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Home My WebLink About20050118Rosborough Exhibits Part I.pdfCase No. PAC-O5- Exhibit No. 13 Witness: Daniel J. Rosborough BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION ACIFICORP Exhibit Accompanying Direct Testimony of Daniel J. Rosborough Hewitt Associates LLC - Actuarial Report January 2005 Hewitt H~witl Asso('i:ttt;'s LLC \rgcmina Au,;tr;jlja China Czl~(b Republj,.' Au,;tria D:::minican R.:puhk FnHlcl~ GeTman: Hell;iull1 Brazil ('-an,HI" Channel hlanJ,; Cree Bong Kong HungaryChik '-----"'------'- ,___.._m_m_____ PacifiCorp Exhibit No. 13 page 1 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Actuarial Report Pacifi Corp Retirement Plan As of January 1 2004 ""-""""""""""""""""...... 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Rosborough Preparation of this Actuarial Valuation As of January 1, 2004 for PacifiCorp Retirement Plan This report has been prepared for PacifiCorp and summarizes the results of the funding valuation for the plan year and the accounting and reporting requirements for the 2005 fiscal year for pension benefits as set forth in FASB Statement of Financial Accounting Standard No. 87 as amended (II SFAS No. 87") and No. 88 as amended (IISFAS No. 88"). In addition, this material is intended to serve as a source document for information to meet certain accounting or government filing requirements. Determinations for purposes other than the funding valuation and financial accounting requirements may be significantly different from the results reported herein. Thus, the use of this report for purposes other than those expressed here may not be appropriate. In conducting the valuation, we have relied on personnel, plan design, and asset infoffi1ation supplied by PacifiCorp as of the valuation date. While we cannot verify the accuracy of all this infoffi1ation, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy or completeness of the information and believe that it has produced appropriate results. This valuation has been conducted in accordance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board. In addition, the valuation results are based on our understanding of the applicable laws and regulations under IRC sections 404 and 412, and our understanding of the requirements of SFAS Nos. 87 and 88. The accounting information in this report is not intended to supersede or supplant the advice and interpretations of the Company s auditors. The actuarial assumptions and methods used in this valuation are described in the Actuarial Assumptions section of this report. For the funding valuation, the interest rate and mortality table used to measure current liability are prescribed by IRC section 412. It is our belief that all other actuarial assumptions used for the funding valuation represent reasonable expectations of anticipated plan experience. PacifiCorp selected the economic assumptions and prescribed them for use for purposes of compliance with SF AS No. 87 and SF AS No. 88. While the demographic assumptions were also prescribed by PacifiCorp, Hewitt Associates provided guidance with respect to these assumptions and it is our belief that they represent reasonable expectations of anticipated plan experIence. The undersigned are familiar with the near-term and long-term aspects of pension valuations and meet the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All of the sections of this report are considered an integral part of the actuarial opinions. Hewitt Associates LLC Albert A. Kopec Jf., Enrolled Actuary Fellow of the Society of Actuaries Daniel S. Watts, Enrolled Actuary Member of the American Academy of Actuaries December 2004 Hewitt Associates 2004 PRPV i\L.DOCXPIO;li\ 1212004 PacifiCorp Exhibit No. 13 page 3 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Table of Contents Page Summary Assets and Liabilities Contri buti ons Experience Accounting Requirements Personnel Information Plan Provisions Actuarial Assumptions Hewitt Associates 2 004 PR PV ALDOCXP/03A 1212004 PacifiCorp Exhibit No. 13 page 4 of 53 CASE NO, PAC-O5- Witness Daniel J. Rosborough Summary The following summary presents a comparison of liabilities, assets, and contributions from the 2003 actuarial valuation with the results of the January 1 , 2004 valuation: Before After Amendments Amendments January 1,2003 January 1, 2004 January 1,2004 Funding Requirements Actuarial Accrued Liability Actives and Transfers 344 032 026 378 388 669 379 168 308 Vested Terminations 069 212 71,461 235 461 235 Retirees and Beneficiaries 594 872 666 551 651 223 551 651 223 Total $ 1 008 973 904 $ 1 001 501 127 $ 1 002 280 766 Valuation Assets 853 551 122 889 398 489 889 398 489 Unfunded Actuarial Liability 155 422 782 112 102 638 112 882 277 Annual Nonnal Cost 124 685 131 150 194 723 Actuarial Loss (Gain)N/A (11 613,4 76)N/A Contributions as of 12/31 Minimum Required 500 133 N/A 163,492 Maximum Deductible 174 277 373 N/A 145 915 674 Funding Policy 555 151 N/A 997 387 Interest Rate Salary Scale Mortality 83GAM 83GAM 83GAM Value of Accrued Benefits Value of All Accrued Benefits 887 587 739 878 984 332 879 005 493 Value of All Vested Accrued Benefits 871 865 711 862 241 921 862 260 640 Market Value of Assets 711 292 602 800 645,958 800 645 958 Interest Rate Personnel Summary Number of: Actives 325 521 521 Vested Tenninations 1 ,224 1 ,344 344 Retirees and Beneficiaries 407 254 254 Total 956 119 119 Characteristics of Active Participants A verage Age 45.46.4 46.4 Average Service 15.15.15. Compensation Total 284 667 452 314 691 126 314 691 126 Average 819 69,607 607 Hewitt Associates 2004 PRPV ALDOCXP/O3A 1212004 PacifiCorp Exhibit No. 13 page 5 of CASE NO. PAC-O5- Witness Daniel J. Rosborough Summary (continued) Disclosure Results as of March 31 2003 Disclosure Resu Its as of March 31, 2004 Accounting Requirements Disclosure for Fiscal Year Accumulated Benefit Obligation Projected Benefit Obligation Market Value of Assets Funded Status 2003 2004 020 323 000 047 900 000 107 611 000 181 706 000 681 241 000 733 243 000 (426 370 000)(448,463 000) FAS 87 Expense 2004 300 000 906 000 2005 900 000 775 000 Expense for Fiscal Year Service Cost Discount Rate Assumption Salary Increase Rate Expected Long-Tenn Rate of Retum 75% 00% 25% 00% 75%750/0 I The Accounting Requirements Section provides detailed information relative to the disclosure requirements under FASB Statement Nos. 87 and 132. Excludes contributions accrued but not yet paid.Hewitt Associates 2004 PRPV ALDOCXPIO3A 1212004 PacifiCorp Exhibit No. 13 page 6 of53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Assets and Liabilities The results of the January 1 , 2004 actuarial valuation are set forth below. For your reference, results of the January 1 , 2003 actuarial valuation are also shown. January 1,2004 January 1,2003 Before Amendments After Amendments Funding Basis Actuarial Accrued Liability Actives and Transfers Vested Terminations Retirees and Beneficiaries Total 344 032 026 378 388 669 379 168 308 069 212 7 1 46 1 235 71,46 1 235 594 872 666 55 I ,65 I ,223 551 651 223 $ 1 008 973 904 001 501 127 $ 1 002 280 766 Valuation Assets 853 551 122 889 398 489 889 398,489 Unfunded Actuarial Liability 155,422 782 112 102 638 112 882 277 Annual Nonnal Cost As a Percent of Compensation 124 685 5.43% 13 1 150 5.35% 194 723 37% Interest Rate Salary Scale Mortality 00% 00% 83GAM 00% 00% 83GAM 00% 00% 83GAM Personnel Information Number of: Actives Vested Terminations Retirees and Beneficiaries Total 325 1 ,224 407 956 52 I I ,344 254 119 521 344 254 119 Valuation Compensation $ 296 988 646 320 041 673 320 201 382 I Liabilities for active participants increased because the IRC section 401 (a)(17) pay limit increased from $200,000 to $205,000. Hewitt Associates 2004 PRPV ALDOCXP/03A 1212004 PacifiCorp Exhibit No. 13 page 7 of 53 CASE NO. P AC-O5- Witness Daniel J. Rosborough Assets and Liabilities (continued) Determination of Valuation Assets, 1/1/2004 (1) Market Value, 1/1/2003 711 292 602 (2) Contribution Made for 2003 Plan Year 555,151 (3) Benefit Payments During 2003 Plan Year (107 794 803) (4) Asset transfer to the PacifiCorp/IBEW Local Union 57 Retirement Trust Fund, 10/31/2003 (470 285) (5) Interest at 8.0% to 12/31/2003 on: (a) Market Value of Assets (Item 1)903,408 (b) Company Contributions (Item 2) (c) Benefit Payments (Item 3)952 476) ( d) Asset transfer (I tern 4) (e) Total, (a) + (b) + (c) + (d)944 662 (6) Expected Market Value, 1/1/2004 717 527 327 (1) + (2) + (3) + (4) + (5) (7) Actual Market Value With Accrued Contributions, 1/1/2004 800 645 958 (8) Asset Gain/(Loss), (7) - (6)118 631 (9) Amount of Asset Gain/(Loss) Deferred (a) 200/0 of 2000 Gain/(Loss) of$(97 709 791)(19 541 958) (b) 400/0 of2001 Gain/(Loss) of$(155 938 814)(62 375 526) (c) 600/0 of 2002 Gain/(Loss) of $( 122 216 5 87)(73 329 952) (d) 80% of 2003 Gain/(Loss) of $83 118 631 66,494.905 (e) Total (88 752 531) (10) Actuarial Value of Assets Before Corridor Test, 1/1/2004, (7) - (9)889 398,489 (11) Corridor Test(a) 800/0 of Market Va)ue 640 516 766 (b) 120% of Market Value 960 775,150 (12) Actuarial Value of Assets After Corridor Test, 1/1 /2004 889 398,489 Hewitt Associates 2004 PRPV ALDOCXPIO3A 12/2004 PacifiCorp Exhibit No. 13 page 8 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Assets and Liabilities (continued) Statement of Change in Fund Assets Market Value of Assets, 1/1/2003 Contribution Made for 2003 Plan Year 711 292 602 555 151 (107 794 803 ) 206 560) (470 285) 139 853 800 645 958 Benefit Payments Trustee and Administrative Expenses Asset Transfer to Another Pension Plan Net Investment Income Market Value of Assets, 1/1/2004 Components of Market Value of Assets January 1,2003 January 1, 2004 Investment in Master Retirement Trust 677 844 021 739 090 807 Accrued Contributions 33,448 581 555 151 Market Value of Assets 711 292 602 800 645 958 Hewitt Associates 2004 PRPV ALDOCXPIO3A 12/2004 PacifiCorp Exhibit No. 13 page 9 of 53 CASE NO. PAC-O5- Witness Daniel 1. Rosborough Assets and Liabilities (continued) Current Liability Current liability equals the present value of all accrued benefits, measured using an interest rate that satisfies two requirements: . The interest rate lies within the permissible range, and The interest rate reflects annuity purchase rates that would be used by insurance companies satisfy the liabilities of the plan upon termination. The Internal Revenue Service has stated in IRS Notice 90-11 that the second requirement will be deemed to be satisfied (until the Service provides further guidance) if the interest rate lies within the permissible range. The Pension Funding Equity Act of 2004 changed the permissible range for 2004 and 2005 so it is now expressed in terms of a percentage of the four-year weighted average of corporate bond rates. The pennissible range for RP A '94 current liability calculations (the Retirement Protection Act of 1994) is shown below: RP A ' Applicable 4-Year Weighted Average Rate 55% Pennissible Corridor Percentages 89% to 6.55% (90% to 100%) Interest Rate Used 550/0 (1) Current Liability, as of January 1 2004 Actives and Transfers Retirees and Beneficiaries Vested Terminations Total $ 298 049 429 609 939,324 747 360 $ 975 736 113 (2) Current Year Accrual 958 902 Hewitt Associates 2004 PRPV ALDOCXP/O3A 12/2004 PacifiCorp Exhibit No. 13 page 10 of53 CASE NO. P AC-O5- Witness Daniel J. Rosborough Assets and Liabilities (continued) Accrued Benefit Values This section presents the results of a separate valuation of the plan s obligations based only on benefits accrued as of the valuation date of January 1 2004. The focus of this valuation differs from the calculation of ongoing funding requirements which anticipates benefits to be earned by future service and salary increases. This accrued benefit valuation assumes an ongoing plan and, therefore differs from a calculation of PBGC termination liabilities which would be based on the benefits and assumptions appropriate for a terminating plan. The American Academy of Actuaries, in Appendix I of the Actuarial Standards of Practice Number 4, has provided recommended procedures for the calculation of the present value of vested accrued benefits (Illustration 1) and the present value of accrued benefits (Illustration 2). The results under both Illustrations include the sum of the present value of: . All benefits expected to be paid to former participants and their beneficiaries; and . Benefits expected to be paid at future dates to present active participants, based only on service and pay prior to the date of calculation. The present value of vested accrued benefits using Illustration 1 recognizes only the benefits in which an active participant retains a right, independent of continuation of employment beyond the calculation date. It does not include any additional benefits which might arise because of future death or disability that would not become payable if the participant had terminated employment before the occurrence of the death or disability. The present value of all accrued benefits using Illustration 2 recognizes all accrued benefits expected to become payable at future dates, including the accrued portion of disability and preretirement death benefits. Thus, the accrued benefit of a nonvested participant is included in this calculation to the extent it will become payable (Le., vested) upon the occurrence of a future event such as termination death, disability, or retirement. The accrued benefit used in these calculations is based on the personnel data supplied by the company. Hewitt Associates 2004 PRPV ALDOCXPIO3A 1212004 PacifiCorp Exhibit No. 13 page II of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Assets and Liabilities (continued) Comparison of Vested Accrued and All Accrued Benefits With Assets January 1,2004 January 1,2003 January 1,2004 Current Liability Assumed Interest Rate 55% Mortality Table 83 GAM 83 GAM 83 GAM Present Value of Vested Accrued Benefits Actives and Transfers 206 923 833 239 148 182 268 922 377 Vested Terminations 069,2 I 2 461 235 747 360 Retirees and Beneficiaries 594 872 666 551 651 223 609 939 324 Total 871 865 711 862 260 640 946 609 061 Present Value of All Accrued Benefits Actives and Transfers 222 645 861 255 893 035 298 049,429 Vested Terminations 069 212 461 235 747 360 Retirees and Beneficiaries 594 872 666 55 I ,651 ,223 609 939 324 Total 887 587 739 879 005 493 975 736 113 Market Value of Assets 711 292 602 800 645 958 800 645 958 Funded Ratio (Market to All Accrued)80.91.1%82. Indudes contributions accrued but not yet paid as of the calculation date. Hewitt Associates 2004 PRPV ALDOCXPIO3A J 2/2004 PacifiCorp Exhibit No. 13 page 12 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Assets and Liabilities (continued) Analysis of Change in Present Value of All Accrued Benefits Present Value of Accrued Benefits, 1/1/2003 $ 887 587 739 Change Due to Benefits Paid (107,794 803) Increase Due to Plan Experience, Including Population Changes 518,945 Increase Due to Additional Benefit Accrual 977,224 Increase Due to Interest 695 227 Increase Due to Assumption Changes Increase Due to Plan Amendments 21.161 Present Value of Accrued Benefits, 1/1/2004 $ 879,005 493 I There were no changes in assumptions since the previous valuation. 