RETIREMENT BENEFITS

The primary objective of the Ameren pension and postretirement benefit plans is to provide eligible employees with pension and postretirement health care and life insurance benefits. Ameren has defined benefit pension and postretirement benefit plans covering substantially all of its union employees. Ameren has defined benefit pension plans covering substantially all of its non-union employees and postretirement benefit plans covering non-union employees hired before October 2015. Ameren uses a measurement date of December 31 for its pension and postretirement benefit plans. Ameren Missouri and Ameren Illinois each participate in Ameren’s single-employer pension and other postretirement plans. Ameren’s qualified pension plan is the Ameren Retirement Plan. Ameren also has an unfunded nonqualified pension plan, the Ameren Supplemental Retirement Plan, which is available to provide certain management employees and retirees with a supplemental benefit when their qualified pension plan benefits are capped in compliance with Internal Revenue Code limitations. Ameren’s other postretirement plan is the Ameren Retiree Welfare Benefit Plan. Only Ameren subsidiaries participate in the plans listed above.

Ameren’s unfunded obligation under its pension and other postretirement benefit plans was $481 million and $551 million as of December 31, 2018 and 2017, respectively. These net liabilities are recorded in “Other current liabilities,” “Pension and other postretirement benefits,” and “Other assets” on Ameren’s consolidated balance sheet. The decrease in the unfunded obligation during 2018 was the result of a 75 basis point increase in the pension and other postretirement benefit plan discount rates used to determine the present value of the obligation offset by a decrease in the return on plan assets of the pension and postretirement trusts. The decrease in the unfunded obligation also resulted in a decrease to “Regulatory assets” on Ameren’s, Ameren Missouri’s, and Ameren Illinois’ balance sheets.

The following table presents the net benefit liability recorded on the balance sheets of each of the Ameren Companies as of December 31, 2018 and 2017:



	2018		2017
Ameren^(a)	$	481	$	551
Ameren Missouri	229		215
Ameren Illinois^(a)	120		213


(a)	Assets associated with other postretirement benefits are recorded in “Other assets” on the balance sheet.

Ameren recognizes the underfunded status of its pension and postretirement plans as a liability on its consolidated balance sheet, with offsetting entries to accumulated OCI and regulatory assets. The following table presents the funded status of Ameren’s pension and postretirement benefit plans as of December 31, 2018 and 2017. It also provides the amounts included in regulatory assets and accumulated OCI at December 31, 2018 and 2017, that have not been recognized in net periodic benefit costs.



	2018						2017
	Pension Benefits				Postretirement Benefits		Pension Benefits				Postretirement Benefits
Accumulated benefit obligation at end of year	$	4,258		$	(a)		$	4,577		$	(a)
Change in benefit obligation:
Net benefit obligation at beginning of year	$	4,827		$	1,240		$	4,518		$	1,170
Service cost	100				21		93				21
Interest cost	169				40		179				47
Plan amendments	—				(49	)	—				—
Participant contributions	—				9		—				8
Actuarial (gain) loss	(401		)		(163	)	255				53
Benefits paid	(236		)		(64	)	(218		)		(59	)
Net benefit obligation at end of year	4,459				1,034		4,827				1,240
Change in plan assets:
Fair value of plan assets at beginning of year	4,293				1,223		3,813				1,101
Actual return on plan assets	(218		)		(57	)	634				171
Employer contributions	60				2		64				2
Participant contributions	—				9		—				8
Benefits paid	(236		)		(64	)	(218		)		(59	)
Fair value of plan assets at end of year	3,899				1,113		4,293				1,223
Funded status – deficiency (surplus)	560				(79	)	534				17
Accrued benefit cost (asset) at December 31	$	560		$	(79	)	$	534		$	17
Amounts recognized in the balance sheet consist of:
Noncurrent asset^(b)	$	—		$	(79	)	$	—		$	—
Current liability^(c)	2				—		3				3
Noncurrent liability	558				—		531				14
Net liability (asset) recognized	$	560		$	(79	)	$	534		$	17
Amounts recognized in regulatory assets consist of:
Net actuarial (gain) loss	$	393		$	(91	)	$	374		$	(69	)
Prior service credit	(2		)		(48	)	(3		)		(3	)
Amounts (pretax) recognized in accumulated OCI consist of:
Net actuarial loss	35				3		30				2
Total	$	426		$	(136	)	$	401		$	(70	)


(a)	Not applicable.


