Employee Benefit Plans

Defined Benefit Plans

Domestic Operations

PacifiCorp, MidAmerican Energy and NV Energy sponsor defined benefit pension plans that cover a majority of all employees of BHE and its domestic energy subsidiaries. These pension plans include noncontributory defined benefit pension plans, supplemental executive retirement plans ("SERP") and a restoration plan for certain executives of NV Energy. PacifiCorp, MidAmerican Energy and NV Energy also provide certain postretirement healthcare and life insurance benefits through various plans to eligible retirees.

Net Periodic Benefit Cost

For purposes of calculating the expected return on plan assets, a market-related value is used. The market-related value of plan assets is generally calculated by spreading the difference between expected and actual investment returns over a five-year period beginning after the first year in which they occur.

Net periodic benefit cost for the plans included the following components for the years ended December 31 (in millions):



	Pension									Other Postretirement
	2019			2018			2017			2019			2018			2017

Service cost	$	16		$	21		$	24		$	8		$	9		$	9
Interest cost	111			105			116			27			24			29
Expected return on plan assets	(154		)	(164		)	(160		)	(40		)	(41		)	(40		)
Settlement	—			21			—			—			—			—
Net amortization	31			28			25			(6		)	(13		)	(14		)
Net periodic benefit cost (credit)	$	4		$	11		$	5		$	(11	)	$	(21	)	$	(16	)

Funded Status

The following table is a reconciliation of the fair value of plan assets for the years ended December 31 (in millions):



	Pension						Other Postretirement
	2019			2018			2019			2018

Plan assets at fair value, beginning of year	$	2,396		$	2,761		$	664		$	736
Employer contributions	12			38			2			8
Participant contributions	—			—			9			8
Actual return on plan assets	456			(147		)	122			(38		)
Settlement	(22		)	(119		)	—			—
Benefits paid	(186		)	(137		)	(55		)	(50		)
Plan assets at fair value, end of year	$	2,656		$	2,396		$	742		$	664

The following table is a reconciliation of the benefit obligations for the years ended December 31 (in millions):



	Pension						Other Postretirement
	2019			2018			2019			2018

Benefit obligation, beginning of year	$	2,718		$	3,006		$	672		$	721
Service cost	16			21			8			9
Interest cost	111			105			27			24
Participant contributions	—			—			9			8
Actuarial loss (gain)	242			(160		)	12			(40		)
Amendment	(1		)	2			—			—
Settlement	(22		)	(119		)	—			—
Benefits paid	(186		)	(137		)	(55		)	(50		)
Benefit obligation, end of year	$	2,878		$	2,718		$	673		$	672
Accumulated benefit obligation, end of year	$	2,867		$	2,709

The funded status of the plans and the amounts recognized on the Consolidated Balance Sheets as of December 31 are as follows (in millions):



	Pension						Other Postretirement
	2019			2018			2019			2018

Plan assets at fair value, end of year	$	2,656		$	2,396		$	742		$	664
Benefit obligation, end of year	2,878			2,718			673			672
Funded status	$	(222	)	$	(322	)	$	69		$	(8	)

Amounts recognized on the Consolidated Balance Sheets:
Other assets	$	73		$	20		$	76		$	5
Other current liabilities	(13		)	(13		)	—			—
Other long-term liabilities	(282		)	(329		)	(7		)	(13		)
Amounts recognized	$	(222	)	$	(322	)	$	69		$	(8	)

The SERPs and restoration plan have no plan assets; however, the Company has Rabbi trusts that hold corporate-owned life insurance and other investments to provide funding for the future cash requirements of the SERPs and restoration plan. The cash surrender value of all of the policies included in the Rabbi trusts, net of amounts borrowed against the cash surrender value, plus the fair market value of other Rabbi trust investments, was $252 million and $256 million as of December 31, 2019 and 2018, respectively. These assets are not included in the plan assets in the above table, but are reflected in noncurrent investments and restricted cash and investments on the Consolidated Balance Sheets.

