Benefit Plans
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12 Months Ended |
Dec. 31, 2011
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Benefit Plans [Abstract] |
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Benefit Plans |
7. BENEFIT PLANS For a discussion of investment strategy, investment limitations, target asset allocations and the classification of investments within the fair value hierarchy, see “Investments Held in Trust for Future Liabilities” and “Fair Value Measurements of Assets and Liabilities” sections of Note 1. We sponsor a qualified pension plan and two unfunded nonqualified pension plans. Substantially all of our employees are covered by the qualified plan or both the qualified and a nonqualified pension plan. We sponsor OPEB plans to provide medical and life insurance benefits for retired employees. We recognize the funded status associated with our defined benefit pension and OPEB plans in the balance sheets. Disclosures about the plans are required by the “Compensation – Retirement Benefits” accounting guidance. We recognize an asset for a plan's overfunded status or a liability for a plan's underfunded status, and recognize, as a component of other comprehensive income, the changes in the funded status of the plan that arise during the year that are not recognized as a component of net periodic benefit cost. We record a regulatory asset instead of other comprehensive income for qualifying benefit costs of our regulated operations that for ratemaking purposes are deferred for future recovery. The cumulative funded status adjustment is equal to the remaining unrecognized deferrals for unamortized actuarial losses or gains, prior service costs and transition obligations, such that remaining deferred costs result in an AOCI equity reduction or regulatory asset and deferred gains result in an AOCI equity addition or regulatory liability. Actuarial Assumptions for Benefit Obligations The weighted-average assumptions as of December 31 of each year used in the measurement of our benefit obligations are shown in the following table: | | | | | | Other Postretirement | | | | Pension Plans | | | Benefit Plans | | Assumptions | | 2011 | | | 2010 | | | 2011 | | 2010 | | Discount Rate | | 4.55 | % | | | 5.05 | % | | | 4.75 | % | | 5.25 | % | | Rate of Compensation Increase | | 4.85 | % | (a) | | 4.95 | % | (a) | | NA | | NA |
(a) Rates are for base pay only. In addition, an amount is added to reflect target incentive compensation for exempt employees and overtime and incentive pay for nonexempt employees. NA Not applicable We use a duration-based method to determine the discount rate for our plans. A hypothetical portfolio of high quality corporate bonds similar to those included in the Moody's Aa bond index is constructed with a duration matching the benefit plan liability. The composite yield on the hypothetical bond portfolio is used as the discount rate for the plan. For 2011, the rate of compensation increase assumed varies with the age of the employee, ranging from 3.5% per year to 11.5% per year, with an average increase of 4.85%. Actuarial Assumptions for Net Periodic Benefit Costs The weighted-average assumptions as of January 1 of each year used in the measurement of our benefit costs are shown in the following table: | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | Discount Rate | | 5.05 | % | | 5.60 | % | | 6.00 | % | | 5.25 | % | | 5.85 | % | | 6.10 | % | | Expected Return on Plan Assets | | 7.75 | % | | 8.00 | % | | 8.00 | % | | 7.50 | % | | 8.00 | % | | 7.75 | % | | Rate of Compensation Increase | | 4.85 | % | | 4.60 | % | | 5.90 | % | | NA | | NA | | NA | | | | | | | | | | | | | | | | | | | | | | NA Not Applicable | | | | | | | | | | | | | | | | | | |
The expected return on plan assets was determined by evaluating historical returns, the current investment climate (yield on fixed income securities and other recent investment market indicators), rate of inflation and current prospects for economic growth. The health care trend rate assumptions as of January 1 of each year used for OPEB plans measurement purposes are shown below: | Health Care Trend Rates | | 2011 | | 2010 | | Initial | | 7.50 | % | | 8.00 | % | | Ultimate | | 5.00 | % | | 5.00 | % | | Year Ultimate Reached | | 2016 | | 2016 |
Assumed health care cost trend rates have a significant effect on the amounts reported for the OPEB health care plans. A 1% change in assumed health care cost trend rates would have the following effects: | | 1% Increase | | 1% Decrease | | | (in millions) | | Effect on Total Service and Interest Cost | | | | | | | | Components of Net Periodic Postretirement Health | | | | | | | | Care Benefit Cost | $ | 23 | | $ | (18) | | | | | | | | | Effect on the Health Care Component of the | | | | | | | | Accumulated Postretirement Benefit Obligation | | 274 | | | (223) |
Significant Concentrations of Risk within Plan Assets In addition to establishing the target asset allocation of plan assets, the investment policy also places restrictions on securities to limit significant concentrations within plan assets. The investment policy establishes guidelines that govern maximum market exposure, security restrictions, prohibited asset classes, prohibited types of transactions, minimum credit quality, average portfolio credit quality, portfolio duration and concentration limits. The guidelines were established to mitigate the risk of loss due to significant concentrations in any investment. We monitor the plans to control security diversification and ensure compliance with our investment policy. At December 31, 2011, the assets were invested in compliance with all investment limits. See “Investments Held in Trust for Future Liabilities” section of Note 1 for limit details. Benefit Plan Obligations, Plan Assets and Funded Status as of December 31, 2011 and 2010 The following tables provide a reconciliation of the changes in the plans' benefit obligations, fair value of plan assets and funded status as of December 31. The benefit obligation for the defined benefit pension and OPEB plans are the projected benefit obligation and the accumulated benefit obligation, respectively. | | | | Other Postretirement | | | Pension Plans | | Benefit Plans | | | 2011 | | 2010 | | 2011 | | 2010 | Change in Benefit Obligation | | (in millions) | Benefit Obligation at January 1 | | $ | 4,807 | | $ | 4,701 | | $ | 2,125 | | $ | 1,941 | Service Cost | | | 72 | | | 111 | | | 42 | | | 47 | Interest Cost | | | 237 | | | 253 | | | 109 | | | 113 | Actuarial Loss | | | 169 | | | 222 | | | 253 | | | 164 | Plan Amendment Prior Service Credit | | | - | | | - | | | (196) | | | (36) | Curtailment | | | - | | | - | | | 1 | | | - | Benefit Payments | | | (294) | | | (480) | | | (150) | | | (142) | Participant Contributions | | | - | | | - | | | 34 | | | 29 | Medicare Subsidy | | | - | | | - | | | 9 | | | 9 | Benefit Obligation at December 31 | | $ | 4,991 | | $ | 4,807 | | $ | 2,227 | | $ | 2,125 | | | | | | | | | | | | | | Change in Fair Value of Plan Assets | | | | | | | | | | | | | Fair Value of Plan Assets at January 1 | | $ | 3,858 | | $ | 3,403 | | $ | 1,461 | | $ | 1,308 | Actual Gain (Loss) on Plan Assets | | | 282 | | | 420 | | | (14) | | | 149 | Company Contributions | | | 457 | | | 515 | | | 79 | | | 117 | Participant Contributions | | | - | | | - | | | 34 | | | 29 | Benefit Payments | | | (294) | | | (480) | | | (150) | | | (142) | Fair Value of Plan Assets at December 31 | | $ | 4,303 | | $ | 3,858 | | $ | 1,410 | | $ | 1,461 | | | | | | | | | | | | | | Underfunded Status at December 31 | | $ | (688) | | $ | (949) | | $ | (817) | | $ | (664) |
Benefit Amounts Recognized on the Balance Sheets as of December 31, 2011 and 2010 | | | | | | | | | | | | | | | | | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | | | | | | | | | | | | | | | | | | | December 31, | | | | 2011 | | 2010 | | 2011 | | 2010 | | | | | (in millions) | | Other Current Liabilities - Accrued Short-term | | | | | | | | | | | | | | | Benefit Liability | | $ | (8) | | $ | (8) | | $ | (4) | | $ | (4) | | Employee Benefits and Pension Obligations - | | | | | | | | | | | | | | | Accrued Long-term Benefit Liability | | | (680) | | | (941) | | | (813) | | | (660) | | Underfunded Status | | $ | (688) | | $ | (949) | | $ | (817) | | $ | (664) |
Amounts Included in AOCI and Regulatory Assets as of December 31, 2011 and 2010 | | | | | | | | Other Postretirement | | | Pension Plans | | Benefit Plans | | | | December 31, | | | | 2011 | | 2010 | | 2011 | | 2010 | | Components | | (in millions) | Net Actuarial Loss | | $ | 2,208 | | $ | 2,129 | | $ | 979 | | $ | 638 | | Prior Service Cost (Credit) | | | 10 | | | 11 | | | (210) | | | (20) | | Transition Obligation | | | - | | | - | | | 1 | | | 3 | | | | | | | | | | | | | | | | | Recorded as | | | | | | | | | | | | | | Regulatory Assets | | $ | 1,818 | | $ | 1,764 | | $ | 479 | | $ | 388 | | Deferred Income Taxes | | | 140 | | | 132 | | | 102 | | | 81 | | Net of Tax AOCI | | | 260 | | | 244 | | | 189 | | | 152 | |
Components of the change in amounts included in AOCI and Regulatory Assets during the years ended December 31, 2011 and 2010 are as follows: | | | | Other Postretirement | | | Pension Plans | | Benefit Plans | | | Years Ended December 31, | | | 2011 | | 2010 | | 2011 | | 2010 | Components | | (in millions) | Actuarial Loss During the Year | | $ | 201 | | $ | 121 | | $ | 370 | | $ | 121 | Prior Service Credit | | | - | | | - | | | (191) | | | (36) | Amortization of Actuarial Loss | | | (122) | | | (89) | | | (29) | | | (29) | Amortization of Prior Service Credit (Cost) | | | (1) | | | - | | | 1 | | | - | Amortization of Transition Obligation | | | - | | | - | | | (2) | | | (27) | Change for the Year | | $ | 78 | | $ | 32 | | $ | 149 | | $ | 29 |
Pension and Other Postretirement Plans' Assets The following table presents the classification of pension plan assets within the fair value hierarchy at December 31, 2011: | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in millions) | | | | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 1,455 | | $ | - | | $ | - | | $ | - | | $ | 1,455 | | 33.8 | % | | | International | | | 399 | | | - | | | - | | | - | | | 399 | | 9.3 | % | | | Real Estate Investment Trusts | | | 104 | | | - | | | - | | | - | | | 104 | | 2.4 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 128 | | | - | | | - | | | 128 | | 3.0 | % | | Subtotal - Equities | | | 1,958 | | | 128 | | | - | | | - | | | 2,086 | | 48.5 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 26 | | | - | | | - | | | 26 | | 0.6 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 566 | | | - | | | - | | | 566 | | 13.2 | % | | | Corporate Debt | | | - | | | 985 | | | 6 | | | - | | | 991 | | 23.0 | % | | | Foreign Debt | | | - | | | 190 | | | - | | | - | | | 190 | | 4.4 | % | | | State and Local Government | | | - | | | 48 | | | - | | | - | | | 48 | | 1.1 | % | | | Other - Asset Backed | | | - | | | 26 | | | - | | | - | | | 26 | | 0.6 | % | | Subtotal - Fixed Income | | | - | | | 1,841 | | | 6 | | | - | | | 1,847 | | 42.9 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 163 | | | - | | | 163 | | 3.8 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 161 | | | - | | | 161 | | 3.7 | % | | Securities Lending | | | - | | | 215 | | | - | | | - | | | 215 | | 5.0 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (236) | | | (236) | | (5.5) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | - | | | 93 | | | - | | | - | | | 93 | | 2.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | (26) | | | (26) | | (0.6) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 1,958 | | $ | 2,277 | | $ | 330 | | $ | (262) | | $ | 4,303 | | 100.0 | % |
- Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program.
- Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement.
The following table sets forth a reconciliation of changes in the fair value of assets classified as Level 3 in the fair value hierarchy for AEP's pension assets: | | | | Corporate | | Real | | Alternative | | Total | | | | | Debt | | Estate | | Investments | | Level 3 | | | | | (in millions) | | Balance as of January 1, 2011 | | $ | - | | $ | 83 | | $ | 130 | | $ | 213 | | Actual Return on Plan Assets | | | | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | - | | | 22 | | | 9 | | | 31 | | | Relating to Assets Sold During the Period | | | - | | | - | | | 3 | | | 3 | | Purchases and Sales | | | - | | | 58 | | | 19 | | | 77 | | Transfers into Level 3 | | | 6 | | | - | | | - | | | 6 | | Transfers out of Level 3 | | | - | | | - | | | - | | | - | | Balance as of December 31, 2011 | | $ | 6 | | $ | 163 | | $ | 161 | | $ | 330 |
The following table presents the classification of OPEB plan assets within the fair value hierarchy at December 31, 2011: | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in millions) | | | | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 348 | | $ | - | | $ | - | | $ | - | | $ | 348 | | 24.7 | % | | | International | | | 380 | | | - | | | - | | | - | | | 380 | | 27.0 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 99 | | | - | | | - | | | 99 | | 7.0 | % | | Subtotal - Equities | | | 728 | | | 99 | | | - | | | - | | | 827 | | 58.7 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 69 | | | - | | | - | | | 69 | | 4.9 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 81 | | | - | | | - | | | 81 | | 5.7 | % | | | Corporate Debt | | | - | | | 152 | | | - | | | - | | | 152 | | 10.8 | % | | | Foreign Debt | | | - | | | 32 | | | - | | | - | | | 32 | | 2.3 | % | | | State and Local Government | | | - | | | 9 | | | - | | | - | | | 9 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 2 | | | - | | | - | | | 2 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 345 | | | - | | | - | | | 345 | | 24.4 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 46 | | | - | | | - | | | 46 | | 3.3 | % | | | United States Bonds | | | - | | | 158 | | | - | | | - | | | 158 | | 11.2 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | 17 | | | 23 | | | - | | | - | | | 40 | | 2.9 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (a) | | | - | | | - | | | - | | | (6) | | | (6) | | (0.5) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 745 | | $ | 671 | | $ | - | | $ | (6) | | $ | 1,410 | | 100.0 | % |
- Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement.
The following table presents the classification of pension plan assets within the fair value hierarchy at December 31, 2010: | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in millions) | | | | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 1,350 | | $ | 2 | | $ | - | | $ | - | | $ | 1,352 | | 35.1 | % | | | International | | | 403 | | | - | | | - | | | - | | | 403 | | 10.4 | % | | | Real Estate Investment Trusts | | | 112 | | | - | | | - | | | - | | | 112 | | 2.9 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 163 | | | - | | | - | | | 163 | | 4.2 | % | | Subtotal - Equities | | | 1,865 | | | 165 | | | - | | | - | | | 2,030 | | 52.6 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 634 | | | - | | | - | | | 634 | | 16.4 | % | | | Corporate Debt | | | - | | | 672 | | | - | | | - | | | 672 | | 17.4 | % | | | Foreign Debt | | | - | | | 127 | | | - | | | - | | | 127 | | 3.3 | % | | | State and Local Government | | | - | | | 23 | | | - | | | - | | | 23 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 51 | | | - | | | - | | | 51 | | 1.3 | % | | Subtotal - Fixed Income | | | - | | | 1,507 | | | - | | | - | | | 1,507 | | 39.0 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 83 | | | - | | | 83 | | 2.2 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 130 | | | - | | | 130 | | 3.4 | % | | Securities Lending | | | - | | | 254 | | | - | | | - | | | 254 | | 6.6 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (276) | | | (276) | | (7.1) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (b) | | | - | | | 127 | | | - | | | 2 | | | 129 | | 3.3 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (c) | | | - | | | - | | | - | | | 1 | | | 1 | | - | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 1,865 | | $ | 2,053 | | $ | 213 | | $ | (273) | | $ | 3,858 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent foreign currency holdings. (c) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following table sets forth a reconciliation of changes in the fair value of real estate and alternative investments classified as Level 3 in the fair value hierarchy for the pension assets: | | | | | | Alternative | | Total | | | | | Real Estate | | Investments | | Level 3 | | | | | (in millions) | | Balance as of January 1, 2010 | | $ | 90 | | $ | 106 | | $ | 196 | | Actual Return on Plan Assets | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | (7) | | | 4 | | | (3) | | | Relating to Assets Sold During the Period | | | - | | | 1 | | | 1 | | Purchases and Sales | | | - | | | 19 | | | 19 | | Transfers into Level 3 | | | - | | | - | | | - | | Transfers out of Level 3 | | | - | | | - | | | - | | Balance as of December 31, 2010 | | $ | 83 | | $ | 130 | | $ | 213 |
The following table presents the classification of OPEB plan assets within the fair value hierarchy at December 31, 2010: | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in millions) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 584 | | $ | - | | $ | - | | $ | - | | $ | 584 | | 40.0 | % | | | International | | | 220 | | | - | | | - | | | - | | | 220 | | 15.1 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 115 | | | - | | | - | | | 115 | | 7.9 | % | | Subtotal - Equities | | | 804 | | | 115 | | | - | | | - | | | 919 | | 63.0 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 48 | | | - | | | - | | | 48 | | 3.3 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 93 | | | - | | | - | | | 93 | | 6.4 | % | | | Corporate Debt | | | - | | | 110 | | | - | | | - | | | 110 | | 7.5 | % | | | Foreign Debt | | | - | | | 25 | | | - | | | - | | | 25 | | 1.7 | % | | | State and Local Government | | | - | | | 3 | | | - | | | - | | | 3 | | 0.2 | % | | | Other - Asset Backed | | | - | | | 1 | | | - | | | - | | | 1 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 280 | | | - | | | - | | | 280 | | 19.2 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 49 | | | - | | | - | | | 49 | | 3.3 | % | | | United States Bonds | | | - | | | 163 | | | - | | | - | | | 163 | | 11.1 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (a) | | | 21 | | | 25 | | | - | | | 1 | | | 47 | | 3.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | 3 | | | 3 | | 0.2 | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 825 | | $ | 632 | | $ | - | | $ | 4 | | $ | 1,461 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent foreign currency holdings. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. Determination of Pension Expense We base our determination of pension expense or income on a market-related valuation of assets which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded. | | | December 31, | | Accumulated Benefit Obligation | | 2011 | | 2010 | | | | (in millions) | | Qualified Pension Plan | | $ | 4,808 | | $ | 4,659 | | Nonqualified Pension Plans | | | 89 | | | 80 | | Total | | $ | 4,897 | | $ | 4,739 |
For our underfunded pension plans that had an accumulated benefit obligation in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets of these plans at December 31, 2011 and 2010 were as follows: | | | Underfunded Pension Plans | | | | December 31, | | | | 2011 | | 2010 | | | | (in millions) | | Projected Benefit Obligation | | $ | 4,991 | | $ | 4,807 | | | | | | | | | | Accumulated Benefit Obligation | | $ | 4,897 | | $ | 4,739 | | Fair Value of Plan Assets | | | 4,303 | | | 3,858 | | Underfunded Accumulated Benefit Obligation | | $ | (594) | | $ | (881) |
Estimated Future Benefit Payments and Contributions We expect contributions and payments for the pension plans of $208 million and the OPEB plans of $99 million during 2012. The estimated pension benefit payments for the unfunded plan and contributions to the trust are at least the minimum amount required by the Employee Retirement Income Security Act plus payment of unfunded nonqualified benefits. For the qualified pension plan, we may make additional discretionary contributions to maintain the funded status of the plan. The contribution to the OPEB plans is generally based on the amount of the OPEB plans' periodic benefit costs for accounting purposes as provided in agreements with state regulatory authorities, plus the additional discretionary contribution of our Medicare subsidy receipts. The table below reflects the total benefits expected to be paid from the plan or from our assets. The payments include the participants' contributions to the plan for their share of the cost. In December 2011, we amended the prescription drug program for certain participants. The impact of the change is reflected in the Benefit Plan Obligation table as a plan amendment. As a result of this amendment to the plan, the Medicare subsidy receipts in the following table are reduced from prior published estimates. Future benefit payments are dependent on the number of employees retiring, whether the retiring employees elect to receive pension benefits as annuities or as lump sum distributions, future integration of the benefit plans with changes to Medicare and other legislation, future levels of interest rates and variances in actuarial results. The estimated payments for pension benefits and OPEB are as follows: | | | Pension Plans | | Other Postretirement Benefit Plans | | | | Pension | | Benefit | | Medicare Subsidy | | | | Payments | | Payments | | Receipts | | | | (in millions) | | 2012 | | $ | 327 | | $ | 145 | | $ | 9 | | 2013 | | | 334 | | | 148 | | | - | | 2014 | | | 354 | | | 153 | | | - | | 2015 | | | 356 | | | 160 | | | - | | 2016 | | | 360 | | | 168 | | | - | | Years 2017 to 2021, in Total | | | 1,864 | | | 955 | | | 2 |