(b)	Included in “Other assets” on Ameren’s consolidated balance sheet.


(c)	Included in “Other current liabilities” on Ameren’s consolidated balance sheet.

The following table presents the assumptions used to determine our benefit obligations at December 31, 2018 and 2017:



	Pension Benefits				Postretirement Benefits
	2018		2017		2018		2017
Discount rate at measurement date	4.25	%	3.50	%	4.25	%	3.50	%
Increase in future compensation	3.50		3.50		3.50		3.50
Medical cost trend rate (initial)^(a)	(b)		(b)		5.00		5.00
Medical cost trend rate (ultimate)^(a)	(b)		(b)		5.00		5.00


(a)	Initial and ultimate medical cost trend rate for certain Medicare-eligible participants is 3.00%.


(b)	Not applicable.

Ameren determines discount rate assumptions by identifying a theoretical settlement portfolio of high-quality corporate bonds sufficient to provide for a plan’s projected benefit payments. The settlement portfolio of bonds is selected from a pool of nearly 600 high-quality corporate bonds. A single discount rate is then determined; that rate results in a discounted value of the plan’s benefit payments that equates to the market value of the selected bonds. In addition, during 2018, Ameren adopted the Society of Actuaries 2018 Mortality Improvement Scale. The updated scale assumes a lower rate of mortality improvement as compared to the 2017 Mortality Improvement Scale that Ameren used in 2017, resulting in a decrease to our pension and other postretirement benefit obligations.

Funding

Pension benefits are based on the employees’ years of service, age, and compensation. Ameren’s pension plans are funded in compliance with income tax regulations, federal funding, and other regulatory requirements. As a result, Ameren expects to fund its pension plan at a level equal to the greater of the pension cost or the legally required minimum contribution. Based on its assumptions at December 31, 2018, its investment performance in 2018, and its pension funding policy, Ameren expects to make annual contributions of approximately $20 million to $70 million in each of the next five years, with aggregate estimated contributions of $200 million. Ameren Missouri and Ameren Illinois estimate that their portion of the future funding requirements will be 30% and 60%, respectively. These estimates may change based on actual investment performance, changes in interest rates, changes in our assumptions, changes in government regulations, and any voluntary contributions. Our funding policy for postretirement benefits is primarily to fund the Voluntary Employee Beneficiary Association (VEBA) trusts to match the annual postretirement expense.

The following table presents the cash contributions made to our defined benefit retirement plan and to our postretirement plans during 2018, 2017, and 2016:



	Pension Benefits						Postretirement Benefits
	2018		2017		2016		2018		2017		2016
Ameren Missouri	$	18	$	19	$	21	$	1	$	1	$	1
Ameren Illinois	35		37		30		1		1		1
Other	7		8		6		—		—		—
Ameren	$	60	$	64	$	57	$	2	$	2	$	2

Investment Strategy and Policies

Ameren manages plan assets in accordance with the “prudent investor” guidelines contained in ERISA. The investment committee, which includes members of senior management, approves and implements investment strategy and asset allocation guidelines for the plan assets. The investment committee’s goals are twofold: first, to ensure that sufficient funds are available to provide the benefits at the time they are payable; and second, to maximize total return on plan assets and to minimize expense volatility consistent with its tolerance for risk. Ameren delegates the task of investment management to specialists in each asset class. As appropriate, Ameren provides each investment manager with guidelines that specify allowable and prohibited investment types. The investment committee regularly monitors manager performance and compliance with investment guidelines.