The fair value of plan assets, projected benefit obligation and accumulated benefit obligation for (1) pension and other postretirement benefit plans with a projected benefit obligation in excess of the fair value of plan assets and (2) pension plans with an accumulated benefit obligation in excess of the fair value of plan assets as of December 31 are as follows (in millions):



	Pension				Other Postretirement
	2019		2018		2019		2018

Fair value of plan assets	$	1,939	$	1,752	$	439	$	417

Projected benefit obligation	$	2,227	$	2,091	$	446	$	429

Accumulated benefit obligation	$	2,222	$	2,085

Unrecognized Amounts

The portion of the funded status of the plans not yet recognized in net periodic benefit cost as of December 31 is as follows (in millions):



	Pension						Other Postretirement
	2019			2018			2019			2018

Net loss	$	653		$	747		$	(23	)	$	50
Prior service credit	(2		)	—			(14		)	(22		)
Regulatory deferrals	1			(1		)	6			7
Total	$	652		$	746		$	(31	)	$	35

A reconciliation of the amounts not yet recognized as components of net periodic benefit cost for the years ended December 31, 2019 and 2018 is as follows (in millions):



							Accumulated
							Other
	Regulatory			Regulatory			Comprehensive
	Asset			Liability			Loss			Total
Pension
Balance, December 31, 2017	$	665		$	(43	)	$	20		$	642
Net loss (gain) arising during the year	114			43			(6		)	151
Net prior service cost arising during the year	—			—			2			2
Settlement	(21		)	—			—			(21		)
Net amortization	(28		)	—			—			(28		)
Total	65			43			(4		)	104
Balance, December 31, 2018	730			—			16			746
Net (gain) loss arising during the year	(38		)	(33		)	10			(61		)
Net prior service credit arising during the year	—			—			(2		)	(2		)
Net amortization	(31		)	—			—			(31		)
Total	(69		)	(33		)	8			(94		)
Balance, December 31, 2019	$	661		$	(33	)	$	24		$	652



							Accumulated
							Other
	Regulatory			Regulatory			Comprehensive
	Asset			Liability			Loss			Total
Other Postretirement
Balance, December 31, 2017	$	10		$	(26	)	$	—		$	(16	)
Net loss arising during the year	23			14			1			38
Net amortization	11			2			—			13
Total	34			16			1			51
Balance, December 31, 2018	44			(10		)	1			35
Net gain arising during the year	(45		)	(23		)	(4		)	(72		)
Net amortization	5			1			—			6
Total	(40		)	(22		)	(4		)	(66		)
Balance, December 31, 2019	$	4		$	(32	)	$	(3	)	$	(31	)

Plan Assumptions

Weighted-average assumptions used to determine benefit obligations and net periodic benefit cost were as follows:



	Pension						Other Postretirement
	2019		2018		2017		2019		2018		2017

Benefit obligations as of December 31:
Discount rate	3.32	%	4.25	%	3.60	%	3.24	%	4.21	%	3.57	%
Rate of compensation increase	2.75	%	2.75	%	2.75	%	NA		NA		NA
Interest crediting rates for cash balance plan
2017	NA		NA		2.49	%	NA		NA		NA
2018	NA		3.38	%	3.06	%	NA		NA		NA
2019	3.22	%	3.54	%	3.06	%	NA		NA		NA
2020	2.94	%	3.54	%	2.72	%	NA		NA		NA
2021	2.94	%	3.56	%	2.72	%	NA		NA		NA
2022	3.02	%	3.56	%	2.72	%	NA		NA		NA

Net periodic benefit cost for the years ended December 31:
Discount rate	4.25	%	3.60	%	4.06	%	4.21	%	3.57	%	4.01	%
Expected return on plan assets	6.48	%	6.36	%	6.55	%	6.39	%	6.44	%	6.73	%
Rate of compensation increase	2.75	%	2.75	%	2.75	%	NA		NA		NA
Interest crediting rate for cash balance plan	3.22	%	3.38	%	2.49	%	NA		NA		NA

In establishing its assumption as to the expected return on plan assets, the Company utilizes the asset allocation and return assumptions for each asset class based on historical performance and forward-looking views of the financial markets.



	2019		2018
Assumed healthcare cost trend rates as of December 31:
Healthcare cost trend rate assumed for next year	6.50	%	6.80	%
Rate that the cost trend rate gradually declines to	5.00	%	5.00	%
Year that the rate reaches the rate it is assumed to remain at	2025		2025

Contributions and Benefit Payments

Employer contributions to the pension and other postretirement benefit plans are expected to be $13 million and $- million, respectively, during 2020. Funding to the established pension trusts is based upon the actuarially determined costs of the plans and the requirements of the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 and the Pension Protection Act of 2006, as amended. The Company considers contributing additional amounts from time to time in order to achieve certain funding levels specified under the Pension Protection Act of 2006, as amended. The Company evaluates a variety of factors, including funded status, income tax laws and regulatory requirements, in determining contributions to its other postretirement benefit plans.

