| 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 a nonqualified defined benefit pension plan for certain senior management employees called the Security Plan for Senior Management Employees (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 2015 , 2014 , and 2013 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 2015 2014 2015 2014 Change in projected benefit obligation: Benefit obligation at January 1 $ 844,812 $ 695,093 $ 94,410 $ 77,773 Service cost 33,164 25,292 1,689 1,645 Interest cost 35,171 35,415 3,868 3,856 Actuarial (gain) loss (47,952 ) 114,496 (352 ) 15,324 Benefits paid (29,672 ) (25,484 ) (4,226 ) (4,188 ) Projected benefit obligation at December 31 835,523 844,812 95,389 94,410 Change in plan assets: Fair value at January 1 559,719 545,092 — — Actual return on plan assets (9,431 ) 10,111 — — Employer contributions 39,000 30,000 — — Benefits paid (29,672 ) (25,484 ) — — Fair value at December 31 559,616 559,719 — — Funded status at end of year $ (275,907 ) $ (285,093 ) $ (95,389 ) $ (94,410 ) Amounts recognized in the statement of financial position consist of: Other current liabilities $ — $ — $ (4,423 ) $ (4,193 ) Noncurrent liabilities (275,907 ) (285,093 ) (90,966 ) (90,217 ) Net amount recognized $ (275,907 ) $ (285,093 ) $ (95,389 ) $ (94,410 ) Amounts recognized in accumulated other comprehensive income consist of: Net loss $ 253,212 $ 263,350 $ 34,260 $ 38,808 Prior service cost 74 295 673 857 Subtotal 253,286 263,645 34,933 39,665 Less amount recorded as regulatory asset (253,286 ) (263,645 ) — — Net amount recognized in accumulated other comprehensive income $ — $ — $ 34,933 $ 39,665 Accumulated benefit obligation $ 714,994 $ 719,617 $ 86,838 $ 84,684 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 $69.3 million and $65.0 million at December 31, 2015 and 2014 , 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 2015 2014 2013 2015 2014 2013 Service cost $ 33,164 $ 25,292 $ 31,357 $ 1,689 $ 1,645 $ 2,178 Interest cost 35,171 35,415 31,830 3,868 3,856 3,258 Expected return on assets (42,310 ) (42,289 ) (35,755 ) — — — Amortization of net loss 13,927 3,911 17,118 4,195 2,618 2,840 Amortization of prior service cost 221 347 347 185 220 212 Net periodic pension cost 40,173 22,676 44,897 9,937 8,339 8,488 Adjustments due to the effects of regulation (1) (21,173 ) 12,124 (9,013 ) — — — Net periodic benefit cost recognized for financial reporting $ 19,000 $ 34,800 $ 35,884 $ 9,937 $ 8,339 $ 8,488 (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 2015 2014 2013 2015 2014 2013 Actuarial (loss) gain during the year $ (3,790 ) $ (146,674 ) $ 154,261 $ 353 $ (15,324 ) $ 4,664 Reclassification adjustments for: Amortization of net loss 13,927 3,911 17,118 4,195 2,618 2,840 Amortization of prior service cost 221 347 347 185 220 212 Adjustment for deferred tax effects (4,050 ) 55,678 (67,136 ) (1,851 ) 4,881 (3,017 ) Adjustment due to the effects of regulation (6,308 ) 86,738 (104,590 ) — — — Other comprehensive income recognized related to pension benefit plans $ — $ — $ — $ 2,882 $ (7,605 ) $ 4,699 In 2016 , IDACORP and Idaho Power expect to recognize as components of net periodic benefit cost $17.3 million from amortizing amounts recorded in accumulated other comprehensive income (or as a regulatory asset for the pension plan) as of December 31, 2015 , relating to the pension plan and SMSP. This amount consists of $13.5 million of amortization of net loss and $0.1 million of amortization of prior service cost for the pension plan, and $3.5 million of amortization of net loss and $0.2 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): 2016 2017 2018 2019 2020 2021-2025 Pension Plan $ 30,086 $ 32,529 $ 35,156 $ 37,795 $ 40,527 $ 241,079 SMSP 4,516 4,582 4,371 4,547 4,964 25,659 As of December 31, 2015 , IDACORP's and Idaho Power's minimum required contributions to the pension plan are estimated to be zero in 2016 , though Idaho Power plans to contribute at least $20 million to the pension plan during 2016 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): 2015 2014 Change in accumulated benefit obligation: Benefit obligation at January 1 $ 65,999 $ 57,341 Service cost 1,235 1,011 Interest cost 2,678 2,841 Actuarial (gain) loss (5,008 ) 7,026 Benefits paid (1) (2,511 ) (2,220 ) Benefit obligation at December 31 62,393 65,999 Change in plan assets: Fair value of plan assets at January 1 38,375 37,111 Actual return on plan assets 85 3,888 Employer contributions (1) (383 ) (404 ) Benefits paid (1) (2,511 ) (2,220 ) Fair value of plan assets at December 31 35,566 38,375 Funded status at end of year (included in noncurrent liabilities) $ (26,827 ) $ (27,624 ) (1) Contributions and benefits paid are each net of $3,518 thousand and $3,379 thousand of plan participant contributions, and $330 thousand and $344 thousand of Medicare Part D subsidy receipts for 2015 and 2014 , respectively. Amounts recognized in accumulated other comprehensive income consist of the following (in thousands of dollars): 2015 2014 Net (gain) loss $ (1,654 ) $ 759 Prior service cost 130 145 Subtotal (1,524 ) 904 Less amount recognized in regulatory assets 1,524 (904 ) Net amount recognized in accumulated other comprehensive income $ — $ — The net periodic postretirement benefit cost was as follows (in thousands of dollars): 2015 2014 2013 Service cost $ 1,235 $ 1,011 $ 1,315 Interest cost 2,678 2,841 2,633 Expected return on plan assets (2,680 ) (2,595 ) (2,328 ) Amortization of net loss — — 98 Amortization of prior service cost 15 183 (229 ) Net periodic postretirement benefit cost $ 1,248 $ 1,440 $ 1,489 The following table shows the components of other comprehensive income for the plan (in thousands of dollars): 2015 2014 2013 Actuarial gain (loss) during the year $ 2,413 $ (5,733 ) $ 20,673 Reclassification adjustments for: Amortization of net loss — — 98 Amortization of prior service cost 15 183 (229 ) Adjustment for deferred tax effects (949 ) 2,170 (8,031 ) Adjustment due to the effects of regulation (1,479 ) 3,380 (12,511 ) Other comprehensive income related to postretirement benefit plans $ — $ — $ — In 2016 , IDACORP and Idaho Power expect to recognize as components of net periodic benefit cost $26 thousand from amortizing amounts recorded in accumulated other comprehensive income as of December 31, 2015 , relating to the postretirement benefit plan. The entire amount represents $26 thousand of amortization of prior service cost. 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): 2016 2017 2018 2019 2020 2021-2025 Expected benefit payments $ 4,010 $ 4,050 $ 4,100 $ 4,150 $ 4,190 $ 21,030 Expected Medicare Part D subsidy receipts 380 430 470 510 560 3,480 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 2015 2014 2015 2014 2015 2014 Discount rate 4.60 % 4.25 % 4.60 % 4.20 % 4.60 % 4.20 % Rate of compensation increase (1) 4.11 % 4.30 % 4.50 % 4.50 % — — Medical trend rate — — — — 9.7 % 6.4 % Dental trend rate — — — — 5.0 % 5.0 % Measurement date 12/31/2015 12/31/2014 12/31/2015 12/31/2014 12/31/2015 12/31/2014 (1) The 2015 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 2015 2014 2013 2015 2014 2013 2015 2014 2013 Discount rate 4.25 % 5.20 % 4.20 % 4.20 % 5.10 % 4.15 % 4.20 % 5.15 % 4.20 % Expected long-term rate of return on assets 7.50 % 7.75 % 7.75 % — — — 7.25 % 7.25 % 7.25 % Rate of compensation increase 4.11 % 4.30 % 4.38 % 4.50 % 4.50 % 4.50 % — — — Medical trend rate — — — — — — 9.7 % 6.4 % 6.8 % Dental trend rate — — — — — — 5.0 % 5.0 % 5.0 % In October 2014, the Society of Actuaries released a new set of mortality tables referred to as RP-2014. Mortality tables are used by defined benefit plans to estimate the life expectancy of plan participants and the expected length of benefit payments in retirement. Idaho Power's measurement of its plan benefit obligations as of December 31, 2015 and 2014, and its net periodic benefit cost for 2015, reflect the adoption of the new tables, which was not material. The assumed health care cost trend rate used to measure the expected cost of health benefits covered by the postretirement plan was 9.7 percent in 2015 and is assumed to decrease to 8.3 percent in 2016, 6.8 percent in 2017, 5.4 percent in 2018 and to gradually decrease to 4.8 percent by 2099 . 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, 2015 (in thousands of dollars): One-Percentage-Point Increase Decrease Effect on total of cost components $ 407 $ (297 ) Effect on accumulated postretirement benefit obligation 3,719 (2,838 ) Plan Assets Pension Asset Allocation Policy: The target allocation and actual allocations at December 31, 2015 for the pension asset portfolio by asset class is set forth below: Asset Class Target Allocation Actual Allocation December 31, 2015 Debt securities 24 % 25 % Equity securities 54 % 55 % Real estate 6 % 7 % Other plan assets 16 % 13 % 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). If the inputs used to measure the securities fall within different levels of the hierarchy, the categorization is based on the lowest level