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Retirement Benefits
12 Months Ended
Dec. 31, 2016
Retirement Benefits

12:Retirement  Benefits

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

·

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

·

a qualified Cash Balance Pension Plan for certain employees hired between July 1, 2003 and August 31, 2005

·

a non‑contributory, qualified DCCP for employees hired on or after September 1, 2005

·

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 Plan: Participants in the DB Pension Plan include present and former employees of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. DB Pension Plan trust assets are not distinguishable by company.

DCCP and Cash Balance Pension Plan: CMS Energy and Consumers provide an employer contribution to the DCCP 401(k) plan for employees hired on or after September 1, 2005. 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.

Participants in the Cash Balance Pension Plan, effective July 1, 2003 to August 31, 2005, also participate in the DCCP as of September 1, 2005. Additional pay credits under the Cash Balance Pension Plan were discontinued as of September 1, 2005. DCCP expense for CMS Energy, including Consumers, was $20 million for the year ended December 31, 2016,  $16 million for the year ended December 31, 2015,  and $13 million for the year ended December 31, 2014. DCCP expense for Consumers was $19 million for the year ended December 31, 2016,  $16 million for the year ended December 31, 2015, and $13 million for the year ended December 31, 2014.

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. 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

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Trust assets

 

$

144 

 

$

148 

 

ABO

 

 

143 

 

 

140 

 

Contributions

 

 

 -

 

 

25 

 

Consumers

 

 

 

 

 

 

 

Trust assets

 

$

104 

 

$

106 

 

ABO

 

 

101 

 

 

97 

 

Contributions

 

 

 -

 

 

17 

 



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 $3 million and $2 million at December 31, 2016 and 2015. 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 less than $1 million for each of the years ended December 31, 2016,  2015, and 2014.

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 $24 million for the year ended December 31, 2016, $19 million for the year ended December 31, 2015, and $18 million for the year ended December 31, 2014. The total 401(k) plan cost for Consumers was $23 million for the year ended December 31, 2016,  $19 million for the year ended December 31, 2015, and $18 million for the year ended December 31, 2014.

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 DB Pension Plan disability retirement 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 7.00 percent in 2017 and 7.25 percent in 2016 for those under 65 and would increase 7.75 percent in 2017 and 8.00 percent in 2016 for those over 65. The rate of increase was assumed to decline to 4.75 percent by 2027 and thereafter for all retirees.

The assumptions used in the health care cost-trend rate affect service, interest, and PBO costs. Presented in the following table are the effects of a one-percentage-point change in the health care cost-trend assumption:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  



One Percentage 

One Percentage 

 

Year Ended December 31, 2016

Point Increase 

Point Decrease 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Effect on total service and interest cost component

 

$

13 

 

$

(10)

 

Effect on PBO

 

 

201 

 

 

(163)

 

Consumers

 

 

 

 

 

 

 

Effect on total service and interest cost component

 

$

13 

 

$

(10)

 

Effect on PBO

 

 

196 

 

 

(159)

 



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

2016 

 

2015 

 

2014 

 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Weighted average for benefit obligations1

 

 

 

 

 

 

 

 

 

 

Discount rate2,3

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

4.30 

%

 

4.52 

%

 

4.10 

%

 

DB SERP

 

4.16 

 

 

4.43 

 

 

4.10 

 

 

OPEB Plan

 

4.49 

 

 

4.70 

 

 

4.30 

 

 

Rate of compensation increase

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

3.60 

 

 

3.00 

 

 

3.00 

 

 

DB SERP

 

5.50 

 

 

5.50 

 

 

5.50 

 

 

Weighted average for net periodic benefit cost1

 

 

 

 

 

 

 

 

 

 

Service cost discount rate2,3

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

4.79 

 

 

4.10 

 

 

4.90 

 

 

DB SERP

 

4.87 

 

 

4.10 

 

 

4.90 

 

 

OPEB Plan

 

4.75 

 

 

4.30 

 

 

5.10 

 

 

Interest cost discount rate2,3

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

3.66 

 

 

4.10 

 

 

4.90 

 

 

DB SERP

 

3.64 

 

 

4.10 

 

 

4.90 

 

 

OPEB Plan

 

3.89 

 

 

4.30 

 

 

5.10 

 

 

Expected long-term rate of return on plan assets4

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

7.25 

 

 

7.50 

 

 

7.50 

 

 

OPEB Plan

 

7.25 

 

 

7.25 

 

 

7.25 

 

 

Rate of compensation increase

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

3.00 

 

 

3.00 

 

 

3.00 

 

 

DB SERP

 

5.50 

 

 

5.50 

 

 

5.50 

 

 



1

The mortality assumption for benefit obligations was based on the RP-2014 mortality table, with projection scales MP-2016 for 2016, MP-2015 for 2015, and MP-2014 for 2014. The mortality assumption for net periodic benefit cost for 2016 and 2015 was based on the RP-2014 mortality table, with projection scales MP-2015 for 2016 and MP-2014 for 2015, and for 2014 was based on the RP-2000 mortality table.

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 Plan and OPEB Plan and the yields on high-quality corporate bonds rated Aa or better.

3

In January 2016, CMS Energy and Consumers changed the method they use to determine the discount rate used to calculate the service cost and interest cost components of net periodic benefit costs for the DB Pension and OPEB Plans. Historically, the discount rate used for this purpose represented a single weighted-average rate derived from the yield curve used to determine the benefit obligation. CMS Energy and Consumers have elected to use instead a full-yield-curve approach in the estimation of service cost and interest cost; this approach is more accurate in that it applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment. This change represented a change in accounting estimate and did not impact years prior to 2016. As a result of changing to the full-yield-curve approach to determine the discount rate, for the year ended December 31, 2016, the service cost and interest cost components of net periodic benefit costs were reduced by $23 million for the DB Pension Plan and $12 million for the OPEB Plan for CMS Energy and by $22 million for the DB Pension Plan and $11 million for the OPEB Plan for Consumers.

4

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 DB Pension Plan assets was 7.25 percent in 2016. The actual return (loss) on DB Pension Plan assets was 8.0 percent in 2016,  (2.0) percent in 2015, and 7.4 percent in 2014.

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 Plan and DB SERP

 

OPEB Plan

 

Years Ended December 31

2016  2015  2014 

 

2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic cost (credit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

42 

 

$

50 

 

$

42 

 

 

$

18 

 

$

25 

 

$

20 

 

Interest cost

 

 

90 

 

 

108 

 

 

105 

 

 

 

46 

 

 

58 

 

 

56 

 

Expected return on plan assets

 

 

(147)

 

 

(138)

 

 

(135)

 

 

 

(85)

 

 

(91)

 

 

(88)

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

71 

 

 

97 

 

 

60 

 

 

 

21 

 

 

21 

 

 

 

Prior service cost (credit)

 

 

 

 

 

 

 

 

 

(41)

 

 

(41)

 

 

(41)

 

Net periodic cost (credit)

 

$

60 

 

$

118 

 

$

73 

 

 

$

(41)

 

$

(28)

 

$

(51)

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic cost (credit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

41 

 

$

49 

 

$

41 

 

 

$

17 

 

$

25 

 

$

20 

 

Interest cost

 

 

87 

 

 

103 

 

 

100 

 

 

 

45 

 

 

56 

 

 

54 

 

Expected return on plan assets

 

 

(143)

 

 

(134)

 

 

(131)

 

 

 

(80)

 

 

(86)

 

 

(83)

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

68 

 

 

93 

 

 

59 

 

 

 

22 

 

 

22 

 

 

 

Prior service cost (credit)

 

 

 

 

 

 

 

 

 

(40)

 

 

(40)

 

 

(40)

 

Net periodic cost (credit)

 

$

57 

 

$

112 

 

$

70 

 

 

$

(36)

 

$

(23)

 

$

(46)

 



Presented in the following table are the estimated net loss and prior service cost (credit) that will be amortized into net periodic benefit cost in 2017 from or to the associated regulatory asset and AOCI:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  



DB Pension Plan

OPEB Plan

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Regulatory asset

 

$

82 

 

$

(2)

 

AOCI

 

 

 

 

(2)

 

Consumers

 

 

 

 

 

 

 

Regulatory asset

 

$

82 

 

$

(2)

 



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. The estimated period of amortization of gains and losses for CMS Energy and Consumers was ten years for the DB Pension Plan for the years ended December 31, 2016,  2015, and 2014 and for the OPEB Plan was 11 years for the year ended December 31, 2016 and 13 years for the years ended December 31, 2015 and 2014. 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 a new prior service credit for OPEB in 2015 and new prior service cost for the DB Pension Plan in 2015. The estimated period of amortization of these new prior service costs (credits) for CMS Energy and Consumers is ten years.

CMS Energy and Consumers determine the MRV for DB Pension Plan assets 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 Plan

 

DB SERP

 

OPEB Plan

 

Years Ended December 31

2016  2015 

 

2016  2015 

 

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation at beginning of
   period

 

$

2,403 

 

$

2,547 

 

 

$

150 

 

$

156 

 

 

$

1,227 

 

$

1,378 

 

Service cost

 

 

42 

 

 

49 

 

 

 

 -

 

 

 

 

 

18 

 

 

25 

 

Interest cost

 

 

85 

 

 

102 

 

 

 

 

 

 

 

 

46 

 

 

58 

 

Plan amendments

 

 

 -

 

 

13 

 

 

 

 -

 

 

 -

 

 

 

 -

 

 

(25)

 

Actuarial (gain) loss

 

 

196 

1

 

(153)

1

 

 

 

 

(5)

 

 

 

171 

1

 

(152)

1

Benefits paid

 

 

(164)

 

 

(155)

 

 

 

(8)

 

 

(8)

 

 

 

(54)

 

 

(57)

 

Benefit obligation at end of period

 

$

2,562 

 

$

2,403 

 

 

$

151 

 

$

150 

 

 

$

1,408 

 

$

1,227 

 

Plan assets at fair value at
   beginning of period

 

$

2,013 

 

$

1,979 

 

 

$

 -

 

$

 -

 

 

$

1,208 

 

$

1,265 

 

Actual return on plan assets

 

 

152 

 

 

(36)

 

 

 

 -

 

 

 -

 

 

 

109 

 

 

(29)

 

Company contribution

 

 

100 

 

 

225 

 

 

 

 

 

 

 

 

 -

 

 

29 

 

Actual benefits paid

 

 

(164)

 

 

(155)

 

 

 

(8)

 

 

(8)

 

 

 

(53)

 

 

(57)

 

Plan assets at fair value at end
   of period

 

$

2,101 

 

$

2,013 

 

 

$

 -

 

$

 -

 

 

$

1,264 

 

$

1,208 

 

Funded status

 

$

(461)

2

$

(390)

2

 

$

(151)

 

$

(150)

 

 

$

(144)

 

$

(19)

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation at beginning of
   period

 

 

 

 

 

 

 

 

$

106 

 

$

111 

 

 

$

1,188 

 

