Other Postretirement Benefits

12 Months Ended

Dec. 31, 2014

Note F – Other Postretirement Benefits

The Utilities currently have contributory comprehensive hospital, medical and prescription drug programs for all retirees, their dependents and surviving spouses.

CECONY also has a contributory life insurance program for bargaining unit employees and provides basic life insurance benefits up to a specified maximum at no cost to retired management employees. O&R has a non-contributory life insurance program for retirees. Certain employees of Con Edison’s competitive energy businesses are eligible to receive benefits under these programs.

Net Periodic Benefit Cost

The components of the Companies’ net periodic postretirement benefit costs for 2014, 2013 and 2012 were as follows:


	Con Edison									CECONY
(Millions of Dollars)	2014			2013			2012			2014			2013			2012
Service cost	$	19		$	23		$	26		$	15		$	18		$	21
Interest cost on accumulated other postretirement benefit obligation		60			54			73			52			46			63
Expected return on plan assets		(77	)		(77	)		(85	)		(68	)		(68	)		(75	)
Recognition of net actuarial loss		57			65			98			51			57			87
Recognition of prior service cost		(19	)		(27	)		(21	)		(15	)		(23	)		(18	)
Recognition of transition obligation		-			-			2			-			-			2
NET PERIODIC POSTRETIREMENT BENEFIT COST	$	40		$	38		$	93		$	35		$	30		$	80
Cost capitalized		(15	)		(15	)		(32	)		(14	)		(12	)		(28	)
Reconciliation to rate level		10			58			20			2			50			16
Cost charged to operating expenses	$	35		$	81		$	81		$	23		$	68		$	68

Funded Status

The funded status of the programs at December 31, 2014, 2013 and 2012 were as follows:


	Con Edison									CECONY
(Millions of Dollars)	2014			2013			2012			2014			2013			2012
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year	$	1,395		$	1,454		$	1,756		$	1,198		$	1,238		$	1,511
Service cost		19			23			26			15			18			21
Interest cost on accumulated postretirement benefit obligation		60			54			73			52			46			63
Amendments		(12	)		-			(127	)		-			-			(89	)
Net actuarial loss/(gain)		47			(42	)		(175	)		28			(20	)		(178	)
Benefits paid and administrative expenses		(134	)		(136	)		(146	)		(125	)		(126	)		(134	)
Participant contributions		36			38			37			35			38			36
Medicare prescription subsidy		-			4			10			-			4			8
BENEFIT OBLIGATION AT END OF YEAR	$	1,411		$	1,395		$	1,454		$	1,203		$	1,198		$	1,238
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year	$	1,113		$	1,047		$	947		$	977		$	922		$	840
Actual return on plan assets		59			153			124			54			134			109
Employer contributions		7			9			83			7			9			71
EGWP payments		12			8			-			11			7			-
Participant contributions		36			38			37			35			38			36
Benefits paid		(143	)		(142	)		(144	)		(134	)		(133	)		(134	)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR	$	1,084		$	1,113		$	1,047		$	950		$	977		$	922
FUNDED STATUS	$	(327	)	$	(282	)	$	(407	)	$	(253	)	$	(221	)	$	(316	)
Unrecognized net loss	$	78		$	70		$	251		$	45		$	54		$	197
Unrecognized prior service costs		(71	)		(78	)		(105	)		(46	)		(61	)		(84	)

In 2012, the Utilities amended their postretirement life and health benefit plans for management employees, resulting in a reduction to the obligation of $102 million. Also in 2012, the Utilities amended the retiree contributions for supplemental postretirement life insurance for CECONY management and weekly retirees, resulting in a reduction to the obligation of $25 million. Also in 2012, the Utilities elected to change the method of receiving the subsidy under Medicare Part D for retiree prescription drug coverage from the Retiree Drug Subsidy to the Employer Group Waiver Plan (EGWP) beginning in January 2013. Participation in the EGWP allows Con Edison to offer substantially the same postretirement benefits to eligible participants while increasing subsidy reimbursements received by the plans from the Federal Government. This change was effective January 2013 and, as a result, the Utilities recognized a reduction to their postretirement health benefit obligation of $306 million as of December 31, 2012, which was recorded as an actuarial gain.