The expected benefit payments to participants in the Company's pension and other postretirement benefit plans for 2020 through 2024 and for the five years thereafter are summarized below (in millions):



	Projected Benefit
	Payments
			Other
	Pension		Postretirement

2020	$	233	$	57
2021	218		56
2022	213		55
2023	212		54
2024	205		51
2025-2029	927		224

Plan Assets

Investment Policy and Asset Allocations

The Company's investment policy for its pension and other postretirement benefit plans is to balance risk and return through a diversified portfolio of debt securities, equity securities and other alternative investments. Maturities for debt securities are managed to targets consistent with prudent risk tolerances. The plans retain outside investment advisors to manage plan investments within the parameters outlined by each plan's Pension and Employee Benefits Plans Administrative Committee. The investment portfolio is managed in line with the investment policy with sufficient liquidity to meet near-term benefit payments.

The target allocations (percentage of plan assets) for the Company's pension and other postretirement benefit plan assets are as follows as of December 31, 2019:



		Other
	Pension	Postretirement
	%	%
PacifiCorp:
Debt securities⁽¹⁾	30-43	33-37
Equity securities⁽¹⁾	48-65	62-66
Limited partnership interests	6-12	1-3

MidAmerican Energy:
Debt securities⁽¹⁾	20-50	25-45
Equity securities⁽¹⁾	60-80	45-80
Real estate funds	2-8	—
Other	0-3	0-5

NV Energy:
Debt securities⁽¹⁾	53-77	40
Equity securities⁽¹⁾	23-47	60


(1)	For purposes of target allocation percentages and consistent with the plans' investment policy, investment funds are allocated based on the underlying investments in debt and equity securities.

Fair Value Measurements

The following table presents the fair value of plan assets, by major category, for the Company's defined benefit pension plans (in millions):



	Input Levels for Fair Value Measurements⁽¹⁾
	Level 1		Level 2		Total
As of December 31, 2019:
Cash equivalents	$	27	$	36	$	63
Debt securities:
United States government obligations	210		—		210
International government obligations	—		5		5
Corporate obligations	—		376		376
Municipal obligations	—		28		28
Agency, asset and mortgage-backed obligations	—		115		115
Equity securities:
United States companies	547		1		548
International companies	136		—		136
Investment funds⁽²⁾	125		—		125
Total assets in the fair value hierarchy	$	1,045	$	561	1,606
Investment funds⁽²⁾ measured at net asset value					915
Limited partnership interests⁽³⁾ measured at net asset value					93
Real estate funds measured at net asset value					42
Total assets measured at fair value					$	2,656

As of December 31, 2018:
Cash equivalents	$	8	$	41	$	49
Debt securities:
United States government obligations	160		—		160
International government obligations	—		5		5
Corporate obligations	—		373		373
Municipal obligations	—		29		29
Agency, asset and mortgage-backed obligations	—		123		123
Equity securities:
United States companies	492		1		493
International companies	108		—		108
Investment funds⁽²⁾	119		—		119
Total assets in the fair value hierarchy	$	887	$	572	1,459
Investment funds⁽²⁾ measured at net asset value					792
Limited partnership interests⁽³⁾ measured at net asset value					104
Real estate funds measured at net asset value					41
Total assets measured at fair value					$	2,396


(1)	Refer to Note 15 for additional discussion regarding the three levels of the fair value hierarchy.


(2)	Investment funds are comprised of mutual funds and collective trust funds. These funds consist of equity and debt securities of approximately 62% and 38%, respectively, for 2019 and 59% and 41%, respectively, for 2018. Additionally, these funds are invested in United States and international securities of approximately 66% and 34%, respectively, for 2019 and 73% and 27%, respectively, for 2018.


(3)	Limited partnership interests include several funds that invest primarily in real estate, buyout, growth equity and venture capital.

The following table presents the fair value of plan assets, by major category, for the Company's defined benefit other postretirement plans (in millions):



	Input Levels for Fair Value Measurements⁽¹⁾
	Level 1		Level 2		Total
As of December 31, 2019:
Cash equivalents	$	17	$	1	$	18
Debt securities:
United States government obligations	23		—		23
Corporate obligations	—		44		44
Municipal obligations	—		57		57
Agency, asset and mortgage-backed obligations	—		33		33
Equity securities:
United States companies	151		—		151
International companies	6		—		6
Investment funds	236		—		236
Total assets in the fair value hierarchy	$	433	$	135	568
Investment funds measured at net asset value					169
Limited partnership interests measured at net asset value					5
Total assets measured at fair value					$	742

As of December 31, 2018:
Cash equivalents	$	10	$	2	$	12
Debt securities:
United States government obligations	13		—		13
Corporate obligations	—		42		42
Municipal obligations	—		45		45
Agency, asset and mortgage-backed obligations	—		30		30
Equity securities:
United States companies	158		—		158
International companies	6		—		6
Investment funds⁽²⁾	202		1		203
Total assets in the fair value hierarchy	$	389	$	120	509
Investment funds⁽²⁾ measured at net asset value					149
Limited partnership interests⁽³⁾ measured at net asset value					6
Total assets measured at fair value					$	664


(1)	Refer to Note 15 for additional discussion regarding the three levels of the fair value hierarchy.


