(9) Employee Benefit Plans

PacifiCorp sponsors defined benefit pension and other postretirement benefit plans that cover the majority of its employees, as well as a defined contribution 401(k) employee savings plan ("401(k) Plan"). In addition, PacifiCorp contributes to a joint trustee pension plan and a subsidiary contributes to a multiemployer pension plan for benefits offered to certain bargaining units.

Pension and Other Postretirement Benefit Plans

PacifiCorp's pension plans include a non-contributory defined benefit pension plan, the PacifiCorp Retirement Plan ("Retirement Plan"), and the Supplemental Executive Retirement Plan ("SERP"). The Retirement Plan is closed to all non-union employees hired after January 1, 2008. The SERP was closed to new participants as of March 21, 2006. All non-union Retirement Plan participants hired prior to January 1, 2008 that did not elect to receive equivalent fixed contributions to the 401(k) Plan effective January 1, 2009, earn benefits based on a cash balance formula. In general for union employees, benefits under the Retirement Plan were frozen at various dates from December 31, 2007 through December 31, 2011 as they are now being provided with enhanced 401(k) Plan benefits. However, certain limited union Retirement Plan participants continue to earn benefits under the Retirement Plan based on the employee's years of service and a final average pay formula.

PacifiCorp's other postretirement benefit plan provides healthcare and life insurance benefits to eligible retirees.

Plan Amendment

Effective January 1, 2012, PacifiCorp changed the medical benefits for the majority of Medicare-eligible participants in its other postretirement benefit plan. Medicare-eligible participants now enroll in individual medical plans, rather than company-sponsored plans, under which PacifiCorp contributes fixed amounts to the participant's health reimbursement account. As a result of this change, PacifiCorp's benefit obligation for its other postretirement benefit plan and its related regulatory assets decreased $54 million as of December 31, 2011.

Net Periodic Benefit Cost

For purposes of calculating the expected return on plan assets, a market-related value is used. The market-related value of plan assets is calculated by spreading the difference between expected and actual investment returns over a five-year period beginning after the first year in which they occur.

Net periodic benefit cost for the plans included the following components for the years ended December 31 (in millions):



	Pension									Other Postretirement
	2012			2011			2010			2012			2011			2010

Service cost	$	7		$	10		$	12		$	7		$	7		$	6
Interest cost	61			63			66			28			31			31
Expected return on plan assets	(74		)	(75		)	(74		)	(30		)	(30		)	(30		)
Net amortization	34			20			13			4			18			15
Net periodic benefit cost	$	28		$	18		$	17		$	9		$	26		$	22

Funded Status

The following table is a reconciliation of the fair value of plan assets for the years ended December 31 (in millions):



	Pension						Other Postretirement
	2012			2011			2012			2011

Plan assets at fair value, beginning of year	$	931		$	960		$	384		$	389
Employer contributions	49			71			9			28
Participant contributions	—			—			7			9
Actual return on plan assets	120			(13		)	52			(4		)
Benefits paid	(88		)	(87		)	(28		)	(38		)
Plan assets at fair value, end of year	$	1,012		$	931		$	424		$	384

The following table is a reconciliation of the benefit obligations for the years ended December 31 (in millions):



	Pension						Other Postretirement
	2012			2011			2012			2011

Benefit obligation, beginning of year	$	1,291		$	1,236		$	575		$	581
Service cost	7			10			7			7
Interest cost	61			63			28			31
Participant contributions	—			—			7			9
Plan amendments	—			(4		)	—			(54		)
Actuarial loss	120			73			43			36
Benefits paid, net of Medicare subsidy	(88		)	(87		)	(28		)	(35		)
Benefit obligation, end of year	$	1,391		$	1,291		$	632		$	575
Accumulated benefit obligation, end of year	$	1,390		$	1,289

The funded status of the plans and the amounts recognized on the Consolidated Balance Sheets as of December 31 are as follows (in millions):



	Pension						Other Postretirement
	2012			2011			2012			2011

Plan assets at fair value, end of year	$	1,012		$	931		$	424		$	384
Less - Benefit obligation, end of year	1,391			1,291			632			575
Funded status	$	(379	)	$	(360	)	$	(208	)	$	(191	)