The expected return on plan assets assumption is based on historical and projected rates of return for current and planned asset classes in the investment portfolio. Projected rates of return for each asset class were estimated after an analysis of historical experience, future expectations, and the volatility of the various asset classes. After considering the target asset allocation for each asset class, we adjusted the overall expected rate of return for the portfolio for historical and expected experience of active portfolio management results compared with benchmark returns and for the effect of expenses paid from plan assets. Ameren will use an expected return on plan assets for its pension and postretirement plan assets of 7.00% in 2019. No plan assets are expected to be returned to Ameren during 2019.

Ameren’s investment committee strives to assemble a portfolio of diversified assets that does not create a significant concentration of risks. The investment committee develops asset allocation guidelines between asset classes, and it creates diversification through investments in assets that differ by type (equity, debt, real estate, private equity), duration, market capitalization, country, style (growth or value), and industry, among other factors. The diversification of assets is displayed in the target allocation table below. The investment committee also routinely rebalances the plan assets to adhere to the diversification goals. The investment committee’s strategy reduces the concentration of investment risk; however, Ameren is still subject to overall market risk. The following table presents our target allocations for 2019 and our pension and postretirement plans’ asset categories as of December 31, 2018 and 2017:



Asset Category	Target Allocation 2019	Percentage of Plan Assets at December 31,
Asset Category	Target Allocation 2019	2018		2017
Pension Plan:
Cash and cash equivalents	0% – 5%	1	%	1	%
Equity securities:
U.S. large-capitalization	21% – 31%	24	%	34	%
U.S. small- and mid-capitalization	3% – 13%	7	%	9	%
International	9% – 19%	13	%	14	%
Global	3% – 13%	8	%	—	%
Total equity	51% – 61%	52	%	57	%
Debt securities	35% – 45%	42	%	37	%
Real estate	0% – 9%	5	%	5	%
Private equity	0% – 5%	(a)		(a)
Total		100	%	100	%
Postretirement Plans:
Cash and cash equivalents	0% – 7%	2	%	2	%
Equity securities:
U.S. large-capitalization	34% – 44%	40	%	41	%
U.S. small- and mid-capitalization	2% – 12%	7	%	8	%
International	9% – 19%	13	%	14	%
Total equity	55% – 65%	60	%	63	%
Debt securities	33% – 43%	38	%	35	%
Total		100	%	100	%


(a)	Less than 1% of plan assets.

In general, the United States large-capitalization equity investments are passively managed or indexed, whereas the international, global, United States small-capitalization, and United States mid-capitalization equity investments are actively managed by investment managers. Debt securities include a broad range of fixed-income vehicles. Debt security investments in high-yield securities and non-United-States-dollar-denominated securities are owned by the plans, but in limited quantities to reduce risk. Most of the debt security investments are under active management by investment managers. Real estate investments include private real estate vehicles; however, Ameren does not, by policy, hold direct investments in real estate property. Additionally, Ameren’s investment committee allows investment managers to use derivatives, such as index futures, foreign exchange futures, and options, in certain situations to increase or to reduce market exposure in an efficient and timely manner.

Fair Value Measurements of Plan Assets

Investments in the pension and postretirement benefit plans were stated at fair value as of December 31, 2018. The fair value of an asset is the amount that would be received upon its sale in an orderly transaction between market participants at the measurement date. Cash and cash equivalents have initial maturities of three months or less and are recorded at cost plus accrued interest. The carrying amounts of cash and cash equivalents approximate fair value because of the short-term nature of these instruments. Investments traded in active markets on national or international securities exchanges are valued at closing prices on the measurement date or, if that is not a business day, on the last business day before that date. Securities traded in over-the-counter markets are valued by quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Investments measured under NAV as a practical expedient are based on the fair values of the underlying assets provided by the funds and their administrators. The fair value of real estate investments is based on NAV; it is determined by annual appraisal reports prepared by an independent real estate appraiser. Investments measured at NAV often provide for daily, monthly, or quarterly redemptions with 60 or less days of notice depending on the fund. For some funds, redemption may also require approval from the fund’s board of directors. Derivative contracts are valued at fair value, as determined by the investment managers (or independent third parties on behalf of the investment managers), who use proprietary models and take into consideration exchange quotations on underlying instruments, dealer quotations, and other market information.

