EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT RETIREMENT PLANS

Duke Energy maintains, and the Subsidiary Registrants participate in, qualified, non-contributory defined benefit retirement plans. The plans cover most U.S. employees using a cash balance formula. Under a cash balance formula, a plan participant accumulates a retirement benefit consisting of pay credits based upon a percentage of current eligible earnings based on age and/or years of service and interest credits. Certain employees are covered under plans that use a final average earnings formula. Under these average earnings formulas, a plan participant accumulates a retirement benefit equal to the sum of percentages of their (i) highest three-year or four-year average earnings, (ii) highest three-year or four-year average earnings in excess of covered compensation per year of participation (maximum of 35 years), and/or (iii) highest three-year or four-year average earnings times years of participation in excess of 35 years. Duke Energy also maintains, and the Subsidiary Registrants participate in, non-qualified, non-contributory defined benefit retirement plans which cover certain executives. As of January 1, 2014, the qualified and non-qualified non-contributory defined benefit plans are closed to new and rehired non-union and certain unionized employees.

Duke Energy uses a December 31 measurement date for its defined benefit retirement plan assets and obligations.

Duke Energy’s policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants. Duke Energy made contributions directly to pension plan assets during the three and nine months ended September 30, 2013 of $27 million, all of which relates to Duke Energy Florida. Duke Energy did not make any contributions to its qualified defined benefit retirement plans during the nine months ended September 30, 2014.

Net periodic benefit costs disclosed in the tables below represent the cost of the respective benefit plan for the periods presented. However, portions of the net periodic benefit costs disclosed in the tables below have been capitalized as a component of property, plant and equipment. Amounts presented in the tables below for the Subsidiary Registrants represent the amounts of pension and other post-retirement benefit cost allocated by Duke Energy for employees of the Subsidiary Registrants. Additionally, the Subsidiary Registrants are allocated their proportionate share of pension and post-retirement benefit cost for employees of Duke Energy’s shared services affiliate that provide support to the Subsidiary Registrants. These allocated amounts are included in the governance and shared service costs discussed in Note 9.

QUALIFIED PENSION PLANS

The following tables include the components of net periodic pension costs for qualified pension plans.



	Three Months Ended September 30, 2014
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	34		$	10		$	10		$	6		$	5		$	1		$	3
Interest cost on projected benefit obligation	86			22			28			13			14			5			7
Expected return on plan assets	(128		)	(33		)	(44		)	(21		)	(21		)	(7		)	(10		)
Amortization of actuarial loss	37			8			17			8			8			1			3
Amortization of prior service credit	(4		)	(2		)	—			—			—			—			—
Other	3			1			1			—			—			—			—
Net periodic pension costs	$	28		$	6		$	12		$	6		$	6		$	—		$	3



	Three Months Ended September 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	41		$	12		$	15		$	6		$	8		$	1		$	2
Interest cost on projected benefit obligation	80			20			29			13			13			5			7
Expected return on plan assets	(137		)	(37		)	(50		)	(24		)	(21		)	(7		)	(11		)
Amortization of actuarial loss	61			15			26			11			12			3			6
Amortization of prior service credit	(2		)	(2		)	(1		)	(1		)	(1		)	—			—
Other	2			1			—			1			—			—			1
Net periodic pension costs	$	45		$	9		$	19		$	6		$	11		$	2		$	5



	Nine Months Ended September 30, 2014
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	102		$	31		$	30		$	16		$	15		$	3		$	7
Interest cost on projected benefit obligation	258			64			84			40			43			15			22
Expected return on plan assets	(383		)	(99		)	(130		)	(64		)	(64		)	(20		)	(30		)
Amortization of actuarial loss	111			26			51			24			24			3			9
Amortization of prior service credit	(11		)	(6		)	(2		)	(1		)	(1		)	—			—
Other	6			2			2			1			1			—			—
Net periodic pension costs	$	83		$	18		$	35		$	16		$	18		$	1		$	8



	Nine Months Ended September 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	125		$	37		$	45		$	17		$	23		$	4		$	8
Interest cost on projected benefit obligation	240			60			87			38			40			16			21
Expected return on plan assets	(411		)	(111		)	(149		)	(71		)	(65		)	(22		)	(33		)
Amortization of actuarial loss	183			45			76			34			37			9			17
Amortization of prior service credit	(8		)	(5		)	(3		)	(1		)	(2		)	—			—
Other	5			2			1			1			—			—			1
Net periodic pension costs	$	134		$	28		$	57		$	18		$	33		$	7		$	14

NON-QUALIFIED PENSION PLANS

The following tables include the components of net periodic pension costs for non-qualified pension plans for registrants with non-qualified pension costs.



	Three Months Ended September 30, 2014
(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy			Duke Energy Progress		Duke Energy Florida
Service cost	$	1	$	—	$	—		$	1	$	—
Interest cost on projected benefit obligation	3		1		2			—		—
Amortization of actuarial loss	1		—		—			—		—
Amortization of prior service credit	—		—		(1		)	—		—
Net periodic pension costs	$	5	$	1	$	1		$	1	$	—



	Three Months Ended September 30, 2013
(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida
Service cost	$	1	$	—	$	1	$	1	$	—
Interest cost on projected benefit obligation	3		—		1		—		—
Amortization of actuarial loss	1		—		1		1		1
Net periodic pension costs	$	5	$	—	$	3	$	2	$	1



	Nine Months Ended September 30, 2014
(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy			Duke Energy Progress		Duke Energy Florida
Service cost	$	2	$	—	$	1		$	1	$	—
Interest cost on projected benefit obligation	10		1		4			1		1
Amortization of actuarial loss	2		—		1			—		—
Amortization of prior service credit	—		—		(1		)	—		—
Net periodic pension costs	$	14	$	1	$	5		$	2	$	1



