| Benefit Plans | BENEFIT PLANS Idaho Power sponsors defined benefit and other postretirement benefit plans that cover the majority of its employees. Idaho Power also sponsors a defined contribution 401(k) employee savings plan and provides certain post-employment benefits. Pension Plans Idaho Power has two pension plans–a noncontributory defined benefit pension plan (pension plan) and two nonqualified defined benefit pension plans for certain senior management employees called the Security Plan for Senior Management Employees I and Security Plan for Senior Management Employees II (together, SMSP). Idaho Power also has a nonqualified defined benefit pension plan for directors that was frozen in 2002. Remaining vested benefits from that plan are included with the SMSP in the disclosures below. The benefits under these plans are based on years of service and the employee's final average earnings. Idaho Power’s funding policy for the pension plan is to contribute at least the minimum required under the Employee Retirement Income Security Act of 1974 (ERISA) but not more than the maximum amount deductible for income tax purposes. In 2016 , 2015 , and 2014 Idaho Power elected to contribute more than the minimum required amounts in order to bring the pension plan to a more funded position, to reduce future required contributions, and to reduce Pension Benefit Guaranty Corporation premiums. The following table summarizes the changes in benefit obligations and plan assets of these plans (in thousands of dollars): Pension Plan SMSP 2016 2015 2016 2015 Change in projected benefit obligation: Benefit obligation at January 1 $ 835,523 $ 844,812 $ 95,389 $ 94,410 Service cost 32,019 33,164 1,228 1,689 Interest cost 37,813 35,171 4,275 3,868 Actuarial loss (gain) 22,640 (47,952 ) 2,933 (352 ) Plan amendment 81 — 120 — Benefits paid (33,016 ) (29,672 ) (4,375 ) (4,226 ) Projected benefit obligation at December 31 895,060 835,523 99,570 95,389 Change in plan assets: Fair value at January 1 559,616 559,719 — — Actual return on plan assets 40,968 (9,431 ) — — Employer contributions 40,000 39,000 — — Benefits paid (33,016 ) (29,672 ) — — Fair value at December 31 607,568 559,616 — — Funded status at end of year $ (287,492 ) $ (275,907 ) $ (99,570 ) $ (95,389 ) Amounts recognized in the statement of financial position consist of: Other current liabilities $ — $ — $ (4,733 ) $ (4,423 ) Noncurrent liabilities (287,492 ) (275,907 ) (94,837 ) (90,966 ) Net amount recognized $ (287,492 ) $ (275,907 ) $ (99,570 ) $ (95,389 ) Amounts recognized in accumulated other comprehensive income consist of: Net loss $ 263,634 $ 253,212 $ 33,660 $ 34,260 Prior service cost 96 74 625 673 Subtotal 263,730 253,286 34,285 34,933 Less amount recorded as regulatory asset (263,730 ) (253,286 ) — — Net amount recognized in accumulated other comprehensive income $ — $ — $ 34,285 $ 34,933 Accumulated benefit obligation $ 766,367 $ 714,994 $ 91,146 $ 86,838 As a non-qualified plan, the SMSP has no plan assets. However, Idaho Power has a Rabbi trust designated to provide funding for SMSP obligations. The Rabbi trust holds investments in marketable securities and corporate-owned life insurance. The recorded value of these investments was approximately $78 million and $69 million at December 31, 2016 and 2015 , respectively, and is reflected in Investments and in Company-owned life insurance on the consolidated balance sheets. The following table shows the components of net periodic benefit cost for these plans (in thousands of dollars). For purposes of calculating the expected return on plan assets, the market-related value of assets is equal to the fair value of the assets. Pension Plan SMSP 2016 2015 2014 2016 2015 2014 Service cost $ 32,019 $ 33,164 $ 25,292 $ 1,228 $ 1,689 $ 1,645 Interest cost 37,813 35,171 35,415 4,275 3,868 3,856 Expected return on assets (42,081 ) (42,310 ) (42,289 ) — — — Amortization of net loss 13,331 13,927 3,911 3,532 4,195 2,618 Amortization of prior service cost 59 221 347 168 185 220 Net periodic pension cost 41,141 40,173 22,676 9,203 9,937 8,339 Adjustments due to the effects of regulation (1) (22,181 ) (21,173 ) 12,124 — — — Net periodic benefit cost recognized for financial reporting $ 18,960 $ 19,000 $ 34,800 $ 9,203 $ 9,937 $ 8,339 (1) Net periodic benefit costs for the pension plan are recognized for financial reporting based upon the authorization of each regulatory jurisdiction in which Idaho Power operates. Under IPUC order, income statement recognition of pension plan costs is deferred until costs are recovered through rates. The following table shows the components of other comprehensive income for the plans (in thousands of dollars): Pension Plan SMSP 2016 2015 2014 2016 2015 2014 Actuarial (loss) gain during the year $ (23,753 ) $ (3,790 ) $ (146,674 ) $ (2,933 ) $ 353 $ (15,324 ) Reclassification adjustments for: Amortization