Components of Net Periodic Benefit Cost The following table provides the components of our net periodic benefit cost for the plans for the years ended December 31, 2011, 2010 and 2009: | | | | | | Other Postretirement | | | | Pension Plans | | Benefit Plans | | | | | Years Ended December 31, | | | | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | | | | (in millions) | | Service Cost | | $ | 72 | | $ | 111 | | $ | 104 | | $ | 42 | | $ | 47 | | $ | 42 | | Interest Cost | | | 237 | | | 253 | | | 254 | | | 109 | | | 113 | | | 110 | | Expected Return on Plan Assets | | | (314) | | | (312) | | | (321) | | | (109) | | | (105) | | | (80) | | Curtailment | | | - | | | - | | | - | | | 1 | | | - | | | - | | Amortization of Transition Obligation | | | - | | | - | | | - | | | 2 | | | 27 | | | 27 | | Amortization of Prior Service Cost (Credit) | | | 1 | | | - | | | - | | | (1) | | | - | | | - | | Amortization of Net Actuarial Loss | | | 122 | | | 89 | | | 59 | | | 29 | | | 29 | | | 42 | | Net Periodic Benefit Cost | | | 118 | | | 141 | | | 96 | | | 73 | | | 111 | | | 141 | | Capitalized Portion | | | (37) | | | (44) | | | (30) | | | (22) | | | (35) | | | (44) | | Net Periodic Benefit Cost Recognized as | | | | | | | | | | | | | | | | | | | | | Expense | | $ | 81 | | $ | 97 | | $ | 66 | | $ | 51 | | $ | 76 | | $ | 97 |
Estimated amounts expected to be amortized to net periodic benefit costs and the impact on the balance sheet during 2012 are shown in the following table: | | | | | Other | | | | | | | Postretirement | | | | | Pension Plans | | Benefit Plans | | Components | | (in millions) | | Net Actuarial Loss | | $ | 145 | | $ | 59 | | Prior Service Credit | | | (1) | | | (18) | | Transition Obligation | | | - | | | 1 | | Total Estimated 2012 Amortization | | $ | 144 | | $ | 42 | | | | | | | | | | Expected to be Recorded as | | | | | | | | Regulatory Asset | | $ | 116 | | $ | 25 | | Deferred Income Taxes | | | 10 | | | 6 | | Net of Tax AOCI | | | 18 | | | 11 | | Total | | $ | 144 | | $ | 42 |
American Electric Power System Retirement Savings Plan We sponsor the American Electric Power System Retirement Savings Plan, a defined contribution retirement savings plan for substantially all employees who are not members of the United Mine Workers of America (UMWA). It is a qualified plan offering participants an opportunity to contribute a portion of their pay with features under Section 401(k) of the Internal Revenue Code. The matching contributions to the plan are 100% of the first 1% of eligible employee contributions and 70% of the next 5% of contributions. The cost for matching contributions totaled $64 million in 2011, $61 million in 2010 and $74 million in 2009. UMWA Benefits We provide UMWA pension, health and welfare benefits for certain unionized mining employees, retirees and their survivors who meet eligibility requirements. UMWA trustees make final interpretive determinations with regard to all benefits. The pension benefits are administered by UMWA trustees and contributions are made to their trust funds. The health and welfare benefits are administered by us and benefits are paid from our general assets. The UMWA pension benefits are administered through a multiemployer plan that is different from single-employer plans as an employer's contributions may be used to provide benefits to employees of other participating employers. Required contributions not made by an employer may result in other employers bearing the unfunded plan obligations, while a withdrawing employer may be subject to a withdrawal liability. UMWA pension benefits are provided through the United Mine Workers of America 1974 Pension Plan (Employer Identification Number: 52-1050282, Plan Number 002), which under the Pension Protection Act of 2006 (PPA) was in Seriously Endangered Status for the plan years ending June 30, 2011 and 2010, without utilization of extended amortization provisions. The Plan is required under the PPA to adopt a funding improvement plan by May 25, 2012. Contributions in 2011, 2010 and 2009, which were made under a collective bargaining agreement that expires December 31, 2012, were immaterial and represent less than 5% of the total contributions in the plan's latest annual report for the years ended June 30, 2011, 2010 and 2009. Contributions did not include a surcharge, and there are no minimum contributions for future years. |
Appalachian Power Co [Member]
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Benefit Plans [Abstract] |
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Benefit Plans |
7. BENEFIT PLANS For a discussion of investment strategy, investment limitations, target asset allocations and the classification of investments within the fair value hierarchy, see “Investments Held in Trust for Future Liabilities” and “Fair Value Measurements of Assets and Liabilities” sections of Note 1. The Registrant Subsidiaries participate in an AEP sponsored qualified pension plan and two unfunded nonqualified pension plans. Substantially all employees are covered by the qualified plan or both the qualified and a nonqualified pension plan. The Registrant Subsidiaries also participate in OPEB plans sponsored by AEP to provide medical and life insurance benefits for retired employees. Due to the Registrant Subsidiaries' participation in AEP's benefits plans, the assumptions used by the actuary and the accounting for the plans by each subsidiary are the same. This section details the assumptions that apply to all Registrant Subsidiaries and the rate of compensation increase for each subsidiary. The Registrant Subsidiaries recognize the funded status associated with defined benefit pension and OPEB plans in their balance sheets. Disclosures about the plans are required by the “Compensation – Retirement Benefits” accounting guidance. The Registrant Subsidiaries recognize an asset for a plan's overfunded status or a liability for a plan's underfunded status, and recognize, as a component of other comprehensive income, the changes in the funded status of the plan that arise during the year that are not recognized as a component of net periodic benefit cost. The Registrant Subsidiaries record a regulatory asset instead of other comprehensive income for qualifying benefit costs of regulated operations that for ratemaking purposes are deferred for future recovery. The cumulative funded status adjustment is equal to the remaining unrecognized deferrals for unamortized actuarial losses or gains, prior service costs and transition obligations, such that remaining deferred costs result in an AOCI equity reduction or regulatory asset and deferred gains result in an AOCI equity addition or regulatory liability. Actuarial Assumptions for Benefit Obligations The weighted-average assumptions as of December 31 of each year used in the measurement of the Registrant Subsidiaries' benefit obligations are shown in the following tables: | | | | | Other Postretirement | | | Pension Plans | | | Benefit Plans | Assumption | | 2011 | | 2010 | | | 2011 | | 2010 | Discount Rate | | 4.55 | % | | 5.05 | % | | | 4.75 | % | | 5.25 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase (a) | | 2011 | | 2010 | | APCo | | 4.65 | % | | 4.70 | % | | I&M | | 4.90 | % | | 4.90 | % | | OPCo | | 4.95 | % | | 5.05 | % | | PSO | | 4.85 | % | | 4.95 | % | | SWEPCo | | 4.70 | % | | 4.80 | % |
(a) Rates are for base pay only. In addition, an amount is added to reflect target incentive compensation for exempt employees and overtime and incentive pay for nonexempt employees. A duration-based method is used to determine the discount rate for the plans. A hypothetical portfolio of high quality corporate bonds similar to those included in the Moody's Aa bond index is constructed with a duration matching the benefit plan liability. The composite yield on the hypothetical bond portfolio is used as the discount rate for the plan. The discount rate is the same for each Registrant Subsidiary. For 2011, the rate of compensation increase assumed varies with the age of the employee, ranging from 3.5% per year to 11.5% per year, with the average increase shown in the table above. The compensation increase rates reflect variations in each Registrant Subsidiary's population participating in the pension plan. Actuarial Assumptions for Net Periodic Benefit Costs The weighted-average assumptions as of January 1 of each year used in the measurement of each Registrant Subsidiary's benefit costs are shown in the following tables: | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | Assumptions | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | Discount Rate | | 5.05 | % | | 5.60 | % | | 6.00 | % | | 5.25 | % | | 5.85 | % | | 6.10 | % | | Expected Return on Plan Assets | | 7.75 | % | | 8.00 | % | | 8.00 | % | | 7.50 | % | | 8.00 | % | | 7.75 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase | | 2011 | | 2010 | | 2009 | | APCo | | 4.65 | % | | 4.35 | % | | 5.65 | % | | I&M | | 4.90 | % | | 4.55 | % | | 5.85 | % | | OPCo | | 4.95 | % | | 4.70 | % | | 6.00 | % | | PSO | | 4.85 | % | | 4.60 | % | | 5.90 | % | | SWEPCo | | 4.70 | % | | 4.45 | % | | 5.75 | % |
The expected return on plan assets was determined by evaluating historical returns, the current investment climate (yield on fixed income securities and other recent investment market indicators), rate of inflation and current prospects for economic growth. The expected return on plan assets is the same for each Registrant Subsidiary. The health care trend rate assumptions as of January 1 of each year used for OPEB plans measurement purposes are shown below: | Health Care Trend Rates | | 2011 | | 2010 | | Initial | | 7.50 | % | | 8.00 | % | | Ultimate | | 5.00 | % | | 5.00 | % | | Year Ultimate Reached | | 2016 | | 2016 |
Assumed health care cost trend rates have a significant effect on the amounts reported for the OPEB health care plans. A 1% change in assumed health care cost trend rates would have the following effects: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Effect on Total Service and Interest Cost | | | | | | | | | | | | | | | | | Components of Net Periodic Postretirement | | | | | | | | | | | | | | | | | Health Care Benefit Cost: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 3,806 | | $ | 2,972 | | $ | 5,188 | | $ | 1,300 | | $ | 1,500 | | 1% Decrease | | | (3,015) | | | (2,367) | | | (4,110) | | | (1,036) | | | (1,195) | | | | | | | | | | | | | | | | | | Effect on the Health Care Component of the | | | | | | | | | | | | | | | | | Accumulated Postretirement Benefit | | | | | | | | | | | | | | | | | Obligation: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 50,216 | | $ | 33,657 | | $ | 65,251 | | $ | 15,088 | | $ | 17,499 | | 1% Decrease | | | (40,748) | | | (27,448) | | | (53,015) | | | (12,314) | | | (14,281) |
Significant Concentrations of Risk within Plan Assets In addition to establishing the target asset allocation of plan assets, the investment policy also places restrictions on securities to limit significant concentrations within plan assets. The investment policy establishes guidelines that govern maximum market exposure, security restrictions, prohibited asset classes, prohibited types of transactions, minimum credit quality, average portfolio credit quality, portfolio duration and concentration limits. The guidelines were established to mitigate the risk of loss due to significant concentrations in any investment. Management monitors the plans to control security diversification and ensure compliance with the investment policy. At December 31, 2011, the assets were invested in compliance with all investment limits. See “Investments Held in Trust for Future Liabilities” section of Note 1 for limit details. Benefit Plan Obligations, Plan Assets and Funded Status as of December 31, 2011 and 2010 The following tables provide a reconciliation of the changes in the plans' benefit obligations, fair value of plan assets and funded status as of December 31. The benefit obligation for the defined benefit pension and OPEB plans are the projected benefit obligation and the accumulated benefit obligation, respectively. APCo | | | | Other Postretirement | | | Pension Plans | | Benefit Plans | | | 2011 | | 2010 | | 2011 | | 2010 | Change in Benefit Obligation | | (in thousands) | Benefit Obligation at January 1 | | $ | 652,219 | | $ | 632,832 | | $ | 383,152 | | $ | 348,787 | Service Cost | | | 7,199 | | | 12,908 | | | 4,983 | | | 5,722 | Interest Cost | | | 32,293 | | | 33,956 | | | 19,468 | | | 20,300 | Actuarial Loss | | | 29,137 | | | 28,909 | | | 41,306 | | | 33,656 | Plan Amendment Prior Service Credit | | | - | | | - | | | (31,145) | | | (4,257) | Benefit Payments | | | (39,398) | | | (56,386) | | | (30,040) | | | (27,677) | Participant Contributions | | | - | | | - | | | 6,005 | | | 4,782 | Medicare Subsidy | | | - | | | - | | | 1,753 | | | 1,839 | Benefit Obligation at December 31 | | $ | 681,450 | | $ | 652,219 | | $ | 395,482 | | $ | 383,152 | | | | | | | | | | | | | | Change in Fair Value of Plan Assets | | | | | | | | | | | | | Fair Value of Plan Assets at January 1 | | $ | 512,836 | | $ | 474,657 | | $ | 243,771 | | $ | 217,160 | Actual Gain (Loss) on Plan Assets | | | 36,970 | | | 57,745 | | | (4,102) | | | 29,112 | Company Contributions | | | 60,348 | | | 36,820 | | | 14,101 | | | 20,394 | Participant Contributions | | | - | | | - | | | 6,005 | | | 4,782 | Benefit Payments | | | (39,398) | | | (56,386) | | | (30,040) | | | (27,677) | Fair Value of Plan Assets at December 31 | | $ | 570,756 | | $ | 512,836 | | $ | 229,735 | | $ | 243,771 | | | | | | | | | | | | | | Underfunded Status at December 31 | | $ | (110,694) | | $ | (139,383) | | $ | (165,747) | | $ | (139,381) |
Amounts Recognized on the Registrant Subsidiaries' Balance Sheets as of December 31, 2011 and 2010 | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | | | | December 31, | | APCo | | 2011 | | 2010 | | 2011 | | 2010 | | | | | (in thousands) | | Other Current Liabilities - Accrued Short-term | | | | | | | | | | | | | | | Benefit Liability | | $ | (34) | | $ | (34) | | $ | (2,956) | | $ | (2,854) | | Employee Benefits and Pension Obligations - | | | | | | | | | | | | | | | Accrued Long-term Benefit Liability | | | (110,660) | | | (139,349) | | | (162,791) | | | (136,527) | | Underfunded Status | | $ | (110,694) | | $ | (139,383) | | $ | (165,747) | | $ | (139,381) |
Amounts Included in AOCI and Regulatory Assets as of December 31, 2011 and 2010 | | | | | Other Postretirement | APCo | | Pension Plans | | Benefit Plans | | | | December 31, | | | | 2011 | | 2010 | | 2011 | | 2010 | Components | | (in thousands) | Net Actuarial Loss | | $ | 308,223 | | $ | 290,798 | | $ | 174,615 | | $ | 115,350 | Prior Service Cost (Credit) | | | 1,393 | | | 2,310 | | | (33,060) | | | (2,086) | Transition Obligation | | | - | | | - | | | 780 | | | 1,947 | | | | | | | | | | | | | | | Recorded as | | | | | | | | | | | | | Regulatory Assets | | $ | 305,558 | | $ | 289,214 | | $ | 56,764 | | $ | 45,891 | Deferred Income Taxes | | | 1,420 | | | 1,366 | | | 29,951 | | | 23,881 | Net of Tax AOCI | | | 2,638 | | | 2,528 | | | 55,620 | | | 45,439 |
Components of the change in amounts included in AOCI and Regulatory Assets by Registrant Subsidiary during the years ended December 31, 2011 and 2010 are as follows: Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 33,995 | | $ | 21,372 | | $ | 44,976 | | $ | 8,712 | | $ | 8,958 | Amortization of Actuarial Loss | | | (16,570) | | | (14,144) | | | (24,828) | | | (6,757) | | | (6,759) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 795 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 16,508 | | $ | 6,484 | | $ | 18,674 | | $ | 2,905 | | $ | 2,994 | | | | | | | | | | | | | | | | | | Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss (Gain) During the Year | | $ | 14,769 | | $ | 24,732 | | $ | 26,308 | | $ | (2,346) | | $ | (6,379) | Amortization of Actuarial Loss | | | (11,842) | | | (10,065) | | | (18,150) | | | (5,188) | | | (5,242) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 796 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 2,010 | | $ | 13,923 | | $ | 6,684 | | $ | (6,584) | | $ | (10,825) | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 65,104 | | $ | 46,321 | | $ | 79,611 | | $ | 22,147 | | $ | 23,619 | Amortization of Actuarial Loss | | | (5,839) | | | (3,566) | | | (7,298) | | | (1,553) | | | (1,785) | Prior Service Credit | | (31,145) | | | (24,846) | | | (42,357) | | | (11,612) | | | (9,409) | Amortization of Prior Service Cost (Credit) | | | 171 | | | 237 | | | 212 | | | 75 | | | (258) | Amortization of Transition Obligation | | | (1,167) | | | (188) | | | (150) | | | - | | | - | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 27,124 | | $ | 17,958 | | $ | 30,018 | | $ | 9,057 | | $ | 12,167 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 23,876 | | $ | 13,372 | | $ | 31,207 | | $ | 7,283 | | $ | 7,570 | Amortization of Actuarial Loss | | | (5,410) | | | (3,526) | | | (6,877) | | | (1,573) | | | (1,711) | Prior Service Credit | | (4,257) | | | (4,273) | | | (6,039) | | | (2,408) | | | (2,399) | Amortization of Transition Obligation | | | (5,244) | | | (2,814) | | | (6,642) | | | (2,805) | | | (2,461) | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 8,965 | | $ | 2,759 | | $ | 11,649 | | $ | 497 | | $ | 999 |
