Retirement Benefits and Trusteed Assets (Notes) | 12 Months Ended |
Dec. 31, 2013 |
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | ' |
Retirement Benefits and Trusteed Assets | ' |
RETIREMENT BENEFITS AND TRUSTEED ASSETS |
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Pension Plan Benefits |
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The Company has qualified defined benefit retirement plans for eligible represented and non-represented employees. The plans are noncontributory and cover most employees. The plans provide traditional retirement benefits based on the employees’ years of benefit service, average final compensation and age at retirement. In addition, certain represented and non-represented employees are covered under cash balance provisions that determine benefits on annual employer contributions and interest credits. The Company also maintains supplemental nonqualified, noncontributory, retirement benefit plans for selected management employees. These plans provide for benefits that supplement those provided by DTE Energy’s other retirement plans. |
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Effective January 1, 2012 for non-represented employees, and in June 2011 and March 2013 for the majority of represented employees, the Company discontinued offering a defined benefit retirement plan. In its place, the Company will annually contribute an amount equivalent to 4% (8% for certain DTE Gas represented employees) of an employee's eligible pay to the employee's defined contribution retirement savings plan. |
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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 $277 million to its qualified pension plans in 2013. At the discretion of management, and depending upon financial market conditions, we anticipate making up to $345 million in contributions to the pension plans in 2014. |
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Net pension cost includes the following components: |
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| 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | |
Service cost | $ | 94 | | | $ | 82 | | | $ | 69 | | | | | | | | | | | | | | | | | | | | | |
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Interest cost | 192 | | | 204 | | | 202 | | | | | | | | | | | | | | | | | | | | | |
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Expected return on plan assets | (266 | ) | | (244 | ) | | (246 | ) | | | | | | | | | | | | | | | | | | | | |
Amortization of: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | 208 | | | 176 | | | 142 | | | | | | | | | | | | | | | | | | | | | |
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Prior service cost | — | | | — | | | 3 | | | | | | | | | | | | | | | | | | | | | |
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Special termination benefits | — | | | 2 | | | 2 | | | | | | | | | | | | | | | | | | | | | |
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Net pension cost | $ | 228 | | | $ | 220 | | | $ | 172 | | | | | | | | | | | | | | | | | | | | | |
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| 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized in Regulatory assets and Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial (gain) loss | $ | (581 | ) | | $ | 395 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Amortization of net actuarial loss | (208 | ) | | (178 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Total recognized Regulatory assets and Other comprehensive income | $ | (789 | ) | | $ | 217 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total recognized in net periodic pension cost, Regulatory assets and Other comprehensive income | $ | (561 | ) | | $ | 437 | | | | | | | | | | | | | | | | | | | | | | | | | |
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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 | $ | 151 | | | $ | 202 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table reconciles the obligations, assets and funded status of the plans as well as the amounts recognized as prepaid pension cost or pension liability in the Consolidated Statements of Financial Position at December 31: |
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| 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated benefit obligation, end of year | $ | 4,068 | | | $ | 4,349 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Change in projected benefit obligation | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Projected benefit obligation, beginning of year | $ | 4,729 | | | $ | 4,195 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Service cost | 94 | | | 82 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Interest cost | 192 | | | 204 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Plan amendments | (3 | ) | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Actuarial (gain) loss | (400 | ) | | 474 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Special termination benefits | — | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Benefits paid | (232 | ) | | (228 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Projected benefit obligation, end of year | $ | 4,380 | | | $ | 4,729 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Change in plan assets | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Plan assets at fair value, beginning of year | $ | 3,223 | | | $ | 2,886 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Actual return on plan assets | 445 | | | 325 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Company contributions | 284 | | | 240 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Benefits paid | (232 | ) | | (228 