$

1,336 

 

Service cost

 

 

 

 

 

 

 

 

 

 -

 

 

 

 

 

17 

 

 

25 

 

Interest cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45 

 

 

56 

 

Plan amendments

 

 

 

 

 

 

 

 

 

 -

 

 

 -

 

 

 

 -

 

 

(24)

 

Actuarial (gain) loss

 

 

 

 

 

 

 

 

 

 

 

(5)

 

 

 

167 

1

 

(150)

1

Benefits paid

 

 

 

 

 

 

 

 

 

(5)

 

 

(5)

 

 

 

(52)

 

 

(55)

 

Benefit obligation at end of period

 

 

 

 

 

 

 

 

$

109 

 

$

106 

 

 

$

1,365 

 

$

1,188 

 

Plan assets at fair value at
   beginning of period

 

 

 

 

 

 

 

 

$

 -

 

$

 -

 

 

$

1,133 

 

$

1,186 

 

Actual return on plan assets

 

 

 

 

 

 

 

 

 

 -

 

 

 -

 

 

 

103 

 

 

(27)

 

Company contribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 -

 

 

29 

 

Actual benefits paid

 

 

 

 

 

 

 

 

 

(5)

 

 

(5)

 

 

 

(52)

 

 

(55)

 

Plan assets at fair value at end
   of period

 

 

 

 

 

 

 

 

$

 -

 

$

 -

 

 

$

1,184 

 

$

1,133 

 

Funded status

 

 

 

 

 

 

 

 

$

(109)

 

$

(106)

 

 

$

(181)

 

$

(55)

 



1

The actuarial loss for 2016 was primarily the result of claims, experience, and lowering the discount rates used in calculating the plans’ obligations. The actuarial gain for 2015 was primarily the result of increasing the discount rates used in calculating the plans’ obligations.

2

At December 31, 2016, $441 million of the total funded status of the DB Pension Plan was attributable to Consumers, based on an allocation of expenses. At December 31, 2015, $368 million of the total funded status of the DB Pension Plan was attributable to Consumers, based on an allocation of expenses.

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



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  

December 31

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

DB SERP

 

$

 

$

 

Non-current liabilities

 

 

 

 

 

 

 

DB Pension Plan

 

 

461 

 

 

390 

 

DB SERP

 

 

143 

 

 

142 

 

OPEB Plan

 

 

144 

 

 

19 

 

Consumers

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

DB SERP

 

$

 

$

 

Non-current liabilities

 

 

 

 

 

 

 

DB Pension Plan

 

 

441 

 

 

368 

 

DB SERP

 

 

104 

 

 

101 

 

OPEB Plan

 

 

181 

 

 

55 

 



Presented in the following table are the DB Pension Plan PBO, ABO, and fair value of plan assets:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  

December 31

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

DB Pension Plan PBO

 

$

2,562 

 

$

2,403 

 

DB Pension Plan ABO

 

 

2,250 

 

 

2,140 

 

Fair value of DB Pension Plan assets

 

 

2,101 

 

 

2,013 

 



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 and liabilities, see Note 3, Regulatory Matters.



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  



DB Pension Plan
and DB SERP

 

OPEB Plan

 

Years Ended December 31

2016  2015 

 

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

1,062 

 

$

944 

 

 

$

483 

 

$

360 

 

Prior service cost (credit)

 

 

15 

 

 

19 

 

 

 

(187)

 

 

(227)

 

Regulatory assets

 

$

1,077 

 

$

963 

 

 

$

296 

 

$

133 

 

AOCI

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (gain)

 

 

93 

 

 

86 

 

 

 

(8)

 

 

(11)

 

Prior service cost (credit)

 

 

 

 

 

 

 

(6)

 

 

(8)

 

Total amounts recognized in regulatory assets
   and AOCI

 

$

1,171 

 

$

1,050 

 

 

$

282 

 

$

114 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

1,062 

 

$

944 

 

 

$

483 

 

$

360 

 

Prior service cost (credit)

 

 

15 

 

 

19 

 

 

 

(187)

 

 

(227)

 

Regulatory assets

 

$

1,077 

 

$

963 

 

 

$

296 

 

$

133 

 

AOCI

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

33 

 

 

29 

 

 

 

 -

 

 

 -

 

Total amounts recognized in regulatory assets
   and AOCI

 

$

1,110 

 

$

992 

 

 

$

296 

 

$

133 

 



Plan Assets: Presented in the following tables are the fair values of CMS Energy’s DB Pension Plan and OPEB Plan assets, 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 Plan

 



December 31, 2016

 

December 31, 2015

 



Total 

Level 1 

Level 2 

 

Total 

Level 1 

Level 2 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term
   investments

 

$

110 

 

$

110 

 

$

 -

 

 

$

215 

 

$

215 

 

$

 -

 

U.S. government and
   agencies securities

 

 

 

 

 -

 

 

 

 

 

19 

 

 

 -

 

 

19 

 

Corporate debt

 

 

266 

 

 

 -

 

 

266 

 

 

 

243 

 

 

 -

 

 

243 

 

State and municipal bonds

 

 

 

 

 -

 

 

 

 

 

 

 

 -

 

 

 

Foreign corporate bonds

 

 

25 

 

 

 -

 

 

25 

 

 

 

16 

 

 

 -

 

 

16 

 

Mutual funds

 

 

571 

 

 

571 

 

 

 -

 

 

 

538 

 

 

538 

 

 

 -

 



 

$

982 

 

$

681 

 

$

301 

 

 

$

1,039 

 

$

753 

 

$

286 

 

Pooled funds

 

 

1,119 

 

 

 

 

 

 

 

 

 

974 

 

 

 

 

 

 

 

Total

 

$

2,101 

 

 

 

 

 

 

 

 

$

2,013 

 

 

 

 

 

 

 



                    



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  



OPEB Plan

 



December 31, 2016

 

December 31, 2015

 



Total 

Level 1 

Level 2 

 

Total 

Level 1 

Level 2 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term
   investments

 

$

39 

 

$

39 

 

$

 -

 

 

$

51 

 

$

51 

 

$

 -

 

U.S. government and
   agencies securities

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 -

 

 

 

Corporate debt

 

 

38 

 

 

 -

 

 

38 

 

 

 

34 

 

 

 -

 

 

34 

 

State and municipal bonds

 

 

 

 

 -

 

 

 

 

 

 

 

 -

 

 

 

Foreign corporate bonds

 

 

 

 

 -

 

 

 

 

 

 

 

 -

 

 

 

Common stocks

 

 

44 

 

 

44 

 

 

 -

 

 

 

54 

 

 

54 

 

 

 -

 

Mutual funds

 

 

563 

 

 

563 

 

 

 -

 

 

 

456 

 

 

456 

 

 

 -

 



 

$

689 

 

$

646 

 

$

43 

 

 

$

601 

 

$

561 

 

$

40 

 

Pooled funds

 

 

575 

 

 

 

 

 

 

 

 

 

607 

 

 

 

 

 

 

 

Total

 

$

1,264 

 

 

 

 

 

 

 

 

$

1,208 

 

 

 

 

 

 

 



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 were valued based on quoted market prices.

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

State and Municipal Bonds: State and municipal bonds were valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds was 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 were 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 with low transaction costs that were actively managed and tracked by the S&P 500 Index. These securities were valued at their quoted closing prices.

Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted NAVs 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. Presented in the following table are the investment components of these funds:



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



DB Pension Plan

 

OPEB Plan

 

December 31

2016 

 

2015 

 

 

2016 

 

2015 

 

 

U.S. equity securities

 

67 

%

 

62 

%

 

 

72 

%

 

58 

%

 

Foreign equity securities

 

16 

 

 

18 

 

 

 

13 

 

 

13 

 

 

U.S. fixed-income securities

 

 

 

11 

 

 

 

 

 

22 

 

 

Foreign fixed-income securities

 

 

 

 

 

 

 

 

 

 

Alternative investments

 

 

 

 

 

 

 

 

 

 



 

100 

%

 

100 

%

 

 

100 

%

 

100 

%

 



Since these investments were valued at their NAV as a practical expedient, they are not classified in the fair value hierarchy.

Target Asset Allocations: CMS Energy’s target asset allocation for DB Pension Plan assets is 53 percent equity, 32 percent fixed income, and 15 percent alternative-strategy 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. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. 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 alternative-strategy investments. CMS Energy’s target asset allocation for the life trusts is 42 percent equity, 28 percent fixed income, and 30 percent alternative-strategy 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. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. 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’ OPEB Plan and DB Pension Plan:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  

Years Ended December 31

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

OPEB Plan

 

$

 -

 

$

29 

 

DB Pension Plan

 

 

100 

 

 

225 

 

Consumers

 

 

 

 

 

 

 

OPEB Plan

 

$

 -

 

$

29 

 

DB Pension Plan

 

 

93 

 

 

209 

 



Contributions comprise required amounts and discretionary contributions. Neither CMS Energy nor Consumers plans to contribute to the OPEB or DB Pension Plans in 2017. Actual future contributions will depend on future investment performance, discount rates, and various factors related to the DB Pension Plan and OPEB Plan participants.

Following amendments to the OPEB Plan in July 2013, Consumers’ OPEB costs decreased substantially and, as a result, the OPEB Plan was fully funded at December 31, 2013. In May 2014, Consumers filed an application with the MPSC requesting approval to suspend contributions to Consumers’ OPEB Plan during 2014 and 2015 if the OPEB Plan continued to be fully funded. Consumers’ electric and gas rates still reflect the higher OPEB costs, and previous MPSC orders required Consumers to contribute to the OPEB Plan the associated amount collected in rates annually.

In September 2014, the MPSC approved a settlement agreement addressing Consumers’ OPEB Plan funding application. Under the settlement agreement, Consumers contributed $25 million to the plan in 2014 and $29 million in February 2015. Consumers will suspend further contributions until the MPSC determines funding requirements in future general rate cases.

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 Plan

DB SERP 

OPEB Plan 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

2017

 

$

153 

 

$

 

$

59 

 

2018

 

 

159 

 

 

 

 

63 

 

2019

 

 

163 

 

 

 

 

66 

 

2020

 

 

165 

 

 

11 

 

 

69 

 

2021

 

 

166 

 

 

10 

 

 

72 

 

2022-2026

 

 

827 

 

 

50 

 

 

385 

 

Consumers

 

 

 

 

 

 

 

 

 

 

2017

 

$

149 

 

$

 

$

57 

 

2018

 

 

155 

 

 

 

 

61 

 

2019

 

 

159 

 

 

 

 

64 

 

2020

 

 

161 

 

 

 

 

67 

 

2021

 

 

161 

 

 

 

 

70 

 

2022-2026

 

 

803 

 

 

32 

 

 

371 

 



Collective Bargaining Agreements: At December 31, 2016, unions represented 39 percent of CMS Energy’s employees and 41 percent of Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and call center employees. The USW represents Zeeland employees. Union contracts expire in 2020.

Consumers Energy Company [Member]  
Retirement Benefits

12:Retirement  Benefits

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

·

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

·

a qualified Cash Balance Pension Plan for certain employees hired between July 1, 2003 and August 31, 2005

·

a non‑contributory, qualified DCCP for employees hired on or after September 1, 2005

·

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 Plan: Participants in the DB Pension Plan include present and former employees of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. DB Pension Plan trust assets are not distinguishable by company.

DCCP and Cash Balance Pension Plan: CMS Energy and Consumers provide an employer contribution to the DCCP 401(k) plan for employees hired on or after September 1, 2005. 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.

Participants in the Cash Balance Pension Plan, effective July 1, 2003 to August 31, 2005, also participate in the DCCP as of September 1, 2005. Additional pay credits under the Cash Balance Pension Plan were discontinued as of September 1, 2005. DCCP expense for CMS Energy, including Consumers, was $20 million for the year ended December 31, 2016,  $16 million for the year ended December 31, 2015,  and $13 million for the year ended December 31, 2014. DCCP expense for Consumers was $19 million for the year ended December 31, 2016,  $16 million for the year ended December 31, 2015, and $13 million for the year ended December 31, 2014.

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. 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

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Trust assets

 

$

144 

 

$

148 

 

ABO

 

 

143 

 

 

140 

 

Contributions

 

 

 -

 

 

25 

 

Consumers

 

 

 

 

 

 

 

Trust assets

 

$

104 

 

$

106 

 

ABO

 

 

101 

 

 

97 

 

Contributions

 

 

 -

 

 

17 

 



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 $3 million and $2 million at December 31, 2016 and 2015. 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 less than $1 million for each of the years ended December 31, 2016,  2015, and 2014.

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 $24 million for the year ended December 31, 2016, $19 million for the year ended December 31, 2015, and $18 million for the year ended December 31, 2014. The total 401(k) plan cost for Consumers was $23 million for the year ended December 31, 2016,  $19 million for the year ended December 31, 2015, and $18 million for the year ended December 31, 2014.

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 DB Pension Plan disability retirement 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 7.00 percent in 2017 and 7.25 percent in 2016 for those under 65 and would increase 7.75 percent in 2017 and 8.00 percent in 2016 for those over 65. The rate of increase was assumed to decline to 4.75 percent by 2027 and thereafter for all retirees.

The assumptions used in the health care cost-trend rate affect service, interest, and PBO costs. Presented in the following table are the effects of a one-percentage-point change in the health care cost-trend assumption:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  



One Percentage 

One Percentage 

 

Year Ended December 31, 2016

Point Increase 

Point Decrease 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Effect on total service and interest cost component

 

$

13 

 

$

(10)

 

Effect on PBO

 

 

201 

 

 

(163)

 

Consumers

 

 

 

 

 

 

 

Effect on total service and interest cost component

 

$

13 

 

$

(10)

 

Effect on PBO

 

 

196 

 

 

(159)

 



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

2016 

 

2015 

 

2014 

 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Weighted average for benefit obligations1

 

 

 

 

 

 

 

 

 

 

Discount rate2,3

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

4.30 

%

 

4.52 

%

 

4.10 

%

 

DB SERP

 

4.16 

 

 

4.43 

 

 

4.10 

 

 

OPEB Plan

 

4.49 

 

 

4.70 

 

 

4.30 

 

 

Rate of compensation increase

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

3.60 

 

 

3.00 

 

 

3.00 

 

 

DB SERP

 

5.50 

 

 

5.50 

 

 

5.50 

 

 

Weighted average for net periodic benefit cost1

 

 

 

 

 

 

 

 

 

 

Service cost discount rate2,3

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

4.79 

 

 

4.10 

 

 

4.90 

 

 

DB SERP

 

4.87 

 

 

4.10 

 

 

4.90 

 

 

OPEB Plan

 

4.75 

 

 

4.30 

 

 

5.10 

 

 

Interest cost discount rate2,3

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

3.66 

 

 

4.10 

 

 

4.90 

 

 

DB SERP

 

3.64 

 

 

4.10 

 

 

4.90 

 

 

OPEB Plan

 

3.89 

 

 

4.30 

 

 

5.10 

 

 

Expected long-term rate of return on plan assets4

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

7.25 

 

 

7.50 

 

 

7.50 

 

 

OPEB Plan

 

7.25 

 

 

7.25 

 

 

7.25 

 

 

Rate of compensation increase

 

 

 

 

 

 

 

 

 

 

DB Pension Plan

 

3.00 

 

 

3.00 

 

 

3.00 

 

 

DB SERP

 

5.50 

 

 

5.50 

 

 

5.50 

 

 



1

The mortality assumption for benefit obligations was based on the RP-2014 mortality table, with projection scales MP-2016 for 2016, MP-2015 for 2015, and MP-2014 for 2014. The mortality assumption for net periodic benefit cost for 2016 and 2015 was based on the RP-2014 mortality table, with projection scales MP-2015 for 2016 and MP-2014 for 2015, and for 2014 was based on the RP-2000 mortality table.

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 Plan and OPEB Plan and the yields on high-quality corporate bonds rated Aa or better.