input (Level 3 being the lowest) that is significant to the fair value measurement of the security. Level 1 Level 2 Level 3 Total Assets at December 31, 2015 Pension plan assets: 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 59,787 — 67,485 Equity Securities: Emerging Markets 9,679 23,167 — 32,846 Real estate — — 39,035 39,035 Private market investments — — 37,316 37,316 Commodities funds — 27,555 — 27,555 Total pension assets $ 258,267 $ 224,998 $ 76,351 $ 559,616 Postretirement plan assets (1) $ 16 $ 35,550 $ — $ 35,566 Assets at December 31, 2014 Pension plan assets: Cash and cash equivalents $ 19,190 $ — $ — $ 19,190 Short-term bonds — 10,991 — 10,991 Intermediate bonds — 101,867 — 101,867 Long-term bonds — 21,615 — 21,615 Equity Securities: Large-Cap 66,151 — — 66,151 Equity Securities: Mid-Cap 68,974 — — 68,974 Equity Securities: Small-Cap 50,972 — — 50,972 Equity Securities: Micro-Cap 22,962 — — 22,962 Equity Securities: International 6,555 57,705 — 64,260 Equity Securities: Emerging Markets 8,629 22,915 — 31,544 Real estate — — 33,996 33,996 Private market investments — — 37,118 37,118 Commodities funds — 30,079 — 30,079 Total pension assets $ 243,433 $ 245,172 $ 71,114 $ 559,719 Postretirement plan assets (1) $ 11 $ 38,364 $ — $ 38,375 (1) The postretirement benefits assets are primarily life insurance contracts. For the year ended December 31, 2015 , there were no significant transfers into or out of Levels 1, 2, or 3. For the year ended December 31, 2014 , there were $23.1 million of mid-cap equity security investments that were transferred from Level 2 to Level 1. The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3) (in thousands of dollars): Private Equity Real Estate Total Beginning balance - January 1, 2014 $ 33,709 $ 28,019 $ 61,728 Realized gains 1,430 866 2,296 Unrealized (losses) gains (545 ) 1,305 760 Purchases 2,434 3,806 6,240 Settlements 90 — 90 Ending balance - December 31, 2014 37,118 33,996 71,114 Realized gains 1,897 923 2,820 Unrealized (losses) gains (3,152 ) 3,193 41 Purchases 2,255 923 3,178 Sales (802 ) — (802 ) Ending balance - December 31, 2015 $ 37,316 $ 39,035 $ 76,351 Fair Value Measurement of Level 2 and Level 3 Plan Asset Inputs: Level 2 Bonds, Equity Securities, and Level 2 Commodities : These investments represent U.S. government and agency bonds, corporate bonds, and commingled funds consisting of publicly traded equity securities or exchange-traded commodity contracts and other contractual claims to commodity holdings. The U.S. government and agency bonds, as well as the corporate bonds, are not traded on an exchange and are valued utilizing quoted prices for similar assets or liabilities in active markets. The commingled funds themselves are not publicly traded, and therefore no publicly quoted market price is readily available. The value of these investments is calculated by the custodian for the fund company on a monthly basis, and is based on market prices of the assets held by the commingled fund divided by the number of fund shares outstanding. Level 2 Postretirement Assets: These assets represent an investment in a life insurance contract and are 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. Level 3 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 company, 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. Level 3 Private Market Investments : Private market investments represent two categories: fund of hedge funds and venture capital funds. These funds are valued by the fund company based on the estimated fair value of the underlying fund holdings divided by the fund shares outstanding. 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. Venture capital fund investments are valued by the fund company 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. The fair value of the Level 3 assets is determined based on pricing provided or reviewed by third-party vendors to our investment managers. While the input amounts used by the pricing vendors in determining fair value are not provided, and therefore unavailable for Idaho Power's review, the asset results are reviewed and monitored to ensure the fair values are reasonable and in line with market experience in similar assets classes. Additionally, the audited financial statements of the funds are reviewed at the time they are issued. 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 approximately $7 million each year from 2013 to 2015 . 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, 2015 and 2014 were $2.0 million . |
