•

The Unitil Retiree Health and Welfare Benefits Plan (PBOP Plan)—The PBOP Plan provides health care and life insurance benefits to retirees. The Company has established Voluntary Employee Benefit Trusts, into which it funds contributions to the PBOP Plan.

•

The Unitil Corporation Supplemental Executive Retirement Plan (SERP)—The SERP is a

non-qualified

retirement plan, with participation limited to executives selected by the Board of Directors.

The following table includes the key assumptions used in determining the Company’s benefit plan costs and obligations:


	2020			2019			2018
Used to Determine Plan costs for years ended December 31:

Discount Rate		3.25	%		4.25	%		3.60	%

Rate of Compensation Increase		3.00	%		3.00	%		3.00	%

Expected Long-term rate of return on plan assets		7.40	%		7.50	%		7.75	%

Health Care Cost Trend Rate Assumed for Next Year		7.00	%		7.00	%		7.50	%

Ultimate Health Care Cost Trend Rate		4.50	%		4.50	%		4.50	%

Year that Ultimate Health Care Cost Trend Rate is reached		2029			2024			2024


Used to Determine Benefit Obligations at December 31:

Discount Rate	2.50	%	3.25	%	4.25	%

Rate of Compensation Increase	3.00	%	3.00	%	3.00	%

Health Care Cost Trend Rate Assumed for Next Year	6.60	%	7.00	%	7.00	%

Ultimate Health Care Cost Trend Rate	4.50	%	4.50	%	4.50	%

Year that Ultimate Health Care Cost Trend Rate is reached	2029		2029		2024

The Discount Rate assumptions used in determining retirement plan costs and retirement plan obligations are based on an assessment of current market conditions using high quality corporate bond interest rate indices and pension yield curves. For 2020, a change in the discount rate of 0.25% would have resulted in an increase or decrease of approximately $629,000 in the Net Periodic Benefit Cost (NPBC). The Rate of Compensation Increase assumption used for 2020 was based on the expected long-term increase in compensation costs for personnel covered by the plans.

The following table provides the components of the Company’s Retirement plan costs (000’s):


	Pension Plan									PBOP Plan									SERP
	2020			2019			2018			2020			2019			2018			2020			2019			2018

Service Cost	$	3,322		$	3,104		$	3,393		$	2,698		$	2,304		$	2,933		$	283		$	247		$	487

Interest Cost		5,776			6,484			5,878			3,121			3,426			3,404			549			567			404

Expected Return on Plan Assets		(9,019	)		(8,475	)		(7,785	)		(2,063	)		(1,645	)		(1,635	)		—			—			—

Prior Service Cost Amortization		320			320			324			1,210			1,213			1,309			57			56			189

Actuarial Loss Amortization		6,472			4,324			5,786			744			227			1,383			1,036			628			486


Sub-total		6,871			5,757			7,596			5,710			5,525			7,394			1,925			1,498			1,566

Amounts Capitalized or Deferred		(3,083	)		(2,227	)		(3,465	)		(2,865	)		(2,317	)		(3,416	)		(579	)		(430	)		(451	)

NPBC Recognized	$	3,788		$	3,530		$	4,131		$	2,845		$	3,208		$	3,978		$	1,346		$	1,068		$	1,115

The Company bases the actuarial determination of pension expense on a market-related valuation of assets, which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a three-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the fair value of assets. Since the market-related value of assets recognizes gains or losses over a three-year period, the future value of the market-related assets will be affected as previously deferred gains or losses are recognized. The Company’s pension expense for the years 2020, 2019 and 2018 before capitalization and deferral was

$6.9 million, $5.8 million and $7.6 million, respectively. Had the Company used the fair value of assets instead of the market-related value, pension expense for the years 2020, 2019 and 2018 would have been $6.5 million, $7.3 million and $7.2 million respectively, prior to amounts capitalized or deferred.

