20170727AVU to Staff 8.doc

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 07/20/2017
CASE NO: AVU-E-17-01/AVU-G-17-01 WITNESS: Elizabeth Andrews
REQUESTER: IPUC RESPONDER: Annette Brandon
TYPE: Production Request DEPARTMENT: State & Federal Regulation
REQUEST NO.: Staff - 008 TELEPHONE: [phone]

REQUEST:

Company witness Andrews mentions a comprehensive benefit evaluation study, BENEVAL, on page 39 of her testimony. Please provide a copy of this study.

RESPONSE:

Please see Avista's response 008C, which contains TRADE SECRET, PROPRIETARY or CONFIDENTIAL information and exempt from public view and is separately filed under IDAPA 31.01.01, Rule 067 and 233, and Section 9-340D, Idaho Code.

Please see Staff_PR_008C Confidential attachment(s) A & B for the BENEVAL studies for 2011 and 2012, respectively.

Over time the market for employee benefits changes, and Avista makes adjustments, as appropriate, to stay within the market. Following the 2011 and 2012 reports, the Company developed changes to the Pension and Post-Retirement medical plans to position overall benefits within +/- 15% of the market median. In October 2013, the defined benefit pension plan was revised such that as of January 1, 2014 the plan is closed to all non-union employees hired or rehired on or after January 1, 2014. All actively employed non-union employees that were hired prior to January 1, 2014, and were covered under the defined benefit pension plan at that time, will continue accruing benefits as originally specified in the plan. A defined contribution 401(k) plan replaced 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 where Avista matches a portion of the pay deferred by each participant. The Company also revised our lump sum calculation for non-union retirees under the defined benefit pension plan to provide non-union participants who retire on or after January 1, 2014 with a lump sum amount equivalent to the present value of the annuity based upon applicable discount rates.

For the medical plan, the following changes were also made effective January 1, 2014:

For non-union employees hired or rehired on or after January 1, 2014, and Local Union 659 employees hired or rehired on or after April 1, 2014, upon retirement the Company no longer provides a contribution towards his or her medical premiums. The Company will provide access to the retiree medical plan, but the retiree will pay the full cost of premiums upon retirement.

Beginning January 1, 2020, the method for calculating health insurance premiums for all non-union and Local 659 (Southeast Oregon) retirees under age 65 will no longer be “pooled” with current employee and Local 77 (Washington/Idaho) retirees.  This revision will result in a separate health insurance premium structure beginning January 1, 2020.   

Manage Utilization of Specialty Drugs – The Company reviews measures to lower the cost of prescription drugs including requiring prior authorization, and implementing step therapy.

In addition, changes were made due to health care reform increasing the out of pocket maximum and annual deductibles.

As of January 1, 2017 the Company began offering a self-insured High Deductible Health Plan (“HDHP”) in addition to the current self-insured plan, in an effort to mitigate cost increases. The HDHP requires plan participants to pay all costs of medical care up to defined deductible limits. This plan enforces the message to participants to manage their own health with an array of tools to assist them in becoming better consumers. We expect this plan to result in lower overall medical costs to the Company. The level of cost savings will be dependent upon, among other things, the number of employees that choose this plan, and the level of utilization of medical care for those employees (i.e., the overall medical expense to the Company under the High Deductible plan versus the old plan for those particular employees and their families). The level of cost savings from the HDHP is expected to be minimal initially, and will be unknown for the longer-term until we have actual experience under the plan. In summary, proactive steps are being taken to reduce medical cost increases in the coming years, which will help to offset some of the increases in medical expense going forward.

The Company plans to participate in a BENEVAL study in 2017 in order to benchmark the impact of the changes noted above. We anticipate our overall compensation package to remain competitive (+/- 15% of market median) within the peer group within which we compete for talent.

The BENEVAL report is typically requested as part of contract negotiations with our Local Unions. With negotiations anticipated to begin in late 2017 to early 2018, the Company is participating in the 2017 BENEVAL report. We believe the timing of this report has allowed for a sufficient timeframe for the effects of the 2014 changes to be fully incorporated, and anticipate an overall benefit position to fall within our peer group (+/- 15% of market median).
Changes were applicable to Local Union 659 (Southeast Oregon) effective April 1, 2014.
Local Union 659 (southeast Oregon) retired on or after April 1, 2014.
The Survey to be completed in 2017 is similar in content to 2011. (2012 was an expanded version)

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