of net loss 13,331 13,927 3,911 3,532 4,195 2,618 Plan amendment service cost (81 ) — — (120 ) — — Amortization of prior service cost 59 221 347 168 185 220 Adjustment for deferred tax effects 4,083 (4,050 ) 55,678 (253 ) (1,851 ) 4,881 Adjustment due to the effects of regulation 6,361 (6,308 ) 86,738 — — — Other comprehensive income recognized related to pension benefit plans $ — $ — $ — $ 394 $ 2,882 $ (7,605 ) In 2017 , IDACORP and Idaho Power expect to recognize as components of net periodic benefit cost $16.6 million from amortizing amounts recorded in accumulated other comprehensive income (or as a regulatory asset for the pension plan) as of December 31, 2016 , relating to the pension plan and SMSP. This amount consists of $13.5 million of amortization of net loss for the pension plan and $3.0 million of amortization of net loss and $0.1 million of amortization of prior service cost for the SMSP. The following table summarizes the expected future benefit payments of these plans (in thousands of dollars): 2017 2018 2019 2020 2021 2022-2026 Pension Plan $ 32,592 $ 34,957 $ 37,375 $ 39,938 $ 42,477 $ 248,151 SMSP 4,829 4,630 4,594 5,199 4,843 26,976 As of December 31, 2016 , IDACORP's and Idaho Power's minimum required contributions to the pension plan are estimated to be zero in 2017 , though Idaho Power plans to contribute between $20 million and $40 million to the pension plan during 2017 in order to help balance the regulatory collection of these expenditures with the amount and timing of contributions and to mitigate the cost of being in an underfunded position. Postretirement Benefits Idaho Power maintains a defined benefit postretirement benefit plan (consisting of health care and death benefits) that covers all employees who were enrolled in the active-employee group plan at the time of retirement as well as their spouses and qualifying dependents. Retirees hired on or after January 1, 1999, have access to the standard medical option at full cost, with no contribution by Idaho Power. Benefits for employees who retire after December 31, 2002, are limited to a fixed amount, which has limited the growth of Idaho Power’s future obligations under this plan. The following table summarizes the changes in benefit obligation and plan assets (in thousands of dollars): 2016 2015 Change in accumulated benefit obligation: Benefit obligation at January 1 $ 62,393 $ 65,999 Service cost 1,116 1,235 Interest cost 2,766 2,678 Actuarial loss (gain) 1,550 (5,008 ) Benefits paid (1) (3,949 ) (2,511 ) Benefit obligation at December 31 63,876 62,393 Change in plan assets: Fair value of plan assets at January 1 35,566 38,375 Actual return on plan assets 2,425 85 Employer contributions (1) 957 (383 ) Benefits paid (1) (3,949 ) (2,511 ) Fair value of plan assets at December 31 34,999 35,566 Funded status at end of year (included in noncurrent liabilities) $ (28,877 ) $ (26,827 ) (1) Contributions and benefits paid are each net of $3.7 million and $3.5 million of plan participant contributions, and $0.3 million and $0.3 million of Medicare Part D subsidy receipts for 2016 and 2015 , respectively. Amounts recognized in accumulated other comprehensive income consist of the following (in thousands of dollars): 2016 2015 Net gain $ (55 ) $ (1,654 ) Prior service cost 104 130 Subtotal 49 (1,524 ) Less amount recognized in regulatory assets (49 ) 1,524 Net amount recognized in accumulated other comprehensive income $ — $ — The net periodic postretirement benefit cost was as follows (in thousands of dollars): 2016 2015 2014 Service cost 1,116 $ 1,235 $ 1,011 Interest cost 2,766 2,678 2,841 Expected return on plan assets (2,474 ) (2,680 ) (2,595 ) Amortization of prior service cost 26 15 183 Net periodic postretirement benefit cost $ 1,434 $ 1,248 $ 1,440 The following table shows the components of other comprehensive income for the plan (in thousands of dollars): 2016 2015 2014 Actuarial (loss) gain during the year $ (1,600 ) $ 2,413 $ (5,733 ) Reclassification adjustments for amortization of prior service cost 26 15 183 Adjustment for deferred tax effects 615 (949 ) 2,170 Adjustment due to the effects of regulation 959 (1,479 ) 3,380 Other comprehensive income related to postretirement benefit plans $ — $ — $ — Medicare Act: The Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law in December 2003 and established a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a prescription drug benefit that is at least actuarially equivalent to Medicare’s prescription drug coverage. The following table summarizes the expected future benefit payments of the postretirement benefit plan and expected Medicare Part D subsidy receipts (in thousands of dollars): 2017 2018 2019 2020 2021 2022-2026 Expected benefit payments $ 3,980 $ 4,040 $ 4,070 $ 4,100 $ 4,120 $ 20,620 Expected Medicare Part D subsidy receipts 370 410 450 480 520 3,240 Plan Assumptions