3

In January 2016, CMS Energy and Consumers changed the method they use to determine the discount rate used to calculate the service cost and interest cost components of net periodic benefit costs for the DB Pension and OPEB Plans. Historically, the discount rate used for this purpose represented a single weighted-average rate derived from the yield curve used to determine the benefit obligation. CMS Energy and Consumers have elected to use instead a full-yield-curve approach in the estimation of service cost and interest cost; this approach is more accurate in that it applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment. This change represented a change in accounting estimate and did not impact years prior to 2016. As a result of changing to the full-yield-curve approach to determine the discount rate, for the year ended December 31, 2016, the service cost and interest cost components of net periodic benefit costs were reduced by $23 million for the DB Pension Plan and $12 million for the OPEB Plan for CMS Energy and by $22 million for the DB Pension Plan and $11 million for the OPEB Plan for Consumers.

4

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 DB Pension Plan assets was 7.25 percent in 2016. The actual return (loss) on DB Pension Plan assets was 8.0 percent in 2016,  (2.0) percent in 2015, and 7.4 percent in 2014.

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 Plan and DB SERP

 

OPEB Plan

 

Years Ended December 31

2016  2015  2014 

 

2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic cost (credit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

42 

 

$

50 

 

$

42 

 

 

$

18 

 

$

25 

 

$

20 

 

Interest cost

 

 

90 

 

 

108 

 

 

105 

 

 

 

46 

 

 

58 

 

 

56 

 

Expected return on plan assets

 

 

(147)

 

 

(138)

 

 

(135)

 

 

 

(85)

 

 

(91)

 

 

(88)

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

71 

 

 

97 

 

 

60 

 

 

 

21 

 

 

21 

 

 

 

Prior service cost (credit)

 

 

 

 

 

 

 

 

 

(41)

 

 

(41)

 

 

(41)

 

Net periodic cost (credit)

 

$

60 

 

$

118 

 

$

73 

 

 

$

(41)

 

$

(28)

 

$

(51)

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic cost (credit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

41 

 

$

49 

 

$

41 

 

 

$

17 

 

$

25 

 

$

20 

 

Interest cost

 

 

87 

 

 

103 

 

 

100 

 

 

 

45 

 

 

56 

 

 

54 

 

Expected return on plan assets

 

 

(143)

 

 

(134)

 

 

(131)

 

 

 

(80)

 

 

(86)

 

 

(83)

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

68 

 

 

93 

 

 

59 

 

 

 

22 

 

 

22 

 

 

 

Prior service cost (credit)

 

 

 

 

 

 

 

 

 

(40)

 

 

(40)

 

 

(40)

 

Net periodic cost (credit)

 

$

57 

 

$

112 

 

$

70 

 

 

$

(36)

 

$

(23)

 

$

(46)

 



Presented in the following table are the estimated net loss and prior service cost (credit) that will be amortized into net periodic benefit cost in 2017 from or to the associated regulatory asset and AOCI:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  



DB Pension Plan

OPEB Plan

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Regulatory asset

 

$

82 

 

$

(2)

 

AOCI

 

 

 

 

(2)

 

Consumers

 

 

 

 

 

 

 

Regulatory asset

 

$

82 

 

$

(2)

 



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. The estimated period of amortization of gains and losses for CMS Energy and Consumers was ten years for the DB Pension Plan for the years ended December 31, 2016,  2015, and 2014 and for the OPEB Plan was 11 years for the year ended December 31, 2016 and 13 years for the years ended December 31, 2015 and 2014. 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 a new prior service credit for OPEB in 2015 and new prior service cost for the DB Pension Plan in 2015. The estimated period of amortization of these new prior service costs (credits) for CMS Energy and Consumers is ten years.

CMS Energy and Consumers determine the MRV for DB Pension Plan assets 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 Plan

 

DB SERP

 

OPEB Plan

 

Years Ended December 31

2016  2015 

 

2016  2015 

 

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation at beginning of
   period

 

$

2,403 

 

$

2,547 

 

 

$

150 

 

$

156 

 

 

$

1,227 

 

$

1,378 

 

Service cost

 

 

42 

 

 

49 

 

 

 

 -

 

 

 

 

 

18 

 

 

25 

 

Interest cost

 

 

85 

 

 

102 

 

 

 

 

 

 

 

 

46 

 

 

58 

 

Plan amendments

 

 

 -

 

 

13 

 

 

 

 -

 

 

 -

 

 

 

 -

 

 

(25)

 

Actuarial (gain) loss

 

 

196 

1

 

(153)

1

 

 

 

 

(5)

 

 

 

171 

1

 

(152)

1

Benefits paid

 

 

(164)

 

 

(155)

 

 

 

(8)

 

 

(8)

 

 

 

(54)

 

 

(57)

 

Benefit obligation at end of period

 

$

2,562 

 

$

2,403 

 

 

$

151 

 

$

150 

 

 

$

1,408 

 

$

1,227 

 

Plan assets at fair value at
   beginning of period

 

$

2,013 

 

$

1,979 

 

 

$

 -

 

$

 -

 

 

$

1,208 

 

$

1,265 

 

Actual return on plan assets

 

 

152 

 

 

(36)

 

 

 

 -

 

 

 -

 

 

 

109 

 

 

(29)

 

Company contribution

 

 

100 

 

 

225 

 

 

 

 

 

 

 

 

 -

 

 

29 

 

Actual benefits paid

 

 

(164)

 

 

(155)

 

 

 

(8)

 

 

(8)

 

 

 

(53)

 

 

(57)

 

Plan assets at fair value at end
   of period

 

$

2,101 

 

$

2,013 

 

 

$

 -

 

$

 -

 

 

$

1,264 

 

$

1,208 

 

Funded status

 

$

(461)

2

$

(390)

2

 

$

(151)

 

$

(150)

 

 

$

(144)

 

$

(19)

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation at beginning of
   period

 

 

 

 

 

 

 

 

$

106 

 

$

111 

 

 

