Exelon 2014 Annual Report Download - page 243

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Assumed health care cost trend rates impact the costs reported for Exelon’s other postretirement benefit plans for participants
populations with plan designs that do not have a cap on cost growth. A one percentage point change in assumed health care cost
trend rates would have the following effects:
Effect of a one percentage point increase in assumed health care cost trend:
on 2014 total service and interest cost components ......................................................... $ 35
on postretirement benefit obligation at December 31, 2014 ................................................... 162
Effect of a one percentage point decrease in assumed health care cost trend:
on 2014 total service and interest cost components ......................................................... (24)
on postretirement benefit obligation at December 31, 2014 ................................................... (113)
Health Care Reform Legislation
In March 2010, the Health Care Reform Acts were signed into law, which contain a number of provisions that impact retiree health
care plans provided by employers. One such provision imposes an excise tax on certain high-cost plans beginning in 2018, whereby
premiums paid over a prescribed threshold will be taxed at a 40% rate. Although the excise tax does not go into effect until 2018,
accounting guidance requires Exelon to incorporate the estimated impact of the excise tax in its annual actuarial valuation. The
application of the legislation is still unclear and Exelon continues to monitor the Department of Labor and IRS for additional
guidance. Certain key assumptions are required to estimate the impact of the excise tax on Exelon’s other postretirement benefit
obligation, including projected inflation rates (based on the CPI) and whether pre- and post- 65 retiree populations can be
aggregated in determining the premium values of health care benefits. Exelon reflected its best estimate of the expected impact in its
annual actuarial valuation.
Contributions
The following table provides contributions made by Exelon to the pension and other postretirement benefit plans:
Pension Benefits Other Postretirement Benefits
2014 (b) 2013 2012 2014 2013 2012 (a)
Exelon ........................................................... $332 $339 $149 $291 $83 $323
(a) The Registrants present the cash contributions above net of Federal subsidy payments received on each of their respective Consolidated Statements of Cash Flows.
Exelon, received Federal subsidy payments of $10 million, in 2012. Effective January 1, 2013, Exelon is no longer receiving this subsidy.
(b) Exelon’s pension contributions include $43 million related to the legacy CENG plans that was funded by CENG as provided in an Employee Matters Agreement
(EMA) between Exelon and CENG.
Management considers various factors when making pension funding decisions, including actuarially determined minimum
contribution requirements under ERISA, contributions required to avoid benefit restrictions and at-risk status as defined by the
Pension Protection Act of 2006 (the Act), management of the pension obligation and regulatory implications. The Act requires the
attainment of certain funding levels to avoid benefit restrictions (such as an inability to pay lump sums or to accrue benefits
prospectively), and at-risk status (which triggers higher minimum contribution requirements and participant notification). Additionally,
for Exelon’s largest qualified pension plan, until the plan is fully funded on an ABO basis, the projected contribution reflects a funding
strategy of contributing $250 million. This level funding strategy helps minimize volatility of future period required pension
contributions.
Exelon plans to contribute $447 million to its qualified pension plans in 2015, of which Generation, ComEd, PECO, and BGE will
contribute $230 million, $138 million, $40 million, and $1 million, respectively. Exelon’s and Generation’s expected qualified pension
plan contributions above include $36 million related to the legacy CENG plans that will be funded by CENG as provided in an EMA
between Exelon and CENG.
Unlike the qualified pension plans, Exelon’s non-qualified pension plans are not funded. Exelon plans to make non-qualified pension
plan benefit payments of $15 million in 2015, of which Generation, ComEd, PECO, and BGE will make payments of $6 million, $1
million, $1 million and $1 million, respectively.
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