The following table sets forth the weighted-average assumptions used at the end of each year to determine benefit obligations for all Idaho Power-sponsored pension and postretirement benefits plans: Pension Plan SMSP Postretirement Benefits 2016 2015 2016 2015 2016 2015 Discount rate 4.45 % 4.60 % 4.45 % 4.60 % 4.45 % 4.60 % Rate of compensation increase (1) 4.11 % 4.11 % 4.75 % 4.50 % — — Medical trend rate — — — — 8.3 % 9.7 % Dental trend rate — — — — 5.0 % 5.0 % Measurement date 12/31/2016 12/31/2015 12/31/2016 12/31/2015 12/31/2016 12/31/2015 (1) The 2016 rate of compensation increase assumption for the pension plan includes an inflation component of 2.50% plus a 1.61% composite merit increase component that is based on employees' years of service. Merit salary increases are assumed to be 8.0% for employees in their first year of service and scale down to 0% for employees in their fortieth year of service and beyond. The following table sets forth the weighted-average assumptions used to determine net periodic benefit cost for all Idaho Power-sponsored pension and postretirement benefit plans: Pension Plan SMSP Postretirement Benefits 2016 2015 2014 2016 2015 2014 2016 2015 2014 Discount rate 4.60 % 4.25 % 5.20 % 4.60 % 4.20 % 5.10 % 4.60 % 4.20 % 5.15 % Expected long-term rate of return on assets 7.50 % 7.50 % 7.75 % — — — 7.25 % 7.25 % 7.25 % Rate of compensation increase 4.11 % 4.11 % 4.30 % 4.50 % 4.50 % 4.50 % — — — Medical trend rate — — — — — — 8.3 % 9.7 % 6.4 % Dental trend rate — — — — — — 5.0 % 5.0 % 5.0 % The assumed health care cost trend rate used to measure the expected cost of health benefits covered by the postretirement plan was 8.3 percent in 2016 and is assumed to decrease to 6.8 percent in 2017 , 5.3 percent in 2018, 5.2 percent in 2019 and to gradually decrease to 4.5 percent by 2096 . The assumed dental cost trend rate used to measure the expected cost of dental benefits covered by the plan was 5.0 percent , or equal to the medical trend rate if lower, for all years. A one percentage point change in the assumed health care cost trend rate would have the following effects at December 31, 2016 (in thousands of dollars): One-Percentage-Point Increase Decrease Effect on total of cost components $ 382 $ (280 ) Effect on accumulated postretirement benefit obligation 3,687 (2,841 ) Plan Assets Pension Asset Allocation Policy: The target allocation and actual allocations at December 31, 2016 , for the pension asset portfolio by asset class is set forth below: Asset Class Target Allocation Actual Allocation December 31, 2016 Debt securities 24 % 22 % Equity securities 54 % 56 % Real estate 6 % 7 % Other plan assets 16 % 15 % Total 100 % 100 % Assets are rebalanced as necessary to keep the portfolio close to target allocations. The plan’s principal investment objective is to maximize total return (defined as the sum of realized interest and dividend income and realized and unrealized gain or loss in market price) consistent with prudent parameters of risk and the liability profile of the portfolio. Emphasis is placed on preservation and growth of capital along with adequacy of cash flow sufficient to fund current and future payments to pensioners. The three major goals in Idaho Power’s asset allocation process are to: • determine if the investments have the potential to earn the rate of return assumed in the actuarial liability calculations; • match the cash flow needs of the plan. Idaho Power sets bond allocations sufficient to cover at least five years of benefit payments and cash allocations sufficient to cover the current year benefit payments. Idaho Power then utilizes growth instruments (equities, real estate, venture capital) to fund the longer-term liabilities of the plan; and • maintain a prudent risk profile consistent with ERISA fiduciary standards. Allowable plan investments include stocks and stock funds, investment-grade bonds and bond funds, core real estate funds, private equity funds, and cash and cash equivalents. With the exception of real estate holdings and private equity, investments must be readily marketable so that an entire holding can be disposed of quickly with only a minor effect upon market price. Rate-of-return projections for plan assets are based on historical risk/return relationships among asset classes. The primary measure is the historical risk premium each asset class has delivered versus the yield on the Moody's AA Corporate Bond Index. This historical risk premium is then added to the current yield on the Moody's AA Corporate Bond Index. Additional analysis is performed to measure the expected range of returns, as well as worst-case and best-case scenarios. Based on the current low interest rate environment, current rate-of-return expectations are lower than the nominal returns generated over the past 20 years when interest rates were generally much higher. Idaho