•

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:


	2021			2020			2019
Used to Determine Plan costs for years ended December 31:


Discount Rate		2.50	%		3.25	%		4.25	%

Rate of Compensation Increase		3.00	%		3.00	%		3.00	%

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

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


Used to Determine Benefit Obligations at December 31:

Discount Rate	2.85	%	2.50	%	3.25	%

Rate of Compensation Increase	3.00	%	3.00	%	3.00	%

Health Care Cost Trend Rate Assumed for Next Year	6.20	%	6.60	%	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		2029

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 2021, a change in the discount rate of 0.25% would have resulted in an increase or decrease of approximately $679,000 in the Net Periodic Benefit Cost (NPBC). The Rate of Compensation Increase assumption used for 2021 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
	2021			2020			2019			2021			2020			2019			2021			2020			2019

Service Cost	$	3,472		$	3,322		$	3,104		$	3,034		$	2,698		$	2,304		$	354		$	283		$	247

Interest Cost		5,003			5,776			6,484			2,740			3,121			3,426			458			549			567

Expected Return on Plan Assets		(9,693	)		(9,019	)		(8,475	)		(2,508	)		(2,063	)		(1,645	)		—			—			—

Prior Service Cost Amortization		301			320			320			1,208			1,210			1,213			56			57			56

Actuarial Loss Amortization		8,089			6,472			4,324			1,045			744			227			1,489			1,036			628


Sub-total		7,172			6,871			5,757			5,519			5,710			5,525			2,357			1,925			1,498

Amounts Capitalized or Deferred		(3,384	)		(3,083	)		(2,227	)		(3,136	)		(2,865	)		(2,317	)		(712	)		(579	)		(430	)

NPBC Recognized	$	3,788		$	3,788		$	3,530		$	2,383		$	2,845		$	3,208		$	1,645		$	1,346		$	1,068

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 ga

ns 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 2021, 2020 and 2019 before capitalization and deferral was $7.2 million, $6.9 million and $5.8 million, respectively. Had the Company used the fair value of assets instead of the market-related value, pension expense for the years 2021, 2020 and 2019 would have been $6.1 million, $6.5 million and $7.3 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:	2021			2020			2021			2020			2021			2020


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

Actual Return on Plan Assets		16,989			13,024			3,586			3,739			—			—

Employer Contributions		4,100			4,665			8,903			4,156			637			654

Participant Contributions		—			—			220			240			—			—

Benefits Paid		(6,489	)		(6,038	)		(2,905	)		(2,568	)		(637	)		(654	)

Plan Assets at End of Year	$	152,006		$	137,406		$	42,651		$	32,847		$	—		$	—


Change in PBO:

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

Service Cost		3,472			3,322			3,034			2,698			354			283

Interest Cost		5,003			5,776			2,740			3,121			458			549

Participant Contributions		—			—			220			240			—			—

Plan Amendments		674			732			—			—			—			—

Benefits Paid		(6,489	)		(6,038	)		(2,905	)		(2,568	)		(637	)		(654	)

Actuarial (Gain) or Loss		(9,334	)		20,165			2,167			7,683			(2,686	)		2,288

PBO at End of Year	$	199,418		$	206,092		$	112,087		$	106,831		$	17,714		$	20,225

Funded Status: Assets vs PBO	$	(47,412	)	$	(68,686	)	$	(69,436	)	$	(73,984	)	$	(17,714	)	$	(20,225	)

The decrease in the PBO for the Pension plan as of Dece

ber 31, 2021 compared to December 31, 2020 primarily reflects an increase in the assumed discount rate as of December 31, 2021.

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 $86.4 million and $103.7 million at December 31, 2021 and 2020, 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 $185.1 million and $189.4 million as of December 31, 2021 and 2020, respectively. The ABO for the SERP was $17.5 million and $16.7 million as of December 31, 2021 and 2020, 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 2022 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
	2021		2020		2019		2021		2020		2019		2021		2020		2019

Employer Contributions	$	4,100	$	4,665	$	6,916	$	8,903	$	4,156	$	4,000	$	637	$	654	$	610
Participant Contributions	$	—	$	—	$	—	$	220	$	240	$	121	$	—	$	—	$	—
Benefit Payments	$	6,489	$	6,038	$	6,877	$	2,905	$	2,568	$	1,758	$	637	$	654	$	610

The following table represents estimated future

benefit

payments (000’s).


Estimated Future Benefit Payments
	Pension		PBOP		SERP
2022	$	7,040	$	3,151	$	637
2023		8,046		3,448		636
2024		8,497		3,559		635
2025		8,702		3,862		1,090
2026		9,804		4,158		1,144
2027—2031		54,565		23,853		5,583

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 2022			Actual Allocation at December 31,
	Target Allocation 2022			2021			2020			2019

Equity Funds		56	%		57	%		58	%		54	%
Debt Funds		39	%		38	%		37	%		36	%
Real Estate Fund		5	%		4	%		4	%		9	%
Other (1)		—			1	%		1	%		1	%

Total					100	%		100	%		100	%

(1)

Represents investments being held in cash equivalents as of December 31, 2021, December 31, 2020 and December 31, 2019 pending payment of benefits.


PBOP Plan	Target Allocation 2022			Actual Allocation at December 31,
PBOP Plan	Target Allocation 2022			2021			2020			2019

Equity Funds		55	%		56	%		55	%		56	%
Debt Funds		45	%		44	%		45	%		44	%

Total					100	%		100	%		100	%

The combination of these target allocations and expected returns resulted in the overall assumed long-term rate of return of 7.50% for 2021. 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, 2021 and 2020. 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, 2021 and 2020 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)
2021
Pension Plan Assets:
Mutual Funds:

Equity Funds	$	86,356	$	86,356	$	—	$	—
Fixed Income Funds		57,883		57,883		—		—

Total Mutual Funds		144,239		144,239		—		—
Cash Equivalents		912		912

Total Assets in the Fair Value Hierarchy	$	145,151	$	145,151	$	—	$	—

Real Estate Fund–Measured at Net Asset Value		6,855

Total Assets	$	152,006


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

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, 2021 and 2020 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)
2021
PBOP Plan Assets:
Mutual Funds:

Fixed Income Funds	$	18,882	$	18,882	$	—	$	—
Equity Funds		23,769		23,769		—		—

Total Assets	$	42,651	$	42,651	$	—	$	—


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	$	—	$	—

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 $3.3 million, $3.0 million and $2.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.