Amounts recognized on the Consolidated Balance Sheets:
Other current liabilities	$	(4	)	$	(4	)	$	—		$	—
Other long-term liabilities	(375		)	(356		)	(208		)	(191		)
Amounts recognized	$	(379	)	$	(360	)	$	(208	)	$	(191	)

The SERP has no plan assets; however, PacifiCorp has a Rabbi trust that holds corporate-owned life insurance and other investments to provide funding for the future cash requirements of the SERP. The cash surrender value of all of the policies included in the Rabbi trust, net of amounts borrowed against the cash surrender value, plus the fair market value of other Rabbi trust investments, was $44 million and $41 million as of December 31, 2012 and 2011, respectively. These assets are not included in the plan assets in the above table, but are reflected in noncurrent other assets on the Consolidated Balance Sheets.

Unrecognized Amounts

The portion of the funded status of the plans not yet recognized in net periodic benefit cost as of December 31 is as follows (in millions):



	Pension						Other Postretirement
	2012			2011			2012			2011

Net loss	$	660		$	630		$	214		$	206
Prior service credit	(37		)	(45		)	(40		)	(46		)
Regulatory deferrals	(5		)	(7		)	3			3
Total	$	618		$	578		$	177		$	163

A reconciliation of the amounts not yet recognized as components of net periodic benefit cost for the years ended December 31, 2012 and 2011 is as follows (in millions):



				Accumulated
				Other
	Regulatory			Comprehensive
	Asset			Loss			Total
Pension
Balance, December 31, 2010	$	430		$	11		$	441
Net loss arising during the year	157			4			161
Prior service credit arising during the year	(4		)	—			(4		)
Net amortization	(19		)	(1		)	(20		)
Total	134			3			137
Balance, December 31, 2011	564			14			578
Net loss arising during the year	68			6			74
Net amortization	(33		)	(1		)	(34		)
Total	35			5			40
Balance, December 31, 2012	$	599		$	19		$	618



	Regulatory
	Asset
Other Postretirement
Balance, December 31, 2010	$	165
Net loss arising during the year	70
Prior service credit arising during the year	(46		)
Reduction in net transition obligation	(8		)
Net amortization	(18		)
Total	(2		)
Balance, December 31, 2011	163
Net loss arising during the year	18
Net amortization	(4		)
Total	14
Balance, December 31, 2012	$	177

The net loss, prior service credit and regulatory deferrals that will be amortized in 2013 into net periodic benefit cost are estimated to be as follows (in millions):



	Net		Prior Service			Regulatory
	Loss		Credit			Deferrals			Total

Pension	$	57	$	(8	)	$	(1	)	$	48
Other postretirement	15		(7		)	1			9
Total	$	72	$	(15	)	$	—		$	57

Plan Assumptions

Assumptions used to determine benefit obligations and net periodic benefit cost were as follows:



	Pension						Other Postretirement
	2012		2011		2010		2012		2011		2010

Benefit obligations as of December 31:
Discount rate	4.05	%	4.90	%	5.35	%	4.10	%	4.95	%	5.45	%
Rate of compensation increase	3.00		3.50		3.50		N/A		N/A		N/A

Net periodic benefit cost for the years ended December 31:
Discount rate	4.90	%	5.35	%	5.80	%	4.95	%	5.45	%	5.85	%
Expected return on plan assets	7.50		7.50		7.75		7.50		7.50		7.75
Rate of compensation increase	3.50		3.50		3.00		N/A		N/A		N/A

In establishing its assumption as to the expected return on plan assets, PacifiCorp utilizes the expected asset allocation and return assumptions for each asset class based on historical performance and forward-looking views of the financial markets.



