Retirement Benefits

12 Months Ended

Dec. 31, 2011

12: RETIREMENT BENEFITS

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 defined benefit 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 defined benefit 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;

•

health care and life insurance benefits under an OPEB plan;

•

benefits to a selected group of management under a non-contributory, nonqualified EISP; and

•

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

Pension Plan: Participants in the Pension Plan include CMS Energy's and Consumers' present employees, employees of their subsidiaries, and employees of Panhandle, a former CMS Energy subsidiary. Pension Plan trust assets are not distinguishable by company.

CMS Energy and Consumers provide an employer contribution of five percent of base pay to the DCCP 401(k) plan for employees hired on or after September 1, 2005. On January 1, 2011, the employer contribution was increased to six percent. 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 and Consumers was $7 million for the year ended December 31, 2011, $5 million for the year ended December 31, 2010, and $4 million for the year ended December 31, 2009.

SERP: The SERP is a non-qualified plan as defined by the Internal Revenue Code. SERP benefits are paid from a rabbi trust established in 1988. SERP rabbi trust earnings are taxable. Presented in the following table are the funded status and fair value of trust assets for CMS Energy's and Consumers' SERP

In Millions


Years Ended December 31		2011		2010
CMS ENERGY, INCLUDING CONSUMERS
Trust assets¹	$	114	$	91
ABO		117		107
Contributions		27		17
CONSUMERS
Trust assets¹	$	75	$	57
ABO		76		66
Contributions		20		11

¹	Trust assets are included in other non-current assets on CMS Energy's and Consumers' consolidated balance sheets.

On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the 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 less than $1 million at December 31, 2011 and December 31, 2010. 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, 2011, 2010, and 2009.

401(k): The 401(k) plan employer match equals 60 percent of eligible contributions up to the first six percent of an employee's wages. The total 401(k) plan cost for CMS Energy, including Consumers, was $16 million for each of the years ended December 31, 2011, 2010, and 2009. The total 401(k) plan cost for Consumers was $16 million for the year ended December 31, 2011 and $15 million for each of the years ended December 31, 2010 and 2009.

EISP: In 2002, CMS Energy and Consumers implemented a nonqualified EISP to provide flexibility in separation of employment by officers, a selected group of management, or other highly compensated employees. Terms of the plan include payment of a lump sum, payment of monthly benefits for life, payment of premiums for continuation of health care, or any other legally permissible term deemed to be in CMS Energy's and Consumers' best interest. EISP expense for CMS Energy and Consumers was less than $1 million for each of the years ended December 31, 2011, 2010, and 2009. The ABO for the EISP for CMS Energy, including Consumers, was $5 million at December 31, 2011 and 2010. The ABO for the EISP for Consumers was $1 million at December 31, 2011 and 2010.

OPEB: 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 Pension Plan disability retirement and 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 7.5 percent in 2012 and 8.0 percent in 2011 for all retirees. The rate of increase was assumed to decline to five percent for all retirees by 2017 and thereafter.

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:


	One Percentage Point Increase		One Percentage Point Decrease
CMS ENERGY, INCLUDING CONSUMERS
Effect on total service and interest cost component		$ 19		$ (16)
Effect on PBO		245		(213)
CONSUMERS
Effect on total service and interest cost component		$ 18		$ (15)
Effect on PBO		238		(207)

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


	Pension and SERP							OPEB
December 31		2011		2010		2009			2011		2010		2009
Weighted Average for Benefit Obligations
CMS ENERGY, INCLUDING CONSUMERS
Discount rate¹		4.90	%	5.40	%	5.85	%		5.10	%	5.60	%	6.00	%
Mortality table²		2000		2000		2000			2000		2000		2000
Rate of compensation increase
Pension		3.50	%	4.00	%	4.00	%
SERP		5.50	%	5.50	%	5.50	%


	Pension and SERP							OPEB
December 31		2011		2010		2009			2011		2010		2009
Weighted Average for Net Periodic Benefit Cost
CMS ENERGY, INCLUDING CONSUMERS
Discount rate¹		5.40	%	5.85	%	6.50	%		5.60	%	6.00	%	6.50	%
Expected long-term rate of return on plan assets³		8.00	%	8.00	%	8.25	%		7.50	%	7.50	%	7.75	%
Mortality table²		2000		2000		2000			2000		2000		2000
Rate of compensation increase
Pension		4.00	%	4.00	%	4.00	%
SERP		5.50	%	5.50	%	5.50	%

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' Pension Plan and OPEB plan and the yields on high quality corporate bonds rated Aa or better.

