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82
Pension
OPEB
ComponentsofNetPeriodicBenefitCosts
2015
2014
2013
2015
2014
2013
(Inmillions)
Servicecost
$
193
$
167
$
197
$
5
$
9
$
13
Interestcost
383
402
372
29
39
37
Expectedreturnonplanassets
(443
)
(462
)
(501
)
(33
)
(34
)
(34
)
Amortizationofpriorservicecost(credit)
8
8
12
(134
)
(176
)
(207
)
Pension&OPEBmarktomarketadjustment
344
1,235
(267
)
25
8
(129
)
Netperiodiccost(credit)
$
485
$
1,350
$
(187
)
$
(108
)
$
(154
)
$
(320
)
AssumptionsUsedtoDetermineNetPeriodic
BenefitCost
forYearsEndedDecember31
Pension
OPEB
2015
2014
2013
2015
2014
2013
Weightedaveragediscountrate
4.25
%
5.00
%
4.25
%
4.00
%
4.75
%
4.00
%
Expectedlongtermreturnonplanassets
7.75
%
7.75
%
7.75
%
7.75
%
7.75
%
7.75
%
Rateofcompensationincrease
4.20
%
4.20
%
4.70
%
N/A
N/A
N/A
In selecting an assumed discount rate, FirstEnergy considers currently available rates of returnon highquality fixed income
investmentsexpectedtobeavailableduringtheperiodtomaturityofthepensionandOPEBobligations.Theassumedratesofreturn
onplanassetsconsiderhistoricalmarketreturnsandeconomicforecastsforthetypesofinvestmentsheldbyFirstEnergy’spension
trusts.Thelongtermrateofreturnisdevelopedconsideringtheportfolio’sassetallocationstrategy.In2016,FirstEnergydecreased
theexpectedlongtermreturnonplanassetsto7.50%.
Thefollowingtablessetforthpensionfinancialassetsthatareaccountedforatfairvaluebylevelwithinthefairvaluehierarchy.See
Note9,FairValueMeasurements,foradescriptionofeachlevelofthefairvaluehierarchy.Therewerenosignificanttransfers
betweenlevelsduring2015and2014.
December31,2015
Asset
Allocation
Level1
Level2
Level3
Total
(Inmillions)
Cashandshorttermsecurities
$
—
$
427
$
—
$
427
8
%
Equityinvestments
Domestic
869
75
—
944
18
%
International
395
794
—
1,189
22
%
Fixedincome
Governmentbonds
—
232
—
232
4
%
Corporatebonds
—
1,115
—
1,115
21
%
Highyielddebt
—
438
—
438
8
%
Mortgagebackedsecurities(non
government)
—
31
—
31
1
%
Alternatives
Hedgefunds(Absolutereturn)
—
343
—
343
7
%
Derivatives
—
15
—
15
—
%
Privateequityfunds
—
—
24
24
—
%
Realestatefunds
—
—
587
587
11
%
Total
(1)
$
1,264
$
3,470
$
611
$
5,345
100
%
(1)
Excludes$(7)millionasofDecember31,2015ofreceivables,payables,taxesandaccruedincomeassociatedwithfinancialinstruments
reflectedwithinthefairvaluetable.
83
December31,2014Asset
Allocation
Level1Level2 Level3Total
(Inmillions)
Cashandshorttermsecurities $ — $ 517 $ — $ 517 9%
Equityinvestments
Domestic1,266 8 —1,27422%
International355414 — 76914%
Fixedincome
Governmentbonds — 159 — 159 3%
Corporatebonds — 1,386 — 1,38624%
Highyielddebt — 300 — 300 5%
Mortgagebackedsecurities(non
government)— 37 — 37 1%
Alternatives
Hedgefunds(Absolutereturn) — 809 — 80914%
Derivatives — 35 — 35 1%
Privateequityfunds — — 2525 —%
Realestatefunds — — 421421 7%
Total(1) $1,621 $ 3,665 $ 446 $ 5,732100%
(1)Excludes$92millionasofDecember31,2014ofreceivables,payables,taxesandaccruedincomeassociatedwithfinancialinstruments
reflectedwithinthefairvaluetable.
ThefollowingtableprovidesareconciliationofchangesinthefairvalueofpensioninvestmentsclassifiedasLevel3inthefairvalue
hierarchyduring2015and2014:
PrivateEquity
Funds
RealEstate
Funds
(Inmillions)
BalanceasofJanuary1,2014 $ 27 $ 385
Actualreturnonplanassets:
Unrealizedgains(losses)(2) 17
Realizedgains 114
Transfersin(out)(1) 5
BalanceasofDecember31,2014 $ 25 $ 421
Actualreturnonplanassets:
Unrealizedgains — 42
Realizedgains(losses)(1) 16
Transfersin — 108
BalanceasofDecember31,2015 $ 24 $ 587