Table of Contents EL PASO ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS The total amount recognized in net periodic benefit cost and other comprehensive income are presented below (in thousands): Years Ended December 31, 2019 2018 2017 Total recognized in net periodic benefit cost and other comprehensive income $ (867 ) $ (1,251 ) $ (7,534 ) 2019 2018 2017 Discount rate: Benefit obligation 4.44% 3.79% 4.37% Service cost 4.51 % 3.87 % 4.59 % Interest cost 4.15% 3.38% 3.76% Expected long-term return on plan assets 6.00 % 6.12 % 4.875 % Health care cost trend rates: Initial Pre-65 medical 6.0% 6.25% 6.5% Post-65 medical 4.5 % 4.5 % 4.5 % Pre-65 drug 7.0% 7.25% 7.5% Post-65 drug 8.5 % 10.0 % 10.5 % Ultimate 4.5% 4.5% 4.5% Year ultimate reached (a) 2026 2026 2026 December 31, 2019 Equity securities 45.4 % Fixed income 39.3% Alternative investments 15.3 % Total 100.0% The OPEB Plan invests the majority of its plan assets in institutional funds which includes a diversified portfolio of domestic and international equity securities and fixed income securities. Alternative investments of the OPEB Plan are comprised of a real estate limited partnership and equity securities of real estate companies, primarily in real estate investment 106 The Company's overall expected long-term rate of return on assets is 7.85%, as of January 1, 2020, on a pre-tax basis. The expected long-term rate of return on assets on an after-tax basis is 6.00% as of January 1, 2020. The trust's tax rate was assumed to be 23.60% at January 1, 2019 and January 1, 2020. The expected long-term rate of return is based on the after-tax weighted average of the expected returns on investments based upon the target asset allocation. The Company’s target allocations for the plan’s assets are presented below: Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. The effect of a 1% change in these assumed health care cost trend rates would increase or decrease the December 31, 2019 benefit obligation by $10.6 million or $8.3 million, respectively. In addition, a 1% change in said rate would increase or decrease the aggregate 2019 service and interest cost components of the net periodic benefit cost by $1.0 million or $0.8 million, respectively. (a) Pre-65 medical reaches the ultimate trend rate in 2025. Additionally, the Post-65 medical trend is assumed to be 4.50% for all years into the future. The amount in AOCI that is expected to be recognized as a component of net periodic benefit cost during 2020 is a prior service benefit of $3.1 million and a net gain of $2.4 million. The following are the weighted-average actuarial assumptions used to determine the net periodic benefit cost for the twelve months ended December 31: