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Benefit Plans and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2021
Retirement Benefits [Abstract]  
Benefit Plans and Other Postretirement Benefits
9. Benefit Plans and Other Postretirement Benefits
Pension and Postretirement Health Care Benefits
Xcel Energy, which includes SPS, has several noncontributory, qualified, defined benefit pension plans that cover almost all employees. All newly hired or rehired employees participate under the Cash Balance formula, which is based on pay credits using a percentage of annual eligible pay and annual interest credits. The average annual interest crediting rates for these plans was 2.35, 2.37 and 3.12 percent in 2021, 2020, and 2019, respectively. Some employees may participate under legacy formulas such as the traditional final average pay or pension equity. Xcel Energy’s policy is to fully fund into an external trust the actuarially determined pension costs subject to the limitations of applicable employee benefit and tax laws.
In addition to the qualified pension plans, Xcel Energy maintains a SERP and a nonqualified pension plan. The SERP is maintained for certain executives who participated in the plan in 2008, when the SERP was closed to new participants. The nonqualified pension plan provides benefits for compensation that is in excess of the limits applicable to the qualified pension plans, with distributions funded by Xcel Energy’s consolidated operating cash flows. Obligations of the SERP and nonqualified plan as of Dec. 31, 2021 and 2020 were $43 million and $43 million, respectively, of which $2 million was attributable to SPS in both years. In 2021 and 2020, Xcel Energy recognized net benefit cost for the SERP and nonqualified plans of $4 million and $6 million, respectively, of which immaterial amounts were attributable to SPS.
Xcel Energy, which includes SPS, investment-return assumption considers the expected long-term performance for each of the asset classes in its pension and postretirement health care portfolio. Xcel Energy considers the historical returns achieved by its asset portfolios over long time periods, as well as long-term projected return levels. 20 years or longer period, as well as long-term projected return levels. Xcel Energy and SPS continually review pension assumptions.
Pension cost determination assumes a forecasted mix of investment types over the long-term.
•Investment returns in 2021 were above the assumed level of 6.39%.
•Investment returns in 2020 were above the assumed level of 6.78%.
•Investment returns in 2019 were above the assumed level of 6.78%.
•In 2022, SPS’s expected investment-return assumption is 6.39%.
Pension plan and postretirement benefit assets are invested in a portfolio according to Xcel Energy’s return, liquidity and diversification objectives to provide a source of funding for plan obligations and minimize contributions to the plan, within appropriate levels of risk. The principal mechanism for achieving these objectives is the asset allocation given the long-term risk, return, correlation and liquidity characteristics of each particular asset class.
There were no significant concentrations of risk in any industry, index, or entity. Market volatility can impact even well-diversified portfolios and significantly affect the return levels achieved by the assets in any year.
State agencies also have issued guidelines to the funding of postretirement benefit costs. SPS is required to fund postretirement benefit costs for Texas and New Mexico amounts collected in rates. These assets are invested in a manner consistent with the investment strategy for the pension plan.
Xcel Energy’s ongoing investment strategy is based on plan-specific investment recommendations that seek to minimize potential investment and interest rate risk as a plan’s funded status increases over time. The investment recommendations consider many factors and generally result in a greater percentage of long-duration fixed income securities being allocated to specific plans having relatively higher funded status ratios and a greater percentage of growth assets being allocated to plans having relatively lower funded status ratios.

Plan Assets
For each of the fair value hierarchy levels, SPS’ pension plan assets measured at fair value:
Dec. 31, 2021 (a)
Dec. 31, 2020 (a)
(Millions of Dollars)Level 1Level 2Level 3Measured at NAVTotalLevel 1Level 2Level 3Measured at NAVTotal
Cash equivalents$20 $— $— $— $20 $31 $— $— $— $31 
Commingled funds202 — — 169 371 211 — — 160 371 
Debt securities— 148 1 — 149 — 110 1 — 111 
Equity securities10 — — — 10 11 — — — 11 
Other— 2 — 5 7 2 1 — — 3 
Total$232 $150 $1 $174 $557 $255 $111 $1 $160 $527 
(a)See Note 8 for further information on fair value measurement inputs and methods.
