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Home My WebLink About20040326Response of Avista to Staff Part XVIII.pdfAvista Corp. 1411 East Mission PO Box 3727 Spokane, Washington 99220-3727 Telephone 509-489-0500 Toll Free 800-727-9170 'V'STA. Corp. March 25 2004 Idaho Public Utilities Commission Office of the SecretaryRECEIVED Idaho Public Utilities Commission 472 W. Washington St. Boise, ill 83720-0074 Attn: Scott Woodbury Deputy Attorney General MAR 2 6 2004 Boise, Idaho Re:Production Requests of the Commission Staff in Case Nos. A VU-04-01 and A VU-04- /~ RfxYdf~ Mr. Woodbury, I have attached an original and three copies of Avista s response to Staff Data Request No. (s) 112, 150, 154, 155, 157, 171 , 172, 173, 173(C), and 174-178. Our records indicate that A vista has now responded to all requests in the First through Fourth Production Request of the Commission Staff. If you have any questions, please call me at (509) 495-4706 or Don Falkner at (509) 495- 4326. ~elY' Mike ::t::5 Rate Analyst , -' .. , Enclosures VISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION JURISDICTION: CASE NO: REQUESTER: TYPE: REQUEST NO. Idaho A VU-O4-01 / A VU-04- IPUC Data Request 112 DATE PREPARED: WITNESS: RESPONDER: DEPARTMENT: TELEPHONE: 3/25/2004 Malyn Malquist Don Falkner Rates (509) 495-4124 REQUEST: Please identify expenses associated with bond issuances, analyst fees, rating agencies, Board of Directors' fees, and shareholder expenses and how they are allocated to A vista Corp. and its subsidiaries, including the utility and Idaho Gas and Electric Operations. (Formerly Audit Request No. 110, dated on-site October 27,2003). RESPONSE: Fees and costs associated with debt financings are recorded to FERC account 181 , Unamortized Debt Expense. The accumulated costs are later amortized to expense account 428 , Amortization of Debt Discount and Expense. No accounting or regulatory allocations are applied to these costs. In the Company s requested Rate of Return, debt expense is factored into its overall cost of debt, which is a component of the Cost of Capital calculation. Other costs related to Avista s debt and equity financing activities, such as Board of Director fees, rating agency fees and other shareholder costs , are generally recorded to FERC account 930., Miscellaneous General Expenses. These account 930 costs are primarily assigned the common-to-all utility code "7" which spreads those expenses initially to both electric and gas operations, and then to all state jurisdictions, through application of the "Four Factor." Those allocation factors are outlined in the Company s Results of Operations jurisdictional model. A rough composite weighting of system costs to Idaho operations, associated with utility code 7 charges, is 17% for the electric system and 1 % for the gas system. VISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION JURISDICTION: CASE NO: REQUESTER: TYPE: REQUEST NO. Idaho A VU-O4-01 1 A VU-O4- IPUC Data Request 150 DATE PREPARED: WITNESS: RESPONDER: DEPARTMENT: TELEPHONE: 3/25/2004 Scott Morris Don Falkner Rates (509) 495-4326 REQUEST: Have there been any cost/workforce reduction programs during the past 5 years (1999-2004)? Are any planned for 2004 and 2005? If yes, please provide details including amounts, number and salary levels of FTEs affected. RESPONSE: Please see the Company s response to Staff Request 99 regarding initiatives undertaken in 2000 and 2001. The Company does not currently have any plans for workforce reductions during 2004 and 2005. VISTA CORPORATION RESPONSE TO REQUEST FOR INFORMA TION JURISDICTION: CASE NO: REQUESTER: TYPE: REQUEST NO. Idaho A VU-O4-01 1 A VU-O4- IPUC Data Request 154 D ATE PREP ARED: WITNESS: RESPONDER: DEPARTMENT: TELEPHONE: 3/25/2004 Don Falkner Don Falkner Rates (509) 495-4326 REQUEST: Are there anyone-time charges, out-of-period charges, adjustments or accounting changes that impact 2002 test year revenues, operating expenses, other taxes and/or current and deferred income taxes? Include any costs in the test year that are expected to either be substantially less or discontinued in future years. Please provide detailed descriptions and documentation including FERC accounts and amounts. RESPONSE: The Company is not currently aware of any material one-time charges, out-of-period charges, adjustments or accounting changes that would have impacted its Idaho electric or gas operations during the 2002 test year. AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION JURISDICTION: CASE NO: REQUESTER: TYPE: REQUEST NO. Idaho A VU-O4-01 1 A VU-O4- IPUC Data Request Staff 155 DATE PREPARED: WITNESS: RESPONDER: DEPARTMENT: TELEPHONE: 03/24/2004 Adam Munson Finance (509) 495-2471 REQUEST: Please provide copies of Avista s pension and actuarial reports for the years 1999-2002, and2004 when available. Also, provide any actuarial calculations and documentation that show the development ofF AS 87 expense estimates, company contributions, balances and assumptions for 2003 through 2011. RESPONSE: Please see the attached copies of our pension and actuarial reports for the years ended December , 1999 - 2002. Our actuarial and pension reports are typically not finalized until September as a result our December 31 , 2003 report is not available for several more months. We do not have actuarial forecasts related to our pension plan beyond 2007. The most recentprojection estimating pension expense and contributions included the following assumptions: 2004 2005 2006 2007 88% 5.23% 8.00% 8.00% 00% 8.00% 8.00% 8.00% 00% 5.00% 5.00% 5.00% 25% 7.00% 7.25% 7.25% Actual Rate of Return Rate of Return Compensation Increase Discount Rate The following table summarizes the results of our projections: (millions) 2004 2005 2006Pension Expense $ 13 600 $ 12 000 $ 12 000 Contributions (I) $ 15 000 $ 15 000 $ 20 000 2007 $ 11 ,400 $ 22 000 (1) Contributions for 2004 and 2005 are in excess of the minimum ERISA contributions indicated by the projections which assume a certain level of funding relief from Congress. Contributionsin 2006 and 2007 are based on the ERISA minimum contributions indicated by our projections. Actuarial Valuation Report Retirement Plan for Em ployees of Avista Corporation Pension Contribution-01/01/2002 Pens ion Expense-01/01/2002 September 2002 WWW.WATSONWYATT.COM ;, , Actuarial Valuation for Purposes Determining Contributions for the Plan Year Beginning January 1, 2002 , ' Actuarial Valuation for Purposes of FASB Statement 87 for the Fiscal Year Beginning January 1 J 2002 ... JF CONTENTS XECUTIVE SUMMARY Summary of Key Results........... ........ ................ ...................... ............. Review of Changes Since Last Year .................................................... Annual Expense.............. ..." ..... ............................................................ Cash Contributions.................................................... ........................... SF AS 87 Funded Status........................................................................ PBGC Premium.... ........................ ..." .................................... ............... Regulatory Environment....................................................................... Actuarial Statement .............................................................................. EXHIBITS 1. Funded Status and Accrued Benefit Cost....................................... 2. Summary and Comparison of Expense .......................................... 3. Development of Expense Components .......................................... 4. Reconciliation of Accrued Benefit Cost and of Unrecognized Balances .......... ."..... ........... ............... ................ ..".. 5. Amortization of Unrecognized Net (Gain)/Loss ............................ ion 6. Summary and Comparison of Funding Requirements.................... 7. Minimum Required Contribution...... .......... .......... ........ ..".... ......... 8. Maximum Deductible Contribution ............................................... 9. Present Value of Accumulated Benefits ......................................... 10. Change in Plan Assets During Plan Year ....................................... 11. Development of Actuarial Value of Assets .................................... 12. Details of Actuarial Accrued Liabilities ......................................... 'II lion 13. Historical Information......................... ........................................... 14. Summary of Plan participants ...." ............................. ........ ............. 15. Age and Service Distribution ......................................................... 16. Reconciliation of Participant Data................... ................... ............ Ibl\rept\vaI2002.doc ~nt for Employees of Avista Corporation Page r.r.J tTJ i:T' ::;":\ ~ ! ' "0, "0 (1) :::s0..I _., n -' (1) 'I:: ' I Ii: ! , : t" I :i : I:\! I.' il i I, " :.'; ' OF CONTENTS (cont' APPENDICES A. Statement of Actuarial Assumptions and Methods........................ B. Summary of Principal Plan Provisions .......................................... C. Schedule B Attachments ................................................................ GLOSSARY RECENT EXPERIENCE ?mr Plan for Employees of Avista Corporation Page r:/1 o...c: rr( ~ . t'Ji ::r' ....... v:J , ,:, ~:! : i In.I ~ ; ~ Ii:II i : ;1ii 1 '1'' n " 9i' -I:: tT1 'I "Ci: t'IIj, I ::to ~ , i! g t'II " ,,.- It!' ; I . i , , tI'J 0-: :;:+. EXECUTIVE SUMMARY ('I) ('I)~ : ~ i ; j ~. ii 'I i i !i i :!i , I:,; , 111;, :i Ii , I' ::1. ! : I , ~ : JMMARY OF KEY RESULTS requested by A vista Corporation, this report presents the results of the actuarial valuation of Retirement Plan for Employees of A vista Corporation. In addition, the report documents theded status of the plan, the provisions on which the valuation is based, and the actuariallmptions and methods used in the calculations. n Years Beginning:01/01/2002 01/01/2001 I:al Years BeginnIng:01/01/2002 01/01/2001 'lual Net Periodic Benefit Cost/(Income)277 6221 767 622,ense Percentage of compensation 12. rtribution Minimum Required Contribution $7,481 201Percentage of compensation Maximum Deductible Contribution $25 202 320 519 417Percentage of compensation 33.4% Plan Deposited February 25, 2002 Deposited March 15 2002 Deposited April 15, 2002 Deposited July 15 2002 000 000 000 000 000 000 000 000 'tl. 'ate ions iminary '.Ire tribution uirements Payable April 15 , 2003 Payable July 15, 2003 Payable October 15, 2003 Payable January 15 2004 288 234 990 965 \djusted to reflect lump sum plan amendment effective July 1 2002. hese amounts are calculated assuming that contributions wiII be made in these amounts and on these dates and that any eceivable contributions for the prior plan year wiII be made when due. To the extent that actual deposits are shown , theirffect on subsequent requirements has been reflected. ~uarterly contribution requirements for the next plan year may, depending on the results of the next actuarial valuation , be~ss than these amounts. They will not be more unless actual contributions for the current plan year are smaller or are paiditer required. ?ment Plan for Employees of A vista Corporation i'li - !II:Ii I ~ : , I : , ", ', !: ! : i tlj ::r' :=" CI:I ! ::: ': 'i'i: ,ii, ~'"C ': '"C(1) ::3 ; ' I ~ :1 . :,' .'Ii Iii t'- 'i! ! : 1 : ('1 ('1 ... MARY OF KEY RESULTS (cont' "'" an Years Beginning:01/01/2002 01/01/2001 seal Years Beginning:01/01/2002 01/01/2001 ior Year Projected Benefit Obligation ($198 573 609)($175 290 637)5closed Fair Value of Assets 153 705 277 175 032 954endedFunded Status (44 868 332)(257 683),Ius Prepaid Benefit Cost/(Accrued Benefit Liability)($10 783 878)($7 016 256)Intangible Asset Flat Rate Premium Variable Rate Premium Total Premium $47 234 $47 234 $46 702 $46 702 ticipant Participating Employees 342 331'ormation Participant Compensation $75 531 401 $71 343 521Deferred Vested Participants 337 329Retirees and Beneficiaries 807 798Retiree and Beneficiary Annual Benefit Payments $10,447 309 $10 204 513Total Plan Participants 486 2,458 ?ment Planfor Employees of vista Corporation if: : I: : r i Ii ~ il : ~ ;1 , , ; l' . ~ , , I : I " , :;; tTJ ::+" 'i:I'i:I (1) (') (1) , i i . II , ;;-" "!: ' ,1:1, :: : I, II II ; 1 J 1' , : Ii II ~ i !i ' : i i I : ill ; 1:1 Ii m Provisions Appendix B summarizes the main provisions of the plan as of the valuation date. The plan was amended effective July 1 2002 to provide a lump sum payment option for collectively bargained employees. This change is reflected as of the effective date in the FAS results shown in this report and will be reflected in the funding results next year. The increase in the projected benefit obligation due to this change in plan provisions is ($2 529 480). To our knowledge, no additional changes are pending. ! II ; ~ ! :11 !:i!. I , , i I ;: i 'I I ~ I gVTEW OF CHANGES SINCE LAST YEAR I , ; : I , ': I ' I j No significant events requiring recognition under SF AS 88 occurred during the year. t'1i ::r ..... r:r .......... ell ~umptions Appendix A summarizes the actuarial assumptions and cost methods used to determine plan liabilities and cash contribution requirements. A comparison of assumptions for the current and prior years is shown below. rement Plan/or Employees 0/ A vista Corporation ::- ('I Fiscal Years Beginning:01/01/2002 01/01/2001 Assumptions for Expense Discount rate 7.25%75% Expected long-term return on assets 00%00% Compensation increase rate 00%00% The discount rate was lowered from 7.75% to 7.25% effective December 31 2001. Effective January 1 2002, the expected long-term return on assets was lowered from 9.00% to 8.00% and the assumed lump sum election percent was lowered from 80% to 50%. The increase in the projected benefit obligation due to the assumption changes effective January 1 2002 is $2 291 181. t'J "t:I:' ~ (=, ('I Plan Years Beginning:01/01/2002 01/01/2001 Assumptions for Contributions Valuation interest rate 00%00% Current liability interest rate 00%6.21 % Compensation increase rate 00%00% ffiVIEW OF CHANGES SINCE LAST YEAR (cont' ~tuarial Methods Effective January 1 2002, the valuation interest rate was lowered from 00% to 8.00% and the assumed lump sum election percent was lowered fTom 80% to 50%. The increase in unfunded actuarial accrued liability due to the assumption changes effective January 1 2002 is $20 035 678under the funding method. In accordance with Revenue Ruling 81-213 , the increase in unfunded accrued liability due to assumption changes is $11 307 388 due to the plan s prior overfunded status. i ' , ' There have been no changes since last year.tT1 ,........ CIJ 'In Experience The actuarialloss/(gain), not due to plan, assumption or methodchanges during the prior year has been determined in accordance with Revenue Ruling 81-213 to be $0 due to the plan s overfunded status.Prior to such special calculations, the actuarialloss/(gain) was998350 under the funding method. The components of thisloss/(gain) are $4 907 173 due to investment results from the actuarialvalue of assets and $4 091 177 from sources related to plan liabilities.The loss in investments in 2001 from the market value of assets was $24 566 963, of which 80%, or $19 629 609, was deferred due to thesmoothing method used for the actuarial value of assets. I ' ! ' 'nent Plan/or Employees of A vista Corporation The corresponding experience loss/(gain) was $28 620 888 for F ASexpense purposes. The components of this loss/(gain) are $24 566 963due to investment results and $4 053 925 from sources related to planliabilities. NNU AL EXPENSE 1e net periodi(f benefit cost (income statement expense) was determined in accordance with atement of Financial Accounting Standards 87 (SFAS 87) for the year beginning January I 102. For the fiscal year beginning in 2002, this amount is $9 277 622 , which compares with an :pense of$3 767 622 for the prior fiscal year. ianges In ?nefti 'pense! '1 come) The table below shows the principal reasons for the change of 510 000 inexpense from last year to this year. Annual Expense/(Income) for Fiscal Year Beginning in 2001Changes in SFAS 87 Expense Due to: Investment Losses/(Gains) Liability Losses/(Gains) Changes in Assumptions Plan Changes Anticipated Normal Plan Progression 767 622 238,470 511 637 995 597 (317 500) 796 277 622 yu,.....tions Annual Expense/(Income) for Fiscal Year Beginning in 2002 Discount rate Compensation increase rate Expected long-term return on assets 25% 00% 00% rement Plan for Employees of A vista Corporation ~ : : i' tTJ ::r- :::,:::: : ', ' 1:Tj "t:t , ::to :ASH CONTRIBUTIONS he Internal Revenue Code (IRC) permits flexibility in plan contributions so that normally a nge of contributions is possible. A contribution in the range shown below will be fully tax ~ductible and satisfy minimum funding requirements. For a contribution to be deductible for a x year, it must be made before the due date for filing the tax return for that year, with ::tensions if applicable. Ian Years Beginning: ax Years Ending: 01/01/2002 12/31/2002 01/01/2001 12/31/2001 ermitted ontribution ange Minimum Required Maximum Deductible 519,417 $7,481 201 $25 202 320 The minimum required contribution changed from $0 for the plan year beginning in 2001 to $7,481 201 for the plan year beginning in 2002 primarily due to lower than expected asset returns and assumptions changes. In 2003 , the minimum required contribution must be paid in four quarterly installments plus a fmal residual payment. Quarterly contributions will be necessary because in 2002 the current liability funded percent is less than 100%. The contributions made thus far in 2002 in excess of the 2002 minimum required contribution and any subsequent contributions will create a credit which can be applied toward quarterly contributions required in 2003. Failure to make the required contributions results in an interest penalty, raising the minimum required contribution. The Pension Benefit Guaranty Corporation may deem a missed required contribution to be a Reportable Event. Also, it might be necessary to notify all plan participants of the missed contribution. fJonsor Funding olicy The current A vista funding policy has been generally to contribute an amount equal to the Net Periodic Pension Cost, within the ranges of the minimum required and maximum tax deductible contributions. A contribution of $0 was made for the prior plan year. For 2002, the policy would suggest a contribution of $9 277 622. issumptions Valuation interest rate Compensation increase rate 00% 00% 00% 00% letirement Plan/or Employees 0/ A vista Corporation I I ; ': ', " I J tI'j ::r ::;: ClI I i :I ~ !, ::sQ..I _." II g II cI)'I iii , i Ii ' ''!: ~ : I ! \11::1 ' III 51';1 ~ :: : r I:1, 11' ;:I- rAS 87 FUNDED STATUS e ". -mcial Accounting Standards Board reqnires disclosnre of the plan s funded starns as well a. ;ment ofthe prepaid benefit cost/(accrued benefit liability) along with any intangible set recognized due to an unfunded accumulated benefit obligation. The table below mmarlzes the plan s current funded status as of the end of the fiscal year, December 31, 2001 ong with comparable information as remeasured on January 1, 2002, with a new census. iscal Years Ending: r;'unded ~tatus Projected Benefit Obligation Fair Value of Assets Funded Status Accumulated Benefit Obligation ABO Funded Ratio 12/31/2002 Remeasured as of beginning of fiscal year $201 452,202 153,705,277 (47 746 925) 161 779,156 95. 