2 Liabilities for active participants increased because the IRC section 401 (a)(J 7) pay limit increased from $200,000 to $205,000.Hewitt Associates 2004 PRPV ALDOCXP/O3A 1212004 PacifiCorp Exhibit No. 13 page 13 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Contributions Funding Standard Account The minimum contribution is determined under Section 412 of the Internal Revenue Code (IRC) by maintaining a Funding Standard Account (FSA). The minimum contribution required is the amount necessary to make the FSA credits for the plan year equal to the FSA charges for the plan year. Contributions in excess of the minimum create a credit balance, which serves to reduce the minimum contribution requirement for the subsequent plan year. The FSA charges for the plan year are the sum of: (1 )Normal cost; (2)Amortization payments, representing amortization over 30-year periods for the initial unfunded actuarial liability, and for increases in the unfunded actuarial liability caused by plan amendments or the addition of new employee groups; over I a-year periods for the increases in the unfunded actuarial liability due to changes in actuarial assumptions; and over 5-year periods for increases in the unfunded actuarial liability resulting from actuarial losses; (3)Interest on the above items; and (4)An additional charge is applied for plans that are not sufficiently well-funded. The FSA credits for the plan year are the sum of: (5)Credit balance at the end of the prior plan year; (6)Contributions made; (7)Amortization payments, representing amortization over I a-year periods for decreases in the unfunded actuarial liability due to changes in actuarial assumptions and over 5-year periods for decreases in the unfunded actuarial liability resulting from actuarial gains; and (8)Interest on the above items. If the FSA credits are less than the FSA charges, a funding deficiency exists which is subject to an initial nondeductible tax of 100/0 with additional penalties if not corrected within a specified time frame. Hewitt Associates 2UO4 PRPV ALDOCXP/O3A 1212004 Contributions (continued) PacifiCorp Exhibit No. 13 page 14 of 53 CASE NO. P AC-O5- Witness Daniel J. Rosborough Funding Standard Account for Plan Year Ended December 31, 2003 Shown below is the calculation of the balance in the Funding Standard Account as of December 31 , 2003: (1)Charges (a) Nonnal Cost, 1/1 /2003 (b) Amortization Payment (on $483 498 005) (c) Interest as Applicable to End of Plan Year on (a) + (b) (d) Additional Funding Charge (e) Total (2)Credits (a) Credit Balance on 12/31/2002 (b) Amortization Payment (on $157 678 785) (c) 2003 Plan Year Contribution Made on April 15 , 2004 (d) Interest as Applicable to End of Plan Year on (a) + (b) + (c) (e) Full Funding Limit Credit (f) Total (3)Credit Balance, 12/31/2003, 2(f) (e) $ 16 124 685 198 253 385,835 $ 99,708 773 $ 45 002 030 672 637 555 151 533 973 $ 149,763 791 $ 50 055 018 Hewitt Associates 2004 PRPY ALDOCXPIO3A 12/2()O4 PacifiCorp Exhibit No. 13 page 15 of 53 CASE NO. PAC-O5- Witness Daniel 1. Rosborough Contributions (continued) Minimum Contribution (Funding Standard Account) for 2004 Plan Year The minimum contribution required for the plan year ending December 31 , 2004 is developed below: (1)Charges (a) Normal Cost, 1/1/2004 (b) Amortization Payment (on $440 663 372) (c) Interest as Applicable to End of Plan Year on (a) + (b) (d) Additional Funding Charge (e) Total $ 17 194 723 75,039,432 378,732 $ 99 612 887 (2)Credits (a) Credit Balance on 12/31/2003 (b) Amortization Payment (on $142 300 116) (c) Interest as Applicable to End of Plan Year on (a) + (b) (d) Full Funding Limit Credit (e) Total $ 50 055,018 36,4 72 200 922 177 $ 93,449,395 (3)Contribution Needed to Avoid Funding Deficiency, 12/31/2004, (1 )(e) - (2)(e), But Not Less Than Zero 163,492 (4)2004 Plan Year Contributions Expected to be Paid on April 15, 2005 $ 59 997 387 (5)Expected Credit Balance, 12/31/2004, (2)( e) - (1)( e) + (4)$ 53 833 895 Hewitt Associates 2004 PRPV ALDOCXPIO3A 12/2004 PacifiCorp Exhibit No. 13 page 16 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Con tributions (continued) Additional Funding Requirement for 2004 Plan Year Beginning with the 1995 plan year, the Retirement Protection Act of 1994 modified the additional funding charge that was introduced by the Pension Protection Act of 1987. This additional funding charge applies only to underfunded plans. In general, this charge can vary from a 4 to a 12-year amortization of the unfunded current liability, reduced by certain charges and credits in the funding standard account. If applicable, the additional funding charge results in an increased minimum required contribution. The additional funding requirement eligibility test (Gateway Test) determines if the plan s minimum contribution is subject to the additional charge for the plan year. For the 2004 plan year, the test compares current liabiHty to the actuarial value of assets on January 1 , 2004. The gateway current liability must be calculated using the 1983 Group Annuity Mortality table and the maximum permissible interest rate, which is 6.550/0 for 2004. If the gateway percentage (the ratio of assets to liabilities) is greater than 90%, then the plan is exempt from the additional funding charge. If the gateway percentage is greater than 80% but less than 900/0, then the plan may qualify for the "volatility rule exemption.To qualify, the plan must have gateway percentages greater than 90% in two consecutive years out of the immediately prior three years. For 2004, the gateway percentage is greater than 90%, and thus the plan is exempt from the additional funding charge. Additional Funding Requirement Eligibility Test (1) Gateway Current Liability, 1/1/2004 Based on Interest Rate of 6.550/0 975,736,113 (2)Actuarial Val ue of Assets, 1/1/2004 889,398 489 (3)Gateway Percentage, (2) -7- (1 )91.20/0 Prior Gateway Percentages Gateway Percentage, January 1 , 2003 88.4% Gateway Percentage, January 1 2002 100. Gateway Percentage, January 1 , 2001 90. Hewitt Associates 2004 PRPV ALDOCXP/O3A 1212004 PacifiCorp Exhibit No. 13 page 17 of 53 CASE NO. P AC-O5- Witness Daniel J. Rosborough Contributions (continued) Amortization Schedule for Minimum Required Contribution Source,Remaining Date of 2004 Date Began Initial Balance on Final Payment Amortization Amount ./)/2004 Payment Amount Charges Bases Combined, 1/1/1992 122 190 098 215 236 1/1/2010 953 881 Plan Amendment, 1/1/1993 391 031 446 506 1/1/2022 092,457 Plan Amendment, 1/1/1993 041 966 895 464 1/1/2022 335 Plan Amendment, 1/1/1995 303 956 847 299 1/1/2024 355 634 Assumption Change, 1/1/1995 256 554 430,576 1/1/2004 430 576 Plan Amendment, 1/1/1996 598 470 544 094 1/1/2025 387 Assumption Change, 1/1/1996 120 033 977 909 1/1/2005 546 222 Change in Limits, 1/1/1997 079 812 920 042 1/1/2026 171 421 Assumption Change, 1/1/1997 583 735 503 025 1/ 1/2006 210 796 Plan Amendment, 1/1/1997 384 224 277 888 1/1/2026 114 090 Change in Limits, 1/1/1998 712 903 1/1/2027 047 Plan Amendment, 1/1/1998 555 513 566 860 1/1/2027 281 047 Plan Amendment, 1/1/1998 109 091 542 102 158 067 1/1/2027 984 042 Assumption Change, 1/1/1999 616 718 890 215 1/1/2008 786,897 Plan Amendment, 1/1/2000 702 426 596 201 1/1/2029 222 377 Plan Amendment, 1/1/2000 481 417 462 494 1/1/2029 39,615 Actuarial Loss, 1/1/2000 777 840 806 743 1/1/2004 806,743 Plan Amendment, 1/1/2001 858,303 903 982 1/1/2030 786 117 Plan Amendment, 1/1/2002 964 860 873 700 1/1/2031 408 348 Plan Amendment, 1/1/2002 792 646 502 675 1/1/2031 298 908 Actuarial Loss, 1/1/2002 064 838 269 103 1/1/2006 174 557 Plan Amendment, 1/1/2003 574 458 525 250 1/1/2032 458 486 Actuarial Loss, 1/1/2003 955 679 258 501 1/1/2007 716 326 Plan Amendment, 1/1/2004 779,639 779 639 1/1/2033 123 Total 440 663,372 039 432 Credits Plan Amendment, 1/1/1994 413 393 117,404 1/1/2023 199 687 Asset Method Change, 1/1/1997 556 163 683 070 1/1/2006 227 678 De Minimus Merger ofPFS, 1/1/1998 964 832 972 567 1/1/2007 271 888 Method Change, 1/1/1999 141 826 250 471 931 1/1/2008 19,589 390 Plan Amendment, 1/1/2000 961 683 530 811 1/1/2029 902 014 Actuarial Gain, 1/1/2001 15,451 891 910 857 1/1/2005 588 330 Actuarial Gain, 1/1/2004 613 476 11,613,476 1/1/2008 693 213 Total 142 300 116 472 200 Hewitt Associates 2 0O4 PR PV ALDOCXP/O3A 12/2004 PacifiCorp Exhibit No. 13 page 18 of 53 CASE NO. P AC-O5- Witness Daniel 1. Rosborough Contributions (continued) Amortization Schedule for Minimum Required Contribution (continued) Equation of Balance, 1/1/2004 (1) Net Remaining Balance (2) Credit Balance (3) Reconciliation Account (Due to Prior Deficit Reduction Contribution) (4) Unfunded Actuarial Liability, (1) - (2) - (3), but not less than $0 $ 298,363 256 '" 055,018 135 425 961 $ 112 882 277 Hewitt Associates 2004 PRPY ALDOCXPIO3A ) 212004 PacifiCorp Exhibit No. 13 page 19 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Contributions (continued) Maximum Deductible Contribution The determination of the maximum deductible contribution for the tax year ending March 31 , 2004 is based upon the plan year beginning January 1 , 2004, as shown below: (1) Normal Cost 194 723 (2) Net Amortization Payment (on $146 330 858)192 234 (3)Interest to 3/31/2004 (4)Ten-year Maximum for 12 Months (5)Full Funding Limit (6)Lesser of (4) or (5) 747 739 134 696 (8)Greater of (6) and (7) 269 784 474 134 696 163 492 134 696 (7)Minimum Required Contribution as of 12/31/2004 (9)Projected Unfunded Current Liability, 3/31/2004, for Maximum Purposes $ 145 915 674 (10) Maximum Deductible Contribution, Greater of (8) and (9)$ 145 915 674 It is our understanding that all contributions reported on the Form 5500 for years prior to 2003 have been fully deducted. This calculation does not reflect the 25% of covered compensation limitation on deduction for contributions to overlapping plans. Hewitt Associates 2004 PRPV ALDOCXP/O3A 1212004 PacifiCorp Exhibit No. 13 page 20 of 53 CASE NO. P AC-E-O5- Witness Daniel J. Rosborough Contributions (continued) Funding Policy Contribution Effective January 1 , 2001 , the company adopted a new funding policy. The policy defines the contribution as of January 1 , 2001 to be the normal cost plus a five year amortization of the unfunded actuarial liability . In subsequent years, the difference between the actual unfunded actuarial liability and the expected unfunded liability is amortized over five years. In addition, increases or decreases in the unfunded actuarial liability as a result of changes in plan benefits, population coverages, assumptions, or actuarial methods are amortized over five years. Finally, the funding policy contribution will be no less than the minimum required contribution nor greater than the maximum deductible contribution. The calculation of the Funding Policy Contribution for the 2004 plan year is as follows: (7)Funding Policy Contribution greater of(4) and (5), but not to exceed (6) 194 723 358,413 4,444 251 997 387 163 492 145 915 674 997 387 (1) Normal Cost, 1/1/2004 (2)Amortization Payment (on $112 882 275) (3)Interest on (1) + (2) to 12/31/2004 (4)Five-Year Contribution, (1) + (2) + (3) (5)Minimum Contribution (6)Maximum Deductible Contribution Hewitt Associates 2004 PRPV ALDOCXP/U3A 12/2004 PacifiCorp Exhibit No, 13 page 21 of 53 CASE NO, PAC-05- Witness Daniel J. Rosborough Contributions (continued) Amortization Schedule for Funding Policy Contribution Remaining Source, Date Began Balance on Date of Annual Payment Amortization Initial Amount 1/1/2004 Final Payment Amount Initial Unfunded Actuarial Liability, 1/1/2001 398 502 363 410 1/1/2005 977 154 Spinoff, 1/31/2001 12,489 202 802 900 1/1/2006 896 297 Actuarial Loss, 1/1/2002 064 838 269 102 1/1/2006 174 557 Plan Amendments, 1/1/2002 757 506 397 944 1/1/2006 813 751 Actuarial Loss, 1/1/2003 955 679 258 501 1/1/2007 716 326 Plan Amendments, 1/1/2003 574,458 624 255 1/1/2007 292 740 Actuarial Gain, 1/1/2004 (11 613 476)(11 613 476)1/1/2008 693 213) Plan Amendments, 1/1/2004 779 639 779 639 1/1/2008 180 801 112 882 275 358,413 Hewitt Associates 2004 PRPV AL.DOCXP/03A 1212004 PacifiCorp Exhibit No. 13 page 22 of 53 CASE NO. P AC-05- Witness Daniel J. Rosborough Contributions (continued) Full Funding Limitation The Full Funding Limitation (FFL) is defined in IRC Section 412(c)(7) as the ERISA full funding limitation with a minimum equal to the RP A '94 full funding limitation. The ERISA FFL is the excess, if any, of the actuarial accrued liability (projected to the end of the year) over the lesser of the fair market value of assets and the actuarial value of assets. RPA ' requires the full funding limitation to be no smaller than the excess, if any, of 90% of the RP A ' current liability over the actuarial value of assets. For determining the ERISA full funding limitation for the minimum required contribution, an adjustment is made to reflect the Funding Standard Account Credit Balance, with interest to the end of the year at the funding interest rate. Adjusted Liability ERISA RP A ' FFL Override 001 193 528 974 358 538 100%90% 001 193,528 876 922 684 Projected Liability, 12/31/2004 Applicable Percentage Projected Assets for Maximum Purposes Lesser of Market Value and Actuarial Value 731,409 054 N/A Actuarial Value N/A For Determining Maximum Deductible Contribution 269 784 474 827 261 787 660 897 Carryover Contributions for Maximum (33 448 581 )(33 448 581 ) Credit Balance, 12/31/2004 059 419 290 395 312 N/A For Determining Minimum Required Contribution 212 3 16 Full Funding Limitation, 12/31/2004 For Maximum For Minimum Deductible Required Contribution Contribution 269 784,474 290 395 312 Hewitt Associates 2004 PRPV ALDOCXP/03A 1212004 PacifiCorp Exhibit No. 13 page 23 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Contributions (continued) Full Funding Limitation This page develops the end of year liabilities and assets for the determination of the full funding limitation. Interest to 12/31/2004 Actuarial Current Lia bility Liability (ERISA)(RPA '94) 00/0 55% $ 1 002 280 766 975 736 113 194 723 958 902 (96 000 000 )(90 000 000 ) 718 039 663 523 $ 1 001 193 528 876 922 684 Liabilities Interest Rate Liability, 1/1/2004 Expected Benefit Accrual for 2004 Expected Benefit Payments Projected Liability, 12/31/2004 Assets Market Value Actuarial Value Interest Rate 00/0 Assets, 1/1/2004 800 645 958 889 398 489 Expected Benefit Payments for 2004 (96 000 000 )(96 000 000 ) Interest to 12/31/2004 211 677 311 879 Projected Assets, 12/31/2004 764 857 635 860 710 368 Carryover Contributions 33,448 581 448 581 Projected Assets for Maximum 731,409 054 827 261 787 12/31/2004 Hewitt Associates 2004 PRI'V ALDOCXP/O3A 1212004 PacifiCorp Exhibit No. 13 page 24 of 53 CASE NO. PAC-E-o5- Witness Daniel J. Rosborough Experien ce Determination of the Actuarial Loss (Gain) for Funding Purposes If the experience of the plan had corresponded to that expected under the actuarial assumptions, the plan would have had no actuarial loss (gain). However, for the plan year just ended, the actual experience did vary from the assumptions used for the plan and the resulting actuarial loss (gain) is determined as follows: (1)Unfunded Actuarial Liability, 1/1/2003 (2)Normal Cost, 1/1/2003 (3)2003 Plan Year Contributions $ 155 422 782 124 685 555 151 (4)Interest at 8.000/0 on: (a) Unfunded Actuarial Liability (b) Normal Cost (c) Contributions (d) Total, (a) + (b) - (c) $ 12 433 823 289 975 (5)Expected Unfunded Actuarial Liability, (1) + (2) - (3) + (4)(d) $ 13.723.798 $ 123 716,114 (6)Actual Unfunded Actuarial Liability Before Changes, 1/1/2004 $ 112 102 638 (7)Actuarial Loss (Gain), (6) - (5)$ (11 613,476) Analysis of Experience There are two main sources of actuarial gain or loss during any year: liability experience and investment experience. During 2003, the experience from all sources created a net actuarial gain of $11 613,476. This gain was the result of an investment gain of$17 755,407 offset by a liability loss of $6 141 931 . The return during the 2003 plan year on the actuarial value of assets was 10.3%. The return during the 2003 plan year on the market value of assets was 21.2%. The history of return on market value of assets is shown on the following page. Hewitt Associates 2004 PRPV ALDOCXP/03A 12/2004 PacifiCorp Exhibit No. 13 page 25 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Experience (continued) Asset Return The table below shows the actual and assumed rates of return on the market value of assets over the past several years. The rates of return have been developed by assuming benefits and expenses are paid uniformly throughout the year and contributions made after the plan year are paid at the end of the year. The rate should be used in analyzing trends in actuarial experience, but is not appropriate for comparisons external to the actuarial report. The rates of return prior to 1996 are taken from the January I , 1996 valuation report by the previous actuary. Actual