XML 141 R20.htm IDEA: XBRL DOCUMENT

Retirement Benefits

12 Months Ended

Dec. 31, 2019

Defined Benefit Plan Disclosure [Line Items]

Benefit Plans: CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans. These plans include:


•	non‑contributory, qualified DB Pension Plans (closed to new non‑union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005)


•	a non‑contributory, qualified DCCP for employees hired on or after July 1, 2003


•	benefits to certain management employees under a non‑contributory, nonqualified DB SERP (closed to new participants as of March 31, 2006)


•	a non‑contributory, nonqualified DC SERP for certain management employees hired or promoted on or after April 1, 2006


•	a contributory, qualified defined contribution 401(k) plan


•	health care and life insurance benefits under an OPEB Plan

DB Pension Plans: Participants in the pension plans include present and former employees of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. Pension plan trust assets are not distinguishable by company. Effective December 31, 2017, CMS Energy’s and Consumers’ then-existing pension plan was amended to include only retired and former employees already covered; this amended plan is referred to as DB Pension Plan B. Also effective December 31, 2017, active employees were moved to a newly created pension plan, referred to as DB Pension Plan A, whose benefits mirror those provided under DB Pension Plan B. Maintaining separate plans for the two groups allows CMS Energy and Consumers to employ a more targeted investment strategy and provides additional opportunities to mitigate risk and volatility.

DCCP: CMS Energy and Consumers provide an employer contribution to the DCCP 401(k) plan for employees hired on or after July 1, 2003. The contribution ranges from five to seven percent of base pay, depending on years of service. Employees are not required to contribute in order to receive the plan’s employer contribution. DCCP expense for CMS Energy, including Consumers, was $30 million for the year ended December 31, 2019, $26 million for the year ended December 31, 2018, and $23 million for the year ended December 31, 2017. DCCP expense for Consumers was $28 million for the year ended December 31, 2019, $25 million for the year ended December 31, 2018, and $22 million for the year ended December 31, 2017.

DB SERP: The DB SERP is a nonqualified plan as defined by the Internal Revenue Code. DB SERP benefits are paid from a rabbi trust established in 1988. The trust assets are not considered plan assets under ASC 715. DB SERP rabbi trust earnings are taxable. Presented in the following table are the fair values of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:



In Millions
Years Ended December 31	2019			2018
CMS Energy, including Consumers
Trust assets		$	143		$	147
ABO		149			137
Contributions		—			8
Consumers
Trust assets		$	104		$	106
ABO		107			98
Contributions		—			5

DC SERP: On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the DB SERP. The DC SERP provides participants benefits ranging from 5 percent to 15 percent of total compensation. The DC SERP requires a minimum of five years of participation before vesting. CMS Energy’s and Consumers’ contributions to the plan, if any, are placed in a grantor trust. For CMS Energy and Consumers, trust assets were $8 million at December 31, 2019 and $5 million at December 31, 2018. DC SERP assets are included in other non‑current assets on CMS Energy’s and Consumers’ consolidated balance sheets. CMS Energy’s and Consumers’ DC SERP expense was $2 million for the year ended December 31, 2019, and $1 million for each of the years ended December 31, 2018 and 2017.

401(k) Plan: The 401(k) plan employer match equals 100 percent of eligible contributions up to the first three percent of an employee’s wages and 50 percent of eligible contributions up to the next two percent of an employee’s wages. The total 401(k) plan cost for CMS Energy, including Consumers, was $28 million for the year ended December 31, 2019, $27 million for the year ended December 31, 2018, and $26 million for the year ended December 31, 2017. The total 401(k) plan cost for Consumers was $27 million for the year ended December 31, 2019, $26 million for the year ended December 31, 2018, and $25 million for the year ended December 31, 2017.

OPEB Plan: Participants in the OPEB Plan include all regular full-time employees covered by the employee health care plan on the day before retirement from either CMS Energy or Consumers at age 55 or older with at least ten full years of applicable continuous service. Regular full-time employees who qualify for disability retirement under the DB Pension Plans or are disabled and covered by the DCCP and who have 15 years of applicable continuous service may also participate in the OPEB Plan. Retiree health care costs were based on the assumption that costs would increase 6.75 percent in 2020 and 7.00 percent in 2019 for those under 65 and would increase 7.25 percent in 2020 and 7.75 percent in 2019 for those over 65. The rate of increase was assumed to decline to 4.75 percent by 2027 and thereafter for all retirees.