The following table represents information on the plans’ assets, projected benefit obligations (PBO), and funded status (000’s):


	Pension Plan						PBOP Plan						SERP
Change in Plan Assets:	2020			2019			2020			2019			2020			2019

Plan Assets at Beginning of Year	$	125,755		$	107,808		$	27,280		$	21,109		$	—		$	—

Actual Return on Plan Assets		13,024			17,908			3,739			3,808			—			—

Employer Contributions		4,665			6,916			4,156			4,000			654			610

Participant Contributions		—			—			240			121			—			—

Benefits Paid		(6,038	)		(6,877	)		(2,568	)		(1,758	)		(654	)		(610	)

Plan Assets at End of Year	$	137,406		$	125,755		$	32,847		$	27,280		$	—		$	—


Change in PBO:

PBO at Beginning of Year	$	182,135		$	156,197		$	95,657		$	81,005		$	17,759		$	13,754

Service Cost		3,322			3,104			2,698			2,304			283			247

Interest Cost		5,776			6,484			3,121			3,426			549			567

Participant Contributions		—			—			240			121			—			—

Plan Amendments		732			—			—			—			—			225

Benefits Paid		(6,038	)		(6,877	)		(2,568	)		(1,758	)		(654	)		(610	)

Actuarial (Gain) or Loss		20,165			23,227			7,683			10,559			2,288			3,576

PBO at End of Year	$	206,092		$	182,135		$	106,831		$	95,657		$	20,225		$	17,759

Funded Status: Assets vs PBO	$	(68,686	)	$	(56,380	)	$	(73,984	)	$	(68,377	)	$	(20,225	)	$	(17,759	)

The increases in the PBO for the Pension and PBOP plans as of December 31, 2020 compared to December 31, 2019 reflects a decrease in the assumed discount rate as of December 31, 2020.

The funded status of the Pension, PBOP and SERP Plans is calculated based on the difference between the benefit obligation and the fair value of plan assets and is recorded on the balance sheets as an asset or a liability. Because the Company recovers the retiree benefit costs from customers through rates, regulatory assets are recorded in lieu of an adjustment to Accumulated Other Comprehensive Income/(Loss).

The Company has recorded on its consolidated balance sheets as a liability the underfunded status of its and its subsidiaries’ retirement benefit obligations based on the projected benefit obligation. The Company has recognized Regulatory Assets, net of deferred tax benefits, of $103.7 million and $88.9 million at December 31, 2020 and 2019, respectively, to account for the future collection of these plan obligations in electric and gas rates.

The Accumulated Benefit Obligation (ABO) is required to be disclosed for all plans where the ABO is in excess of plan assets. The difference between the PBO and the ABO is that the PBO includes projected

compensation increases. The ABO for the Pension Plan was $189.4 million and $166.5 million as of December 31, 2020 and 2019, respectively. The ABO for the SERP was $16.7 million and $13.6

million as of December 31, 2020 and 2019, respectively. For the PBOP Plan, the ABO and PBO are the same. (See Note 1 (Summary of Significant Accounting Policies) for further discussion of SERP funding.)

The Company, along with its subsidiaries, expects to continue to make contributions to its Pension Plan in 2021 and future years at minimum required and discretionary funding levels consistent with the amounts recovered in the distribution utilities’ rates for these Pension Plan costs.

The following table represents employer contributions, participant contributions and benefit payments (000’s).


	Pension Plan						PBOP Plan						SERP
	2020		2019		2018		2020		2019		2018		2020		2019		2018
Employer Contributions	$	4,665	$	6,916	$	16,628	$	4,156	$	4,000	$	4,000	$	654	$	610	$	401
Participant Contributions	$	—	$	—	$	—	$	240	$	121	$	153	$	—	$	—	$	—
Benefit Payments	$	6,038	$	6,877	$	4,986	$	2,568	$	1,758	$	2,193	$	654	$	610	$	401

The following table represents estimated future benefit payments (000’s).


Estimated Future Benefit Payments
	Pension		PBOP		SERP
2021	$	7,150	$	2,948	$	637
2022		7,051		3,066		636
2023		7,864		3,235		635
2024		8,532		3,418		634
2025		8,648		3,704		1,182
2026—2030		52,765		21,958		6,258

The Expected Long-Term Rate of Return on Pension Plan assets assumption used by the Company is developed based on input from actuaries and investment managers. The Company’s Expected Long-Term Rate of Return on Pension Plan assets is based on target investment allocation of 56% in common stock equities, 39% in fixed income securities and 5% in real estate securities. The Company’s Expected Long-Term Rate of Return on PBOP Plan assets is based on target investment allocation of 55% in common stock equities and 45% in

fixed income securities.

The actual investment allocations are shown in the following tables.


Pension Plan	Target Allocation 2021			Actual Allocation at December 31,
	Target Allocation 2021			2020			2019			2018
Equity Funds		56	%		58	%		54	%		49	%
Debt Funds		39	%		37	%		36	%		40	%
Real Estate Fund		5	%		4	%		9	%		10	%
Other (1)		—			1	%		1	%		1	%

Total					100	%		100	%		100	%

(1)

Represents investments being held in cash equivalents as of December 31, 2020, December 31, 2019 and December 31, 2018 pending payment of benefits.