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Plan assets at fair value, end of year | $ | 3,720 | | | $ | 3,223 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Funded status of the plans | $ | (660 | ) | | $ | (1,506 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amount recorded as: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities | $ | (7 | ) | | $ | (8 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Noncurrent liabilities | (653 | ) | | (1,498 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | (660 | ) | | $ | (1,506 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized in Accumulated other comprehensive loss, pre-tax | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial loss | $ | 174 | | | $ | 205 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Prior service (credit) | (1 | ) | | (2 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 173 | | | $ | 203 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Amounts recognized in Regulatory assets (see Note 11) | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial loss | $ | 1,654 | | | $ | 2,413 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Prior service cost | 6 | | | 7 | | | | | | | | | | | | | | | | | | | | | | | | | |
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| $ | 1,660 | | | $ | 2,420 | | | | | | | | | | | | | | | | | | | | | | | | | |
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At December 31, 2013, 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) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2014 | $ | 242 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2015 | 250 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2016 | 258 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2017 | 268 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2018 | 280 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2019-2023 | 1,529 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| $ | 2,827 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Assumptions used in determining the projected benefit obligation and net pension costs are listed below: |
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| 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | | | | | | | | | | |
Projected benefit obligation | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | 4.95 | % | | 4.15 | % | | 5 | % | | | | | | | | | | | | | | | | | | | | | | | |
Rate of compensation increase | 4.2 | % | | 4.2 | % | | 4.2 | % | | | | | | | | | | | | | | | | | | | | | | | |
Net pension costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | 4.15 | % | | 5 | % | | 5.5 | % | | | | | | | | | | | | | | | | | | | | | | | |
Rate of compensation increase | 4.2 | % | | 4.2 | % | | 4 | % | | | | | | | | | | | | | | | | | | | | | | | |
Expected long-term rate of return on plan assets | 8.25 | % | | 8.25 | % | | 8.5 | % | | | | | | | | | | | | | | | | | | | | | | | |
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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 2014. The Company believes these rates are a reasonable assumption for the long-term rate of return on its plan assets for 2014 given its investment strategy. |
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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. |
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Target allocations for pension plan assets as of December 31, 2013 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 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Fair Value Measurements for pension plan assets at December 31, 2013 and 2012 (a): |
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| 31-Dec-13 | | 31-Dec-12 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| (In millions) |
Asset Category: | | | | | | | | | | | | | | | |
Short-term investments (b) | $ | 22 | | | $ | — | | | $ | — | | | $ | 22 | | | $ | — | | | $ | 24 | | | $ | — | | | $ | 24 | |
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Equity securities | | | | | | | | | | | | | | | | | | | | | | |
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U.S. Large Cap (c) | 896 | | | — | | | — | | | 896 | | | 688 | | | 44 | | | — | | | 732 | |
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U.S. Small/Mid Cap (d) | 221 | | | — | | | — | | | 221 | | | 153 | | | 5 | | | — | | | 158 | |
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Non U.S. (e) | 611 | | | 130 | | | — | | | 741 | | | 530 | | | 120 | | | — | | | 650 | |
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Fixed income securities (f) | 16 | | | 921 | | | — | | | 937 | | | 87 | | | 765 | | | — | | | 852 | |
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Hedge Funds and Similar Investments (g) | 268 | | | 70 | | | 395 | | | 733 | | | 209 | | | 80 | | | 339 | | | 628 | |
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Private Equity and Other (h) | — | | | — | | | 170 | | | 170 | | | — | | | — | | | 179 | | | 179 | |
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Total | $ | 2,034 | | | $ | 1,121 | | | $ | 565 | | | $ | 3,720 | | | $ | 1,667 | | | $ | 1,038 | | | $ | 518 | | | $ | 3,223 | |
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(a) | See Note 3 — Fair Value for a description of levels within the fair value hierarchy. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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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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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 stated net asset values (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 trustees challenge an assigned price and determine that another price source is considered to be preferable. DTE Energy 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 Energy selectively corroborates the fair values of securities by comparison of market-based price sources. |