Cumulative Assumed Year Annual Average Return 2003 21.20/0 10.00% 2002 50/0 00% 2001 90/0 10.00% 2000 -0.4%12.00% 1999 28.4%13.00% 1998 17.3%12.00/0 50% 1997 15.9%1 11.50/0 50% 1996 16.11.1%75% 1995 21.8%10.75% 1994 -0.75% 1993 14.4010 10.75% 1992 10.3%00% 1991 19.11.00% 1990 9.3%00% 1989 21.12.20/0 00% 1988 14.8.3% 1987 3.2%8.30/0 1986 10.10.90/0 8.30/0 I The method for determining the annual rate of return changed effective January 1 , 1997, and the return under the new method is shown for all subsequent years.Hewitt Associates 2004 PRPV ALDOCXP/O3A 1212004 PacifiCorp Exhibit No. 13 page 26 of 53 CASE NO. P AC-05- Witness Daniel J. Rosborough Accounting Requirements Accounting Information Under SFAS No. The Financial Accounting Standards Board issued Statement No. 87 (Employers' Accounting for Pensions) and Statement No. 88 (Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits) in December 1985. The expense and disclosure portions of Statement No. 87 are effective for fiscal years beginning after December 15, 1986. The balance sheet and non-U .S. plans portion of Statement No. 87 are effective for fiscal years beginning after December 15 , 1988. Statement No. 88 is effective upon adoption of Statement No. 87. Statement of Financial Accounting Standards No. 132 (Employers' Disclosures about Pensions and Other Postretirement Benefits) was published in February 1998. Statement No. 132 amended the disclosure requirements of F AS Statements No. 87 and 88. The disclosure requirements under Statement No. 132 first became effective for fiscal years beginning after December 15 , 1997. Statement No. 132 was subsequently revised in December 2003. All but one of the new disclosure requirements under Statement No. 132 (revised 2003) are effective for fiscal years ending after December 15 2003. Disclosure of estimated future benefit payments is effective for fiscal years ending after June 15, 2004. PacifiCorp adopted the expense and disclosure portions of Statement No. 87 in 1987 based on a December 31 measurement date. The next several pages contain the results determined under Statement No. 87 , as amended by Statement No. 132, for footnote disclosure in the 2004 financial statements and net periodic pension cost determination for fiscal year 2005. Hewitt Associates 2004 PRPY AL.DOCXP!O~A 1212004 PacifiCorp Exhibit No. 13 page 27 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Accounting Requirements (continued) Financial Position During 2004 Under SFAS No. 87 Unrecognized Net Transition (Asset) Obligation Disclosed March 31, 2004 (1,181 706 000) 733,243,000 (448,463 000) 369 209 000 815 000 361 000 Projected Benefit Obligation Plan Assets at Fair Value Funded Status Unrecognized Net (Gain) Loss Unrecognized Prior Service Cost Prepajd (Accrued) Pensjon Cost (46 078 000) Net Periodic Pension Cost 4/1/2004 - 3/31/2005 Expected Benefit Payments 900 000 857 000 (77 670 000) 384 000 897 000 407 000 775 000 555 000 000 000 Service Cost Component Interest Cost Component Expected Return on Assets Amortization of: Unrecognized Net (Gain) Loss Unrecognized Prior Service Cost Unrecognized Net (Asset) Obligation Net Periodic Pension Cost (Income) Expected Employer Contributions Hewitt Associates 2004 PRPV ALDOCXP/O3A ) 2/2004 PacifiCorp Exhibit No. 13 page 28 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Accounting Requirements (continued) Determination of Market Related Valoe of Assets Market Related Value of Assets have been determined as the market value of assets adjusted to spread asset gains and losses after January 1 , 2000 over five measurement periods. This method of determining assets is an acceptable method under current F AS 87 and is designed to reflect a relatively stable, long-term growth of assets. January 1,2004 (1) (2) Market value of assets, January 1 2004 Amount of Asset Gain/(Loss) Deferred (a) 20% of Gain/(Loss) from April 1 2000 December 31 2000 of $(30 862 971) 733,243 461 $ (6 172 594) (b) 40% of Gain/(Loss) from January 1 2001 to December 31 , 2001 of$(247 483 829) (c) 60% of Gain/(Loss) from January 1 2002 to December 31 , 2002 of$(152 823 874) (98 993 532) (91 694 324) (d) 80% of Gain/(Loss) from January 1 , 2003 to December 31 , 2003 of$47 559 993 (e) Total 38.047.994 (3)Market related value of assets, January 1 , 2004 (1) - (2) (e) $ 892 055,917 (Gain)/Loss Subject to Amortization for 4/1/2004 - 3/31/2005 Corridor Test (a) Total (Gain)/Loss (b) Nonamortizable Portion of Asset (Gain)/Loss (c) (Gain)/Loss Subject to Corridor, (a) - (b) 369 209 000 158.812.456 210 396 544 Corridor Limit (d) 10% of the Greater of Projected Benefit Obligation and Market- Related Value of Assets (e) (Gain)/Loss Subject to Amortization, Excess of (c) Over (d) (t) Average Remaining Service (Years) (g) Amortization Payment (e) -7- (t) 118 170 600 225 944 384 177 Hewitt Associates 2004 PRPV ALDOCXPIO3A 1212004 PacifiCorp Exhibit No. 13 page 29 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Accounting Requirements (continued) Alternative Amortization Method As permitted under Paragraph 26 of Statement No. 87, the amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period employees expected to receive benefits under the Plan. Initial Balance Remaining Annual Net Date 4/1/2004 Period Amortization Payment Transition Obligation/Assets UP&L Transition 1/1/1987 $ 12 622 108 611 470 DCP Transition 1/1/1987 738 806 795 397 $ 24 360 914 8,406 867 Prior Service Costs Plan Change Local 57 4/1 /2000 $ (5 912 751)(739 094) COLA 4/1 /2002 727 272 636 364 814 521 897 270 (Gain)/Loss 2004 Loss 4/1/2004 $ 92 225 944 11.384 177 Hewitt Associates 2004 PRPV ALDOCXPIO3A 12/2004 PacifiCorp Exhibit No. 13 page 30 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Personnel Information This section contains data on personnel submitted for the actuarial valuation. The information is organized to be useful for a variety of purposes: . Counts of plan participants and averages of age and service provide quick comparisons of the differences from year to year in the employee group. .. . . The detailed information on personnel by age and service isolates the number of participants eligible for specific employee benefits. For example, if participants with 15 or more years of, service are to receive additional vacation, this distribution indicates the number of participants currently eligible for additional vacation and the number potentially becoming eligible for additional vacation in each of the next several years. The actuarial valuation was based on personnel information from company records. The following table shows the number of participants by category and the number of vested active participants: Personnel Summary January 1 2003 January 1, 2004 Active Participants Vested Subtotal 3,429 896 325 593 928 521 Nonvested Vested Tenninations 1 ,224 1 ,344 Retirees and Beneficiaries 407 254 Total Number of Participants 956 119 Hewitt Associates 2004 PRPV ALDOCXP/OJA 12/2004 PacifiCorp Exhibit No. 13 page 31 of 53 CASE NO. P AC-05- Witness Daniel J. Rosborough Personnel Information (continued) Personnel Characteristics of Active Participants The following characteristics of active participants, both male and female, are presented: number of employees, average age, and average service. January 1,2003 January 1, 2004 Number of Active Participants Males Females Total 249 076 325 403 118 521 Average Present Age Males Females Total 46. 42. 45. 47. 43.4 46.4 Average Years of Service Males Females Total 17. 10. 15. 17.2 11.1 15. Com pensation Total Average $ 284 667 452 $ 65 819 314 691 126 607 Valuation Compensation Total Average $ 296 988 646 $ 68 668 320 201 382 825 Hewitt Associates 2004 PRPV ALDOCXP/O3A 12/2004 PacifiCorp Exhibit No. 13 page 32 of 53 CASE NO. P AC-05- Witness Daniel J. Rosborough Personnel Information (continued) Personnel Characteristics of Inactive Participants January 1,2003 January 1, 2004 Terminated Vested Participants Number A verage Age Average Month1y Benefit 1 ,224 50. $ 1 067 1 ,344 50. 