Pension and Other Postretirement Plans' Assets The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | APCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 192,957 | | $ | - | | $ | - | | $ | - | | $ | 192,957 | | 33.8 | % | | | International | | | 52,904 | | | - | | | - | | | - | | | 52,904 | | 9.3 | % | | | Real Estate Investment Trusts | | | 13,794 | | | - | | | - | | | - | | | 13,794 | | 2.4 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 17,038 | | | - | | | - | | | 17,038 | | 3.0 | % | | Subtotal - Equities | | | 259,655 | | | 17,038 | | | - | | | - | | | 276,693 | | 48.5 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 3,483 | | | - | | | - | | | 3,483 | | 0.6 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 75,042 | | | - | | | - | | | 75,042 | | 13.2 | % | | | Corporate Debt | | | - | | | 130,606 | | | 846 | | | - | | | 131,452 | | 23.0 | % | | | Foreign Debt | | | - | | | 25,289 | | | - | | | - | | | 25,289 | | 4.4 | % | | | State and Local Government | | | - | | | 6,374 | | | - | | | - | | | 6,374 | | 1.1 | % | | | Other - Asset Backed | | | - | | | 3,449 | | | - | | | - | | | 3,449 | | 0.6 | % | | Subtotal - Fixed Income | | | - | | | 244,243 | | | 846 | | | - | | | 245,089 | | 42.9 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 21,666 | | | - | | | 21,666 | | 3.8 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 21,269 | | | - | | | 21,269 | | 3.7 | % | | Securities Lending | | | - | | | 28,488 | | | - | | | - | | | 28,488 | | 5.0 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (31,276) | | | (31,276) | | (5.5) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | - | | | 12,306 | | | - | | | - | | | 12,306 | | 2.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | (3,479) | | | (3,479) | | (0.6) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 259,655 | | $ | 302,075 | | $ | 43,781 | | $ | (34,755) | | $ | 570,756 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of assets classified as Level 3 in the fair value hierarchy by Registrant Subsidiary for pension assets: | | | | Corporate | | Real | | Alternative | | Total | | APCo | | Debt | | Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2011 | | $ | - | | $ | 11,060 | | $ | 17,281 | | $ | 28,341 | | Actual Return on Plan Assets | | | | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | - | | | 2,952 | | | 1,142 | | | 4,094 | | | Relating to Assets Sold During the Period | | | - | | | - | | | 392 | | | 392 | | Purchases and Sales | | | - | | | 7,654 | | | 2,454 | | | 10,108 | | Transfers into Level 3 | | | 846 | | | - | | | - | | | 846 | | Transfers out of Level 3 | | | - | | | - | | | - | | | - | | Balance as of December 31, 2011 | | $ | 846 | | $ | 21,666 | | $ | 21,269 | | $ | 43,781 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | APCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 56,670 | | $ | - | | $ | - | | $ | - | | $ | 56,670 | | 24.7 | % | | | International | | | 61,982 | | | - | | | - | | | - | | | 61,982 | | 27.0 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 16,159 | | | - | | | - | | | 16,159 | | 7.0 | % | | Subtotal - Equities | | | 118,652 | | | 16,159 | | | - | | | - | | | 134,811 | | 58.7 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 11,279 | | | - | | | - | | | 11,279 | | 4.9 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 13,165 | | | - | | | - | | | 13,165 | | 5.7 | % | | | Corporate Debt | | | - | | | 24,792 | | | - | | | - | | | 24,792 | | 10.8 | % | | | Foreign Debt | | | - | | | 5,256 | | | - | | | - | | | 5,256 | | 2.3 | % | | | State and Local Government | | | - | | | 1,371 | | | - | | | - | | | 1,371 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 312 | | | - | | | - | | | 312 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 56,175 | | | - | | | - | | | 56,175 | | 24.4 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 7,533 | | | - | | | - | | | 7,533 | | 3.3 | % | | | United States Bonds | | | - | | | 25,719 | | | - | | | - | | | 25,719 | | 11.2 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | 2,739 | | | 3,816 | | | - | | | - | | | 6,555 | | 2.9 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (a) | | | - | | | - | | | - | | | (1,058) | | | (1,058) | | (0.5) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 121,391 | | $ | 109,402 | | $ | - | | $ | (1,058) | | $ | 229,735 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | APCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 179,421 | | $ | 366 | | $ | - | | $ | - | | $ | 179,787 | | 35.1 | % | | | International | | | 53,559 | | | - | | | - | | | - | | | 53,559 | | 10.4 | % | | | Real Estate Investment Trusts | | | 14,932 | | | - | | | - | | | - | | | 14,932 | | 2.9 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 21,619 | | | - | | | - | | | 21,619 | | 4.2 | % | | Subtotal - Equities | | | 247,912 | | | 21,985 | | | - | | | - | | | 269,897 | | 52.6 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 84,280 | | | - | | | - | | | 84,280 | | 16.4 | % | | | Corporate Debt | | | - | | | 89,296 | | | - | | | - | | | 89,296 | | 17.4 | % | | | Foreign Debt | | | - | | | 16,900 | | | - | | | - | | | 16,900 | | 3.3 | % | | | State and Local Government | | | - | | | 3,021 | | | - | | | - | | | 3,021 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 6,798 | | | - | | | - | | | 6,798 | | 1.3 | % | | Subtotal - Fixed Income | | | - | | | 200,295 | | | - | | | - | | | 200,295 | | 39.0 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 11,060 | | | - | | | 11,060 | | 2.2 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 17,281 | | | - | | | 17,281 | | 3.4 | % | | Securities Lending | | | - | | | 33,804 | | | - | | | - | | | 33,804 | | 6.6 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (36,664) | | | (36,664) | | (7.1) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (b) | | | - | | | 16,870 | | | - | | | 212 | | | 17,082 | | 3.3 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (c) | | | - | | | - | | | - | | | 81 | | | 81 | | - | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 247,912 | | $ | 272,954 | | $ | 28,341 | | $ | (36,371) | | $ | 512,836 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent foreign currency holdings. (c) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of real estate and alternative investments classified as Level 3 in the fair value hierarchy for pension assets by Registrant Subsidiary: | | | | | | Alternative | | Total | | APCo | | Real Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2010 | | $ | 12,623 | | $ | 14,739 | | $ | 27,362 | | Actual Return on Plan Assets | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | (1,563) | | | 412 | | | (1,151) | | | Relating to Assets Sold During the Period | | | - | | | 134 | | | 134 | | Purchases and Sales | | | - | | | 1,996 | | | 1,996 | | Transfers into Level 3 | | | - | | | - | | | - | | Transfers out of Level 3 | | | - | | | - | | | - | | Balance as of December 31, 2010 | | $ | 11,060 | | $ | 17,281 | | $ | 28,341 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | APCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 97,469 | | $ | - | | $ | - | | $ | - | | $ | 97,469 | | 40.0 | % | | | International | | | 36,792 | | | - | | | - | | | - | | | 36,792 | | 15.1 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 19,153 | | | - | | | - | | | 19,153 | | 7.9 | % | | Subtotal - Equities | | | 134,261 | | | 19,153 | | | - | | | - | | | 153,414 | | 63.0 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 7,966 | | | - | | | - | | | 7,966 | | 3.3 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 15,636 | | | - | | | - | | | 15,636 | | 6.4 | % | | | Corporate Debt | | | - | | | 18,365 | | | - | | | - | | | 18,365 | | 7.5 | % | | | Foreign Debt | | | - | | | 4,140 | | | - | | | - | | | 4,140 | | 1.7 | % | | | State and Local Government | | | - | | | 583 | | | - | | | - | | | 583 | | 0.2 | % | | | Other - Asset Backed | | | - | | | 158 | | | - | | | - | | | 158 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 46,848 | | | - | | | - | | | 46,848 | | 19.2 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 8,189 | | | - | | | - | | | 8,189 | | 3.3 | % | | | United States Bonds | | | - | | | 27,130 | | | - | | | - | | | 27,130 | | 11.1 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (a) | | | 3,422 | | | 4,179 | | | - | | | 143 | | | 7,744 | | 3.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | 446 | | | 446 | | 0.2 | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 137,683 | | $ | 105,499 | | $ | - | | $ | 589 | | $ | 243,771 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent foreign currency holdings. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. Determination of Pension Expense The determination of pension expense or income is based on a market-related valuation of assets which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded. Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 672,967 | | $ | 569,855 | | $ | 1,005,608 | | $ | 269,230 | | $ | 269,809 | Nonqualified Pension Plans | | | 234 | | | 168 | | | 821 | | | 1,368 | | | 1,223 | Total as of December 31, 2011 | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 646,513 | | $ | 551,702 | | $ | 973,802 | | $ | 261,535 | | $ | 260,838 | Nonqualified Pension Plans | | | 221 | | | 994 | | | 799 | | | 1,326 | | | 1,133 | Total as of December 31, 2010 | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 |
For the underfunded pension plans that had an accumulated benefit obligation in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets of these plans at December 31, 2011 and 2010 were as follows: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 681,450 | | $ | 581,677 | | $ | 1,020,890 | | $ | 277,448 | | $ | 277,594 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | Fair Value of Plan Assets | | | 570,756 | | | 503,926 | | | 925,939 | | | 245,769 | | | 255,861 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2011 | | $ | (102,445) | | $ | (66,097) | | $ | (80,490) | | $ | (24,829) | | $ | (15,171) | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 652,219 | | $ | 560,982 | | $ | 984,089 | | $ | 268,180 | | $ | 267,206 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 | Fair Value of Plan Assets | | | 512,836 | | | 451,688 | | | 799,281 | | | 213,576 | | | 224,618 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2010 | | $ | (133,898) | | $ | (101,008) | | $ | (175,320) | | $ | (49,285) | | $ | (37,353) |
Estimated Future Benefit Payments and Contributions The estimated pension benefit payments for the unfunded plan and contributions to the trust are at least the minimum amount required by the Employee Retirement Income Security Act plus payment of unfunded nonqualified benefits. For the qualified pension plan, additional discretionary contributions may be made to the trust to maintain the funded status of the plan. The contributions to the OPEB plans are generally based on the amount of the OPEB plans' periodic benefit costs for accounting purposes as provided in agreements with state regulatory authorities, plus the additional discretionary contribution of the Medicare subsidy receipts. The following table provides the estimated contributions and payments by Registrant Subsidiary for 2012: | | | | | Other Postretirement | | Company | | Pension Plans | | Benefit Plans | | | | (in thousands) | | APCo | | $ | 33,442 | | $ | 16,775 | | I&M | | | 23,938 | | | 13,465 | | OPCo | | | 39,095 | | | 19,705 | | PSO | | | 11,612 | | | 5,982 | | SWEPCo | | | 9,089 | | | 7,089 |
The tables below reflect the total benefits expected to be paid from the plan or from the Registrant Subsidiary's assets. The payments include the participants' contributions to the plan for their share of the cost. In December 2011, the prescription drug plan was amended for certain participants. The impact of the change is reflected in the Benefit Plan Obligation table as a plan amendment. As a result of this amendment to the plan, the Medicare subsidy receipts in the following table are reduced from prior published estimates. Future benefit payments are dependent on the number of employees retiring, whether the retiring employees elect to receive pension benefits as annuities or as lump sum distributions, future integration of the benefit plans with changes to Medicare and other legislation, future levels of interest rates and variances in actuarial results. The estimated payments for the pension benefits and OPEB are as follows: Pension Plans | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 44,506 | | $ | 34,963 | | $ | 69,978 | | $ | 19,989 | | $ | 19,329 | 2013 | | | 45,202 | | | 35,686 | | | 72,422 | | | 20,472 | | | 20,281 | 2014 | | | 47,192 | | | 37,289 | | | 76,712 | | | 22,199 | | | 22,080 | 2015 | | | 46,327 | | | 37,831 | | | 75,063 | | | 22,020 | | | 22,288 | 2016 | | | 48,178 | | | 39,781 | | | 75,042 | | | 21,847 | | | 22,331 | Years 2017 to 2021, in Total | | | 248,647 | | | 213,381 | | | 371,555 | | | 113,723 | | | 115,691 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Benefit Payments | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 27,515 | | $ | 17,849 | | $ | 36,517 | | $ | 7,833 | | $ | 8,302 | 2013 | | | 27,741 | | | 18,289 | | | 36,412 | | | 8,120 | | | 8,628 | 2014 | | | 28,782 | | | 19,085 | | | 37,271 | | | 8,438 | | | 9,179 | 2015 | | | 29,668 | | | 20,117 | | | 38,306 | | | 8,934 | | | 9,598 | 2016 | | | 30,657 | | | 21,358 | | | 39,774 | | | 9,467 | | | 10,214 | Years 2017 to 2021, in Total | | | 168,810 | | | 123,258 | | | 218,695 | | | 54,491 | | | 61,146 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Medicare Subsidy Receipts | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 1,777 | | $ | 1,096 | | $ | 2,276 | | $ | 618 | | $ | 586 | 2013 | | | 272 | | | 28 | | | 43 | | | - | | | - | 2014 | | | 287 | | | 27 | | | 48 | | | - | | | - | 2015 | | | 298 | | | 26 | | | 59 | | | - | | | - | 2016 | | | 307 | | | 26 | | | 67 | | | - | | | - | Years 2017 to 2021, in Total | | | 1,578 | | | 110 | | | 536 | | | - | | | - |
Components of Net Periodic Benefit Cost The following tables provide the components of net periodic benefit cost by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | | | Other Postretirement | | APCo | | Pension Plans | | Benefit Plans | | | | | Years Ended December 31, | | | | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | Service Cost | | $ | 7,199 | | $ | 12,908 | | $ | 12,689 | | $ | 4,983 | | $ | 5,722 | | $ | 5,142 | | Interest Cost | | | 32,293 | | | 33,956 | | | 34,050 | | | 19,468 | | | 20,300 | | | 19,710 | | Expected Return on Plan Assets | | | (41,833) | | | (43,805) | | | (44,885) | | | (17,985) | | | (17,628) | | | (13,531) | | Amortization of Transition Obligation | | | - | | | - | | | - | | | 1,167 | | | 5,244 | | | 5,244 | | Amortization of Prior Service Cost (Credit) | | | 917 | | | 917 | | | 917 | | | (171) | | | - | | | - | | Amortization of Net Actuarial Loss | | | 16,570 | | | 11,842 | | | 7,688 | | | 5,839 | | | 5,410 | | | 7,666 | | Net Periodic Benefit Cost | | | 15,146 | | | 15,818 | | | 10,459 | | | 13,301 | | | 19,048 | | | 24,231 | | Capitalized Portion | | | (5,604) | | | (6,058) | | | (3,661) | | | (4,921) | | | (7,295) | | | (8,481) | | Net Periodic Benefit Cost Recognized as | | | | | | | | | | | | | | | | | | | | | Expense | | $ | 9,542 | | $ | 9,760 | | $ | 6,798 | | $ | 8,380 | | $ | 11,753 | | $ | 15,750 |
Estimated amounts expected to be amortized to net periodic benefit costs and the impact on each Registrant Subsidiary's balance sheet during 2012 are shown in the following tables: | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Pension Plan - Components | | (in thousands) | Net Actuarial Loss | | $ | 19,816 | | $ | 16,915 | | $ | 29,690 | | $ | 8,074 | | $ | 8,077 | Prior Service Cost (Credit) | | | 475 | | | 407 | | | 743 | | | (948) | | | (793) | Total Estimated 2012 Amortization | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | Pension Plans - | | | | | | | | | | | | | | | | Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 20,190 | | $ | 16,303 | | $ | 16,299 | | $ | 7,126 | | $ | 7,284 | Deferred Income Taxes | | | 35 | | | 357 | | | 4,947 | | | - | | | - | Net of Tax AOCI | | | 66 | | | 662 | | | 9,187 | | | - | | | - | Total | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Other Postretirement Benefit Plans - | | (in thousands) | Components | | | | | | | | | | | | | | | | Net Actuarial Loss | | $ | 10,671 | | $ | 7,325 | | $ | 13,951 | | $ | 3,296 | | $ | 3,822 | Prior Service Credit | | | (2,862) | | | (2,383) | | | (3,873) | | | (1,079) | | | (933) | Transition Obligation | | | 780 | | | 132 | | | 104 | | | - | | | - | Total Estimated 2012 Amortization | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 3,049 | | $ | 4,400 | | $ | 4,565 | | $ | 2,217 | | $ | 1,804 | Deferred Income Taxes | | | 1,939 | | | 236 | | | 1,966 | | | - | | | 380 | Net of Tax AOCI | | | 3,601 | | | 438 | | | 3,651 | | | - | | | 705 | Total | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 |
American Electric Power System Retirement Savings Plans The Registrant Subsidiaries participate in an AEP sponsored defined contribution retirement savings plan, the American Electric Power System Retirement Savings Plan, for substantially all employees who are not members of the United Mine Workers of America (UMWA). This qualified plan offers participants an opportunity to contribute a portion of their pay, includes features under Section 401(k) of the Internal Revenue Code and provides for company matching contributions. The matching contributions to the plan are 100% of the first 1% of eligible employee contributions and 70% of the next 5% of contributions. The following table provides the cost for matching contributions to the retirement savings plans by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | Years Ended December 31, | | Company | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | APCo | | $ | 7,432 | | $ | 7,284 | | $ | 8,673 | | I&M | | | 9,541 | | | 8,969 | | | 10,315 | | OPCo | | | 10,166 | | | 9,706 | | | 11,640 | | PSO | | | 3,626 | | | 3,505 | | | 4,083 | | SWEPCo | | | 4,438 | | | 3,866 | | | 5,269 |
UMWA Benefits APCo, I&M and OPCo provide UMWA pension, health and welfare benefits for certain unionized mining employees, retirees and their survivors who meet eligibility requirements. UMWA trustees make final interpretive determinations with regard to all benefits. The pension benefits are administered by UMWA trustees and contributions are made to their trust funds. APCo, I&M and OPCo administer the health and welfare benefits and pay them from their general assets. The UMWA pension benefits are administered through a multiemployer plan that is different from single-employer plans as an employer's contributions may be used to provide benefits to employees of other participating employers. Required contributions not made by an employer may result in other employers bearing the unfunded plan obligations, while a withdrawing employer may be subject to a withdrawal liability. UMWA pension benefits are provided through the United Mine Workers of America 1974 Pension Plan (Employer Identification Number: 52-1050282, Plan Number 002), which under the Pension Protection Act of 2006 (PPA) was in Seriously Endangered Status for the plan years ending June 30, 2011 and 2010, without utilization of extended amortization provisions. The Plan is required under the PPA to adopt a funding improvement plan by May 25, 2012. Contributions in 2011, 2010 and 2009, which were made under a collective bargaining agreement that expires December 31, 2012, were immaterial and represent less than 5% of the total contributions in the plan's latest annual report for the years ended June 30, 2011, 2010 and 2009. Contributions did not include a surcharge, and there are no minimum contributions for future years. |
Indiana Michigan Power Co [Member]
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Benefit Plans [Abstract] |
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Benefit Plans |
7. BENEFIT PLANS For a discussion of investment strategy, investment limitations, target asset allocations and the classification of investments within the fair value hierarchy, see “Investments Held in Trust for Future Liabilities” and “Fair Value Measurements of Assets and Liabilities” sections of Note 1. The Registrant Subsidiaries participate in an AEP sponsored qualified pension plan and two unfunded nonqualified pension plans. Substantially all employees are covered by the qualified plan or both the qualified and a nonqualified pension plan. The Registrant Subsidiaries also participate in OPEB plans sponsored by AEP to provide medical and life insurance benefits for retired employees. Due to the Registrant Subsidiaries' participation in AEP's benefits plans, the assumptions used by the actuary and the accounting for the plans by each subsidiary are the same. This section details the assumptions that apply to all Registrant Subsidiaries and the rate of compensation increase for each subsidiary. The Registrant Subsidiaries recognize the funded status associated with defined benefit pension and OPEB plans in their balance sheets. Disclosures about the plans are required by the “Compensation – Retirement Benefits” accounting guidance. The Registrant Subsidiaries recognize an asset for a plan's overfunded status or a liability for a plan's underfunded status, and recognize, as a component of other comprehensive income, the changes in the funded status of the plan that arise during the year that are not recognized as a component of net periodic benefit cost. The Registrant Subsidiaries record a regulatory asset instead of other comprehensive income for qualifying benefit costs of regulated operations that for ratemaking purposes are deferred for future recovery. The cumulative funded status adjustment is equal to the remaining unrecognized deferrals for unamortized actuarial losses or gains, prior service costs and transition obligations, such that remaining deferred costs result in an AOCI equity reduction or regulatory asset and deferred gains result in an AOCI equity addition or regulatory liability. Actuarial Assumptions for Benefit Obligations The weighted-average assumptions as of December 31 of each year used in the measurement of the Registrant Subsidiaries' benefit obligations are shown in the following tables: | | | | | Other Postretirement | | | Pension Plans | | | Benefit Plans | Assumption | | 2011 | | 2010 | | | 2011 | | 2010 | Discount Rate | | 4.55 | % | | 5.05 | % | | | 4.75 | % | | 5.25 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase (a) | | 2011 | | 2010 | | APCo | | 4.65 | % | | 4.70 | % | | I&M | | 4.90 | % | | 4.90 | % | | OPCo | | 4.95 | % | | 5.05 | % | | PSO | | 4.85 | % | | 4.95 | % | | SWEPCo | | 4.70 | % | | 4.80 | % |
(a) Rates are for base pay only. In addition, an amount is added to reflect target incentive compensation for exempt employees and overtime and incentive pay for nonexempt employees. A duration-based method is used to determine the discount rate for the plans. A hypothetical portfolio of high quality corporate bonds similar to those included in the Moody's Aa bond index is constructed with a duration matching the benefit plan liability. The composite yield on the hypothetical bond portfolio is used as the discount rate for the plan. The discount rate is the same for each Registrant Subsidiary. For 2011, the rate of compensation increase assumed varies with the age of the employee, ranging from 3.5% per year to 11.5% per year, with the average increase shown in the table above. The compensation increase rates reflect variations in each Registrant Subsidiary's population participating in the pension plan. Actuarial Assumptions for Net Periodic Benefit Costs The weighted-average assumptions as of January 1 of each year used in the measurement of each Registrant Subsidiary's benefit costs are shown in the following tables: | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | Assumptions | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | Discount Rate | | 5.05 | % | | 5.60 | % | | 6.00 | % | | 5.25 | % | | 5.85 | % | | 6.10 | % | | Expected Return on Plan Assets | | 7.75 | % | | 8.00 | % | | 8.00 | % | | 7.50 | % | | 8.00 | % | | 7.75 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase | | 2011 | | 2010 | | 2009 | | APCo | | 4.65 | % | | 4.35 | % | | 5.65 | % | | I&M | | 4.90 | % | | 4.55 | % | | 5.85 | % | | OPCo | | 4.95 | % | | 4.70 | % | | 6.00 | % | | PSO | | 4.85 | % | | 4.60 | % | | 5.90 | % | | SWEPCo | | 4.70 | % | | 4.45 | % | | 5.75 | % |