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3): |
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| Year Ended December 31, 2013 | | Year Ended December 31, 2012 | | | | | | | | |
| Hedge Funds | | Private Equity | | Total | | Hedge Funds | | Private Equity | | Total | | | | | | | | |
and Similar | and Other | and Similar | and Other | | | | | | | | |
Investments | | Investments | | | | | | | | | |
| (In millions) | | | | | | | | |
Beginning Balance at January 1 | $ | 339 | | | $ | 179 | | | $ | 518 | | | $ | 296 | | | $ | 168 | | | $ | 464 | | | | | | | | | |
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Total realized/unrealized gains (losses): | | | | | | | | | | | | | | | | | | | |
Realized gains (losses) | — | | | 18 | | | 18 | | | 18 | | | (6 | ) | | 12 | | | | | | | | | |
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Unrealized gains (losses) | 40 | | | (14 | ) | | 26 | | | (5 | ) | | 12 | | | 7 | | | | | | | | | |
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Purchases, sales and settlements: | | | | | | | | | | | | | | | | | | | |
Purchases | 16 | | | 15 | | | 31 | | | 250 | | | 33 | | | 283 | | | | | | | | | |
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Sales | — | | | (28 | ) | | (28 | ) | | (220 | ) | | (28 | ) | | (248 | ) | | | | | | | | |
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Ending Balance at December 31 | $ | 395 | | | $ | 170 | | | $ | 565 | | | $ | 339 | | | $ | 179 | | | $ | 518 | | | | | | | | | |
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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 | $ | 38 | | | $ | 3 | | | $ | 41 | | | $ | 16 | | | $ | 6 | | | $ | 22 | | | | | | | | | |
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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, 2013 and 2012. |
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Other Postretirement Benefits |
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The Company provides 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 Voluntary Employees Beneficiary Association (VEBA) and 401(h) trusts exist for represented and non-represented employees. The Company contributed $264 million to its other postretirement medical and life insurance benefit plans during 2013. At the discretion of management, we anticipate making up to $145 million of contributions to the VEBA trusts in 2014. |
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Starting in 2012, in lieu of offering future employees post-employment health care and life insurance benefits, the Company allocates a fixed amount per year to an account in a tax-exempt trust for each employee. These trusts 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 cost of these plans was $2 million in 2013 and less than $1 million in 2012. |
|
Beginning in 2013, the Company replaced sponsored retiree medical, prescription drug and dental coverage with a Retiree Health Care Allowance (RHCA). This change applies to both current and future Medicare eligible non-represented retirees, spouses, surviving spouses or same sex domestic partners; as well as future Medicare eligible represented retirees, spouses, surviving spouses or same sex domestic partners. The 2013 RHCA allowance ranged between $3,250 and $3,500 depending on an employee’s date of hire and will increase each year at the lower of the rate of medical inflation or 2%. |
|
Net other postretirement cost includes the following components: |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | |
Service cost | $ | 47 | | | $ | 68 | | | $ | 64 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Interest cost | 88 | | | 120 | | | 121 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Expected return on plan assets | (110 | ) | | (92 | ) | | (94 | ) | | | | | | | | | | | | | | | | | | | | |
Amortization of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net loss | 64 | | | 80 | | | 55 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Prior service credit | (131 | ) | | (27 | ) | | (26 | ) | | | | | | | | | | | | | | | | | | | | |
Net transition asset | — | | | 2 | | | 2 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net other postretirement cost (benefit) | $ | (42 | ) | | $ | 151 | | | $ | 122 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in plan assets and APBO recognized in Regulatory assets (liabilities) and Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial gain | $ | (353 | ) | | $ | (34 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of net actuarial loss | (64 | ) | | (80 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service credit | (218 | ) | | (264 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of prior service credit | 131 | | | 27 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Amortization of transition asset | — | | | (2 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total recognized in Regulatory assets (liabilities) and Other comprehensive income | $ | (504 | ) | | $ | (353 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Total recognized in net periodic benefit cost, Regulatory assets (liabilities) and Other comprehensive income | $ | (546 | ) | | $ | (202 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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 | $ | 21 | | | $ | 69 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Prior service credit | $ | (144 | ) | | $ | (91 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following table reconciles the obligations, assets and funded status of the plans including amounts recorded as Accrued postretirement liability in the Consolidated Statements of Financial Position at December 31: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | |
Change in accumulated postretirement benefit obligation | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated postretirement benefit obligation, beginning of year | $ | 2,315 | | | $ | 2,470 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Service cost | 47 | | | 68 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Interest cost | 88 | | | 120 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Plan amendments | (218 | ) | | (264 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Actuarial (gain) loss | (267 | ) | | 5 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Medicare Part D subsidy | 1 | | | 6 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Benefits paid | (88 | ) | | (90 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated postretirement benefit obligation, end of year | $ | 1,878 | | | $ | 2,315 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Change in plan assets | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Plan assets at fair value, beginning of year | $ | 1,153 | | | $ | 985 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Actual return on plan assets | 196 | | | 131 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Company contributions | 264 | | | 140 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Benefits paid | (86 | ) | | (103 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Plan assets at fair value, end of year | $ | 1,527 | | | $ | 1,153 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Funded status, end of year | $ | (351 | ) | | $ | (1,162 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amount recorded as: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities | $ | (1 | ) | | $ | (2 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Noncurrent liabilities | (350 | ) | | (1,160 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | (351 | ) | | $ | (1,162 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized in Accumulated other comprehensive loss, pre-tax | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial loss | $ | 29 | | | $ | 40 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Prior service credit | (10 | ) | | (14 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Net transition asset | — | | | (1 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| $ | 19 | | | $ | 25 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized in Regulatory assets (liabilities) (See Note 11) | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial loss | $ | 321 | | | $ | 727 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Prior service credit | (393 | ) | | (302 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Net transition obligation | — | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| $ | (72 | ) | | $ | 426 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
At December 31, 2013, 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: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2014 | $ | 103 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2015 | 110 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | 115 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2017 | 123 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2018 | 130 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
2019 — 2023 | 724 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 1,305 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Assumptions used in determining the accumulated postretirement benefit obligation and net other postretirement benefit costs are listed below: |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated postretirement benefit obligation | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | 4.95 | % | | 4.15 | % | | 5 | % | | | | | | | | | | | | | | | | | | | | | | | |
Health care trend rate pre- and post- 65 | 7.5 | / 6.50% | | 7 | % | | 7 | % | | | | | | | | | | | | | | | | | | | | | | | |
Ultimate health care trend rate | 4.5 | % | | 5 | % | | 5 | % | | | | | | | | | | | | | | | | | | | | | | | |
Year in which ultimate reached pre- and post- 65 | 2025 / 2024 | | | 2021 | | | 2020 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other postretirement benefit costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate (prior to interim remeasurement) | 4.15 | % | | 5 | % | | 5.5 | % | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate (post interim remeasurement) | 4.3 | % | | N/A | | | N/A | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Expected long-term rate of return on plan assets | 8.25 | % | | 8.25 | % | | 8.75 | % | | | | | | | | | | | | | | | | | | | | | | | |
Health care trend rate pre- and post- 65 | 7 | % | | 7 | % | | 7 | % | | | | | | | | | | | | | | | | | | | | | | | |
Ultimate health care trend rate | 5 | % | | 5 | % | | 5 | % | | | | | | | | | | | | | | | | | | | | | | | |
Year in which ultimate reached | 2021 | | | 2020 | | | 2019 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
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 $9 million in 2013 and increased the accumulated benefit obligation by $124 million at December 31, 2013. 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 $8 million in 2013 and would have decreased the accumulated benefit obligation by $108 million at December 31, 2013. |
|
