Retirement Benefits and Trusteed Assets (Notes) | 12 Months Ended |
Dec. 31, 2014 |
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |
Retirement Benefits and Trusteed Assets | RETIREMENT BENEFITS AND TRUSTEED ASSETS |
Pension Plan Benefits |
DTE Electric participates in various plans that provide pension and other postretirement benefits for DTE Energy and its affiliates. The plans are sponsored by DTE Energy Corporate Services, LLC (LLC), a subsidiary of DTE Energy. DTE Electric is allocated net periodic benefit costs for its share of the amounts of the combined plans. |
Effective January 1, 2012 for non-represented employees and in March 2013 for the majority of represented employees, the Company discontinued offering a defined benefit retirement plan to newly hired employees. In its place, the Company will annually contribute an amount equivalent to 4% of an employee's eligible pay to the employee's defined contribution retirement savings plan. |
The Company’s policy is to fund pension costs by contributing amounts consistent with the provisions of the Pension Protection Act of 2006 and additional amounts when it deems appropriate. The Company contributed $145 million to its qualified pension plans in 2014. At the discretion of management, and depending upon financial market conditions, the Company anticipates making up to $145 million in contributions to the pension plans in 2015. |
Net pension cost includes the following components: |
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| 2014 | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | |
Service cost | $ | 64 | | | $ | 73 | | | $ | 64 | | | | | | | | | | | | | | | | | | | | | |
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Interest cost | 162 | | | 146 | | | 155 | | | | | | | | | | | | | | | | | | | | | |
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Expected return on plan assets | (194 | ) | | (184 | ) | | (166 | ) | | | | | | | | | | | | | | | | | | | | |
Amortization of: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | 110 | | | 148 | | | 124 | | | | | | | | | | | | | | | | | | | | | |
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Prior service cost | 2 | | | 1 | | | 1 | | | | | | | | | | | | | | | | | | | | | |
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Settlements | — | | | — | | | 2 | | | | | | | | | | | | | | | | | | | | | |
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Net pension cost | $ | 144 | | | $ | 184 | | | $ | 180 | | | | | | | | | | | | | | | | | | | | | |
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| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized in Regulatory assets and Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial (gain) loss | $ | 614 | | | $ | (418 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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Amortization of net actuarial loss | (110 | ) | | (148 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service cost | (2 | ) | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Amortization of prior service cost | (2 | ) | | (1 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Total recognized in Regulatory assets and Other comprehensive income | $ | 500 | | | $ | (567 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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Total recognized in net periodic pension cost, Regulatory assets and Other comprehensive income | $ | 644 | | | $ | (383 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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Estimated amounts to be amortized from Regulatory assets and Accumulated other comprehensive income into net periodic benefit cost during next fiscal year | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial loss | $ | 149 | | | $ | 106 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Prior service cost | $ | 1 | | | $ | 1 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table reconciles the obligations, assets and funded status of the plan as well as the amount recognized as prepaid pension cost or pension liability in the Consolidated Statements of Financial Position at December 31: |
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| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated benefit obligation, end of year | $ | 3,712 | | | $ | 3,111 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Change in projected benefit obligation | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Projected benefit obligation, beginning of year | $ | 3,341 | | | $ | 3,585 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Service cost | 64 | | | 73 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Interest cost | 162 | | | 146 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Plan amendments | (2 | ) | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Actuarial (gain) loss | 634 | | | (286 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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Benefits paid | (181 | ) | | (177 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Projected benefit obligation, end of year | $ | 4,018 | | | $ | 3,341 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Change in plan assets | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Plan assets at fair value, beginning of year | $ | 2,632 | | | $ | 2,211 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Actual return on plan assets | 212 | | | 316 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Company contributions | 149 | | | 282 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Benefits