The expected return on plan assets was determined by evaluating historical returns, the current investment climate (yield on fixed income securities and other recent investment market indicators), rate of inflation and current prospects for economic growth. The expected return on plan assets is the same for each Registrant Subsidiary. The health care trend rate assumptions as of January 1 of each year used for OPEB plans measurement purposes are shown below: | Health Care Trend Rates | | 2011 | | 2010 | | Initial | | 7.50 | % | | 8.00 | % | | Ultimate | | 5.00 | % | | 5.00 | % | | Year Ultimate Reached | | 2016 | | 2016 |
Assumed health care cost trend rates have a significant effect on the amounts reported for the OPEB health care plans. A 1% change in assumed health care cost trend rates would have the following effects: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Effect on Total Service and Interest Cost | | | | | | | | | | | | | | | | | Components of Net Periodic Postretirement | | | | | | | | | | | | | | | | | Health Care Benefit Cost: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 3,806 | | $ | 2,972 | | $ | 5,188 | | $ | 1,300 | | $ | 1,500 | | 1% Decrease | | | (3,015) | | | (2,367) | | | (4,110) | | | (1,036) | | | (1,195) | | | | | | | | | | | | | | | | | | Effect on the Health Care Component of the | | | | | | | | | | | | | | | | | Accumulated Postretirement Benefit | | | | | | | | | | | | | | | | | Obligation: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 50,216 | | $ | 33,657 | | $ | 65,251 | | $ | 15,088 | | $ | 17,499 | | 1% Decrease | | | (40,748) | | | (27,448) | | | (53,015) | | | (12,314) | | | (14,281) |
Significant Concentrations of Risk within Plan Assets In addition to establishing the target asset allocation of plan assets, the investment policy also places restrictions on securities to limit significant concentrations within plan assets. The investment policy establishes guidelines that govern maximum market exposure, security restrictions, prohibited asset classes, prohibited types of transactions, minimum credit quality, average portfolio credit quality, portfolio duration and concentration limits. The guidelines were established to mitigate the risk of loss due to significant concentrations in any investment. Management monitors the plans to control security diversification and ensure compliance with the investment policy. At December 31, 2011, the assets were invested in compliance with all investment limits. See “Investments Held in Trust for Future Liabilities” section of Note 1 for limit details. Benefit Plan Obligations, Plan Assets and Funded Status as of December 31, 2011 and 2010 The following tables provide a reconciliation of the changes in the plans' benefit obligations, fair value of plan assets and funded status as of December 31. The benefit obligation for the defined benefit pension and OPEB plans are the projected benefit obligation and the accumulated benefit obligation, respectively. I&M | | | | Other Postretirement | | | Pension Plans | | Benefit Plans | | | 2011 | | 2010 | | 2011 | | 2010 | Change in Benefit Obligation | | (in thousands) | Benefit Obligation at January 1 | | $ | 560,982 | | $ | 526,363 | | $ | 266,742 | | $ | 241,847 | Service Cost | | | 9,447 | | | 15,284 | | | 6,119 | | | 6,750 | Interest Cost | | | 27,726 | | | 29,085 | | | 13,610 | | | 14,164 | Actuarial Loss | | | 17,289 | | | 40,694 | | | 28,876 | | | 20,980 | Plan Amendment Prior Service Credit | | | - | | | - | | | (24,846) | | | (4,273) | Benefit Payments | | | (33,767) | | | (50,444) | | | (18,387) | | | (17,439) | Participant Contributions | | | - | | | - | | | 4,112 | | | 3,526 | Medicare Subsidy | | | - | | | - | | | 1,127 | | | 1,187 | Benefit Obligation at December 31 | | $ | 581,677 | | $ | 560,982 | | $ | 277,353 | | $ | 266,742 | | | | | | | | | | | | | | Change in Fair Value of Plan Assets | | | | | | | | | | | | | Fair Value of Plan Assets at January 1 | | $ | 451,688 | | $ | 379,562 | | $ | 188,690 | | $ | 166,682 | Actual Gain (Loss) on Plan Assets | | | 32,773 | | | 50,811 | | | (3,946) | | | 20,983 | Company Contributions | | | 53,232 | | | 71,759 | | | 10,768 | | | 14,938 | Participant Contributions | | | - | | | - | | | 4,112 | | | 3,526 | Benefit Payments | | | (33,767) | | | (50,444) | | | (18,387) | | | (17,439) | Fair Value of Plan Assets at December 31 | | $ | 503,926 | | $ | 451,688 | | $ | 181,237 | | $ | 188,690 | | | | | | | | | | | | | | Underfunded Status at December 31 | | $ | (77,751) | | $ | (109,294) | | $ | (96,116) | | $ | (78,052) |
Amounts Recognized on the Registrant Subsidiaries' Balance Sheets as of December 31, 2011 and 2010 | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | | | | December 31, | | I&M | | 2011 | | 2010 | | 2011 | | 2010 | | | | | (in thousands) | | Other Current Liabilities - Accrued Short-term | | | | | | | | | | | | | | | Benefit Liability | | $ | (14) | | $ | (57) | | $ | (308) | | $ | (313) | | Deferred Credits and Other Noncurrent Liabilities | | | | | | | | | | | | | | | Accrued Long-term Benefit Liability | | | (77,737) | | | (109,237) | | | (95,808) | | | (77,739) | | Underfunded Status | | $ | (77,751) | | $ | (109,294) | | $ | (96,116) | | $ | (78,052) |
Amounts Included in AOCI and Regulatory Assets as of December 31, 2011 and 2010 | | | | | Other Postretirement | I&M | | Pension Plans | | Benefit Plans | | | | December 31, | | | | 2011 | | 2010 | | 2011 | | 2010 | Components | | (in thousands) | Net Actuarial Loss | | $ | 216,107 | | $ | 208,879 | | $ | 121,238 | | $ | 78,483 | Prior Service Cost (Credit) | | | 1,307 | | | 2,051 | | | (27,491) | | | (2,882) | Transition Obligation | | | - | | | - | | | 132 | | | 320 | | | | | | | | | | | | | | | Recorded as | | | | | | | | | | | | | Regulatory Assets | | $ | 207,237 | | $ | 199,982 | | $ | 84,155 | | $ | 68,098 | Deferred Income Taxes | | | 3,561 | | | 3,830 | | | 3,403 | | | 2,737 | Net of Tax AOCI | | | 6,616 | | | 7,118 | | | 6,321 | | | 5,086 |
Components of the change in amounts included in AOCI and Regulatory Assets by Registrant Subsidiary during the years ended December 31, 2011 and 2010 are as follows: Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 33,995 | | $ | 21,372 | | $ | 44,976 | | $ | 8,712 | | $ | 8,958 | Amortization of Actuarial Loss | | | (16,570) | | | (14,144) | | | (24,828) | | | (6,757) | | | (6,759) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 795 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 16,508 | | $ | 6,484 | | $ | 18,674 | | $ | 2,905 | | $ | 2,994 | | | | | | | | | | | | | | | | | | Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss (Gain) During the Year | | $ | 14,769 | | $ | 24,732 | | $ | 26,308 | | $ | (2,346) | | $ | (6,379) | Amortization of Actuarial Loss | | | (11,842) | | | (10,065) | | | (18,150) | | | (5,188) | | | (5,242) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 796 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 2,010 | | $ | 13,923 | | $ | 6,684 | | $ | (6,584) | | $ | (10,825) | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 65,104 | | $ | 46,321 | | $ | 79,611 | | $ | 22,147 | | $ | 23,619 | Amortization of Actuarial Loss | | | (5,839) | | | (3,566) | | | (7,298) | | | (1,553) | | | (1,785) | Prior Service Credit | | (31,145) | | | (24,846) | | | (42,357) | | | (11,612) | | | (9,409) | Amortization of Prior Service Cost (Credit) | | | 171 | | | 237 | | | 212 | | | 75 | | | (258) | Amortization of Transition Obligation | | | (1,167) | | | (188) | | | (150) | | | - | | | - | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 27,124 | | $ | 17,958 | | $ | 30,018 | | $ | 9,057 | | $ | 12,167 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 23,876 | | $ | 13,372 | | $ | 31,207 | | $ | 7,283 | | $ | 7,570 | Amortization of Actuarial Loss | | | (5,410) | | | (3,526) | | | (6,877) | | | (1,573) | | | (1,711) | Prior Service Credit | | (4,257) | | | (4,273) | | | (6,039) | | | (2,408) | | | (2,399) | Amortization of Transition Obligation | | | (5,244) | | | (2,814) | | | (6,642) | | | (2,805) | | | (2,461) | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 8,965 | | $ | 2,759 | | $ | 11,649 | | $ | 497 | | $ | 999 |
Pension and Other Postretirement Plans' Assets The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | I&M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 170,364 | | $ | - | | $ | - | | $ | - | | $ | 170,364 | | 33.8 | % | | | International | | | 46,709 | | | - | | | - | | | - | | | 46,709 | | 9.3 | % | | | Real Estate Investment Trusts | | | 12,179 | | | - | | | - | | | - | | | 12,179 | | 2.4 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 15,043 | | | - | | | - | | | 15,043 | | 3.0 | % | | Subtotal - Equities | | | 229,252 | | | 15,043 | | | - | | | - | | | 244,295 | | 48.5 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 3,075 | | | - | | | - | | | 3,075 | | 0.6 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 66,255 | | | - | | | - | | | 66,255 | | 13.2 | % | | | Corporate Debt | | | - | | | 115,313 | | | 747 | | | - | | | 116,060 | | 23.0 | % | | | Foreign Debt | | | - | | | 22,328 | | | - | | | - | | | 22,328 | | 4.4 | % | | | State and Local Government | | | - | | | 5,628 | | | - | | | - | | | 5,628 | | 1.1 | % | | | Other - Asset Backed | | | - | | | 3,045 | | | - | | | - | | | 3,045 | | 0.6 | % | | Subtotal - Fixed Income | | | - | | | 215,644 | | | 747 | | | - | | | 216,391 | | 42.9 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 19,129 | | | - | | | 19,129 | | 3.8 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 18,779 | | | - | | | 18,779 | | 3.7 | % | | Securities Lending | | | - | | | 25,153 | | | - | | | - | | | 25,153 | | 5.0 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (27,614) | | | (27,614) | | (5.5) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | - | | | 10,865 | | | - | | | - | | | 10,865 | | 2.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | (3,072) | | | (3,072) | | (0.6) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 229,252 | | $ | 266,705 | | $ | 38,655 | | $ | (30,686) | | $ | 503,926 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of assets classified as Level 3 in the fair value hierarchy by Registrant Subsidiary for pension assets: | | | | Corporate | | Real | | Alternative | | Total | | I&M | | Debt | | Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2011 | | $ | - | | $ | 9,742 | | $ | 15,220 | | $ | 24,962 | | Actual Return on Plan Assets | | | | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | - | | | 2,612 | | | 1,019 | | | 3,631 | | | Relating to Assets Sold During the Period | | | - | | | - | | | 350 | | | 350 | | Purchases and Sales | | | - | | | 6,775 | | | 2,190 | | | 8,965 | | Transfers into Level 3 | | | 747 | | | - | | | - | | | 747 | | Transfers out of Level 3 | | | - | | | - | | | - | | | - | | Balance as of December 31, 2011 | | $ | 747 | | $ | 19,129 | | $ | 18,779 | | $ | 38,655 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | I&M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 44,707 | | $ | - | | $ | - | | $ | - | | $ | 44,707 | | 24.7 | % | | | International | | | 48,897 | | | - | | | - | | | - | | | 48,897 | | 27.0 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 12,748 | | | - | | | - | | | 12,748 | | 7.0 | % | | Subtotal - Equities | | | 93,604 | | | 12,748 | | | - | | | - | | | 106,352 | | 58.7 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 8,898 | | | - | | | - | | | 8,898 | | 4.9 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 10,386 | | | - | | | - | | | 10,386 | | 5.7 | % | | | Corporate Debt | | | - | | | 19,558 | | | - | | | - | | | 19,558 | | 10.8 | % | | | Foreign Debt | | | - | | | 4,146 | | | - | | | - | | | 4,146 | | 2.3 | % | | | State and Local Government | | | - | | | 1,082 | | | - | | | - | | | 1,082 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 246 | | | - | | | - | | | 246 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 44,316 | | | - | | | - | | | 44,316 | | 24.4 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 5,943 | | | - | | | - | | | 5,943 | | 3.3 | % | | | United States Bonds | | | - | | | 20,290 | | | - | | | - | | | 20,290 | | 11.2 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | 2,161 | | | 3,010 | | | - | | | - | | | 5,171 | | 2.9 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (a) | | | - | | | - | | | - | | | (835) | | | (835) | | (0.5) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 95,765 | | $ | 86,307 | | $ | - | | $ | (835) | | $ | 181,237 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | I&M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 158,027 | | $ | 323 | | $ | - | | $ | - | | $ | 158,350 | | 35.1 | % | | | International | | | 47,173 | | | - | | | - | | | - | | | 47,173 | | 10.4 | % | | | Real Estate Investment Trusts | | | 13,152 | | | - | | | - | | | - | | | 13,152 | | 2.9 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 19,041 | | | - | | | - | | | 19,041 | | 4.2 | % | | Subtotal - Equities | | | 218,352 | | | 19,364 | | | - | | | - | | | 237,716 | | 52.6 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 74,231 | | | - | | | - | | | 74,231 | | 16.4 | % | | | Corporate Debt | | | - | | | 78,649 | | | - | | | - | | | 78,649 | | 17.4 | % | | | Foreign Debt | | | - | | | 14,885 | | | - | | | - | | | 14,885 | | 3.3 | % | | | State and Local Government | | | - | | | 2,661 | | | - | | | - | | | 2,661 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 5,987 | | | - | | | - | | | 5,987 | | 1.3 | % | | Subtotal - Fixed Income | | | - | | | 176,413 | | | - | | | - | | | 176,413 | | 39.0 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 9,742 | | | - | | | 9,742 | | 2.2 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 15,220 | | | - | | | 15,220 | | 3.4 | % | | Securities Lending | | | - | | | 29,773 | | | - | | | - | | | 29,773 | | 6.6 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (32,292) | | | (32,292) | | (7.1) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (b) | | | - | | | 14,859 | | | - | | | 186 | | | 15,045 | | 3.3 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (c) | | | - | | | - | | | - | | | 71 | | | 71 | | - | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 218,352 | | $ | 240,409 | | $ | 24,962 | | $ | (32,035) | | $ | 451,688 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent foreign currency holdings. (c) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of real estate and alternative investments classified as Level 3 in the fair value hierarchy for pension assets by Registrant Subsidiary: | | | | | | Alternative | | Total | | I&M | | Real Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2010 | | $ | 10,094 | | $ | 11,786 | | $ | 21,880 | | Actual Return on Plan Assets | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | (352) | | | 556 | | | 204 | | | Relating to Assets Sold During the Period | | | - | | | 181 | | | 181 | | Purchases and Sales | | | - | | | 2,697 | | | 2,697 | | Transfers into Level 3 | | | - | | | - | | | - | | Transfers out of Level 3 | | | - | | | - | | | - | | Balance as of December 31, 2010 | | $ | 9,742 | | $ | 15,220 | | $ | 24,962 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | I&M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 75,446 | | $ | - | | $ | - | | $ | - | | $ | 75,446 | | 40.0 | % | | | International | | | 28,479 | | | - | | | - | | | - | | | 28,479 | | 15.1 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 14,825 | | | - | | | - | | | 14,825 | | 7.9 | % | | Subtotal - Equities | | | 103,925 | | | 14,825 | | | - | | | - | | | 118,750 | | 63.0 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 6,166 | | | - | | | - | | | 6,166 | | 3.3 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 12,103 | | | - | | | - | | | 12,103 | | 6.4 | % | | | Corporate Debt | | | - | | | 14,215 | | | - | | | - | | | 14,215 | | 7.5 | % | | | Foreign Debt | | | - | | | 3,204 | | | - | | | - | | | 3,204 | | 1.7 | % | | | State and Local Government | | | - | | | 452 | | | - | | | - | | | 452 | | 0.2 | % | | | Other - Asset Backed | | | - | | | 122 | | | - | | | - | | | 122 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 36,262 | | | - | | | - | | | 36,262 | | 19.2 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 6,338 | | | - | | | - | | | 6,338 | | 3.3 | % | | | United States Bonds | | | - | | | 21,000 | | | - | | | - | | | 21,000 | | 11.1 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (a) | | | 2,649 | | | 3,234 | | | - | | | 111 | | | 5,994 | | 3.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | 346 | | | 346 | | 0.2 | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 106,574 | | $ | 81,659 | | $ | - | | $ | 457 | | $ | 188,690 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent foreign currency holdings. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. Determination of Pension Expense The determination of pension expense or income is based on a market-related valuation of assets which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded. Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 672,967 | | $ | 569,855 | | $ | 1,005,608 | | $ | 269,230 | | $ | 269,809 | Nonqualified Pension Plans | | | 234 | | | 168 | | | 821 | | | 1,368 | | | 1,223 | Total as of December 31, 2011 | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 646,513 | | $ | 551,702 | | $ | 973,802 | | $ | 261,535 | | $ | 260,838 | Nonqualified Pension Plans | | | 221 | | | 994 | | | 799 | | | 1,326 | | | 1,133 | Total as of December 31, 2010 | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 |
For the underfunded pension plans that had an accumulated benefit obligation in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets of these plans at December 31, 2011 and 2010 were as follows: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 681,450 | | $ | 581,677 | | $ | 1,020,890 | | $ | 277,448 | | $ | 277,594 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | Fair Value of Plan Assets | | | 570,756 | | | 503,926 | | | 925,939 | | | 245,769 | | | 255,861 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2011 | | $ | (102,445) | | $ | (66,097) | | $ | (80,490) | | $ | (24,829) | | $ | (15,171) | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 652,219 | | $ | 560,982 | | $ | 984,089 | | $ | 268,180 | | $ | 267,206 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 | Fair Value of Plan Assets | | | 512,836 | | | 451,688 | | | 799,281 | | | 213,576 | | | 224,618 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2010 | | $ | (133,898) | | $ | (101,008) | | $ | (175,320) | | $ | (49,285) | | $ | (37,353) |
Estimated Future Benefit Payments and Contributions The estimated pension benefit payments for the unfunded plan and contributions to the trust are at least the minimum amount required by the Employee Retirement Income Security Act plus payment of unfunded nonqualified benefits. For the qualified pension plan, additional discretionary contributions may be made to the trust to maintain the funded status of the plan. The contributions to the OPEB plans are generally based on the amount of the OPEB plans' periodic benefit costs for accounting purposes as provided in agreements with state regulatory authorities, plus the additional discretionary contribution of the Medicare subsidy receipts. The following table provides the estimated contributions and payments by Registrant Subsidiary for 2012: | | | | | Other Postretirement | | Company | | Pension Plans | | Benefit Plans | | | | (in thousands) | | APCo | | $ | 33,442 | | $ | 16,775 | | I&M | | | 23,938 | | | 13,465 | | OPCo | | | 39,095 | | | 19,705 | | PSO | | | 11,612 | | | 5,982 | | SWEPCo | | | 9,089 | | | 7,089 |