942 Retirees and Beneficiaries Number A verage Age A verage Monthly Benefit 407 70. $ 1 294 254 71.4 $ 1 292 I Includes OCP Benefit. Hewitt Associates 2004 PRPV ALDOCXP/03A 12/2004 YEARS OF SERVI~~E 1:; 1 :;':'~~ ~~;i;;DISTRIBUTION OF PERSONNEL t.:.J ~~;;;:; BY AGE AND YEARS OF SERVICE .;:.;.;~~.;.~.: PACIFICORP RETIREMENT PLAN ACTIVE PARTICIPANTS;.z':' ",:,,:.; JO'.';:::":This distribution shows personnel by age last birthday and completed years of service as of 0110112004. For instance, the cell at age 21 and 1 year of service contains 1 employee. Individual careers progress along a diagonal (stair-step) line; e.g., all employees hired at age 25 appear on the diagonal which starts at age 25 with 0 service and runs through 26 and 1, 27 and 2. etc. The average age of this group is 46.4 and the average service is 15. :i,;.~~ ::.;;:;is ::';1(. t:i;:'~:;: ,i(;:,,~'j,: ~'~':- :~;~;~S "~.. :"X :.~. ;"X~ ~:,:~. t.:o!:,~ :~:.:r-: ;~1.ii5: .",-~.;.(.:';"j,~ o;,,";~ ~~;~ v;,,;' ",:. 5 r,~.- ,;, z.;.; .;(i~' ':..:,,:,~~:".: 1 iXi;.' ~;:.:, ;,)i:, 1 .., l' ,I;,:;':; :::H:","""-i',':c-':., :~d:.~, :,:'.;~?: 'i:;::!~ ;,~,~;::,~:.~...;, t:,~':.';;;~fi~; .:~".~.-:;~.:;~~.~.,,-;;:;:. 200 223 64 95 '122 109 68 59 52 115 85 90 140 44 76 87 79 69 24 14 28 290 363 108 171 209 188 137 83SERVICE :(;6.,'ZO::-. :.':'~': 41 51 126 87 90 82 199 188 214167 142 123 83 87 77 73 48 28 20 25 20 23 25 30 34 26 19 41 25 24 19 11 11 4 65 71 64 76 156 121 116 101 240 213 248 191 161 134 94 91 84 78 49 28 22 15 20 25 30 x!!~~ PacifiCorp Exhibit No. 13 page 33 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough u.: "ti" 2:~~: ~;:-;:;,'~"-'"~:;.,'.! I:,::'~' ~J;t:):, Hewitt Associates 2004 PRPV AI.,()OCXP/OJA 1212004 PacifiCorp Exhibit No. 13 page 34 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Distribution of Personnel by Age PACIFICORP RETIREMENT PLAN ACTIVE PARTICIPANTS Number 229 325 396 649 089 1,131 529 III 4,521 Average 273 49,766 60,349 68,656 72,228 75,078 72,943 68,773 536 52,413 69,607Pay Average 7.4 12.18.2 \.l 22.17.15.Serv ice De-lail Of Employees 55 & Over Age 66+ ------------------- Number 235 142 Average 69.594 67,084 67,119 71,748 69,749 690 685 60,999 47,685 57,702 843 50,676 -..--.....------------------ Average 23.2\.7 17.24.18.19.16.17.15.12.2Service 25% 20% 15% 10% Age:15-20~25-35-40-50-55-60-Total65+45-30- Hewiu Associates 2004 PRPVALDOCXPXJ3A 1212004 PacifiCorp Exhibit No. 13 page 35 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Distribution Of Personnel By Expected Service At Age 65 :Based U pOD Personnel Age 55 And Over) PACIFICORP RETIREMENT PLAN ACTIVE PARTICIPANTS 25% 20% 15% 10% Service:10-15-20-25-30-35-40-45+Total Average Pay A verage Service At A~e 65* 134 118 652 47,454 60,938 538 62,743 149 187 543 938 495 69,706 66,558 12.17.22.27.32.37.42.46.28.2 Number 'P Or CurrentAge If Older Hewitt Associates 2004.pRPV Al_IXJCXP~)3r\ I2flOl'14 verage Compensation By Age $77,000 PacltjCorp Exhibit No. 13 page 36 of 53 CASE NO. P AC-05- Witness Daniel J. Rosborough PACIFICORP RETIREMENT PLAN ACTIVE PARTICIPANTS $70,000 $63,000 I $56,000 $49,000 I / $42,000 -- ----- $35.000 I -------,----._---~-- Age: 20-25- 29 Hewitt Associates ---,----- 30-35-40-44 ----,.-- 45-50-55-60- 2004 PRPV AL,DOCXPI1J3r\ 1212004 PacifiCorp Exhibit No. 13 page 37 of 53 CASE NO. PAC-05- Witness Daniel 1. Rosborough A verage Compensation By Service P A CIFI CO RP RETIRElVIENT PLAN ACTIVE PARTICIPANTS $81,000 $69,000 $75 $51,000 --\- $63,000 ---------- $57.000 -----,------ $45,000 -------- r-----._------ , ---'-.'--.----,-'.,..---------.,- 40- ------ Service:10-15-20-25-30-35- Hewitt Associates 20()4 PRPV AUXX:XPIO3,\ 1212004 PacifiCorp Exhibit No. 13 page 38 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Plan Provisions Effective Date Amended and restated effective January 1, 1994; most recently amended effective December 31 , 2002. Participation Any employee, other than a casual or leased employee, of a participating company shall become a participant on the first of the month following the completion of one-year of service and attainment of age 21. Eligibility for Benefits Normal Attainment of age 65. Early Attainment of age 55 and the completion of 5 years of servIce; or At least 75 points (age plus years of service). Deferred Completion of 5 years of service. Disability Completion of 10 years of service, and disabled. Preretirement Death Completion of 5 years of service. Postponed Retirement after attainment of age 65. Hewitt Associates 2004 PRPV ALDOCXP/O3A 1212004 Plan Provisions (con6nued) PacifiCorp Exhibit No. 13 page 39 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Retirement Benefits Normal Monthly benefit equal to the greatest of (1), (2), (3), (4), and (5); plus the OCP benefit. (1)The Basic Benefit plus the Excess Benefit, plus the Additional Service Benefit; Basic Benefit =1.30/0 of Final Average Pay times Benefit Years up to a maximum of 30. Excess Benefit =650/0 of Final Average Pay in excess of Social Security Covered Compensation, times Benefit Years up to a maximum of30. Additional 0.25% of Final Average Pay times Service Benefit = Benefit Years in excess of 30. (2)Monthly benefit under the Utah Power and Light Company Retirement Income Plan on the New Formula Oate as follows: . 12/31/90 for union employees; or . 12/31/89 for non-union employees; or . the date of transfer from union to non-union status for employees making this transfer during 1990. (3)Short service factor (SSF) x Benefit Years up to 20 plus the long service factor (LSF) x Benefit Years in excess of 20, where: Annual Salary Rate on New Formula Date SSF LSF Under $25 000 $35 $15 From $25 000 to $35,000 $50 $20 Over $35 000 $60 $25 (4)Monthly benefit earned under other groups that were merged with the Plan. Hewitt Associates 2004 PRPY ALDOCXP/O3A J 2/2004 Plan Provisions (continued) PacifiCorp Exhibit No. 13 page 40 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Retirement Benefits (continued) Early (5)For members of the IBEW Local 57 who are age 50 or older and in active status on July 1 , 1999: 67% of Final Average Pay times Benefit Years up to a maximum of30 plus 0.50% of Final Average Pay times Benefit Years in excess of 30. The DCP benefit is the monthly benefit payable to former participants of the Utah Power and Light Deferred Compensation Plan. A benefit computed in the same manner as a normal retirement benefit based on compensation and benefit years at the time of termination. This benefit is paid without reduction if deferred to age 65 or reduced if payments commence before age 65. The applicable early retirement factors vary depending upon which benefit formula predominates. For Formula (1), the Basic Benefit is reduced under the Higher Percentage table if the participant terminates with 75 or more points, otherwise the Lower Percentage table is used; the Excess Benefit is reduced under the Lower Percentage Table and the Additional Service Benefit is reduced under the Higher Percentage table. Age at Benefit Starting Date Higher Percentage Lower Percentage 100.00%92.000/0 100.00%84.00% 100.00%76.00% 96.00%72.000/0 92.00%68.00% 88.00%64.00% 84.00%60.000/0 80.00%56.00% 76.00%52.00% 72.00%48.000/0 64.63%43.09% 58.09%38.730/0 52.29%34.86% 47.12%31.420/0 42.52%28.35% Hewitt Associates 2004 PRPV ALDOCXP/O3A 12/2004 Plan Provisions (continued) PacifiCorp Exhibit No. 13 page 41 of 53 CASE NO. P AC-05- Witness Daniel J. Rosborough Retirement Benefits continued) Deferred Vested Disability For Formulas (2) and (5), the reduction factor is 40/0 per year below age 65 if the participant has less than 30 years of service; otherwise, the reduction is 40/0 per year below age 64. For retirement between ages 50 and 55 , the reduction factors are the same as the terminated vested factors. For Formula (3), the reduction factors are based on the factors in the Higher Percentage table listed above. For Formula (4), the reduction is based upon the applicable early retirement factor for the frozen benefit that was merged with the Plan. The DCP benefit is also reduced for early commencement under a schedule that approximates