²	The mortality assumption was based on the RP-2000 mortality tables with projection of future mortality improvements using Scale AA, which aligned with the IRS prescriptions for cash funding valuations under the Pension Protection Act of 2006.

CMS Energy and Consumers determined the long-term rate of return using the 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 Pension Plan assets was eight percent in 2011. The actual return on Pension Plan assets was four percent in 2011, 13 percent in 2010, and 21 percent in 2009.

Costs: Presented in the following tables are the costs and other changes in plan assets and benefit obligations incurred in CMS Energy's and Consumers' retirement benefits plans:

In Millions


	Pension and SERP
Years Ended December 31		2011			2010			2009
CMS ENERGY, INCLUDING CONSUMERS
Net periodic pension cost
Service cost	$	49		$	45		$	41
Interest expense		106			104			102
Expected return on plan assets		(112	)		(92	)		(86	)
Amortization of:
Net loss		65			52			41
Prior service cost		5			5			6

Net periodic pension cost	$	113		$	114		$	104
Regulatory adjustment¹		-			30			-

Net periodic pension cost after regulatory adjustment	$	113		$	144		$	104

CONSUMERS
Net periodic pension cost
Service cost	$	48		$	44		$	40
Interest expense		101			99			97
Expected return on plan assets		(109	)		(89	)		(83	)
Amortization of:
Net loss		63			50			40
Prior service cost		5			5			5

Net periodic pension cost	$	108		$	109		$	99
Regulatory adjustment¹		-			30			-

Net periodic pension cost after regulatory adjustment	$	108		$	139		$	99

In Millions


	OPEB
Years Ended December 31		2011			2010			2009
CMS ENERGY, INCLUDING CONSUMERS
Net periodic OPEB cost
Service cost	$	27		$	26		$	24
Interest expense		77			80			80
Expected return on plan assets		(66	)		(60	)		(50	)
Amortization of:
Net loss		30			32			33
Prior service credit		(20	)		(17	)		(10	)

Net periodic OPEB cost	$	48		$	61		$	77
Regulatory adjustment¹		-			5			-

Net periodic OPEB cost after regulatory adjustment	$	48		$	66		$	77

CONSUMERS
Net periodic OPEB cost
Service cost	$	26		$	25		$	24
Interest expense		74			77			77
Expected return on plan assets		(61	)		(56	)		(46	)
Amortization of:
Net loss		31			33			33
Prior service credit		(20	)		(16	)		(10	)

Net periodic OPEB cost	$	50		$	63		$	78
Regulatory adjustment¹		-			5			-

Net periodic OPEB cost after regulatory adjustment	$	50		$	68		$	78

Regulatory adjustments are the differences between amounts included in rates and the periodic benefit cost calculated. These regulatory adjustments were offset by surcharge revenues, which resulted in no impact to net income for the years presented. The pension and OPEB regulatory liability was less than $1 million at December 31, 2011 and 2010.

For CMS Energy, the estimated net loss and prior service cost for the defined benefit Pension Plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $79 million and from AOCI is $2 million. For Consumers, the estimated net loss and prior service cost for the defined benefit Pension Plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $79 million. For CMS Energy, the estimated net loss and prior service credit for OPEB plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $33 million, with a decrease from AOCI of $1 million. For Consumers, the estimated net loss and prior service credit for OPEB plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $33 million.

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 11 years for pension and 13 years for OPEB for the year ended December 31, 2011, and 12 years for pension and 14 years for OPEB for each of the years ended December 31, 2010 and 2009. Prior service cost amortization is established in the year in which the prior service cost first occurred, and is based on the same amortization period for all future years until the prior service costs are fully amortized. CMS Energy and Consumers had new prior services credits for OPEB in 2010. The estimated period of amortization of these new prior service credits for CMS Energy and Consumers was ten years for OPEB for the year ended December 31, 2010.