The tables below reflect the total benefits expected to be paid from the plan or from the Registrant Subsidiary's assets. The payments include the participants' contributions to the plan for their share of the cost. In December 2011, the prescription drug plan was amended for certain participants. The impact of the change is reflected in the Benefit Plan Obligation table as a plan amendment. As a result of this amendment to the plan, the Medicare subsidy receipts in the following table are reduced from prior published estimates. Future benefit payments are dependent on the number of employees retiring, whether the retiring employees elect to receive pension benefits as annuities or as lump sum distributions, future integration of the benefit plans with changes to Medicare and other legislation, future levels of interest rates and variances in actuarial results. The estimated payments for the pension benefits and OPEB are as follows: Pension Plans | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 44,506 | | $ | 34,963 | | $ | 69,978 | | $ | 19,989 | | $ | 19,329 | 2013 | | | 45,202 | | | 35,686 | | | 72,422 | | | 20,472 | | | 20,281 | 2014 | | | 47,192 | | | 37,289 | | | 76,712 | | | 22,199 | | | 22,080 | 2015 | | | 46,327 | | | 37,831 | | | 75,063 | | | 22,020 | | | 22,288 | 2016 | | | 48,178 | | | 39,781 | | | 75,042 | | | 21,847 | | | 22,331 | Years 2017 to 2021, in Total | | | 248,647 | | | 213,381 | | | 371,555 | | | 113,723 | | | 115,691 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Benefit Payments | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 27,515 | | $ | 17,849 | | $ | 36,517 | | $ | 7,833 | | $ | 8,302 | 2013 | | | 27,741 | | | 18,289 | | | 36,412 | | | 8,120 | | | 8,628 | 2014 | | | 28,782 | | | 19,085 | | | 37,271 | | | 8,438 | | | 9,179 | 2015 | | | 29,668 | | | 20,117 | | | 38,306 | | | 8,934 | | | 9,598 | 2016 | | | 30,657 | | | 21,358 | | | 39,774 | | | 9,467 | | | 10,214 | Years 2017 to 2021, in Total | | | 168,810 | | | 123,258 | | | 218,695 | | | 54,491 | | | 61,146 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Medicare Subsidy Receipts | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 1,777 | | $ | 1,096 | | $ | 2,276 | | $ | 618 | | $ | 586 | 2013 | | | 272 | | | 28 | | | 43 | | | - | | | - | 2014 | | | 287 | | | 27 | | | 48 | | | - | | | - | 2015 | | | 298 | | | 26 | | | 59 | | | - | | | - | 2016 | | | 307 | | | 26 | | | 67 | | | - | | | - | Years 2017 to 2021, in Total | | | 1,578 | | | 110 | | | 536 | | | - | | | - |
Components of Net Periodic Benefit Cost The following tables provide the components of net periodic benefit cost by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | | | Other Postretirement | | I&M | | Pension Plans | | Benefit Plans | | | | | Years Ended December 31, | | | | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | Service Cost | | $ | 9,447 | | $ | 15,284 | | $ | 14,002 | | $ | 6,119 | | $ | 6,750 | | $ | 5,990 | | Interest Cost | | | 27,726 | | | 29,085 | | | 28,520 | | | 13,610 | | | 14,164 | | | 13,675 | | Expected Return on Plan Assets | | | (36,856) | | | (35,040) | | | (35,733) | | | (13,886) | | | (13,397) | | | (10,259) | | Amortization of Transition Obligation | | | - | | | - | | | - | | | 188 | | | 2,814 | | | 2,814 | | Amortization of Prior Service Cost (Credit) | | | 744 | | | 744 | | | 744 | | | (237) | | | - | | | - | | Amortization of Net Actuarial Loss | | | 14,144 | | | 10,065 | | | 6,406 | | | 3,566 | | | 3,526 | | | 5,213 | | Net Periodic Benefit Cost | | | 15,205 | | | 20,138 | | | 13,939 | | | 9,360 | | | 13,857 | | | 17,433 | | Capitalized Portion | | | (3,163) | | | (4,028) | | | (2,732) | | | (1,947) | | | (2,771) | | | (3,417) | | Net Periodic Benefit Cost Recognized as | | | | | | | | | | | | | | | | | | | | | Expense | | $ | 12,042 | | $ | 16,110 | | $ | 11,207 | | $ | 7,413 | | $ | 11,086 | | $ | 14,016 |
Estimated amounts expected to be amortized to net periodic benefit costs and the impact on each Registrant Subsidiary's balance sheet during 2012 are shown in the following tables: | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Pension Plan - Components | | (in thousands) | Net Actuarial Loss | | $ | 19,816 | | $ | 16,915 | | $ | 29,690 | | $ | 8,074 | | $ | 8,077 | Prior Service Cost (Credit) | | | 475 | | | 407 | | | 743 | | | (948) | | | (793) | Total Estimated 2012 Amortization | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | Pension Plans - | | | | | | | | | | | | | | | | Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 20,190 | | $ | 16,303 | | $ | 16,299 | | $ | 7,126 | | $ | 7,284 | Deferred Income Taxes | | | 35 | | | 357 | | | 4,947 | | | - | | | - | Net of Tax AOCI | | | 66 | | | 662 | | | 9,187 | | | - | | | - | Total | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Other Postretirement Benefit Plans - | | (in thousands) | Components | | | | | | | | | | | | | | | | Net Actuarial Loss | | $ | 10,671 | | $ | 7,325 | | $ | 13,951 | | $ | 3,296 | | $ | 3,822 | Prior Service Credit | | | (2,862) | | | (2,383) | | | (3,873) | | | (1,079) | | | (933) | Transition Obligation | | | 780 | | | 132 | | | 104 | | | - | | | - | Total Estimated 2012 Amortization | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 3,049 | | $ | 4,400 | | $ | 4,565 | | $ | 2,217 | | $ | 1,804 | Deferred Income Taxes | | | 1,939 | | | 236 | | | 1,966 | | | - | | | 380 | Net of Tax AOCI | | | 3,601 | | | 438 | | | 3,651 | | | - | | | 705 | Total | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 |
American Electric Power System Retirement Savings Plans The Registrant Subsidiaries participate in an AEP sponsored defined contribution retirement savings plan, the American Electric Power System Retirement Savings Plan, for substantially all employees who are not members of the United Mine Workers of America (UMWA). This qualified plan offers participants an opportunity to contribute a portion of their pay, includes features under Section 401(k) of the Internal Revenue Code and provides for company matching contributions. The matching contributions to the plan are 100% of the first 1% of eligible employee contributions and 70% of the next 5% of contributions. The following table provides the cost for matching contributions to the retirement savings plans by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | Years Ended December 31, | | Company | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | APCo | | $ | 7,432 | | $ | 7,284 | | $ | 8,673 | | I&M | | | 9,541 | | | 8,969 | | | 10,315 | | OPCo | | | 10,166 | | | 9,706 | | | 11,640 | | PSO | | | 3,626 | | | 3,505 | | | 4,083 | | SWEPCo | | | 4,438 | | | 3,866 | | | 5,269 |
UMWA Benefits APCo, I&M and OPCo provide UMWA pension, health and welfare benefits for certain unionized mining employees, retirees and their survivors who meet eligibility requirements. UMWA trustees make final interpretive determinations with regard to all benefits. The pension benefits are administered by UMWA trustees and contributions are made to their trust funds. APCo, I&M and OPCo administer the health and welfare benefits and pay them from their general assets. The UMWA pension benefits are administered through a multiemployer plan that is different from single-employer plans as an employer's contributions may be used to provide benefits to employees of other participating employers. Required contributions not made by an employer may result in other employers bearing the unfunded plan obligations, while a withdrawing employer may be subject to a withdrawal liability. UMWA pension benefits are provided through the United Mine Workers of America 1974 Pension Plan (Employer Identification Number: 52-1050282, Plan Number 002), which under the Pension Protection Act of 2006 (PPA) was in Seriously Endangered Status for the plan years ending June 30, 2011 and 2010, without utilization of extended amortization provisions. The Plan is required under the PPA to adopt a funding improvement plan by May 25, 2012. Contributions in 2011, 2010 and 2009, which were made under a collective bargaining agreement that expires December 31, 2012, were immaterial and represent less than 5% of the total contributions in the plan's latest annual report for the years ended June 30, 2011, 2010 and 2009. Contributions did not include a surcharge, and there are no minimum contributions for future years. |
Ohio Power Co [Member]
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Benefit Plans [Abstract] |
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Benefit Plans |
7. BENEFIT PLANS For a discussion of investment strategy, investment limitations, target asset allocations and the classification of investments within the fair value hierarchy, see “Investments Held in Trust for Future Liabilities” and “Fair Value Measurements of Assets and Liabilities” sections of Note 1. The Registrant Subsidiaries participate in an AEP sponsored qualified pension plan and two unfunded nonqualified pension plans. Substantially all employees are covered by the qualified plan or both the qualified and a nonqualified pension plan. The Registrant Subsidiaries also participate in OPEB plans sponsored by AEP to provide medical and life insurance benefits for retired employees. Due to the Registrant Subsidiaries' participation in AEP's benefits plans, the assumptions used by the actuary and the accounting for the plans by each subsidiary are the same. This section details the assumptions that apply to all Registrant Subsidiaries and the rate of compensation increase for each subsidiary. The Registrant Subsidiaries recognize the funded status associated with defined benefit pension and OPEB plans in their balance sheets. Disclosures about the plans are required by the “Compensation – Retirement Benefits” accounting guidance. The Registrant Subsidiaries recognize an asset for a plan's overfunded status or a liability for a plan's underfunded status, and recognize, as a component of other comprehensive income, the changes in the funded status of the plan that arise during the year that are not recognized as a component of net periodic benefit cost. The Registrant Subsidiaries record a regulatory asset instead of other comprehensive income for qualifying benefit costs of regulated operations that for ratemaking purposes are deferred for future recovery. The cumulative funded status adjustment is equal to the remaining unrecognized deferrals for unamortized actuarial losses or gains, prior service costs and transition obligations, such that remaining deferred costs result in an AOCI equity reduction or regulatory asset and deferred gains result in an AOCI equity addition or regulatory liability. Actuarial Assumptions for Benefit Obligations The weighted-average assumptions as of December 31 of each year used in the measurement of the Registrant Subsidiaries' benefit obligations are shown in the following tables: | | | | | Other Postretirement | | | Pension Plans | | | Benefit Plans | Assumption | | 2011 | | 2010 | | | 2011 | | 2010 | Discount Rate | | 4.55 | % | | 5.05 | % | | | 4.75 | % | | 5.25 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase (a) | | 2011 | | 2010 | | APCo | | 4.65 | % | | 4.70 | % | | I&M | | 4.90 | % | | 4.90 | % | | OPCo | | 4.95 | % | | 5.05 | % | | PSO | | 4.85 | % | | 4.95 | % | | SWEPCo | | 4.70 | % | | 4.80 | % |
(a) Rates are for base pay only. In addition, an amount is added to reflect target incentive compensation for exempt employees and overtime and incentive pay for nonexempt employees. A duration-based method is used to determine the discount rate for the plans. A hypothetical portfolio of high quality corporate bonds similar to those included in the Moody's Aa bond index is constructed with a duration matching the benefit plan liability. The composite yield on the hypothetical bond portfolio is used as the discount rate for the plan. The discount rate is the same for each Registrant Subsidiary. For 2011, the rate of compensation increase assumed varies with the age of the employee, ranging from 3.5% per year to 11.5% per year, with the average increase shown in the table above. The compensation increase rates reflect variations in each Registrant Subsidiary's population participating in the pension plan. Actuarial Assumptions for Net Periodic Benefit Costs The weighted-average assumptions as of January 1 of each year used in the measurement of each Registrant Subsidiary's benefit costs are shown in the following tables: | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | Assumptions | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | Discount Rate | | 5.05 | % | | 5.60 | % | | 6.00 | % | | 5.25 | % | | 5.85 | % | | 6.10 | % | | Expected Return on Plan Assets | | 7.75 | % | | 8.00 | % | | 8.00 | % | | 7.50 | % | | 8.00 | % | | 7.75 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase | | 2011 | | 2010 | | 2009 | | APCo | | 4.65 | % | | 4.35 | % | | 5.65 | % | | I&M | | 4.90 | % | | 4.55 | % | | 5.85 | % | | OPCo | | 4.95 | % | | 4.70 | % | | 6.00 | % | | PSO | | 4.85 | % | | 4.60 | % | | 5.90 | % | | SWEPCo | | 4.70 | % | | 4.45 | % | | 5.75 | % |
The expected return on plan assets was determined by evaluating historical returns, the current investment climate (yield on fixed income securities and other recent investment market indicators), rate of inflation and current prospects for economic growth. The expected return on plan assets is the same for each Registrant Subsidiary. The health care trend rate assumptions as of January 1 of each year used for OPEB plans measurement purposes are shown below: | Health Care Trend Rates | | 2011 | | 2010 | | Initial | | 7.50 | % | | 8.00 | % | | Ultimate | | 5.00 | % | | 5.00 | % | | Year Ultimate Reached | | 2016 | | 2016 |
Assumed health care cost trend rates have a significant effect on the amounts reported for the OPEB health care plans. A 1% change in assumed health care cost trend rates would have the following effects: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Effect on Total Service and Interest Cost | | | | | | | | | | | | | | | | | Components of Net Periodic Postretirement | | | | | | | | | | | | | | | | | Health Care Benefit Cost: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 3,806 | | $ | 2,972 | | $ | 5,188 | | $ | 1,300 | | $ | 1,500 | | 1% Decrease | | | (3,015) | | | (2,367) | | | (4,110) | | | (1,036) | | | (1,195) | | | | | | | | | | | | | | | | | | Effect on the Health Care Component of the | | | | | | | | | | | | | | | | | Accumulated Postretirement Benefit | | | | | | | | | | | | | | | | | Obligation: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 50,216 | | $ | 33,657 | | $ | 65,251 | | $ | 15,088 | | $ | 17,499 | | 1% Decrease | | | (40,748) | | | (27,448) | | | (53,015) | | | (12,314) | | | (14,281) |
Significant Concentrations of Risk within Plan Assets In addition to establishing the target asset allocation of plan assets, the investment policy also places restrictions on securities to limit significant concentrations within plan assets. The investment policy establishes guidelines that govern maximum market exposure, security restrictions, prohibited asset classes, prohibited types of transactions, minimum credit quality, average portfolio credit quality, portfolio duration and concentration limits. The guidelines were established to mitigate the risk of loss due to significant concentrations in any investment. Management monitors the plans to control security diversification and ensure compliance with the investment policy. At December 31, 2011, the assets were invested in compliance with all investment limits. See “Investments Held in Trust for Future Liabilities” section of Note 1 for limit details. Benefit Plan Obligations, Plan Assets and Funded Status as of December 31, 2011 and 2010 The following tables provide a reconciliation of the changes in the plans' benefit obligations, fair value of plan assets and funded status as of December 31. The benefit obligation for the defined benefit pension and OPEB plans are the projected benefit obligation and the accumulated benefit obligation, respectively. OPCo | | | | Other Postretirement | | | Pension Plans | | Benefit Plans | | | 2011 | | 2010 | | 2011 | | 2010 | Change in Benefit Obligation | | (in thousands) | Benefit Obligation at January 1 | | $ | 984,089 | | $ | 981,481 | | $ | 506,255 | | $ | 457,872 | Service Cost | | | 10,230 | | | 17,254 | | | 7,827 | | | 8,187 | Interest Cost | | | 48,350 | | | 51,900 | | | 25,497 | | | 26,498 | Actuarial Loss | | | 42,693 | | | 31,409 | | | 49,132 | | | 45,633 | Plan Amendment Prior Service Credit | | | - | | | - | | | (42,357) | | | (6,039) | Curtailment | | | - | | | - | | | 605 | | | - | Benefit Payments | | | (64,472) | | | (97,955) | | | (38,347) | | | (35,673) | Participant Contributions | | | - | | | - | | | 8,828 | | | 7,253 | Medicare Subsidy | | | - | | | - | | | 2,452 | | | 2,524 | Benefit Obligation at December 31 | | $ | 1,020,890 | | $ | 984,089 | | $ | 519,892 | | $ | 506,255 | | | | | | | | | | | | | | Change in Fair Value of Plan Assets | | | | | | | | | | | | | Fair Value of Plan Assets at January 1 | | $ | 799,281 | | $ | 756,768 | | $ | 333,198 | | $ | 299,551 | Actual Gain (Loss) on Plan Assets | | | 63,181 | | | 81,765 | | | (6,589) | | | 38,466 | Company Contributions | | | 127,949 | | | 58,703 | | | 14,746 | | | 23,601 | Participant Contributions | | | - | | | - | | | 8,828 | | | 7,253 | Benefit Payments | | | (64,472) | | | (97,955) | | | (38,347) | | | (35,673) | Fair Value of Plan Assets at December 31 | | $ | 925,939 | | $ | 799,281 | | $ | 311,836 | | $ | 333,198 | | | | | | | | | | | | | | Underfunded Status at December 31 | | $ | (94,951) | | $ | (184,808) | | $ | (208,056) | | $ | (173,057) |
Amounts Recognized on the Registrant Subsidiaries' Balance Sheets as of December 31, 2011 and 2010 | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | | | | December 31, | | OPCo | | 2011 | | 2010 | | 2011 | | 2010 | | | | | (in thousands) | | Other Current Liabilities - Accrued Short-term | | | | | | | | | | | | | | | Benefit Liability | | $ | (62) | | $ | (59) | | $ | (991) | | $ | (667) | | Employee Benefits and Pension Obligations - | | | | | | | | | | | | | | | Accrued Long-term Benefit Liability | | | (94,889) | | | (184,749) | | | (207,065) | | | (172,390) | | Underfunded Status | | $ | (94,951) | | $ | (184,808) | | $ | (208,056) | | $ | (173,057) |
Amounts Included in AOCI and Regulatory Assets as of December 31, 2011 and 2010 | | | | | Other Postretirement | OPCo | | Pension Plans | | Benefit Plans | | | | December 31, | | | | 2011 | | 2010 | | 2011 | | 2010 | Components | | (in thousands) | Net Actuarial Loss | | $ | 517,180 | | $ | 497,032 | | $ | 231,189 | | $ | 158,876 | Prior Service Cost (Credit) | | | 2,025 | | | 3,499 | | | (44,742) | | | (2,597) | Transition Obligation | | | - | | | - | | | 104 | | | 254 | | | | | | | | | | | | | | | Recorded as | | | | | | | | | | | | | Regulatory Assets | | $ | 305,240 | | $ | 292,702 | | $ | 84,472 | | $ | 71,129 | Deferred Income Taxes | | | 74,888 | | | 72,741 | | | 35,728 | | | 29,888 | Net of Tax AOCI | | | 139,077 | | | 135,088 | | | 66,351 | | | 55,516 |
Components of the change in amounts included in AOCI and Regulatory Assets by Registrant Subsidiary during the years ended December 31, 2011 and 2010 are as follows: Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 33,995 | | $ | 21,372 | | $ | 44,976 | | $ | 8,712 | | $ | 8,958 | Amortization of Actuarial Loss | | | (16,570) | | | (14,144) | | | (24,828) | | | (6,757) | | | (6,759) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 795 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 16,508 | | $ | 6,484 | | $ | 18,674 | | $ | 2,905 | | $ | 2,994 | | | | | | | | | | | | | | | | | | Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss (Gain) During the Year | | $ | 14,769 | | $ | 24,732 | | $ | 26,308 | | $ | (2,346) | | $ | (6,379) | Amortization of Actuarial Loss | | | (11,842) | | | (10,065) | | | (18,150) | | | (5,188) | | | (5,242) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 796 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 2,010 | | $ | 13,923 | | $ | 6,684 | | $ | (6,584) | | $ | (10,825) | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 65,104 | | $ | 46,321 | | $ | 79,611 | | $ | 22,147 | | $ | 23,619 | Amortization of Actuarial Loss | | | (5,839) | | | (3,566) | | | (7,298) | | | (1,553) | | | (1,785) | Prior Service Credit | | (31,145) | | | (24,846) | | | (42,357) | | | (11,612) | | | (9,409) | Amortization of Prior Service Cost (Credit) | | | 171 | | | 237 | | | 212 | | | 75 | | | (258) | Amortization of Transition Obligation | | | (1,167) | | | (188) | | | (150) | | | - | | | - | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 27,124 | | $ | 17,958 | | $ | 30,018 | | $ | 9,057 | | $ | 12,167 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 23,876 | | $ | 13,372 | | $ | 31,207 | | $ | 7,283 | | $ | 7,570 | Amortization of Actuarial Loss | | | (5,410) | | | (3,526) | | | (6,877) | | | (1,573) | | | (1,711) | Prior Service Credit | | (4,257) | | | (4,273) | | | (6,039) | | | (2,408) | | | (2,399) | Amortization of Transition Obligation | | | (5,244) | | | (2,814) | | | (6,642) | | | (2,805) | | | (2,461) | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 8,965 | | $ | 2,759 | | $ | 11,649 | | $ | 497 | | $ | 999 |