actuarial reductions from age 65. A benefit computed in the same manner as a normal retirement benefit based on final average compensation and benefit years at the time of termination. This benefit is paid without reduction at age 65 or actuarially reduced for early commencement. A benefit computed in the same manner as a normal retirement benefit based on final average pay and benefit years at the time of disability. This benefit is paid without reduction if deferred to age 65 or reduced in accordance with the early retirement table if receipt is commenced earlier. Hewitt Associates 2004 PRPY ALDOCXPIO3A 1212004 Plan Provisions (continued) PacifiCorp Exhibit No. 13 page 42 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Retirement Benefits continued) Preretirement Death Postponed Retirement If death occurs before age 55, the vested participant's spouse will be eligible to begin receiving a life annuity or lump sum immediately or may defer payment until the time the participant would have become age 55. If deferred to age 55, the benefit amount will be equal to the amount the spouse would have received if the participant had separated from service on the date of death or on the actual date of termination, if earlier, survived until age 55, and then died with a 50% joint and survivor benefit in effect. The spouse of a participant who dies while employed after age 55 or after completing 30 years of service shall receive a life annuity equal to the benefit which would have been paid if the participant had retired on the day before his death with a 50% joint and survivor benefit in effect. In the case of death of a participant with 30 years of service before age , 55, the participant is assumed to be age 55 in determining the applicable early retirement reduction factors. Preretirement death benefits of tenninated vested participants are the same as those for active participants except that the benefit is reduced for the cost of death protection after the date of termination of employment. Participants may elect out of this coverage at the time of termination with spousal consent. A benefit computed in the same manner as a normal retirement benefit. Hewitt Associates 2004 PRPV ALDOCXP/O3A 1212004 Plan Provisions (continued) PacifiCorp Exhibit No. 13 page 43 of 53 CASE NO. P AC-05- Witness Daniel J. Rosborough Definitions Year of Service Benefit Year Com pensation Final Average Pay Social Security Covered Compensation Plan Year 12-month period during which an employee is in continuous employment with the company or an affiliate. Years of service while a participant. Any participants who complete less than a full year of service receive fractional credit. Compensation includes all nondeferred compensation reportable on Form W-2 except the amounts shown below plus salary reduction amounts elected by the participant under a qualified cash or deferred arrangement or a cafeteria plan. Excluded items are: . Bonuses in excess of 10 percent of base salary, determined before reductions in base salary for nonqualified deferred compensation; . Overtime, premium pay, shift and location differentials; . Imputed income from expense reimbursement or fringe benefits; Commissions that are in lieu of participation in a bonus program or that do not accompany a discounted salary rate; . Other items such as prizes and awards, severance payments, long-term incentive pay. As of January 1 , 2004, compensation for purposes of calculating qualified plan benefits is limited to $205 000 in accordance with IRC section 401 (a)(l7). A verage monthly compensation in the 60 highest consecutive calendar months of the last 120 calendar months of employment. The covered compensation amount for a person with the participant's Social Security retirement age. January 1 to December 31. Hewitt Associates 2004 PRPV ALDOCXP/O3A 12/2004 Plan Provisions (continued) PacifiCorp Exhibit No. 13 page 44 of 53 CASE NO. PAC-O5- Witness Daniel J. Rosborough Contributions Normal Form of Benefits Optional Annuity Forms of Benefit Lump Sum Benefit Cost of Living Adjustment The plan is paid for by the company. No participant contributions are allowed other than amounts previously transferred from plans that merged with the Plan. An unmarried member receives benefits payable as a single life annuity. A married participant retiring from active or disabled status receives a 50% joint and survivor benefit which is the actuarial equivalent of a life annuity payment. All other benefits are provided on an actuarial equivalent basis to a life annuity. Level income option , 1000/0 or 500/0 joint and survivor options, 10-year certain and life option. All optional forms are actuarially equivalent to the single life annuity based upon: Interest:00% Mortality:1984 Unisex Pension Mortality Table. The actuarially equivalent lump sum benefit is paid: . automatically if the amount is not over $5 000; or . upon request. The lump sum is based upon: 30-year Treasury Rate for the September preceding the year in which the lump sum is paid. Mortality: 1994 Group Annuity Reserving Table per Revenue Ruling 2001-62. Interest: The amount payable to each participant with no service after December 31 , 1987 is increased each January 1 by the lesserof (1) (2) 2%; or The percentage increase in the U. Consumer Price Index (all items) during the 12 months ending with the September index preceding the adjustment date. Effective May 1 , 2002, an ad hoc COLA was granted to certain pre-1996 retirees. Hewitt Associates 20U4 PRPV ALDOCXPIO3A 1212004 Actuarial Assum ptions PacifiCorp Exhibit No. 13 page 45 of CASE NO. PAC-O5- Witness Daniel J. Rosborough Factor Mortality Withdrawal Before Retirement Retirement Disability Investment Return Salary Scale Social Security Taxable Wage Base Increase Maximum Benefit Limitations Lump Sum Interest Rate Assumption 1983 Group Annuity Mortality Table. Table A. Table B. Table C. Cash Contribution: 000/0 per year (net of investment expenses and net of 250/0 for administrative expenses) F AS 87 Expense for fiscal year ending March 31,2005: Discount Rate: 6.250/0 Long-term Rate of return: 8.75% (net of investment expenses and net of 0.25% for administrative expenses) Cash Contribution: 00/0 per year. Expense: 0% per year. Cash Contribution: 50/0 per year. Expense: 00/0 per year. Cash Contribution: Limit at Social Security Normal Retirement Age for 2004 is $165 000; no increase permitted under IRC section 412. Expense: The 2004 IRC section 415 annual benefit limit of $165 000 is assumed to increase at 4% per year thereafter (preretirement and postemployment increases reflected). Cash Contribution: 150 basis points less than the Investment Return assumption. Expense: 100 basis points less than the Discount Rate. Hewitt Associates 20U4 PRPV ALDOCXP/O3A 1212004 PacifiCorp Exhibit No. 13 page 46 of 53 CASE NO. P AC-05- Witness Daniel J. Rosborough Actuarial Assumptions (continued) Factor Assumption Lump Sum Mortality 1994 GAR as modified for use in Revenue Ruling 2001-62. Percent Electing Lump Sum 50% of normal and eil'rly retirement eligible active employees are assumed to elect a lump sum when they retire. All pre-retirement, post-decrement benefits are assumed to be paid as a lump sum. Compensation Limitations Cash Contribution: Limit for 2004 is $205 000; no increase permitted under IRC section 412. Expense: The 2004 IRC section 401 (a)(17) annual compensation limitation of $205 000 is increased 4% per year thereafter. Death Benefits 800/0 of participants are assumed to be married. Males are assumed to be 3 years older than their spouses. Valuation of Assets The market value is written up at the expected return on asset assumption (80/0 for Cash Contribution, 8.750/0 for Expense) and 200/0 of each of the preceding five years' asset gains or losses are captured. For Cash Contribution, the asset value detennined under the method will be adjusted be no greater than 120% and no less than 80% of the fair market value. Actuarial Method Projected unit credit cost method. Hewitt Associates 2004 PRPV ALDOCXPIO1A 