The increase in the other postretirement benefit plan obligation (due primarily to decreased discount rates) was the primary cause of the increased liability for other postretirement benefits at Con Edison and CECONY of $45 million and $32 million, respectively, compared with December 31, 2013. For Con Edison, this increased liability resulted in an increase to regulatory assets of $14 million for unrecognized net losses and unrecognized prior service costs associated with the Utilities consistent with the accounting rules for regulated operations, and a charge to OCI of $3 million (net of taxes) for the unrecognized net losses and an immaterial change to OCI (net of taxes) for the unrecognized prior service costs associated with the competitive energy businesses and O&R’s New Jersey subsidiary.

For CECONY, the increase in liability resulted in an increase to regulatory assets of $6 million for unrecognized net losses and unrecognized prior service costs associated with the company consistent with the accounting rules for regulated operations, a debit to OCI of $2 million (net of taxes) for the unrecognized net losses and an immaterial change to OCI for unrecognized prior service costs associated with the competitive energy businesses.

A portion of the unrecognized net losses and prior service costs for the other postretirement benefits, equal to $33 million and $(20) million, respectively, will be recognized from accumulated OCI and the regulatory asset into net periodic benefit cost over the next year for Con Edison. Included in these amounts are $29 million and $(14) million, respectively, for CECONY.

Assumptions

The actuarial assumptions were as follows:


	2014			2013			2012
Weighted-average assumptions used to determine benefit obligations at December 31:
Discount Rate
CECONY		3.75	%		4.50	%		3.75	%
O&R		3.85	%		4.75	%		4.05	%
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:
Discount Rate
CECONY		4.50	%		3.75	%		4.55	%
O&R		4.75	%		4.05	%		4.55	%
Expected Return on Plan Assets		7.75	%		7.75	%		8.50	%

Refer to Note E for descriptions of the basis for determining the expected return on assets, investment policies and strategies and the assumed discount rate.

The health care cost trend rate used to determine net periodic benefit cost for the year ended December 31, 2014 was 5.50 percent, which is assumed to decrease gradually to 4.50 percent by 2018 and remain at that level thereafter. The health care cost trend rate used to determine benefit obligations as of December 31, 2014 was 5.25 percent, which is assumed to decrease gradually to 4.50 percent by 2018 and remain at that level thereafter.

A one-percentage point change in the assumed health care cost trend rate would have the following effects at December 31, 2015:


	Con Edison					CECONY
	1-Percentage-Point
(Millions of Dollars)	Increase			Decrease		Increase			Decrease
Effect on accumulated other postretirement benefit obligation	$	(21	)	$	40	$	(43	)	$	57
Effect on service cost and interest cost components for 2014		(2	)		1		(4	)		3

Expected Benefit Payments

Based on current assumptions, the Companies expect to make the following benefit payments over the next ten years, net of receipt of governmental subsidies:


(Millions of Dollars)	2015		2016		2017		2018		2019		2020-2024
BENEFIT PAYMENTS
Con Edison	$	99	$	95	$	94	$	92	$	89	$	419
CECONY		89		85		84		82		79		364

Expected Contributions

Based on estimates as of December 31, 2014, Con Edison expects to make a contribution of $6 million, nearly all of which is for CECONY, to the other postretirement benefit plans in 2015.

Plan Assets

The asset allocations for CECONY’s other postretirement benefit plans at the end of 2014, 2013 and 2012, and the target allocation for 2015 are as follows:


	Target Allocation Range	Plan Assets at December 31
Asset Category	2015	2014			2013			2012
Equity Securities	57% - 73%		59	%		61	%		62%
Debt Securities	26% - 44%		41	%		39	%		38%
Total	100%		100	%		100	%		100%

Con Edison has established postretirement health and life insurance benefit plan trusts for the investment of assets to be used for the exclusive purpose of providing other postretirement benefits to participants and beneficiaries.