In 2017, CMS Energy and Consumers approved certain amendments to the OPEB Plan. Under these amendments, effective January 1, 2019, certain Medicare-eligible retirees will purchase health care plans from private Medicare exchanges. CMS Energy and Consumers performed a remeasurement of the OPEB Plan as of October 31, 2017, resulting in a significant reduction in the benefit obligation. In July 2018, CMS Energy and Consumers approved an amendment to the OPEB Plan to improve survivor benefits for certain Medicare-eligible retirees, effective January 1, 2019, resulting in a $26 million increase in the benefit obligation.

Assumptions: Presented in the following table are the weighted-average assumptions used in CMS Energy’s and Consumers’ retirement benefits plans to determine benefit obligations and net periodic benefit cost:



December 31	2019		2018		2017
CMS Energy, including Consumers
Weighted average for benefit obligations¹
Discount rate²
DB Pension Plan A	3.37	%	4.48	%	3.78	%
DB Pension Plan B	3.17		4.32		3.64
DB SERP	3.15		4.32		3.65
OPEB Plan	3.32		4.42		3.74
Rate of compensation increase
DB Pension Plan A	3.50		3.50		3.50
DB SERP	5.50		5.50		5.50
Weighted average for net periodic benefit cost¹
Service cost discount rate^2,3
DB Pension Plan A⁴	4.55		3.85
DB SERP	4.58		3.83		4.51
OPEB Plan	4.63		3.93		4.89
Interest cost discount rate^2,3
DB Pension Plan A⁴	4.08		3.39
DB Pension Plan B⁴	3.93		3.24
DB SERP	3.94		3.26		3.51
OPEB Plan	4.03		3.35		3.79
Expected long-term rate of return on plan assets⁵
DB Pension Plans	7.00		7.00		7.25
OPEB Plan	7.00		7.00		7.25
Rate of compensation increase
DB Pension Plan A⁴	3.50		3.50
DB SERP	5.50		5.50		5.50

The mortality assumption for benefit obligations was based on the Pri-2012 mortality table for 2019 and on the RP-2014 mortality table for 2018 and 2017, with projection scales MP-2019 for 2019, MP-2018 for 2018, and MP-2017 for 2017. The mortality assumption for net periodic benefit cost for 2019, 2018, and 2017 was based on the RP-2014 mortality table, with projection scales MP-2018 for 2019, MP-2017 for 2018, and MP-2016 for 2017.


²	The discount rate reflects the rate at which benefits could be effectively settled and is equal to the equivalent single rate resulting from a yield-curve analysis. This analysis incorporated the projected benefit payments specific to CMS Energy’s and Consumers’ DB Pension Plans and OPEB Plan and the yields on high-quality corporate bonds rated Aa or better.


³	CMS Energy and Consumers have elected to use a full-yield-curve approach in the estimation of service cost and interest cost; this approach applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment.


⁴	Effective December 31, 2017, CMS Energy’s and Consumers’ existing defined benefit pension plan was amended to include only retired or inactive employees; this amended plan is referred to as DB Pension Plan B. Active employees were moved to a newly created pension plan, referred to as DB Pension Plan A.

The assumptions used to measure the plan cost of the previous defined benefit pension plan at December 31, 2017 were:


•	service cost discount rate of 4.53 percent


•	interest cost discount rate of 3.56 percent


•	weighted-average rate of compensation increase of 3.60 percent

⁵

CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and Consumers review for reasonableness and appropriateness the forecasted returns for various classes of assets used to construct an expected return model. CMS Energy’s and Consumers’ expected long-term rate of return on the assets of the DB Pension Plans was 7.00 percent in 2019. The actual return (loss) on the assets of the DB Pension Plans was 21.0 percent in 2019, (6.7) percent in 2018, and 18.0 percent in 2017.

Costs: Presented in the following table are the costs (credits) and other changes in plan assets and benefit obligations incurred in CMS Energy’s and Consumers’ retirement benefits plans:



In Millions
	DB Pension Plans and DB SERP												OPEB Plan
Years Ended December 31	2019				2018				2017				2019				2018				2017
CMS Energy, including Consumers
Net periodic cost (credit)
Service cost		$	41			$	48			$	45			$	14			$	17			$	19
Interest cost		103				95				93				41				34				51
Expected return on plan assets		(162		)		(149		)		(153		)		(88		)		(97		)		(90		)
Amortization of:
Net loss		50				76				82				26				15				29
Prior service cost (credit)		1				3				5				(62		)		(67		)		(40		)
Net periodic cost (credit)		$	33			$	73			$	72			$	(69	)		$	(98	)		$	(31	)
Consumers
Net periodic cost (credit)
Service cost		$	40			$	47			$	44			$	13			$	16			$	19
Interest cost		97				88				90				40				33				49
Expected return on plan assets		(153		)		(139		)		(149		)		(82		)		(91		)		(84		)
Amortization of:
Net loss		47				73				79				26				16				29
Prior service cost (credit)		1				3				4				(61		)		(65		)		(39		)
Net periodic cost (credit)		$	32			$	72			$	68			$	(64	)		$	(91	)		$	(26	)

CMS Energy and Consumers amortize net gains and losses in excess of ten percent of the greater of the PBO or the MRV over the average remaining service period for DB Pension Plan A and the OPEB Plan and, began in 2018, over the average remaining life expectancy of participants for DB Pension Plan B.

For DB Pension Plan A, the estimated period of amortization of gains and losses was nine years for the years ended December 31, 2019 and 2018. For DB Pension Plan B, the estimated period of amortization of gains and losses was 20 years for the years ended December 31, 2019 and 2018. The estimated period of amortization for gains and losses for CMS Energy and Consumers was ten years for the DB Pension Plans for the year ended December 31, 2017. For the OPEB Plan, the estimated amortization period was ten years for the year ended December 31, 2019 and 2018 and 11 years for the year ended December 31, 2017.

Prior service cost (credit) amortization is established in the year in which the prior service cost (credit) first occurred, and is based on the same amortization period for all future years until the prior service cost (credit) is fully amortized. CMS Energy and Consumers had new prior service costs (credits) for OPEB in 2018 and 2017. The estimated period of amortization of these new prior service costs (credits) for CMS Energy and Consumers is nine years.

CMS Energy and Consumers determine the MRV for the assets of the DB Pension Plans as the fair value of plan assets on the measurement date, adjusted by the gains or losses that will not be admitted into the MRV until future years. CMS Energy and Consumers reflect each year’s gain or loss in the MRV in equal amounts over a five-year period beginning on the date the original amount was determined. CMS Energy and Consumers determine the MRV for OPEB Plan assets as the fair value of assets on the measurement date.

Reconciliations: Presented in the following table are reconciliations of the funded status of CMS Energy’s and Consumers’ retirement benefits plans with their retirement benefits plans’ liabilities:



In Millions
	DB Pension Plans									DB SERP								OPEB Plan
Years Ended December 31	2019				2018					2019				2018				2019				2018
CMS Energy, including Consumers
Benefit obligation at beginning of period		$	2,512			$	2,780				$	140			$	154			$	1,045			$	1,097
Service cost		41				48					—				—				14				17
Interest cost		98				90					5				5				41				34
Plan amendments		—				—					—				—				—				26
Actuarial loss (gain)		476			¹	(258		)	¹		15				(10		)		110			¹	(74		)	¹
Benefits paid		(154		)		(148		)			(10		)		(9		)		(45		)		(55		)
Benefit obligation at end of period		$	2,973			$	2,512				$	150			$	140			$	1,165			$	1,045
Plan assets at fair value at beginning of period		$	2,247			$	2,305				$	—			$	—			$	1,280			$	1,420
Actual return on plan assets		453				(150		)			—				—				273				(86		)
Company contribution		—				240					10				9				—				—
Actual benefits paid		(154		)		(148		)			(10		)		(9		)		(44		)		(54		)
Plan assets at fair value at end of period		$	2,546			$	2,247				$	—			$	—			$	1,509			$	1,280
Funded status		$	(427	)	²	$	(265	)	²		$	(150	)		$	(140	)		$	344			$	235
Consumers
Benefit obligation at beginning of period											$	101			$	112			$	1,004			$	1,053
Service cost											—				—				13				16
Interest cost											4				4				40				33
Plan amendments											—				—				—				25
Actuarial loss (gain)											11				(8		)		106			¹	(70		)	¹
Benefits paid											(7		)		(7		)		(43		)		(53		)
Benefit obligation at end of period											$	109			$	101			$	1,120			$	1,004
Plan assets at fair value at beginning of period											$	—			$	—			$	1,197			$	1,329
Actual return on plan assets											—				—				255				(80		)
Company contribution											7				7				—				—
Actual benefits paid											(7		)		(7		)		(42		)		(52		)
Plan assets at fair value at end of period											$	—			$	—			$	1,410			$	1,197
Funded status											$	(109	)		$	(101	)		$	290			$	193

The actuarial loss for 2019 for the DB Pension Plans was primarily the result of lower discount rates and lower interest rates used to calculate the value of lump-sum payments. The actuarial gain for 2018 was primarily the result of higher discount rates. The actuarial loss for 2019 for the OPEB Plan was primarily the result of lower discount rates. The actuarial gain for 2018 was primarily the result of higher discount rates.


