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82
Pension OPEB
ComponentsofNetPeriodicBenefitCosts201520142013201520142013
(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
PensionOPEB
201520142013201520142013
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,2014
Asset
Allocation
Level1
Level2
Level3
Total
(Inmillions)
Cashandshorttermsecurities
$
—
$
517
$
—
$
517
9
%
Equityinvestments
Domestic
1,266
8
—
1,274
22
%
International
355
414
—
769
14
%
Fixedincome
Governmentbonds
—
159
—
159
3
%
Corporatebonds
—
1,386
—
1,386
24
%
Highyielddebt
—
300
—
300
5
%
Mortgagebackedsecurities(non
government)
—
37
—
37
1
%
Alternatives
Hedgefunds(Absolutereturn)
—
809
—
809
14
%
Derivatives
—
35
—
35
1
%
Privateequityfunds
—
—
25
25
—
%
Realestatefunds
—
—
421
421
7
%
Total(1)
$
1,621
$
3,665
$
446
$
5,732
100
%
(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
1
14
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