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


In Millions
Years Ended December 31	Pension Plan
Years Ended December 31		2011			2010
CMS ENERGY, INCLUDING CONSUMERS
Benefit obligation at beginning of period	$	1,896		$	1,717
Service cost		48			44
Interest cost		100			98
Actuarial loss		107			150
Benefits paid		(79	)		(113	)
Benefit obligation at end of period¹	$	2,072		$	1,896
Plan assets at fair value at beginning of period	$	1,401		$	1,007
Actual return on plan assets		54			132
Company contribution		250			375
Actual benefits paid²		(79	)		(113	)
Plan assets at fair value at end of period	$	1,626		$	1,401
Funded status at December 31^3,4	$	(446	)	$	(495	)


In Millions
Years Ended December 31	SERP						OPEB
Years Ended December 31		2011			2010			2011			2010
CMS ENERGY, INCLUDING CONSUMERS
Benefit obligation at beginning of period	$	118		$	106		$	1,410		$	1,423
Service cost		1			1			27			26
Interest cost		6			6			77			80
Plan amendments⁵		-			-			-			(101	)
Actuarial loss		8			11			180			36
Benefits paid		(6	)		(6	)		(53	)		(54	)
Benefit obligation at end of period¹	$	127		$	118		$	1,641		$	1,410
Plan assets at fair value at beginning of period	$	-		$	-		$	887		$	782
Actual return on plan assets		-			-			23			88
Company contribution		6			6			67			71
Actual benefits paid²		(6	)		(6	)		(53	)		(54	)
Plan assets at fair value at end of period	$	-		$	-		$	924		$	887
Funded status at December 31³	$	(127	)	$	(118	)	$	(717	)	$	(523	)
CONSUMERS
Benefit obligation at beginning of period	$	77		$	67		$	1,358		$	1,373
Service cost		1			1			26			25
Interest cost		4			4			74			77
Plan amendments⁵		-			-			-			(100	)
Actuarial loss		6			8			178			34
Benefits paid		(3	)		(3	)		(51	)		(51	)
Benefit obligation at end of period¹	$	85		$	77		$	1,585		$	1,358
Plan assets at fair value at beginning of period	$	-		$	-		$	825		$	725
Actual return on plan assets		-			-			21			81
Company contribution		3			3			66			70
Actual benefits paid²		(3	)		(3	)		(51	)		(51	)
Plan assets at fair value at end of period	$	-		$	-		$	861		$	825
Funded status at December 31³	$	(85	)	$	(77	)	$	(724	)	$	(533	)

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy, which is tax-exempt, to sponsors of retiree health care benefit plans that provide a benefit that is actuarially equivalent to Medicare Part D. In 2010, the Health Care Acts repealed these tax-exempt deductions for years beginning after December 31, 2012. The Medicare Part D annualized reduction in net OPEB cost for CMS Energy was $26 million for 2011, $28 million for 2010, and $19 million for 2009. Consumers' Medicare Part D annualized reduction in net OPEB costs was $25 million for 2011, $26 million for 2010, and $18 million for 2009. The reduction for CMS Energy and Consumers included $9 million for 2011, $10 million for 2010, and $6 million for 2009 in capitalized OPEB costs.

²	CMS Energy received payments of $5 million in each of 2011 and 2010 and $4 million in 2009 for the Medicare Part D subsidies. Consumers received payments of $5 million in each of 2011 and 2010 and $4 million in 2009 for the Medicare Part D subsidies.

At December 31, 2011, CMS Energy classified $7 million as current liabilities and $1.3 billion as non-current liabilities on its consolidated balance sheets. At December 31, 2010, CMS Energy classified $7 million as current liabilities and $1.1 billion as non-current liabilities on its consolidated balance sheets. Current liabilities relate to SERP projected payments for the next year.

At December 31, 2011, Consumers classified $4 million as current liabilities and $1.2 billion as non-current liabilities on its consolidated balance sheets. At December 31, 2010, Consumers classified $4 million as current liabilities and $1.1 billion as non-current liabilities on its consolidated balance sheets.

⁴	At December 31, 2011, $414 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses. At December 31, 2010, $463 million of the funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses.

⁵	Plan amendments reflect changes resulting from an agreement reached with the UWUA in April 2010 on a new five-year contract for UWUA members.

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


In Millions
Years Ended December 31	2011		2010
CMS ENERGY, INCLUDING CONSUMERS
Pension PBO	$	2,072	$	1,896
Pension ABO		1,765		1,517
Fair value of Pension Plan assets		1,626		1,401

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 6, Regulatory Matters.


In Millions
	Pension and SERP				OPEB
Years Ended December 31		2011		2010		2011			2010
CMS ENERGY, INCLUDING CONSUMERS
Regulatory assets
Net loss	$	1,014	$	914	$	766		$	579
Prior service cost (credit)		17		23		(132	)		(152	)
AOCI
Net loss (gain)		81		72		(5	)		(9	)
Prior service cost (credit)		2		2		(3	)		(4	)
Total amounts recognized in regulatory assets and AOCI	$	1,114	$	1,011	$	626		$	414
CONSUMERS
Regulatory assets
Net loss	$	1,014	$	914	$	766		$	579
Prior service cost (credit)		17		23		(132	)		(152	)
AOCI
Net loss		27		22		-			-
Prior service cost		-		1		-			-
Total amounts recognized in regulatory assets and AOCI	$	1,058	$	960	$	634		$	427

Plan Assets: Presented in the following tables are the fair values of CMS Energy's and Consumers' Pension Plan and OPEB plan assets at December 31, 2011 and 2010, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 4, Fair Value Measurements.


	Pension Plan
December 31, 2011	Total		Level 1		Level 2
	In Millions
CMS ENERGY, INCLUDING CONSUMERS
Asset Category
Cash and short-term investments¹	$	241	$	241	$	—
U.S. government and agencies securities²		24		—		24
Corporate debt³		236		—		236
State and municipal bonds⁵		10		—		10
Foreign corporate debt⁶		23		—		23
Mutual funds⁸		257		257		—
Pooled funds⁹		835		—		835

Total	$	1,626	$	498	$	1,128


	Pension Plan
December 31, 2010	Total		Level 1		Level 2
	In Millions
CMS ENERGY, INCLUDING CONSUMERS
Asset Category
Cash and short-term investments¹	$	248	$	248	$	—
U.S. government and agencies securities²		57		—		57
Corporate debt³		161		—		161
State and municipal bonds⁵		8		—		8
Foreign corporate debt⁶		17		—		17
Mutual funds⁸		183		183		—
Pooled funds⁹		727		—		727

Total	$	1,401	$	431	$	970


	OPEB Plan
December 31, 2011	Total		Level 1		Level 2
	In Millions
CMS ENERGY, INCLUDING CONSUMERS
Asset Category
Cash and short-term investments¹	$	64	$	64	$	—
U.S. government and agencies securities²		203		—		203
Corporate debt⁴		28		—		28
State and municipal bonds⁵		71		—		71
Foreign corporate debt⁶		3		—		3
Common stocks⁷		113		113		—
Mutual funds⁸		31		31		—
Pooled funds¹⁰		411		—		411

Total	$	924	$	208	$	716

CONSUMERS
Asset Category
Cash and short-term investments¹	$	60	$	60	$	—
U.S. government and agencies securities²		189		—		189
Corporate debt⁴		26		—		26
State and municipal bonds⁵		66		—		66
Foreign corporate debt⁶		3		—		3
Common stocks⁷		105		105		—
Mutual funds⁸		29		29		—
Pooled funds¹⁰		383		—		383

Total	$	861	$	194	$	667


	OPEB Plan
December 31, 2010	Total		Level 1		Level 2
	In Millions
CMS ENERGY, INCLUDING CONSUMERS
Asset Category
Cash and short-term investments¹	$	56	$	56	$	—
U.S. government and agencies securities²		181		—		181
Corporate debt⁴		20		—		20
State and municipal bonds⁵		36		—		36
Foreign corporate debt⁶		2		—		2
Common stocks⁷		154		154		—
Mutual funds⁸		23		23		—
Pooled funds¹⁰		415		—		415

Total	$	887	$	233	$	654

CONSUMERS
Asset Category
Cash and short-term investments¹	$	52	$	52	$	—
U.S. government and agencies securities²		168		—		168
Corporate debt⁴		19		—		19
State and municipal bonds⁵		34		—		34
Foreign corporate debt⁶		2		—		2
Common stocks⁷		143		143		—
Mutual funds⁸		21		21		—
Pooled funds¹⁰		386		—		386

Total	$	825	$	216	$	609

1	Cash and short-term investments consist of money market funds with daily liquidity.

2	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.

At December 31, 2011, corporate debt investments in the Pension Plan comprised investment grade bonds (69 percent) and non-investment grade, high-yield bonds (31 percent) of U.S. issuers from diverse industries. At December 31, 2010, corporate debt investments in the Pension Plan comprised investment grade bonds (61 percent) and non-investment grade, high-yield bonds (39 percent) 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.

At December 31, 2011, corporate debt investments in the OPEB plan comprised investment grade bonds (69 percent) and non-investment grade, high-yield bonds (31 percent) of U.S. issuers from diverse industries. At December 31, 2010, corporate debt investments in the OPEB plan comprised investment grade bonds (61 percent) and non-investment grade, high-yield bonds (39 percent) 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 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.