1212004 PacifiCorp Exhibit No. 13 page 47 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Actuarial Assumptions (continued) Table A Rates of Withdrawal Male and Female Age Factor Age Factor 13250 05250 12800 04900 0.12350 04550 O. 11900 04200 11450 03850 11000 03500 10550 03150 10100 02800 09650 02450 09200 02100 08750 01750 08400 01400 08050 01050 07700 00700 07350 00350 07000 00000 06650 56+00000 06300 05950 05600 Hewitt Associates 2004 PRPV ALDOCXP/O3A 12/20()4 PacifiCorp Exhibit No. 13 page 48 of CASE NO. P AC-O5- Witness Daniel J. Rosborough Actuarial Assumptions (continued) Table B Rates of Retirement Male and Female Age Factor 25% 35% 10% 10% 65 and over 100% Hewitt Associates 2004 PRPV ALDOCXP/O3A 12/2004 PacifiCorp Exhibit No. 13 page 49 of 53 CASE NO. P AC-05- Witness Daniel J. Rosborough Actuarial Assumptions (continued) Table C Rates of Disability Male and Female Age Factor Age Factor 00060 00220 00065 00259 00070 00298 00075 00337 00080 00376 00085 00415 00090 00454 00095 00493 00100 00532 00105 00571 00110 00610 00121 00712 00132 00814 00143 00916 00154 01018 00165 01120 00176 01222 00187 01324 00198 01426 00209 01528 01630 61+00000 Hewitt Associates 2004 PRPY ALDOCXP/03A 12/2004 PacifiCorp Exhibit No. 13 page 50 of 53 CASE NO. PAC-OS- Witness Daniel J. Rosborough Actuarial Assumptions (continued) Discussion of Actuarial Assumptions and Methods Ultimate Cost The ultimate cost of a pension plan can be measured only when the obligation to all participants has been fully discharged. The cost will then be: The benefits paid from the plan plus administrative expenses less investment gains plus investment losses. The actuarial process assigns pension costs to the current year by estimating, based on both current and future service, the benefits to be paid to current plan participants. These estimates are determined through an actuarial valuation which uses three basic elements to project payments from the plan: . Benefit provisions of the plan. . Data on the present work force, terminated vested, and retired employees. . Certain predictions (actuarial assumptions) about the future as it applies to this work force. Actuarial Assumptions The first step in the actuarial process is to determine the magnitude of the pension liability by determining the benefits expected to be paid. To determine how many employees will become eligible for benefits, what benefits will be paid, and how long benefits wi11 be paid, it is necessary to make some economic and demographic predictions (usua11y called actuarial assumptions) such as: An assumed retirement age predicting when employees will begin to receive retirement benefits. . A mortality rate predicting the number of employees who will die before retirement and the duration of benefit payments after retirement. . A withdrawal rate predicting the number of employees who will leave the work force before retirement. (Sometimes certain kinds of withdrawal such as disabilities are predicted separately. . If the benefits are based on compensation, an assumed rate of pay increases predicting employees compensation in future years. Hewitt Associates 2004 PRPY ALDOCXP/O3A 1212004 PacifiCorp Exhibit No. 13 page 51 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Actuarial Assumptions (continued) These assumptions are applied to the data for each employee to predict the amount of benefits expected to be paid each year in the future. The total future benefit payments in each year are then discounted at a selected interest rate to determine the current amount which with future investment return, wil1 be sufficient to pay the expected benefits as they become payable. The discounted payments are usually called the present value of future benefits. Total Future Benefit Payments Future Investment Retu rn Present Value of Future Benefits Actuarial Method The actuarial method is the mathematical process which determines the contributions required to pay for the present value of future benefits, by allocating costs to the years of an employee s career. Some costs are allocated to future years in an employee s career (future service liability) and other costs are allocated to past years (past service liability). Total Future Benefit Payments Future Investment Retu rn Present Value of Future Benefits Future Service Liabili Past Service Liabili There is a fair amount of flexibility in this allocation of costs between future and past. Some methods assign relatively little cost to past years in an employee s career, others assign a more significant portion to the past. Al1 methods produce allocations of contributions which will accumulate to amount sufficient to provide the benefits at retirement. However, the various methods produce widely different al1ocation of contributions to past and future employment. Hewitt Associates 2004 PRPV ALDOCXP/O3A 12/2004 PacifiCorp Exhibit No. 13 page 52 of 53 CASE NO. P AC-05- Witness Daniel 1. Rosborough Actuarial Assumptions (continued) Many actuarial methods are acceptable under the Employee Retirement Income Security Act of 1974 (ERISA) for calculating cash contributions. However, once an actuarial method has been selected and filed for minimum funding purposes, a change in method may be made only if approved by the Secretary of the Treasury or his delegate. The Secretary has granted automatic approval for some changes in actuarial method. Usual terminology refers to the future allocation as the present value offuture normal costs and the past allocation as the accrued liability. The portion of the accrued liability which is not covered by the assets of the plan is called the unfunded accrued liability. The value of the assets used in the actuarial process under ERISA must take into account fair market value, but this may be done in a way which eliminates much of the short-term fluctuation of market value from one valuation to the next. Total Future Benefit Payments Future Investment Retu rn Present Value of Future Benefits Future Service Liabili Past Service Liabili Present Value of Future Normal Costs Unfunded Accrued Liability Assets For the current year, the method produces a normal cost. Payment of the normal cost each year would eventually discharge all future service liability. Hewitt Associates 2004 PRPV ALDOCXPIO3A 1212004 PacifiCorp Exhibit No. 13 page 53 of 53 CASE NO. PAC-05- Witness Daniel J. Rosborough Actuarial Assumptions (continued) The unfunded accrued liability must also be discharged, and this is done by an amortization payment. The amortization payment is flexible, and may be increased or decreased within certain allowable bounds. The sum of both the normal cost and the amortization payment is the current year s pension cost. Total Future Benefit Payments Future Investment Return Present Value of Future Benefits Future Service Liabili Past Service Liabili Present Value of Future Normal Costs Unfunded Accrued Liability Assets Normal Cost Amortization Payment Current Year Contribution Valuations to determine contributions to the ongoing plan use the Projected Unit Credit Cost Method. Under this actuarial method, the cost attributed to past service (past service liability or accrued liability) is determined on the valuation date as the present value of the benefits actually earned (accrued) as of that date. The unfunded accrued liability is the amount by which the accrued liability exceeds the valuation assets. The current year normal cost determined on the valuation date, is the amount required to fund the benefit expected to be earned in the current year. Because the value of the future service liability is not used in the calculation of normal cost, it is often omitted from the actuarial report which may show only an a~crued liability. The calculations for any disability, termination or death benefits take into consideration that the entitlement to benefits may begin at various future times. Each age prior to retirement has associated with it appropriate probabilities of disability, termination and death. Hewitt Associates 2004 PRPV ALDOCXP/O3A 12/2004