The following table sets forth, by level within the fair value hierarchy discussed in Note 8 – Fair Value Measurements, the pension plans’ assets measured at fair value as of December 31, 2018:



	Quoted Prices in Active Markets for Identified Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Measured at NAV		Total
Cash and cash equivalents	$	—	$	—	$	—	$	41	$	41
Equity securities:
U.S. large-capitalization	—		—		—		955		955
U.S. small- and mid-capitalization	272		—		—		—		272
International	224		—		—		298		522
Global	—		—		—		321		321
Debt securities:
Corporate bonds	—		701		—		19		720
Municipal bonds	—		87		—		—		87
U.S. Treasury and agency securities	—		891		—		—		891
Other	1		11		—		—		12
Real estate	—		—		—		202		202
Private equity	—		—		—		3		3
Total	$	497	$	1,690	$	—	$	1,839	$	4,026
Less: Medical benefit assets at December 31^(a)									(144		)
Plus: Net receivables at December 31^(b)									17
Fair value of pension plans’ assets at December 31									$	3,899


(a)	Medical benefit (health and welfare) component for accounts maintained in accordance with Section 401(h) of the Internal Revenue Code to fund a portion of the postretirement obligation.


(b)	Receivables related to pending security sales, offset by payables related to pending security purchases.

The following table sets forth, by level within the fair value hierarchy discussed in Note 8 – Fair Value Measurements, the pension plans’ assets measured at fair value as of December 31, 2017:



	Quoted Prices in Active Markets for Identified Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Measured at NAV		Total
Cash and cash equivalents	$	—	$	—	$	—	$	25	$	25
Equity securities:
U.S. large-capitalization	—		—		—		1,523		1,523
U.S. small- and mid-capitalization	379		—		—		—		379
International	179		—		—		450		629
Debt securities:
Corporate bonds	—		726		—		15		741
Municipal bonds	—		91		—		—		91
U.S. Treasury and agency securities	8		816		—		—		824
Other	—		7		—		—		7
Real estate	—		—		—		196		196
Private equity	—		—		—		4		4
Total	$	566	$	1,640	$	—	$	2,213	$	4,419
Less: Medical benefit assets at December 31^(a)									(153		)
Plus: Net receivables at December 31^(b)									27
Fair value of pension plans’ assets at December 31									$	4,293


(a)	Medical benefit (health and welfare) component for accounts maintained in accordance with Section 401(h) of the Internal Revenue Code to fund a portion of the postretirement obligation.


(b)	Receivables related to pending security sales, offset by payables related to pending security purchases.

The following table sets forth, by level within the fair value hierarchy discussed in Note 8 – Fair Value Measurements, the postretirement benefit plans’ assets measured at fair value as of December 31, 2018:



	Quoted Prices in Active Markets for Identified Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Measured at NAV		Total
Cash and cash equivalents	$	32	$	—	$	—	$	—	$	32
Equity securities:
U.S. large-capitalization	297		—		—		89		386
U.S. small- and mid-capitalization	63		—		—		—		63
International	45		—		—		84		129
Other	—		12		—		—		12
Debt securities:
Corporate bonds	—		144		—		—		144
Municipal bonds	—		107		—		—		107
U.S. Treasury and agency securities	—		62		—		—		62
Other	—		7		—		34		41
Total	$	437	$	332	$	—	$	207	$	976
Plus: Medical benefit assets at December 31^(a)									144
Less: Net payables at December 31^(b)									(7		)
Fair value of postretirement benefit plans’ assets at December 31									$	1,113


(a)	Medical benefit (health and welfare) component for 401(h) accounts to fund a portion of the postretirement obligation. These 401(h) assets are included in the pension plan assets shown above.