paid | (181 | ) | | (177 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Plan assets at fair value, end of year | $ | 2,812 | | | $ | 2,632 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Funded status of the plan | $ | (1,206 | ) | | $ | (709 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amount recorded as: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Current liabilities | $ | (6 | ) | | $ | (4 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Noncurrent liabilities | (1,200 | ) | | (705 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | (1,206 | ) | | $ | (709 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized in Regulatory assets (see Note 7 - "Regulatory Matters") | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Net actuarial loss | $ | 1,738 | | | $ | 1,248 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Prior service cost | 5 | | | 9 | | | | | | | | | | | | | | | | | | | | | | | | | |
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| $ | 1,743 | | | $ | 1,257 | | | | | | | | | | | | | | | | | | | | | | | | | |
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At December 31, 2014, the benefits related to the Company’s qualified and nonqualified pension plans expected to be paid in each of the next five years and in the aggregate for the five fiscal years thereafter are as follows: |
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| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2015 | $ | 210 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2016 | 216 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2017 | 223 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2018 | 233 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2019 | 239 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2020 - 2024 | 1,264 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total | $ | 2,385 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Assumptions used in determining the projected benefit obligation and net pension costs are listed below: |
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| 2014 | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Projected benefit obligation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | 4.12% | | 4.95% | | 4.15% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Rate of compensation increase | 4.65% | | 4.20% | | 4.20% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net pension costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | 4.95% | | 4.15% | | 5.00% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Rate of compensation increase | 4.20% | | 4.20% | | 4.20% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected long-term rate of return on plan assets | 7.75% | | 8.25% | | 8.25% | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Company employs a formal process in determining the long-term rate of return for various asset classes. Management reviews historic financial market risks and returns and long-term historic relationships between the asset classes of equities, fixed income and other assets, consistent with the widely accepted capital market principle that asset classes with higher volatility generate a greater return over the long-term. Current market factors such as inflation, interest rates, asset class risks and asset class returns are evaluated and considered before long-term capital market assumptions are determined. The long-term portfolio return is also established employing a consistent formal process, with due consideration of diversification, active investment management and rebalancing. Peer data is reviewed to check for reasonableness. As a result of this process, the Company has long-term rate of return assumptions for its pension plans of 7.75% and other postretirement benefit plans of 8.00%, for 2015. The Company believes these rates are a reasonable assumption for the long-term rate of return on its plan assets for 2015 given its investment strategy. |
The Company employs a total return investment approach whereby a mix of equities, fixed income and other investments are used to maximize the long-term return on plan assets consistent with prudent levels of risk, with consideration given to the liquidity needs of the plan. Risk tolerance is established through consideration of future plan cash flows, plan funded status and corporate financial considerations. The investment portfolio contains a diversified blend of equity, fixed income and other investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, growth and value stocks and large and small market capitalizations. Fixed income securities generally include market and long duration bonds of companies from diversified industries, mortgage-backed securities, non-US securities, bank loans and U.S. Treasuries. Other assets such as private markets and hedge funds are used to enhance long-term returns while improving portfolio diversification. Derivatives may be utilized in a risk controlled manner, to potentially increase the portfolio beyond the market value of invested assets and/or reduce portfolio investment risk. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews. |
Target allocations for pension plan assets as of December 31, 2014 are listed below: |
