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Benefit Plans and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
Benefit Plans and Other Postretirement Benefits
9. Benefit Plans and Other Postretirement Benefits
Pension and Postretirement Health Care Benefits
Xcel Energy, which includes NSP-Wisconsin, has several noncontributory, qualified, defined benefit pension plans that cover almost all employees. All newly hired or rehired employees participate under the Cash Balance formula, which is based on pay credits using a percentage of annual eligible pay and annual interest credits. The average annual interest crediting rates for these plans was 1.78, 2.74 and 3.57 percent in 2020, 2019, and 2018, respectively. Some employees may participate under legacy formulas such as the traditional final average pay or pension equity. Xcel Energy’s policy is to fully fund into an external trust the actuarially determined pension costs subject to the limitations of applicable employee benefit and tax laws.
In addition to the qualified pension plans, Xcel Energy maintains a SERP and a nonqualified pension plan. The SERP is maintained for certain executives who participated in the plan in 2008, when the SERP was closed to new participants. The nonqualified pension plan provides benefits for compensation that is in excess of the limits applicable to the qualified pension plans, with distributions funded by Xcel Energy’s consolidated operating cash flows. Obligations of the SERP and nonqualified plan as of Dec. 31, 2020 and 2019 were $43 million and $39 million, respectively, of which $1 million was attributable to NSP-Wisconsin in both years. Xcel
Energy recognized net benefit cost for the SERP and nonqualified plans of $6 million and $4 million in 2020 and 2019, respectively, of which amounts attributable to NSP-Wisconsin were immaterial.
Xcel Energy, which includes NSPW, bases the investment-return assumption on expected long-term performance for each of the asset classes in its pension and postretirement health care portfolios. For pension assets, Xcel Energy considers the historical returns achieved by its asset portfolio over the past 20 years or longer period, as well as the long-term projected return levels. Xcel Energy and NSP-Wisconsin continually review their pension assumptions.
Pension cost determination assumes a forecasted mix of investment types over the long-term.
•Investment returns in 2020 were above the assumed level of 7.10%.
•Investment returns in 2019 were below the assumed level of 7.10%.
•Investment returns in 2018 were above the assumed level of 7.10%.
•In 2021, NSP-Wisconsin’s expected investment-return assumption is 6.60%.
Pension plan and postretirement benefit assets are invested in a portfolio according to Xcel Energy’s return, liquidity and diversification objectives to provide a source of funding for plan obligations and minimize contributions to the plan, within appropriate levels of risk. The principal mechanism for achieving these objectives is the asset allocation given the long-term risk, return, correlation and liquidity characteristics of each particular asset class. There were no significant concentrations of risk in any industry, index, or entity. Market volatility can impact even well-diversified portfolios and significantly affect the return levels achieved by the assets in any year.
Xcel Energy’s ongoing investment strategy is based on plan-specific investment recommendations that seek to minimize potential investment and interest rate risk as a plan’s funded status increases over time. The investment recommendations result in a greater percentage of long-duration fixed income securities being allocated to specific plans having relatively higher funded status ratios and a greater percentage of growth assets being allocated to plans having relatively lower funded status ratios.
Plan Assets
For each of the fair value hierarchy levels, NSP-Wisconsin’s pension plan assets measured at fair value:
Dec. 31, 2020 (a)
Dec. 31, 2019 (a)
(Millions of Dollars)Level 1Level 2Level 3Measured at NAVTotalLevel 1Level 2Level 3Measured at NAVTotal
Cash equivalents$8 $— $— $— $8 $6 $— $— $— $6 
Commingled funds57 — — 44 101 55 — — 41 96 
Debt securities— 26 — — 26 — 24 — — 24 
Equity securities4 — — — 4 3 — — — 3 
Other1 — — — 1 (5)— — — (5)
Total$70 $26 $— $44 $140 $59 $24 $— $41 $124 
(a)See Note 8 for further information on fair value measurement inputs and methods.
