Duke Energy 2011 Annual Report Download - page 212

PART II
DUKE ENERGY CORPORATION •DUKE ENERGY CAROLINAS, LLC •DUKE ENERGY OHIO, INC. •DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
Amounts Recognized in the Consolidated Balance Sheets: Other
Post-Retirement Benefit Plans
The following table provides the amounts related to Duke
Energy’s other post-retirement benefit plans that are reflected in Other
within Deferred Credits and Other Liabilities on the Consolidated
Balance Sheets at December 31, 2011 and 2010:
As of December 31,
(in millions) 2011 2010
Accrued other post-retirement liability(a) $(486) $(537)
(a) Includes $3 million and $2 million recognized in Other within Current Liabilities on the
Consolidated Balance Sheets as of December 31, 2011 and 2010, respectively.
The following table provides the amounts related to Duke
Energy’s other post-retirement benefit plans that are reflected in Other
within Regulatory Assets and Deferred Debits, Other within Deferred
Credits and Other Liabilities and AOCI on the Consolidated Balance
Sheets at December 31, 2011 and 2010:
As of December 31,
(in millions) 2011 2010
Regulatory assets $37 $59
Regulatory liabilities 107 86
Accumulated other comprehensive (income)/loss:
Deferred income tax liability 43
Prior service credit (3) (3)
Net actuarial loss (gain) (6) (7)
Net amount recognized in accumulated other
comprehensive (income)/loss $(5) $(7)
Of the amounts above, $8 million of unrecognized net transition
obligation, $6 million of unrecognized actuarial gains and $8 million
of unrecognized prior service credit (which will reduce pension
expense) will be recognized in net periodic pension costs in 2012.
Assumptions Used for Other Post-Retirement Benefits Accounting
As of December 31,
(percentages) 2011 2010 2009
Determined Benefit Obligations
Discount rate 5.10 5.00 5.50
2011 2010 2009
Net Periodic Benefit Cost
Discount rate 5.00 5.50 6.50
Expected long-term rate of return on
plan assets 5.36-8.25 5.53-8.50 5.53-8.50
Assumed tax rate(a) 35.0 35.0 35.0
(a) Applicable to the health care portion of funded post-retirement benefits.
The discount rate used to determine the current year other post-
retirement benefits obligation and following year’s other post-
retirement benefits expense is based on a bond selection-settlement
portfolio approach. This approach develops a discount rate by
selecting a portfolio of high quality corporate bonds that generate
sufficient cash flow to provide for the projected benefit payments of
the plan. The selected bond portfolio is derived from a universe of
non-callable corporate bonds rated Aa quality or higher. After the
bond portfolio is selected, a single interest rate is determined that
equates the present value of the plan’s projected benefit payments
discounted at this rate with the market value of the bonds selected.
Assumed Health Care Cost Trend Rate
2011 2010
Health care cost trend rate assumed for next year 8.75% 8.50%
Rate to which the cost trend is assumed to decline (the
ultimate trend rate) 5.00% 5.00%
Year that the rate reaches the ultimate trend rate 2020 2020
Sensitivity to Changes in Assumed Health Care Cost Trend Rates
(in millions)
1-Percentage-
Point Increase
1-Percentage-
Point Decrease
Effect on total service and interest
costs $ 2 $ (2)
Effect on post-retirement benefit
obligation 31 (28)
Expected Benefit Payments: Defined Benefit Retirement Plans
The following table presents Duke Energy’s expected benefit
payments to participants in its qualified, non-qualified and other post-
retirement benefit plans over the next 10 years, which are primarily
paid out of the assets of the various trusts. These benefit payments
reflect expected future service, as appropriate.
(in millions)
Qualified
Plans
Non-
Qualified
Plans
Other Post-
Retirement
Plans(a) Total
Years Ended December 31,
2012 $ 463 $17 $ 49 $ 529
2013 451 15 52 518
2014 440 17 53 510
2015 434 14 54 502
2016 428 13 55 496
2017 – 2021 2,050 64 270 2,384
(a) Duke Energy expects to receive future subsidies under Medicare Part D of $4 million in
2012 and $3 million in each of the years 2013-2016, and a total of $15 million
during the years 2017-2021.
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