PG&E Corporation and the Utility sponsor a non-contributory defined benefit pension plan for eligible employees hired before December 31, 2012 and a cash balance plan for those eligible employees hired after this date or who made a one-time election to participate (“Pension Plan”). Certain trusts underlying these plans are qualified trusts under the Internal Revenue Code of 1986, as amended. If certain conditions are met, PG&E Corporation and the Utility can deduct payments made to the qualified trusts, subject to certain limitations. PG&E Corporation’s and the Utility’s funding policy is to contribute tax-deductible amounts, consistent with applicable regulatory decisions and federal minimum funding requirements. On an annual basis, the Utility funds the pension plans up to the amount it is authorized to recover in rates, $328 million for both 2019 and 2018.

PG&E Corporation and the Utility also sponsor contributory postretirement medical plans for retirees and their eligible dependents, and non-contributory postretirement life insurance plans for eligible employees and retirees. PG&E Corporation and the Utility use a fiscal year-end measurement date for all plans.

On February 27, 2019, PG&E Corporation and the Utility received approval from the Bankruptcy Court to maintain existing pension and other benefit plans during the pendency of the Chapter 11 Cases. (For more information see “First Day Motions” in Note 2 above.)


(in millions)	2019		2018
Change in plan assets:
Fair value of plan assets at beginning of year	$	15,312	$	16,652
Actual return on plan assets	3,713		(923)
Company contributions	328		334
Benefits and expenses paid	(806)		(751)
Fair value of plan assets at end of year	$	18,547	$	15,312

Change in benefit obligation:
Benefit obligation at beginning of year	$	17,407	$	18,757
Service cost for benefits earned	443		514
Interest cost	758		687
Actuarial (gain) loss	2,723		(1,800)
Plan amendments	—		—
Benefits and expenses paid	(806)		(751)
Benefit obligation at end of year⁽¹⁾	$	20,525	$	17,407

Funded Status:
Current liability	$	(14)	$	(8)
Noncurrent liability	(1,964)		(2,087)
Net liability at end of year	$	(1,978)	$	(2,095)


(in millions)	2019		2018
Change in plan assets:
Fair value of plan assets at beginning of year	$	2,258	$	2,420
Actual return on plan assets	474		(108)
Company contributions	29		31
Plan participant contribution	82		81
Benefits and expenses paid	(165)		(166)
Fair value of plan assets at end of year	$	2,678	$	2,258

Change in benefit obligation:
Benefit obligation at beginning of year	$	1,745	$	1,897
Service cost for benefits earned	56		66
Interest cost	76		69
Actuarial (gain) loss	22		(221)
Benefits and expenses paid	(150)		(150)
Federal subsidy on benefits paid	2		3
Plan participant contributions	81		81
Benefit obligation at end of year	$	1,832	$	1,745

Funded Status:⁽¹⁾
Noncurrent asset	$	879	$	545
Noncurrent liability	(33)		(32)
Net asset at end of year	$	846	$	513

PG&E Corporation and the Utility sponsor a non-contributory defined benefit pension plan and cash balance plan. Both plans are included in “Pension Benefits” below. Post-retirement medical and life insurance plans are included in “Other Benefits” below.


(in millions)	2019		2018		2017
Service cost for benefits earned⁽¹⁾	$	443	$	514	$	472
Interest cost	758		687		714
Expected return on plan assets	(906)		(1,021)		(770)
Amortization of prior service cost	(6)		(6)		(7)
Amortization of net actuarial loss	3		5		22
Net periodic benefit cost	292		179		431
Less: transfer to regulatory account⁽²⁾	42		157		(92)
Total expense recognized	$	334	$	336	$	339


(in millions)	2019		2018		2017
Service cost for benefits earned⁽¹⁾	$	56	$	66	$	59
Interest cost	76		69		77
Expected return on plan assets	(123)		(130)		(97)
Amortization of prior service cost	14		14		15
Amortization of net actuarial loss	(3)		(5)		4
Net periodic benefit cost	$	20	$	14	$	58

PG&E Corporation and the Utility record unrecognized prior service costs and unrecognized gains and losses related to pension and post-retirement benefits other than pension as components of accumulated other comprehensive income, net of tax. In addition, regulatory adjustments are recorded in the Consolidated Statements of Income and Consolidated Balance Sheets to reflect the difference between expense or income calculated in accordance with GAAP for accounting purposes and expense or income for ratemaking purposes, which is based on authorized plan contributions. For pension benefits, a regulatory asset or liability is recorded for amounts that would otherwise be recorded to accumulated other comprehensive income. For post-retirement benefits other than pension, the Utility generally records a regulatory liability for amounts that would otherwise be recorded to accumulated other comprehensive income. As the Utility is unable to record a regulatory asset for these other benefits, the charge remains in accumulated other comprehensive income (loss).

The following actuarial assumptions were used in determining the projected benefit obligations and the net periodic benefit costs. The following weighted average year-end assumptions were used in determining the plans’ projected benefit obligations and net benefit cost.