6	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.

7	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.

8	Mutual funds represent shares in registered investment companies that are priced based on the quoted NAV that is the basis for transactions to buy or sell shares in the funds.

Pooled funds in the Pension Plan 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. At December 31, 2011, these funds comprised investments in U.S. equity securities (53 percent), foreign equity securities (22 percent), foreign fixed-income securities (16 percent), U.S. fixed-income securities (five percent), and alternative investments (four percent). At December 31, 2010, these funds comprised investments in U.S. equity securities (55 percent), foreign equity securities (24 percent), foreign fixed-income securities (14 percent), U.S. fixed-income securities (four percent), and alternative investments (three percent). These investments were valued at the quoted NAV provided by the fund managers that is the basis for transactions to buy or sell shares in the funds.

Pooled funds in the OPEB plan 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. At December 31, 2011, these funds comprised investments in U.S. equity securities (88 percent), foreign equity securities (six percent), foreign fixed-income securities (four percent), U.S. fixed-income securities (one percent), and alternative investments (one percent). At December 31, 2010, these funds comprised investments in U.S. equity securities (89 percent), foreign equity securities (six percent), foreign fixed-income securities (three percent), U.S. fixed-income securities (one percent), and alternative investments (one percent). These investments are valued at the quoted NAV provided by the fund managers that is the basis for transactions to buy or sell shares in the funds.

Presented in the following table are the contributions to CMS Energy's and Consumers' OPEB plan and Pension Plan:


In Millions
Years Ended December 31		2011		2010
CMS ENERGY, INCLUDING CONSUMERS
OPEB¹
VEBA trust	$	48	$	57
401(h) component		19		14
	$	67	$	71
Pension²	$	250	$	375
CONSUMERS
OPEB¹
VEBA trust	$	47	$	57
401(h) component		19		13
	$	66	$	70
Pension²	$	245	$	366

¹	CMS Energy, including Consumers, plans to contribute $65 million to the OPEB plan in 2012 and Consumers plans to contribute $64 million to the OPEB plan in 2012.

²	CMS Energy, including Consumers, does not plan to contribute to the Pension Plan in 2012.

Contributions include required and discretionary amounts. Actual future contributions will depend on future investment performance, changes in discount rates, and various factors related to the populations participating in the plans.

In 2011, CMS Energy reached its target asset allocation for Pension Plan assets of 50 percent equity, 30 percent fixed income, and 20 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 and Consumers use annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.

CMS Energy and Consumers established union and non-union VEBA trusts to fund their 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 and Consumers have a target asset allocation of 60 percent equity and 40 percent fixed-income investments.

CMS Energy and Consumers invest the equity portions of the union and non-union health care VEBA trusts in an S&P 500 Index fund. CMS Energy and Consumers invest the fixed-income portion of the union health care VEBA trust in domestic investment grade taxable instruments. CMS Energy and Consumers invest the fixed-income portion of the non-union health care VEBA trust in a diversified mix of domestic tax-exempt securities. The investment selections of each VEBA trust are influenced by the tax consequences, as well as the objective of generating asset returns that will meet the medical and life insurance costs of retirees.

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
		Pension		SERP		OPEB	¹
CMS ENERGY, INCLUDING CONSUMERS
2012	$	111	$	7	$	70
2013		120		7		73
2014		129		7		76
2015		138		8		80
2016		144		8		83
2017-2021		777		44		466
CONSUMERS
2012	$	108	$	4	$	67
2013		117		4		70
2014		126		4		73
2015		134		4		76
2016		140		4		80
2017-2021		757		23		445

CMS Energy's and Consumers' OPEB benefit payments are net of employee contributions and expected Medicare Part D prescription drug subsidy payments. For CMS Energy, subsidies to be received are estimated to be $6 million for 2012, $7 million for each of 2013 and 2014, $8 million for each of 2015 and 2016, and $49 million combined for 2017 through 2021. For Consumers, subsidies to be received are estimated to be $6 million for each of 2012 and 2013, $7 million for each of 2014 and 2015, $8 million for 2016, and $47 million combined for 2017 through 2021.

Collective Bargaining Agreements: At December 31, 2011, unions represented 42 percent of CMS Energy's employees and 44 percent of Consumers' employees. The UWUA represents Consumers' operating, maintenance, construction, and call center employees. The USW represents Zeeland employees. Union contracts expire in 2015.