NSP-Wisconsin has immaterial postretirement benefit plan assets that were measured at fair value at Dec. 31, 2020 and 2019.
No assets were transferred in or out of Level 3 for 2020. Immaterial assets were transferred in or out of Level 3 for 2019.
Funded Status — Benefit obligations for both pension and postretirement plans increased from Dec. 31, 2019 to Dec. 31, 2020, due primarily to decreases in discount rates used in actuarial valuations. Comparisons of the actuarially computed benefit obligation, changes in plan assets and funded status of the pension and postretirement health care plans for NSP-Wisconsin are as follows:
Pension BenefitsPostretirement Benefits
(Millions of Dollars)2020201920202019
Change in Benefit Obligation:
Obligation at Jan. 1$144 $140 $13 $13 
Service cost4 4 — — 
Interest cost5 6 1 1 
Actuarial loss13 8 — — 
Benefit payments(12)(14)(1)(1)
Obligation at Dec. 31$154 $144 $13 $13 
Change in Fair Value of Plan Assets:
Fair value of plan assets at Jan. 1$124 $110 $— $— 
Actual return on plan assets21 21 — — 
Employer contributions7 7 1 1 
Benefit payments(12)(14)(1)(1)
Fair value of plan assets at Dec. 31$140 $124 $— $— 
Funded status of plans at Dec. 31$(14)$(20)$(13)$(13)
Amounts recognized in the Consolidated Balance Sheet at Dec. 31:
Current liabilities$— $— $(1)$(1)
Noncurrent liabilities(14)(20)(12)(12)
Net amounts recognized$(14)$(20)$(13)$(13)
Pension BenefitsPostretirement Benefits
Significant Assumptions Used to Measure Benefit Obligations:2020201920202019
Discount rate for year-end valuation2.71 %3.49 %2.65 %3.47 %
Expected average long-term increase in compensation level3.75 %3.75 %N/AN/A
Mortality tablePri-2012Pri-2012Pri-2012Pri-2012
Health care costs trend rate — initial: Pre-65N/AN/A5.50 %6.00 %
Health care costs trend rate — initial: Post-65N/AN/A5.00 %5.10 %
Ultimate trend assumption — initial: Pre-65N/AN/A4.50 %4.50 %
Ultimate trend assumption — initial: Post-65N/AN/A4.50 %4.50 %
Years until ultimate trend is reachedN/AN/A53
Accumulated benefit obligation for the pension plan was $141 million and $132 million as of Dec. 31, 2020 and 2019, respectively.
Net Periodic Benefit Cost (Credit) — Net periodic benefit cost (credit), other than the service cost component, is included in other expense in the consolidated statements of income.
Components of net periodic benefit cost (credit) and amounts recognized in other comprehensive income and regulatory assets and liabilities:
Pension BenefitsPostretirement Benefits
(Millions of Dollars)202020192018202020192018
Service cost$4 $4 $5 $— $— $— 
Interest cost5 6 5 1 1 1 
Expected return on plan assets(8)(8)(9)— — — 
Amortization of net loss5 4 6 — — — 
Settlement charge (a)
— — 7 — — — 
Net periodic pension cost$6 $6 $14 $1 $1 $1 
Effects of regulation7 — (3)— — — 
Net benefit cost recognized for financial reporting$13 $6 $11 $1 $1 $1 
Significant Assumptions Used to Measure Costs:
Discount rate3.49 %4.31 %3.63 %3.47 %4.32 %3.62 %
Expected average long-term increase in compensation level3.75 3.75 3.75 — — — 
Expected average long-term rate of return on assets7.10 7.10 7.10 4.50 4.50 5.30 
(a)A settlement charge is required when the amount of all lump-sum distributions during the year is greater than the sum of the service and interest cost components of the annual net periodic pension cost. In 2018, as a result of lump-sum distributions during the 2018 plan year, NSP-Wisconsin recorded a total pension settlement charge of $7 million in 2018, a total of $2 million of that amount was recorded in the income statement in 2018. There were no settlement charges recorded to the qualified pension plans in 2020 and 2019.