12/31/2001 Disclosed at end of fiscal year $198,573,609 153,705,277 (44 868,332) 158,458,479 97. Balance Sheet Entries Prepaid Benefit Cost Accrued Benefit Liability Intangible Asset Accumulated Other Comprehensive Income Adjustments N/A ($10,783,878) Assumptions Discount rate Compensation increase rate 25% 00% 25% 00% Reflects lump sum plan amendment. Exhibit 2 shows the basis of calculations before and after the plan amendment. Il.etirement Plan/or Employees 0/ Avista Corporation : I ;: ' : I : I , ;, ;, , , I. tTJ ,.... (/I " , , ;:t ('I ... ('I 'I" :LI ;' ;, I i PBGC PREMIUM Pension Benefit Guaranty Corporation (PBGC) requires annual premium payments to cover ail participants in the plan. The premium is composed of a flat rate portion and a variable rate portion. For the plan year beginning January 1 , 2002, the flat rate premium is $19 per participant. The variable rate premium is based on the plan s unfunded vested benefits. The table below summarizes the determination of the PBGC premium for the plan year beginning January 1,2002. Flat Rate Premium Number of covered participants Amount of flat rate premium per participant Total flat rate premium 486 $19 $47 234 Variable Rate Premium This plan is exempt from the variable rate premium because it is at the full funding limit for the plan year ending December 31 , 2001. Total Premium Total PBGC premium $47 234 Assumptions Premium for plan year beginning Determination date Required interest rate 01/01/2002 12/31/2001 5.48% Retirement Plan for Employees of A vista Corporation - ------ - ---" --~, . - -o, ~ ' ,::?"~- --;' , , " I ' i :! ; IiiI', , ': ' ! I !111 :: ill, , "! : II" i' : i " :! Ii ! ,; , i,l, :i' JLA TORY ENVIRONMENT "ull Funding Limit The Economic Growth and Tax Relief Reconciliation Act of2001 (EGTRRA) increased the current liability full funding limit to 165% for plan years beginning in 2002, to 170% for plan years beginning in 2003, and repealed the current liability full funding limit for subsequent years. Changes made by the Job Creation and Worker Assistance Act of 2002 (JCW AA), which are described below, also affected the 90% of current liability minimum full funding limitation. This is not expected to have an impact on the Retirement Plan for Employees of A vista Corporation. Deficit Reduction Contribution JCW AA revised the permissible range of assumed interest rates for current liability valuations to be not less than 90%, nor more than 120%, of the four year weighted average of 30-year treasury bond rates for plan years beginning in 2002. Previously, the range was 90% to 105%. The acceptable range of assumed interest rates for plan years beginning January 1,2002, is 5.14% to 6.85%. The mortality assumptions used for this purpose are also regulated by the IRS. The Retirement Plan for Employees of A vista Corporation is not currently subject to the deficit reduction contribution. Benefit and Compensation Limits For limitation years ending in 2001 , the maximum annual defined benefit amount commencing at social security normal retirement age was $140 000. For 2002 limitation years, EGTRRA increased the maximum to $160 000 commencing on or after age 62 (with actuarial increases for commencement after age 65). For 2001 plan years, the compensation limit was $170 000. EGTRRA increased this limit in 2002 to $200,000. , \ i \I, \' I' ' I 1 j tr1 1: ' , .\ ' I . , :1 ' 1:1:\ i\~ '"C : " '"CI ,\ II " Ii ", Participant Notifications For this plan year beginning January 1 , 2002 , the PBGC underfunding notices to plan participants are not required. The PBGC underfunding notices will not be required for the next plan year either. :111 i'il 1\; ili! 1:1 ';1 ' ,\\ , ,1\ ii il . , I : i , 'ii i \ \;,\1\ \ \1 11"111ill H , Retirement Plan for Employees of A vista Corporation Ii' r. JLA TORY ENVIRONMENT (cout' In addition to the flat $19 per participant premium paid by all sponsors of single-employer pension plans guaranteed by the PBGC, sponsors must pay additional premiums based on any unfunded vested current liability as determined using the required interest rate. JCW AA revised the required interest rate for this current liability valuation to be 100% of the prior month's average 30-year treasury bond rates for plan years beginning in 2002. Previously, the required interest rate was 85% of the prior month's average 30-year treasury bond rates. For years beginning January \,2002, the required interest rate is 5.48%. The Retirement Plan for Employees of A vista corporation is exempt from the variable premium for the 2002 plan year because it is at the full funding limit for the plan year ending December 31, 2001. I'd 1Ii \' ! I! :;1 \ I' \1 ' I ' .' ' I I i I I :: Ii : : , . II \: 'I \\ I , !II l 1 . 'BGC Premiums tr1 r::r ::+., \\\, \, ,, ! ,t"" / i Retirement Plan for Employees of Avista Corporation "'---~-- ~ r1 TU ARIAL STATEMENT Primary Purposes of Actuarial Valuation As requested by the Retirement Committee of A vista Corporation, this report presents the results of the actuarial valuation of the Retirement Plan for Employees of A vista Corporation. The primary purpose of the valuation is to determine the minimum required contribution and the maximum tax-deductible contribution under the Internal Revenue Code for the plan year ending December 31 , 2002, and the tax year ending December 31 , 2002. The report also documents the Net Periodic Benefit Cost, the funded status of the plan, the provisions on which the valuation is based, and the actuarial assumptions and methods used in the calculations. The use of this report for anything other than this purpose may be inappropriate and misleading. Sources of Data A vista Corporation provided employee data as of January 1 , 2002. Data for other participants were provided by A vista Corporation. have relied on all the data and information provided, including plan provisions and asset information, as being complete and accurate. We have not independently verified the accuracy or completeness of the data or information provided, but we have performed appropriate checks for reasonableness. Asset data were provided by the plan trustee. Actuarial Calculations The valuation summarized in this report involves actuarial calculations that require the making of assumptions about future events. We believe that the assumptions and methods used in this report are reasonable and appropriate for the purpose for which they'have been used. However other assumptions and methods could also be reasonable and could result in materially different results. Because actuarial calculations are based on many assumptions, they are inherently imprecise. The numbers in this report are not rounded. However, the use of unfounded numbers for plan liabilities should not imply precision. In addition because it is not possible or practical to consider every possible contingency, we may use summary information, estimates or simplifications of calculations to facilitate the modeling of future events. We may also exclude factors or data that we deem to be immaterial. Retirement Plan for Employees of A vista Corporation I Ii I: ; 1 II i 1 ,1 , I I 'l i I L tTJ ::T cr: ::+. , :1 i,l ::i :1' ; ~ i: I !i! : I' ! ' ;;, ! .i i ., ' :1 ! , II il :ir 1'1, ':I!"": ~CTUARIAL STATEMENT (cont' 7ertijication of f'1 fiance and rnu...pendence The undersigned consultants of Watson Wyatt Worldwide with actuarial credentials meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. To the best of our knowledge, all plan participants on January 1,2002 and all plan provisions have been reflected in the valuation. In our opinion, all calculations and procedures are in conformity with generally accepted actuarial principles and practices; and the results presented comply with the requirements of the Internal Revenue Code ERISA and applicable IRS rulings or Statements of Financial Accounting Standards including modifications made by Statements 130 and 132, as applicable. Avista Corporation is responsible for the selection of assumptions for SF AS 87 purposes. There is no relationship between A vista Corporation and Watson Wyatt Worldwide that impacts our objectivity. We will be pleased to review this report with you at your convenience. Sincerely, ju lJOlft-- & ~ AJ Susan E. Hedrick, F . tsulting Actuary ~~g ;li' Consulting Actuary Retirement Plan for Employees of A vista Corporation I i : ;, ,, ', " I' , , :!i , ill ; I ::r :=" CIJ : r , :1 : ! II ' ; I :1 I , :\ ' :1 , II ; I ; \ ~ I EXHIBITS , : \ ;;i ! '",:, ' ' I, I : I Ii" .." ,t" FUNDED STATUS AND ACCRUED BENEFIT COST Fiscal Years Ending: Reconciliation of Funded Status a. Measurement date b. Accumulated benefit obligation c. Projected benefit obligation d. Plan assets at fair value e. Funded status f. Unrecognized net loss/(gain) g. Unrecognized prior service costs h. Unrecognized net transition obligationl(asset) 1. Prepaid/(accrued) benefit cost j. (Additional minimum liability) k. Prepaid benefit cost/(accrued benefit liability) Intangible asset m. Accumulated other comprehensive income adjustments n. Net amount recognized 12/31/2002 For NPBC development remeasured on 01/0112002 ($161 779 156) ($201,452,202)1 153,705,277 ($47 746 925) 541 677 178 370 (3,757 000) ($10 783 878) 12/31/2001 Balance sheet disclosure as of 12/31/200 I ($158,458,479) ($198,573 609) 153,705 277 ($44 868 332) 133 604 707 850 757 000) ($10 783,878) ($10 783 878) ($10 783 878) Assumptions o. Discount rate p. Compensation increase rate Reflects lump sum plan amendment. 25% 00% 25% 00% Retirement Plan for Employees of A vista Corporation I:! , :! Ii I Ii , I 1 : Ii Ii, Ii' . ,~ . " I : I ; :, . I I i : . , : I .... SUMMARY AND COMPARISON OF EXPENSE .." :', Fiscal Years Pre Post BegInning:Amendment Amendment 01/01/2002 01/01/2002 01/01/2001 Basis of Measurement date 01/01/2002 01/01/2002 01/01/2001 Calculations Service cost 780 096 627 856 686 257 Projected benefit obligation 203 981 682 201 452 202 179 091,474 Fair value of assets 153 705 277 153 705 277 175 032 954 Market-related value of assets 153,705 277 153 705 277 175,032 954 Expected Benefit payments $11 304 775 $11 941 475 $11,084 938 Net Periodic Service cost $6,703,9761 686,257 Benefit Cost Interest cost 275 640 450 048 Expected return on assets (12 311,49i)(15 254 144) Net (gain)/loss recognition 882 944 Prior service cost amortization 812 560 971,461 Transition (asset)/obligation recognition 086 000)(1,086 000) , ,, , Net periodic benefit cost/(income)277 622 $3,767 622 , ' Assumptions m. Discount rate 25%75% ; , ., ll.Expected long-term return ; I on assets 00%00%; i Compensation increase rate 00%00% Adjusted to reflect lump sum plan amendment effective July 1 2002. Retirement Plan for Employees of A vista Corporation ... DEVELOPMENT OF EXPENSE COMPONENTS Fiscal Year Beginning: Service Cost a. Service cost at beginning of year b. Expected administrative expenses c. Interest on service cost at discount rate (7.25%) d. Total 0110112002 250 794 453 183 703 976 Projected Benefit Obligation e. Participating employees f. Deferred vested g. Retirees and beneficiaries h. Total $102 080 654 757 934 613,614 $201,452 202 Interest Cost i. Projected benefit obligation j. Expected benefit payments during year k. Interest on time-weighted amounts at discount rate (7.25%) $201 452 202 (11 623 125 $14 275,640 Market-Related Value of Assets I. Fair value of assets as ofOl/0l/2002 m. Market-related value of assets $153 705 277 $153 705 277 Expected Return on Assets n. Market-related value of assets o. Expected contributions during fiscal year p. Expected benefit payments q. Expected administrative expenses r. Expected rate of return s. Expected return on assets adjusted for timing of above contributions and payments Adjusted to reflect lump sum plan amendment effective July 1 2002. Reflects lump sum plan amendment. $153,705 277 000,000 (11 623 125) 00% $12,311,49i Retirement Plan for Employees of A vista Corporation Ii, Ii :: .\ :: '. ' a. Prepaid/(accrued) benefit cost as of 0 1/0 1/200 1 b. Net periodic benefit cost/(income) for fiscal year ending 12/31/2001 c. Employer contributions paid during fiscal year ending 12/31/2001 d. Prepaid/(accrued) benefit cost as of 01/01/2002 (a - b + c) e. Net periodic benefit cost/(income) for fiscal year ending 12/31/2002 f. Expected employer contributions paid during fiscal year ending 12/31/2002 g. Expected prepaid/(accrued) benefit cost as of 0 l/O 1/2003 (d - e + f) RECONCILIATION OF ACCRUED BENEFIT COST AND )F UNRECOGNIZED BALANCES conciliation of ?paid/(Accrued) neftt Cost ($7 016 256) 767 622 ($10 783 878) 277 622 000 000 ($8 061 500) conciliation Unrecognized Unrecognized Transition Date Original Amount as of Amount as of Amortization ;;:. Ii:'ni Established Amount 01/01/200 I 01/01/2002 Amount (1),se~ 0..01/01/1994 ($21 768 000)($4 843 000)($3 757 000)($1 086 000) ()' (1) i en conciliation Unrecognized Unrecognized 2002PriorDateOriginalAmount as of Amount as of Amortization , ! pr-"Vice Costs Established Amount 01/01/2002 07/01/2002 Amount I' I I' , (1) 01/01/1994 884 000 741,497 $49 9761 $165 180 . :::s01/01/1995 947 349 839 089 688 499 301 180 03/01/1998 5,454 360 127 264 954 165 346 200 (1)Total 707 850 692 640 $812 560 .... :::s (') (1) : Ii Ar' '~d for half-year amortization payment and gain due to lump sum plan amendment effective July 1 2002, irement Planfor Employees of A vista Corporation AMORTIZA TION OF UNRECOGNIZED NET (GAIN)/LOSS Fiscal Year Beginning: Total Unrecognized (Gain)/Loss Adjusted for Deferred Asset (Gain)/Loss a. Total unrecognized (gain)/loss b. Deferred (gain)/lossi. Market-related value of assets ii. Fair value of assets iii. Deferred (gain)/loss (i-ii) c. Unrecognized (gain)/loss adjusted for deferred asset (gain)/loss (a- 0110112002 $33 541 677 $153 705 277 153 705 277 $33 541 677 Amortization d. Absolute value of adjusted unrecognized (gain)/loss of Unrecognized e. Projected benefit obligation Net f. Market-related value of assets (Gain)/Los/ g. Larger of e and f h. 10% ofg i. Absolute value of (gain)/loss in excess of 10% corridor (d-, not less than zero) j. Unrecognized (gain)/loss subject to amortization with sign from c k. Average future expected working lifetime of participants expected to receive benefits I. Amortization amount G + k) Gain/loss amortization detennined prior to lump sum plan amendment. $33 541 677 203 981 682 153 705 277 203 981 682 398 168 $13 143 509 $13 143 509 14.886 years $882 944 Retirement Plan/or Employees of A vista Corporation i i I 'I , ; !!, j ; 0 , i J: :j, I I I!!!I SUMMARY AND COMPARISON OF FUNDING REQ UIREMENTS Plan Years Beginning:01101/2002 01/01/2001 Current Under RP A '94 (IRS mortality)$191 191 348 $173 108,748 Liability Under OBRA ' 87 (Valuation mortality)188 522 736 170 740 231 Actuarial Participating employees $90 838 919 $70 464 397 Accrued DefeITed vested participants 541 177 669 368 Liability Retirees and beneficiaries 262 178 077 758 Total $184 642 274 $154 211 523 Assets Market value of assets $153 705 277 $175 032 954 Actuarial value of assets 173 334 886 175 032 954 VAAL Unfunded actuarial accrued liability $11 307 388 ($20 821,431) ' , Normal Cost Normal cost 813 636 558,459 As a percentage of compensation 6.4% Contribution Minimum required contribution $7,481 201 ~ ! Range As a percentage compensation ' ' I i, Maximum deductible contribution $25 202 320 519,417 :ii" . , As a percentage compensation 33.4% Assumptions Valuation interest rate 00%00% RP A '94 current liability interest rate 00%21% OBRA '87 current liability interest rate 00%21% Compensation increase rate 00%00% These amounts are calculated assuming that contributions will be made in the amounts and on the dates described in the Executive Summary and that any receivable contributions for the prior plan year will be made when due. If actual contributions differ from this schedule, these amounts may need to be adjusted. . i : I , I; , 'I : Retirement Plan/or Employees 0/ A vista Corporation i , I I. ! i! MINIMUM REQUIRED CONTRIBUTION ,.r I an Year Beginning: !gular inimum mtribution a. Normal cost b. Net amortization chargesc. Interest to end of year d. Additional funding chargee. Interest penalty due to late quarterly contributions f. Total charges (not less than zero) 01/0112002 813 636 560 309 589 916 N/A 963 861 III Funding mitation g. Full funding limitation adjusted by credit balance $39 690 684 eliminary fnimum 'ntribution h. Minimum required contribution after recognition of full funding limitation (lesser of f and g)963 861 '"0 '"0 ('t) ::;! e-. I gI' en edit lIalance 1. Prior year credit balance j. Interest to end of year k. End of year credit balance nimum quired ntribution 1. Minimum required contribution, if paid on or after December 31 , 2002 (h-, not less than zero) m. Interest to the end of the plan year on accumulated quarterly installments n. Minimum required contribution, if paid on January 1 2002 o. Minimum required contribution for plan year ending December 31 , 2002 (l-m, not less than n) 963 861 ! I~ (""., , 482 660 373 945 t"J ;.. "1::: c=. $7,481 201 !'f1,1 1;1 , fi irement Plan/or Employees 0/ A vista Corporation MAXIMUM DEDUCTIBLE CONTRIBUTION lD Year Beginning: x Year Ending: gular lXimum ntribution a. Normal cost b. Net amortization chargesc. Interest to end of plan year d. Total 0110112002 12/31/2002 $5,813 636 560 309 589 916 963 861 ~ll Funding nitation e. Full funding limitation f. Lesser of regular maximum and full funding limitation $39 690 684 963 861 nimum ntribution Current Year g. Minimum required contribution (for the plan year ending within the current tax year) not claimed as a deduction for the prior tax yearh. Contributions not claimed as a deduction for the prior tax year but required to satisfy minimum funding for earlier plan years 1. Minimum required contributions for plan years ending within or before the current tax year (g+h) $7,481 201 $7,481 201 'funded ~rrent lbility j. Adjusted current liability at end of yeark. Actuarial value of assets at end of year 1. Deductible contributions included in assets but not yet deducted less deducted contributions not included in assets m. Unfunded current liability G-k+l, not less than zero) $200 147 031 174 944 711 $25,202 320 lXimum ntribution n. Maximum deductible contribution (largest off, i, and m) I $25 202 320 The fact that, if a qualified defined contribution plan covers the same employees as this plan, the total amount of the tax deduction under both plans cannot exceed 25% of the total compensation of the covered employees for that tax year, has notbr lnsidered here. tirement Plan for Employees of vista Corporation ; -- - I (11 0.. (11 '1 en fr- I ~ ; P. : ("t : := : t1 , '"0I ("t , ....., , n :;::3: r. PRESENT VALUE OF ACCUMULATED BENEFITS ccumulated ~enefits As of 01/01/2002 a. Participating employees b. Deferred vestedc. Retirees and beneficiaries d. Total vested accumulated benefits e. Nonvested accumulated benefits f. Total accumulated benefits Number of Participants Vested 049 337 807 1-93 $34 259 762 541 177 262 178 $128 063 117 975 386 $151 038 503 Present Value ~enefit Security g. Market value of assets atio h. Asset value divided by total accumulated benefits value $153 705 277 101.77% ~econciliationf J ~nt 'alk... ccumulated enefits i. Present value of accumulated benefits as of January 1 2001 J . Changes during the year due to: Benefits accumulated4 Decrease in the discount period Actual benefits paid Plan amendment Change of assumptions Net increase (decrease) k. Present value of accumulated benefits as of December 31 , 2001 $128 578 429 091 138 073 557 (11 077 825) 373 204 $22 460 074 $151 038 503 ctuarial assumptions: The same actuarial assumptions are used to value the F ASB Statement 35 abilities as are used for purposes of determining the plan s funding requirements, as described in ppendix A. An investment return assumption of8.00% was used. Of these, 1 049 are fully vested, There are also 293 non-vested participating employees for a total of 1 342 participatingemployees. This does not represent liabilities on a plan termination basis for which a separate extensive analysis would be required. There were no accrued contributions as of December 31, 2001. ies actuarial gains and losses due to non investment experience. , 23 etirement Plan/or Employees of A vista Corporation L - ::s0.. (i' CIJ ! I , ! ! i ! i :1, : :1' :jJ: !! I , " ('I) ('I) :::s ...... ('I) ... ('I) :;,' ; LO.CHANGE IN PLAN ASSETS DURING PLAN YEAR Market Value Actuarial Value '::hange Plan assets as ofO1/0l/2001 $175 032 954 $175 032 954 isseis Employer contributions 2 Benefit payments made (11 077 825)(11 077 825) Administrative expenses paid (937 033)(937 033) Total investment return 312 819)316 790 Plan assets as of 12/31/2001 2 $153 705 277 $173 334 886 ~eturn isseis Rate of return on average invested assets (5.51)%6.10% There were no contributions receivable at the beginning of the plan year. ' - e were no contributions receivable at the end of the plan year. letirement Plan for Employees of vista Corporation : I i ' . ~ ,; "0. "0 " ~ ::30.. .....("), ~ :::3 ......;..: '1::1 ("!)..... :::3 (")("!) 10.CHANGE IN PLAN ASSETS DURING PLAN YEAR (cont' Historical Return on Assets The schedule below summarizes the total rate of return in recent years. 10. . Market Value . Actuarial Value Return on Assets 25. 20. 15. 10. 1998 13. 12. 2000 18. 20011999 11. 16. Actuarial value of assets was marked to market as of January 1 , 2001. Retirement Plan/or Employees 0/ A vista Corporation : ~, '. ": :! : i! , :!: i:: . ' ' i ii; 'i' ~,' '0, '0(1) ::s ' e; n(1) i :I , : I ; i I: ' I. 11.DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS Expected Return Market value of assets as of January I , 2001 $175 032 954 Item (1) Contributions paid during prior year Benefits paid Administrative expenses Total Weight for Amount Timing (2)(3) 100. (11 077 825)48. (937 033)48. Weighted Amount (4) Market value of assets plus total weighted amount Assumed rate of return on plan assets for the year Expected return (5,417 056) (458 209) ($5 875 265) $169 157 689 00% $15 224 192 '! ' ', .j : j i I Actual Return Market value as of January I , 2001 Contributions for prior plan year Benefits and administrative expenses paid Market value as of January 1 2002 Actual return ($175 032 954) 014 858 153,705 277 ($9 312 819) ; i Investment Gain/(Loss) Actual return minus expected return ($24 537 011) i! i ~ ! : ; Ii i : , i ,; Ii' ; Ii, : Ii i, i:i Retirement Plan/or Employees 0/ A vista Corporation 11.DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS (cont' Actuarial Value of Assets Market value of plan assets as of January I , 2002 Plan Investment Percent Percent Year Gain/(Loss)Recognized Deferred (1)(2)(3)(4) 1998 80.000%20.000% 1999 60.000%40.000% 2000 40.000%60.000% 2001 (24 537 011)20.000%80.000% Total ($24 537 011) $153 705 277 Deferred Gain/(Loss) (5) (19 629 609) ($19 629 609) Asset value minus total deferred gain/Closs)$173 334 886 I j Corridor for actuarial value . 80% of market value 120% of market value $122 964 222 $184 446 332 Actuarial value of plan assets as of January I , 2002 $173 334 886 Note: The actuarial value of assets is a calculated value detennined by starting with market value of assets at January 1 2001. For subsequent years the calculated value is determined by adjusting the market value of assets to reflect the investment gains and losses (the difference between the actual investment return and the expected investment return) during each of the last five years or, iffewer, the completed years since January 1 2001 , at the rate of20% per year. The actuarial value is subject to a restriction that it not be less than 80% or more than 120% of market value. Retirement Plan for Employees of A vista Corporation ';: 12. ......., , DETAILS OF ACTUARIAL ACCRUED LIABILITIES Plan Year Beginning: Funding Unit Credit Method Liabilities Applicable Interest Rate 000% Normal Cost Benefits Administrative expenses Total 350 673 462 963 813 636 Liability Participating employees $90 838 919Deferred vested 9 541 177 Retirees and beneficiaries 262 178Total $184 642 274 Preparticipation service exclusion Expected Benefit Payments $11 ,304 775 Vested Current Liability Participating employees Deferred vested Retirees and beneficiaries Total Present Value of Future Benefits Participating employees Deferred vested Retirees and beneficiaries Total $161 053 239 541 177 262 178 $254 856 594 01/01/2002 Current Liabilities OBRA '87 based on RP A '94 based on Funding Assumed IRS AssumedMortality Mortality000% 6.000% $8,310 542 471 698 782 240 , , 611 434 471 698 083 132 : I i i $78 297 497 315 528 909,711 $188 522 736 $188 522 736 $80 966 109 315 528 909 711 $191 191 348 $191 191 348 , : ::s $11 304 775 ; , $11 304 775 $43 272 446 315,528 909,711 $153 497 685 Reflects a change in the calculation of vested active benefits to exclude the effect of early retirement subsidies for those who are not currently eligible for early retirement. The resulting vested benefits reflect the benefits payable only due to current ~rvice. Retirement Plan for Employees of A vista Corporation I i I .3.HISTORICAL INFORMATION Ian Years Beginning:01/01/2002 01/01/2001 01/01/2000 01/01/1999 articipant Data articipating employees 342 331 323 354 articipant compensation $75 531,401 $71 343 521 $67 830 210 $67 984 647 )eferred vested participants 337 329 337 319 ~etirees and beneficiaries 807 798 770 772 ~etiree and beneficiary arlnual benefit payments $10,447 309 $10 204 513 920 960 $9,439 805 ota! plan participants 2,486 2,458 2,430 2,445 Isset History 1arket value $153 705 277 $175 032 954 $188 868 230 $178 878 604 I.ctuarial value 173 334 886 175 032 954 158 913 107 146 146 934lenefit payments In pnor year 077 ,825 860 057 108 417 747 603 :mployer contributions in prior year 303 632 ~etum on market value (5.51)%(0.56)%11.54%13.20% ' ~ ~et'on actuarial value 6.10%18.97%16.24%12.26% , ~ :;I ~ C. ::JUSA Funding CIJ formal cost 813 636 558 459 345 711 929,415 Jnfunded actuarial liability 307 388 (20 821 431)(13,042 170)(884 593)1inimurn contribution 481 201 303 632 1aximum contribution 202 320 519 417 146 250 186 691 unded current liability %90.66%101.11%98.60%93.80%Jateway current liability %100.20%101.11%98.60%93.80% , g t'1iscal Years Beginning:01/01/2002 01/01/2001 01/01/2000 01/01/1999 ;.. '"C !::! ~FAS 87 Expense !:! l.11Ilual expense 277 622 767 622 $842 290 440 020 rior Year SFAS I iI .)isclosure I ' repaid/( accrued) benefit cost (10 783 878)016 256)477 598)037 578)~ccumulated benefit obligation $158 458 479 $141 138 302 $134 425 464 $147 331 060illO funded ratio 97.124.138.121.4% ~etirement Plan/or Employees 0/ A vista Corporation 14.SUMMARY OF PLAN P ARTICIP ANTS 01/01/2002 01/01/2001 Participating Number 342 331 Employees Total plan compensation $75 531 401 $71 343 521 Average plan compensation $56 283 $53 601 Average age 45.45. Average credited service 13.13. Retirees and Number 807 798 Beneficiaries Total annual pension $10 447 309 $10 204 513 Average annual pension $12 946 $12 788 Average age 72.72. Distribution Age Last Birthday Number Annual Pension as of Under 55 $77 656 01/01/2002 55 - 59 284 740 60 - 64 107 941 077 65 - 69 149 041,032 70 - 74 141 523,500 75 - 79 150 771 884 80 - 84 071 544 85 and Over 735 876 :1: I :; .. Ii : i . I : 'tj : ~ ::s0.. ,.... , n. n Participants Number 337 329 " " with Deferred Total annual pension 346 469 099 920 Pensions Average annual pension 963 383 Average age 49.49.43 Distribution Age Last Birthday Number Annual Pension as of Under 40 $147,452 01/01/2002 40 - 44 334 137 45 - 49 596 190 50 - 54 610 362 55 - 59 453 192 60-195 934 65 and Over 202 onent Plan for Employees of vista Corporation , .' :! ::: I Ii IIf ' J , , ? , : J i 4 ! i , ( , ,' : : r , , ; ' AG E A N D S E R V I C E D I S T R I B U T I O N Co m p l e t e d Y e a r s o f C r e d i t e d S e r v i c e 10 - 15 - 20 - 25 - 30 - 35 - 40 & O v e r To t a l No . & No , & No . & No . No . No . No . No . & No . & No . & No . & No . & No . & No . & At t a i n e d Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Ag e Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p . Un d e r 2 5 $3 3 99 4 $4 2 81 1 $4 2 , 17 2 $4 4 25 8 $3 9 10 2 25 - $4 8 86 1 $4 5 34 2 $4 6 26 0 $4 5 14 4 $4 8 , 4 2 5 $4 7 , 21 1 30 - $5 4 81 9 $4 9 , 02 7 $4 3 84 8 $5 2 , 77 5 $5 3 83 7 $4 7 10 6 $5 0 , 77 8 35 - 17 1 $4 6 16 1 $5 3 54 5 $5 0 , 73 8 $4 9 55 7 $5 3 , 20 0 $5 3 25 4 $6 0 50 3 $4 3 , 44 8 $5 2 49 0 40 - 4 4 25 5 $5 9 , 12 7 $5 9 , 15 7 $4 6 41 1 $4 8 , 4 8 9 $5 2 77 7 $5 7 27 8 $5 6 , 75 5 $6 4 11 8 $5 6 92 0 45 - 26 8 $5 0 , 49 6 $6 2 32 1 $6 5 46 7 $4 8 , 40 6 $5 4 , 92 9 $5 3 43 0 $5 0 92 5 $6 3 54 2 $6 9 , 09 3 $5 8 10 0 50 - 26 6 $5 1 33 9 $5 5 , 49 8 $6 1 09 8 $6 0 53 6 $4 9 , 09 3 $5 7 76 8 $5 0 96 7 $6 1 , 83 9 $6 8 48 8 $7 9 , 06 6 $6 1 54 8 55 - 16 6 $5 2 45 9 $5 7 64 9 $5 7 , 58 3 $3 8 , 4 8 0 $5 0 98 9 $5 1 96 7 $5 2 17 2 $5 5 31 6 $5 9 , 04 1 $6 1 39 9 $6 3 98 7 $5 5 , 55 1 60 - $2 5 91 7 $4 9 44 6 $4 3 , 98 4 $5 4 79 7 $7 3 , 84 8 $7 0 57 6 $4 7 , 94 9 $1 2 , 27 1 $5 2 29 5 65 - $4 8 22 9 $6 4 , 41 1 $3 1 22 4 $6 4 11 3 $5 1 99 4 70 & O v e r To t a l 23 2 22 5 18 4 24 0 34 2 $5 0 10 0 $5 3 , 28 7 $5 1 08 3 $4 9 86 4 $5 2 , 51 9 $5 4 34 4 $5 3 , 67 2 $6 2 03 8 $6 6 20 4 $7 0 20 1 $5 8 26 8 $1 2 , 27 1 $5 6 09 1 Av e r a g e : Ag e 45 . Nu m b e r o f p a r t i c i p a n t s : Fu l l y v e s t e d 04 9 , M a l e s 95 0 Se r v i c e \3 . Pa r t i a l l y v e s t e d Fe m a l e s 39 2 Re t i r e m e n t Pl a n / o r E m p l o y e e s 0 / Av i s t a C o r p o r a t i o n ,- - _ . , -- - ' - - - - "- ' , - - SJ : ) 1 D U J d d v .- - - . - . . RE C O N C I L I A T I O N O F P A R T I C I P AN r )A T A Pa r t i c i p a t i n g Ve s t e d T e r m i n a t e d Pa r t i c i p a n t s Em p l o y e e s Pa r t i c i p a n t s Re c e i v i n g B e n e f i t s To t a l (I ) (2 ) (3 ) (4 ) Re c o n c i l i a t i o n o f Nu m b e r a s o f O l / 0 l / 2 0 0 1 33 1 32 9 79 8 45 8 Pa r t i c i p a n t s Ch a n g e s b y c a t e g o r y : by S t a t u s No n v e s t e d t e r m i n a t i o n s (2 9 ) (2 9 ) Ve s t e d t e r m i n a t i o n s (1 6 ) Lu m p s u m s p a i d (1 0 ) (1 ) (1 1 ) (2 2 ) (4 ) et u e m e n t s Be n e f i t s c e a s e d (1 6 ) (1 6 ) Ne w e n t r a n t s a n d r e h i r e s (2 ) Ad j u s t m e n t s (1 ) (1 ) Nu m b e r a s o f 0 11 0 1 1 2 0 0 2 34 2 33 7 80 7 2, 4 8 6 In c l u d i n g d e a t h s i n s e r v i c e . Re t i r e m e n t Pl a n / o r E m p l o y e e s 0 / A vi s t a C o r p o r a t i o n .. ' ~~ " . " - - ~. . -- - - - , _. , - , -- - - - - - - - - . _ , - -- - -- - - - - - . - , ,, " ' ~ _ . ~ " - - -'. - - -- - - - - "- - - _ . 0 - -- - - , s~ : ) ! p u ~ d d V - , - _.. -, - m. . - - - - -- - , -- . . -- - - . . . . , -- . . , . n - , - - - . - -- - - - - - - __ u n -.- n - -- - n -- APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS For Determining Accounting Entries Interest Rates 25%Discount rate Expected long-term return on assets 00% Compensation Increases Future compensation is assumed to increase at the rate of 00% per year, compounded annually. Future Increases in Social Security 00% annual increases in the national average wage index are assumed. Future Increases in Maximum Benefits and Plan Compen- sation Limitations It is assumed that maximum benefit and plan compensation limitations under the Internal Revenue Code will increase 00% per year in the future. Assumed Cost-o/- Living Adjustments None. Expenses None. Mortality The 1983 Group Annuity Mortality Tables for males and females. Retirement Plan/or Employees 0/ Avista Corporation ;f: i i ; . i I' ! " I, . APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS (cont' For Determining Accounting Entries Retirement It is assumed that participants will retire upon becoming eligible for normal retirement. The following table shows rates at various ages. Rate Male Female 56- 30.30. 63-20.20. 100.100. Disability Rates Rates of disability are based on the Society of Actuaries Reports on Group Long-Term Disability Insurance from four recent years. Disabled Mortality 1992 Railroad Retirement Board Disabled Annuitants. Representative Rate Termination Rates Attained A Male Female 12. 1.5 1.0 1.5 1.0 60 and over Retirement Plan for Employees of Avista Corporation i . ! : ., ,, ' APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS (cont' For Determining Accounting Entries Form of Payment It is assumed that 50% of participants elect a lump sum benefit and 50% elect an annuity benefit payable in the normal form. Lump Sum Assumptions Interest Rate:00% interest Mortality:1983 Group Annuity Mortality Table (blended 50% male 150% female) Marriage It is assumed that 80% of all male participants and 60% of all female participants are married to an Eligible Spouse. Wives are assumed to be three years younger than husbands. Employees It is assumed that there will be no new or rehired employees. 