Consumers Energy Company [Member]

Retirement Benefits

12: RETIREMENT BENEFITS

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 defined benefit 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 defined benefit 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;

•

health care and life insurance benefits under an OPEB plan;

•

benefits to a selected group of management under a non-contributory, nonqualified EISP; and

•

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

In Millions


Years Ended December 31		2011		2010
CMS ENERGY, INCLUDING CONSUMERS
Trust assets¹	$	114	$	91
ABO		117		107
Contributions		27		17
CONSUMERS
Trust assets¹	$	75	$	57
ABO		76		66
Contributions		20		11

¹	Trust assets are included in other non-current assets on CMS Energy's and Consumers' consolidated balance sheets.


	One Percentage Point Increase		One Percentage Point Decrease
CMS ENERGY, INCLUDING CONSUMERS
Effect on total service and interest cost component		$ 19		$ (16)
Effect on PBO		245		(213)
CONSUMERS
Effect on total service and interest cost component		$ 18		$ (15)
Effect on PBO		238		(207)

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

Weighted Average for Benefit Obligations


	Pension and SERP									OPEB
December 31	2011			2010			2009			2011			2010			2009
CMS ENERGY, INCLUDING CONSUMERS
Discount rate¹		4.90	%		5.40	%		5.85	%		5.10	%		5.60	%		6.00	%
Mortality table²		2000			2000			2000			2000			2000			2000
Rate of compensation increase
Pension		3.50	%		4.00	%		4.00	%
SERP		5.50	%		5.50	%		5.50	%

Weighted Average for Net Periodic Benefit Cost


December 31	Pension and SERP									OPEB
December 31	2011			2010			2009			2011			2010			2009
CMS ENERGY, INCLUDING CONSUMERS
Discount rate¹		5.40	%		5.85	%		6.50	%		5.60	%		6.00	%		6.50	%
Expected long-term rate of return on plan assets³		8.00	%		8.00	%		8.25	%		7.50	%		7.50	%		7.75	%
Mortality table²		2000			2000			2000			2000			2000			2000
Rate of compensation increase
Pension		4.00	%		4.00	%		4.00	%
SERP		5.50	%		5.50	%		5.50	%

²	The mortality assumption was based on the RP-2000 mortality tables with projection of future mortality improvements using Scale AA, which aligned with the IRS prescriptions for cash funding valuations under the Pension Protection Act of 2006.

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 Pension Plan assets was eight percent in 2011. The actual return on Pension Plan assets was four percent in 2011, 13 percent in 2010, and 21 percent in 2009.

Costs: Presented in the following tables are the costs and other changes in plan assets and benefit obligations incurred in CMS Energy's and Consumers' retirement benefits plans:

In Millions


	Pension and SERP
Years Ended December 31		2011			2010			2009
CMS ENERGY, INCLUDING CONSUMERS
Net periodic pension cost
Service cost	$	49		$	45		$	41
Interest expense		106			104			102
Expected return on plan assets		(112	)		(92	)		(86	)
Amortization of:
Net loss		65			52			41
Prior service cost		5			5			6

Net periodic pension cost	$	113		$	114		$	104
Regulatory adjustment¹		-			30			-

Net periodic pension cost after regulatory adjustment	$	113		$	144		$	104

CONSUMERS
Net periodic pension cost
Service cost	$	48		$	44		$	40
Interest expense		101			99			97
Expected return on plan assets		(109	)		(89	)		(83	)
Amortization of:
Net loss		63			50			40
Prior service cost		5			5			5

Net periodic pension cost	$	108		$	109		$	99
Regulatory adjustment¹		-			30			-

Net periodic pension cost after regulatory adjustment	$	108		$	139		$	99

In Millions


	OPEB
Years Ended December 31		2011			2010			2009
CMS ENERGY, INCLUDING CONSUMERS
Net periodic OPEB cost
Service cost	$	27		$	26		$	24
Interest expense		77			80			80
Expected return on plan assets		(66	)		(60	)		(50	)
Amortization of:
Net loss		30			32			33
Prior service credit		(20	)		(17	)		(10	)

Net periodic OPEB cost	$	48		$	61		$	77
Regulatory adjustment¹		-			5			-

Net periodic OPEB cost after regulatory adjustment	$	48		$	66		$	77

CONSUMERS
Net periodic OPEB cost
Service cost	$	26		$	25		$	24
Interest expense		74			77			77
Expected return on plan assets		(61	)		(56	)		(46	)
Amortization of:
Net loss		31			33			33
Prior service credit		(20	)		(16	)		(10	)

