Duke Energy 2011 Annual Report Download - page 223

PART II
DUKE ENERGY CORPORATION •DUKE ENERGY CAROLINAS, LLC •DUKE ENERGY OHIO, INC. •DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
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.
Assumptions Used for Pension Benefits Accounting
As of December 31,
(percentages) 2011 2010 2009
Benefit Obligations
Discount rate 5.10 5.00 5.50
Salary increase 4.40 4.10 4.50
Net Periodic Benefit Cost
Discount rate 5.00 5.50 6.50
Salary increase 4.10 4.50 4.50
Other Post-Retirement Benefit Plans
Duke Energy Ohio participates in other post-retirement benefit
plans sponsored by Duke Energy. Duke Energy provides certain
health care and life insurance benefits to retired employees and their
eligible dependents on a contributory and non-contributory basis.
These benefits are subject to minimum age and service requirements.
The health care benefits include medical coverage, dental coverage,
and prescription drug coverage and are subject to certain limitations,
such as deductibles and co-payments. These benefit costs are
accrued over an employee’s active service period to the date of full
benefits eligibility. The net unrecognized transition obligation is
amortized over 20 years.
Actuarial gains and losses are amortized over the average
remaining service period of the active employees. The average
remaining service period of the active employees covered by the plan
is 10 years. Duke Energy did not make any contributions to its other
post-retirement plans in 2011, 2010 or 2009.
Components of Net Periodic Other Post-Retirement Benefit Costs
as allocated by Duke Energy
For the Years Ended
December 31,
(in millions) 2011(a) 2010(a) 2009(a)
Service cost $1 $1 $1
Interest cost on accumulated post-
retirement benefit obligation 334
Expected return on plan assets (1) (1) (1)
Amortization of prior service credit (1) (1) (1)
Amortization of actuarial gain (2) (2) (2)
Net periodic other post-retirement benefit
costs $— $— $ 1
(a) These amounts exclude $2 million for each of the years ended December 31, 2011,
2010 and 2009 of regulatory asset amortization resulting from purchase accounting
adjustments associated with Duke Energy’s merger with Cinergy in April 2006.
Other Changes in Plan Assets and Projected Benefit Obligations
Recognized in Accumulated Other Comprehensive Income,
Regulatory Assets and Regulatory Liabilities: Other Post-
Retirement Benefit Plans
For the Years Ended
December 31,
(in millions) 2011 2010
Regulatory liabilities, net decrease $(1) (4)
Accumulated other comprehensive (income)/loss
Deferred income tax liability (1) 3
Actuarial loss (gain) arising during the year 2(3)
Amortization of prior year actuarial gains 11
Net amount recognized in accumulated other
comprehensive (income)/loss $2 $1
Reconciliation of Funded Status to Accrued Other Post-Retirement
Benefit Costs
As of and for the Years
Ended December 31,
(in millions) 2011 2010
Change in Benefit Obligation
Accumulated post-retirement benefit obligation
at prior measurement date $66 $70
Service cost 11
Interest cost 33
Plan participants’ contributions 11
Actuarial loss —2
Transfers (2) (6)
Benefits paid (8) (5)
Accumulated post-retirement benefit obligation
at measurement date $61 $66
Change in Fair Value of Plan Assets
Plan assets at prior measurement date $8 $7
Actualreturnonplanassets —2
Benefits paid (8) (5)
Employer contributions 83
Plan participants’ contributions 11
Plan assets at measurement date $9 $8
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