(2)	Investment funds are comprised of mutual funds and collective trust funds. These funds consist of equity and debt securities of approximately 58% and 42%, respectively, for 2019 and 65% and 35%, respectively, for 2018. Additionally, these funds are invested in United States and international securities of approximately 75% and 25%, respectively, for 2019 and 79% and 21%, respectively, for 2018.


(3)	Limited partnership interests include several funds that invest primarily in real estate, buyout, growth equity and venture capital.

For level 1 investments, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. For level 2 investments, the fair value is determined using pricing models based on observable market inputs. Shares of mutual funds not registered under the Securities Act of 1933, private equity limited partnership interests, common and commingled trust funds and investment entities are reported at fair value based on the net asset value per unit, which is used for expedience purposes. A fund's net asset value is based on the fair value of the underlying assets held by the fund less its liabilities.

Foreign Operations

Certain wholly-owned subsidiaries of Northern Powergrid participate in the Northern Powergrid group of the United Kingdom industry-wide Electricity Supply Pension Scheme (the "UK Plan"), which provides pension and other related defined benefits, based on final pensionable pay, to the employees of Northern Powergrid. The UK Plan is closed to employees hired after July 23, 1997. Employees hired after that date are covered by a defined contribution plan sponsored by a wholly-owned subsidiary of Northern Powergrid.

Net Periodic Benefit Cost

For purposes of calculating the expected return on pension plan assets, a market-related value is used. The market-related value of plan assets is calculated by spreading the difference between expected and actual investment returns over a five-year period beginning after the first year in which they occur.

Net periodic benefit cost for the UK Plan included the following components for the years ended December 31 (in millions):



	2019			2018			2017

Service cost	$	16		$	19		$	23
Interest cost	49			56			58
Expected return on plan assets	(100		)	(101		)	(100		)
Settlement	26			44			31
Net amortization	46			45			63
Net periodic benefit cost	$	37		$	63		$	75

Funded Status

The following table is a reconciliation of the fair value of plan assets for the years ended December 31 (in millions):



	2019			2018

Plan assets at fair value, beginning of year	$	1,989		$	2,368
Employer contributions	56			60
Participant contributions	1			1
Actual return on plan assets	194			(44		)
Settlement	(99		)	(205		)
Benefits paid	(71		)	(71		)
Foreign currency exchange rate changes	81			(120		)
Plan assets at fair value, end of year	$	2,151		$	1,989

The following table is a reconciliation of the benefit obligation for the years ended December 31 (in millions):



	2019			2018

Benefit obligation, beginning of year	$	1,833		$	2,201
Service cost	16			19
Interest cost	49			56
Participant contributions	1			1
Actuarial loss (gain)	175			(87		)
Settlement	(99		)	(182		)
Amendment	—			8
Benefits paid	(71		)	(71		)
Foreign currency exchange rate changes	115			(112		)
Benefit obligation, end of year	$	2,019		$	1,833
Accumulated benefit obligation, end of year	$	1,786		$	1,637

The funded status of the UK Plan and the amounts recognized on the Consolidated Balance Sheets as of December 31 are as follows (in millions):



	2019		2018

Plan assets at fair value, end of year	$	2,151	$	1,989
Benefit obligation, end of year	2,019		1,833
Funded status	$	132	$	156

Amounts recognized on the Consolidated Balance Sheets:
Other assets	$	132	$	156

Unrecognized Amounts

The portion of the funded status of the UK Plan not yet recognized in net periodic benefit cost as of December 31 is as follows (in millions):



	2019		2018

Net loss	$	543	$	472
Prior service cost	6		8
Total	$	549	$	480

A reconciliation of the amounts not yet recognized as components of net periodic benefit cost, which are included in accumulated other comprehensive loss on the Consolidated Balance Sheets, for the years ended December 31 is as follows (in millions):



