Exelon 2014 Annual Report Download - page 250

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Derivative instruments consisting primarily of interest rate swaps to manage risk are recorded at fair value. Derivative instruments
are valued based on external price data of comparable securities and have been categorized as Level 2.
Private equity. Private equity investments include those in limited partnerships that invest in operating companies that are not publicly
traded on a stock exchange such as leveraged buyouts, growth capital, venture capital, distressed investments and investments in
natural resources. Private equity valuations are reported by the fund manager and are based on the valuation of the underlying
investments, which include inputs such as cost, operating results, discounted future cash flows and market based comparable data.
Since these valuation inputs are not highly observable, private equity investments have been categorized as Level 3.
Hedge funds. Hedge fund investments include those seeking to maximize absolute returns using a broad range of strategies to
enhance returns and provide additional diversification. The fair value of hedge funds is determined using NAV or ownership interest
of the investments. Exelon has the ability to redeem these investments at NAV or its equivalent subject to certain restrictions which
may include a lock-up period or a gate. For Exelon’s investments that have terms that allow redemption within a reasonable period of
time from the measurement date, the hedge fund investments are categorized as Level 2. For investments that have restrictions that
may limit Exelon’s ability to redeem the investments at the measurement date or within a reasonable period of time, the hedge fund
investments are categorized as Level 3.
Real estate. Real estate investment trusts valued daily based on quoted prices in active markets are categorized as Level 1. Real
estate commingled funds are maintained by investment companies and hold certain investments in accordance with a stated set of
fund objectives, which are consistent with Exelon’s overall investment strategy. Since these funds are not publicly quoted, the fund
administrators value the funds using the NAV per fund share, derived from the quoted prices in active markets of the underlying
securities. These funds have been categorized as Level 2. Other real estate funds are funds with a direct investment in a pool of real
estate properties. These funds are valued by investment managers on a periodic basis using pricing models that use independent
appraisals from sources with professional qualifications. Since these valuation inputs are not highly observable, these real estate
funds have been categorized as Level 3.
As of December 31, 2014, Exelon has outstanding commitments to invest in private equity and real estate investments of
approximately $825 million. These commitments will be funded by Exelon’s existing pension and other postretirement benefit trusts.
Defined Contribution Savings Plan
The Registrants participate in various 401(k) defined contribution savings plans that are sponsored by Exelon. The plans are
qualified under applicable sections of the IRC and allow employees to contribute a portion of their pre-tax and after-tax income in
accordance with specified guidelines. All Registrants match a percentage of the employee contributions up to certain limits. The
following table presents Exelon’s matching contributions to the savings plan for the years ended December 31, 2014, 2013 and
2012:
For the Year Ended December 31,
2014 .................................................................................................... $103
2013 .................................................................................................... 85
2012 .................................................................................................... 67
17. Severance
Exelon has an ongoing severance plan under which, in general, the longer an employee worked prior to termination the greater the
amount of severance benefits. Exelon records a liability and expense or regulatory asset for severance once terminations are
probable of occurrence and the related severance benefits can be reasonably estimated. For severance benefits that are
incremental to its ongoing severance plan (“one-time termination benefits”), Exelon measures the obligation and records the
expense at fair value at the communication date if there are no future service requirements, or, if future service is required to receive
the termination benefit, ratably over the required service period.
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