Allegheny Power 2013 Annual Report Download - page 97
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82
3. PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS
FirstEnergy provides noncontributory qualified defined benefit pension plans that cover substantially all of its employees and non-
qualified pension plans that cover certain employees. The plans provide defined benefits based on years of service and compensation
levels. In addition, FirstEnergy provides a minimum amount of noncontributory life insurance to retired employees in addition to
optional contributory insurance. Health care benefits, which include certain employee contributions, deductibles and co-payments,
are also available upon retirement to certain employees, their dependents and, under certain circumstances, their survivors.
FirstEnergy recognizes the expected cost of providing pensions and OPEB to employees and their beneficiaries and covered
dependents from the time employees are hired until they become eligible to receive those benefits. FirstEnergy also has obligations
to former or inactive employees after employment, but before retirement, for disability-related benefits. On July 25, 2013, FirstEnergy
announced that non-bargaining employees hired on or after January 1, 2014 will participate in a cash-balance defined benefit
pension plan. The plan for existing employees will remain unchanged. Under the cash-balance pension plan, FirstEnergy will make
contributions to eligible employee retirement accounts based on employee age and years of service. The balance of these accounts
will be provided to employees when they leave the company.
FirstEnergy’s pensions and OPEB funding policy is based on actuarial computations using the projected unit credit method. During
the year ended December 31, 2013, FirstEnergy did not make any contributions to its qualified pension plan. Pension and OPEB
costs are affected by employee demographics (including age, compensation levels and employment periods), the level of
contributions made to the plans and earnings on plan assets. Pension and OPEB costs may also be affected by changes in key
assumptions, including anticipated rates of return on plan assets, the discount rates and health care trend rates used in determining
the projected benefit obligations for pension and OPEB costs. FirstEnergy uses a December 31 measurement date for its pension
and OPEB plans. The fair value of the plan assets represents the actual market value as of the measurement date.