²	The total funded status of the DB Pension Plans attributable to Consumers, based on an allocation of expenses, was $408 million at December 31, 2019 and $246 million at December 31, 2018.

Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit plans’ assets and liabilities:



In Millions
December 31	2019			2018
CMS Energy, including Consumers
Non‑current assets
DB Pension Plans		$	104		$	38
OPEB Plan		344			235
Current liabilities
DB SERP		10			10
Non‑current liabilities
DB Pension Plans		531			303
DB SERP		140			130
Consumers
Non‑current assets
DB Pension Plans		$	109		$	49
OPEB Plan		290			193
Current liabilities
DB SERP		7			7
Non‑current liabilities
DB Pension Plans		517			295
DB SERP		102			94

The ABO for the DB Pension Plans was $2.6 billion at December 31, 2019 and $2.2 billion at December 31, 2018. Presented in the following table is information related to the defined benefit pension plan for which the PBO and the ABO exceed plan assets:



In Millions
December 31	2019			2018
CMS Energy, including Consumers
PBO		$	1,736		$	1,363
ABO		1,398			1,091
Fair value of plan assets		1,205			1,059

Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets, see Note 3, Regulatory Matters.



In Millions
	DB Pension Plans and DB SERP						OPEB Plan
Years Ended December 31	2019			2018			2019				2018
CMS Energy, including Consumers
Regulatory assets
Net loss		$	1,114		$	978		$	308			$	402
Prior service cost (credit)		8			9			(300		)		(361		)
Regulatory assets		$	1,122		$	987		$	8			$	41
AOCI
Net loss (gain)		105			90			(6		)		2
Prior service credit		—			—			(8		)		(9		)
Total amounts recognized in regulatory assets and AOCI		$	1,227		$	1,077		$	(6	)		$	34
Consumers
Regulatory assets
Net loss		$	1,114		$	978		$	308			$	402
Prior service cost (credit)		8			9			(300		)		(361		)
Regulatory assets		$	1,122		$	987		$	8			$	41
AOCI
Net loss		36			27			—				—
Total amounts recognized in regulatory assets and AOCI		$	1,158		$	1,014		$	8			$	41

Plan Assets: Presented in the following tables are the fair values of the assets of CMS Energy’s DB Pension Plans and OPEB Plan, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 6, Fair Value Measurements.



In Millions
	DB Pension Plans
	December 31, 2019									December 31, 2018
	Total			Level 1			Level 2			Total			Level 1			Level 2
CMS Energy, including Consumers
Cash and short-term investments		$	44		$	44		$	—		$	242		$	242		$	—
U.S. government and agencies securities		66			—			66			11			—			11
Corporate debt		493			—			493			400			—			400
State and municipal bonds		17			—			17			6			—			6
Foreign corporate bonds		33			—			33			35			—			35
Mutual funds		640			640			—			552			552			—
		$	1,293		$	684		$	609		$	1,246		$	794		$	452
Pooled funds		1,253									1,001
Total		$	2,546								$	2,247



In Millions
	OPEB Plan
	December 31, 2019									December 31, 2018
	Total			Level 1			Level 2			Total			Level 1			Level 2
CMS Energy, including Consumers
Cash and short-term investments		$	9		$	9		$	—		$	36		$	36		$	—
U.S. government and agencies securities		10			—			10			2			—			2
Corporate debt		71			—			71			55			—			55
State and municipal bonds		2			—			2			1			—			1
Foreign corporate bonds		5			—			5			5			—			5
Common stocks		55			55			—			41			41			—
Mutual funds		713			713			—			594			594			—
		$	865		$	777		$	88		$	734		$	671		$	63
Pooled funds		644									546
Total		$	1,509								$	1,280

Cash and Short-Term Investments: Cash and short-term investments consist of money market funds with daily liquidity.