(b)	Payables related to pending security purchases, offset by interest receivables and receivables related to pending security sales.



	Quoted Prices in Active Markets for Identified Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Measured at NAV		Total
Cash and cash equivalents	$	44	$	—	$	—	$	—	$	44
Equity securities:
U.S. large-capitalization	332		—		—		110		442
U.S. small- and mid-capitalization	80		—		—		—		80
International	53		—		—		101		154
Other	—		8		—		—		8
Debt securities:
Corporate bonds	—		144		—		—		144
Municipal bonds	—		110		—		—		110
U.S. Treasury and agency securities	—		76		—		—		76
Other	—		4		—		34		38
Total	$	509	$	342	$	—	$	245	$	1,096
Plus: Medical benefit assets at December 31^(a)									153
Less: Net payables at December 31^(b)									(26		)
Fair value of postretirement benefit plans’ assets at December 31									$	1,223


(a)	Medical benefit (health and welfare) component for 401(h) accounts to fund a portion of the postretirement obligation. These 401(h) assets are included in the pension plan assets shown above.


(b)	Payables related to pending security purchases, offset by interest receivables and receivables related to pending security sales.

Net Periodic Benefit Cost

In March 2017, the FASB issued authoritative guidance that requires an entity to report, including on a retrospective basis, the non-service cost or income components of net periodic benefit cost separately from the service cost component and outside of operating income. The Ameren Companies adopted this guidance, effective January 1, 2018, and as a result, $44 million, $22 million, and $10 million of net benefit income has been retrospectively reclassified from “Operating Expenses – Other operations and maintenance” to “Other Income, Net” on Ameren's, Ameren Missouri’s, and Ameren Illinois’ respective statements of income for the year ended December 31, 2017. Net benefit income of $56 million, $18 million, and $24 million has been similarly retrospectively reclassified on Ameren’s, Ameren Missouri’s, and Ameren Illinois’ respective statements of income for the year ended December 31, 2016.

The guidance also requires an entity to capitalize only the service cost component as part of an asset, such as inventory or property, plant, and equipment, on a prospective basis. Previously all of the net benefit cost components were eligible for capitalization. This change in the capitalization of net benefit costs is not expected to affect our ability to recover total net benefit cost through customer rates.

The following table presents the components of the net periodic benefit cost of Ameren’s pension and postretirement benefit plans during 2018, 2017, and 2016:



	Pension Benefits			Postretirement Benefits
2018
Service cost^(a)	$	100		$	21
Non-service cost components:
Interest cost	169			40
Expected return on plan assets	(276		)	(77		)
Amortization of:
Prior service credit	(1		)	(4		)
Actuarial (gain) loss	68			(6		)
Total non-service cost components^(b)	$	(40	)	$	(47	)
Net periodic benefit cost (income)	$	60		$	(26	)
2017
Service cost^(a)	$	93		$	21
Non-service cost components:
Interest cost	179			47
Expected return on plan assets	(262		)	(75		)
Amortization of:
Prior service credit	(1		)	(5		)
Actuarial (gain) loss	55			(6		)
Total non-service cost components^(b)	$	(29	)	$	(39	)
Net periodic benefit cost (income)	$	64		$	(18	)
2016
Service cost^(a)	$	81		$	19
Non-service cost components:
Interest cost	185			50
Expected return on plan assets	(253		)	(72		)
Amortization of:
Prior service credit	(1		)	(5		)
Actuarial (gain) loss	32			(11		)
Total non-service cost components^(b)	$	(37	)	$	(38	)
Net periodic benefit cost (income)	$	44		$	(19	)

(a) Service cost, net of capitalization, is reflected in “Operating Expenses - Other operations and maintenance” on Ameren’s statement of income.


(b)	2018 amounts and the non-capitalized portion of 2017 and 2016’s non-service cost components, as discussed above, are reflected in “Other Income, Net” on Ameren’s statement of income. See Note 5 - Other Income, Net for additional information.