Pension and Other Postretirement Plans' Assets The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | OPCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 313,034 | | $ | - | | $ | - | | $ | - | | $ | 313,034 | | 33.8 | % | | | International | | | 85,825 | | | - | | | - | | | - | | | 85,825 | | 9.3 | % | | | Real Estate Investment Trusts | | | 22,379 | | | - | | | - | | | - | | | 22,379 | | 2.4 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 27,641 | | | - | | | - | | | 27,641 | | 3.0 | % | | Subtotal - Equities | | | 421,238 | | | 27,641 | | | - | | | - | | | 448,879 | | 48.5 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 5,650 | | | - | | | - | | | 5,650 | | 0.6 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 121,741 | | | - | | | - | | | 121,741 | | 13.2 | % | | | Corporate Debt | | | - | | | 211,883 | | | 1,372 | | | - | | | 213,255 | | 23.0 | % | | | Foreign Debt | | | - | | | 41,027 | | | - | | | - | | | 41,027 | | 4.4 | % | | | State and Local Government | | | - | | | 10,341 | | | - | | | - | | | 10,341 | | 1.1 | % | | | Other - Asset Backed | | | - | | | 5,595 | | | - | | | - | | | 5,595 | | 0.6 | % | | Subtotal - Fixed Income | | | - | | | 396,237 | | | 1,372 | | | - | | | 397,609 | | 42.9 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 35,148 | | | - | | | 35,148 | | 3.8 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 34,505 | | | - | | | 34,505 | | 3.7 | % | | Securities Lending | | | - | | | 46,217 | | | - | | | - | | | 46,217 | | 5.0 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (50,739) | | | (50,739) | | (5.5) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | - | | | 19,964 | | | - | | | - | | | 19,964 | | 2.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | (5,644) | | | (5,644) | | (0.6) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 421,238 | | $ | 490,059 | | $ | 71,025 | | $ | (56,383) | | $ | 925,939 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of assets classified as Level 3 in the fair value hierarchy by Registrant Subsidiary for pension assets: | | | | Corporate | | | | Alternative | | Total | | OPCo | | Debt | | Real Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2011 | | $ | - | | $ | 17,239 | | $ | 26,933 | | $ | 44,172 | | Actual Return on Plan Assets | | | | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | - | | | 4,985 | | | 2,167 | | | 7,152 | | | Relating to Assets Sold During the Period | | | - | | | - | | | 744 | | | 744 | | Purchases and Sales | | | - | | | 12,924 | | | 4,661 | | | 17,585 | | Transfers into Level 3 | | | 1,372 | | | - | | | - | | | 1,372 | | Transfers out of Level 3 | | | - | | | - | | | - | | | - | | Balance as of December 31, 2011 | | $ | 1,372 | | $ | 35,148 | | $ | 34,505 | | $ | 71,025 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | OPCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 76,921 | | $ | - | | $ | - | | $ | - | | $ | 76,921 | | 24.7 | % | | | International | | | 84,133 | | | - | | | - | | | - | | | 84,133 | | 27.0 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 21,934 | | | - | | | - | | | 21,934 | | 7.0 | % | | | | | Subtotal Equities | | | 161,054 | | | 21,934 | | | - | | | - | | | 182,988 | | 58.7 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 15,310 | | | - | | | - | | | 15,310 | | 4.9 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 17,870 | | | - | | | - | | | 17,870 | | 5.7 | % | | | Corporate Debt | | | - | | | 33,652 | | | - | | | - | | | 33,652 | | 10.8 | % | | | Foreign Debt | | | - | | | 7,134 | | | - | | | - | | | 7,134 | | 2.3 | % | | | State and Local Government | | | - | | | 1,861 | | | - | | | - | | | 1,861 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 424 | | | - | | | - | | | 424 | | 0.1 | % | | | | | Subtotal Fixed Income | | | - | | | 76,251 | | | - | | | - | | | 76,251 | | 24.4 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 10,225 | | | - | | | - | | | 10,225 | | 3.3 | % | | | United States Bonds | | | - | | | 34,910 | | | - | | | - | | | 34,910 | | 11.2 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | 3,718 | | | 5,180 | | | - | | | - | | | 8,898 | | 2.9 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (a) | | | - | | | - | | | - | | | (1,436) | | | (1,436) | | (0.5) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 164,772 | | $ | 148,500 | | $ | - | | $ | (1,436) | | $ | 311,836 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | OPCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 279,635 | | $ | 571 | | $ | - | | $ | - | | $ | 280,206 | | 35.1 | % | | | International | | | 83,473 | | | - | | | - | | | - | | | 83,473 | | 10.4 | % | | | Real Estate Investment Trusts | | | 23,273 | | | - | | | - | | | - | | | 23,273 | | 2.9 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 33,695 | | | - | | | - | | | 33,695 | | 4.2 | % | | Subtotal - Equities | | | 386,381 | | | 34,266 | | | - | | | - | | | 420,647 | | 52.6 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 131,355 | | | - | | | - | | | 131,355 | | 16.4 | % | | | Corporate Debt | | | - | | | 139,172 | | | - | | | - | | | 139,172 | | 17.4 | % | | | Foreign Debt | | | - | | | 26,340 | | | - | | | - | | | 26,340 | | 3.3 | % | | | State and Local Government | | | - | | | 4,708 | | | - | | | - | | | 4,708 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 10,594 | | | - | | | - | | | 10,594 | | 1.3 | % | | Subtotal - Fixed Income | | | - | | | 312,169 | | | - | | | - | | | 312,169 | | 39.0 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 17,239 | | | - | | | 17,239 | | 2.2 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 26,933 | | | - | | | 26,933 | | 3.4 | % | | Securities Lending | | | - | | | 52,686 | | | - | | | - | | | 52,686 | | 6.6 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (57,142) | | | (57,142) | | (7.1) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (b) | | | - | | | 26,293 | | | - | | | 330 | | | 26,623 | | 3.3 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (c) | | | - | | | - | | | - | | | 126 | | | 126 | | - | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 386,381 | | $ | 425,414 | | $ | 44,172 | | $ | (56,686) | | $ | 799,281 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent foreign currency holdings. (c) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of real estate and alternative investments classified as Level 3 in the fair value hierarchy for pension assets by Registrant Subsidiary: | | | | | | Alternative | | Total | | OPCo | | Real Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2010 | | $ | 20,125 | | $ | 23,498 | | $ | 43,623 | | Actual Return on Plan Assets | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | (2,886) | | | 557 | | | (2,329) | | | Relating to Assets Sold During the Period | | | - | | | 181 | | | 181 | | Purchases and Sales | | | - | | | 2,697 | | | 2,697 | | Transfers into Level 3 | | | - | | | - | | | - | | Transfers out of Level 3 | | | - | | | - | | | - | | Balance as of December 31, 2010 | | $ | 17,239 | | $ | 26,933 | | $ | 44,172 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | OPCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 133,225 | | $ | - | | $ | - | | $ | - | | $ | 133,225 | | 40.0 | % | | | International | | | 50,290 | | | - | | | - | | | - | | | 50,290 | | 15.1 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 26,179 | | | - | | | - | | | 26,179 | | 7.9 | % | | Subtotal - Equities | | | 183,515 | | | 26,179 | | | - | | | - | | | 209,694 | | 63.0 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 10,889 | | | - | | | - | | | 10,889 | | 3.3 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 21,372 | | | - | | | - | | | 21,372 | | 6.4 | % | | | Corporate Debt | | | - | | | 25,102 | | | - | | | - | | | 25,102 | | 7.5 | % | | | Foreign Debt | | | - | | | 5,658 | | | - | | | - | | | 5,658 | | 1.7 | % | | | State and Local Government | | | - | | | 797 | | | - | | | - | | | 797 | | 0.2 | % | | | Other - Asset Backed | | | - | | | 216 | | | - | | | - | | | 216 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 64,034 | | | - | | | - | | | 64,034 | | 19.2 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 11,192 | | | - | | | - | | | 11,192 | | 3.3 | % | | | United States Bonds | | | - | | | 37,082 | | | - | | | - | | | 37,082 | | 11.1 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (a) | | | 4,678 | | | 5,712 | | | - | | | 195 | | | 10,585 | | 3.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | 611 | | | 611 | | 0.2 | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 188,193 | | $ | 144,199 | | $ | - | | $ | 806 | | $ | 333,198 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent foreign currency holdings. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. Determination of Pension Expense The determination of pension expense or income is based on a market-related valuation of assets which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded. Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 672,967 | | $ | 569,855 | | $ | 1,005,608 | | $ | 269,230 | | $ | 269,809 | Nonqualified Pension Plans | | | 234 | | | 168 | | | 821 | | | 1,368 | | | 1,223 | Total as of December 31, 2011 | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 646,513 | | $ | 551,702 | | $ | 973,802 | | $ | 261,535 | | $ | 260,838 | Nonqualified Pension Plans | | | 221 | | | 994 | | | 799 | | | 1,326 | | | 1,133 | Total as of December 31, 2010 | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 |
For the underfunded pension plans that had an accumulated benefit obligation in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets of these plans at December 31, 2011 and 2010 were as follows: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 681,450 | | $ | 581,677 | | $ | 1,020,890 | | $ | 277,448 | | $ | 277,594 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | Fair Value of Plan Assets | | | 570,756 | | | 503,926 | | | 925,939 | | | 245,769 | | | 255,861 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2011 | | $ | (102,445) | | $ | (66,097) | | $ | (80,490) | | $ | (24,829) | | $ | (15,171) | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 652,219 | | $ | 560,982 | | $ | 984,089 | | $ | 268,180 | | $ | 267,206 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 | Fair Value of Plan Assets | | | 512,836 | | | 451,688 | | | 799,281 | | | 213,576 | | | 224,618 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2010 | | $ | (133,898) | | $ | (101,008) | | $ | (175,320) | | $ | (49,285) | | $ | (37,353) |
Estimated Future Benefit Payments and Contributions The estimated pension benefit payments for the unfunded plan and contributions to the trust are at least the minimum amount required by the Employee Retirement Income Security Act plus payment of unfunded nonqualified benefits. For the qualified pension plan, additional discretionary contributions may be made to the trust to maintain the funded status of the plan. The contributions to the OPEB plans are generally based on the amount of the OPEB plans' periodic benefit costs for accounting purposes as provided in agreements with state regulatory authorities, plus the additional discretionary contribution of the Medicare subsidy receipts. The following table provides the estimated contributions and payments by Registrant Subsidiary for 2012: | | | | | Other Postretirement | | Company | | Pension Plans | | Benefit Plans | | | | (in thousands) | | APCo | | $ | 33,442 | | $ | 16,775 | | I&M | | | 23,938 | | | 13,465 | | OPCo | | | 39,095 | | | 19,705 | | PSO | | | 11,612 | | | 5,982 | | SWEPCo | | | 9,089 | | | 7,089 |
The tables below reflect the total benefits expected to be paid from the plan or from the Registrant Subsidiary's assets. The payments include the participants' contributions to the plan for their share of the cost. In December 2011, the prescription drug plan was amended for certain participants. The impact of the change is reflected in the Benefit Plan Obligation table as a plan amendment. As a result of this amendment to the plan, the Medicare subsidy receipts in the following table are reduced from prior published estimates. Future benefit payments are dependent on the number of employees retiring, whether the retiring employees elect to receive pension benefits as annuities or as lump sum distributions, future integration of the benefit plans with changes to Medicare and other legislation, future levels of interest rates and variances in actuarial results. The estimated payments for the pension benefits and OPEB are as follows: Pension Plans | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 44,506 | | $ | 34,963 | | $ | 69,978 | | $ | 19,989 | | $ | 19,329 | 2013 | | | 45,202 | | | 35,686 | | | 72,422 | | | 20,472 | | | 20,281 | 2014 | | | 47,192 | | | 37,289 | | | 76,712 | | | 22,199 | | | 22,080 | 2015 | | | 46,327 | | | 37,831 | | | 75,063 | | | 22,020 | | | 22,288 | 2016 | | | 48,178 | | | 39,781 | | | 75,042 | | | 21,847 | | | 22,331 | Years 2017 to 2021, in Total | | | 248,647 | | | 213,381 | | | 371,555 | | | 113,723 | | | 115,691 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Benefit Payments | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 27,515 | | $ | 17,849 | | $ | 36,517 | | $ | 7,833 | | $ | 8,302 | 2013 | | | 27,741 | | | 18,289 | | | 36,412 | | | 8,120 | | | 8,628 | 2014 | | | 28,782 | | | 19,085 | | | 37,271 | | | 8,438 | | | 9,179 | 2015 | | | 29,668 | | | 20,117 | | | 38,306 | | | 8,934 | | | 9,598 | 2016 | | | 30,657 | | | 21,358 | | | 39,774 | | | 9,467 | | | 10,214 | Years 2017 to 2021, in Total | | | 168,810 | | | 123,258 | | | 218,695 | | | 54,491 | | | 61,146 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Medicare Subsidy Receipts | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 1,777 | | $ | 1,096 | | $ | 2,276 | | $ | 618 | | $ | 586 | 2013 | | | 272 | | | 28 | | | 43 | | | - | | | - | 2014 | | | 287 | | | 27 | | | 48 | | | - | | | - | 2015 | | | 298 | | | 26 | | | 59 | | | - | | | - | 2016 | | | 307 | | | 26 | | | 67 | | | - | | | - | Years 2017 to 2021, in Total | | | 1,578 | | | 110 | | | 536 | | | - | | | - |
Components of Net Periodic Benefit Cost The following tables provide the components of net periodic benefit cost by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | | | Other Postretirement | | OPCo | | Pension Plans | | Benefit Plans | | | | | Years Ended December 31, | | | | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | Service Cost | | $ | 10,230 | | $ | 17,254 | | $ | 16,538 | | $ | 7,827 | | $ | 8,187 | | $ | 7,347 | | Interest Cost | | | 48,350 | | | 51,900 | | | 52,629 | | | 25,497 | | | 26,498 | | | 25,818 | | Expected Return on Plan Assets | | | (65,464) | | | (69,077) | | | (71,554) | | | (24,514) | | | (24,092) | | | (18,685) | | Curtailment | | | - | | | - | | | - | | | 605 | | | - | | | - | | Amortization of Transition Obligation | | | - | | | - | | | - | | | 150 | | | 6,642 | | | 6,643 | | Amortization of Prior Service Cost (Credit) | | | 1,474 | | | 1,474 | | | 1,475 | | | (212) | | | - | | | - | | Amortization of Net Actuarial Loss | | | 24,828 | | | 18,150 | | | 11,931 | | | 7,298 | | | 6,877 | | | 9,988 | | Net Periodic Benefit Cost | | | 19,418 | | | 19,701 | | | 11,019 | | | 16,651 | | | 24,112 | | | 31,111 | | Capitalized Portion | | | (6,932) | | | (6,843) | | | (3,901) | | | (5,944) | | | (8,334) | | | (10,913) | | Net Periodic Benefit Cost Recognized as | | | | | | | | | | | | | | | | | | | | | Expense | | $ | 12,486 | | $ | 12,858 | | $ | 7,118 | | $ | 10,707 | | $ | 15,778 | | $ | 20,198 |
Estimated amounts expected to be amortized to net periodic benefit costs and the impact on each Registrant Subsidiary's balance sheet during 2012 are shown in the following tables: | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Pension Plan - Components | | (in thousands) | Net Actuarial Loss | | $ | 19,816 | | $ | 16,915 | | $ | 29,690 | | $ | 8,074 | | $ | 8,077 | Prior Service Cost (Credit) | | | 475 | | | 407 | | | 743 | | | (948) | | | (793) | Total Estimated 2012 Amortization | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | Pension Plans - | | | | | | | | | | | | | | | | Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 20,190 | | $ | 16,303 | | $ | 16,299 | | $ | 7,126 | | $ | 7,284 | Deferred Income Taxes | | | 35 | | | 357 | | | 4,947 | | | - | | | - | Net of Tax AOCI | | | 66 | | | 662 | | | 9,187 | | | - | | | - | Total | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Other Postretirement Benefit Plans - | | (in thousands) | Components | | | | | | | | | | | | | | | | Net Actuarial Loss | | $ | 10,671 | | $ | 7,325 | | $ | 13,951 | | $ | 3,296 | | $ | 3,822 | Prior Service Credit | | | (2,862) | | | (2,383) | | | (3,873) | | | (1,079) | | | (933) | Transition Obligation | | | 780 | | | 132 | | | 104 | | | - | | | - | Total Estimated 2012 Amortization | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 3,049 | | $ | 4,400 | | $ | 4,565 | | $ | 2,217 | | $ | 1,804 | Deferred Income Taxes | | | 1,939 | | | 236 | | | 1,966 | | | - | | | 380 | Net of Tax AOCI | | | 3,601 | | | 438 | | | 3,651 | | | - | | | 705 | Total | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 |
American Electric Power System Retirement Savings Plans The Registrant Subsidiaries participate in an AEP sponsored defined contribution retirement savings plan, the American Electric Power System Retirement Savings Plan, for substantially all employees who are not members of the United Mine Workers of America (UMWA). This qualified plan offers participants an opportunity to contribute a portion of their pay, includes features under Section 401(k) of the Internal Revenue Code and provides for company matching contributions. The matching contributions to the plan are 100% of the first 1% of eligible employee contributions and 70% of the next 5% of contributions. The following table provides the cost for matching contributions to the retirement savings plans by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | Years Ended December 31, | | Company | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | APCo | | $ | 7,432 | | $ | 7,284 | | $ | 8,673 | | I&M | | | 9,541 | | | 8,969 | | | 10,315 | | OPCo | | | 10,166 | | | 9,706 | | | 11,640 | | PSO | | | 3,626 | | | 3,505 | | | 4,083 | | SWEPCo | | | 4,438 | | | 3,866 | | | 5,269 |
UMWA Benefits APCo, I&M and OPCo provide UMWA pension, health and welfare benefits for certain unionized mining employees, retirees and their survivors who meet eligibility requirements. UMWA trustees make final interpretive determinations with regard to all benefits. The pension benefits are administered by UMWA trustees and contributions are made to their trust funds. APCo, I&M and OPCo administer the health and welfare benefits and pay them from their general assets. The UMWA pension benefits are administered through a multiemployer plan that is different from single-employer plans as an employer's contributions may be used to provide benefits to employees of other participating employers. Required contributions not made by an employer may result in other employers bearing the unfunded plan obligations, while a withdrawing employer may be subject to a withdrawal liability. UMWA pension benefits are provided through the United Mine Workers of America 1974 Pension Plan (Employer Identification Number: 52-1050282, Plan Number 002), which under the Pension Protection Act of 2006 (PPA) was in Seriously Endangered Status for the plan years ending June 30, 2011 and 2010, without utilization of extended amortization provisions. The Plan is required under the PPA to adopt a funding improvement plan by May 25, 2012. Contributions in 2011, 2010 and 2009, which were made under a collective bargaining agreement that expires December 31, 2012, were immaterial and represent less than 5% of the total contributions in the plan's latest annual report for the years ended June 30, 2011, 2010 and 2009. Contributions did not include a surcharge, and there are no minimum contributions for future years. |
Public Service Co Of Oklahoma [Member]
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Benefit Plans [Abstract] |
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Benefit Plans |
7. BENEFIT PLANS For a discussion of investment strategy, investment limitations, target asset allocations and the classification of investments within the fair value hierarchy, see “Investments Held in Trust for Future Liabilities” and “Fair Value Measurements of Assets and Liabilities” sections of Note 1. The Registrant Subsidiaries participate in an AEP sponsored qualified pension plan and two unfunded nonqualified pension plans. Substantially all employees are covered by the qualified plan or both the qualified and a nonqualified pension plan. The Registrant Subsidiaries also participate in OPEB plans sponsored by AEP to provide medical and life insurance benefits for retired employees. Due to the Registrant Subsidiaries' participation in AEP's benefits plans, the assumptions used by the actuary and the accounting for the plans by each subsidiary are the same. This section details the assumptions that apply to all Registrant Subsidiaries and the rate of compensation increase for each subsidiary. The Registrant Subsidiaries recognize the funded status associated with defined benefit pension and OPEB plans in their balance sheets. Disclosures about the plans are required by the “Compensation – Retirement Benefits” accounting guidance. The Registrant Subsidiaries recognize an asset for a plan's overfunded status or a liability for a plan's underfunded status, and recognize, as a component of other comprehensive income, the changes in the funded status of the plan that arise during the year that are not recognized as a component of net periodic benefit cost. The Registrant Subsidiaries record a regulatory asset instead of other comprehensive income for qualifying benefit costs of regulated operations that for ratemaking purposes are deferred for future recovery. The cumulative funded status adjustment is equal to the remaining unrecognized deferrals for unamortized actuarial losses or gains, prior service costs and transition obligations, such that remaining deferred costs result in an AOCI equity reduction or regulatory asset and deferred gains result in an AOCI equity addition or regulatory liability. Actuarial Assumptions for Benefit Obligations The weighted-average assumptions as of December 31 of each year used in the measurement of the Registrant Subsidiaries' benefit obligations are shown in the following tables: | | | | | Other Postretirement | | | Pension Plans | | | Benefit Plans | Assumption | | 2011 | | 2010 | | | 2011 | | 2010 | Discount Rate | | 4.55 | % | | 5.05 | % | | | 4.75 | % | | 5.25 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase (a) | | 2011 | | 2010 | | APCo | | 4.65 | % | | 4.70 | % | | I&M | | 4.90 | % | | 4.90 | % | | OPCo | | 4.95 | % | | 5.05 | % | | PSO | | 4.85 | % | | 4.95 | % | | SWEPCo | | 4.70 | % | | 4.80 | % |
