RETIREMENT BENEFITS

On January 1, 2018, the qualified defined benefit pension plan of Southern Company Gas was merged into the qualified defined benefit pension plan of Southern Company. Following the plan merger, Southern Company has a qualified defined benefit, trusteed, pension plan covering substantially all employees, with the exception of employees at PowerSecure. The Southern Company qualified defined benefit pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No mandatory contributions to the Southern Company qualified defined benefit pension plan are anticipated for the year ending December 31, 2018.

In addition, the Southern Company Gas non-qualified retirement plans were merged into the Southern Company non-qualified retirement plan (defined benefit and defined contribution). Following the non-qualified retirement plan mergers, Southern Company continues to provide certain non-qualified defined benefits for a select group of management and highly compensated employees, which are funded on a cash basis.

Furthermore, Southern Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional electric operating companies fund related other postretirement trusts to the extent required by their respective regulatory commissions. Southern Company Gas also provides certain medical care and life insurance benefits for eligible retired employees through a postretirement benefit plan. Southern Company Gas has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses.

As indicated in Note (A), the registrants adopted ASU 2017-07 as of January 1, 2018. ASU 2017-07 requires that an employer report the service cost component of net periodic benefit costs in the same line item or items as other compensation costs and requires the other components of net periodic benefit costs to be separately presented in the statements of income outside of income from operations. The presentation requirements of ASU 2017-07 have been applied retrospectively with the service cost component of net periodic benefit costs included in operations and maintenance and all other components of net periodic benefit costs included in other income (expense), net in the statements of income for the three and nine months ended September 30, 2017.

With respect to the presentation requirements, the registrants have used the practical expedient provided by ASU 2017-07, which permits an employer to use the amounts disclosed in its retirement benefits footnote for prior comparative periods as the estimation basis for applying the retrospective presentation requirements to those periods. The amounts of the other components of net periodic benefit costs reclassified for the prior period are presented in the following tables.

See Note 2 to the financial statements of each registrant in Item 8 of the Form 10-K for additional information.

Components of the net periodic benefit costs for the three and nine months ended September 30, 2018 and 2017 are presented in the following tables.



Three Months Ended September 30, 2018	Southern Company			Alabama Power			Georgia Power			Gulf Power			Mississippi Power			Southern Power			Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	90		$	19		$	22		$	4		$	5		$	3		$	8
Interest cost	116			26			34			5			5			1			10
Expected return on plan assets	(236		)	(51		)	(74		)	(10		)	(11		)	(3		)	(18		)
Amortization:
Prior service costs	1			—			1			—			—			—			(1		)
Regulatory asset	—			—			—			—			—			—			4
Net (gain)/loss	53			13			18			2			3			—			3
Net periodic pension cost (income)	$	24		$	7		$	1		$	1		$	2		$	1		$	6
Postretirement Benefits
Service cost	$	6		$	1		$	2		$	—		$	—		$	1		$	—
Interest cost	19			5			7			1			—			—			2
Expected return on plan assets	(17		)	(7		)	(6		)	—			—			—			(1		)
Amortization:
Prior service costs	2			1			—			—			—			—			—
Regulatory asset	—			—			—			—			—			—			2
Net (gain)/loss	3			—			2			—			—			—			—
Net periodic postretirement benefit cost	$	13		$	—		$	5		$	1		$	—		$	1		$	3



Nine Months Ended September 30, 2018	Southern Company			Alabama Power			Georgia Power			Gulf Power			Mississippi Power			Southern Power			Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	269		$	58		$	65		$	12		$	13		$	7		$	24
Interest cost	348			76			104			15			15			4			29
Expected return on plan assets	(707		)	(155		)	(222		)	(30		)	(31		)	(8		)	(53		)
Amortization:
Prior service costs	3			1			2			—			—			—			(2		)
Regulatory asset	—			—			—			—			—			—			11
Net (gain)/loss	160			40			52			7			8			1			9
Net periodic pension cost (income)	$	73		$	20		$	1		$	4		$	5		$	4		$	18
Postretirement Benefits
Service cost	$	18		$	4		$	5		$	1		$	1		$	1		$	1
Interest cost	56			13			21			2			2			—			7
Expected return on plan assets	(51		)	(20		)	(19		)	(1		)	(1		)	—			(5		)
Amortization:
Prior service costs	5			3			1			—			—			—			—
Regulatory asset	—			—			—			—			—			—			5
Net (gain)/loss	10			1			6			—			—			—			—
Net periodic postretirement benefit cost	$	38		$	1		$	14		$	2		$	2		$	1		$	8



Three Months Ended September 30, 2017^(*)	Southern Company			Alabama Power			Georgia Power			Gulf Power			Mississippi Power			Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	73		$	15		$	19		$	3		$	4		$	6
Interest cost	114			25			34			5			5			10
Expected return on plan assets	(224		)	(49		)	(71		)	(10		)	(9		)	(18		)
Amortization:
Prior service costs	3			1			—			—			—			—
Net (gain)/loss	41			10			15			2			1			5
Net periodic pension cost (income)	$	7		$	2		$	(3	)	$	—		$	1		$	3
Postretirement Benefits
Service cost	$	6		$	1		$	2		$	—		$	—		$	1
Interest cost	19			4			6			1			1			3
Expected return on plan assets	(16		)	(5		)	(6		)	—			—			(2		)
Amortization:
Prior service costs	2			1			—			—			—			(1		)
Net (gain)/loss	3			—			3			—			—			1
Net periodic postretirement benefit cost	$	14		$	1		$	5		$	1		$	1		$	2


(*)	Excludes Southern Power since Southern Power did not participate in the qualified pension and postretirement benefit plans until December 2017.



Nine Months Ended September 30, 2017^(*)	Southern Company			Alabama Power			Georgia Power			Gulf Power			Mississippi Power			Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	220		$	47		$	56		$	10		$	11		$	17
Interest cost	341			73			103			15			15			30
Expected return on plan assets	(673		)	(147		)	(212		)	(29		)	(29		)	(53		)
Amortization:
Prior service costs	9			2			2			—			1			(1		)
Net (gain)/loss	122			31			43			5			5			15
Net periodic pension cost (income)	$	19		$	6		$	(8	)	$	1		$	3		$	8
Postretirement Benefits
Service cost	$	18		$	4		$	5		$	1		$	1		$	2
Interest cost	59			13			21			2			3			8
Expected return on plan assets	(49		)	(19		)	(18		)	(1		)	(1		)	(5		)
Amortization:
Prior service costs	5			3			1			—			—			(2		)
Net (gain)/loss	10			1			6			—			—			3
Net periodic postretirement benefit cost	$	43		$	2		$	15		$	2		$	3		$	6


(*)	Excludes Southern Power since Southern Power did not participate in the qualified pension and postretirement benefit plans until December 2017.