For each of the fair value hierarchy levels, SPS’ proportionate allocation of the total postretirement benefit plan assets that were measured at fair value:
Dec. 31, 2021 (a)
Dec. 31, 2020 (a)
(Millions of Dollars)Level 1Level 2Level 3Measured at NAVTotalLevel 1Level 2Level 3Measured at NAVTotal
Cash equivalents$3 $— $— $— $3 $3 $— $— $— $3 
Insurance contracts— 5 — — 5 — 5 — — 5 
Commingled funds6 — — 7 13 7 — — 7 14 
Debt securities— 22 — — 22 — 22 — — 22 
Total$9 $27 $— $7 $43 $10 $27 $— $7 $44 
(a)See Note 8 for further information on fair value measurement inputs and methods.
No assets were transferred in or out of Level 3 for 2021 or 2020.
Funded Status — Benefit obligations for both pension and postretirement plans decreased from Dec. 31, 2020 to Dec. 31, 2021, due primarily to benefit payments and increases in discount rates used in actuarial valuations. Comparisons of the actuarially computed benefit obligation, changes in plan assets and funded status of the pension and postretirement health care plans for SPS are as follows:
Pension BenefitsPostretirement Benefits
(Millions of Dollars)2021202020212020
Change in Benefit Obligation:
Obligation at Jan. 1$562 $519 $38 $44 
Service cost11 10 1 1 
Interest cost15 18 1 1 
Plan amendments— — — — 
Actuarial (gain) loss(13)45 (3)(5)
Plan participants’ contributions— — — 1 
Benefit payments(30)(30)(3)(4)
Obligation at Dec. 31$545 $562 $34 $38 
Change in Fair Value of Plan Assets:
Fair value of plan assets at Jan. 1$527 $458 $44 $44 
Actual return on plan assets46 84 1 3 
Employer contributions14 15 — — 
Plan participants’ contributions— — 1 1 
Benefit payments(30)(30)(3)(4)
Fair value of plan assets at Dec. 31$557 $527 $43 $44 
Funded status of plans at Dec. 31$12 $(35)$9 $6 
Amounts recognized in the Balance Sheet at Dec. 31:
Noncurrent assets12 — 9 6 
Noncurrent liabilities— (35)— — 
Net amounts recognized$12 $(35)$9 $6 

Pension BenefitsPostretirement Benefits
Significant Assumptions Used to Measure Benefit Obligations:2021202020212020
Discount rate for year-end valuation3.08 %2.71 %3.09 %2.65 %
Expected average long-term increase in compensation level3.75 %3.75 %N/AN/A
Mortality tablePri-2012Pri-2012Pri-2012Pri-2012
Health care costs trend rate — initial: Pre-65N/AN/A5.30 %5.50 %
Health care costs trend rate — initial: Post-65N/AN/A4.90 %5.00 %
Ultimate trend assumption — initial: Pre-65N/AN/A4.50 %4.50 %
Ultimate trend assumption — initial: Post-65N/AN/A4.50 %4.50 %
Years until ultimate trend is reachedN/AN/A45
Accumulated benefit obligation for the pension plan was $506 million and $519 million as of Dec. 31, 2021 and 2020, respectively.
Net Periodic Benefit Cost (Credit) — Net periodic benefit cost (credit), other than the service cost component, is included in other income (expense) in the statements of income.
