
(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 continue to 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.

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
	2013			2012			2011			2013			2012			2011

Service cost	$	6		$	7		$	10		$	9		$	7		$	7
Interest cost	54			61			63			25			28			31
Expected return on plan assets	(74		)	(74		)	(75		)	(30		)	(30		)	(30		)
Net amortization	48			34			20			8			4			18
Net periodic benefit cost	$	34		$	28		$	18		$	12		$	9		$	26

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
	2013			2012			2013			2012

Plan assets at fair value, beginning of year	$	1,012		$	931		$	424		$	384
Employer contributions	63			49			8			9
Participant contributions	—			—			7			7
Actual return on plan assets	213			120			86			52
Benefits paid	(117		)	(88		)	(39		)	(28		)
Plan assets at fair value, end of year	$	1,171		$	1,012		$	486		$	424

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



	Pension						Other Postretirement
	2013			2012			2013			2012

Benefit obligation, beginning of year	$	1,391		$	1,291		$	632		$	575
Service cost	6			7			9			7
Interest cost	54			61			25			28
Participant contributions	—			—			7			7
Actuarial (gain) loss	(104		)	120			(36		)	43
Benefits paid	(117		)	(88		)	(39		)	(28		)
Benefit obligation, end of year	$	1,230		$	1,391		$	598		$	632
Accumulated benefit obligation, end of year	$	1,229		$	1,390

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
	2013			2012			2013			2012

Plan assets at fair value, end of year	$	1,171		$	1,012		$	486		$	424
Less - Benefit obligation, end of year	1,230			1,391			598			632
Funded status	$	(59	)	$	(379	)	$	(112	)	$	(208	)

Amounts recognized on the Consolidated Balance Sheets:
Other current liabilities	$	(4	)	$	(4	)	$	—		$	—
Other long-term liabilities	(55		)	(375		)	(112		)	(208		)
Amounts recognized	$	(59	)	$	(379	)	$	(112	)	$	(208	)

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 $48 million and $44 million as of December 31, 2013 and 2012, 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
	2013			2012			2013			2012

Net loss	$	361		$	660		$	108		$	214
Prior service credit	(29		)	(37		)	(33		)	(40		)
Regulatory deferrals	(4		)	(5		)	2			3
Total	$	328		$	618		$	77		$	177

A reconciliation of the amounts not yet recognized as components of net periodic benefit cost for the years ended December 31, 2013 and 2012 is as follows (in millions):



				Accumulated
				Other
	Regulatory			Comprehensive
	Asset			Loss			Total
Pension
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
Net gain arising during the year	(239		)	(3		)	(242		)
Net amortization	(47		)	(1		)	(48		)
Total	(286		)	(4		)	(290		)
Balance, December 31, 2013	$	313		$	15		$	328



	Regulatory
	Asset
Other Postretirement
Balance, December 31, 2011	$	163
Net loss arising during the year	18
Net amortization	(4		)
Total	14
Balance, December 31, 2012	177
Net gain arising during the year	(92		)
Net amortization	(8		)
Total	(100		)
Balance, December 31, 2013	$	77

The net loss, prior service credit and regulatory deferrals that will be amortized in 2014 into net periodic benefit cost are estimated to be as follows (in millions):



	Net		Prior Service			Regulatory
	Loss		Credit			Deferrals			Total

Pension	$	38	$	(8	)	$	(1	)	$	29
Other postretirement	9		(7		)	—			2
Total	$	47	$	(15	)	$	(1	)	$	31

Plan Assumptions

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



	Pension						Other Postretirement
	2013		2012		2011		2013		2012		2011

Benefit obligations as of December 31:
Discount rate	4.80	%	4.05	%	4.90	%	4.90	%	4.10	%	4.95	%
Rate of compensation increase	3.00		3.00		3.50		N/A		N/A		N/A

Net periodic benefit cost for the years ended December 31:
Discount rate	4.05	%	4.90	%	5.35	%	4.10	%	4.95	%	5.45	%
Expected return on plan assets	7.50		7.50		7.50		7.50		7.50		7.50
Rate of compensation increase	3.00		3.50		3.50		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 forward-looking views of the financial markets and historical performance.