(a) Rates are for base pay only. In addition, an amount is added to reflect target incentive compensation for exempt employees and overtime and incentive pay for nonexempt employees. A duration-based method is used to determine the discount rate for the plans. A hypothetical portfolio of high quality corporate bonds similar to those included in the Moody's Aa bond index is constructed with a duration matching the benefit plan liability. The composite yield on the hypothetical bond portfolio is used as the discount rate for the plan. The discount rate is the same for each Registrant Subsidiary. For 2011, the rate of compensation increase assumed varies with the age of the employee, ranging from 3.5% per year to 11.5% per year, with the average increase shown in the table above. The compensation increase rates reflect variations in each Registrant Subsidiary's population participating in the pension plan. Actuarial Assumptions for Net Periodic Benefit Costs The weighted-average assumptions as of January 1 of each year used in the measurement of each Registrant Subsidiary's benefit costs are shown in the following tables: | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | Assumptions | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | Discount Rate | | 5.05 | % | | 5.60 | % | | 6.00 | % | | 5.25 | % | | 5.85 | % | | 6.10 | % | | Expected Return on Plan Assets | | 7.75 | % | | 8.00 | % | | 8.00 | % | | 7.50 | % | | 8.00 | % | | 7.75 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase | | 2011 | | 2010 | | 2009 | | APCo | | 4.65 | % | | 4.35 | % | | 5.65 | % | | I&M | | 4.90 | % | | 4.55 | % | | 5.85 | % | | OPCo | | 4.95 | % | | 4.70 | % | | 6.00 | % | | PSO | | 4.85 | % | | 4.60 | % | | 5.90 | % | | SWEPCo | | 4.70 | % | | 4.45 | % | | 5.75 | % |
The expected return on plan assets was determined by evaluating historical returns, the current investment climate (yield on fixed income securities and other recent investment market indicators), rate of inflation and current prospects for economic growth. The expected return on plan assets is the same for each Registrant Subsidiary. The health care trend rate assumptions as of January 1 of each year used for OPEB plans measurement purposes are shown below: | Health Care Trend Rates | | 2011 | | 2010 | | Initial | | 7.50 | % | | 8.00 | % | | Ultimate | | 5.00 | % | | 5.00 | % | | Year Ultimate Reached | | 2016 | | 2016 |
Assumed health care cost trend rates have a significant effect on the amounts reported for the OPEB health care plans. A 1% change in assumed health care cost trend rates would have the following effects: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Effect on Total Service and Interest Cost | | | | | | | | | | | | | | | | | Components of Net Periodic Postretirement | | | | | | | | | | | | | | | | | Health Care Benefit Cost: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 3,806 | | $ | 2,972 | | $ | 5,188 | | $ | 1,300 | | $ | 1,500 | | 1% Decrease | | | (3,015) | | | (2,367) | | | (4,110) | | | (1,036) | | | (1,195) | | | | | | | | | | | | | | | | | | Effect on the Health Care Component of the | | | | | | | | | | | | | | | | | Accumulated Postretirement Benefit | | | | | | | | | | | | | | | | | Obligation: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 50,216 | | $ | 33,657 | | $ | 65,251 | | $ | 15,088 | | $ | 17,499 | | 1% Decrease | | | (40,748) | | | (27,448) | | | (53,015) | | | (12,314) | | | (14,281) |
Significant Concentrations of Risk within Plan Assets In addition to establishing the target asset allocation of plan assets, the investment policy also places restrictions on securities to limit significant concentrations within plan assets. The investment policy establishes guidelines that govern maximum market exposure, security restrictions, prohibited asset classes, prohibited types of transactions, minimum credit quality, average portfolio credit quality, portfolio duration and concentration limits. The guidelines were established to mitigate the risk of loss due to significant concentrations in any investment. Management monitors the plans to control security diversification and ensure compliance with the investment policy. At December 31, 2011, the assets were invested in compliance with all investment limits. See “Investments Held in Trust for Future Liabilities” section of Note 1 for limit details. Benefit Plan Obligations, Plan Assets and Funded Status as of December 31, 2011 and 2010 The following tables provide a reconciliation of the changes in the plans' benefit obligations, fair value of plan assets and funded status as of December 31. The benefit obligation for the defined benefit pension and OPEB plans are the projected benefit obligation and the accumulated benefit obligation, respectively. PSO | | | | Other Postretirement | | | Pension Plans | | Benefit Plans | | | 2011 | | 2010 | | 2011 | | 2010 | Change in Benefit Obligation | | (in thousands) | Benefit Obligation at January 1 | | $ | 268,180 | | $ | 285,592 | | $ | 116,935 | | $ | 108,220 | Service Cost | | | 5,760 | | | 6,052 | | | 2,621 | | | 2,815 | Interest Cost | | | 13,285 | | | 14,888 | | | 6,046 | | | 6,360 | Actuarial (Gain) Loss | | | 7,679 | | | (1,047) | | | 16,705 | | | 7,540 | Plan Amendment Prior Service Credit | | | - | | | - | | | (11,612) | | | (2,408) | Benefit Payments | | | (17,456) | | | (37,305) | | | (8,110) | | | (8,049) | Participant Contributions | | | - | | | - | | | 1,926 | | | 1,763 | Medicare Subsidy | | | - | | | - | | | 653 | | | 694 | Benefit Obligation at December 31 | | $ | 277,448 | | $ | 268,180 | | $ | 125,164 | | $ | 116,935 | | | | | | | | | | | | | | Change in Fair Value of Plan Assets | | | | | | | | | | | | | Fair Value of Plan Assets at January 1 | | $ | 213,576 | | $ | 216,966 | | $ | 83,917 | | $ | 75,700 | Actual Gain on Plan Assets | | | 16,430 | | | 21,040 | | | 646 | | | 6,357 | Company Contributions | | | 33,219 | | | 12,875 | | | 4,711 | | | 8,146 | Participant Contributions | | | - | | | - | | | 1,926 | | | 1,763 | Benefit Payments | | | (17,456) | | | (37,305) | | | (8,110) | | | (8,049) | Fair Value of Plan Assets at December 31 | | $ | 245,769 | | $ | 213,576 | | $ | 83,090 | | $ | 83,917 | | | | | | | | | | | | | | Underfunded Status at December 31 | | $ | (31,679) | | $ | (54,604) | | $ | (42,074) | | $ | (33,018) |
Amounts Recognized on the Registrant Subsidiaries' Balance Sheets as of December 31, 2011 and 2010 | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | | | | December 31, | | PSO | | 2011 | | 2010 | | 2011 | | 2010 | | | | | (in thousands) | | Other Current Liabilities - Accrued Short-term | | | | | | | | | | | | | | | Benefit Liability | | $ | (88) | | $ | (68) | | $ | - | | $ | - | | Employee Benefits and Pension Obligations - | | | | | | | | | | | | | | | Accrued Long-term Benefit Liability | | | (31,591) | | | (54,536) | | | (42,074) | | | (33,018) | | Underfunded Status | | $ | (31,679) | | $ | (54,604) | | $ | (42,074) | | $ | (33,018) |
Amounts Included in AOCI and Regulatory Assets as of December 31, 2011 and 2010 | | | | | Other Postretirement | PSO | | Pension Plans | | Benefit Plans | | | | December 31, | | | | 2011 | | 2010 | | 2011 | | 2010 | Components | | (in thousands) | Net Actuarial Loss | | $ | 136,056 | | $ | 134,101 | | $ | 54,516 | | $ | 33,922 | Prior Service Cost (Credit) | | | 181 | | | (769) | | | (12,458) | | | (921) | | | | | | | | | | | | | | | Recorded as | | | | | | | | | | | | | Regulatory Assets | | $ | 136,237 | | $ | 133,332 | | $ | 42,058 | | $ | 33,001 |
Components of the change in amounts included in AOCI and Regulatory Assets by Registrant Subsidiary during the years ended December 31, 2011 and 2010 are as follows: Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 33,995 | | $ | 21,372 | | $ | 44,976 | | $ | 8,712 | | $ | 8,958 | Amortization of Actuarial Loss | | | (16,570) | | | (14,144) | | | (24,828) | | | (6,757) | | | (6,759) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 795 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 16,508 | | $ | 6,484 | | $ | 18,674 | | $ | 2,905 | | $ | 2,994 | | | | | | | | | | | | | | | | | | Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss (Gain) During the Year | | $ | 14,769 | | $ | 24,732 | | $ | 26,308 | | $ | (2,346) | | $ | (6,379) | Amortization of Actuarial Loss | | | (11,842) | | | (10,065) | | | (18,150) | | | (5,188) | | | (5,242) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 796 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 2,010 | | $ | 13,923 | | $ | 6,684 | | $ | (6,584) | | $ | (10,825) | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 65,104 | | $ | 46,321 | | $ | 79,611 | | $ | 22,147 | | $ | 23,619 | Amortization of Actuarial Loss | | | (5,839) | | | (3,566) | | | (7,298) | | | (1,553) | | | (1,785) | Prior Service Credit | | (31,145) | | | (24,846) | | | (42,357) | | | (11,612) | | | (9,409) | Amortization of Prior Service Cost (Credit) | | | 171 | | | 237 | | | 212 | | | 75 | | | (258) | Amortization of Transition Obligation | | | (1,167) | | | (188) | | | (150) | | | - | | | - | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 27,124 | | $ | 17,958 | | $ | 30,018 | | $ | 9,057 | | $ | 12,167 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 23,876 | | $ | 13,372 | | $ | 31,207 | | $ | 7,283 | | $ | 7,570 | Amortization of Actuarial Loss | | | (5,410) | | | (3,526) | | | (6,877) | | | (1,573) | | | (1,711) | Prior Service Credit | | (4,257) | | | (4,273) | | | (6,039) | | | (2,408) | | | (2,399) | Amortization of Transition Obligation | | | (5,244) | | | (2,814) | | | (6,642) | | | (2,805) | | | (2,461) | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 8,965 | | $ | 2,759 | | $ | 11,649 | | $ | 497 | | $ | 999 |
Pension and Other Postretirement Plans' Assets The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | PSO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 83,086 | | $ | - | | $ | - | | $ | - | | $ | 83,086 | | 33.8 | % | | | International | | | 22,781 | | | - | | | - | | | - | | | 22,781 | | 9.3 | % | | | Real Estate Investment Trusts | | | 5,940 | | | - | | | - | | | - | | | 5,940 | | 2.4 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 7,337 | | | - | | | - | | | 7,337 | | 3.0 | % | | Subtotal - Equities | | | 111,807 | | | 7,337 | | | - | | | - | | | 119,144 | | 48.5 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 1,500 | | | - | | | - | | | 1,500 | | 0.6 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 32,313 | | | - | | | - | | | 32,313 | | 13.2 | % | | | Corporate Debt | | | - | | | 56,239 | | | 364 | | | - | | | 56,603 | | 23.0 | % | | | Foreign Debt | | | - | | | 10,890 | | | - | | | - | | | 10,890 | | 4.4 | % | | | State and Local Government | | | - | | | 2,745 | | | - | | | - | | | 2,745 | | 1.1 | % | | | Other - Asset Backed | | | - | | | 1,485 | | | - | | | - | | | 1,485 | | 0.6 | % | | Subtotal - Fixed Income | | | - | | | 105,172 | | | 364 | | | - | | | 105,536 | | 42.9 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 9,329 | | | - | | | 9,329 | | 3.8 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 9,159 | | | - | | | 9,159 | | 3.7 | % | | Securities Lending | | | - | | | 12,267 | | | - | | | - | | | 12,267 | | 5.0 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (13,467) | | | (13,467) | | (5.5) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | - | | | 5,299 | | | - | | | - | | | 5,299 | | 2.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | (1,498) | | | (1,498) | | (0.6) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 111,807 | | $ | 130,075 | | $ | 18,852 | | $ | (14,965) | | $ | 245,769 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of assets classified as Level 3 in the fair value hierarchy by Registrant Subsidiary for pension assets: | | | | Corporate | | Real | | Alternative | | Total | | PSO | | Debt | | Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2011 | | $ | - | | $ | 4,606 | | $ | 7,197 | | $ | 11,803 | | Actual Return on Plan Assets | | | | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | - | | | 1,314 | | | 561 | | | 1,875 | | | Relating to Assets Sold During the Period | | | - | | | - | | | 193 | | | 193 | | Purchases and Sales | | | - | | | 3,409 | | | 1,208 | | | 4,617 | | Transfers into Level 3 | | | 364 | | | - | | | - | | | 364 | | Transfers out of Level 3 | | | - | | | - | | | - | | | - | | Balance as of December 31, 2011 | | $ | 364 | | $ | 9,329 | | $ | 9,159 | | $ | 18,852 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | PSO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 20,497 | | $ | - | | $ | - | | $ | - | | $ | 20,497 | | 24.7 | % | | | International | | | 22,417 | | | - | | | - | | | - | | | 22,417 | | 27.0 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 5,844 | | | - | | | - | | | 5,844 | | 7.0 | % | | Subtotal - Equities | | | 42,914 | | | 5,844 | | | - | | | - | | | 48,758 | | 58.7 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 4,079 | | | - | | | - | | | 4,079 | | 4.9 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 4,762 | | | - | | | - | | | 4,762 | | 5.7 | % | | | Corporate Debt | | | - | | | 8,967 | | | - | | | - | | | 8,967 | | 10.8 | % | | | Foreign Debt | | | - | | | 1,901 | | | - | | | - | | | 1,901 | | 2.3 | % | | | State and Local Government | | | - | | | 496 | | | - | | | - | | | 496 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 113 | | | - | | | - | | | 113 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 20,318 | | | - | | | - | | | 20,318 | | 24.4 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 2,724 | | | - | | | - | | | 2,724 | | 3.3 | % | | | United States Bonds | | | - | | | 9,302 | | | - | | | - | | | 9,302 | | 11.2 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | 991 | | | 1,380 | | | - | | | - | | | 2,371 | | 2.9 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (a) | | | - | | | - | | | - | | | (383) | | | (383) | | (0.5) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 43,905 | | $ | 39,568 | | $ | - | | $ | (383) | | $ | 83,090 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | PSO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 74,721 | | $ | 153 | | $ | - | | $ | - | | $ | 74,874 | | 35.1 | % | | | International | | | 22,305 | | | - | | | - | | | - | | | 22,305 | | 10.4 | % | | | Real Estate Investment Trusts | | | 6,219 | | | - | | | - | | | - | | | 6,219 | | 2.9 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 9,004 | | | - | | | - | | | 9,004 | | 4.2 | % | | Subtotal - Equities | | | 103,245 | | | 9,157 | | | - | | | - | | | 112,402 | | 52.6 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 35,099 | | | - | | | - | | | 35,099 | | 16.4 | % | | | Corporate Debt | | | - | | | 37,188 | | | - | | | - | | | 37,188 | | 17.4 | % | | | Foreign Debt | | | - | | | 7,038 | | | - | | | - | | | 7,038 | | 3.3 | % | | | State and Local Government | | | - | | | 1,258 | | | - | | | - | | | 1,258 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 2,831 | | | - | | | - | | | 2,831 | | 1.3 | % | | Subtotal - Fixed Income | | | - | | | 83,414 | | | - | | | - | | | 83,414 | | 39.0 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 4,606 | | | - | | | 4,606 | | 2.2 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 7,197 | | | - | | | 7,197 | | 3.4 | % | | Securities Lending | | | - | | | 14,078 | | | - | | | - | | | 14,078 | | 6.6 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (15,269) | | | (15,269) | | (7.1) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (b) | | | - | | | 7,026 | | | - | | | 88 | | | 7,114 | | 3.3 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (c) | | | - | | | - | | | - | | | 34 | | | 34 | | - | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 103,245 | | $ | 113,675 | | $ | 11,803 | | $ | (15,147) | | $ | 213,576 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent foreign currency holdings. (c) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of real estate and alternative investments classified as Level 3 in the fair value hierarchy for pension assets by Registrant Subsidiary: | | | | | | Alternative | | Total | | PSO | | Real Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2010 | | $ | 5,770 | | $ | 6,737 | | $ | 12,507 | | Actual Return on Plan Assets | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | (1,164) | | | 75 | | | (1,089) | | | Relating to Assets Sold During the Period | | | - | | | 24 | | | 24 | | Purchases and Sales | | | - | | | 361 | | | 361 | | Transfers into Level 3 | | | - | | | - | | | - | | Transfers out of Level 3 | | | - | | | - | | | - | | Balance as of December 31, 2010 | | $ | 4,606 | | $ | 7,197 | | $ | 11,803 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | PSO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 33,555 | | $ | - | | $ | - | | $ | - | | $ | 33,555 | | 40.0 | % | | | International | | | 12,666 | | | - | | | - | | | - | | | 12,666 | | 15.1 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 6,593 | | | - | | | - | | | 6,593 | | 7.9 | % | | Subtotal - Equities | | | 46,221 | | | 6,593 | | | - | | | - | | | 52,814 | | 63.0 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 2,742 | | | - | | | - | | | 2,742 | | 3.3 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 5,382 | | | - | | | - | | | 5,382 | | 6.4 | % | | | Corporate Debt | | | - | | | 6,322 | | | - | | | - | | | 6,322 | | 7.5 | % | | | Foreign Debt | | | - | | | 1,425 | | | - | | | - | | | 1,425 | | 1.7 | % | | | State and Local Government | | | - | | | 201 | | | - | | | - | | | 201 | | 0.2 | % | | | Other - Asset Backed | | | - | | | 54 | | | - | | | - | | | 54 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 16,126 | | | - | | | - | | | 16,126 | | 19.2 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 2,819 | | | - | | | - | | | 2,819 | | 3.3 | % | | | United States Bonds | | | - | | | 9,339 | | | - | | | - | | | 9,339 | | 11.1 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (a) | | | 1,178 | | | 1,438 | | | - | | | 49 | | | 2,665 | | 3.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | 154 | | | 154 | | 0.2 | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 47,399 | | $ | 36,315 | | $ | - | | $ | 203 | | $ | 83,917 | | 100.0 | % |
(a) Amounts in "Other" column primarily represent foreign currency holdings. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. Determination of Pension Expense The determination of pension expense or income is based on a market-related valuation of assets which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded. Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 672,967 | | $ | 569,855 | | $ | 1,005,608 | | $ | 269,230 | | $ | 269,809 | Nonqualified Pension Plans | | | 234 | | | 168 | | | 821 | | | 1,368 | | | 1,223 | Total as of December 31, 2011 | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 646,513 | | $ | 551,702 | | $ | 973,802 | | $ | 261,535 | | $ | 260,838 | Nonqualified Pension Plans | | | 221 | | | 994 | | | 799 | | | 1,326 | | | 1,133 | Total as of December 31, 2010 | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 |
For the underfunded pension plans that had an accumulated benefit obligation in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets of these plans at December 31, 2011 and 2010 were as follows: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 681,450 | | $ | 581,677 | | $ | 1,020,890 | | $ | 277,448 | | $ | 277,594 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | Fair Value of Plan Assets | | | 570,756 | | | 503,926 | | | 925,939 | | | 245,769 | | | 255,861 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2011 | | $ | (102,445) | | $ | (66,097) | | $ | (80,490) | | $ | (24,829) | | $ | (15,171) | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 652,219 | | $ | 560,982 | | $ | 984,089 | | $ | 268,180 | | $ | 267,206 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 | Fair Value of Plan Assets | | | 512,836 | | | 451,688 | | | 799,281 | | | 213,576 | | | 224,618 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2010 | | $ | (133,898) | | $ | (101,008) | | $ | (175,320) | | $ | (49,285) | | $ | (37,353) |
