20150729AVU to Staff 30.doc

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 07/15/2015
CASE NO.: AVU-E-15-05/AVU-G-15-01 WITNESS: Elizabeth Andrews
REQUESTER: IPUC RESPONDER: Annette Brandon
TYPE: Production Request DEPARTMENT: State & Federal Regulation
REQUEST NO.: Staff - 030 TELEPHONE: [phone]

REQUEST:

Please summarize all benefit and retirement plans provided to any classification of Company employees. Please also include any changes that have occurred to the benefits/accruals during the past five years.

RESPONSE:

All regular employees, including executive officers, are eligible for the Company’s Qualified Defined Benefit plan (hires after 01.01.14 – see below), the Company’s 401(k) plan, health and dental coverage, Company-paid term life insurance, disability insurance, paid time off and paid holidays. This benefit package offers several choices as to the type of medical plan, dental plan, life insurance, etc to determine the best fit for their circumstances. These plans are designed to be competitive with the overall market practices and are in place to attract and retain the talent needed in the business. As with all portions of the plan, the Company works with a third-party administrator to determine the annual rates for the Company and for each individual employee based on their elections.

Avista sponsors a self-funded medical benefit plan that provides various levels of coverage for medical, dental and vision. Avista encourages employees to take responsibility for their health care decisions and make lifestyle changes to avoid health care issues. The Company also encourages participants to adopt and maintain healthy lifestyles, and use health care wisely. Proactive programs are set up to help individuals change their behaviors and live a healthier life. The Company addresses this by using a health continuum; low risk (Wellness), moderate risk (Wellness, Lifestyle Health Coaching) and high risk (Disease Management, Case Management).

Retirement programs are crucial to attracting and retaining a skilled workforce within the utility industry. The Company provides a defined benefit pension plan and a defined contribution plan (401k) to employees.

For employees hired before January 1, 2014, The Company’s provides a defined benefit pension plan which provides a retirement benefit based upon employees’ compensation and years of credited service. The retirement benefit is based on a participant’s final average annual base salary for the highest 36 consecutive months during the last 120 months of service with the Company. Employees hired on or after January 1, 2014 are no longer eligible to participate in this plan.

All employees are eligible to participate in the defined contribution plan, or 401(k) plan which provides tax deferred savings providing partial matching of employee contributed dollars (except for union employees). The matching feature encourages participation in the plan and provides incentive to maximize contributions to take full advantage of the Company match. The amount of Company match is based upon hire date.

Please see bullet points below for additional information regarding changes to the retirement plan (including both defined contribution and 401(K)) for employees hired on or after January 1, 2014.

In addition, executives are offered the following benefits:

Supplemental Executive Officer Retirement Plan (SERP)
In addition to the Company’s retirement plan for all employees, the Company provides additional pension benefits through the SERP to executive officers of the Company who have attained the age of 55 and a minimum of 15 years of credited service with the Company. The costs associated with SERP are excluded from retail rates.

Deferred Compensation
The Executive Officer Deferred Compensation plan provides the opportunity to defer up to 75% of base salary and up to 100% of cash bonuses for payment at a future date. This plan is competitive in the market, and provides eligible employees and executive officers with a tax-efficient savings method. The costs associated with Deferred Compensation are excluded from retail rates.

Approximately every two years, Avista participates in a comprehensive benefit study, BENEVAL, conducted by Towers Watson which compares the total value of our benefit package to the total benefit value of our peers. This study is comparable to the peer group benchmarking conducted annually for direct compensation.

As a result of the 2013 benefit plan review, the following changes were made which will result in long term reduction in expenses:

The defined benefit pension plan was revised such that as of January 1, 2014, the plan will be closed to all non-union employees hired or rehired by Avista on or after January 1, 2014. All actively employed non-union employees that were hired prior to January 1, 2014, are currently covered under the defined benefit pension plan, and will continue accruing benefits as originally specified in the plan. A defined contribution 401(k) plan will replace the defined benefit pension plan for all non-union employees hired or rehired on or after January 1, 2014. Under the defined contribution plan the Company will provide a non-elective contribution as a percentage of each employee’s pay based on his or her age. This defined contribution is in addition to the existing 401(k) contribution in which we match a portion of the pay deferred by each participant.

Revisions were made to the lump sum calculation effective January 1, 2014, for non-union participants who retire under the defined pension plan. The lump sum amount is equivalent to the present value of the annuity based upon applicable discount rates.

The health care benefit plan was also revised for non-union employees hired or rehired on or after January 1, 2014. Upon retirement, the Company will no longer provide a contribution toward the medical premiums for these employees. We will provide access to the retiree medical plan, but the non-union employees hired or rehired on or after January 1, 2014 will pay the full cost of premiums upon retirement.

Also beginning in January 1, 2020 the method of calculating health insurance premiums for non-union retirees under age 65 and active Company employees will be revised. The revisions will result in separate health insurance premium calculations for each group.

The Company’s process for determining executive pay and benefits effectively manages the costs associated with total executive compensation while meeting the Company’s goal of recruiting and retaining the executive officers needed to efficiently manage the Company

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