'lclusion Date The valuation date coincident with or next following the enrollment date on which the employee becomes a participant. Compensation for Plan Participants Compensation assumed paid in the current year beginning on the valuation date is the prior year pay increased by the assumed compensation increase rate. Retirement Plan for Employees of A vista Corporation ;! ,; ,, . ! i , i 7f' 'C- " ' l1': T~, ~;, ':i, ,;- i::: ti' ;~."', APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS (cont' For Determining Accounting Entries Cost Method The Projected Unit Credit Cost Method was used to determine the service cost and the projected benefit obligation for retirement termination, and ancillary benefits. Under this method, a "projected accrued benefit" is calculated as of the beginning of the year and as of the end of the year for each benefit that may be payable in the future. The "projected accrued benefit" is based on the plan s accrual formula and upon service as of the beginning or end of the year, but using final average compensation, social security benefits, etc., projected to the age at which the employee is assumed to leave active service. The projected benefit obligation is the actuarial present value of the projected accrued benefits" as of the beginning of the year for employed participants and is the actuarial present value of all benefits for other participants. The service cost is the actuarial present value of the difference between the "projected accrued benefits" as of the beginning and end of the year. Asset Method The investments in the trust fund are valued on the basis of their fair market value. : I Participant Data Employee data were supplied by A vista Corporation as of the census date. Data on persons receiving benefits were supplied by A vista Corporation. Retirement Plan for Employees of Avista Corporation APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS (cont' For Determining Accounting Entries Valuation Date Measurement Date The measurement date is January I , 2001. The last day of the fiscal year is December 31. For purposes of determining the net periodic benefit cost for the fiscal year, results as of the valuation date January 1 2001 , are used. Material mid-year plan amendments are recognized as of their respective effective dates. For year-end disclosure, results are projected from the valuation date to the next measurement date, assuming no actuarial gains or losses occur in the interim, except for those due to changes in the assumptions necessary to reflect the situation at the measurement date and those due to recognizing differences between actual and expected benefit payments and administrative expenses. Amortization of Unrecognized Net Gain or Loss Amortization of unrecognized net gain or loss resulting from experience different from that assumed and from changes in assumptions (excluding asset gains and losses not yet reflected in market-related value) is included as a component of net periodic benefit cost for a year if, as of the beginning of the year, that unrecognized net gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets. If amortization is required, the amortization is that excess divided by the average remaining service period of participating employees expected to receive benefits under the plan. Amortization of Prior Service Costs Amortization of prior service costs resulting from a plan change are included as a component of net periodic benefit cost in the year first recognized and every year thereafter until such time as they are fully amortized. Where there is a plan change that reduces pension benefit obligation, prior service costs are reduced sequentially starting with the oldest base. Benefits Not Included in Valuation None. Retirement Plan for Employees of A vista Corporation :; I I ~ APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS (cont' For Determining Accounting Entries Changes in Assumptions and Methods Since Last Actuarial Valuation The discount rate was lowered from 7.75% to 7.25% effective December 31 , 2001. Effective January 1 , 2002, the expected long-term return on assets was lowered from 9.00% to 8.00% and the lump sum election percent was lowered from 80% to 50%. There were no other assumption or method changes since the last valuation. "'- Retirement Plan for Employees of Avista Corporation r-- i I i . I ! I! APPENDIX A - STATEMENT OF ACTUAlUAL A~~lJIVlrllUl~~ AND METHODS (cont' For Determining Cash Contributions Plan Sponsor A vista Corporation EIN/PN 91-04624701001 Interest Rates Compensation Increases Future Increases in Social Security Future Increases in Maximum Benefits and Plan Compen- sation Limitations Assumed Cost-of- Living Adjustments Expenses Mortality Valuation 00% RP A '94 Current liability 00% OBRA '87 Current liability 00% Future compensation is assumed to increase at the rate of 5.00% per year, compounded annually. 00% annual increases in the national average wage index are assumed. It is assumed that maximum benefit and plan compensation limitations under the Internal Revenue Code will not increase in the future. None. Expenses are assumed to be $500 000 during 2002. The 1983 Group Annuity Mortality Tables for males and females. Retirement Plan for Employees of Avista Corporation APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS (cont' For Determining Cash Contributions Retirement It is assumed that participants will retire upon becoming eligible for normal retirement. The following table shows rates at various ages: Rate Age(s)Male Female ' I56- 30.30. 63-20.20. 100.100. Disability Rates Rates of disability are based on the Society of Actuaries Reports on Group Long-Term Disability Insurance from four recent years. Disabled Mortality 1992 Railroad Retirement Board Disabled Annuitants. However, the 1983 Group Annuity Mortality Tables for males and females are used for current liability. Representative Termination Rates Rate Attained Age Male Female 60 and over 1.5 1.0 12. 1.5 1.0 Retirement Plan for Employees of Avista Corporation 1 ! I II i , , APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS (cont' For Determining Cash Contributions Form of Payment Union participants:Annuity benefit payable in the normal form. Non-Union participants:80% lump sum benefit; 20% annuity benefit payable in the normal form. Lump Sum Assumptions Interest Rate:00% interest Mortality:1983 Group Annuity Mortality Table (blended 50% male 1 50% female) Marriage It is assumed that 80% of all male participants and 60% of all female participants are married to an Eligible Spouse. Wives are assumed to be three years younger than husbands. Employees It is assumed that there will be no new or rehired employees. Inclusion Date The valuation date coincident with or next following the enrollment date on which the employee becomes a participant. Compensation for Plan Participants Compensation assumed paid in the current year beginning on the valuation date is the prior year pay increased by the assumed compensation increase. Compensation is limited by Internal Revenue Code Section 401 (a)( 17). Retirement Plan for Employees of Avista Corporation ,.! I APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS (cont' For Determining Cash Contributions Cost Method The Projected Unit Credit Cost Method was used to determine the normal cost and the actuarial accrued liability for retirement termination, and ancillary benefits. Under this method, a "projected accrued benefit" is calculated as of the beginning of the year and as of the end of the year for each benefit that may be payable in the future. The "projected accrued benefit" is based on the plan s accrual formula and upon service as of the beginning or end of the year, but using fmal average compensation, social security benefits, etc., projected to the age at which the employee is assumed to leave active service. For benefits where the plan s accrual formula is not relevant, benefits are ~sumed to accrue on a straight-line basis over the period during which the employee earns credited service. The actuarial accrued liability is the present value of the "projected accrued benefits" as of the beginning of the year for employed participants and is the present value of all benefits for other participants. The normal cost is the present value of the difference between the "projected accrued benefits" as of the beginning and end of the year. The normal cost and actuarial accrued liability for the plan are the sums of the individually computed normal costs and actuarial accrued liabilities for all plan participants. Asset Method The actuarial value of assets is calculated under an adjusted market value method by starting with market value of assets at January 1 2001. For subsequent years the value is determined by adjusting the market value of assets to reflect the investment gains and losses (the difference between the actual investment return and the expected investment return) during each of the last five years or, iffewer, the completed years since January I , 200 I , at the rate of 20% per year. The actuarial value is subject to a restriction that it not be less than 80% nor more than 120% of market value. Participant Data Employee data were supplied by A vista Corporation as of the valuation date. Data on persons receiving benefits were supplied by A vista Corporation. etirement Plan/or Employees 0/ Avista Corporation ; ,, '; , I !' I : :i :: " ' I :' ii ' j : I I ! iI , APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS (cont' For Determining Cash Contributions January 01 , 2002 Schedule B , Lines 6 and 11 91-04624701001 Benefits Not Included in Valuation None for this plan year. Changes in Assumptions and Methods Since Last Actuarial Valuation Effective January 1 2002, the valuation interest rate was lowered from 00% to 8.00%. The lump sum election percent was lowered from 80% to 50% and the current liability interest rate was reduced from 21 % to 6.00%. There were no other assumption or method changes since the last valuation. 1etirement Plan/or Employees 0/ Avista Corporation : I. r : I ! ! , I ; ~I : , ,, ,~: ~: ~ I r I ' 1 : :1 : . i APPENDIX B - SUMMARY OF PRINCIPAL PLAN PROVISIONS muary 1 , 2002 Schedule B, Line 6 91-0462470100 I Plan Sponsor A vista Corporation Effective Date March 1 1948. Restated as ofJanuary 1 2001. Eligibility An employee becomes a Member after completing a year of service with at least 1 000 Hours of Service. Benefit Service Prior to 1/1/80 One month of Benefit Service for each month of employment beginning on or after the Hire Date. After 1/1/80 One year of Benefit Service for each Plan Year after the Hire Date in which the Member has 2 080 Hours of Service. Partial credit is given for a year in which the Member has at least 1 000 Hours of Service at the rate of one-twelfth of a year for each 173-1/3 Hours of Service (rounded up). Vesting Service One month of Vesting Service for each month of employment. Earnings Base Pay excluding overtime and other special compensation, but including contributions to a 401(k) Plan. Final Average Earnings Highest consecutive 36 months earnings during Member s last 120 months. tirement Plan for Employees of Avista Corporation , ' I , : : i ;i :, II ' :i I i ,; II I ~I ;! j' I. I' I i' , ," ": : 1 ! ;:1;' 'i' I Ii ! , i :if ': ; , :i : ,: : I I , I , I. APPENDIX B - SUMMARY OF PRINCIPAL PLAN PROVISIONS ( cont' Normal Retirement Eligibility First day of month coinciding with or next following 65th birthday. Benefit 5% of Final Average Earnings for each year of Benefit Service. Early Retirement Eligibility Attained age 55 and at least 15 years Vesting Service. Benefit Accrued benefit based on Benefit Service to early retirement date payable in full at or after age 62. If payments commence immediately at date of early retirement the benefit is multiplied by the appropriate factor from the following table: Age Early Retirement Factor 100% 96% 92% 88% 84% 80% 76% 72% The Early Retirement Factor is increased, up to a maximum of100%, by 1.0% (one percentage point) for each year of vesting service above 15. Retirement Plan/or Employees 0/ Avista Corporation , . . . i . : ,, . . i I: 1 i i: ; . ' : I " i i , ' . ;, o . , I , I : ; ! APPENDIX B - SUMMARY OF PRINCIPAL PLAN PROVISIONS (cont' Deferred Retirement Eligibility Continued employment beyond Normal Retirement Date. Benefit The Normal Retirement Benefit Formula applied to earnings and Service up to deferred retirement date. Payment commences on the actual retirement date. Disability Eligibility Five Years of Vesting Service and a disability which prevents the Member from performing assigned duties and which is expected to be a permanent condition. Benefit Accrued Benefit commencing at Normal Retirement Date based on Final Average Earnings at time of disability but including as Benefit Service the period of the Member s disability, contingent upon five years of Vesting Service (10 years if employed in a position covered by a collective bargaining agreement). A disabled Member may elect Early Retirement when fust eligible to do so, in which case the benefit is reduced. Vesting Eligibility Five years of Vesting Service. Benefit Accrued benefit at date of termination with payments commencing at normal retirement date. If the Member has 15 years Vesting Service, an election may be made for benefits to commence at any time after age 55, in which case benefits will be actuarially reduced from age 65. :c. :i:; !f, "'etirement Plan/or Employees 0/ Avista Corporation , I . i iI ' ,, ; I : ' i , , ! I ' i ; i i ! I ! i , ; APPENDIX B - SUMMARY OF PRINCIPAL PLAN PROVISIONS (cont' Changes in Plan Provisions The plan was amended effective July 1 2002 to provide a lump sum payment option for collectively bargained employees. This change is reflected in the F AS results shown in this report and will be reflected in the contribution results next year. There have been no other changes in plan provisions since the prior valuation report. Retirement Plan/or Employees 0/ Avista Corporation ! I Ii ; i I .I I : : I j I . I : i ' : ! I : , i ; ,I ,i i I APPENDIX C - SCHEDULE BATT ACHMENTS Statement by Enrolled Actuary Plan Sponsor A vista Corporation EIN 91-04624701001 Plan Name Retirement Plan for Employees of A vista Corporation Valuation Date January 1 2002 Enrolled Actuary Susan E. Hedrick Enrollment Number 02 - 5581 The actuarial assumptions and methods, in combination, represent the enrolled actuary s best estimate of anticipated experience under the plan, subject to the following conditions: The actuarial valuation, on which the information in this Schedule B is based, has been prepared in reliance upon the employee and financial data furnished by the plan administrator and the trustee. The enrolled actuary has not made a rigorous check of the accuracy of this information but has accepted it after reviewing it and concluding it is reasonable in relation to similar information furnished in previous years. The amounts of contributions and dates paid shown in Line 3 of Schedule B were listed in reliance on information provided by the plan administrator and/or trustee. Retirement Plan for Employees of A vista Corporation , i , ; I l, ; 1;11 , ; , ; ,I : l I i ,; ! ': :!, , : 1 APPENDIX C - SCHEDULE B ATTACHMENTS (cont' Schedule B, Line 6b - Description of Weighted Average Retirement Age See Appendix A for retirement rates. The average retirement age for Line 6b was calculated by creating a hypothetical life table with retirement as the only decrement, and then computing the average retirement age for the table. Valuation Date:January 1 2002 EIN/PN:91-04624701001 Plan Sponsor:A vista Corporation CALCULATION OF WEIGHTED AVERAGE RETIREMENT AGE Age Rate of Retirement 30% 20% 20% 100% Number of Retirements 000 900 862 825 788 381 665 474 421 137 36,547 Weighted Average Age . Assuming 100 000 participants Number of Remaining Participants* 000 100 238 413 625 244 579 57,105 684 547 Weighted Average Age 275 000.000 106,400.000 106 134.000 105 836.080 105 507.623 262 874.926 101 557.346 517 366.646 719 525.474 584 757.210 375 576.168 62.605 .', Retirement Plan for Employees of A vista Corporation iI-:It, !r:;,' I , ' I ' i ' !, I . I , I , I' PE N D I X C - S C H E D U L E B A T T A C H M E S ( c o n t ' Sc h e d u l e B , L i n e s 9 c a n d 9j - Sc h e d u l e o f F u n d i n g St a n d a r d A c c o u n t B a s e s As o f J a n u a r y 1 , 20 0 2 In i t i a l Re m a i n i n g Am o r t i z a t i o n Am o r t i z a t i o n Am o r t i z a t i o n Pa y m e n t a s o f Da t e In i t i a l Pe r i o d Ou t s t a n d i n g Pe r i o d Be g i n n i n g o f Es t a b l i s h e d Am o u n t (Y e a r s ) Ba l a n c e (Y e a r s ) Ye a r (1 ) (2 ) (3 ) (4 ) (5 ) (6 ) 01 / 0 1 / 2 0 0 2 $ 1 1 30 7 , 38 8 $ 1 1 30 7 38 8 10 . 00 0 56 0 30 9 $ 1 1 30 7 , 38 8 56 0 30 9 $ 1 1 30 7 38 8 56 0 30 9 A. Ch a r g e s 1. C h a n g e As s u m p t i o n s To t a l B. Cr e d i t s To t a l C. Ne t ( A Pl a n S p o n s o r : EI N PN : A v i s t a C o r p o r a t i o n 91 - 04 6 2 4 7 0 1 0 0 1 Re t i r e m e n t Pl a n / o r E m p l o y e e s 0 / vi s t a C o r p o r a t i o n . - . . -- ... ., ,- - - - - _ . . ' .- - - . - - - - - . .- . ' - - - ' -. .- - _ . . . -- - . - . . - . 