Allegheny Power 2014 Annual Report Download - page 91
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76
Pension OPEB
Components of Net Periodic Benefit Costs 2014 2013 2012 2014 2013 2012
(In millions)
Service cost $ 167 $ 197 $ 161 $ 9 $ 13 $ 12
Interest cost 402 372 389 39 37 47
Expected return on plan assets (462) (501) (486) (34) (34) (37)
Amortization of prior service cost (credit) 8 12 12 (176) (207) (203)
Pension & OPEB mark-to-market adjustment 1,235 (267) 735 8 (129) 140
Net periodic cost $ 1,350 $ (187) $ 811 $ (154) $ (320) $ (41)
Assumptions Used to Determine Net Periodic
Benefit Cost
for Years Ended December 31
Pension OPEB
2014 2013 2012 2014 2013 2012
Weighted-average discount rate 5.00% 4.25% 5.00% 4.75% 4.00% 4.75%
Expected long-term return on plan assets 7.75% 7.75% 7.75% 7.75% 7.75% 7.75%
Rate of compensation increase 4.20% 4.70% 5.20% N/A N/A N/A
In selecting an assumed discount rate, FirstEnergy considers currently available rates of return on high-quality fixed income
investments expected to be available during the period to maturity of the pension and OPEB obligations. The assumed rates of
return on plan assets consider historical market returns and economic forecasts for the types of investments held by FirstEnergy’s
pension trusts. The long-term rate of return is developed considering the portfolio’s asset allocation strategy.
The following tables set forth pension financial assets that are accounted for at fair value by level within the fair value hierarchy.
See Note 9, Fair Value Measurements, for a description of each level of the fair value hierarchy. There were no significant transfers
between levels during 2014 and 2013.
December 31, 2014 Asset
AllocationLevel 1 Level 2 Level 3 Total
(In millions)
Cash and short-term securities $ — $ 517 $ — $ 517 9%
Equity investments
Domestic 1,266 8 — 1,274 22%
International 355 414 — 769 14%
Fixed income
Government bonds — 159 — 159 3%
Corporate bonds — 1,386 — 1,386 24%
High yield debt — 300 — 300 5%
Mortgage-backed securities (non-
government) — 37 — 37 1%
Alternatives
Hedge funds (Absolute return) — 809 — 809 14%
Derivatives — 35 — 35 1%
Private equity funds — — 25 25 —%
Real estate funds — — 421 421 7%
Total (1) $ 1,621 $ 3,665 $ 446 $ 5,732 100%
(1) Excludes $92 million as of December 31, 2014 of receivables, payables, taxes and accrued income associated with financial instruments
reflected within the fair value table.