Power’s asset modeling process also utilizes historical market returns to measure the portfolio’s exposure to a “worst-case” market scenario, to determine how much performance could vary from the expected “average” performance over various time periods. This “worst-case” modeling, in addition to cash flow matching and diversification by asset class and investment style, provides the basis for managing the risk associated with investing portfolio assets. Fair Value of Plan Assets: Idaho Power classifies its pension plan and postretirement benefit plan investments using the three-level fair value hierarchy described in Note 16. The following table presents the fair value of the plans' investments by asset category (in thousands of dollars). Level 1 Level 2 Level 3 Total Assets at December 31, 2016 Cash and cash equivalents $ 28,632 $ — $ — $ 28,632 Short-term bonds 11,198 — — 11,198 Intermediate bonds 11,904 88,734 — 100,638 Long-term bonds — 20,573 — 20,573 Equity Securities: Large-Cap 80,582 — — 80,582 Equity Securities: Mid-Cap 68,634 — — 68,634 Equity Securities: Small-Cap 53,766 — — 53,766 Equity Securities: Micro-Cap 29,671 — — 29,671 Equity Securities: International 7,782 — — 7,782 Equity Securities: Emerging Markets 9,204 — — 9,204 Plan assets measured at NAV (not subject to hierarchy disclosure) Equity Securities: International — — — 64,930 Equity Securities: Emerging Markets — — — 24,443 Real estate — — — 41,907 Private market investments — — — 33,713 Commodities fund — — — 31,895 Total $ 301,373 $ 109,307 $ — $ 607,568 Postretirement plan assets (1) $ 28 $ 34,971 $ — $ 34,999 Assets at December 31, 2015 Cash and cash equivalents $ 10,519 $ — $ — $ 10,519 Short-term bonds 11,023 — — 11,023 Intermediate bonds 11,499 92,742 — 104,241 Long-term bonds — 21,747 — 21,747 Equity Securities: Large-Cap 73,489 — — 73,489 Equity Securities: Mid-Cap 64,397 — — 64,397 Equity Securities: Small-Cap 47,777 — — 47,777 Equity Securities: Micro-Cap 22,186 — — 22,186 Equity Securities: International 7,698 — — 7,698 Equity Securities: Emerging Markets 9,679 — — 9,679 Plan assets measured at NAV (not subject to hierarchy disclosure) Equity Securities: International — — — 59,787 Equity Securities: Emerging Markets — — — 23,167 Real estate — — — 39,035 Private market investments — — — 37,316 Commodities fund — — — 27,555 Total $ 258,267 $ 114,489 $ — $ 559,616 Postretirement plan assets (1) $ 16 $ 35,550 $ — $ 35,566 (1) The postretirement benefits assets are primarily life insurance contracts. For the year ended December 31, 2016 and December 31, 2015 , there were no material transfers into or out of Levels 1, 2, or 3 other than the adoption of ASU 2015-07, Fair Value Measurement (Topic 820) - Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) , which removed from the fair value hierarchy, investments for which the practical expedient is used to measure fair value at net asset value (NAV). In prior years, certain investments were measured using NAV as a practical expedient for fair value, and these amounts were included as level 2 and 3 items in the fair value hierarchy. The requirements of this ASU were adopted retrospectively; therefore, the 2015 amounts have been reclassified to conform to the 2016 presentation. Because these amounts are no longer included in the fair value hierarchy as level 3 items, the level 3 reconciliations are no longer applicable and have been excluded from this footnote. Fair Value Measurement of Level 2 Plan assets and Plan assets measured at NAV: Level 2 Bonds : These investments represent U.S. government, agency bonds, and corporate bonds. The U.S. government and agency bonds, as well as the corporate bonds, are not traded on an exchange and are valued utilizing market prices for similar assets or liabilities in active markets. Level 2 Postretirement Asset: This asset represents an investment in a life insurance contract and is recorded at fair value, which is the cash surrender value, less any unpaid expenses. The cash surrender value of this insurance contract is contractually equal to the insurance contract's proportionate share of the market value of an associated investment account held by the insurer. The investments held by the insurer's investment account are all instruments traded on exchanges with readily determinable market prices. Commingled Funds : These funds, made up of the international, emerging markets equity securities, and commodites fund measured at NAV, are not publicly traded, and therefore no publicly quoted market price is readily available. The value of the commingled funds are presented at estimated fair value, which is determined based on the unit value of the fund. The values of these investments are calculated by the custodian for the fund company on a monthly or more frequent basis, and are based on market prices of the assets held by each of the commingled funds