'I . ~ ! j j ' f F r : ; ' ! f ) 1 : f ~ / : : ~ : ' ,:" : : : " ~ , , ,," .. ~ ' : l t 1 ' i : ' :" : ' ' ,: " ," " : :" , " c : " ' ," " " :C : " ,,, , 1: , ,': f " ' !" " "" " " " " ; ': : - " " " \ - :'- _ "" " " '~ 0 . ':" " " ~ : : : ' :\ ' 7 'm ~ " j ' : " ; ~ R ~ " ~'Y ' F " " - " ' : \ :': : - \'~ : : : ' ., . \,: ":" .f : " ::" , " co ' C . ., ::: : " :. Al ' P E N D I X C - SC H E D U L E B A T T A C H M E N T S ( c o n t ' Li n e 8 c - S c h e d u l e o f A c t i v e Pa r t i c i p a n t D a t a At t a c h m e n t t o S c h e d u l e B ( F o r m 5 5 0 0 ) Ye a r s o f C r e d i t e d S e r v i c e Un d e r 1 11 0 4 5 t o 9 10 t o 1 4 15 t o l 9 20 t o 2 4 25 t o 2 9 30 t o 3 4 35 t o 3 9 40 & O v e r At t a i n e d Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Av g . Ag e No . Co m p o No . Co m o . No . Co m o . No . Co m p o No . Co m p o No . Co m p o No . Co m p o No . Co m p o No . Co m p o No . Co m p o Un d e r 2 5 25 - 2 9 61 7 48 , 4 2 5 30 - 3 4 08 6 53 , 83 7 35 - 3 9 49 , 37 4 20 0 53 , 25 4 40 - 40 5 77 7 27 8 75 5 11 8 45 - 4 9 58 , 63 6 92 9 43 0 92 5 54 2 50 - 5 4 94 4 49 , 09 3 57 , 76 8 96 7 83 9 48 8 06 6 55 - 5 9 96 7 17 2 31 6 04 1 39 9 60 - 65 - 70 & O v e r Va l u a t i o n D a t e : Na m e o f P l a n : EIN PN : Pl a n S p o n s o r : Ja n u a r y 1 20 0 2 A v i s t a C o r p o r a t i o n 91 - 04 6 2 4 7 0 1 0 0 1 A v i s t a C o r p o r a t i o n Re t i r e m e n t P l a n f o r E m p l o y e e s o f A v i s t a C o r p o r a t i o n ". n- - - ,- , , , - - - ' - - - - - - - - - - '- - " , - - . -- - - - - , - - - - -" ' - ,. . , '" ., - -- - ' " n, -- - ' - - - - , :..;~'~~'~,~ GLOSSARY Accumulated Benefit Obligation This is the same as the Projected Benefit Obligation except that it is based on current and past compensation levels instead of future compensation levels. Actuarial Accrued Liability This is computed differently under different actuarial cost methods. Generally, the actuarial accrued liability represents the portion of the cost of the participants' anticipated retirement , termination andlor deathand disability benefits allocated to the years before the current plan year. Actuarial Gain or Loss From one plan year to the next, if the experience of the plan differs from that anticipated using the actuarial assumptions, an actuarial gainor loss occurs. For example, an actuarial gain would occur if the assets in the trust earned 12% for the year while the assumed rate ofretumused in the valuation was 8%. Additional Minimum Liability If a plan has a minimum liability, the sponsor may be required to post a liability on the balance sheet in addition to the accrued/(prepaid) benefit cost already recorded. If the Accumulated Benefit Obligation exceedsthe fair value of assets, the plan has a minimum liability equal to the excess. If there is a minimum liability and it exceeds the Accrued/(Prepaid) Benefit Cost, the difference is called the Additional Minimum Liability and the accrued benefit liability equals the minimum liability. '1'1 i ~ Current Liability This is computed the same as the Present Value of Accumulated Benefits, but using interest rate and mortality assumptions specified by the IRS. This quantity is used in the calculation of the plan s fundedpercentage, to determine whether the plan sponsor will be allowed to make a tax-deductible contribution to the plan for the year, whetherquarterly contribution deposits are required, whether the plan is exemptfrom the deficit reduction contribution and, if not, the amount of theadditional funding charge. . i Retirement Plan for Employees of A vista Corporation . i ! :, ., , CO" ;'f fi' 'Wi ,"" , W ',0' , .. GLOSSARY (cont' Funded Status This is the excess/(shortfall) of the fair value of plan assets over the Projected Benefit Obligation. Normal Cost Computed differently under different actuarial cost methods, the normal cost generally represents the portion"ofthe cost of the participants anticipated retirement, termination and/or death and disability benefits allocated to the current plan year. JPrepaidV(L4ccrued) Benefit Cost The sponsor s balance sheet asset/(liability) entry, the net recognized amount, is the sum of the cumulative excess of contributions to the plan over net periodic benefit costs and other plan-related charges to income due either to business combination or accelerated recognition pursuant to SF AS 88. The difference between this account and the Funded Status is the unrecognized net loss/(gain) and prior service costs. JPresent Value of L4ccumulated Benefits Computed in accordance with SF AS 35, this quantity is determined independently from the plan s actuarial cost method. Basically, this is the present value of a participant's accrued benefit as of the valuation date, assuming the participant will earn no more credited service and will receive no future salary. JPresent Value of Future Benefits This is computed by projecting the total future benefit cash flow from the plan, using actuarial assumptions, and then discounting the cash flow to the valuation date. JPresent Value of Vested Benefits This is the portion of the Present Value of Accumulated Benefits in which the employee has a vested interest if the employee were to separate from service with the employer on the valuation date. Retirement Plan for Employees of A vista Corporation GLOSSARY (cont' Projected Benefit Obligation Computed in accordance with SF AS 87, this quantity is the actuarial present value of all benefits attributed by the plan s benefit formula to service rendered prior to the measurement date. It is measured using an assumption as to future compensation levels when the benefit formula is based on future compensation levels. . Service Cost Computed in accordance with SF AS 87, this component of the net periodic benefit cost is the actuarial present value of benefits attributed by the plan s benefit formula to services rendered by employees during the period over which the net periodic benefit cost is incurred. It is measured using an assumption as to future compensation levels when the benefit formula is based on those future compensation levels. Retirement Plan/or Employees 0/ A vista Corporation Retirement Plan for Employees of Avista Corporation Actuarial Valuation - January 1 , 2002 Minimum Required Contribution Contribution as % of Pay Normal Cost Nonnal Cost as % of Pay Actuarial Value of Assets Actuarial Accrued Liability Percentage Funded Current Liability Percentage Funded 000,000 000 000 000 000 000 000 RECENT EXPERIENCE - FUNDING 1998 1999 2000 2001 2002 303,632 7,481 201 00%86%00%00%90% 533,416 929 415 345,711 558,459 813,636 72%78%6.41%39%70% 138,446,238 146 146 934 158 913,107 175,032 954 173,334 886 134 755 291 145,262 341 145,870 937 154 211 523 184 642 274 103%101%109%114%94% 134 120 592 155 809 086 161 164 402 173,108 748 191 191 348 103%94%99%101%91% Comparison of Assets and Liabilities for Contribution Determination Purposes 1998 1999 2000 2001 2002 Plan Year .Actuarial Value of Assets .Actuarial Accrued Liability . Current Liability Contribution and Normal Cost 1998 1999 2000 Plan Year -+-Minimum Required Contribution 2001 2002 Normal Cost K:\A VIST A\DB 1 \VAL \2002\2002HISTXLS Retirement Plan for Employees of A vista Corp, Actuarial Valuation - January 1, 2002 RECENT EXPERIENCE - FINANCIAL ACCOUNTING (FAS 87) 1998 1999 2000 2001 2002Net Periodic Pension Cost 466 593 440 020 842 290 767 622 277 622 Fair Market Value of Assets 166 242 219 178 878 604 185 564 598 175 032 954 153 705 277Projected Benefit Obligation 159 163,997 177 ,924 885 169 093 051 179 091 474 201 452 202Percentage Funded 104%101%110%98%76%Accumulated Benefit Obligation 132 861 529 147 551 325 137 192 854 144 891 966 161 779 156Percentage Funded 125%121%135%121%95% (Accrued)/Prepaid Pension Cost 570,985) $037 578) $(9,477 598) $016,256) $(10 783 878) $10,000 000 000,000 000,000 000 000 000,000 000,000 000 000 000,000 000 000 000,000 $0 ,' Net Periodic Pension Cost (Income) 1998 1999 2000 Year 2001 2002 (Accrued) Prepaid Pension Cost on Balance Sheet $0 .. ($1 500,000) ($3 000,000) ($4 500,000) ($6,000 000) ($7 500 000) ($9 000,000) ($10,500,000) ($12 000 000) . 1998 1999 2000 Year 2001 2002 k:\avista\db 1 \val\2002\2002H 1ST .xLS Actuarial Valuation for Purposes of DeterminingContributions for the Plan Year Beginning January 1,2001 Actuarial Valuation for Purposes of FASB Statement 87 for the Fiscal Year Beginning January 2001 October 2001 , ~ 4atson Wyatt :~ldwidc , , TABLE OF CONTENTS Expense Information Contribution Information SF AS 35 Assets Liabilities Historical Information Data EXECUTIVE SUMMARY Summary of Key Results...................................................................... Review of Changes Since Last Year .................................................... Annual Expense .................................................................................... Cash Contributions ............................................................................... SF AS 87 Funded Status ..................,........ ...... ........ ............... """" ........ PBGC Premium .................................................................................... Regulatory Environment .................................................................."" Actuarial Statement .............................................................................. EXHIBITS 1. Funded Status and Accrued Benefit Cost....................................... 2. Summary and Comparison of Expense .......................................... 3. Development of Expense Components............. ........... """" ........... 4. Reconciliation of Accrued Benefit Cost and of Unrecognized Balances .........................................................."""" 5. Amortization of Unrecognized Net (Gain)lLoss ............................ 6. Summary and Comparison of Funding Requirements ...................7. Minimum Required Contribution ................................................... 8. Maximum Deductible Contribution ............................................... 9. Present Value of Accumulated Benefits......................................... 10. Change in Plan Assets During Plan Year ....................................... 11. Development of Actuarial Value of Assets .................................... 12. Details of Actuarial Accrued Liabilities......................................... 13. Historical Information ..................... "'" ............. ............................. 14. Summary of Plan Participants ........................................................ 15. Age and Service Distribution ......................................................... 16. Reconciliation of Participant Data.... ........... ................................... Retirement Plan for Employees of vista Corporation Page TABLE OF CONTENTS (cont' Page APPENDICES Statement of Actuarial Assumptions and Methods................... Summary of Principal Plan Provisions ..................................... GLOSSARY RECENT EXPERIENCE EMPLOYER ALLOCATION Retirement Plan for Employees of A vista Corporation EXE UTIVE SUMMA' .., - \\1 .'.' iikii. ;;:tr~::t::~::: .. " ;;i,~'1~~1;i~:: ...C"'-. ~"'~~"~'-'"..", ' f~5;*c~~!C ~~'~.. SUMMARY OF KEY RESULTS As requested by Avista Corporation, this report presents the results of the actuarial valuation of the Retirement Plan for Employees of Avista Corporation. In addition, the report documents the funded status of the plan, the provisions on which the valuation is based, and the actuarial assumptions and methods used in the calculations. Plan Years Beginning: Fiscal Years Beginning: Annual Expense 01/01/2001 01/01/2001 Net Periodic Benefit Cost/(Income) tA~ 87 $3 767 622Percentage of compensation 5. 01101/2000 01101/2000 $842 290 1.2% Con tribu tions Minimum Required Contribution Percentage of compensation Maximum Deductible Contribution Percentage of compensation 519,417 146 250 Quarterly Contribution Requiremenr Payable April 13 , 2001 Payable July 13 2001 Payable October 15, 2001 Payable January 15 2002 Preliminary Future Contribution Requirements Payable April 15, 2002 Payable July 15 2002 Payable October 15, 2002 Payable January 15 2003 These amounts are calculated assuming that contributions will be made in these amounts and on these dates and that anyreceivable contributions for the prior plan year will be made when due. To the extent that actual deposits are shown, theireffect on subsequent requirements has been reflected. Quarterly contribution requirements for the next plan year may, depending on the results of the next actuarial valuation, beless than these amounts. They will not be more unless actual contributions for the current plan year are smaller or later thanrequired. Retirement Plan for Employees of A vista Corporation SUMMARY OF KEY RESULTS (cont' Plan Years Beginning: Fiscal Years Beginning: 0110112001 0110112001 0110112000 0110112000 Prior Year Disclosed Funded Status Projected Benefit Obligation Fair Value of Assets Funded Status Prepaid Benefit Cost/(Accrued Benefit Liability) Intangible Asset ($175 290 637) 175 032 954 (257 683) ($162 097 055) 185 564 598 467 543 ($7 016 256)($9 477 598) PBGC Flat Rate Premium Variable Rate Premium Total Rate Premium $46 702 $46 702 $46 170 $46 170 Participant Participating Employees 331 323InformationParticipant Compensation $71 343 521 $67 830 210Deferred Vested Participants 329 337Retirees and Beneficiaries 798 770Retiree and Beneficiary Annual Benefit Payments $10 204 513 920 960Total Plan Participants 458 2,430 Retirement Plan for Employees of A vista Corporation REVIEW OF CHANGES SINCE LAST YEAR Plan Provisions Appendix B summarizes the main provisions of the plan as of the valuation date. There have been no changes in the provisions valued since the preceding valuation. To our knowledge, no changes are pending. No significant events requiring recognition under SF AS 88 occurred during the year. Assumptions Appendix A summarizes the actuarial assumptions and cost methods used to determine plan liabilities and cash contribution requirements. A comparison of assumptions for the current and prior years is shown below. Fiscal Years Beginning:0110112001 01101/2000 Assumptions for Expense Discount rate 750%750% Expected long-term return on assets 000%000% Compensation increase rate 000%000% Plan Years Begmning:0110112001 01101/2000 Assumptions for Contributions Valuation interest rate 000%000% Current liability interest rate 210%6.310% Compensation increase rate 000%000% Actuarial Methods The asset method for the actuarial value of assets was changed effective January 1 2001 from the IRS average of market value method which recognized realized and unrealized growth in capital appreciation over five years to the adjusted market value method that smooths expected versus actual investment return over five years, starting with the market value of assets at January 1 , 2001. The change in method was due to a change from independently managed asset funds into a pooled asset fund such that infonnation necessary to continue the prior method is no longer available. . There have been no other changes since last year. Retirement Plan for Employees of A vista Corporation REVIEW OF CHANGES SINCE LAST YEAR (cont'd) Plan Experience The actuarialloss/(gain), not due to plan, assumption or method changes during the prior year has been determined in accordance with Revenue Ruling 81-213 to be $0 due to the plan s overfunded status. Prior to such special calculations, the actuarialloss/(gain) was 804 624 under the funding method. The components of this loss/(gain) are $1 934 356 due to investment results and $3 870 268 from sources related to plan liabilities The corresponding experience loss/(gain) was $22 019 268 forFAS expense purposes. The components of this loss/(gain) are $17 248 490 due to investment results and $4 770 778 from sources related to plan liabilities. i)~ $.; :L';i= ~~~:. tirement Plan for Employees of A vista Corporation ~:~. ::2T1::~':;::6' if~~i~ ... . ANNUAL EXPENSE The net periodic benefit cost (income statement expense) was determined in accordance with Statement of financial Accounting Standards 87 (SF AS 87) for the year beginning January 1 , 2001. For the fiscal year beginning in 2001 , this amount is $3 767 622, which compares with an expense of$842 290 for the prior fiscal year. Changes In Benefit Expense! (Income) The table below shows the principal reasons for the change of $2 925 332 in expense from last year to this year. Annual Expense/(Income) for Fiscal Year Beginning in 2000 . Changes in SF AS 87 Expense Due to: Investment Losses/(Gains) Liability Losses/(Gains) Changes in Assumptions Plan Changes Anticipated Normal Plan Progression $842 290 Annual Expense/(Income) for Fiscal Year Beginning in 2001 286 553 397 794 240 985 767 622 Assumptions Discount rate Compensation increase rate Expected long-term return on assets 750% 000% 000% Retirement Plan for Employees of A vista Corporation CASH CONTRIBUTIONS The Internal Revenue Code (IRC) permits flexibility in plan contributions so that normally a range of contributions is possible. A contribution in the range shown below will be fully tax deductible and satisfy minimum funding requirements. For a contribution to be deductible for a tax year, it must be made before the due date for filing the tax return for that year, with extensions if applicable. Plan Years Beginning: Tax Years Ending: 01/01/2001 12/31/2001 01/01/2000 12/31/2000 Permitted Contribution Range Minimum Required Maximum Deductible 519,417 146 250 The minimum required contribution remained $0 for the plan year beginning in 2001 primarily due to the change in actuarial asset method. The change in method was due to a change from independently managed asset funds into a pooled asset fund such that information necessary to continue the prior method is no longer available. Sponsor Funding Policy The current A vista funding policy has been generally to contribute an amount equal to the Net Periodic Pension Cost, within the ranges of the minimum required and maximum tax deductible contributions. A contribution of $0 was made for the prior plan year. For 2001 , the policy would suggest a contribution of$I 519 417. Assumptions Valuation interest rate Compensation increase rate 000% 000% . 