	2013		2012
Assumed healthcare cost trend rates as of December 31:
Healthcare cost trend rate assumed for next year	8.00	%	8.00	%
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	2019		2018

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	$	4	$	(3	)
Other postretirement benefit obligation	41		(33		)

Contributions and Benefit Payments

Employer contributions to the pension and other postretirement benefit plans are expected to be $10 million and $4 million, respectively, during 2014. 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 generally contribute an amount equal to the net periodic benefit cost.

The expected benefit payments to participants in PacifiCorp's pension and other postretirement benefit plans for 2014 through 2018 and for the five years thereafter are summarized below (in millions):



	Projected Benefit Payments
			Other Postretirement
	Pension		Gross		Medicare Subsidy

2014	$	102	$	38	$	—
2015	108		39		—
2016	109		39		—
2017	104		40		—
2018	104		42		—
2019 - 2023	470		210		(3		)

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 target allocations (percentage of plan assets) for PacifiCorp's pension and other postretirement benefit plan assets are as follows as of December 31, 2013:



	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 are 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, 2013
Cash equivalents	$	—	$	18	$	—	$	18
Debt securities:
United States government obligations	13		—		—		13
International government obligations	—		1		—		1
Corporate obligations	—		48		—		48
Municipal obligations	—		8		—		8
Agency, asset and mortgage-backed obligations	—		50		—		50
Equity securities:
United States companies	489		—		—		489
International companies	16		—		—		16
Investment funds⁽²⁾	215		227		—		442
Limited partnership interests⁽³⁾	—		—		86		86
Total	$	733	$	352	$	86	$	1,171

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


(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 50% and 50%, respectively, for 2013 and 60% and 40%, respectively, for 2012, and are invested in United States and international securities of approximately 42% and 58%, respectively, for 2013 and 2012.


(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, 2013
Cash and cash equivalents	$	3	$	1	$	—	$	4
Debt securities:
United States government obligations	1		—		—		1
Corporate obligations	—		4		—		4
Municipal obligations	—		1		—		1
Agency, asset and mortgage-backed obligations	—		4		—		4
Equity securities:
United States companies	167		—		—		167
International companies	6		—		—		6
Investment funds⁽²⁾	173		120		—		293
Limited partnership interests⁽³⁾	—		—		6		6
Total	$	350	$	130	$	6	$	486

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


(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 49% and 51%, respectively, for 2013 and 48% and 52%, respectively, for 2012, and are invested in United States and international securities of approximately 70% and 30%, respectively, for 2013 and 66% and 34%, respectively, for 2012.


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

For level 1 investments, 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. For level 2 investments, the fair value is determined using pricing models or unquoted net asset values based on observable market inputs. For level 3 investments, 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 pension and other postretirement benefit plans' proportionate shares 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, 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
Actual return on plan assets still held at December 31, 2013	16			1
Purchases, sales, distributions and settlements	(26		)	(2		)
Balance, December 31, 2013	$	86		$	6

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 although formed with the ability for other employers to participate in the plan, there are no other employers that participate in this 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	2013	2012	2011	Funding improvement plan	Surcharge imposed under PPA	2013		2012		2011		Year contributions to plan exceeded more than 5% of total contributions⁽³⁾
UMWA Pension Plan	52-1050282	Seriously Endangered⁽⁴⁾	Seriously Endangered	Seriously Endangered	Implemented	None	$	3	$	3	$	3	None
Local 57 Trust Fund	87-0640888	At least 80%	At least 80%	At least 80%	None	None	$	9	$	12	$	12	2012, 2011, 2010


(1)	Among other factors, multiemployer plans in seriously endangered status are at least 65% but less than 80% funded and 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.


(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 agreements and the number of mining hours worked for the UMWA Pension Plan, respectively, subject to ERISA minimum funding requirements.


(3)	For the UMWA Pension Plan, information is for plan years beginning July 1, 2011 and 2010. Information for the plan years beginning July 1, 2013 and 2012 is not available. For the Local 57 Trust Fund, information is for plan years beginning July 1, 2012, 2011 and 2010. Information for the plan year beginning July 1, 2013 is not yet available.


(4)	If PacifiCorp's subsidiary was to withdraw from the UMWA Pension Plan, a liability of up to an estimated $125 million could be triggered.

The current collective bargaining agreements governing the Local 57 Trust Fund expire in January 2016. Although the collective bargaining agreement governing the UMWA Pension Plan expired in January 2013 and a new agreement has not yet been reached, operations continue under the provisions of the expired agreement.

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 $35 million, $36 million and $38 million for the years ended December 31, 2013, 2012 and 2011, respectively.