divided by the number of fund shares outstanding for the respective fund. The investments in commingled funds have redemption limitations that permit monthly redemption following notice requirements of 5 to 7 days. Real Estate : Real estate holdings represent investments in open-ended commingled real estate funds. As the property interests held in these real estate funds are not frequently traded, establishing the market value of the property interests held by the fund, and the resulting unit value of fund shareholders, is based on unobservable inputs including property appraisals by the fund companies, property appraisals by independent appraisal firms, analysis of the replacement cost of the property, discounted cash flows generated by property rents and changes in property values, and comparisons with sale prices of similar properties in similar markets. These open-ended real estate funds also furnish annual audited financial statements that are also used to further validate the information provided. Redemptions are generally available on a quarterly basis, with 10 to 35 days written notice, depending on the individual fund. If the fund has sufficient liquidity, the redemption will be processed at the fund NAV or the fund’s estimate of fair value at the end of the quarter. If the fund does not have sufficient liquidity to honor the full redemption, the remainder will be set for redemption the following quarter on a pro-rata basis with other redemption requests. This same process will repeat until the redemption request has been completed. To protect other fund holders, real estate funds have no duty to liquidate or encumber funds to meet redemption requests. Private Market Investments : Private market investments represent two categories: fund of hedge funds and venture capital funds. These funds are valued by the fund companies based on the estimated fair values of the underlying fund holdings divided by the fund shares outstanding or multiplied by the ownership percentages of the holder. Some hedge fund strategies utilize securities with readily available market prices, while others utilize less liquid investment vehicles that are valued based on unobservable inputs including cost, operating results, recent funding activity, or comparisons with similar investment vehicles. Redemptions are available on a quarterly basis with 70 days written notice. Redemptions will be processed at the quarterly NAV or fair value within 60 days following quarter end. In the event of a full redemption, a reserve amount of 5% to 10% of the redemption amount may be held in reserve until the audited financial statements of the fund are published. This allows the fund to adjust the redemption so that other fund holders are not adversely impacted. Venture capital fund investments are valued by the fund companies based on estimated fair value of the underlying fund holdings divided by the fund shares outstanding. Some venture capital investments have progressed to the point that they have readily available exchange-based market valuations. Early stage venture investments are valued based on unobservable inputs including cost, operating results, discounted cash flows, the price of recent funding events, or pending offers from other viable entities. These private market investments furnish annual audited financial statements that are also used to further validate the information provided. These funds are formed for a stated life of 10 to 15 years. The general partner can extend the fund life for 2 or 3 one-year periods. The fund can be further extended with the approval of the limited partners. There are generally no redemption rights associated with these funds. The limited partner must hold the fund for the life of the fund or find a third-party buyer. Employee Savings Plan Idaho Power has a defined contribution plan designed to comply with Section 401(k) of the Internal Revenue Code and that covers substantially all employees. Idaho Power matches specified percentages of employee contributions to the plan. Matching annual contributions were $8 million , $7 million , and $7 million in 2016 , 2015 , and 2014 , respectively. Post-employment Benefits Idaho Power provides certain benefits to former or inactive employees, their beneficiaries, and covered dependents after employment but before retirement, in addition to the health care benefits required under the Consolidated Omnibus Budget Reconciliation Act. These benefits include salary continuation, health care and life insurance for those employees found to be disabled under Idaho Power’s disability plans, and health care for surviving spouses and dependents. Idaho Power accrues a liability for such benefits. The post employment benefit amounts included in other deferred credits on IDACORP’s and Idaho Power’s consolidated balance sheets at both December 31, 2016 and 2015 , were $2 million . |