	2019			2018

Balance, beginning of year	$	480		$	510
Net loss arising during the year	81			59
Net prior service cost arising during the year	—			8
Settlement	(26		)	(22		)
Net amortization	(46		)	(45		)
Foreign currency exchange rate changes	60			(30		)
Total	69			(30		)
Balance, end of year	$	549		$	480

Plan Assumptions

Assumptions used to determine benefit obligations and net periodic benefit cost were as follows:



	2019		2018		2017

Benefit obligations as of December 31:
Discount rate	2.10	%	2.90	%	2.60	%
Rate of compensation increase	3.30	%	3.55	%	3.45	%
Rate of future price inflation	2.80	%	3.05	%	2.95	%

Net periodic benefit cost for the years ended December 31:
Discount rate	2.90	%	2.60	%	2.70	%
Expected return on plan assets	5.10	%	4.90	%	5.00	%
Rate of compensation increase	3.55	%	3.45	%	3.00	%
Rate of future price inflation	3.05	%	2.95	%	3.00	%

Contributions and Benefit Payments

Employer contributions to the UK Plan are expected to be £43 million during 2020. The expected benefit payments to participants in the UK Plan for 2020 through 2024 and for the five years thereafter excluding lump sum settlement elections, using the foreign currency exchange rate as of December 31, 2019, are summarized below (in millions):



2020	$	74
2021	75
2022	77
2023	79
2024	81
2025-2029	436

Plan Assets

Investment Policy and Asset Allocations

The investment policy for the UK Plan is to balance risk and return through a diversified portfolio of debt securities, equity securities, real estate and other asset classes. Maturities for debt securities are managed to targets consistent with prudent risk tolerances. The UK Plan retains outside investment advisors to manage plan investments within the parameters set by the trustees of the UK Plan in consultation with Northern Powergrid. The investment portfolio is managed in line with the investment policy with sufficient liquidity to meet near-term benefit payments. The return on assets assumption is based on a weighted-average of the expected historical performance for the types of assets in which the UK Plan invests.

The target allocations (percentage of plan assets) for the UK Plan assets are as follows as of December 31, 2019:



	%
Debt securities⁽¹⁾	50-55
Equity securities⁽¹⁾	35-40
Real estate funds and other	5-15


(1)	For purposes of target allocation percentages and consistent with the plans' investment policy, investment funds have been allocated based on the underlying investments in debt and equity securities.

Fair Value Measurements

The following table presents the fair value of the UK Plan assets, by major category (in millions):



	Input Levels for Fair Value Measurements⁽¹⁾
	Level 1		Level 2		Level 3		Total
As of December 31, 2019:
Cash equivalents	$	3	$	24	$	—	$	27
Debt securities:
United Kingdom government obligations	960		—		—		960
Equity securities:
Investment funds⁽²⁾	—		818		—		818
Real estate funds	—		—		243		243
Total	$	963	$	842	$	243	2,048
Investment funds⁽²⁾ measured at net asset value							103
Total assets measured at fair value							$	2,151

As of December 31, 2018:
Cash equivalents	$	3	$	59	$	—	$	62
Debt securities:
United Kingdom government obligations	891		—		—		891
Equity securities:
Investment funds⁽²⁾	—		697		—		697
Real estate funds	—		—		239		239
Total	$	894	$	756	$	239	1,889
Investment funds⁽²⁾ measured at net asset value							100
Total assets measured at fair value							$	1,989


(1)	Refer to Note 15 for additional discussion regarding the three levels of the fair value hierarchy.


(2)	Investment funds are comprised of mutual funds and collective trust funds. These funds consist of equity and debt securities of approximately 38% and 62%, respectively, for 2019 and 36% and 64%, respectively, for 2018.

The fair value of the UK Plan's assets are determined similar to the plan assets of the domestic plans as previously discussed.

The following table reconciles the beginning and ending balances of the UK Plan assets measured at fair value using significant Level 3 inputs for the years ended December 31 (in millions):



	Real Estate Funds
	2019			2018			2017

Beginning balance	$	239		$	230		$	105
Actual return on plan assets still held at period end	(5		)	23			6
Purchases	—			—			104
Foreign currency exchange rate changes	9			(14		)	15
Ending balance	$	243		$	239		$	230

Defined Contribution Plans

The Company sponsors various defined contribution plans covering substantially all employees. The Company's contributions vary depending on the plan, but matching contributions are based on each participant's level of contribution, and certain participants receive contributions based on eligible pre-tax annual compensation. Contributions cannot exceed the maximum allowable for tax purposes. The Company's contributions to these plans were $115 million, $112 million and $103 million for the years ended December 31, 2019, 2018 and 2017, respectively.