Allegheny Power 2015 Annual Report Download - page 97

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80
key assumptions, including anticipated rates of return on plan assets, the discount rates and health care trend rates used in
determiningtheprojectedbenefitobligationsforpensionandOPEBcosts.FirstEnergyusesaDecember31measurementdateforits
pensionandOPEBplans.Thefairvalueoftheplanassetsrepresentstheactualmarketvalueasofthemeasurementdate.
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FirstEnergy’sassumedrateofreturnonpensionplanassetsconsidershistoricalmarketreturnsandeconomicforecastsforthetypes
ofinvestmentsheldbythepensiontrusts.In2015,FirstEnergy’squalifiedpensionandOPEBplanassetsexperiencedlossesof
$(172)million,or(2.7)%comparedtoearningsof$387million,or6.2%in2014andlossesof$(22)million,or(0.3)%in2013,and
assumeda7.75%rateofreturnforeachyearonplanassetswhichgenerated$476million,$496millionand$535millionofexpected
returnsonplanassets,respectively.TheexpectedreturnonpensionandOPEBassetsisbasedonthetrusts’assetallocationtargets
andthehistoricalperformanceofriskbasedandfixedincomesecurities.Thegainsorlossesgeneratedasaresultofthedifference
betweenexpectedandactualreturnsonplanassetswillincreaseordecreasefuturenetperiodicpensionandOPEBcostasthe
difference is recognized annually in the fourth quarter of each fiscal year or whenever a plan is determined to qualify for
remeasurement.
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During2014,theSocietyofActuariespublishednewmortalitytablesandimprovementscalesreflectingimprovedlifeexpectancies
andanexpectationthatthetrendwillcontinue.AnanalysisofFirstEnergypensionandOPEBplanmortalitydataindicatedtheuseof
theRP2014mortalitytablewithbluecollaradjustmentforfemalesandprojectionscaleSS2014INTwasmostappropriateasof
December31,2015.Assuch,theRP2014mortalitytablewithprojectionscaleSS2014INTwasutilizedtodeterminethe2015benefit
costandobligationasofDecember31,2015fortheFirstEnergypensionandOPEBplans.TheimpactofusingtheRP2014mortality
tableandprojectionscaleSS2014INTresultedinanincreaseintheprojectedbenefitobligationof$49millionand$1millionforthe
pensionandOPEBplans,respectively,andwasincludedinthe2015pensionandOPEBmarktomarketadjustment.
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81
Pension
OPEB
ObligationsandFundedStatus
2015
2014
2015
2014
(Inmillions)
Changeinbenefitobligation:
BenefitobligationasofJanuary1
$
9,249
$
8,263
$
757
$
879
Servicecost
193
167
5
9
Interestcost
383
402
29
39
Planparticipants’contributions
—
—
6
16
Planamendments
—
5
(10
)
(97
)
Medicareretireedrugsubsidy
—
—
1
—
Actuarial(gain)loss
(277
)
1,123
(2
)
13
Benefitspaid
(469
)
(711
)
(62
)
(102
)
BenefitobligationasofDecember31
$
9,079
$
9,249
$
724
$
757
Changeinfairvalueofplanassets:
FairvalueofplanassetsasofJanuary1
$
5,824
$
6,171
$
464
$
495
Actualreturn(losses)onplanassets
(178
)
349
6
38
Companycontributions
161
15
17
17
Planparticipants’contributions
—
—
6
16
Benefitspaid
(469
)
(711
)
(62
)
(102
)
FairvalueofplanassetsasofDecember31
$
5,338
$
5,824
$
431
$
464
FundedStatus:
Qualifiedplan
$
(3,366
)
$
(3,064
)
Nonqualifiedplans
(375
)
(361
)
FundedStatus
$
(3,741
)
$
(3,425
)
$
(293
)
$
(293
)
Accumulatedbenefitobligation
$
8,579
$
8,744
$
—
$
—
AmountsRecognizedontheBalanceSheet:
Currentliabilities
$
(18
)
$
(17
)
$
—
$
—
Noncurrentliabilities
(3,723
)
(3,408
)
(293
)
(293
)
NetliabilityasofDecember31
$
(3,741
)
$
(3,425
)
$
(293
)
$
(293
)
AmountsRecognizedinAOCI:
Priorservicecost(credit)
$
37
$
45
$
(355
)
$
(479
)
AssumptionsUsedtoDetermineBenefitObligations
(asofDecember31)
Discountrate
4.50
%
4.25
%
4.25
%
4.00
%
Rateofcompensationincrease
4.20
%
4.20
%
N/A
N/A
AssumedHealthCareCostTrendRates
(asofDecember31)
Healthcarecosttrendrateassumed(pre/postMedicare)
N/A
N/A
6.05.5%
7.57.0%
Ratetowhichthecosttrendrateisassumedtodecline(theultimate
trendrate)
N/A
N/A
4.5
%
4.5
%
Yearthattheratereachestheultimatetrendrate
N/A
N/A
2026
2026
AllocationofPlanAssets(asofDecember31)
Equitysecurities
40
%
36
%
51
%
49
%
Bonds
34
%
33
%
43
%
40
%
Absolutereturnstrategies
7
%
14
%
—
%
1
%
Realestate
11
%
7
%
—
%
1
%
Derivatives
—
%
1
%
—
%
—
%
Cashandshorttermsecurities
8
%
9
%
6
%
9
%
Total
100
%
100
%
100
%
100
%

Theestimated2016amortizationofpensionandOPEBpriorservicecosts(credits)fromAOCIintonetperiodicpensionand
OPEBcosts(credits)isapproximately$8millionand$(80)million,respectively.