9.000% c ':,, . 000%(:"" ' Retirement Plan for Employees of A vista Corporati ~~,:.':;.~ ;;~i5,:;;X SFAS 87 FUNDED STATUS The Financial Accounting Standards Board requires disclosure of the plan s funded status as well as a statement of the prepaid benefit cost/(accrued benefit liability) along with any intangible asset recognized due to an unfunded accumulated benefit obligation. The table below summarizes the plan s current funded status as of the end of the fiscal year, December 31 , 2000 along with comparable information as remeasured on January 1 2001 , with a new census. Fiscal Years Ending: Funded Status 12/31/2001 Remeasured as of beginning of fiscal year Projected Benefit Obligation Fair Value of Assets Funded Status Accumulated Benefit Obligation (ABO) ABO Funded Ratio $179 091,474 175 032 954 058 520) 144 891 966 120. 12/31/2000 Disclosed at end of fiscal year $175 290,637 175 032 954 (257 683) 141 138 302 124. Balance Sheet Entries Prepaid Benefit Cost Accrued Benefit Liability Intangible Asset Accumulated Other Comprehensive Income Adjustments N/A ($7 016 256) Assumptions Discount rate Compensation increase rate 750% 000% 750% 000% Retirement Plan for Employees of A vista Corporation PBGC PREMIUM The Pension Benefit Guaranty Corporation (PBGC) requires annual premium payments to cover all participants in the plan. The premium is composed of a flat rate portion and a variable rate portion. For the plan year beginning January 1 2001 , the flat rate premium is $19 per participant. The variable rate premium is based on the plan s unfunded vested benefits. The table below summarizes the determination of the PBGC premium for the plan year beginning January 1 2001. Flat Rate Premium Number of covered participants Amount of flat rate premium per participant Total flat rate premium 2,458 $19 $46,702 Variable Rate Premium This plan is exempt from the variable rate premium because it is at the full funding limit. Total Premium Total PBGC premium $46 702 Assumptions Premium for plan year beginning Determination date Required interest rate 01/01/2001 12/31/2000 67% Retirement Plan for Employees of A vista Corporation .,-...- .... .,. REGULATORY ENVIRONMENT Full Funding Limit The Economic. Growth and Tax Relief Reconciliation Act of2001 (EGTRRA) increased the current liability full funding limit to 165% for plan years beginning in 2002, to 170% for plan years beginning in 2003 , and repealed the current liability full funding limit for subsequent years. This is not expected to have an impact on the Retirement Plan for Employees of A vista Corporation. Deficit Reduction Contribution The Retirement Protection Act (RP A), part of the 1994 GATT free trade agreement, requires plan sponsors to pay additional "deficit reduction" contributions based on unfunded current liability amounts. The assumed interest rate for current liability valuations may not be less than 90%, nor more than 105%, of the four year weighted average of 30-year treasury bond rates. The acceptable range of assumed interest rates for plan years beginning January 1 2001 , is 5.32% to 21 %. The mortality assumptions used for this purpose are also regulated by the IRS. The Retirement Plan for Employees of Avista Corporation is not currently subject to a deficit reduction contribution. Benefit and Compensation Limits For 2001 limitation years, the maximum annual defined benefit amount commencing at social security nonnal retirement age is $140 000. For 2002 limitation years, EGTRRA increased this to $160 000 commencing on or after age 62 (with actuarial increases for commencement after age 65). For 2001 , the maximum qualified pay is $170 000. EGTRRA increased this amount to $200 000 for 2002. Should Avista choose to adopt these increased limits, the liability of the Retirement Plan for Employees of Avista Corporation will increase slightly. Participant Notifications For this plan year beginning January 1 , 2001 , the PBGC underfunding notices to plan participants are not required. The PBGC underfunding notices will not be required for the next plan year either. Retirement Plan for Employees of A vista Corporation REGULATORY ENVIRONMENT (cont' d) PBGC Premiums In addition to the flat $19 per participant paid by all sponsors of single- employer pension plans guaranteed by the PBGC, sponsors must pay additional premiums based on any unfunded vested current liability as determined using the required interest rate, 85% of the prior month' average 3 year treasury bond rates. For years beginning January 1 2001 , the required interest rate is 4.67%. There is no cap on these additional premiums. Retirement Plan for Employees of A vista Corporation ACTUARIAL STATEMENT Primary Purposes of Actuarial Valuation As requested by the Retirement Committee of A vista Corporation, this report presents the results of the actuarial valuation of the Retirement Plan for Employees of Avista Corporation. The primary purpose of the valuation is to determine the permitted contribution range - minimum required contribution and the maximum tax-deductible contribution - under the Internal Revenue Code for the plan year ending December 31 2001 , and the tax year ending December 31 2001. The report also documents the Net Periodic Benefit Cost, the funded status of the plan, the provisions on which the valuation is based, and the actuarial assumptions and methods used in the calculations. Sources of Data Employee data as of January 1 2001 , were provided by Avista Corporation. Data for other participants were provided by A vista Corporation. We did not audit the participant data. We did check the data we received thoroughly, reconciling last year s data with the new data. This reconciliation accounted for all changes to the covered population. All data were checked for internal consistency and for consistency with last year s data. Asset data were provided by the pl'!-ll trustee. ~: , 12 .. ..',--. ., .. -..u -... .., .. ".",-~...".",~"...,..~-. -'" ~E;ZG11~~it7iE::' Retirement Plan for Employees of A vista Corporation ACTUARIAL STATEMENT (cont' Certification of Compliance and Independence The undersigned consultants of Watson Wyatt Worldwide with actuarial credentials meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. To the best of our knowledge, all plan participants on January 1 2001 , and all plan provisions have been reflected in the valuation. In our opinion, all calculations and procedures are in conformity with generally accepted actuarial principles and practices; and the results presented comply with the requirements of the Internal Revenue Code, ERISA, or Statements of Financial Accounting Standards including modifications made by Statements 130 and 132 , as applicable. There is no relationship between Avista Corporation and Watson Wyatt Worldwide that impacts our objectivity. Avista Corporation is responsible for the selection of assumptions for SF 87 purposes. We will be pleased to review this report with you at your convenience. Sincerely, d~l ~(1 Consulting Actuary ~~. Susan E. Hedrick, F. Consulting Actuary Retirement Plan for Employees of A vista Corporation ~;:: EXHIBITS FUNDED STATUS AND ACCRUED BENEFIT COST Fiscal Years Ending: Reconciliation of Funded Status a. Measurement date b. Accumulated benefit obligation c. Projected benefit obligation d. Plan assets at fair value e. Funded status f. Unrecognized net loss/(gain) . g. Unrecognized prior service costs h. Unrecognized net transition obligation/(asset) 1. Prepaid/(accrued) benefit cost j. (Additional minimum liability) k. Prepaid benefit cost/(accrued benefit liability) 1. Intangible asset m. Accumulated other comprehensive income adjustments n. Net amount recognized 12/31/2001 For NPBC development remeasured on 12/31/2000 ($144 891 966) ($179 091,474) 175 032 954 ($4 058 520) 794 047) 679 311 843 000) ($7 016 256) 12/31/2000 Balance sheet disclosure as of 12/31/2000 ($141 138 302) ($175 290 637) 175 032 954 ($257 683) (12 594 884) 679 311 843 000) ($7 016 256) ($7 016 256) ($7 016 256) Assumptions o. Discount rate p. Compensation increase rate 750% 000% 750% 000% Retirement Plan for Employees of A vista Corporation 1;;.,0:".;,;;, ' ~i28?" SUMMARY AND COMPARISON OF EXPENSE Fiscal Years BeginnIng:01/01/2001 01/01/2000 Basis Measurement date 12/31/2000 12/31/1999 Service cost 686 257 346 978CalculationsProjected benefit obligation 179 091,474 169 093 051 d. Fair value of assets 175 032 954 185 564 598 Market-related value of assets 175 032 954 185 564 598 Net Periodic Benefit Cost f. Service cost g. Interest cost h. Expected return on assets i. Net (gain)/loss recognition J. Prior service cost amortization k. Transition (asset)/obligation recognition 1. Net periodic benefit cost/(income) (1,086 000) $842 290 686 257 13,450 048 (15 254 144) 346 978 710 665 (16 243 212) (857 602) 971,461 971,461 086 000) 767,622 Assumptions m. Discount rate 750%750% Expected long-term return on assets 000%000% Compensation increase rate 000%000% Retirement Plan for Employees of A vista Corporation --. .e... ti?~:2. ~~; ~;r:; ?~:l~~' ;:~:'f;,;t";l~;'" . . DEVELOPMENT OF EXPENSE COMPONENTS Service Cost Fiscal Year Beginning: a. Service cost at beginning of year b. Expected administrative expensesc. Interest on service cost at discount rate (7.750%) d. Total 0110112001 277 269 408 988 686 257 Projected Benefit Obligation e. Participating employees f. DefeITed vested g. Retirees and beneficiaries h. Total $87 361 620 104 907 624 947 $179 091,474 Interest Cost 1. Projected benefit obligation j. Expected benefit payments during year k. Interest on time-weighted amounts at discount rate (7.750%) $179 091,474 (11 084 938) $13,450 048 Market-Related Value of Assets 1. Fair value of assets as of 0110112001 m. Market-related value of assets $175 032 954 $175 032 954 Expected Return on Assets n. Market-related value of assets o. Expected contributions during fiscal year p. Expected benefit payments q. Expected administrative expenses r. Expected rate of return s. Expected return on assets adjusted for timing of above contributions and payments $175 032 954 (11 084 938) 000% $15 254 144 Retirement Plan/or Employees 0/ A vista Corporation ~!;t 1!f ~~r RECONCILIATION OF ACCRUED BENEFIT COST AND OF UNRECOGNIZED BALANCES Reconciliation of Prepaid/( Accrued) Benefit Cost Prepaid/(accrued) benefit cost as of 01/01/2000 b. Net periodic benefit cost/(income) for fiscal year ending 12/31/2000 c. Employer contributions paid during fiscal year ending 12/31/2000 d. Prepaid/(accrued) benefit cost as of 01/01/2001 (a - b + c) e. Net periodic benefit cost/(income) for fiscal year ending 12/31/2001 f. Expected employer contributions paid during fiscal year ending 12/31/2001 g. Expected prepaid/(accrued) benefit cost as of 01/01/2002 (d - e + f) ($9 477 598) 842 290 303 632 ($7 016 256) 767 622 ($10 783 878) Reconciliation Unrecognized Unrecognizedof Transition Date Original Amount as Amount as AmortizationObligation!Established Amount 01/01/2000 01/01/2001 Amount(Asset) 01/01/1994 ($21 768 000)($5 929 000)($4 843 000)($1 086 000) Reconciliation Unrecognized Unrecognizedof Prior Date Original Amount as Amount as Amortization Service Costs Established Amount 01/01/2000 01/01/2001 Amount 01/01/1994 884 000 389 661 065 579 $324 08201/01/1995 947 349 441 449 140 269 301 18003/01/1998 5,454 360 819 662 4,473,463 346 199Total$11 650 772 $10 679 311 $971 461 Retirement Plan for Employees of A vista Corporation AMORTIZATION OF UNRECOGNIZED NET (GAIN)/LOSS Fiscal Year Beginning: Total Unrecognized (Gain)/Loss Adjusted for Deferred Asset (Gain)/Loss a. Total unrecognized (gain)/loss b. Deferred (gain)/loss i. Market-related value of assets ii. Fair value of assets iii. Deferred (gain)/loss (i-ii) c. Unrecognized (gain)/loss adjusted for deferred asset (gain)/loss (a- 01101/2001 ($8 794 047) $175 032 954 175 032 954 ($8 794 047) Amortization of Unrecognized Net (Gain)/Loss d. Absolute value of adjusted unrecognized (gain)/loss e. Projected benefit obligation f. Market-related value of assets g. Larger of e and f h. 10% of 1. Absolute value of (gain)/loss in excess of 10% corridor (d-, not less than zero) J. Unrecognized (gain)/loss subject to amortization with sign from c k. Average future expected working lifetime of participants expected to receive benefits 1. Amortization amount (j + k) 794 047 179 091 474 175 032 954 179 091 474 909 147 15.200 years Retirement Plan for Employees of A vista Corporation II' ~ff'- SUMMARY AND COMPARISON OF FUNDING REQ UIREMENTS Plan Years BegInning:0110112001 0110112000 Current Under RPA '94 (IRS mortality)$173 108 748 $161 164 402LiabilityUnder OBRA '87 (Valuation mortality)170 740 231 161 164,402 Actuarial Participating employees $70 464 397 $65 540 935AccruedDeferred vested participants 669 368 721 683LiabilityRetirees and beneficiaries 077 758 608 319Total$154 211 523 $145 870 937 Assets Market value of assets $175 032 954 $188 868 230Actuarial value of assets 175 032 954 158 913 107 UAAL Unfunded actuarial accrued liability ($20 821 431)($13 042 170) Normal Cost Nonna! cost 558,459 345 711As a percentage of compensation 6.4%6.4% Contribution Minimum required contribution Range As a percentage compensation Maximum deductible contribution 519,417 146 250As a percentage compensation Assumptions Valuation interest rate 000%000%RP A '94 current liability interest rate 6.210%310%OBRA '87 current liability interest rate 6.210%310%Compensation increase rate 000%000% These amounts are calculated assuming that contributions will be made in the amounts and on the dates described in the Executive Summary and that any receivable contributions for the prior plan year will be made when due. If actual contributions differ from this schedule, these amounts may need to be adjusted. Retirement Plan for Employees of A vista Corporation MINIMUM REQUIRED CONTRIBUTION Plan Year Beginning: Regular Minimum Contribution a. Normal cost b. Net amortization chargesc. Interest to end of year d. Additional funding chargee. Interest penalty due to late quarterly contributions f. Total charges (not less than zero) 01/01/2001 558,459 410 261 N/A 968 720 Full Funding Limitation g. Full funding limitation adjusted by credit balance Preliminary Minimum Contribution h. Minimum required contribution after recognition of full funding limitation (lesser of f and g) Credit Balance i. Prior year credit balance j. Interest to end of year k. End of year credit balance Minimum Required Contribution 1. Minimum required contribution, if paid on or after December 31 , 2001 (h-, not less than zero) m. Interest to the end of the plan year on accumulated quarterly installments n. Minimum required contribution, if paid on January 1 2001 o. Minimum required contribution for plan year ending December 31 , 2001 (l-m, not less than n) Retirement Plan for Employees of A vista Corporation MAXIMUM DEDUCTIBLE CONTRIBUTION . Plan Year Beginning: Tax Year Ending: Regular Maximum Contribution a. Nonnal cost b. Net amortization chargesc. Interest to end of plan year d. Total 01/01/2001 12/31/2001 558 459 410 261 968 720 Full Funding Limitation e. Full funding limitation f. Lesser of regular maximum and full funding limitation Minimum Contribution for Current Tax Year g. Minimum required contribution (for the plan year ending within the current tax year) not claimed as a deduction for the prior tax year h. Contributions not claimed as a deduction for the prior tax year but required to satisfy minimum funding for earlier plan years 1. Minimum required contributions for plan years ending within or before the current tax year (g+h) Unfunded Current Liability j. Adjusted current liability at end of year k. Actuarial value of assets at end of year 1. Deductible contributions included in assets but not yet deducted less deducted. contributions not included in assets m. Unfunded current liability (j-k+l, not less than zero) $180 221 577 178 702 160 519,417 Maximum Contribution n. Maximum deductible contribution (largest off, i, and m) I 519,417 The fact that, if a qualified defined contribution plan covers the same employees as this plan, the total amount of the tax. deduction under both plans cannot exceed 25% of the total compensation of the covered employees for that tax year, has notbeen considered here. Retirement Plan for Employees of A vista Corporation '"0:" tt. ~::.