Exelon 2015 Annual Report Download - page 381

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
liabilities, including both pension and postretirement liabilities, for the legacy Exelon plans were allocated by Exelon to its subsidiaries based on
the number of active employees as of January 1, 2001 as part of Exelon’s corporate restructuring. The obligation for Generation, ComEd and
PECO reflects the initial allocation and the cumulative costs incurred and contributions made since January 1, 2001. Historically, Exelon has
allocated the components of pension and other postretirement costs to the subsidiaries in the legacy Exelon plans based upon several factors,
including the measures of active employee participation in each participating unit. Pension and other postretirement benefit contributions were
allocated to legacy Exelon subsidiaries in proportion to active service costs recognized and total costs recognized, respectively. Beginning in
2015, Exelon began allocating costs related to its legacy Exelon pension and other postretirement benefit plans to its subsidiaries based on both
active and retired employee participation and contributions are allocated based on accounting cost. The impact of this allocation methodology
change is not material to any Registrant. For legacy CEG and legacy CENG plans, components of pension and other postretirement benefit costs
and contributions have been, and will continue to be, allocated to the subsidiaries based on employee participation (both active and retired).
The amounts below were included in capital expenditures and Operating and maintenance expense for the years ended December 31, 2015,
2014 and 2013, respectively, for Generation’s, ComEd’s, PECO’s, BSC’s and BGE’s allocated portion of the pension and other postretirement
benefit plan costs. These amounts include the recognized contractual termination benefit charges, curtailment gains, and settlement charges:
For the Year Ended December 31, Generation ComEd PECO BSC BGE Exelon
2015 $ 269 $ 206 $ 39 $ 57 $66 637
2014 250 162 36 46 67 561
2013 347 309 43 71 55 825
(a) These amounts primarily represent amounts billed to Exelon’s subsidiaries through intercompany allocations. These amounts are not included in the Generation, ComEd, PECO or
BGE amounts above.
Plan Assets
 On a regular basis, Exelon evaluates its investment strategy to ensure that plan assets will be sufficient to pay plan
benefits when due. As part of this ongoing evaluation, Exelon may make changes to its targeted asset allocation and investment strategy.
Exelon has developed and implemented a liability hedging investment strategy for its qualified pension plans that has reduced the volatility
of its pension assets relative to its pension liabilities. Exelon is likely to continue to gradually increase the liability hedging portfolio as the funded
status of its plans improves. The overall objective is to achieve attractive risk-adjusted returns that will balance the liquidity requirements of the
plans’ liabilities while striving to minimize the risk of significant losses. Trust assets for Exelon’s other postretirement plans are managed in a
diversified investment strategy that prioritizes maximizing liquidity and returns while minimizing asset volatility.
Exelon used an EROA of 7.00% and 6.71% to estimate its 2016 pension and other postretirement benefit costs, respectively.
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(a)
Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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