The process used in determining the long-term rate of return for assets and the investment approach for the Company’s 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, 2013 are listed below: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. Large Cap Equity Securities | 17 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. Small Cap and Mid Cap Equity Securities | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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, 2013 and 2012 (a): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 31-Dec-13 | | 31-Dec-12 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Asset Category: | (In millions) |
Short-term investments (b) | $ | 5 | | | $ | — | | | $ | — | | | $ | 5 | | | $ | 1 | | | $ | 2 | | | $ | — | | | $ | 3 | |
|
Equity securities: | | | | | | | | | | | | | | | | | | | | | |
|
U.S. Large Cap (c) | 302 | | | — | | | — | | | 302 | | | 189 | | | 3 | | | — | | | 192 | |
|
U.S. Small/Mid Cap (d) | 147 | | | — | | | — | | | 147 | | | 105 | | | — | | | — | | | 105 | |
|
Non U.S. (e) | 282 | | | 9 | | | — | | | 291 | | | 230 | | | 7 | | | — | | | 237 | |
|
Fixed income securities (f) | 17 | | | 350 | | | — | | | 367 | | | 38 | | | 247 | | | — | | | 285 | |
|
Hedge Funds and Similar Investments (g) | 130 | | | 25 | | | 159 | | | 314 | | | 102 | | | 24 | | | 119 | | | 245 | |
|
Private Equity and Other (h) | — | | | — | | | 101 | | | 101 | | | — | | | — | | | 86 | | | 86 | |
|
Total | $ | 883 | | | $ | 384 | | | $ | 260 | | | $ | 1,527 | | | $ | 665 | | | $ | 283 | | | $ | 205 | | | $ | 1,153 | |
|
_______________________________________ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | See Note 3 — Fair Value for a description of levels within the fair value hierarchy. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The VEBA trusts hold 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 net asset values (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 trustees challenge an assigned price and determine that another price source is considered to be preferable. DTE Energy 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 Energy 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, 2013 | | Year Ended December 31, 2012 | | | | | | | | |
| Hedge Funds | | Private Equity | | Total | | Hedge Funds | | Private Equity | | Total | | | | | | | | |
and Similar | and Other | and Similar | and Other | | | | | | | | |
Investments | | Investments | | | | | | | | | |
| (In millions) | | | | | | | | |
Beginning Balance at January 1 | $ | 119 | | | $ | 86 | | | $ | 205 | | | $ | 95 | | | $ | 60 | | | $ | 155 | | | | | | | | | |
| | | | | | | |
Total realized/unrealized gains (losses): | | | | | | | | | | | | | | | | | | | |
Realized gains (losses) | — | | | 2 | | | 2 | | | 6 | | | (11 | ) | | (5 | ) | | | | | | | | |
| | | | | | | |
Unrealized gains | 14 | | | 7 | | | 21 | | | — | | | 14 | | | 14 | | | | | | | | | |
| | | | | | | |
Purchases, sales and settlements: | | | | | | | | | | | | | | | | | | | |
Purchases | 26 | | | 15 | | | 41 | | | 86 | | | 36 | | | 122 | | | | | | | | | |
| | | | | | | |
Sales | — | | | (9 | ) | | (9 | ) | | (68 | ) | | (13 | ) | | (81 | ) | | | | | | | | |
| | | | | | | |
Ending Balance at December 31 | $ | 159 | | | $ | 101 | | | $ | 260 | | | $ | 119 | | | $ | 86 | | | $ | 205 | | | | | | | | | |
| | | | | | | |
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 | $ | 14 | | | $ | 9 | | | $ | 23 | | | $ | 6 | | | $ | 2 | | | $ | 8 | | | | | | | | | |
| | | | | | | |
|
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, 2013 and 2012. |
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Interim Re-Measurement of Other Postretirement Benefit Obligation |
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In March 2013, the Company reached agreements on new four-year labor contracts with certain represented employees under several bargaining units. As a term of the agreements, the Company replaced sponsored retiree medical, prescription drug and dental coverage for future Medicare eligible retirees with a Retiree Health Care Allowance (RHCA) account of $3,250 per year. The modification in retiree health coverage will reduce future other postretirement benefit costs. |
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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 contracts. |
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Healthcare Legislation |
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In December 2003, the Medicare Act was signed into law which provides for a non-taxable federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least “actuarially equivalent” to the benefit established by law. The effects of the subsidy reduced net periodic other postretirement benefit costs by $1 million in 2013, $6 million in 2012 and $6 million in 2011. |
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Grantor Trust |
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DTE Gas maintains a Grantor Trust to fund other postretirement benefit obligations that invests in life insurance contracts and income securities. Employees and retirees have no right, title or interest in the assets of the Grantor Trust, and DTE Gas can revoke the trust subject to providing the MPSC with prior notification. The Company accounts for its investment at fair value, approximately $17 million and $14 million at December 31, 2013 and 2012, respectively, with unrealized gains and losses recorded to earnings. The Grantor Trust investment is included in Other investments on the Consolidated Statements of Financial Position. |
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Defined Contribution Plans |
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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 credited service. The cost of these plans was $41 million, $37 million, and $35 million in each of the years 2013, 2012, and 2011, respectively. |