Allegheny Power 2014 Annual Report Download - page 94
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79
The following table provides a reconciliation of changes in the fair value of OPEB trust investments classified as Level 3 in the fair
value hierarchy during 2014 and 2013:
Real Estate
Funds
Balance as of January 1, 2013 $ 5
Balance as of December 31, 2013 5
Transfers out (2)
Balance as of December 31, 2014 $ 3
FirstEnergy follows a total return investment approach using a mix of equities, fixed income and other available investments while
taking into account the pension plan liabilities to optimize the long-term return on plan assets for a prudent level of risk. Risk tolerance
is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. The investment
portfolio contains a diversified blend of equity and fixed-income investments. Equity investments are diversified across U.S. and
non-U.S. stocks, as well as growth, value, and small and large capitalization funds. Other assets such as real estate and private
equity are used to enhance long-term returns while improving portfolio diversification. Derivatives may be used to gain market
exposure in an efficient and timely manner; however, derivatives are not used to leverage the portfolio beyond the market value of
the underlying investments. Investment risk is measured and monitored on a continuing basis through periodic investment portfolio
reviews, annual liability measurements and periodic asset/liability studies.
FirstEnergy’s target asset allocations for its pension and OPEB trust portfolios for 2014 and 2013 are shown in the following table:
Target Asset Allocations
2014 2013
Equities 42% 26%
Fixed income 32% 40%
Absolute return strategies 14% 22%
Real estate 5% 5%
Alternative investments 1% 1%
Cash 6% 6%
100% 100%
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-
percentage-point change in assumed health care cost trend rates would have the following effects:
1-Percentage-
Point Increase 1-Percentage-
Point Decrease
(in millions)
Effect on total of service and interest cost $ 2 $ (1)
Effect on accumulated benefit obligation $ 23 $ (22)
Taking into account estimated employee future service, FirstEnergy expects to make the following benefit payments from plan
assets and other payments, net of participant contributions:
OPEB
Pension Benefit
Payments Subsidy
Receipts
(in millions)
2015 $ 467 $ 59 $ (3)
2016 476 59 (3)
2017 491 58 (3)
2018 513 56 (3)
2019 529 55 (3)
Years 2020-2024 2,887 260 (10)
FES’ share of the pension and OPEB net (liability) asset as of December 31, 2014 and 2013, was as follows: