare to provide prescription drug benefits to retirees. For the years ended December 31, 2020 and 2019, the subsidy due to MGE was $0.2 million.
Schedule of Amounts Recognized in the Consolidated Balance Sheet The amounts recognized in the consolidated balance sheets to reflect the funded status of the plans as of December 31 are as follows:

 

 

 

Pension Benefits

 

Other Postretirement

Benefits

 

 

(In thousands)

 

2020

 

2019

 

2020

 

2019

 

 

Long-term asset

$

13,873

$

13,630

$

-

$

-

 

 

Current liability

 

(2,139)

 

(1,688)

 

-

 

-

 

 

Long-term liability

 

(43,411)

 

(36,560)

 

(34,625)

 

(32,012)

 

 

Net liability

$

(31,677)

$

(24,618)

$

(34,625)

$

(32,012)

 
Amounts Recognized in Regulatory Asset The following table shows the amounts that have not yet been recognized in our net periodic benefit cost as of December 31 and are recorded as regulatory assets in the consolidated balance sheets:

 

 

 

Pension Benefits

 

Other Postretirement

Benefits

 

 

(In thousands)

 

2020

 

2019

 

2020

 

2019

 

 

Net actuarial loss

$

92,553

$

79,290

$

10,986

$

8,659

 

 

Prior service benefit

 

(144)

 

(268)

 

(1,816)

 

(4,484)

 

 

Transition obligation

 

-

 

-

 

15

 

17

 

 

Total

$

92,409

$

79,022

$

9,185

$

4,192

 
Schedule of Projected Benefit Obligations in Excess of Plan Assets The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets were as follows

 

(In thousands)

 

Pension Benefits

 

 

Projected Benefit Obligation in Excess of Plan Assets

 

2020

 

2019

 

 

Projected benefit obligation, end of year

$

45,550

$

38,247

 

 

Fair value of plan assets, end of year

 

-

 

-

 
Schedule of Accumulated Benefit Obligations in Excess of Plan Assets The accumulated benefit obligation and fair value of plan assets with an accumulated benefit obligation in excess of plan assets were as follows:

 

(In thousands)

 

Pension Benefits

 

Other Postretirement Benefits

 

 

Accumulated Benefit Obligation in Excess of Plan Assets

 

2020

 

2019

 

2020

 

2019

 

 

Accumulated benefit obligation, end of year

$

43,384

$

35,798

$

86,360

$

80,901

 

 

Fair value of plan assets, end of year

 

-

 

-

 

51,735

 

48,889

 
Net Periodic Benefit Costs

 

(In thousands)

 

Pension Benefits

 

Other Postretirement Benefits

 

 

Components of Net Periodic Benefit Cost:

 

2020(a)

 

2019(a)

 

2018

 

2020(a)

 

2019(a)

 

2018

 

 

Service cost

$

5,296

$

4,692

$

5,723

$

1,264

$

1,110

$

1,283

 

 

Interest cost

 

12,210

 

14,302

 

12,859

 

2,278

 

2,893

 

2,612

 

 

Expected return on assets

 

(27,229)

 

(22,786)

 

(26,241)

 

(3,154)

 

(2,723)

 

(3,232)

 

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transition obligation

 

-

 

-

 

-

 

3

 

3

 

3

 

 

Prior service (credit) cost

 

(114)

 

(117)

 

(44)

 

(2,669)

 

(2,669)

 

(2,669)

 

 

Actuarial loss

 

5,357

 

7,379

 

5,278

 

217

 

401

 

488

 

 

Net periodic benefit cost (credit)

$

(4,480)

$

3,470

$

(2,425)

$

(2,061)

$

(985)

$

(1,515)

 

(a)During 2019, MGE deferred approximately $6.2 million of pension and other postretirement costs. During 2020, MGE collected approximately $0.9 million of pension and other postretirement costs, which reduced the amount deferred in 2019. The impact of the deferral has not been reflected in the table above. See Footnote 8 for further information.
Plan Assumptions

The weighted-average assumptions used to determine the benefit obligations were as follows for the years ended December 31:

