Pension and Other Postretirement Benefit Plans

PNMR and its subsidiaries maintain qualified defined benefit pension plans, postretirement benefit plans providing medical and dental benefits, and executive retirement programs (collectively, the “PNM Plans” and “TNMP Plans”). PNMR maintains the legal obligation for the benefits owed to participants under these plans.

Additional information concerning pension and OPEB plans is contained in Note 12 of the Notes to Consolidated Financial Statements in the 2013 Annual Reports on Form 10-K. Annual net periodic benefit cost (income) for the plans is actuarially determined using the methods and assumptions set forth in that note and is recognized ratably throughout the year. The Society of Actuaries recently issued revised mortality tables that include changes in assumptions to reflect increased life expectancy and the corresponding decrease in mortality rates. This change will have impacts on the Company’s pension plans, as the mortality assumptions are used as the basis for stating the pension obligation in financial statements, determining funding requirements, and making minimum lump-sum calculations. The Company, with the assistance of its consulting actuaries, is studying the impact of the mortality table changes. This study is on-going and subject to change. Preliminary estimates indicate that the Company’s pension liabilities reflecting the new mortality tables and other current assumptions could increase by approximately 7% over those previously reported. Although pension expense and funding requirements also will likely increase, these changes are not expected to be material.

PNM Plans

The following tables present the components of the PNM Plans’ net periodic benefit cost:



	Three Months Ended September 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2014			2013			2014			2013			2014		2013
	(In thousands)
Components of Net Periodic
Benefit Cost
Service cost	$	—		$	—		$	45		$	65		$	—	$	—
Interest cost	7,541			7,035			1,159			1,029			205		180
Expected return on plan assets	(9,511		)	(10,482		)	(1,410		)	(1,261		)	—		—
Amortization of net (gain) loss	3,255			3,710			556			1,061			52		58
Amortization of prior service cost	(241		)	19			(336		)	(336		)	—		—
Net periodic benefit cost	$	1,044		$	282		$	14		$	558		$	257	$	238

	Nine Months Ended September 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2014			2013			2014			2013			2014		2013
	(In thousands)
Components of Net Periodic
Benefit Cost
Service cost	$	—		$	—		$	136		$	195		$	—	$	—
Interest cost	22,622			21,106			3,473			3,085			616		540
Expected return on plan assets	(28,533		)	(31,447		)	(4,229		)	(3,782		)	—		—
Amortization of net (gain) loss	9,765			11,130			1,669			3,182			157		174
Amortization of prior service cost	(724		)	57			(1,008		)	(1,008		)	—		—
Net periodic benefit cost	$	3,130		$	846		$	41		$	1,672		$	773	$	714

PNM does not anticipate making any contributions to its pension trust in 2014 due to the current funded status of the pension plan. PNM made contributions to its pension plan trust of zero and $60.0 million in the three and nine months ended September 30, 2013. Based on current law, including recent amendments to funding requirements, and estimates of portfolio performance, contributions to the PNM pension plan trust for 2015-2018 are estimated to total $50.0 million. These anticipated contributions were developed using current funding assumptions, with discount rates of 4.5% to 5.3%. Actual amounts required to be funded in the future will depend on the actuarial assumptions at that time, including the appropriate discount rate. PNM may make additional contributions at its discretion. PNM made contributions to the OPEB trust of $0.8 million and $2.4 million in the three and nine months ended September 30, 2014 and $0.8 million and $2.4 million in the three and nine months ended September 30, 2013. PNM expects to make contributions to the OPEB trust totaling $3.3 million in 2014 and $14.0 million for 2015-2018. Disbursements under the executive retirement program, which are funded by PNM and considered to be contributions to the plan, were $0.4 million and $1.2 million in the three and nine months ended September 30, 2014 and $0.4 million and $1.1 million in the three and nine months ended September 30, 2013 and are expected to total $1.6 million during 2014.

TNMP Plans

The following tables present the components of the TNMP Plans’ net periodic benefit cost (income):



	Three Months Ended September 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2014			2013			2014			2013			2014		2013
	(In thousands)
Components of Net Periodic
Benefit Cost (Income)
Service cost	$	—		$	—		$	59		$	75		$	—	$	—
Interest cost	798			772			155			141			10		9
Expected return on plan assets	(1,132		)	(1,212		)	(133		)	(126		)	—		—
Amortization of net (gain) loss	166			262			(31		)	—			—		—
Amortization of prior service cost	—			—			8			14			—		—
Net Periodic Benefit Cost (Income)	$	(168	)	$	(178	)	$	58		$	104		$	10	$	9

	Nine Months Ended September 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2014			2013			2014			2013			2014		2013
	(In thousands)
Components of Net Periodic
Benefit Cost (Income)
Service cost	$	—		$	—		$	178		$	225		$	—	$	—
Interest cost	2,395			2,315			464			424			29		27
Expected return on plan assets	(3,395		)	(3,637		)	(400		)	(377		)	—		—
Amortization of net (gain) loss	499			787			(92		)	—			—		—
Amortization of prior service cost	—			—			24			43			—		—
Net Periodic Benefit Cost (Income)	$	(501	)	$	(535	)	$	174		$	315		$	29	$	27

TNMP does not anticipate making additional contributions to its pension trust in 2014 due to the current funded status of the pension plan. TNMP made contributions to its pension plan trust of zero and $1.0 million in the three and nine months ended September 30, 2013. Based on current law, including recent amendments to funding requirements, and estimates of portfolio performance, TNMP estimates there would be no contributions to its pension plan trust for 2015-2018. The anticipated contributions were developed using current funding assumptions, including discount rates of 4.5% and 5.3%. Actual amounts to be funded in the future will depend on the actuarial assumptions at that time, including the appropriate discount rate. TNMP may make additional contributions at its discretion. TNMP made contributions to the OPEB trust of zero and $0.3 million in the three and nine months ended September 30, 2014 and zero and $0.3 million in the three and nine months ended September 30, 2013. TNMP expects to make contributions to the OPEB trust totaling $0.3 million in 2014 and $1.4 million for 2015-2018. Disbursements under the executive retirement program, which are funded by TNMP and considered to be contributions to the plan, were less than $0.1 million in the three and nine months ended September 30, 2014 and 2013 and are expected to total $0.1 million during 2014.