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U.S. Large Cap Equity Securities | 22 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. Small Cap and Mid Cap Equity Securities | 5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Non U.S. Equity Securities | 20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Fixed Income Securities | 25 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Hedge Funds and Similar Investments | 20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Private Equity and Other | 8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 100 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair Value Measurements for pension plan assets at December 31, 2014 and 2013 (a): |
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| December 31, 2014 | | December 31, 2013 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| (In millions) |
Asset category: | | | | | | | | | | | | | | | |
Short-term investments (b) | $ | 33 | | | $ | — | | | $ | — | | | $ | 33 | | | $ | 15 | | | $ | — | | | $ | — | | | $ | 15 | |
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Equity securities | | | | | | | | | | | | | | | |
U.S. large cap (c) | 638 | | | — | | | — | | | 638 | | | 639 | | | — | | | — | | | 639 | |
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U.S. small/mid cap (d) | 162 | | | — | | | — | | | 162 | | | 160 | | | — | | | — | | | 160 | |
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Non U.S. (e) | 378 | | | 157 | | | — | | | 535 | | | 440 | | | 94 | | | — | | | 534 | |
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Fixed income securities (f) | 5 | | | 758 | | | — | | | 763 | | | 11 | | | 623 | | | — | | | 634 | |
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Hedge funds and similar investments (g) | 163 | | | 68 | | | 315 | | | 546 | | | 193 | | | 50 | | | 285 | | | 528 | |
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Private equity and other (h) | — | | | — | | | 135 | | | 135 | | | — | | | — | | | 122 | | | 122 | |
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Securities lending (i) | (136 | ) | | (36 | ) | | — | | | (172 | ) | | — | | | — | | | — | | | — | |
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Securities lending collateral (i) | 136 | | | 36 | | | — | | | 172 | | | — | | | — | | | — | | | — | |
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Total | $ | 1,379 | | | $ | 983 | | | $ | 450 | | | $ | 2,812 | | | $ | 1,458 | | | $ | 767 | | | $ | 407 | | | $ | 2,632 | |
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(a) | For a description of levels within the fair value hierarchy see Note 9 to the Consolidated financial Statements, "Fair Value". | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(b) | This category predominantly represents certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets or valuations from brokers or pricing services. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(c) | This category comprises both actively and not actively managed portfolios that track the S&P 500 low cost equity index funds. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as Level 2 assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(d) | This category represents portfolios of small and medium capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as Level 2 assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(e) | This category primarily consists of portfolios of non-U.S. developed and emerging market equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as Level 2 assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(f) | This category includes corporate bonds from diversified industries, U.S. Treasuries, and mortgage-backed securities. Pricing for investments in this category is obtained from quoted prices in actively traded markets and quotations from broker or pricing services. Non-exchange traded securities and exchange-traded securities held in commingled funds are classified as Level 2 assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(g) | This category utilizes a diversified group of strategies that attempt to capture financial market inefficiencies and includes publicly traded debt and equity, publicly traded mutual funds, commingled and limited partnership funds and non-exchange traded securities. Pricing for Level 1 and Level 2 assets in this category is obtained from quoted prices in actively traded markets and quoted prices from broker or pricing services. Non-exchange traded securities held in commingled funds are classified as Level 2 assets. Valuations for some Level 3 assets in this category may be based on limited observable inputs as there may be little, if any, publicly available pricing. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(h) | This category includes a diversified group of funds and strategies that primarily invests in private equity partnerships. This category also includes investments in timber and private mezzanine debt. Pricing for investments in this category is based on limited observable inputs as there is little, if any, publicly available pricing. Valuations for assets in this category may be based on discounted cash flow analyses, relevant publicly-traded comparables and comparable transactions. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(i) | In 2014, DTE Electric began a securities lending program with a third party agent. The program allows the agent to lend certain securities from the Company's pension trusts to selected entities against receipt of collateral (in the form of cash) as provided for and determined in accordance with its securities lending agency agreement. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The pension trust holds debt and equity securities directly and indirectly through commingled funds and institutional mutual funds. Exchange-traded debt and equity securities held directly are valued using quoted market prices in actively traded markets. The commingled funds and institutional mutual funds hold exchange-traded equity or debt securities and are valued based on NAV. Non-exchange traded fixed income securities are valued by the trustee based upon quotations available from brokers or pricing services. A primary price source is identified by asset type, class or issue for each security. The trustee monitors prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustee challenges an assigned price and determines that another price source is considered to be preferable. DTE Electric has obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, DTE Electric selectively corroborates the fair values of securities by comparison of market-based price sources. |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3): |