	2012		2011
Assumed healthcare cost trend rates as of December 31:
Healthcare cost trend rate assumed for next year	8.00	%	8.50	%
Rate that the cost trend rate gradually declines to	5.00	%	5.00	%
Year that the rate reaches the rate it is assumed to remain at	2018		2016

A one percentage-point change in assumed healthcare cost trend rates would have the following effects (in millions):



	Increase (Decrease)
	One Percentage-Point		One Percentage-Point
	Increase		Decrease
Increase (decrease) in:
Total service and interest cost	$	3	$	(2	)
Other postretirement benefit obligation	48		(38		)

Contributions and Benefit Payments

Employer contributions to the pension and other postretirement benefit plans are expected to be $64 million and $13 million, respectively, during 2013. Funding to PacifiCorp's Retirement Plan trust is based upon the actuarially determined costs of the plan and the requirements of the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 ("ERISA") and the Pension Protection Act of 2006, as amended ("PPA"). PacifiCorp considers contributing additional amounts from time to time in order to achieve certain funding levels specified under the PPA. PacifiCorp's funding policy for its other postretirement benefit plan is to contribute an amount equal to the sum of the net periodic benefit cost and the amount of Medicare subsidies expected to be earned during the period.

The expected benefit payments to participants in PacifiCorp's pension and other postretirement benefit plans for 2013 through 2017 and for the five years thereafter are summarized below (in millions):



	Projected Benefit Payments
			Other Postretirement
	Pension		Gross		Medicare Subsidy

2013	$	100	$	36	$	—
2014	102		37		—
2015	104		37		—
2016	106		39		(1		)
2017	103		41		(1		)
2018 - 2022	482		207		(4		)

Plan Assets

Investment Policy and Asset Allocations

PacifiCorp's investment policy for its pension and other postretirement benefit plans is to balance risk and return through a diversified portfolio of equity and debt securities and other alternative investments. Maturities for debt securities are managed to targets consistent with prudent risk tolerances. The plans retain outside investment advisors to manage plan investments within the parameters outlined by the PacifiCorp Pension Committee. The investment portfolio is managed in line with the investment policy with sufficient liquidity to meet near-term benefit payments. The return on assets assumption for each plan is based on a weighted-average of the expected long-term performance for the types of assets in which the plans invest.

The target allocations (percentage of plan assets) for PacifiCorp's pension and other postretirement benefit plan assets are as follows as of December 31, 2012:



	Pension⁽¹⁾	Other Postretirement⁽¹⁾
	%	%
Equity securities⁽²⁾	53 - 57	61 - 65
Debt securities⁽²⁾	33 - 37	33 - 37
Limited partnership interests	8 - 12	1 - 3
Other	0 - 1	0 - 1

(1)

PacifiCorp's Retirement Plan trust includes a separate account that is used to fund benefits for the other postretirement benefit plan. In addition to this separate account, the assets for the other postretirement benefit plan are held in Voluntary Employees' Beneficiary Association ("VEBA") trusts, each of which has its own investment allocation strategies. Target allocations for the other postretirement benefit plan include the separate account of the Retirement Plan trust and the VEBA trusts.


(2)	For purposes of target allocation percentages and consistent with the plans' investment policy, investment funds have been allocated based on the underlying investments in debt and equity securities.

Fair Value Measurements

The following table presents the fair value of plan assets, by major category, for PacifiCorp's defined benefit pension plan (in millions):



	Input Levels for Fair Value Measurements
	Level 1⁽¹⁾		Level 2⁽¹⁾		Level 3⁽¹⁾		Total
As of December 31, 2012
Cash equivalents	$	1	$	8	$	—	$	9
Debt securities:
United States government obligations	48		—		—		48
International government obligations	—		67		—		67
Corporate obligations	—		64		—		64
Municipal obligations	—		7		—		7
Agency, asset and mortgage-backed obligations	—		34		—		34
Equity securities:
United States companies	383		—		—		383
International companies	7		—		—		7
Investment funds⁽²⁾	112		185		—		297
Limited partnership interests⁽³⁾	—		—		96		96
Total	$	551	$	365	$	96	$	1,012

As of December 31, 2011
Cash equivalents	$	—	$	9	$	—	$	9
Debt securities:
United States government obligations	21		—		—		21
International government obligations	—		73		—		73
Corporate obligations	—		63		—		63
Municipal obligations	—		7		—		7
Agency, asset and mortgage-backed obligations	—		45		—		45
Equity securities:
United States companies	366		—		—		366
International companies	7		—		—		7
Investment funds⁽²⁾	104		165		—		269
Limited partnership interests⁽³⁾	—		—		71		71
Total	$	498	$	362	$	71	$	931


(1)	Refer to Note 12 for additional discussion regarding the three levels of the fair value hierarchy.