Net periodic OPEB cost	$	50		$	63		$	78
Regulatory adjustment¹		-			5			-

Net periodic OPEB cost after regulatory adjustment	$	50		$	68		$	78


In Millions
Years Ended December 31	Pension Plan
Years Ended December 31		2011			2010
CMS ENERGY, INCLUDING CONSUMERS
Benefit obligation at beginning of period	$	1,896		$	1,717
Service cost		48			44
Interest cost		100			98
Actuarial loss		107			150
Benefits paid		(79	)		(113	)
Benefit obligation at end of period¹	$	2,072		$	1,896
Plan assets at fair value at beginning of period	$	1,401		$	1,007
Actual return on plan assets		54			132
Company contribution		250			375
Actual benefits paid²		(79	)		(113	)
Plan assets at fair value at end of period	$	1,626		$	1,401
Funded status at December 31^3,4	$	(446	)	$	(495	)


In Millions
Years Ended December 31	SERP						OPEB
Years Ended December 31		2011			2010			2011			2010
CMS ENERGY, INCLUDING CONSUMERS
Benefit obligation at beginning of period	$	118		$	106		$	1,410		$	1,423
Service cost		1			1			27			26
Interest cost		6			6			77			80
Plan amendments⁵		-			-			-			(101	)
Actuarial loss		8			11			180			36
Benefits paid		(6	)		(6	)		(53	)		(54	)
Benefit obligation at end of period¹	$	127		$	118		$	1,641		$	1,410
Plan assets at fair value at beginning of period	$	-		$	-		$	887		$	782
Actual return on plan assets		-			-			23			88
Company contribution		6			6			67			71
Actual benefits paid²		(6	)		(6	)		(53	)		(54	)
Plan assets at fair value at end of period	$	-		$	-		$	924		$	887
Funded status at December 31³	$	(127	)	$	(118	)	$	(717	)	$	(523	)
CONSUMERS
Benefit obligation at beginning of period	$	77		$	67		$	1,358		$	1,373
Service cost		1			1			26			25
Interest cost		4			4			74			77
Plan amendments⁵		-			-			-			(100	)
Actuarial loss		6			8			178			34
Benefits paid		(3	)		(3	)		(51	)		(51	)
Benefit obligation at end of period¹	$	85		$	77		$	1,585		$	1,358
Plan assets at fair value at beginning of period	$	-		$	-		$	825		$	725
Actual return on plan assets		-			-			21			81
Company contribution		3			3			66			70
Actual benefits paid²		(3	)		(3	)		(51	)		(51	)
Plan assets at fair value at end of period	$	-		$	-		$	861		$	825
Funded status at December 31³	$	(85	)	$	(77	)	$	(724	)	$	(533	)

²	CMS Energy received payments of $5 million in each of 2011 and 2010 and $4 million in 2009 for the Medicare Part D subsidies. Consumers received payments of $5 million in each of 2011 and 2010 and $4 million in 2009 for the Medicare Part D subsidies.

⁴	At December 31, 2011, $414 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses. At December 31, 2010, $463 million of the funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses.

⁵	Plan amendments reflect changes resulting from an agreement reached with the UWUA in April 2010 on a new five-year contract for UWUA members.

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


In Millions
Years Ended December 31	2011		2010
CMS ENERGY, INCLUDING CONSUMERS
Pension PBO	$	2,072	$	1,896
Pension ABO		1,765		1,517
Fair value of Pension Plan assets		1,626		1,401


In Millions
	Pension and SERP				OPEB
Years Ended December 31		2011		2010		2011			2010
CMS ENERGY, INCLUDING CONSUMERS
Regulatory assets
Net loss	$	1,014	$	914	$	766		$	579
Prior service cost (credit)		17		23		(132	)		(152	)
AOCI
Net loss (gain)		81		72		(5	)		(9	)
Prior service cost (credit)		2		2		(3	)		(4	)
Total amounts recognized in regulatory assets and AOCI	$	1,114	$	1,011	$	626		$	414
CONSUMERS
Regulatory assets
Net loss	$	1,014	$	914	$	766		$	579
Prior service cost (credit)		17		23		(132	)		(152	)
AOCI
Net loss		27		22		-			-
Prior service cost		-		1		-			-
Total amounts recognized in regulatory assets and AOCI	$	1,058	$	960	$	634		$	427