(, :;1: PRESENT VALUE OF ACCUMULATED BENEFITS 'il :i? Accumulated Benefits ,r;: As of 01/01/2001 Number of Participants Vested Present Value a. Participating employees b. Deferred vestedc. Retirees and beneficiaries d. Total vested accumulated benefits e. Nonvested accumulated benefits f. Total accumulated benefits 0061 329 798 133 $31 394 597 669 368 077 758 $115 141 723 13,436 706 $128 578 429 Benefit Security g. Market value of assets Ratio h. Asset value divided by total accumulated benefits value $175 032 954 136.13% Reconciliation of Present Value of Accumulated Benefits 1. Present value of accumulated benefits as of January 1 2000 J. Changes during the year due to: Benefits accumulated4 Decrease in the discount period Actual benefits paid Plan amendment Change of assumptions Net increase (decrease) k. Present value of accumulated benefits as of December 31 , 2000 $121 654 079 369 243 10,415 164 (11 860 057) 924 350 $128 578,429 Actuarial assumptions: The same actuarial assumptions are used to value the F ASB Statement 35liabilities as are used for purposes of determining the plan s funding requirements, as described inAppendix A. An investment return assumption of9.000% was used. Of these, 1 006 are fully vested. There are also 325 non-vested participating employees for a total of 1 331 participatingemployees. This does not represent liabilities on a plan termination basis for which a separate extensive analysis would be required.There were no accrued contributions as of December 31 , 2000.Includes actuarial gains and losses due to non investment experience. Retirement Plan/or Employees 0/ A vista Corporation i~' !i1: ;;;:~;,', .;'~~~~;; tt""&:.-;;:- - - ~co;t-,;.~- =: 10.CHANGE IN PLAN ASSETS DURING PLAN YEAR Market Valoe Actuarial Valoe Change in Plan assets as of 01/01/2000 $188 868 230 $158 913 107AssetsEmployer contributions Benefit payments made (11 860 057)(11 860 057) Administrative expenses paid (969 941)(969 941)Investment return (1,005 278)Not available Plan assets as of 12/31/2000 before $175 032 954 Not available change in method 2 Plan assets as of 12/31/2000 after change in method $175 032 954 $175 032 954 Return on Assets Rate ofretum on average invested assets (0.56)%18.97% Includes contributions receivable of $3 303 632 at the beginning of the plan year that were deposited after that date. There were no contributions receivable at the end of the plan year. Retirement Plan for Employees of A'\Iista Corporation 10.CHANGE IN PLAN ASSETS DURING PLAN YEAR (co nt' d) Historical Return on Assets The schedule below summarizes the total rate of return in recent years. Return on Assets 23. 18. 13. Year Endin 1997 1998 1999 2000 - Market Value 14.13.11. -Actuarial Value 13.12.16.18. Reflects change in method as of Janu81)' 1 2001 as noted in Appendix A. Retirement Plan for Employees of A vista Corporation 11.DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS Actuarial Value of Assets Market value of plan assets as ofJanuary 1 2001 $175 032 954 Plan Investment Percent Year Gain/(Loss)Recognized (1)(2)(3) Total Percent Deferred (4) Deferred Gain/(Loss) (5) Asset value minus total deferred gain/Closs)$175 032 954 Corridor for actuarial value 80% of market value 120% of market value $140 026 363 $210 039 545 Actuarial value of plan assets as of January 1 , 2001 $175 032 954 :,:,~~; ~i.? ~i:1 lif, 11';"': )$:, Note: The actuarial value of assets is a calculated value detennined by starting with market value of assets at January 1 2001. For subsequent years the calculated value is detennined by adjusting the market value of assets to reflect the investment gains and losses (the difference between the actual investment return and the expected investment return) during each of the last five years or, if fewer, the completed years since January 1 2001, at the rate of 20% per year. The actuarial value is subject to a restriction that it not be less than 80% or more than 120% of market value. f:~::.Retirement Plan for Employees of A vista Corporation ~t1( ,,",.('.';;':;':;, 12.DETAILS OF ACTUARIAL ACCRUED LIABILITIES Plan Year Beginning: Applicable interest rate Normal cost Benefits Administrative expenses Total Funding Unit Credit Method Liabilities 000% 099 743 458 716 558,459 Liability Participating employees $70,464 397 . ' Deferred vested 5 669 368 Retirees and beneficiaries 077 758Total $154 211 523 Preparticipation service exclusion Net Expected Benefit Payments Vested Current Liability Participating employees Deferred vested Retirees and beneficiaries Total Present Value of Future Benefits Participating employees Deferred vested Retirees and beneficiaries Total $11 084 938 $123 103 165 669 368 077 758 $206 850 291 0110112001 Current Liabilities OBRA '87 based on RP A '94 based on Funding Assumed IRS AssumedMortality Mortality 210%210% 070,563 470 765 541 328 336,316 470,765 807 081 $66 857 930 577 466 304 835 $170 740 231 $170 740 231 $~9,226 447 577 466 304 835 $173 108,748 $173 108 748 $11 084 938 $11 084 938 $67 681 989 577,466 304 835 $171 564 290 Retirement Plan for Employees of A vista Corporation \~; l~;'-Vl1' "', t!!;: f',ila, ~;.;,~::' ti:, ,~, #C, :r;" ;';'"':::;~.-\~','",.,,~~'", ,'~".." ,;\,,,.. 0-.:::;: """'~""" ti:;,f=~f" ~~~Zf!~~" 13.HISTORICAL INFORMATION Plan Years Beginning: Participant Data Participating employees Participant compensation Deferred vested participants Retirees and beneficiaries Retiree and beneficiary annual benefit payments Total plan participants 0110112001 1 ,33 1 $71 343 521 329 798 $10 204 513 458 01/01/2000 323 $67 830 210 337 770 920 960 2,430 01101/1999 Asset History Market value Actuarial value Benefit payments In pnor year Employer contributions In pnor year Return on market value Return on actuarial value $175 032 954 175,032 954 860 057 (0.56)% 18.97% $188 868 230 158,913 107 108 417 303 632 11.54% 16.24% 354 $67 984 647 319 772 $9,439 805 2,445 $178 878 604 146 146 934 747 603 13.20% 12.26% ERISA Funding Normal cost Unfunded actuarial liability Minimum contribution Maximum contribution Funded current liability % 558,459 (20,821,431) 519 417 101.11% 345 711 (13 042 170) 146 250 98.60% 929 415 (884 593) 303 632 186 691 93.80% Fiscal Years Beginning: SF AS 87 Expense Annual expense Prior YearSFAS Disclosure Prepaid/(accrued) benefit cost Accumulated benefit obligation ABO funded ratio , ,, 0110112001 767 622 016 256) $141 138 302 124. 01/01/2000 $842 290 (9,477 598) $134,425 464 138. 01/01/1999 440 020 037 578) $147 331 060 121.4% Retirement Plan for Employees of A vista Corporation 14. Number Total plan compensation Average plan compensation Average age Average credited service SUMMARY OF PLAN P ARTICIP ANTS As of: 1." '", fi: i~. ~J:i ;if: ~y, Participating Employees Retirees and Beneficiaries ~:; "e-" ,"'~~~ Distribution as of 01/01/2001 .., ~W; "., ~fi1/' , :,\~. Participants d::~:, with Deferred ~;\ Pensions 01/01/2001 , : , 331 $71 343 521 ' $53 601 45. 13. Number Total annual pension Average annual pension Average age 798 $10 204 513 $12 788 72. :;:~~~ :tf. W::~, 9~O 960 ;, ' $12884 , : '' " ' 72.3.1 Age Last Birthday Under 55 55 - 59 60- 65 - 69 70- 75 - 79 80 - 84 85 and Over , , Number 105 148 149 153 Annual Pension $162 302 216 346 861 072 873 694 690 897 785 144 989 790 625 268 t1i~;' ~2;:;-it~!l:!!i!f!l7&ent Plan/or Employees 0/ A vista Corporation ::~~,._ ~1~~~i' ~":" ~?b~ ?~:~- -;:c~ Distribution 'cls, 01/01/2001 Nwnber 329 337Total annual pension 099 920 250 581Average annual pension 383 678Average age 49.43 48. Age Last Birthday Number Annual Pension Under 40 $143 33140 - 44 419 14245 - 49 554 701 50 - 54 560 454 55 - 59 243,456 60 - 64 176 02565 and Over 811 15 . AG E A N D S E R V I C E D I S T R I B U T I O N Co m p l e t e d Y e a r s o f C r e d i t e d S e r v i c e 10 - 1 4 15 - 20 - 25 - 30 - 35 - 40 & O v e r To t a l No . & No . & No , & No . & No . & No . & No . & No . & No . & No . & No . & No . & No . & No . & At t a i n e d Av g . Av g . Av g . Av g . Av g . Av g . Av g , Av g . Av g . Av g . Av g . Av g . Av g . Av g . Ag e Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Co m p o Un d e r 2 5 $3 3 , 44 7 $3 8 31 6 $3 4 97 6 $2 7 25 9 $3 6 60 3 $3 3 89 2 25 - $3 8 89 8 $4 0 63 6 $3 8 45 7 $4 6 10 3 $4 8 37 6 $4 3 , 46 5 $4 2 56 0 30 - 1\ 6 $4 1 20 3 $4 0 57 6 $5 2 07 5 $5 5 18 0 $4 7 81 8 $4 5 37 8 $6 1 , 90 6 $4 7 04 2 35 - 16 0 $4 8 76 2 $4 5 83 6 $4 2 78 2 $4 8 97 5 $5 0 , 4 0 2 $5 5 34 4 $5 4 54 1 $4 3 13 9 $5 0 33 9 40 - 4 4 26 9 $5 5 , 5 1 2 $4 5 99 7 $4 3 43 6 $5 0 , 5 8 8 $4 9 76 4 $5 3 53 8 $5 5 58 9 $6 1 01 8 $5 3 62 2 45 - 26 3 $5 5 36 7 $7 1 16 4 $5 0 36 3 $4 8 58 0 $5 1 34 4 $5 4 , 4 5 9 $5 0 25 1 $6 2 57 2 $6 7 62 8 $5 7 07 5 50 - 26 1 $4 6 20 7 $6 1 72 5 $5 6 71 1 $4 2 35 3 $5 0 07 2 $5 9 80 3 $5 1 00 1 $5 8 38 6 $6 6 24 5 $7 9 29 7 $6 2 46 2 $5 8 70 0 55 - 14 0 $6 1 43 2 $4 2 50 2 $1 6 45 3 $4 9 19 1 $5 1 43 0 $3 9 08 3 $5 1 78 7 $5 8 89 5 $5 6 16 4 $5 6 69 9 $6 0 59 5 $5 3 36 9 60 - $5 0 10 6 $5 1 25 0 $3 9 , 67 5 $4 3 87 8 $5 1 46 9 $6 6 02 3 $5 5 33 6 $4 9 55 8 $1 2 21 5 $4 9 78 4 65 - 6 9 $6 0 39 0 $6 2 18 0 $6 0 98 7 I, . , . 70 & O v e r To t a l 25 7 16 2 22 7 19 9 10 3 33 1 $4 6 14 4 $4 8 38 4 $4 5 51 8 $4 8 66 4 $5 0 05 5 $5 3 18 4 $5 2 84 9 $6 0 , 12 0 $6 4 30 7 $6 6 62 1 $5 7 82 2 $1 2 21 5 $5 3 , 4 1 9 Av e r a g e : Ag e 45 . Nu m b e r o f p a r t i c i p a n l s : Fu l l y v e s t e d 00 6 Ma l e s 94 2 Se r v i c e 13 . Pa r t i a l l y v e s t e d Fe m a l e s 38 9 Re t i r e m e t l t P l a n f o r E m p l o y e e s o f A v i s t a C o r p o r a t i o n 16 . RE C O N C I L I A T I O N O F P A R T I C I P A N T D A T A Pa r t i c i p a t i n g Ve s t e d T e r m i n a t e d Pa r t i c i p a n t s Em p l o y e e s Pa r t i c i p a n t s Re c e i v i n g B e n e f i t s To t a l (1 ) (2 ) (3 ) (4 ) Re c o n c i l i a t i o n o f Nu m b e r a s o f O l / 0 l / 2 0 0 0 32 3 33 7 77 0 43 0 Pa r t i c i p a n t s Ch a n g e s b y c a t e g o r y : by S t a t u s No n v e s t e d t e r m i n a t i o n s Ve s t e d t e r m i n a t i o n s Lu m p s u m s p a i d Re t i r e m e n t s Be n e f i t s c e a s e d Ne w e n t r a n t s a n d r e h i r e s Ad j u s t m e n t s Nu m b e r a s o f 0 l / O l / 2 0 0 33 1 32 9 79 8 45 8 In c l u d i n g d i s a b i l i t i e s a n d d e a t h s i n s e r v i c e . "" ' J ; h Re t i r e m e l l t P l a l l fo r E m p l o y e e s o f A vi s t a C o r p o r a t i o l l - , . " . " ~,; : r , o" " " , ; , APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS Plan Sponsor A vista Corporation 91-04624701001EIN/PN For Determining Cash Contributions Interest Rates 000%Valuation RP A '94 Current liability 210% OBRA '87 Current liability 210% Compensation Increases Future compensation is assumed to increase at the rate of 5.000% per year, compounded annually. Future Increases in Social Security 000% annual increases in the national average wage index are assumed. Future Increases in Maximum Benefits and Plan Compen- sation Limitations It is assumed that maximum benefit and plan compensation limitations under the Internal Revenue Code will not increase in the future. Assumed Cost-of- Living Adjustments None. Expenses Expenses are assumed to be $500 000 during 2001. Mortality The 1983 Group Annuity Mortality Tables for males and females. Retirement Plan for Employees of A vista Corporation APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS & METHODS (cont'd) For Determining Cash Contributions Retirement It is assumed that participants will retire upon becoming eligible for normal retirement. The following table shows rates at various ages: Rate Male Female 56- 30.30. 63-20.20. 100.100. Disability Rates Rates of disability are based on the Society of Actuaries Reports on Group Long-Term Disability Insurance from four recent years. Disabled Mortality 1992 Railroad Retirement Board Disabled Annuitants. However, the 1983 Group Annuity Mortality Tables for males and females are used for current liability. Representative Termination Rates Rate Attained Age Male Female 60 and over 1.5 1.0 12. 1.5 1.0 Retirement Plan/or Employees of A vista Corporatio~ , . APPENDIX A STATEMENT OF ACTUARIAL ASSUMPTIONS & METHODS (cont'd) For Determining Cash Contributions Form of Payment Union participants:Annuity benefit payable in the nonnal form. Non-Union participants:80% lump sum benefit; 20% annuity benefit payable in the normal form. Lump Sum Assumptions Interest Rate:000% interest Mortality:1983 Group Annuity Mortality Table (blended 50% male 1 50% female) Marriage It is assumed that 100% of all active and terminated employees are married to an Eligible Spouse. Wives are assumed to be three years younger than husbands. Employees It is assumed that there will be no new or rehired employees. Inclusion Date The valuation date coincident with or next following the enrollment date on which the employee becomes a participant. Compensation for Plan Participants Compensation assumed paid in the current year beginning on the valuation date is the prior year pay increased by the assumed compensation increase. Compensation is limited by Internal Revenue Code Section 401(a)(17). Retirement Plan for Employees of A vista Corporation ... , . 'J'":C" -' .,';;'::';' ., , APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS & METHODS (cont' For Determining Cash Contributions Cost Method The Projected Unit Credit Cost Method was used to determine the normal cost and the actuarial accrued liability for retirement termination, and ancillary benefits. Under this method, a "proj ected accrued benefit" is calculated as of the beginning of the year and as of the end of the year for each benefit that may be payable in the future. The "projected accrued benefit" is based on the plan s accrual formula and upon service as ofthe beginning or end of the year, but using fmal average compensation, social security benefits, etc., projected to the age at which the employee is assumed to leave active service. For benefits where the plan s accrual formula is not relevant, benefits are assumed to accrue on a straight~line basis over the period during which the employee earns credited service. The actuarial accruedJiability is the present value of the "projected accrued benefits " , as ,of the beginning of the year for employed participants and is the present value of all benefits for other participants. The normal cosfisfuepresentvalue of the difference between the "projected accrued benefits as9fthebeginning and end of the year. The normal cost arid Cictuarial accruedliability for the plan are the sums of the individually computed normal costs and actuarial accrued liabilities for all plan p~icip~~. 'i" ' "' Asset Method c" "The actuarial value of assets is calculated underan ad.j1isi~dmarket value method by starting with market value of assetsaC4:L;:~i,1: ):- January 2001. For subsequent years the value is d~t~rriJri~d' by;:;:k"adjusting the market value of assets to reflect the~~est~fe~t gain~.an~losses (the difference between the actual investrnentretupi:,~d th~r /;; expected investment return) during each of the la~tfiv~:ye~s if" ':: fewer, the completed years since January 1 , 2001 , atthet~te~f20 pe~ ' year. The actuarial value is subject to a restriction~~f~,i;i,g.~Je sS;/;::~ than 80% nor more than 120% of market value. , ( ":\?~::'~ '::) ;f;~~:1: ~+~~, t.' :?~';~~~;;" :;i;:.\(r-:;~~i~i.~. Participant Data .., :':""', ':):~~~'-:;:"~;:::,,,"; ,' - Employee data were supplied on diskette as of the valua~o~:Aat~ )?~~~;~:;:~- on persons receiving benefits were supplied on diskette fr~~-A\'1~~-L~;:;~;:;":'Corporation. " ;i~'7"'C' ~'* Retirement Plan for Employees of A vista Corporation ----- - APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS & METHODS (cont' For Determining Cash Contributions Benefits Not Included in Valuation None. Changes in Assumptions and Methods Since Last Actuarial Valuation The asset method for the actuarial value of assets was changed effective January 1 2001 from the IRS average of market value method to an adjusted market value method that smooths expected versus actual investment returns over five years, starting with the market value of assets at January 1 , 2001. There were no other changes in assumptions or methods since the prior valuation. Retirement Plan/or Employees 0/ A vista Corporation ~z;~~~~?" ~t~t q~t: , .,. " i,. APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS AND METHODS For Determining Accounting Entries Interest Rates 750%Discount rate Expected long-tenn return on assets 000% Compensation Increases Future compensation is assumed to increase at the rate of 5.000% per year, compounded annually. Future Increases in Social Security 000% annual increases in the national average wage index are assumed. Future Increases in Maximum Benefits and Plan Compen- sation Limitations It is assumed that maximum benefit and plan compensation limitations under the Internal Revenue Code will increase 4.000% per year in the future. Assumed Cost-of- Living Adjustments None. Expenses None. Mortality The 1983 Group Annuity Mortality Tables for males and females. Retirement Plan/or Employees of A vista Corporation APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS & METHODS (cont' For Determining Accounting Entries Retirement It is assumed that participants will retire upon becoming eligible for normal retirement. The following table shows rates at various ages. Rate Male Female 56- 30.30. 63-20.20. 100.100. Disability Rates Rates of disability are based on the Society of Actuaries Reports on Group Long-Term Disability Insurance from four recent years. Disabled Mortality 1992 Railroad Retirement Board Disabled Annuitants. Representative Termination Rates Rate Attained Age Male Female 60 and over 1.5 1.0 12. 