(2)

Investment funds are substantially comprised of mutual funds and collective trust funds. These funds consist of equity and debt securities of approximately 60% and 40%, respectively, for 2012 and 59% and 41%, respectively, for 2011. Additionally, these funds are invested in United States and international securities of approximately 42% and 58%, respectively, for 2012 and 49% and 51%, respectively, for 2011.


(3)	Limited partnership interests include several funds that invest primarily in buyout, growth equity, venture capital and real estate.

The following table presents the fair value of plan assets, by major category, for PacifiCorp's defined benefit other postretirement plan (in millions):



	Input Levels for Fair Value Measurements
	Level 1⁽¹⁾		Level 2⁽¹⁾		Level 3⁽¹⁾		Total
As of December 31, 2012
Cash and cash equivalents	$	4	$	—	$	—	$	4
Debt securities:
United States government obligations	4		—		—		4
International government obligations	—		5		—		5
Corporate obligations	—		5		—		5
Municipal obligations	—		1		—		1
Agency, asset and mortgage-backed obligations	—		3		—		3
Equity securities:
United States companies	137		—		—		137
International companies	3		—		—		3
Investment funds⁽²⁾	152		103		—		255
Limited partnership interests⁽³⁾	—		—		7		7
Total	$	300	$	117	$	7	$	424

As of December 31, 2011
Cash and cash equivalents	$	3	$	—	$	—	$	3
Debt securities:
United States government obligations	2		—		—		2
International government obligations	—		5		—		5
Corporate obligations	—		5		—		5
Municipal obligations	—		1		—		1
Agency, asset and mortgage-backed obligations	—		3		—		3
Equity securities:
United States companies	131		—		—		131
International companies	2		—		—		2
Investment funds⁽²⁾	132		94		—		226
Limited partnership interests⁽³⁾	—		—		6		6
Total	$	270	$	108	$	6	$	384


(1)	Refer to Note 12 for additional discussion regarding the three levels of the fair value hierarchy.


(2)	Investment funds are substantially comprised of mutual funds and collective trust funds. These funds consist of equity and debt securities of approximately 48% and 52%, respectively, for 2012 and 2011. Additionally, these funds are invested in United States and international securities of approximately 66% and 34%, respectively, for 2012 and 69% and 31%, respectively, for 2011.


(3)	Limited partnership interests include several funds that invest primarily in buyout, growth equity, venture capital and real estate.

When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics. When observable market data is not available, the fair value is determined using unobservable inputs, such as estimated future cash flows, purchase multiples paid in other comparable third-party transactions or other information. Most investments in limited partnership interests are valued at estimated fair value based on the Plan's proportionate share of the partnerships' fair value as recorded in the partnerships' most recently available financial statements adjusted for recent activity and estimated returns. The fair values recorded in the partnerships' financial statements are generally determined based on closing public market prices for publicly traded securities and as determined by the general partners for other investments based on factors including estimated future cash flows, purchase multiples paid in other comparable third-party transactions, comparable public company trading multiples and other information. One of the limited partnerships is valued at the unit price calculated by the general partner primarily based on independent appraised values of the underlying property holdings.

The following table reconciles the beginning and ending balances of PacifiCorp's plan assets measured at fair value using significant Level 3 inputs for the years ended December 31 (in millions):



	Limited Partnership Interests
	Pension			Other Postretirement

Balance, December 31, 2009	$	80		$	8
Actual return on plan assets still held at December 31, 2010	10			—
Purchases, sales, distributions and settlements	(6		)	(1		)
Balance, December 31, 2010	84			7
Actual return on plan assets still held at December 31, 2011	7			1
Purchases, sales, distributions and settlements	(20		)	(2		)
Balance, December 31, 2011	71			6
Actual return on plan assets still held at December 31, 2012	7			—
Purchases, sales, distributions and settlements	18			1
Balance, December 31, 2012	$	96		$	7

Multiemployer and Joint Trustee Pension Plans

PacifiCorp contributes to the PacifiCorp/IBEW Local 57 Retirement Trust Fund ("Local 57 Trust Fund") (plan number 001) and a subsidiary contributes to the United Mine Workers of America 1974 Pension Plan ("UMWA Pension Plan") (plan number 002). Contributions to these pension plans are based on the terms of collective bargaining agreements.