Pension BenefitsPostretirement Benefits
(Millions of Dollars)2020201920202019
Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost:
Net loss$60 $64 $7 $7 
Prior service credit— — (1)(1)
Total$60 $64 $6 $6 
Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost Have Been Recorded as Follows Based Upon Expected Recovery in Rates:
Current regulatory assets$4 $4 $— $— 
Noncurrent regulatory assets56 60 6 6 
Total$60 $64 $6 $6 
Measurement dateDec. 31, 2020Dec. 31, 2019Dec. 31, 2020Dec. 31, 2019
Cash Flows — Funding requirements can be impacted by changes to actuarial assumptions, actual asset levels and other calculations prescribed by the requirements of income tax and other pension-related regulations. Required contributions were made in 2018-2021 to meet minimum funding requirements.
Total voluntary and required pension funding contributions across all four of Xcel Energy’s pension plans were as follows:
•$125 million in January 2021, of which $5 million was attributable to NSP-Wisconsin.
•$150 million in 2020, of which $7 million was attributable to NSP-Wisconsin.
•$154 million in 2019, of which $7 million was attributable to NSP-Wisconsin.
•$150 million in 2018, of which $10 million was attributable to NSP-Wisconsin.
The postretirement health care plans have no funding requirements other than fulfilling benefit payment obligations, when claims are presented and approved. Additional cash funding requirements are prescribed by certain state and federal rate regulatory authorities. Xcel Energy’s voluntary postretirement funding contributions were as follows:
•$10 million in January 2021, of which $1 million is attributable to NSP-Wisconsin.
•$11 million in 2020, of which $1 million, was attributable to NSP-Wisconsin.
•$15 million in 2019, of which $1 million was attributable to NSP-Wisconsin.
•$11 million in 2018, of which an immaterial amount was attributable to NSP-Wisconsin.
Target asset allocations:
Pension BenefitsPostretirement Benefits
2020201920202019
Domestic and international equity securities35 %37 %15 %15 %
Long-duration fixed income and interest rate swap securities35 30 — — 
Short-to-intermediate fixed income securities13 14 72 72 
Alternative investments15 17 9 9 
Cash2 2 4 4 
Total100 %100 %100 %100 %
The asset allocations above reflect target allocations approved in the calendar year to take effect in the subsequent year
Plan Amendments — In 2019, the Pension Protection Act measurement concept was extended beyond 2019 for NSP bargaining terminations and retirements to Dec. 31, 2022.
In 2020 and 2018, there were no significant plan amendments made which affected the postretirement benefit obligation.
Projected Benefit Payments
NSP-Wisconsin’s projected benefit payments:
(Millions of Dollars)Projected
Pension Benefit
Payments		Gross Projected
Postretirement
Health Care
Benefit Payments		Expected
Medicare Part D
Subsidies		Net Projected
Postretirement
Health Care
Benefit Payments
2021$13 $1 $— $1 
202212 1 — 1 
202312 1 — 1 
202412 1 — 1 
202512 1 — 1 
2026-203057 3 — 3 
Defined Contribution Plans
Xcel Energy, which includes NSP-Wisconsin, maintains 401(k) and other defined contribution plans that cover most employees. The expense to these plans for NSP-Wisconsin was approximately $2 million in 2020, 2019 and 2018.
Multiemployer Plans
NSP-Wisconsin contributes to several union multiemployer pension plans, none of which are individually significant. These plans provide pension benefits to certain union employees who may perform services for multiple employers and do not participate in the NSP-Wisconsin sponsored pension plans. Contributing to these types of plans creates risk that differs from providing benefits under NSP-Wisconsin sponsored plans, in that if another participating employer ceases to contribute to a multiemployer plan, additional unfunded obligations may need to be funded over time by remaining participating employers.