	Pension Plan
December 31, 2011	Total		Level 1		Level 2
	In Millions
CMS ENERGY, INCLUDING CONSUMERS
Asset Category
Cash and short-term investments¹	$	241	$	241	$	—
U.S. government and agencies securities²		24		—		24
Corporate debt³		236		—		236
State and municipal bonds⁵		10		—		10
Foreign corporate debt⁶		23		—		23
Mutual funds⁸		257		257		—
Pooled funds⁹		835		—		835

Total	$	1,626	$	498	$	1,128


	Pension Plan
December 31, 2010	Total		Level 1		Level 2
	In Millions
CMS ENERGY, INCLUDING CONSUMERS
Asset Category
Cash and short-term investments¹	$	248	$	248	$	—
U.S. government and agencies securities²		57		—		57
Corporate debt³		161		—		161
State and municipal bonds⁵		8		—		8
Foreign corporate debt⁶		17		—		17
Mutual funds⁸		183		183		—
Pooled funds⁹		727		—		727

Total	$	1,401	$	431	$	970


	OPEB Plan
December 31, 2011	Total		Level 1		Level 2
	In Millions
CMS ENERGY, INCLUDING CONSUMERS
Asset Category
Cash and short-term investments¹	$	64	$	64	$	—
U.S. government and agencies securities²		203		—		203
Corporate debt⁴		28		—		28
State and municipal bonds⁵		71		—		71
Foreign corporate debt⁶		3		—		3
Common stocks⁷		113		113		—
Mutual funds⁸		31		31		—
Pooled funds¹⁰		411		—		411

Total	$	924	$	208	$	716

CONSUMERS
Asset Category
Cash and short-term investments¹	$	60	$	60	$	—
U.S. government and agencies securities²		189		—		189
Corporate debt⁴		26		—		26
State and municipal bonds⁵		66		—		66
Foreign corporate debt⁶		3		—		3
Common stocks⁷		105		105		—
Mutual funds⁸		29		29		—
Pooled funds¹⁰		383		—		383

Total	$	861	$	194	$	667


	OPEB Plan
December 31, 2010	Total		Level 1		Level 2
	In Millions
CMS ENERGY, INCLUDING CONSUMERS
Asset Category
Cash and short-term investments¹	$	56	$	56	$	—
U.S. government and agencies securities²		181		—		181
Corporate debt⁴		20		—		20
State and municipal bonds⁵		36		—		36
Foreign corporate debt⁶		2		—		2
Common stocks⁷		154		154		—
Mutual funds⁸		23		23		—
Pooled funds¹⁰		415		—		415

Total	$	887	$	233	$	654

CONSUMERS
Asset Category
Cash and short-term investments¹	$	52	$	52	$	—
U.S. government and agencies securities²		168		—		168
Corporate debt⁴		19		—		19
State and municipal bonds⁵		34		—		34
Foreign corporate debt⁶		2		—		2
Common stocks⁷		143		143		—
Mutual funds⁸		21		21		—
Pooled funds¹⁰		386		—		386

Total	$	825	$	216	$	609

1	Cash and short-term investments consist of money market funds with daily liquidity.

2	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.

6	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.

7	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.

8	Mutual funds represent shares in registered investment companies that are priced based on the quoted NAV that is the basis for transactions to buy or sell shares in the funds.

Presented in the following table are the contributions to CMS Energy's and Consumers' OPEB plan and Pension Plan:


In Millions
Years Ended December 31		2011		2010
CMS ENERGY, INCLUDING CONSUMERS
OPEB¹
VEBA trust	$	48	$	57
401(h) component		19		14
	$	67	$	71
Pension²	$	250	$	375
CONSUMERS
OPEB¹
VEBA trust	$	47	$	57
401(h) component		19		13
	$	66	$	70
Pension²	$	245	$	366

¹	CMS Energy, including Consumers, plans to contribute $65 million to the OPEB plan in 2012 and Consumers plans to contribute $64 million to the OPEB plan in 2012.

²	CMS Energy, including Consumers, does not plan to contribute to the Pension Plan in 2012.

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
		Pension		SERP		OPEB	¹
CMS ENERGY, INCLUDING CONSUMERS
2012	$	111	$	7	$	70
2013		120		7		73
2014		129		7		76
2015		138		8		80
2016		144		8		83
2017-2021		777		44		466
CONSUMERS
2012	$	108	$	4	$	67
2013		117		4		70
2014		126		4		73
2015		134		4		76
2016		140		4		80
2017-2021		757		23		445

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References

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