The Local 57 Trust Fund is a joint trustee plan such that the board of trustees is represented by an equal number of trustees from PacifiCorp and the union. The Local 57 Trust Fund was established pursuant to the provisions of the Taft-Hartley Act and was formed with the ability for other employers to participate in the plan.

The risk of participating in multiemployer pension plans generally differs from single-employer plans in that assets are pooled such that contributions by one employer may be used to provide benefits to employees of other participating employers and plan assets cannot revert back to employers. If an employer ceases participation in the plan, the employer may be obligated to pay a withdrawal liability based on the participants' unfunded, vested benefits in the plan. If participating employers withdraw from the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, including any employers that may have recently withdrawn. Furthermore, to the extent a participating employer defaults on its obligation to the plan, the remaining employers may be allocated a share of the defaulting employer's obligation for unfunded vested benefits. Under the terms of the UMWA Pension Plan, in the event the mining operations cease, PacifiCorp's subsidiary may be subject to a withdrawal liability.

The following table presents PacifiCorp's and its subsidiary's participation in individually significant joint trustee and multiemployer pension plans for the years ended December 31 (dollars in millions):



		PPA zone status or plan funded status percentage for plan years beginning July 1,⁽¹⁾					Contributions⁽²⁾
Plan name	Employer Identification Number	2012	2011	2010	Funding improvement plan	Surcharge imposed under PPA	2012		2011		2010		Year contributions to plan exceeded more than 5% of total contributions⁽⁴⁾
UMWA Pension Plan	52-1050282	Orange	Orange	Green⁽³⁾	Implemented	None	$	3	$	3	$	3	None
Local 57 Trust Fund	87-0640888	At least 80%	At least 80%	At least 80%	None	None	$	12	$	12	$	9	2011, 2010, 2009

(1)

Among other factors, multiemployer plans in the red zone are generally less than 65 percent funded; multiemployer plans in the yellow zone either (a) are at least 65 percent but less than 80 percent funded or (b) have an accumulated funding deficiency for such plan year, or are projected to have such an accumulated funding deficiency for any of the six succeeding plan years; multiemployer plans in the orange zone meet both of the criteria for yellow zone; and multiemployer plans in the green zone are at least 80 percent funded. Multiemployer plans in the red, yellow, orange or green zones are also referred to as being in critical, endangered, seriously endangered or neither endangered nor critical status, respectively.


(2)	PacifiCorp's and its subsidiary's minimum contributions to the plans are based on the amount of wages paid to employees covered by the Local 57 Trust Fund collective bargaining agreement and the number of mining hours worked for the UMWA Pension Plan, respectively, subject to ERISA minimum funding requirements.


(3)	The UMWA Pension Plan elected to extend recognition of investment losses incurred during the plan year ended June 30, 2009 pursuant to the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010. Had the election not been made, the PPA zone status would have been orange for the plan year beginning July 1, 2010.


(4)	For the UMWA Pension Plan, information is for plan years beginning July 1, 2010 and 2009. Information for the plan years beginning July 1, 2012 and 2011 is not available. For the Local 57 Trust Fund, information is for plan years beginning July 1, 2011, 2010 and 2009. Information for the plan year beginning July 1, 2012 is not yet available.

Although the collective bargaining agreements governing the UMWA Pension Plan and the Local 57 Trust Fund expired in January 2013, operations will continue under the provisions of the agreements until such time that new agreements are reached or the existing agreements are terminated.

Defined Contribution Plan

PacifiCorp sponsors a defined contribution plan (401(k) plan) covering substantially all employees. PacifiCorp's contributions are based primarily on each participant's level of contribution and cannot exceed the maximum allowable for tax purposes. PacifiCorp's contributions to the 401(k) plan were $36 million, $38 million and $39 million for the years ended December 31, 2012, 2011 and 2010, respectively.