Components of Net Periodic Benefit Cost

9 Months Ended

Sep. 30, 2021

Note 2 – Components of Net Periodic Benefit Cost

Southwest has a noncontributory qualified retirement plan with defined benefits covering substantially all employees and a separate unfunded supplemental retirement plan (“SERP”) which is limited to officers. Southwest also provides postretirement benefits other than pensions (“PBOP”) to its qualified retirees for health care, dental, and life insurance.

The service cost component of net periodic benefit costs included in the table below is a component of an overhead loading process associated with the cost of labor. The overhead process ultimately results in allocation of service cost to the same accounts to which productive labor is charged. As a result, service costs become components of various accounts, primarily operations and maintenance expense, net utility plant, and deferred charges and other assets for both the Company and Southwest. The other components of net periodic benefit cost are reflected in Other income (deductions) on the Condensed Consolidated Statements of Income of each entity.


	Qualified Retirement Plan
	September 30,
	Three Months				Nine Months				Twelve Months
	2021		2020		2021		2020		2021		2020
(Thousands of dollars)
Service cost	$	10,289	$	8,576	$	30,869	$	25,725	$	39,443	$	32,191
Interest cost	10,108		11,388		30,324		34,165		41,714		46,416
Expected return on plan assets	(18,088)		(16,324)		(54,264)		(48,972)		(70,588)		(64,033)
Amortization of net actuarial loss	10,489		9,006		31,467		27,019		40,473		32,608
Net periodic benefit cost	$	12,798	$	12,646	$	38,396	$	37,937	$	51,042	$	47,182

	SERP
	September 30,
	Three Months				Nine Months				Twelve Months
	2021		2020		2021		2020		2021		2020
(Thousands of dollars)
Service cost	$	131	$	97	$	394	$	292	$	491	$	359
Interest cost	358		401		1,074		1,204		1,474		1,644
Amortization of net actuarial loss	661		451		1,981		1,353		2,433		1,608
Net periodic benefit cost	$	1,150	$	949	$	3,449	$	2,849	$	4,398	$	3,611

	PBOP
	September 30,
	Three Months				Nine Months				Twelve Months
	2021		2020		2021		2020		2021		2020
(Thousands of dollars)
Service cost	$	423	$	395	$	1,269	$	1,186	$	1,664	$	1,505
Interest cost	549		646		1,645		1,936		2,291		2,697
Expected return on plan assets	(810)		(852)		(2,430)		(2,556)		(3,282)		(3,345)
Amortization of prior service costs	239		289		719		867		1,007		1,185

Net periodic benefit cost	$	401	$	478	$	1,203	$	1,433	$	1,680	$	2,042

For new employees hired on or after January 1, 2022, the defined benefit retirement plan will be replaced with enhanced contributions to the 401(k) plan. The change is not applicable to existing employees, nor to employees hired during the remainder of 2021. Current employees will continue to be eligible to receive employer 401(k) matching contributions on one-half of amounts deferred by them, up to a maximum matching contribution of 3.5% of their eligible annual compensation. Employees hired after 2021 will be eligible for enhanced employer 401(k) contributions of 3% plus a matching contribution (dollar-for-dollar) up to 7% of eligible compensation.