Refer to Note E for a discussion of Con Edison’s investment policy for its benefit plans.

The fair values of the plan assets at December 31, 2014 by asset category as defined by the accounting rules for fair value measurements (see Note P) are as follows:


(Millions of Dollars)	Level 1		Level 2		Level 3		Total
Equity(a)	$	-	$	428	$	-	$	428
Other Fixed Income Debt(b)		-		286		-		286
Cash and Cash Equivalents(c)		-		11		-		11
Total investments	$	-	$	725	$	-	$	725
Funds for retiree health benefits(d)		184		131		43		358
Investments(including funds for retiree health benefits)	$	184	$	856	$	43	$	1,083
Pending activities(e)								1
Total fair value of plan net assets							$	1,084

(a)	Equity includes a passively managed commingled index fund benchmarked to the MSCI All Country World Index.

(b)	Other Fixed Income Debt includes a passively managed commingled index fund benchmarked to the Barclays Capital Aggregate Index.

(c)	Cash and Cash Equivalents include short term investments and money markets.

(d)

The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan’s investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan’s obligations and are included in the Companies’ other postretirement benefit obligation. See Note E.

(e)	Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received, and reflects adjustments for available estimates at year end.

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2014 classified as Level 3 in the fair value hierarchy.


(Millions of Dollars)	Beginning Balance as of January 1, 2014		Assets Still Held at Reporting Date – Unrealized Gains/(Losses)		Assets Sold During the Year – Realized Gains/(Losses)		Purchases Sales and Settlements		Transfers In/(Out) of Level 3		Ending Balance as of December 31, 2014
Total investments	$	-	$	-	$	-	$	-	$	-	$	-
Funds for retiree health benefits		42		1		-		-		-		43
Investments (including funds for retiree health benefits)	$	42	$	1	$	-	$	-	$	-	$	43

The fair values of the plan assets at December 31, 2013 by asset category (see Note P) are as follows:


(Millions of Dollars)	Level 1		Level 2		Level 3		Total
Equity(a)	$	-	$	450	$	-	$	450
Other Fixed Income Debt(b)		-		286		-		286
Cash and Cash Equivalents(c)		-		7		-		7
Total investments	$	-	$	743	$	-	$	743
Funds for retiree health benefits(d)		185		145		42		372
Investments(including funds for retiree health benefits)	$	185	$	888	$	42	$	1,115
Pending activities(e)								(2	)
Total fair value of plan net assets							$	1,113

(a)	Equity includes a passively managed commingled index fund benchmarked to the MSCI All Country World Index.

(b)	Other Fixed Income Debt includes a passively managed commingled index fund benchmarked to the Barclays Capital Aggregate Index.

(c)	Cash and Cash Equivalents include short term investments and money markets.

(d)

(e)	Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received, and reflects adjustments for available estimates at year end.

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2013 classified as Level 3 in the fair value hierarchy.


(Millions of Dollars)	Beginning Balance as of January 1, 2013		Assets Still Held at Reporting Date – Unrealized Gains/(Losses)		Assets Sold During the Year – Realized Gains/(Losses)		Purchases Sales and Settlements		Transfers In/(Out) of Level 3		Ending Balance as of December 31, 2013
Total investments	$	-	$	-	$	-	$	-	$	-	$	-
Funds for retiree health benefits		31		3		-		8		-		42
Investments (including funds for retiree health benefits)	$	31	$	3	$	-	$	8	$	-	$	42

Mortality Table Revision

The Companies adopted revised mortality tables effective December 31, 2014 in the measurement of its pension and other postretirement benefit plan obligations, accounting costs, and required contribution amounts as discussed in Note E. As a result of the adoption, Con Edison recognized an increase of less than $10 million in its other postretirement benefits obligation as of December 31, 2014. The Companies, under their current New York rate plans, defer as a regulatory asset or liability, as the case may be, the differences between the actual level of expenses for pension and other postretirement benefits and amounts for those expenses reflected in rates.

CECONY [Member]

Other Postretirement Benefits