The estimated amounts that will be amortized from regulatory assets and accumulated OCI into Ameren’s net periodic benefit cost in 2019 are as follows:



	Pension Benefits			Postretirement Benefits
Regulatory assets:
Prior service credit	$	(1	)	$	(5	)
Net actuarial (gain) loss	24			(15		)
Accumulated OCI:
Net actuarial loss	2			—
Total	$	25		$	(20	)

Prior service cost is amortized on a straight-line basis over the average future service of active participants benefiting under the plan amendment. Net actuarial gains or losses subject to amortization are amortized on a straight-line basis over 10 years.

The Ameren Companies are responsible for their share of the pension and postretirement benefit costs. The following table presents the pension costs and the postretirement benefit costs incurred for the years ended December 31, 2018, 2017, and 2016:



	Pension Costs									Postretirement Costs
	2018			2017			2016			2018			2017			2016
Ameren Missouri^(a)	$	22		$	24		$	26		$	(1	)	$	(4	)	$	(5	)
Ameren Illinois	39			41			22			(25		)	(14		)	(13		)
Other	(1		)	(1		)	(4		)	—			—			(1		)
Ameren	60			64			44			(26		)	(18		)	(19		)


(a)	Does not include the impact of the regulatory tracking mechanism for the difference between the level of pension and postretirement benefit costs incurred by Ameren Missouri and the level of such costs included in customer rates.

The expected pension and postretirement benefit payments from qualified trust and company funds, which reflect expected future service, as of December 31, 2018, are as follows:



	Pension Benefits				Postretirement Benefits
	Paid from Qualified Trust Funds		Paid from Company Funds		Paid from Qualified Trust Funds		Paid from Company Funds
2019	$	267	$	3	$	57	$	2
2020	272		3		59		2
2021	282		3		61		2
2022	285		3		62		2
2023	286		3		64		2
2024 – 2028	1,439		12		315		12

The following table presents the assumptions used to determine net periodic benefit cost for our pension and postretirement benefit plans for the years ended December 31, 2018, 2017, and 2016:



	Pension Benefits						Postretirement Benefits
	2018		2017		2016		2018		2017		2016
Discount rate at measurement date	3.50	%	4.00	%	4.50	%	3.50	%	4.00	%	4.50	%
Expected return on plan assets	7.00		7.00		7.00		7.00		7.00		7.00
Increase in future compensation	3.50		3.50		3.50		3.50		3.50		3.50
Medical cost trend rate (initial)^(a)	(b)		(b)		(b)		5.00		5.00		5.00
Medical cost trend rate (ultimate)^(a)	(b)		(b)		(b)		5.00		5.00		5.00


(a)	Initial and ultimate medical cost trend rate for certain Medicare-eligible participants is 3.00%.


(b)	Not applicable.

The table below reflects the sensitivity of Ameren’s plans to potential changes in key assumptions:



	Pension Benefits					Postretirement Benefits
	Service Cost and Interest Cost			Projected Benefit Obligation		Service Cost and Interest Cost			Postretirement Benefit Obligation
0.25% decrease in discount rate	$	(2	)	$	135	$	—		$	33
0.25% increase in salary scale	2			12		—			—
1.00% increase in annual medical trend	—			—		4			58
1.00% decrease in annual medical trend	—			—		(4		)	(58		)

Other

Ameren sponsors a 401(k) plan for eligible employees. The Ameren 401(k) plan covered all eligible Ameren employees at December 31, 2018. The plan allows employees to contribute a portion of their compensation in accordance with specific guidelines. Ameren matches a percentage of the employee contributions up to certain limits. The following table presents the portion of the matching contribution to the Ameren 401(k) plan attributable to each of the Ameren Companies for the years ended December 31, 2018, 2017, and 2016:



	2018		2017		2016
Ameren Missouri	$	17	$	16	$	16
Ameren Illinois	15		13		12
Other	1		1		1
Ameren	$	33	$	30	$	29