1.5 1.0 Retirement Plan for Employees of A vista Corporation 39 u_- .., -'.-.. . ... 0 . ". . -. ..,-'--~;::.::;;;, ~i;. :::,,-_--..,'~"~~'-----'... ----~~~ _.~'"~-~~_.. , u "'-----0..._. . _. ., ',""..~.."",;".. -".._.'~O" , APPENDIX A STATEMENT OF ACTUARIAL ASSUMPTIONS & METHODS (cont' For Determining Accounting Entries Form of Payment Union participants:Annuity benefit payable in the normal form. Non-Union participants:80% lump sum benefit; 20% annuity benefit payable in the normal form. Lump Sum Assumptions Interest Rate:000% interest Mortality:1983 Group Annuity Mortality Table (blended 50% male 1 50% female) Marriage It is assumed that 100% of all active and terminated employees are married to an Eligible Spouse. Wives are assumed to be three years younger than husbands. Employees It is assumed that there will be no new or rehired employees. Inclusion Date The valuation date coincident with or next following the enrollment date on which the employee becomes a participant. Compensation for Plan Participants Compensation assumed paid in the current year beginning on the valuation date is the prior year pay increased by the assumed compensation increase. Retirement Plan for Employees of A vista Corporation ":' APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS & METHODS (cont' For Determining Accounting Entries Cost Method The Projected Unit Credit Cost Method was used to determine the service cost and the projected benefit obligation for retirement termination, and ancillary benefits. Under this method, a "projected accrued benefit" is calculated as of the beginning of the year and as of the end of the year for each benefit that may be payable in the future. The "projected accrued benefit" is based on the plan s accrual formula and upon service as of the beginning or end of the year, but using final average compensation, social security benefits, etc., projected to the age at which the employee is assumed to leave active service. The projected benefit obligation is the actuarial present value of the projected accrued benefits" as of the beginning of the year for employed participants and is the actuarial present value of all benefits for other participants. The service cost is the actuarial present value of the difference between the "projected accrued benefits" as of the beginning and end of the year. Asset Method The investments in the trust fund are valued on the basis of their fair market value. Participant Data Employee data were supplied on diskette 'as of the census date. Data on persons receiving benefits were supplied on diskette from A vista Corporation. Retirement Plan for Employees of A vista Corporation APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS & METHODS (cont'd) For Determining Accounting Entries Valuation Date Measurement Date The measurement date is January 1 , 2001. The last day of the fiscal year is December 31. For purposes of determining the net periodic benefit cost for the fiscal year, results as of the valuation date, January , 2001 , are used. Material mid-year plan amendments are recognized as of their respective effective dates. For year-end disclosUre, results are projected from the valuation date to the next measurement date, by assuming no actuarial gains or losses occurred in the interim, except for those due to changes in the assumptions necessary to reflect the situation at the measurement date and those due to recognizing differences between actual and expected benefit payments and administrative expenses. Amortization of Unrecognized Net Gain or Loss Amortization of unrecognized net gain or loss resulting from experience different from that assumed and from changes in assumptions (excluding asset gains and losses not yet reflected in market-related value) is included as a component of net periodic benefit cost for a year if, as of the beginning of the year, that unrecognized net gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets. If amortization is required, the amortization is that excess divided by the average remaining service period of participating employees expected to receive benefits under the plan. Amortization of Prior Service Costs Amortization of prior service costs resulting from a plan change are included as a component of net periodic benefit cost in the year first recognized and every year thereafter until such time as they are fully amortized. Benefits Not Included in Valuation None. Retirement Plan for Employees of A vista Corporation APPENDIX A - STATEMENT OF ACTUARIAL ASSUMPTIONS & METHODS (cont' , For Determining Accounting Entries Changes in Assumptions and Methods Since Last Actuarial Valuation There were no changes in assumptions since the prior valuation. Retirement Plan/or Employees of A vista Corporation APPENDIX B - SUMMARY OF PRINCIPAL PLAN PROVISIONS Effective Date March 1, 1948. Restated as of January 1 , 1989. Last amended effective as ofJuly 1 , 1999. Eligibility An employee becomes a Member after completing a year of service with at least 1 000 Hours of Service. Benefit Service Prior to 1/1/80 One month of Benefit Service for each month of employment beginning on or after the Hire Date. After 1/1/80 One year of Benefit Service for each Plan Year after the Hire Date in which the Member has 2 080 Hours of Service. Partial credit is given for a year in which the Member has at least 1 000 Hours of Service at the rate of one-twelfth of a year for each 173-1/3 Hours of Service (rounded up). Vesting Service One month of Vesting Service for each month of employment. Earnings Base Pay excluding overtime and other special compensation, but including contributions to a 401(k) Plan. Final Average Earnings Highest consecutive 36 months earnings during Member s last 120 months. Retirement Plan for Employees of A vista Corporation APPENDIX B - SUMMARY OF PRINCIPAL PLAN PROVISIONS ( cont' Normal Retirement Eligibility First day of month coinciding with or next following 65th birthday. Benefit 1.5% of Final Average Earnings for each year of Benefit Service. Early Retirement Eligibility Attained age 55 and at least 15 years Vesting Service. Benefit Accrued benefit based on Benefit Service to early retirement date payable in full at or after age 62. If payments commence immediately at date of early retirement the benefit is multiplied by the appropriate factor from the following table: Age Early Retirement Factor 100% 96% 92% 88% 84% 80% 76% 72% The Early Retirement Factor is increased, up to a maximum of 100%, by 1.0% (one percentage point) for each year of vesting service above 15. Retirement Plan for Employees of A vista Corporation APPENDIX B - SUMMARY OF PRINCIPAL PLAN PROVISIONS (cont'd) Deferred Retirement Eligibility Continued employment beyond Normal Retirement Date. Benefit The Normal Retirement Benefit Formula applied to earnings and Service up to deferred retirement date. Payment commences on the actual retirement date. Disability Eligibility Five Years of Vesting Service and a disability which prevents the Member from performing assigned duties and which is expected to be a permanent condition. Benefit Accrued Benefit commencing at Normal Retirement Date based on Final Average Earnings at time of disability but including as Benefit Service the period of the Member s disability, contingent upon five years of Vesting Service (10 years if employed in a position covered by a collective bargaining agreement). A disabled Member may elect Early Retirement when first eligible to do so, in which case the benefit is reduced. Vesting Eligibility Fiye years of Vesting Service. Benefit Accrued benefit at date of termination with payments commencing at normal retirement date. If the Member has 15 years Vesting Service, an election may be made for benefits to commence at any time after age 55, in which case benefits will be actuarially reduced from age 65. Retirement Plan/or Employees 0/ A vista Corporation APPENDIX B SUMMARY OF PRINCIPAL PLAN PROVISIONS (cont' Cost-of-Living Adjustments Benefits in pay status have been increased from time to time through ad hoc adjustments to partially offset the reduction in purchase power due to inflation. The most recent adjustments took effect as of March 1 , 1998. The Company is under no obligation to make further adjustments in the future. Changes in Plan Provisions There have been no changes in plan provisions since the prior valuation report. Retirement Plan for Employees of A vista Corporation GLOSSARY Accumulated Benefit Obligation This is the same as the Projected Benefit Obligation except that it is based on current and past compensation levels instead of future compensation levels. Actuarial Accrued Liability This is computed differently under different actuarial cost methods. Generally, the actuarial accrued liability represents the portion of the cost of the participants ' anticipated retirement , termination and/or death and disability benefits allocated to the years before the current plan year. Actuarial Gain or Loss From one plan year to the next, if the experience of the plan differs from that anticipated using the actuarial assumptions, an actuarial gain or loss occurs. For example, an actuarial gain would occur if the assets in the trust earned 12% for the year while the assumed rate of return used in the valuation was 8%. Additional Minimum Liability If a plan has a minimum liability, the sponsor may be. required to post a liability on the balance sheet in addition to the accrued/(prepaid) benefit cost already recorded. If the Accumulated Benefit Obligation exceeds the fair value of assets, the plan has a minimum liability equal to the excess. If there is a minimum liability and it exceeds the Accrued/(prepaid) Benefit Cost, the difference is called the Additional Minimum Liability and the accrued benefiUiability equals the minimum liability. Current Liability This is computed the same as the Present Value of Accumulated Benefits, but using interest rate and mortality assumptions specified by the IRS. This quantity is used in the calculation of the plan s funded percentage, to detennine whether the plan sponsor will be allowed to make a tax-deductible contribution to the plan for the year, whether quarterly contribution deposits are required, whether the plan is exempt from the deficit reduction contribution and, if not, the amount of the additional funding charge. Retirement Plan for Employees of A vista Corporation GLOSSARY (cont' Funded Status This is the excess/(shortfall) of the fair value of plan assets over the Projected Benefit Obligation. Normal Cost Computed differently under different actuarial cost methods, the normal cost generally represents the portion of the cost of the participants' anticipated retirement , termination and/or death and disability benefits allocated to the current plan year. JPrepaidl(Accrued) Benefit Cost The sponsor s balance sheet asset/(liability) entry, the net recognized amount, is the sum of the cumulative excess of contributions to the plan over net periodic benefit costs and other plan-related charges to income due either to business combination or accelerated recognition pursuant to SFAS 88. The difference between this account and the Funded Status is the unrecognized net loss/(gain) and prior service costs. JPresent Value of Accumulated Benefits Computed in accordance with SFAS 35, this quantity is determined independently from the plan s actuarial cost method. Basically, this is the present value of a participant's accrued benefit as of the valuation date, assuming the participant will earn no more credited service and will receive no future salary. JPresent Value of Future Benefits This is computed by projecting the total future benefit cash flow from the plan, using actuarial assumptions, and then ~iscounting the cash flow to the valuation date. JPresent Value of Vested Benefits This is the portion of the Present Value of Accumulated Benefits in which the employee has a vested interest if the employee were to separate from service with the employer on the valuation date. Retirement Plan for Employees of A vista Corporation GLOSSARY (cont' Projected Benefit Obligation Computed in accordance with SF AS 87, this quantity is the actuarial present value of all benefits attributed by the plan s benefit fonnula toservice rendered prior to the measurement date. It is measured using an assumption as to future compensation levels when the benefit fonnula is based on future compensation levels. Service Cost "" '..' ":;,'-';' , ;i: ':,;" : Computed in accordance with SF AS 87, this component of the net ::: :\00~; :/- periodic benefit cost is the actuarial present value of benefits attrib 1.I:ted)'by the plan s benefit fonnula to services rendered by employees dUrUig': the period over which the net periodic benefit cost is incUlTed; 'I(i~; ')' measured using an assumption as to future compensation levels when :i; " ,, ' the benefit fonnula is based on those future compensation levels.ilj :$,* 1,' Retirement Plan for Employees of A vista Corporation Retirement Plan for Employees of A vista Corp. Actuarial Valuation - January 1,2001 RECENT EXPERIENCE - FINANCIAL ACCOUNTING (FAS 87) 1997 1998 1999 2000 2001 Net Periodic Pension Cost 224 987 466,593 440,020 842 290 767,622 Fair Market Value of Assets 149 846,091 166 242 219 178,878,604 185,564,598 175,032 954 Projected Benefit Obligation 145 186,985 159,163 997 177 ,924 885 169,093 051 179,091 474 Percentage Funded 103%104%101%110%98% Accumulated Benefit Obligation 120 165,105 132 861 529 147 551,325 137 192 854 144 891,966 Percentage Funded 125%125%121%135%121% (Accroed)/Prepaid Pension Cost (6,664 475) $(5,570,985) $037,578) $(9,477,598) $(7,016,256) Net Periodic Pension Cost (Income) 000,000 $3,500,000 $3,000,000 $2,500,000 000,000 $1,500,000 000,000 $500,000 $0 - 1997 1998 1999 2000 2001 Year (Accrued) Prepaid Pension Cost on Balance Sheet ($1,500,000) ($3,000,000) ($4,500,000) ($6 000,000) ($7,500,000) ($9,000,000) ($10,500 000) 1997 1998 1999 2000 2001 Year k:\avista\db1 \val\200 1\2001 hist Retirement Plan for Employees of A vista Corporation Actuarial Valuation - January 1, 2001 RECENT EXPERIENCE - FPNDING 1997 1998 1999 2000 2001 084 521 303 632 02%00%86%00%00% 523 844 533 416 929 415 345,711 558,459 73%72%78%6.41%6.39% 126,854 324 138 446,238 146,146,934 158 913 107 175 032 954 126,173 357 134 755,291 145,262 341 145,870 937 154 211,523 101%103%101%109%114% 122 208 074.134 120 592 155,809,086 161 164,402 173 108 748 104%103%94%99%101% Comparison of Assets and Liabilities for Contribution Determination Purposes Contribution for Plan Year Contribution as % of Pay Nonna! Cost Normal Cost as % of Pay Actuarial Value of Assets Actuarial Accrued Liability Percentage Funded Current Liability Percentage Funded 1997 1998 1999 2000 2001 Plan Year .Actuarial Value of Assets .Actuarial Accrued Liability . Current Liability Contribution and Normal Cost $5.000.000 $4.000.000 $3.000,000 $2.000.000 $1.000.000 1997 1998 1999 Plan Year -+-Contribution for Plan Year 2000 2001 -Normal Cost K:IA VIST A\DB 1\V AL\2001 \200 1 hist Ketirement Plan for Employees of A vista Corporation Actuarial Valuation as of January 1 2001 Allocation of Assets, Obligations and Costs Among Participating Employers by Participant Liabilities A vista Corp.Avista Energy Total Accumulated Benefit Obligation 144 369 576 522 390 144 891 966Projected Benefit Obligation 177 978,411 113 063 179 091 474 Funded Status Projected Benefit Obligation (177 978,411)(1,113 063)(179 091 474)Plan Assets at Fair Value 173 945 115 087 839 175 032 954Funded Status 033 296)(25 224)058 520) Reconciliation of Funded Status Funded Status 033 296)(25 224)058 520)Unrecognized Net (Gain) or Loss 739 392)(54 655)794 047)Unrecognized Prior Service Cost 679 311 679 311 Unrecognized Net Asset 843 000)843 000)(Accrued) Pension Cost 936 377)(79 879)016 256) Net Periodic Pension Cost for 2001 Service Cost 589 304 953 686 257Interest Cost 364 010 038 450 048 Expected Return on Assets (15 156 499)(97 645)(15 254 144)Amortization of UnrecognIzed Net (Gain) or Loss Prior Service Cost 971,461 971 461 Net Asset (1,086 000)(1,086 000)Net Periodic Pension Cost or (Income)682 276 85,346 767 622 k;\ay;staldblIYal\2001IVLSPL T2001.XLS Retirement Plan for Employees of Avista Corporation Actuarial Valuation as of January 1 2001 Allocation of Assets, Obligations and Costs Among Participating Employers by Participant Liabilities Avista Corp,A vista Energy Total Assets - Actuarial Value Total at 1/1/2000 1 N/A N/A N/AContributions Investment Income Adjusted Gains Benefit Payments Expenses Transfer Total at 1/1/2001 173 945 115 087 839 175 032 954 Assets - Market Value Total at 1/1/2000 1 N/A N/A N/AContributions Investment Income Adjusted Gains Benefit Payments Expenses Transfer Total at 1/1/2001 173 945 115 087 839 175 032 954 Contribution Allocation for 2001 (Based on Net Periodic Pension Cost) Net Periodic Pension Cost 682 276 346 767 622 1=16 5"1(for accounting purposes only) Expected Cash Contribution 2 484 998 419 519 417(to collect from subsidiaries) Plan Participants Participating Employees 313 331Deferred Vested Participants 329 329Retirees and Beneficiaries 796 798Total438458 I Assets allocated as of January 1 , 2001 based on Projected Benefit Obligation.2 Based on current funding policy. k:\avista\dbllval\2001IVLSPL TlOOl.xLS