	Nine Months Ended September 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas		Progress Energy			Duke Energy Progress		Duke Energy Florida
Service cost	$	2		$	—	$	1		$	1	$	—
Interest cost on projected benefit obligation	10			1		5			1		1
Amortization of actuarial loss	4			—		3			1		1
Amortization of prior service credit	(1		)	—		(1		)	—		—
Net periodic pension costs	$	15		$	1	$	8		$	3	$	2

OTHER POST-RETIREMENT BENEFIT PLANS

Duke Energy provides, and the Subsidiary Registrants participate in, some health care and life insurance benefits for retired employees on a contributory and non-contributory basis. Employees are eligible for these benefits if they have met age and service requirements at retirement, as defined in the plans. The health care benefits include medical, dental, and prescription drug coverage and are subject to certain limitations, such as deductibles and co-payments.

Duke Energy uses a December 31 measurement date for its other post-retirement benefit plan assets and obligations. However, due to the impact of certain changes in Legacy Progress Energy health care benefits announced in September 2013, Duke Energy remeasured its Legacy Progress Energy other post-retirement benefit plan obligation as of September 30, 2013. There are no plan assets associated with the Legacy Progress Energy other post-retirement benefit plan. The discount rate used for the remeasurement was 4.7%. The health care cost trend rate of 8.5% reduces to 5.0% over eight years. The mortality tables were updated to account for mortality improvement.

Duke Energy did not make any contributions to its other post-retirement benefit plans during the three and nine months ended September 30, 2014 and 2013.

The following tables include the components of net periodic other post-retirement benefit costs.



	Three Months Ended September 30, 2014
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Indiana
Service cost	$	2		$	—		$	1		$	—		$	—		$	—
Interest cost on accumulated post-retirement benefit obligation	13			3			6			3			3			1
Expected return on plan assets	(3		)	(2		)	—			—			—			—
Amortization of actuarial loss	9			1			10			8			3			—
Amortization of prior service credit	(31		)	(3		)	(24		)	(19		)	(5		)	—
Net periodic other post-retirement benefit costs	$	(10	)	$	(1	)	$	(7	)	$	(8	)	$	1		$	1



	Three Months Ended September 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy		Duke Energy Progress		Duke Energy Florida		Duke Energy Indiana
Service cost	$	7		$	1		$	6	$	3	$	2	$	1
Interest cost on accumulated post-retirement benefit obligation	19			3			12		7		5		1
Expected return on plan assets	(4		)	(2		)	—		—		—		(1		)
Amortization of actuarial loss	13			—			13		8		4		1
Amortization of prior service credit	(3		)	(2		)	—		—		—		—
Net periodic other post-retirement benefit costs	$	32		$	—		$	31	$	18	$	11	$	2



	Nine Months Ended September 30, 2014
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	7		$	1		$	3		$	1		$	2		$	—		$	—
Interest cost on accumulated post-retirement benefit obligation	38			9			17			8			9			1			4
Expected return on plan assets	(9		)	(6		)	—			—			—			—			(1		)
Amortization of actuarial loss (gain)	29			2			31			23			8			(1		)	—
Amortization of prior service credit	(94		)	(8		)	(71		)	(55		)	(16		)	—			—
Net periodic other post-retirement benefit costs	$	(29	)	$	(2	)	$	(20	)	$	(23	)	$	3		$	—		$	3



	Nine Months Ended September 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida		Duke Energy Ohio			Duke Energy Indiana
Service cost	$	21		$	2		$	17		$	9		$	6	$	—		$	1
Interest cost on accumulated post-retirement benefit obligation	55			9			35			19			13		1			4
Expected return on plan assets	(11		)	(7		)	—			—			—		—			(1		)
Amortization of actuarial loss (gain)	39			2			42			26			12		(1		)	1
Amortization of prior service credit	(9		)	(6		)	(1		)	(1		)	—		—			—
Net periodic other post-retirement benefit costs	$	95		$	—		$	93		$	53		$	31	$	—		$	5

EMPLOYEE SAVINGS PLANS

Duke Energy sponsors and the Subsidiary Registrants participate in, employee savings plans that cover substantially all U.S. employees. Most employees participate in a matching contribution formula where Duke Energy provides a matching contribution generally equal to 100 percent of employee before-tax and Roth 401(k) contributions and, as applicable, after-tax contributions of up to 6 percent of eligible pay per pay period. Dividends on Duke Energy shares held by the savings plans are charged to retained earnings when declared and shares held in the plans are considered outstanding in the calculation of basic and diluted earnings per share.

As of January 1, 2014, for new and rehired non-union and certain unionized employees who are not eligible to participate in Duke Energy’s defined benefit plans, an additional employer contribution of 4 percent of eligible pay per pay period is provided to the employee’s savings plan account, which is subject to a three-year vesting schedule.

The following table includes pretax employer matching contributions made by Duke Energy and expensed by the Subsidiary Registrants.



(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida		Duke Energy Ohio		Duke Energy Indiana
Three Months Ended September 30,
2014^(a)	$	30	$	10	$	10	$	7	$	3	$	—	$	1
2013	30		10		12		7		4		—		2
Nine Months Ended September 30,
2014^(a)	$	110	$	36	$	33	$	23	$	10	$	2	$	5
2013	101		34		34		19		11		2		5


(a)	For the three and nine months ended September 30, 2014, amounts include the additional contribution of 4 percent of eligible pay per pay period for employees not eligible to participate in a defined benefit plan.