 

 

 

Pension Benefits

 

Other Postretirement Benefits

 

 

 

 

2020

 

2019

 

2020

 

2019

 

 

Discount rate

 

2.70

%

 

3.42

%

 

2.52

%

 

3.30

%

 

 

Rate of compensation increase

 

3.22

%

 

3.21

%

 

N/A

 

 

N/A

 

 

 

Assumed health care cost trend rates:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Health care cost trend rate assumed for next year

 

N/A

 

 

N/A

 

 

5.75

%

 

6.00

%

 

 

Rate to which the cost trend rate is assumed to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

decline (the ultimate trend rate)

 

N/A

 

 

N/A

 

 

4.75

%

 

5.00

%

 

 

Year that the rate reaches the ultimate trend rate

 

N/A

 

 

N/A

 

 

2027

 

 

2024

 

 

The weighted-average assumptions used to determine the net periodic cost were as follows for the years ended December 31:

 

 

 

Pension Benefits

 

Other Postretirement Benefits

 

 

 

 

2020

 

2019

 

2018

 

2020

 

2019

 

2018

 

 

Discount rate

 

3.42

%

 

4.32

%

 

3.73

%

 

3.30

%

 

4.24

%

 

3.60

%

 

 

Expected rate of return on plan assets

 

7.20

%

 

7.20

%

 

7.40

%

 

6.75

%

 

6.72

%

 

6.94

%

 

 

Rate of compensation increase

 

3.26

%

 

3.25

%

 

3.72

%

 

N/A

 

 

N/A

 

 

N/A

 

 
Fair Value of Plan Assets by Asset Category The asset allocation for MGE's pension plans as of December 31, 2020 and 2019, and the target allocation for 2021, by asset category, follows:

 

 

Target Allocation

 

Percentage of Plan

Assets at Year End

 

 

 

 

2020

 

2019

 

 

Equity securities(a)

63.0

%

 

69.0

%

 

64.0

%

 

 

Fixed income securities

30.0

%

 

25.0

%

 

29.0

%

 

 

Real estate

7.0

%

 

6.0

%

 

7.0

%

 

 

Total

100.0

%

 

100.0

%

 

100.0

%

 

(a) Target allocations for equity securities are broken out as follows: 45.5% United States equity and 17.5% non-United States equity.The fair values of MGE's plan assets by asset category as of December 31 are as follows:

 

(In thousands)

 

2020

 

2019

 

 

Cash and Cash Equivalents

$

1,180

$

964

 

 

Equity Securities:

 

 

 

 

 

 

U.S. Large Cap

 

151,218

 

134,458

 

 

U.S. Mid Cap

 

37,389

 

31,288

 

 

U.S. Small Cap

 

50,456

 

36,495

 

 

International Blend

 

87,461

 

76,293

 

 

Fixed Income Securities:

 

 

 

 

 

 

Short-Term Fund

 

4,215

 

7,449

 

 

High Yield Bond

 

22,683

 

21,276

 

 

Long Duration Bond

 

92,657

 

92,642

 

 

Real Estate

 

30,005

 

29,671

 

 

Insurance Continuance Fund

 

1,506

 

1,530

 

 

Fixed Rate Fund

 

2,503

 

2,856

 

 

Total

$

481,273

$

434,922

 
Benefit Payments, Fiscal Year Maturity The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

 

 

 

Pension

 

Other Postretirement Benefits

 

 

(In thousands)

 

Pension Benefits

 

Gross Postretirement Benefits

 

Expected Medicare Part D Subsidy

 

Net Postretirement Benefits

 

 

2021

$

18,493

$

4,696

$

(250)

$

4,446

 

 

2022

 

19,508

 

4,859

 

(277)

 

4,582

 

 

2023

 

20,353

 

5,145

 

(302)

 

4,843

 

 

2024

 

21,007

 

5,443

 

(327)

 

5,116

 

 

2025

 

21,678

 

5,529

 

(354)

 

5,175

 

 

2026 - 2030

 

114,762

 

27,163

 

(2,148)

 

25,015