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| Year Ended December 31, 2014 | | Year Ended December 31, 2013 | | | | | | | | |
| Hedge Funds | | Private | | | | Hedge Funds | | Private | | | | | | | | | | |
and Similar | Equity | and Similar | Equity | | | | | | | | |
| Investments | | and Other | | Total | | Investments | | and Other | | Total | | | | | | | | |
| (In millions) | | | | | | | | |
Beginning Balance at January 1 | $ | 285 | | | $ | 122 | | | $ | 407 | | | $ | 238 | | | $ | 125 | | | 363 | | | | | | | | | |
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Total realized/unrealized gains (losses) | 15 | | | 12 | | | 27 | | | 29 | | | 2 | | | 31 | | | | | | | | | |
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Purchases, sales and settlements: | | | | | | | | | | | | | | | | | | | | |
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Purchases | 16 | | | 22 | | | 38 | | | 18 | | | 15 | | | 33 | | | | | | | | | |
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Sales | (1 | ) | | (21 | ) | | (22 | ) | | — | | | (20 | ) | | (20 | ) | | | | | | | | |
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Ending Balance at December 31 | $ | 315 | | | $ | 135 | | | $ | 450 | | | $ | 285 | | | $ | 122 | | | $ | 407 | | | | | | | | | |
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The amount of total gains for the period attributable to the change in unrealized gains or losses related to assets still held at the end of the period | $ | 15 | | | $ | 8 | | | $ | 23 | | | $ | 27 | | | $ | 2 | | | $ | 29 | | | | | | | | | |
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There were no transfers between Level 3 and Level 2 and there were no significant transfers between Level 2 and Level 1 in the years ended December 31, 2014 and 2013. |
Other Postretirement Benefits |
The Company participates in defined benefit plans sponsored by the LLC that provide certain other postretirement health care and life insurance benefits for employees who are eligible for these benefits. The Company’s policy is to fund certain trusts to meet its other postretirement benefit obligations. Separate qualified VEBA and other benefit trusts exist. The Company made no contributions to these trusts for its defined benefit other postretirement medical and life insurance benefit plans during 2014. At the discretion of management, the Company anticipates making up to $175 million of contributions to the trusts in 2015. |
Starting in 2012, in lieu of offering future employees defined benefit post-employment health care and life insurance benefits, the Company allocates a fixed amount per year to an account in a defined contribution VEBA for each employee. These accounts are managed either by the Company (for non-represented and certain represented groups), or by the Utility Workers of America (UWUA) for Local 223 employees. The contributions to the VEBA for these accounts were $2 million in 2014, $1 million in 2013, and less than $1 million in 2012. |
Beginning in 2013, the Company replaced the defined benefit employer-sponsored retiree medical, prescription drug and dental coverage with a notional allocation to a Retiree Reimbursement Account. This change applies to both current and future Medicare eligible non-represented and future represented retirees, spouses, surviving spouses or same sex domestic partners when the youngest of the retiree's covered household turns age 65. The amount of the annual allocation to each participant is determined by the employee's retirement date: for employees who retired on or before January 1, 2013, the base allocation is $3,500, which increased to $3,570 in 2014 and for employees who retire after January 1, 2013, the base allocation is $3,250 which increased to $3,315 in 2014. The amount of the allocation will increase each year at the lower of the rate of medical inflation or 2%. |
Net other postretirement cost includes the following components: |
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| 2014 | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | |
Service cost | $ | 26 | | | $ | 35 | | | $ | 51 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Interest cost | 68 | | | 67 | | | 91 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Expected return on plan assets | (85 | ) | | (74 | ) | | (61 | ) | | | | | | | | | | | | | | | | | | | | |
Amortization of: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | 14 | | | 47 | | | 58 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Prior service credit | (109 | ) | | (100 | ) | | (14 | ) | | | | | | | | | | | | | | | | | | | | |
Net other postretirement cost (credit) | $ | (86 | ) | | $ | (25 | ) | | $ | 125 | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | |
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| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in plan assets and APBO recognized in Regulatory assets (liabilities) and Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial gain | $ | 144 | | | $ | (258 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Amortization of net actuarial loss | (14 | ) | | (47 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service credit | — | | | (159 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Amortization of prior service credit | 109 | | | 100 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total recognized in Regulatory assets (liabilities) and Other comprehensive income | $ | 239 | | | $ | (364 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total recognized in net periodic benefit cost, Regulatory assets (liabilities) and Other comprehensive income | $ | 153 | | | $ | (389 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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Estimated amounts to be amortized from Regulatory assets (liabilities) and Accumulated other comprehensive income into net periodic benefit cost during next fiscal year | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial loss | $ | 31 | | | $ | 15 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Prior service credit | $ | (94 | ) | | $ | (109 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
The following table reconciles the obligations, assets and funded status of the plans including amounts recorded as Accrued postretirement liability - affiliates in the Consolidated Statements of Financial Position at December 31: |
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| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | |
Change in accumulated postretirement benefit obligation | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated postretirement benefit obligation, beginning of year | $ | 1,430 | | | $ | 1,752 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Service cost | 26 | | | 35 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Interest cost | 68 | | | 67 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Plan amendments | — | | | (159 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Actuarial (gain) loss | 100 | | | (200 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Medicare Part D subsidy | — | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Benefits paid | (66 | ) | | (66 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated postretirement benefit obligation, end of year | $ | 1,558 | | | $ | 1,430 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Change in plan assets | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Plan assets at fair value, beginning of year | $ | 1,061 | | | $ | 756 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Actual return on plan assets | 41 | | | 131 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Company contributions | — | | | 239 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Benefits paid | (64 | ) | | (65 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Plan assets at fair value, end of year | $ | 1,038 | | | $ | 1,061 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Funded status, end of year | $ | (520 | ) | | $ | (369 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amount recorded as: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Noncurrent liabilities | $ | (520 | ) | | $ | (369 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized in Regulatory assets (liabilities) (see Note 7 - "Regulatory Matters") | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial loss | $ | 385 | | | $ | 255 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Prior service cost | (194 | ) | | (303 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 191 | | | $ | (48 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2014, the benefits expected to be paid, including prescription drug benefits, in each of the next five years and in the aggregate for the five fiscal years thereafter are as follows: |
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| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2015 | $ | 77 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | 82 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2017 | 85 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2018 | 89 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2019 | 93 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2020 - 2024 | 505 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 931 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Assumptions used in determining the accumulated postretirement benefit obligation and net other postretirement benefit costs are listed below: |
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| 2014 | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated postretirement benefit obligation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | 4.10% | | 4.95% | | 4.15% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Health care trend rate pre- and post- 65 | 7.50 / 6.50% | | 7.50 / 6.50% | | 7.00% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ultimate health care trend rate | 4.50% | | 4.50% | | 5.00% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year in which ultimate reached pre- and post- 65 | 2025 / 2024 | | 2025 / 2024 | | 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other postretirement benefit costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate (prior to interim remeasurement) | 4.95% | | 4.15% | | 5.00% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate (post interim remeasurement) | N/A | | 4.30% | | N/A | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected long-term rate of return on plan assets | 8.00% | | 8.25% | | 8.25% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Health care trend rate pre- and post- 65 | 7.50 / 6.50% | | 7.00% | | 7.00% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ultimate health care trend rate | 4.50% | | 5.00% | | 5.00% | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year in which ultimate reached pre- and post- 65 | 2025 / 2024 | | 2021 | | 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | |
A one percentage-point increase in health care cost trend rates would have increased the total service cost and interest cost components of benefit costs by $5 million in 2014 and increased the accumulated benefit obligation by $89 million at December 31, 2014. A one percentage-point decrease in the health care cost trend rates would have decreased the total service and interest cost components of benefit costs by $4 million in 2014 and would have decreased the accumulated benefit obligation by $77 million at December 31, 2014. |
The process used in determining the long-term rate of return for assets and the investment approach for the other postretirement benefits plans is similar to those previously described for its pension plans. |
Target allocations for other postretirement benefit plan assets as of December 31, 2014 are listed below: |
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U.S. Large Cap Equity Securities | 17 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. Small Cap and Mid Cap Equity Securities | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Non U.S. Equity Securities | 20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed Income Securities | 25 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Hedge Funds and Similar Investments | 20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Private Equity and Other | 14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 100 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair Value Measurements for other postretirement benefit plan assets at December 31, 2014 and 2013 (a): |
|
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| December 31, 2014 | | December 31, 2013 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Asset category: | (In millions) |
Short-term investments (b) | $ | 4 | | | $ | — | | | $ | — | | | $ | 4 | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 3 | |
|
Equity securities | | | | | | | | | | | | | | | |
U.S. large cap (c) | 179 | | | — | | | — | | | 179 | | | 208 | | | — | | | — | | | 208 | |
|
U.S. small/mid cap (d) | 102 | | | — | | | — | | | 102 | | | 103 | | | — | | | — | | | 103 | |
|
Non U.S. (e) | 151 | | | 39 | | | — | | | 190 | | | 197 | | | 5 | | | — | | | 202 | |
|
Fixed income securities (f) | 11 | | | 243 | | | — | | | 254 | | | 12 | | | 243 | | | — | | | 255 | |
|
Hedge funds and similar investments (g) | 73 | | | 31 | | | 114 | | | 218 | | | 91 | | | 17 | | | 111 | | | 219 | |
|
Private equity and other (h) | — | | | — | | | 91 | | | 91 | | | — | | | — | | | 71 | | | 71 | |
|
Securities lending (i) | (98 | ) | | (11 | ) | | — | | | (109 | ) | | — | | | — | | | — | | | — | |
|
Securities lending collateral (i) | 98 | | | 11 | | | — | | | 109 | | | — | | | — | | | — | | | — | |
|
Total | $ | 520 | | | $ | 313 | | | $ | 205 | | | $ | 1,038 | | | $ | 614 | | | $ | 265 | | | $ | 182 | | | $ | 1,061 | |
|
_______________________________________ |
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(a) | For a description of levels within the fair value hierarchy see Note 9 to the Consolidated Financial Statements, "Fair Value". | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(b) | This category predominantly represents certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets or valuations from brokers or pricing services. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(c) | This category comprises both actively and not actively managed portfolios that track the S&P 500 low cost equity index funds. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as Level 2 assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(d) | This category represents portfolios of small and medium capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as Level 2 assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(e) | This category primarily consists of portfolios of non-U.S. developed and emerging market equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as Level 2 assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(f) | This category includes corporate bonds from diversified industries, U.S. Treasuries, bank loans and mortgage backed securities. Pricing for investments in this category is obtained from quoted prices in actively traded markets and quotations from broker or pricing services. Non-exchange traded securities and exchange-traded securities held in commingled funds are classified as Level 2 assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(g) | This category utilizes a diversified group of strategies that attempt to capture financial market inefficiencies and includes publicly traded debt and equity, publicly traded mutual funds, commingled and limited partnership funds and non-exchange traded securities. Pricing for Level 1 and Level 2 assets in this category is obtained from quoted prices in actively traded markets and quoted prices from broker or pricing services. Non-exchange traded securities held in commingled funds are classified as Level 2 assets. Valuations for some Level 3 assets in this category may be based on limited observable inputs as there may be little, if any, publicly available pricing. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(h) | This category includes a diversified group of funds and strategies that primarily invests in private equity partnerships. This category also includes investments in timber and private mezzanine debt. Pricing for investments in this category is based on limited observable inputs as there is little, if any, publicly available pricing. Valuations for assets in this category may be based on discounted cash flow analyses, relevant publicly-traded comparables and comparable transactions. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(i) | In 2014, DTE Electric began a securities lending program with a third party agent. The program allows the agent to lend certain securities from the Company's VEBA trust to selected entities against receipt of collateral (in the form of cash) as provided for and determined in accordance with its securities lending agency agreement. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The VEBA trust holds debt and equity securities directly and indirectly through commingled funds and institutional mutual funds. Exchange-traded debt and equity securities held directly are valued using quoted market prices in actively traded markets. The commingled funds and institutional mutual funds hold exchange-traded equity or debt securities and are valued based on NAV. Non-exchange traded fixed income securities are valued by the trustee based upon quotations available from brokers or pricing services. A primary price source is identified by asset type, class or issue for each security. The trustees monitor prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustee challenges an assigned price and determines that another price source is considered to be preferable. DTE Electric has obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, DTE Electric selectively corroborates the fair values of securities by comparison of market-based price sources. |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3): |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2014 | | Year Ended December 31, 2013 | | | | | | | | |
| Hedge Funds and Similar Investments | | Private Equity and Other | | Total | | Hedge Funds and Similar Investments | | Private Equity and Other | | Total | | | | | | | | |
| (In millions) | | | | | | | | |
Beginning Balance at January 1 | $ | 111 | | | $ | 71 | | | $ | 182 | | | $ | 78 | | | $ | 57 | | | $ | 135 | | | | | | | | | |
| | | | | | | |
Total realized/unrealized gains (losses) | 5 | | | 6 | | | 11 | | | 10 | | | 7 | | | 17 | | | | | | | | | |
| | | | | | | |
Purchases, sales and settlements: | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Purchases | 4 | | | 22 | | | 26 | | | 23 | | | 14 | | | 37 | | | | | | | | | |
| | | | | | | |
Sales | (6 | ) | | (8 | ) | | (14 | ) | | — | | | (7 | ) | | (7 | ) | | | | | | | | |
| | | | | | | |
Ending Balance at December 31 | $ | 114 | | | $ | 91 | | | $ | 205 | | | $ | 111 | | | $ | 71 | | | $ | 182 | | | | | | | | | |
| | | | | | | |
The amount of total gains for the period attributable to the change in unrealized gains or losses related to assets still held at the end of the period | $ | 5 | | | $ | 5 | | | $ | 10 | | | $ | 10 | | | $ | 6 | | | $ | 16 | | | | | | | | | |
| | | | | | | |
There were no transfers between Level 3 and Level 2 and there were no significant transfers between Level 2 and Level 1 in the years ended December 31, 2014 and 2013. |
Interim Re-Measurement of Other Postretirement Benefit Obligation |
In March 2013, the Company reached an agreement on a new four-year labor contract with certain represented employees. As a term of the agreement, the Company replaced the defined benefit employer-sponsored retiree medical, prescription drug and dental coverage for future Medicare eligible retirees and their covered dependents with an allocation to a Retiree Reimbursement Account, when the youngest of the retiree's covered household turns age 65. The amount of the allocation is $3,250 per year for each eligible participant, which increased to $3,315 in 2014. The amount of the allocation will increase each year at the lower of the rate of medical inflation or 2%. The modification in retiree health coverage will reduce future other postretirement benefit costs. |
Based on the impact of such benefit cost savings on the Consolidated Financial Statements, the Company re-measured its retiree health plan as of March 31, 2013. In performing the re-measurement, the Company updated its significant actuarial assumptions, including an adjustment to the discount rate from 4.15% at December 31, 2012 to 4.30% at March 31, 2013. Plan assets were also updated to reflect fair value as of the re-measurement date. Beginning April 2013, net other postretirement benefit costs were recorded based on the updated actuarial assumptions and benefit changes resulting from the new labor contract. |
Defined Contribution Plans |
The Company also sponsors defined contribution retirement savings plans. Participation in one of these plans is available to substantially all represented and non-represented employees. The Company matches employee contributions up to certain predefined limits based upon eligible compensation, the employee’s contribution rate and, in some cases, years of credit service. The cost of these plans was $24 million, $21 million and $19 million in each of the years ended December 31, 2014, 2013 and 2012, respectively. |