$

1,188 

 

$

1,336 

 

Service cost

 

 

 

 

 

 

 

 

 

 -

 

 

 

 

 

17 

 

 

25 

 

Interest cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45 

 

 

56 

 

Plan amendments

 

 

 

 

 

 

 

 

 

 -

 

 

 -

 

 

 

 -

 

 

(24)

 

Actuarial (gain) loss

 

 

 

 

 

 

 

 

 

 

 

(5)

 

 

 

167 

1

 

(150)

1

Benefits paid

 

 

 

 

 

 

 

 

 

(5)

 

 

(5)

 

 

 

(52)

 

 

(55)

 

Benefit obligation at end of period

 

 

 

 

 

 

 

 

$

109 

 

$

106 

 

 

$

1,365 

 

$

1,188 

 

Plan assets at fair value at
   beginning of period

 

 

 

 

 

 

 

 

$

 -

 

$

 -

 

 

$

1,133 

 

$

1,186 

 

Actual return on plan assets

 

 

 

 

 

 

 

 

 

 -

 

 

 -

 

 

 

103 

 

 

(27)

 

Company contribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 -

 

 

29 

 

Actual benefits paid

 

 

 

 

 

 

 

 

 

(5)

 

 

(5)

 

 

 

(52)

 

 

(55)

 

Plan assets at fair value at end
   of period

 

 

 

 

 

 

 

 

$

 -

 

$

 -

 

 

$

1,184 

 

$

1,133 

 

Funded status

 

 

 

 

 

 

 

 

$

(109)

 

$

(106)

 

 

$

(181)

 

$

(55)

 



1

The actuarial loss for 2016 was primarily the result of claims, experience, and lowering the discount rates used in calculating the plans’ obligations. The actuarial gain for 2015 was primarily the result of increasing the discount rates used in calculating the plans’ obligations.

2

At December 31, 2016, $441 million of the total funded status of the DB Pension Plan was attributable to Consumers, based on an allocation of expenses. At December 31, 2015, $368 million of the total funded status of the DB Pension Plan was attributable to Consumers, based on an allocation of expenses.

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



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  

December 31

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

DB SERP

 

$

 

$

 

Non-current liabilities

 

 

 

 

 

 

 

DB Pension Plan

 

 

461 

 

 

390 

 

DB SERP

 

 

143 

 

 

142 

 

OPEB Plan

 

 

144 

 

 

19 

 

Consumers

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

DB SERP

 

$

 

$

 

Non-current liabilities

 

 

 

 

 

 

 

DB Pension Plan

 

 

441 

 

 

368 

 

DB SERP

 

 

104 

 

 

101 

 

OPEB Plan

 

 

181 

 

 

55 

 



Presented in the following table are the DB Pension Plan PBO, ABO, and fair value of plan assets:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  

December 31

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

DB Pension Plan PBO

 

$

2,562 

 

$

2,403 

 

DB Pension Plan ABO

 

 

2,250 

 

 

2,140 

 

Fair value of DB Pension Plan assets

 

 

2,101 

 

 

2,013 

 



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 and liabilities, see Note 3, Regulatory Matters.



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  



DB Pension Plan
and DB SERP

 

OPEB Plan

 

Years Ended December 31

2016  2015 

 

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

1,062 

 

$

944 

 

 

$

483 

 

$

360 

 

Prior service cost (credit)

 

 

15 

 

 

19 

 

 

 

(187)

 

 

(227)

 

Regulatory assets

 

$

1,077 

 

$

963 

 

 

$

296 

 

$

133 

 

AOCI

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (gain)

 

 

93 

 

 

86 

 

 

 

(8)

 

 

(11)

 

Prior service cost (credit)

 

 

 

 

 

 

 

(6)

 

 

(8)

 

Total amounts recognized in regulatory assets
   and AOCI

 

$

1,171 

 

$

1,050 

 

 

$

282 

 

$

114 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

1,062 

 

$

944 

 

 

$

483 

 

$

360 

 

Prior service cost (credit)

 

 

15 

 

 

19 

 

 

 

(187)

 

 

(227)

 

Regulatory assets

 

$

1,077 

 

$

963 

 

 

$

296 

 

$

133 

 

AOCI

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

33 

 

 

29 

 

 

 

 -

 

 

 -

 

Total amounts recognized in regulatory assets
   and AOCI

 

$

1,110 

 

$

992 

 

 

$

296 

 

$

133 

 



Plan Assets: Presented in the following tables are the fair values of CMS Energy’s DB Pension Plan and OPEB Plan assets, 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 Plan

 



December 31, 2016

 

December 31, 2015

 



Total 

Level 1 

Level 2 

 

Total 

Level 1 

Level 2 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term
   investments

 

$

110 

 

$

110 

 

$

 -

 

 

$

215 

 

$

215 

 

$

 -

 

U.S. government and
   agencies securities

 

 

 

 

 -

 

 

 

 

 

19 

 

 

 -

 

 

19 

 

Corporate debt

 

 

266 

 

 

 -

 

 

266 

 

 

 

243 

 

 

 -

 

 

243 

 

State and municipal bonds

 

 

 

 

 -

 

 

 

 

 

 

 

 -

 

 

 

Foreign corporate bonds

 

 

25 

 

 

 -

 

 

25 

 

 

 

16 

 

 

 -

 

 

16 

 

Mutual funds

 

 

571 

 

 

571 

 

 

 -

 

 

 

538 

 

 

538 

 

 

 -

 



 

$

982 

 

$

681 

 

$

301 

 

 

$

1,039 

 

$

753 

 

