Retirement Plans and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2018

Retirement Benefits [Abstract]

Retirement Plans and Other Postretirement Benefits

Retirement Plans and Other Postretirement Benefits

Pinnacle West sponsors a qualified defined benefit and account balance pension plan, a non-qualified supplemental excess benefit retirement plan, and an other postretirement benefit plan for the employees of Pinnacle West and our subsidiaries.  Pinnacle West uses a December 31 measurement date for its pension and other postretirement benefit plans.  The market-related value of our plan assets is their fair value at the measurement dates. Because of plan changes in September 2014, the Company sought IRS approval to move approximately $186 million of other postretirement benefit trust assets into a new trust account to pay for active union employee medical costs. In December 2016, FERC approved a methodology for determining the amount of other postretirement benefit trust assets to transfer into a new trust account to pay for active union

employee medical costs. On January 2, 2018, these funds were moved to the new trust account which is included in the other special use funds on the Condensed Consolidated Balance Sheets.  The Company negotiated a draft Closing Agreement granting tentative approval from the IRS prior to the transfer. Subsequent to the transfer, the Company submitted proof of the transfer to the IRS. The Company and the IRS executed a final Closing Agreement on March 2, 2018. Per the terms of an order from FERC, the Company must also make an informational filing with FERC. The Company made this FERC filing during February 2018. It is the Company’s understanding that completion of these regulatory requirements permits access to approximately $186 million for the sole purpose of paying active union employee medical benefits.

The following table provides details of the plans’ net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction or billed to electric plant participants) (dollars in thousands):

	Pension Benefits												Other Benefits
	Three Months Ended   September 30,						Nine Months Ended   September 30,						Three Months Ended   September 30,						Nine Months Ended   September 30,
	2018			2017			2018			2017			2018			2017			2018			2017
Service cost — benefits earned during the period	$	14,167		$	13,715		$	42,501		$	41,144		$	5,275		$	4,280		$	15,825		$	12,839
Non-service costs (credits):
Interest cost on benefit obligation	31,172			32,439			93,517			97,316			7,037			7,490			21,111			22,470
Expected return on plan assets	(45,713		)	(43,568		)	(137,140		)	(130,703		)	(10,520		)	(13,350		)	(31,561		)	(40,051		)
Amortization of:
Prior service cost (credit)	—			20			—			61			(9,461		)	(9,461		)	(28,382		)	(28,382		)
Net actuarial loss	8,021			11,975			24,062			35,924			—			1,279			—			3,838
Net periodic benefit cost (credit)	$	7,647		$	14,581		$	22,940		$	43,742		$	(7,669	)	$	(9,762	)	$	(23,007	)	$	(29,286	)
Portion of cost (credit) charged to expense	$	2,524		$	7,231		$	7,535		$	21,692		$	(5,359	)	$	(4,841	)	$	(16,083	)	$	(14,523	)

On January 1, 2018, we adopted new accounting standard ASU 2017-07, Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This new standard changed our income statement presentation of net periodic benefit cost/(credits) and allows only the service cost component of net periodic benefit cost to be eligible for capitalization. See Note 13 for additional information.

Contributions

We have made voluntary contributions of $50 million to our pension plan year-to-date in 2018. The minimum required contributions for the pension plan are zero for the next three years. We expect to make voluntary contributions up to a total of $250 million during the 2018-2020 period. We do not expect to make any contributions over the next three years to our other postretirement benefit plans. Year to date in 2018, the Company was reimbursed $72 million for prior years retiree medical claims from the other postretirement benefit plan trust assets.