ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) (In thousands of dollars, except per share amounts)
Accounting for pensions and other post-retirement benefits requires an extensive use of assumptions about the discount rate, expected return on plan assets, the rate of future compensation increases received by the Company’s employees, mortality, turnover and medical costs. Each assumption is reviewed annually with assistance from the Company’s actuarial consultant who provides guidance in establishing the assumptions. The assumptions are selected to represent the average expected experience over time and may differ in any one year from actual experience due to changes in capital markets and the overall economy. These differences will impact the amount of pension and other post-retirement benefit expense that the Company recognizes.
The significant assumptions related to the Company’s benefit obligations are as follows:
Other Post- retirement Benefits
Pension Benefits
2025
2024
2025
2024
Weighted Average Assumptions Used to Determine Benefit Obligations as of December 31, Discount rate
5.45% 5.64% 3.0-4.0% 3.0-4.0%
5.57% 5.65%
Rate of compensation increase
n/a
n/a
Assumed Health Care Cost Trend Rates Used to Determine Benefit Obligations as of December 31, Health care cost trend rate Rate to which the cost trend is assumed to decline (the ultimate trend rate)
n/a n/a n/a
n/a 6.50% 6.50%
n/a n/a
5.0% 5.0%
Year that the rate reaches the ultimate trend rate
2032
2032
n/a – Assumption is not applicable.
The significant assumptions related to the Company’s net periodic benefit costs are as follows:
Pension Benefits
Other Post-retirement Benefits
2025
2024
2023
2025
2024
2023
Weighted Average Assumptions Used to Determine Net Periodic Benefit Costs for Years Ended December 31, Discount rate
5.64% 6.00%
5.17% 5.51% 6.20% 6.80%
5.65%
5.09%
5.45%
Expected return on plan assets Rate of compensation increase
3.78%-6.0% 3.91%-6.2% 4.28%-6.8%
3.0-4.0% 3.0-4.0% 3.0-4.0%
n/a
n/a
n/a
Assumed Health Care Cost Trend Rates Used to Determine Net Periodic Benefit Costs for Years Ended December 31, Health care cost trend rate Rate to which the cost trend is assumed to decline (the ultimate trend rate) Year that the rate reaches the ultimate trend rate
n/a
n/a
n/a
6.50%
6.25%
6.5%
n/a n/a
n/a n/a
n/a n/a
5.0% 2032
5.0% 2029
5.0% 2029
n/a – Assumption is not applicable .
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