ComEd 2013 Annual Report Download - page 214

Assumedhealthcare cost trendrateshaveasignificant effectonthecostsreportedfor theother postretirement benefit plans. A one
percentagepoint changeinassumedhealthcare cost trendrateswouldhavethefollowingeffects:
Effectofa one percentagepoint increaseinassumedhealthcare cost trend:
on 2013 total serviceandinterestcostcomponents ......................................................... $ 90
on postretirement benefitobligation at December 31,2013 ................................................... 858
Effectofa one percentagepoint decreaseinassumedh
ealthcare cost trend:
on 2013 total serviceandinterestcostcomponents ......................................................... (62)
on postretirement benefitobligation at December 31,2013 ................................................... (607)
Health Care Reform Legislation
InMarch 2010,theHealthCare ReformActswere signedinto law, which containanumber ofprovisionsthat impact retiree health
care plansprovidedbyemployers. One such provision reducesthedeductibility, for Federal incometaxpurposes, ofretiree health
care coststo theextent an employer’s postretirement healthcare plan receivesFederal subsidiesthat provide retiree prescription
drugbenefitsat leastequivalent to thoseofferedbyMedicare.Although this changedid not takeeffectimmediately, theRegistrants
were requiredto recognizethefull accountingimpactintheirfinancial statementsinthe periodinwhich thelegislation wasenacted.
Asaresult,inthefirstquarter of2010,Exelon recordedtotal after-taxchargesofapproximately $65 million to incometaxexpenseto
reversedeferredtaxassetspreviouslyestablished. Generation,ComEd, PECO and BGE recordedchargesof$24million,$11
million,$9million and$3million,respectively. Additionally, asaresult ofthis deductibilitychangefor employersandother Health
Care Reformprovisionsthat impactthefederal prescription drugsubsidy optionsprovidedto employers, Exelon hasmadeachange
inthemanner inwhich itwill receive prescription drugsubsidiesbeginningin 2013.
Additionally, theHealthCare ReformActsalsoinclude a provision that imposesan excisetaxon certainhigh-cost plansbeginningin
2018, whereby premiums paid over a prescribedthresholdwill betaxedat a 40%rate.Although theexcisetaxdoesnot gointo
effect until 2018, accountingguidancerequiresExelon to incorporate theestimatedimpactoftheexcisetaxinitsannual actuarial
valuation.The application ofthelegislation is still unclear andExelon continuesto monitor theDepartment ofLabor andIRSfor
additional guidance.Certainkeyassumptionsare requiredto estimate theimpactoftheexcisetaxon Exelon’s other postretirement
benefitobligation,includingprojectedinflation rates(basedon theCPI) andwhether pre-andpost-65 retiree populationscan be
aggregatedindeterminingthe premiumvaluesofhealthcare benefits. Exelon reflecteditsbestestimate oftheexpectedimpactinits
annual actuarial valuation.
Contributions
Thefollowingtable providescontributionsmadeby Exelon to the pension andother postretirement benefit plans:
Pension Benefits Other Postretirement Benefits
2013 2012 2011 (b) 2013 (a) 2012 (a) 2011 (a)
Exelon .......................................................... $339$149 $2,094 $83$323 $277
(a)Exelon presentsthecash contributionsabove net ofFederal subsidy paymentsreceivedon itsConsolidatedStatement ofCash Flows. Exelon receivedFederal
subsidy paymentsof$10 million in 2012 and$11 million in 2011. EffectiveJanuary1,2013,Exelon is no longer receivingthis subsidy.
(b) Theincreasein 2011 pension contributionswasrelatedto Exelon’s $2.1billion contribution to itspension plansasaresult ofacceleratedcash benefitsassociated
withtheTaxReliefActof2010.
Exelon plansto contribute $264 million to itsqualifiedpension plansin 2014. Unlikethequalifiedpension plans, Exelon’s non-
qualifiedpension plansare not funded. Exelon plansto make non-qualifiedpension plan benefitpaymentsof$12 million in 2014.
Management considersvariousfactorswhen makingpension fundingdecisions, includingactuariallydeterminedminimum
contribution requirementsunder ERISA,contributionsrequiredto avoid benefitrestrictionsandat-risk statusasdefinedbythe
Pension Protection Actof2006(theAct), management ofthe pension obligation andregulatoryimplications. TheActrequiresthe
attainment ofcertainfundinglevelsto avoid benefitrestrictions(such asan inabilityto paylumpsums or to accrue benefits
prospectively), andat-risk status (which triggers higher minimumcontribution requirementsandparticipant notification). Additionally,
for Exelon’s largestqualifiedpension plan,the projectedcontributionsreflectafundingstrategy ofcontributingthegreater of$250
million, which approximatesservicecost,or theminimumamountsunder ERISAtoavoid benefitrestrictionsandat-risk status. This
level fundingstrategy helpsminimizevolatilityoffuture periodrequiredpension contributions. OnJuly6,2012,President Obama
signedinto lawtheMovingAheadfor Progress intheTwenty-firstCenturyAct, which containsa pension fundingprovision that
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