	Pension Plan								PBOP Plans
	December 31,								December 31,
	2019		2018		2017		2019	2018	2017
Discount rate	3.46	%	4.35	%	3.64	%	3.37 - 3.47%	4.29 - 4.37%	3.60 - 3.67%
Rate of future compensation increases	3.90	%	3.90	%	3.90	%	—	—	—
Expected return on plan assets	5.70	%	6.00	%	6.20	%	3.50 - 6.60%	3.60 - 6.80%	3.30 - 7.10%

The assumed health care cost trend rate as of December 31, 2019 was 6.3%, decreasing gradually to an ultimate trend rate in 2027 and beyond of approximately 4.5%. A one-percentage-point change in assumed health care cost trend rate would have the following effects:

Expected rates of return on plan assets were developed by determining projected stock and bond returns and then applying these returns to the target asset allocations of the employee benefit plan trusts, resulting in a weighted average rate of return on plan assets. Returns on fixed-income debt investments were projected based on real maturity and credit spreads added to a long-term inflation rate. Returns on equity investments were estimated based on estimates of dividend yield and real earnings growth added to a long-term inflation rate. For the pension plan, the assumed return of 5.7% compares to a ten-year actual return of 9.3%. The rate used to discount pension benefits and other benefits was based on a yield curve developed from market data of over approximately 936 Aa-grade non-callable bonds at December 31, 2019. This yield curve has discount rates that vary based on the duration of the obligations. The estimated future cash flows for the pension benefits and other benefit obligations were matched to the corresponding rates on the yield curve to derive a weighted average discount rate.

The financial position of PG&E Corporation’s and the Utility’s funded status is the difference between the fair value of plan assets and projected benefit obligations. Volatility in funded status occurs when asset values change differently from liability values and can result in fluctuations in costs in financial reporting, as well as the amount of minimum contributions required under the Employee Retirement Income Security Act of 1974, as amended. PG&E Corporation’s and the Utility’s investment policies and strategies are designed to increase the ratio of trust assets to plan liabilities at an acceptable level of funded status volatility.

The trusts’ asset allocations are meant to manage volatility, reduce costs, and diversify its holdings. Interest rate, credit, and equity risk are the key determinants of PG&E Corporation’s and the Utility’s funded status volatility. In addition to affecting the trusts’ fixed income portfolio market values, interest rate changes also influence liability valuations as discount rates move with current bond yields. To manage volatility, PG&E Corporation’s and the Utility’s trusts hold significant allocations in long maturity fixed-income investments. Although they contribute to funded status volatility, equity investments are held to reduce long-term funding costs due to their higher expected return. Real assets and absolute return investments are held to diversify the trust’s holdings in equity and fixed-income investments by exhibiting returns with low correlation to the direction of these markets. Real assets include commodities futures, global REITS, global listed infrastructure equities, and private real estate funds. Absolute return investments include hedge fund portfolios.

Derivative instruments such as equity index futures are used to meet target equity exposure. Derivative instruments, such as equity index futures and U.S. treasury futures, are also used to rebalance the fixed income/equity allocation of the pension’s portfolio. Foreign currency exchange contracts are used to hedge a portion of the non U.S. dollar exposure of global equity investments.


	Pension Plan										PBOP Plans
	2020		2019		2018		2020		2019		2018
Global equity securities	30	%	29	%	29	%	28	%	33	%	33	%
Absolute return	2	%	5	%	5	%	2	%	3	%	3	%
Real assets	8	%	8	%	8	%	8	%	6	%	6	%
Fixed-income securities	60	%	58	%	58	%	62	%	58	%	58	%
Total	100	%	100	%	100	%	100	%	100	%	100	%

PG&E Corporation and the Utility apply a risk management framework for managing the risks associated with employee benefit plan trust assets. The guiding principles of this risk management framework are the clear articulation of roles and responsibilities, appropriate delegation of authority, and proper accountability and documentation. Trust investment policies and investment manager guidelines include provisions designed to ensure prudent diversification, manage risk through appropriate use of physical direct asset holdings and derivative securities, and identify permitted and prohibited investments.


	Fair Value Measurements
	At December 31,
	2019														2018
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Pension Plan:
Short-term investments	$	613	$	231	$	—	$	844	$	333	$	22	$	—	$	355
Global equity securities	1,650		—		—		1,650		1,145		—		—		1,145
Absolute Return	—		1		—		1		—		—		—		—
Real assets	548		1		—		549		461		—		—		461
Fixed-income securities	2,227		6,413		15		8,655		1,897		5,216		8		7,121
Assets measured at NAV	—		—		—		6,937		—		—		—		6,202
Total	$	5,038	$	6,646	$	15	$	18,636	$	3,836	$	5,238	$	8	$	15,284
PBOP Plans:
Short-term investments	$	37	$	—	$	—	$	37	$	33	$	—	$	—	$	33
Global equity securities	151		—		—		151		115		—		—		115
Real assets	58		—		—		58		50		—		—		50
Fixed-income securities	193		875		1		1,069		153		857		—		1,010
Assets measured at NAV	—		—		—		1,373		—		—		—		1,056
Total	$	439	$	875	$	1	$	2,688	$	351	$	857	$	—	$	2,264
Total plan assets at fair value							$	21,324							$	17,548

In addition to the total plan assets disclosed at fair value in the table above, the trusts had other net liabilities of $99 million and other net assets of $22 million at December 31, 2019 and 2018, respectively, comprised primarily of cash, accounts receivable, deferred taxes, and accounts payable.