U.S. Government and Agencies Securities: U.S. government and agencies securities consist of U.S. Treasury notes and other debt securities backed by the U.S. government and related agencies. These securities are valued based on quoted market prices.

Corporate Debt: Corporate debt investments consist of investment grade bonds of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields available on comparable securities of issuers with similar credit ratings.

State and Municipal Bonds: State and municipal bonds are valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds is derived from various observable inputs, including benchmark yields, reported securities trades, broker/dealer quotes, bond ratings, and general information on market movements for investment grade state and municipal securities normally considered by market participants when pricing such debt securities.

Foreign Corporate Bonds: Foreign corporate debt securities are valued based on quoted market prices, when available, or on yields available on comparable securities of issuers with similar credit ratings.

Common Stocks: Common stocks in the OPEB Plan consist of equity securities that are actively managed and tracked to the S&P 500 Index. These securities are valued at their quoted closing prices.

Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted net asset values that are publicly available and are the basis for transactions to buy or sell shares in the funds.

Pooled Funds: Pooled funds include both common and collective trust funds as well as special funds that contain only employee benefit plan assets from two or more unrelated benefit plans. These funds primarily consist of U.S. and foreign equity securities, but also include U.S. and foreign fixed-income securities and multi-asset investments. Since these investments are valued at their net asset value as a practical expedient, they are not classified in the fair value hierarchy.

Asset Allocations: Presented in the following table are the investment components of the assets of CMS Energy’s DB Pension Plans and OPEB Plan as of December 31, 2019:



	DB Pension Plans			OPEB Plan
Equity securities		55	%		48	%
Fixed-income securities		39			33
Multi-asset investments		6			19
		100	%		100	%

CMS Energy’s target asset allocation for the assets of the DB Pension Plans is 53 percent equity, 35 percent fixed income, and 12 percent multi-asset investments. This target asset allocation is expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plan. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P MidCap and SmallCap Indexes and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers as well as high-yield and global bond funds. Multi-assets are diversified across absolute return investment approaches and global tactical asset allocation, such as inflation protected securities, real estate investment trusts, commodities, currency, and preferred stock. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.

CMS Energy established union and non‑union VEBA trusts to fund future retiree health and life insurance benefits. These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non‑utility subsidiaries. CMS Energy’s target asset allocation for the health trusts is 50 percent equity, 30 percent fixed income, and 20 percent multi-asset investments. CMS Energy’s target asset allocation for the life trusts is 42 percent equity, 28 percent fixed income, and 30 percent multi-asset investments. These target allocations are expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plans. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P SmallCap Index and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers. Multi-assets are diversified across absolute return investment approaches and global tactical asset allocation, such as inflation protected securities, real estate investment trusts, commodities, currency and preferred stock. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.

Contributions: Presented in the following table are the contributions to CMS Energy’s and Consumers’ DB Pension Plans:



In Millions
Years Ended December 31	2019			2018
CMS Energy, including Consumers
DB Pension Plans		$	—		$	240
Consumers
DB Pension Plans		$	—		$	234

Contributions comprise required amounts and discretionary contributions. Neither CMS Energy nor Consumers contributed to the OPEB Plan in 2019 and 2018. CMS Energy, including Consumers, contributed $531 million to the DB Pension Plans in January 2020. Consumers contributed $518 million

to the DB Pension Plans in January 2020. Neither CMS Energy nor Consumers plans to contribute to the OPEB Plan in 2020. Actual future contributions will depend on future investment performance, discount rates, and various factors related to the participants of the DB Pension Plans and OPEB Plan. CMS Energy and Consumers will, at a minimum, contribute to the plans as needed to comply with federal funding requirements.

Benefit Payments: Presented in the following table are the expected benefit payments for each of the next five years and the five-year period thereafter:



In Millions
	DB Pension Plans			DB SERP			OPEB Plan
CMS Energy, including Consumers
2020		$	174		$	10		$	58
2021		176			10			60
2022		177			10			62
2023		177			10			63
2024		175			10			64
2025-2029		870			46			319
Consumers
2020		$	165		$	7		$	56
2021		166			7			58
2022		167			7			59
2023		167			7			60
2024		166			7			61
2025-2029		825			32			305

Collective Bargaining Agreements: At December 31, 2019, unions represented 35 percent of CMS Energy’s employees and 37 percent of Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and call center employees. The USW represents Zeeland plant employees. Union contracts expire in 2020.

Consumers Energy Company