CenterPoint Energy 2012 Annual Report Download - page 95
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The following table summarizes changes in the benefit obligation, plan assets, the amounts recognized in consolidated balance
sheets and the key assumptions of CenterPoint Energy’s pension, including benefit restoration, and postretirement plans. The
measurement dates for plan assets and obligations were December 31, 2011 and 2012.
December 31,
2011 2012
Pension
Benefits
Post-
retirement
Benefits Pension
Benefits
Post-
retirement
Benefits
(in millions, except for actuarial assumptions)
Change in Benefit Obligation
Benefit obligation, beginning of year.................................................................. $ 1,969 $ 460 $ 2,085 $ 500
Service cost.......................................................................................................... 33 1 35 1
Interest cost.......................................................................................................... 100 24 100 23
Participant contributions...................................................................................... — 7 — 7
Benefits paid........................................................................................................ (113)(40)(123)(35)
Actuarial loss....................................................................................................... 93 41 219 38
Early retiree reinsurance program reimbursement .............................................. — 3 — —
Medicare reimbursement..................................................................................... 3 4 — 4
Benefit obligation, end of year............................................................................ 2,085 500 2,316 538
Change in Plan Assets
Fair value of plan assets, beginning of year ........................................................ 1,501 144 1,506 138
Employer contributions ....................................................................................... 75 21 82 20
Participant contributions...................................................................................... — 7 — 7
Benefits paid........................................................................................................ (113)(40)(123)(35)
Actual investment return ..................................................................................... 43 6 233 9
Fair value of plan assets, end of year .................................................................. 1,506 138 1,698 139
Funded status, end of year................................................................................... $ (579) $ (362) $ (618) $ (399)
Amounts Recognized in Balance Sheets
Current liabilities-other ....................................................................................... $ (9) $ (9) $ (9) $ (9)
Other liabilities-benefit obligations..................................................................... (570)(353)(609)(390)
Net liability, end of year...................................................................................... $ (579) $ (362) $ (618) $ (399)
Actuarial Assumptions
Discount rate........................................................................................................ 4.90% 4.80% 4.00% 3.90%
Expected return on plan assets ............................................................................ 8.00 5.50 8.00 5.50
Rate of increase in compensation levels.............................................................. 4.20 — 4.00 —
Healthcare cost trend rate assumed for the next year.......................................... — 8.00 — 9.00
Prescription drug cost trend rate assumed for the next year................................ — 8.00 — 9.00
Rate to which the cost trend rate is assumed to decline (the ultimate trend
rate)...................................................................................................................... — 5.50 — 5.50
Year that the healthcare rate reaches the ultimate trend rate............................... — 2017 — 2017
Year that the prescription drug rate reaches the ultimate trend rate.................... — 2017 — 2017
The accumulated benefit obligation for all defined benefit pension plans was $2,064 million and $2,283 million as of
December 31, 2011 and 2012, respectively.
The expected rate of return assumption was developed by a weighted-average return analysis of the targeted asset allocation
of CenterPoint Energy’s plans and the expected real return for each asset class, based on the long-term capital market assumptions,
adjusted for investment fees and diversification effects, in addition to expected inflation.
The discount rate assumption was determined by matching the accrued cash flows of CenterPoint Energy’s plans against a
hypothetical yield curve of high-quality corporate bonds represented by a series of annualized individual discount rates from one-
half to 99 years.