CenterPoint Energy 2015 Annual Report Download - page 76

and$8millionin2015,2014and2013,respectively.Weexpecttomakecontributionsaggregatingapproximately$8millionin2016.
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Changesinpensionobligationsandassetsmaynotbeimmediatelyrecognizedaspensionexpenseintheincomestatement,butgenerallyarerecognizedin
futureyearsovertheremainingaverageserviceperiodofplanparticipants.Assuch,significantportionsofpensionexpenserecordedinanyperiodmaynotreflect
theactuallevelofbenefitpaymentsprovidedtoplanparticipants.
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Asthesponsorofaplan,wearerequiredto(a)recognizeonourbalancesheetasanassetaplan’sover-fundedstatusorasaliabilitysuchplan’sunder-funded
status,(b)measureaplan’sassetsandobligationsasoftheendofourfiscalyearand(c)recognizechangesinthefundedstatusofourplansintheyearthat
changesoccurthroughadjustmentstoothercomprehensiveincomeandregulatoryassets.
Theprojectedbenefitobligationforalldefinedbenefitpensionplanswas$2,193millionand$2,403millionasofDecember31,2015and2014,respectively.
Theadoption of the newmortalitytablebythe Society ofActuariesasofDecember 31, 2014significantlycontributedtothe increase in the projectedbenefit
obligationfor2014.
AsofDecember31,2015,theprojectedbenefitobligationexceededthemarketvalueofplanassetsofourpensionplansby$514million.Changesininterest
ratesorthemarketvaluesofthesecuritiesheldbytheplanduring2016couldmaterially,positivelyornegatively,changeourfundedstatusandaffectthelevelof
pensionexpenseandrequiredcontributions.
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Pension cost was $90 million, $77 million and $72 million for 2015,2014and2013, respectively, of which $59 million, $71 million and $64 million
impacted pre-tax earnings, respectively. Included in the 2015 and 2014 pension costs were a $10 million settlement charge and $6 million curtailment loss,
respectively,asdiscussedbelow.
Aone-time,non-cashsettlementchargeisrequiredwhenlumpsumdistributionsorothersettlementsofplanbenefitobligationsduringtheyearexceedthe
servicecostandinterestcostcomponentsofnetperiodiccostfortheyear.Duetotheamountoflumpsumpaymentdistributionsfromthenon-qualifiedpension
planduringthe yearendedDecember31,2015,CenterPointEnergyrecognizedanon-cash settlementcharge of$10million.Thischargeisan accelerationof
coststhatwouldotherwiseberecognizedinfutureperiods.
During the fourth quarter of 2014, CenterPoint Energy received notification from Enable of its intent to provide employment offers to substantially all
secondedemployees.Asaresult,anadditionalpensioncostof$6millionwasrecognizedforthecurtailmentlossrelatedtoourpensionplans.Substantiallyallof
thesecondedemployeesbecameemployeesofEnableeffectiveJanuary1,2015.
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Thecalculationofpensionexpenseandrelatedliabilitiesrequirestheuseofassumptions.Changesintheseassumptionscanresultindifferentexpenseand
liabilityamounts,andfutureactualexperiencecandifferfromtheassumptions.Twoofthemostcriticalassumptionsaretheexpectedlong-termrateofreturnon
planassetsandtheassumeddiscountrate.
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AsofDecember31,2015,ourqualifiedpensionplanhadanexpectedlong-termrateofreturnonplanassetsof6.25%,whichisa0.25%decreasefromthe
rateassumedasofDecember31,2014duetolowerexpectedcapitalmarketreturnrates.Theexpectedrateofreturnassumptionwasdevelopedusingthetargeted
assetallocationofourplansandtheexpectedreturnforeachassetclass.Weregularlyreviewouractualassetallocationandperiodicallyrebalanceplanassetsto
reducevolatilityandbettermatchplanassetsandliabilities.
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AsofDecember31,2015,theprojectedbenefitobligationwascalculatedassumingadiscountrateof4.40%,whichis0.35%higherthanthe4.05%discount
rate assumed in 2014 . The discount rate was determined by reviewing yields on high-quality bonds that receive one of the two highest ratings given by a
recognizedratingagencyandtheexpecteddurationofpensionobligationsspecifictothecharacteristicsofourplan.
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Pensioncostfor2016,includingthe benefitrestoration plan, isestimated tobe$102million,ofwhichweexpect$66 millionto impactpre-taxearnings,
basedonanexpectedreturnonplanassetsof6.25%andadiscountrateof4.40%asofDecember31,2015.Iftheexpectedreturnassumptionwereloweredby
0.50%from6.25%to5.75%,2016pensioncostwouldincreasebyapproximately$8million.
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As of December 31, 2015 , the pension plan projected benefit obligation, including the unfunded benefit restoration plan, exceeded plan assets by
$514 million.  If the discount rate were lowered by 0.50% from 4.40% to 3.90%, the assumption change would increase our projected benefit obligation by
approximately$115millionanddecreaseour2016pensionexpensebyapproximately$2million.Theexpectedreductioninpensionexpenseduetothedecreasein
discountrateisaresultoftheexpected
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