Duke Energy 2011 Annual Report Download - page 227

PART II
DUKE ENERGY CORPORATION •DUKE ENERGY CAROLINAS, LLC •DUKE ENERGY OHIO, INC. •DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
The following table provides the amounts related to Duke Energy
Indiana’s non-qualified pension plans that are reflected in Regulatory
Assets on the Consolidated Balance Sheets at December 31, 2011
and 2010:
As of December 31,
(in millions) 2011 2010
Regulatory assets $2 $3
Of the amounts above, an insignificant amount will be
recognized in net periodic pension costs in 2012.
Additional Information: Non-Qualified Pension Plans
Information for Plans with Accumulated Benefit Obligation in
Excess of Plan Assets as allocated by Duke Energy
As of December 31,
(in millions) 2011 2010
Projected benefit obligation $5 $6
Accumulated benefit obligation 56
Fair value of plan assets ——
Assumptions Used for Pension Benefits Accounting: Non-Qualified
Plans
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
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.
Other Post-Retirement Benefit Plans
Duke Energy Indiana 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 11 years.
Components of Net Periodic Other Post-Retirement Benefit Costs
as allocated by Duke Energy
For the Years Ended
December 31,
(in millions) 2011 2010 2009
Service cost $1 $1 $ 1
Interest cost on accumulated post-retirement
benefit obligation 7811
Expected return on plan assets (1) (1) (1)
Amortization of actuarial loss (gain) 212
Net periodic other post-retirement benefit
costs $9 $9 $13
Other Changes in Plan Assets and Projected Benefit Obligations
Recognized in Regulatory Assets and Regulatory Liabilities: Other
Post-Retirement Benefit Plans
For the year ended
December 31,
(in millions) 2011 2010
Regulatory assets, net decrease $(7) $(12)
Regulatory liabilities, net increase (decrease) 12 (6)
207