Components of net periodic benefit cost (credit) and amounts recognized in other comprehensive income and regulatory assets and liabilities:
Pension BenefitsPostretirement Benefits
(Millions of Dollars)202120202019202120202019
Service cost$11 $10 $9 $1 $1 $1 
Interest cost15 18 20 1 1 2 
Expected return on plan assets(30)(29)(28)(2)(2)(2)
Amortization of prior service credit— — — — — (1)
Amortization of net loss14 12 11 (1)— — 
Settlement charge (a)
— — 2 — — — 
Net periodic pension cost10 11 14 (1)— — 
Effects of regulation— 2 1 — — — 
Net benefit cost recognized for financial reporting$10 $13 $15 $(1)$— $— 
Significant Assumptions Used to Measure Costs:
Discount rate2.71 %3.49 %4.31 %2.65 %3.47 %4.32 %
Expected average long-term increase in compensation level3.75 3.75 3.75 — %— — 
Expected average long-term rate of return on assets6.39 6.78 6.78 4.10 4.50 5.30 
(a)A settlement charge is required when the amount of all lump-sum distributions during the year is greater than the sum of the service and interest cost components of the annual net periodic pension cost. In 2019, as a result of lump-sum distributions during each plan year, SPS recorded a total pension settlement charge of $2 million. A total of $1 million of that amount was recorded in the income statement in 2019. There were no settlement charges recorded to the qualified pension plans in 2021 or 2020.
Pension BenefitsPostretirement Benefits
(Millions of Dollars)2021202020212020
Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost:
Net loss$143 $186 $(19)$(18)
Prior service credit(1)(1)(1)(1)
Total$142 $185 $(20)$(19)
Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost Have Been Recorded as Follows Based Upon Expected Recovery in Rates:
Current regulatory assets$11 $11 $— $— 
Noncurrent regulatory assets131 174 — — 
Current regulatory liabilities— — (1)(1)
Noncurrent regulatory liabilities— — (19)(18)
Total$142 $185 $(20)$(19)
Measurement dateDec. 31, 2021Dec. 31, 2020Dec. 31, 2021Dec. 31, 2020
Cash Flows — Funding requirements can be impacted by changes to actuarial assumptions, actual asset levels and other calculations prescribed by the requirements of income tax and other pension-related regulations. Required contributions were made in 2019 - 2022 to meet minimum funding requirements.
Total voluntary and required pension funding contributions across all four of Xcel Energy’s pension plans were as follows:
•$50 million in January 2022, of which none was attributable to SPS.
•$131 million in 2021, of which $15 million was attributable to SPS.
•$150 million in 2020, of which $14 million was attributable to SPS.
•$154 million in 2019, of which $18 million was attributable to SPS.
For future years, Xcel Energy and SPS anticipate contributions will be made as necessary.


The postretirement health care plans have no funding requirements other than fulfilling benefit payment obligations when claims are presented and approved. Additional cash funding requirements are prescribed by certain state and federal rate regulatory authorities. Xcel Energy’s voluntary postretirement funding contributions were as follows:
•$9 million during 2022.
•$15 million during 2021.
•$11 million during 2020.
•$15 million during 2019.
•Amounts attributable to SPS were immaterial.
Target asset allocations:
Pension BenefitsPostretirement Benefits
2021202020212020
Domestic and international equity securities33 %35 %15 %15 %
Long-duration fixed income securities37 35 — — 
Short-to-intermediate fixed income securities11 13 71 72 
Alternative investments17 15 8 9 
Cash2 2 6 4 
Total100 %100 %100 %100 %
The asset allocations above reflect target allocations approved in the calendar year to take effect in the subsequent year
Plan Amendments — In 2020 and 2019, there were no significant plan amendments made which affected the benefit obligation.
In 2021, Xcel Energy amended the Xcel Energy Pension Plan and Xcel Energy Inc. Nonbargaining Pension Plan (South) to reduce supplemental benefits for non-bargaining participants as well as to allow the transfer of a portion of non-qualified pension obligations into the qualified plans.
Projected Benefit Payments
SPS’ projected benefit payments:
(Millions of Dollars)Projected
Pension Benefit
Payments		Gross Projected
Postretirement
Health Care
Benefit Payments		Expected
Medicare Part D
Subsidies		Net Projected
Postretirement
Health Care
Benefit Payments
2022$33 $3 $— $3 
202331 2 — 2 
202431 2 — 2 
202532 2 — 2 
202631 2 — 2 
2027-2031153 11 — 11 
Defined Contribution Plans
Xcel Energy, which includes SPS, maintains 401(k) and other defined contribution plans that cover most employees. The expense to these plans for SPS was approximately $3 million in 2021, 2020 and 2019.