$

286 

 

Pooled funds

 

 

1,119 

 

 

 

 

 

 

 

 

 

974 

 

 

 

 

 

 

 

Total

 

$

2,101 

 

 

 

 

 

 

 

 

$

2,013 

 

 

 

 

 

 

 



                    



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  



OPEB Plan

 



December 31, 2016

 

December 31, 2015

 



Total 

Level 1 

Level 2 

 

Total 

Level 1 

Level 2 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term
   investments

 

$

39 

 

$

39 

 

$

 -

 

 

$

51 

 

$

51 

 

$

 -

 

U.S. government and
   agencies securities

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 -

 

 

 

Corporate debt

 

 

38 

 

 

 -

 

 

38 

 

 

 

34 

 

 

 -

 

 

34 

 

State and municipal bonds

 

 

 

 

 -

 

 

 

 

 

 

 

 -

 

 

 

Foreign corporate bonds

 

 

 

 

 -

 

 

 

 

 

 

 

 -

 

 

 

Common stocks

 

 

44 

 

 

44 

 

 

 -

 

 

 

54 

 

 

54 

 

 

 -

 

Mutual funds

 

 

563 

 

 

563 

 

 

 -

 

 

 

456 

 

 

456 

 

 

 -

 



 

$

689 

 

$

646 

 

$

43 

 

 

$

601 

 

$

561 

 

$

40 

 

Pooled funds

 

 

575 

 

 

 

 

 

 

 

 

 

607 

 

 

 

 

 

 

 

Total

 

$

1,264 

 

 

 

 

 

 

 

 

$

1,208 

 

 

 

 

 

 

 



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 were valued based on quoted market prices.

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

State and Municipal Bonds: State and municipal bonds were valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds was 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 were 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 with low transaction costs that were actively managed and tracked by the S&P 500 Index. These securities were valued at their quoted closing prices.

Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted NAVs 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. Presented in the following table are the investment components of these funds:



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



DB Pension Plan

 

OPEB Plan

 

December 31

2016 

 

2015 

 

 

2016 

 

2015 

 

 

U.S. equity securities

 

67 

%

 

62 

%

 

 

72 

%

 

58 

%

 

Foreign equity securities

 

16 

 

 

18 

 

 

 

13 

 

 

13 

 

 

U.S. fixed-income securities

 

 

 

11 

 

 

 

 

 

22 

 

 

Foreign fixed-income securities

 

 

 

 

 

 

 

 

 

 

Alternative investments

 

 

 

 

 

 

 

 

 

 



 

100 

%

 

100 

%

 

 

100 

%

 

100 

%

 



Since these investments were valued at their NAV as a practical expedient, they are not classified in the fair value hierarchy.

Target Asset Allocations: CMS Energy’s target asset allocation for DB Pension Plan assets is 53 percent equity, 32 percent fixed income, and 15 percent alternative-strategy 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. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. 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 alternative-strategy investments. CMS Energy’s target asset allocation for the life trusts is 42 percent equity, 28 percent fixed income, and 30 percent alternative-strategy 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. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. 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’ OPEB Plan and DB Pension Plan:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  

Years Ended December 31

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

OPEB Plan

 

$

 -

 

$

29 

 

DB Pension Plan

 

 

100 

 

 

225 

 

Consumers

 

 

 

 

 

 

 

OPEB Plan

 

$

 -

 

$

29 

 

DB Pension Plan

 

 

93 

 

 

209 

 



Contributions comprise required amounts and discretionary contributions. Neither CMS Energy nor Consumers plans to contribute to the OPEB or DB Pension Plans in 2017. Actual future contributions will depend on future investment performance, discount rates, and various factors related to the DB Pension Plan and OPEB Plan participants.

Following amendments to the OPEB Plan in July 2013, Consumers’ OPEB costs decreased substantially and, as a result, the OPEB Plan was fully funded at December 31, 2013. In May 2014, Consumers filed an application with the MPSC requesting approval to suspend contributions to Consumers’ OPEB Plan during 2014 and 2015 if the OPEB Plan continued to be fully funded. Consumers’ electric and gas rates still reflect the higher OPEB costs, and previous MPSC orders required Consumers to contribute to the OPEB Plan the associated amount collected in rates annually.

In September 2014, the MPSC approved a settlement agreement addressing Consumers’ OPEB Plan funding application. Under the settlement agreement, Consumers contributed $25 million to the plan in 2014 and $29 million in February 2015. Consumers will suspend further contributions until the MPSC determines funding requirements in future general rate cases.

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 Plan

DB SERP 

OPEB Plan 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

2017

 

$

153 

 

$

 

$

59 

 

2018

 

 

159 

 

 

 

 

63 

 

2019

 

 

163 

 

 

 

 

66 

 

2020

 

 

165 

 

 

11 

 

 

69 

 

2021

 

 

166 

 

 

10 

 

 

72 

 

2022-2026

 

 

827 

 

 

50 

 

 

385 

 

Consumers

 

 

 

 

 

 

 

 

 

 

2017

 

$

149 

 

$

 

$

57 

 

2018

 

 

155 

 

 

 

 

61 

 

2019

 

 

159 

 

 

 

 

64 

 

2020

 

 

161 

 

 

 

 

67 

 

2021

 

 

161 

 

 

 

 

70 

 

2022-2026

 

 

803 

 

 

32 

 

 

371 

 



Collective Bargaining Agreements: At December 31, 2016, unions represented 39 percent of CMS Energy’s employees and 41 percent of Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and call center employees. The USW represents Zeeland employees. Union contracts expire in 2020.