The following describes the valuation techniques used to measure the fair value of the assets and liabilities shown in the table above. All investments that are valued using a net asset value per share can be redeemed quarterly with a notice not to exceed 90 days.

The global equity category includes investments in common stock and equity-index futures. Equity investments in common stock are actively traded on public exchanges and are therefore considered Level 1 assets. These equity investments are generally valued based on unadjusted prices in active markets for identical securities. Equity-index futures are valued based on unadjusted prices in active markets and are Level 1 assets.

The real asset category includes portfolios of commodity futures, global REITS, global listed infrastructure equities, and private real estate funds. The commodity futures, global REITS, and global listed infrastructure equities are actively traded on a public exchange and are therefore considered Level 1 assets.

Fixed-income securities are primarily composed of U.S. government and agency securities, municipal securities, and other fixed-income securities, including corporate debt securities. U.S. government and agency securities primarily consist of U.S. Treasury securities that are classified as Level 1 because the fair value is determined by observable market prices in active markets. A market approach is generally used to estimate the fair value of debt securities classified as Level 2 using evaluated pricing data such as broker quotes, for similar securities adjusted for observable differences. Significant inputs used in the valuation model generally include benchmark yield curves and issuer spreads. The external credit ratings, coupon rate, and maturity of each security are considered in the valuation model, as applicable.

Investments in the trusts that are measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy tables above. The fair value amounts are included in the tables above in order to reconcile to the amounts presented in the Consolidated Balance Sheets. These investments include commingled funds that are composed of equity securities traded publicly on exchanges as well as fixed-income securities that are composed primarily of U.S. government securities, asset-backed securities, and private real estate funds. There are no restrictions on the terms and conditions upon which the investments may be redeemed.


(in millions)
For the year ended December 31, 2019	Fixed-Income
Balance at beginning of year	$	8
Actual return on plan assets:
Relating to assets still held at the reporting date	—
Relating to assets sold during the period	—
Purchases, issuances, sales, and settlements:
Purchases	11
Settlements	(4)
Balance at end of year	$	15

(in millions)
For the year ended December 31, 2018	Fixed-Income
Balance at beginning of year	$	4
Actual return on plan assets:
Relating to assets still held at the reporting date	(3)
Relating to assets sold during the period	—
Purchases, issuances, sales, and settlements:
Purchases	6
Settlements	1
Balance at end of year	$	8

PG&E Corporation and the Utility contributed $328 million to the pension benefit plans and $29 million to the other benefit plans in 2019. These contributions are consistent with PG&E Corporation’s and the Utility’s funding policy, which is to contribute amounts that are tax-deductible and consistent with applicable regulatory decisions and federal minimum funding requirements. None of these pension or other benefits were subject to a minimum funding requirement requiring a cash contribution in 2019. The Utility’s pension benefits met all the funding requirements under Employee Retirement Income Security Act. PG&E Corporation and the Utility expect to make total contributions of approximately $327 million and $15 million to the pension plan and other postretirement benefit plans, respectively, for 2020.

As of December 31, 2019, the estimated benefits expected to be paid and the estimated federal subsidies expected to be received in each of the next five fiscal years, and in aggregate for the five fiscal years thereafter, are as follows:

There were no material differences between the estimated benefits expected to be paid by PG&E Corporation and paid by the Utility for the years presented above. There were also no material differences between the estimated subsidies expected to be received by PG&E Corporation and received by the Utility for the years presented above.

PG&E Corporation sponsors a retirement savings plan, which qualifies as a 401(k) defined contribution benefit plan under the Internal Revenue Code 1986, as amended. This plan permits eligible employees to make pre-tax and after-tax contributions into the plan, and provide for employer contributions to be made to eligible participants. Total expenses recognized for defined contribution benefit plans reflected in PG&E Corporation’s Consolidated Statements of Income were $109 million, $105 million, and $103 million in 2019, 2018, and 2017, respectively. Beginning January 1, 2019 PG&E Corporation changed its default matching contributions under its 401(k) plan from PG&E Corporation common stock to cash. Beginning in March 2019, at PG&E Corporation’s directive, the 401(k) plan trustee began purchasing new shares in the PG&E Corporation common stock fund on the open market rather than directly from PG&E Corporation.