CERC’s changes in accumulated comprehensive income (loss) related to postretirement and other postemployment plans are as follows: | | | | | | | | | | | | Year Ended December 31, | | | 2016 | | 2015 | | | (in millions) | Beginning Balance | | $ | 9 |
| | $ | 1 |
| Other comprehensive income (loss) before reclassifications (1) | | (10 | ) | | 13 |
| Amounts reclassified from accumulated other comprehensive income: | | | | | Actuarial gains (2) | | — |
| | 1 |
| Tax benefit (expense) | | 4 |
| | (6 | ) | Net current period other comprehensive income (loss) | | (6 | ) | | 8 |
| Ending Balance | | $ | 3 |
| | $ | 9 |
|
| | (1) | Total other comprehensive income (loss) related to the remeasurement of pension, postretirement and other postemployment plans. |
| | (2) | These accumulated other comprehensive components are included in the computation of net periodic cost. |
Amounts recognized in accumulated other comprehensive (income) loss consist of the following: | | | | | | | | | | December 31, | | 2016 | | 2015 | | (in millions) | Unrecognized actuarial loss | $ | 5 |
| | $ | 3 |
| Unrecognized prior service cost (credit) | 7 |
| | (1 | ) | Total recognized in accumulated other comprehensive loss | 12 |
| | 2 |
| Less: deferred tax benefit (1) | (15 | ) | | (11 | ) | Net amount recognized in accumulated other comprehensive income | $ | (3 | ) | | $ | (9 | ) |
| | (1) | CERC’s postretirement benefit obligation is reduced by the impact of previously non-taxable government subsidies under the Medicare Prescription Drug Act. Because the subsidies were non-taxable, the temporary difference used in measuring the deferred tax impact was determined on the unrecognized losses excluding such subsidies. |
The changes in plan assets and benefit obligations recognized in other comprehensive loss during 2016 are as follows: | | | | | | Postretirement Benefits | | (in millions) | Net loss | $ | 2 |
| Amortization of prior service cost | 8 |
| Total recognized in other comprehensive loss | $ | 10 |
|
The following benefit payments are expected to be made by the postretirement benefit plan: | | | | | | Benefit Payments | | (in millions) | 2017 | $ | 5 |
| 2018 | 6 |
| 2019 | 7 |
| 2020 | 8 |
| 2021 | 8 |
| 2022-2026 | 43 |
|
As part of the investment strategy discussed above, CERC maintained the following asset allocation ranges for its postretirement benefit plan as of December 31, 2016: | | | U.S. equity | 15–25% | International equity | 2–12% | Fixed income | 68–78% | Cash | 0–2% |
The net postretirement benefit cost includes the following components: | | | | | | | | | | | | | | Year Ended December 31, | | 2016 | | 2015 | | 2014 | | (in millions) | Service cost — benefits earned during the period | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| Interest cost on accumulated benefit obligation | 4 |
| | 5 |
| | 5 |
| Expected return on plan assets | (1 | ) | | (1 | ) | | (1 | ) | Amortization of prior service cost | — |
| | 1 |
| | 1 |
| Amortization of net loss | 1 |
| | 1 |
| | 1 |
| Curtailment (1) | (1 | ) | | — |
| | — |
| Net postretirement benefit cost | $ | 4 |
| | $ | 7 |
| | $ | 7 |
|
| | (1) | Effective January 1, 2017, a change in retiree medical coverage for Medicare eligible post-65 retirees from self-insured to a Medicare Advantage Program, an insured benefit, was implemented. A curtailment gain was recognized in October 2016 related to this implementation. |
CERC used the following assumptions to determine net postretirement benefit costs: | | | | | | | | | | | Year Ended December 31, | | 2016 | | 2015 | | 2014 | Discount rate | 4.35 | % | | 3.90 | % | | 4.75 | % | Expected return on plan assets | 3.95 | % | | 4.05 | % | | 3.10 | % |
Following are reconciliations of CERC’s beginning and ending balances of its postretirement benefit plan’s benefit obligation, plan assets and funded status for 2016 and 2015. The measurement dates for plan assets and obligations were December 31, 2016 and 2015. | | | | | | | | | | December 31, | | 2016 | | 2015 | | (in millions, except for actuarial assumptions) | Change in Benefit Obligation | | | | Accumulated benefit obligation, beginning of year | $ | 101 |
| | $ | 126 |
| Service cost | 1 |
| | 1 |
| Interest cost | 4 |
| | 5 |
| Benefits paid | (13 | ) | | (12 | ) | Participant contributions | 5 |
| | 4 |
| Medicare reimbursement | 1 |
| | 1 |
| Plan amendment (1) | 10 |
| | (5 | ) | Actuarial (gain) loss | 6 |
| | (19 | ) | Accumulated benefit obligation, end of year | $ | 115 |
| | $ | 101 |
| Change in Plan Assets | |
| | |
| Plan assets, beginning of year | $ | 25 |
| | $ | 26 |
| Benefits paid | (13 | ) | | (12 | ) | Employer contributions | 7 |
| | 7 |
| Participant contributions | 5 |
| | 4 |
| Actual investment return | 1 |
| | — |
| Plan assets, end of year | $ | 25 |
| | $ | 25 |
| Amounts Recognized in Balance Sheets | |
| | |
| Current liabilities-other | $ | (4 | ) | | $ | (6 | ) | Other liabilities-benefit obligations | (86 | ) | | (70 | ) | Net liability, end of year | $ | (90 | ) | | $ | (76 | ) | Actuarial Assumptions | |
| | |
| Discount rate | 4.15 | % | | 4.35 | % | Expected long-term return on assets | 3.60 | % | | 3.95 | % | Healthcare cost trend rate assumed for the next year - Pre 65 | 5.75 | % | | 6.00 | % | Healthcare cost trend rate assumed for the next year - Post 65 | 10.65 | % | | 5.50 | % | Prescription cost trend rate assumed for the next year | 10.75 | % | | 11.00 | % | Rate to which the cost trend rate is assumed to decline (ultimate trend rate) | 4.50 | % | | 5.00 | % | Year that the healthcare rate reaches the ultimate trend rate | 2024 |
| | 2024 |
| Year that the prescription drug rate reaches the ultimate trend rate | 2024 |
| | 2024 |
|
| | (1) | The postretirement plan was amended in 2016 to change the retiree medical coverage for Medicare eligible post-65 retirees from self-insured to a Medicare Advantage Program, an insured benefit which became effective January 1, 2017. |
|