PBOP Plan	Target Allocation 2021			Actual Allocation at December 31,
PBOP Plan	Target Allocation 2021			2020			2019			2018
Equity Funds		55	%		55	%		56	%		53	%
Debt Funds		45	%		45	%		44	%		47	%

Total					100	%		100	%		100	%

The combination of these target allocations and expected returns resulted in the overall assumed long-term rate of return of 7.40% for 2020. The Company evaluates the actuarial assumptions, including the expected rate of return, at least annually. The desired investment objective is a long-term rate of return on assets that is approximately 5 – 6% greater than the assumed rate of inflation as measured by the Consumer Price Index. The target rate of return for the Plans has been based upon an analysis of historical returns supplemented with an economic and structural review for each asset class.

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2020 and 2019. Please also see Note 1 (Summary of Significant Accounting Policies) for a discussion of the Company’s fair value accounting policy.

Equity, Fixed Income, Index and Asset Allocation Funds

These investments are valued based on quoted prices from active markets. These securities are categorized in Level 1 as they are actively traded and no valuation adjustments have been applied.

Cash Equivalents

These investments are valued at cost, which approximates fair value, and are categorized in Level 1.

Real Estate Fund

These investments are valued at net asset value per unit based on a combination of market- and income-based models utilizing market discount rates, projected cash flows and the estimated value into perpetuity. In accordance with FASB Codification Topic 820, “Fair Value Measurement”, these investments have not been classified in the fair value hierarchy. The fair value amounts presented in the tables below for the Real Estate Fund are intended to permit reconciliation of the fair value hierarchy to the “Plan Assets at End of Year” line item shown in the “Change in Plan Assets” table above.

Assets measured at fair value on a recurring basis for the Pension Plan as of December 31, 2020 and 2019 are as follows (000’s):


	Fair Value Measurements at Reporting Date Using
Description	Balance as of December 31,		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
2020
Pension Plan Assets:
Mutual Funds:
Equity Funds	$	79,690	$	79,690	$	—	$	—
Fixed Income Funds		50,622		50,622		—		—

Total Mutual Funds		130,312		130,312		—		—
Cash Equivalents		1,277		1,277

Total Assets in the Fair Value Hierarchy	$	131,589	$	131,589	$	—	$	—

Real Estate Fund–Measured at Net Asset Value		5,817

Total Assets	$	137,406


	Fair Value Measurements at Reporting Date Using
Description	Balance as of December 31,		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

2019
Pension Plan Assets:
Mutual Funds:
Equity Funds	$	68,848	$	68,848	$	—	$	—
Fixed Income Funds		44,980		44,980		—		—

Total Mutual Funds		113,828		113,828		—		—
Cash Equivalents		750		750

Total Assets in the Fair Value Hierarchy	$	114,578	$	114,578	$	—	$	—

Real Estate Fund–Measured at Net Asset Value		11,177

Total Assets	$	125,755

Redemptions of the Real Estate Fund are subject to a sixty-five day notice period and the fund is valued quarterly. There are no unfunded commitments.

Assets measured at fair value on a recurring basis for the PBOP Plan as of December 31, 2020 and 2019 are as follows (000’s):


	Fair Value Measurements at Reporting Date Using
Description	Balance as of December 31,		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
2020
PBOP Plan Assets:
Mutual Funds:
Fixed Income Funds	$	14,716	$	14,716	$	—	$	—
Equity Funds		18,131		18,131		—		—

Total Assets	$	32,847	$	32,847	$	—	$	—


2019
PBOP Plan Assets:
Mutual Funds:
Fixed Income Funds	$	11,888	$	11,888	$	—	$	—
Equity Funds		15,392		15,392		—		—

Total Assets	$	27,280	$	27,280	$	—	$	—

Employee 401(k) Tax Deferred Savings Plan—

The Company sponsors the Unitil Corporation Tax Deferred Savings and Investment Plan (the 401(k) Plan) under Section 401(k) of the Internal Revenue Code and covering substantially all of the Company’s employees. Participants may elect to defer current compensation by contributing to the plan. Employees may direct, at their sole discretion, the investment of their savings plan balances (both the employer and employee portions) into a variety of investment options, including a Company common stock fund.

The Company’s contributions to the 401(k) Plan were $3.0 million, $2.8 million and $2.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.