Estimated Future Benefit Payments and Contributions The estimated pension benefit payments for the unfunded plan and contributions to the trust are at least the minimum amount required by the Employee Retirement Income Security Act plus payment of unfunded nonqualified benefits. For the qualified pension plan, additional discretionary contributions may be made to the trust to maintain the funded status of the plan. The contributions to the OPEB plans are generally based on the amount of the OPEB plans' periodic benefit costs for accounting purposes as provided in agreements with state regulatory authorities, plus the additional discretionary contribution of the Medicare subsidy receipts. The following table provides the estimated contributions and payments by Registrant Subsidiary for 2012: | | | | | Other Postretirement | | Company | | Pension Plans | | Benefit Plans | | | | (in thousands) | | APCo | | $ | 33,442 | | $ | 16,775 | | I&M | | | 23,938 | | | 13,465 | | OPCo | | | 39,095 | | | 19,705 | | PSO | | | 11,612 | | | 5,982 | | SWEPCo | | | 9,089 | | | 7,089 |
The tables below reflect the total benefits expected to be paid from the plan or from the Registrant Subsidiary's assets. The payments include the participants' contributions to the plan for their share of the cost. In December 2011, the prescription drug plan was amended for certain participants. The impact of the change is reflected in the Benefit Plan Obligation table as a plan amendment. As a result of this amendment to the plan, the Medicare subsidy receipts in the following table are reduced from prior published estimates. Future benefit payments are dependent on the number of employees retiring, whether the retiring employees elect to receive pension benefits as annuities or as lump sum distributions, future integration of the benefit plans with changes to Medicare and other legislation, future levels of interest rates and variances in actuarial results. The estimated payments for the pension benefits and OPEB are as follows: Pension Plans | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 44,506 | | $ | 34,963 | | $ | 69,978 | | $ | 19,989 | | $ | 19,329 | 2013 | | | 45,202 | | | 35,686 | | | 72,422 | | | 20,472 | | | 20,281 | 2014 | | | 47,192 | | | 37,289 | | | 76,712 | | | 22,199 | | | 22,080 | 2015 | | | 46,327 | | | 37,831 | | | 75,063 | | | 22,020 | | | 22,288 | 2016 | | | 48,178 | | | 39,781 | | | 75,042 | | | 21,847 | | | 22,331 | Years 2017 to 2021, in Total | | | 248,647 | | | 213,381 | | | 371,555 | | | 113,723 | | | 115,691 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Benefit Payments | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 27,515 | | $ | 17,849 | | $ | 36,517 | | $ | 7,833 | | $ | 8,302 | 2013 | | | 27,741 | | | 18,289 | | | 36,412 | | | 8,120 | | | 8,628 | 2014 | | | 28,782 | | | 19,085 | | | 37,271 | | | 8,438 | | | 9,179 | 2015 | | | 29,668 | | | 20,117 | | | 38,306 | | | 8,934 | | | 9,598 | 2016 | | | 30,657 | | | 21,358 | | | 39,774 | | | 9,467 | | | 10,214 | Years 2017 to 2021, in Total | | | 168,810 | | | 123,258 | | | 218,695 | | | 54,491 | | | 61,146 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Medicare Subsidy Receipts | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 1,777 | | $ | 1,096 | | $ | 2,276 | | $ | 618 | | $ | 586 | 2013 | | | 272 | | | 28 | | | 43 | | | - | | | - | 2014 | | | 287 | | | 27 | | | 48 | | | - | | | - | 2015 | | | 298 | | | 26 | | | 59 | | | - | | | - | 2016 | | | 307 | | | 26 | | | 67 | | | - | | | - | Years 2017 to 2021, in Total | | | 1,578 | | | 110 | | | 536 | | | - | | | - |
Components of Net Periodic Benefit Cost The following tables provide the components of net periodic benefit cost by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | | | Other Postretirement | | PSO | | Pension Plans | | Benefit Plans | | | | | Years Ended December 31, | | | | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | Service Cost | | $ | 5,760 | | $ | 6,052 | | $ | 5,744 | | $ | 2,621 | | $ | 2,815 | | $ | 2,522 | | Interest Cost | | | 13,285 | | | 14,888 | | | 15,369 | | | 6,046 | | | 6,360 | | | 6,154 | | Expected Return on Plan Assets | | | (17,464) | | | (19,739) | | | (20,438) | | | (6,264) | | | (6,110) | | | (4,695) | | Amortization of Transition Obligation | | | - | | | - | | | - | | | - | | | 2,805 | | | 2,805 | | Amortization of Prior Service Credit | | | (950) | | | (950) | | | (1,082) | | | (75) | | | - | | | - | | Amortization of Net Actuarial Loss | | | 6,757 | | | 5,188 | | | 3,487 | | | 1,553 | | | 1,573 | | | 2,348 | | Net Periodic Benefit Cost | | | 7,388 | | | 5,439 | | | 3,080 | | | 3,881 | | | 7,443 | | | 9,134 | | Capitalized Portion | | | (2,379) | | | (1,806) | | | (1,087) | | | (1,249) | | | (2,471) | | | (3,224) | | Net Periodic Benefit Cost Recognized as | | | | | | | | | | | | | | | | | | | | | Expense | | $ | 5,009 | | $ | 3,633 | | $ | 1,993 | | $ | 2,632 | | $ | 4,972 | | $ | 5,910 |
Estimated amounts expected to be amortized to net periodic benefit costs and the impact on each Registrant Subsidiary's balance sheet during 2012 are shown in the following tables: | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Pension Plan - Components | | (in thousands) | Net Actuarial Loss | | $ | 19,816 | | $ | 16,915 | | $ | 29,690 | | $ | 8,074 | | $ | 8,077 | Prior Service Cost (Credit) | | | 475 | | | 407 | | | 743 | | | (948) | | | (793) | Total Estimated 2012 Amortization | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | Pension Plans - | | | | | | | | | | | | | | | | Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 20,190 | | $ | 16,303 | | $ | 16,299 | | $ | 7,126 | | $ | 7,284 | Deferred Income Taxes | | | 35 | | | 357 | | | 4,947 | | | - | | | - | Net of Tax AOCI | | | 66 | | | 662 | | | 9,187 | | | - | | | - | Total | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Other Postretirement Benefit Plans - | | (in thousands) | Components | | | | | | | | | | | | | | | | Net Actuarial Loss | | $ | 10,671 | | $ | 7,325 | | $ | 13,951 | | $ | 3,296 | | $ | 3,822 | Prior Service Credit | | | (2,862) | | | (2,383) | | | (3,873) | | | (1,079) | | | (933) | Transition Obligation | | | 780 | | | 132 | | | 104 | | | - | | | - | Total Estimated 2012 Amortization | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 3,049 | | $ | 4,400 | | $ | 4,565 | | $ | 2,217 | | $ | 1,804 | Deferred Income Taxes | | | 1,939 | | | 236 | | | 1,966 | | | - | | | 380 | Net of Tax AOCI | | | 3,601 | | | 438 | | | 3,651 | | | - | | | 705 | Total | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 |
American Electric Power System Retirement Savings Plans The Registrant Subsidiaries participate in an AEP sponsored defined contribution retirement savings plan, the American Electric Power System Retirement Savings Plan, for substantially all employees who are not members of the United Mine Workers of America (UMWA). This qualified plan offers participants an opportunity to contribute a portion of their pay, includes features under Section 401(k) of the Internal Revenue Code and provides for company matching contributions. The matching contributions to the plan are 100% of the first 1% of eligible employee contributions and 70% of the next 5% of contributions. The following table provides the cost for matching contributions to the retirement savings plans by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | Years Ended December 31, | | Company | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | APCo | | $ | 7,432 | | $ | 7,284 | | $ | 8,673 | | I&M | | | 9,541 | | | 8,969 | | | 10,315 | | OPCo | | | 10,166 | | | 9,706 | | | 11,640 | | PSO | | | 3,626 | | | 3,505 | | | 4,083 | | SWEPCo | | | 4,438 | | | 3,866 | | | 5,269 |
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Southwestern Electric Power Co [Member]
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Benefit Plans [Abstract] |
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Benefit Plans |
7. BENEFIT PLANS For a discussion of investment strategy, investment limitations, target asset allocations and the classification of investments within the fair value hierarchy, see “Investments Held in Trust for Future Liabilities” and “Fair Value Measurements of Assets and Liabilities” sections of Note 1. The Registrant Subsidiaries participate in an AEP sponsored qualified pension plan and two unfunded nonqualified pension plans. Substantially all employees are covered by the qualified plan or both the qualified and a nonqualified pension plan. The Registrant Subsidiaries also participate in OPEB plans sponsored by AEP to provide medical and life insurance benefits for retired employees. Due to the Registrant Subsidiaries' participation in AEP's benefits plans, the assumptions used by the actuary and the accounting for the plans by each subsidiary are the same. This section details the assumptions that apply to all Registrant Subsidiaries and the rate of compensation increase for each subsidiary. The Registrant Subsidiaries recognize the funded status associated with defined benefit pension and OPEB plans in their balance sheets. Disclosures about the plans are required by the “Compensation – Retirement Benefits” accounting guidance. The Registrant Subsidiaries recognize an asset for a plan's overfunded status or a liability for a plan's underfunded status, and recognize, as a component of other comprehensive income, the changes in the funded status of the plan that arise during the year that are not recognized as a component of net periodic benefit cost. The Registrant Subsidiaries record a regulatory asset instead of other comprehensive income for qualifying benefit costs of regulated operations that for ratemaking purposes are deferred for future recovery. The cumulative funded status adjustment is equal to the remaining unrecognized deferrals for unamortized actuarial losses or gains, prior service costs and transition obligations, such that remaining deferred costs result in an AOCI equity reduction or regulatory asset and deferred gains result in an AOCI equity addition or regulatory liability. Actuarial Assumptions for Benefit Obligations The weighted-average assumptions as of December 31 of each year used in the measurement of the Registrant Subsidiaries' benefit obligations are shown in the following tables: | | | | | Other Postretirement | | | Pension Plans | | | Benefit Plans | Assumption | | 2011 | | 2010 | | | 2011 | | 2010 | Discount Rate | | 4.55 | % | | 5.05 | % | | | 4.75 | % | | 5.25 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase (a) | | 2011 | | 2010 | | APCo | | 4.65 | % | | 4.70 | % | | I&M | | 4.90 | % | | 4.90 | % | | OPCo | | 4.95 | % | | 5.05 | % | | PSO | | 4.85 | % | | 4.95 | % | | SWEPCo | | 4.70 | % | | 4.80 | % |
(a) Rates are for base pay only. In addition, an amount is added to reflect target incentive compensation for exempt employees and overtime and incentive pay for nonexempt employees. A duration-based method is used to determine the discount rate for the plans. A hypothetical portfolio of high quality corporate bonds similar to those included in the Moody's Aa bond index is constructed with a duration matching the benefit plan liability. The composite yield on the hypothetical bond portfolio is used as the discount rate for the plan. The discount rate is the same for each Registrant Subsidiary. For 2011, the rate of compensation increase assumed varies with the age of the employee, ranging from 3.5% per year to 11.5% per year, with the average increase shown in the table above. The compensation increase rates reflect variations in each Registrant Subsidiary's population participating in the pension plan. Actuarial Assumptions for Net Periodic Benefit Costs The weighted-average assumptions as of January 1 of each year used in the measurement of each Registrant Subsidiary's benefit costs are shown in the following tables: | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | Assumptions | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | Discount Rate | | 5.05 | % | | 5.60 | % | | 6.00 | % | | 5.25 | % | | 5.85 | % | | 6.10 | % | | Expected Return on Plan Assets | | 7.75 | % | | 8.00 | % | | 8.00 | % | | 7.50 | % | | 8.00 | % | | 7.75 | % |
| | | Pension Plans | | Assumption - Rate of Compensation Increase | | 2011 | | 2010 | | 2009 | | APCo | | 4.65 | % | | 4.35 | % | | 5.65 | % | | I&M | | 4.90 | % | | 4.55 | % | | 5.85 | % | | OPCo | | 4.95 | % | | 4.70 | % | | 6.00 | % | | PSO | | 4.85 | % | | 4.60 | % | | 5.90 | % | | SWEPCo | | 4.70 | % | | 4.45 | % | | 5.75 | % |
The expected return on plan assets was determined by evaluating historical returns, the current investment climate (yield on fixed income securities and other recent investment market indicators), rate of inflation and current prospects for economic growth. The expected return on plan assets is the same for each Registrant Subsidiary. The health care trend rate assumptions as of January 1 of each year used for OPEB plans measurement purposes are shown below: | Health Care Trend Rates | | 2011 | | 2010 | | Initial | | 7.50 | % | | 8.00 | % | | Ultimate | | 5.00 | % | | 5.00 | % | | Year Ultimate Reached | | 2016 | | 2016 |
Assumed health care cost trend rates have a significant effect on the amounts reported for the OPEB health care plans. A 1% change in assumed health care cost trend rates would have the following effects: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Effect on Total Service and Interest Cost | | | | | | | | | | | | | | | | | Components of Net Periodic Postretirement | | | | | | | | | | | | | | | | | Health Care Benefit Cost: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 3,806 | | $ | 2,972 | | $ | 5,188 | | $ | 1,300 | | $ | 1,500 | | 1% Decrease | | | (3,015) | | | (2,367) | | | (4,110) | | | (1,036) | | | (1,195) | | | | | | | | | | | | | | | | | | Effect on the Health Care Component of the | | | | | | | | | | | | | | | | | Accumulated Postretirement Benefit | | | | | | | | | | | | | | | | | Obligation: | | | | | | | | | | | | | | | | | 1% Increase | | $ | 50,216 | | $ | 33,657 | | $ | 65,251 | | $ | 15,088 | | $ | 17,499 | | 1% Decrease | | | (40,748) | | | (27,448) | | | (53,015) | | | (12,314) | | | (14,281) |
Significant Concentrations of Risk within Plan Assets In addition to establishing the target asset allocation of plan assets, the investment policy also places restrictions on securities to limit significant concentrations within plan assets. The investment policy establishes guidelines that govern maximum market exposure, security restrictions, prohibited asset classes, prohibited types of transactions, minimum credit quality, average portfolio credit quality, portfolio duration and concentration limits. The guidelines were established to mitigate the risk of loss due to significant concentrations in any investment. Management monitors the plans to control security diversification and ensure compliance with the investment policy. At December 31, 2011, the assets were invested in compliance with all investment limits. See “Investments Held in Trust for Future Liabilities” section of Note 1 for limit details. Benefit Plan Obligations, Plan Assets and Funded Status as of December 31, 2011 and 2010 The following tables provide a reconciliation of the changes in the plans' benefit obligations, fair value of plan assets and funded status as of December 31. The benefit obligation for the defined benefit pension and OPEB plans are the projected benefit obligation and the accumulated benefit obligation, respectively. SWEPCo | | | | Other Postretirement | | | Pension Plans | | Benefit Plans | | | 2011 | | 2010 | | 2011 | | 2010 | Change in Benefit Obligation | | (in thousands) | Benefit Obligation at January 1 | | $ | 267,206 | | $ | 288,081 | | $ | 129,726 | | $ | 118,571 | Service Cost | | | 6,573 | | | 7,046 | | | 3,029 | | | 3,108 | Interest Cost | | | 13,331 | | | 15,093 | | | 6,969 | | | 6,940 | Actuarial (Gain) Loss | | | 7,861 | | | (2,014) | | | 24,547 | | | 9,084 | Plan Amendment Prior Service Credit | | | - | | | - | | | (13,534) | | | (2,399) | Benefit Payments | | | (17,377) | | | (41,000) | | | (8,226) | | | (8,125) | Participant Contributions | | | - | | | - | | | 2,041 | | | 1,907 | Medicare Subsidy | | | - | | | - | | | 608 | | | 640 | Benefit Obligation at December 31 | | $ | 277,594 | | $ | 267,206 | | $ | 145,160 | | $ | 129,726 | | | | | | | | | | | | | | Change in Fair Value of Plan Assets | | | | | | | | | | | | | Fair Value of Plan Assets at January 1 | | $ | 224,618 | | $ | 212,626 | | $ | 93,097 | | $ | 82,940 | Actual Gain on Plan Assets | | | 17,283 | | | 23,854 | | | 3,797 | | | 8,150 | Company Contributions | | | 31,337 | | | 29,138 | | | 5,655 | | | 8,225 | Participant Contributions | | | - | | | - | | | 2,041 | | | 1,907 | Benefit Payments | | | (17,377) | | | (41,000) | | | (8,226) | | | (8,125) | Fair Value of Plan Assets at December 31 | | $ | 255,861 | | $ | 224,618 | | $ | 96,364 | | $ | 93,097 | | | | | | | | | | | | | | Underfunded Status at December 31 | | $ | (21,733) | | $ | (42,588) | | $ | (48,796) | | $ | (36,629) |
Amounts Recognized on the Registrant Subsidiaries' Balance Sheets as of December 31, 2011 and 2010 | | | | | | Other Postretirement | | | | | Pension Plans | | Benefit Plans | | | | | December 31, | | SWEPCo | | 2011 | | 2010 | | 2011 | | 2010 | | | | | (in thousands) | | Other Current Liabilities - Accrued Short-term | | | | | | | | | | | | | | | Benefit Liability | | $ | (78) | | $ | (73) | | $ | - | | $ | - | | Employee Benefits and Pension Obligations - | | | | | | | | | | | | | | | Accrued Long-term Benefit Liability | | | (21,655) | | | (42,515) | | | (48,796) | | | (36,629) | | Underfunded Status | | $ | (21,733) | | $ | (42,588) | | $ | (48,796) | | $ | (36,629) |
Amounts Included in AOCI and Regulatory Assets as of December 31, 2011 and 2010 | | | | | Other Postretirement | SWEPCo | | Pension Plans | | Benefit Plans | | | | December 31, | | | | 2011 | | 2010 | | 2011 | | 2010 | Components | | (in thousands) | Net Actuarial Loss | | $ | 133,542 | | $ | 131,343 | | $ | 59,541 | | $ | 37,707 | Prior Service Cost (Credit) | | | 560 | | | (235) | | | (10,762) | | | (1,095) | | | | | | | | | | | | | | | Recorded as | | | | | | | | | | | | | Regulatory Assets | | $ | 134,102 | | $ | 131,108 | | $ | 31,407 | | $ | 23,842 | Deferred Income Taxes | | | - | | | - | | | 6,081 | | | 4,469 | Net of Tax AOCI | | | - | | | - | | | 11,291 | | | 8,301 |
Components of the change in amounts included in AOCI and Regulatory Assets by Registrant Subsidiary during the years ended December 31, 2011 and 2010 are as follows: Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 33,995 | | $ | 21,372 | | $ | 44,976 | | $ | 8,712 | | $ | 8,958 | Amortization of Actuarial Loss | | | (16,570) | | | (14,144) | | | (24,828) | | | (6,757) | | | (6,759) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 795 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 16,508 | | $ | 6,484 | | $ | 18,674 | | $ | 2,905 | | $ | 2,994 | | | | | | | | | | | | | | | | | | Pension Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss (Gain) During the Year | | $ | 14,769 | | $ | 24,732 | | $ | 26,308 | | $ | (2,346) | | $ | (6,379) | Amortization of Actuarial Loss | | | (11,842) | | | (10,065) | | | (18,150) | | | (5,188) | | | (5,242) | Amortization of Prior Service Cost (Credit) | | | (917) | | | (744) | | | (1,474) | | | 950 | | | 796 | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 2,010 | | $ | 13,923 | | $ | 6,684 | | $ | (6,584) | | $ | (10,825) | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 65,104 | | $ | 46,321 | | $ | 79,611 | | $ | 22,147 | | $ | 23,619 | Amortization of Actuarial Loss | | | (5,839) | | | (3,566) | | | (7,298) | | | (1,553) | | | (1,785) | Prior Service Credit | | (31,145) | | | (24,846) | | | (42,357) | | | (11,612) | | | (9,409) | Amortization of Prior Service Cost (Credit) | | | 171 | | | 237 | | | 212 | | | 75 | | | (258) | Amortization of Transition Obligation | | | (1,167) | | | (188) | | | (150) | | | - | | | - | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2011 | $ | 27,124 | | $ | 17,958 | | $ | 30,018 | | $ | 9,057 | | $ | 12,167 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Components | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Actuarial Loss During the Year | | $ | 23,876 | | $ | 13,372 | | $ | 31,207 | | $ | 7,283 | | $ | 7,570 | Amortization of Actuarial Loss | | | (5,410) | | | (3,526) | | | (6,877) | | | (1,573) | | | (1,711) | Prior Service Credit | | (4,257) | | | (4,273) | | | (6,039) | | | (2,408) | | | (2,399) | Amortization of Transition Obligation | | | (5,244) | | | (2,814) | | | (6,642) | | | (2,805) | | | (2,461) | Change for the Year Ended | | | | | | | | | | | | | | | | | December 31, 2010 | $ | 8,965 | | $ | 2,759 | | $ | 11,649 | | $ | 497 | | $ | 999 |
Pension and Other Postretirement Plans' Assets The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | SWEPCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 86,499 | | $ | - | | $ | - | | $ | - | | $ | 86,499 | | 33.8 | % | | | International | | | 23,716 | | | - | | | - | | | - | | | 23,716 | | 9.3 | % | | | Real Estate Investment Trusts | | | 6,184 | | | - | | | - | | | - | | | 6,184 | | 2.4 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 7,638 | | | - | | | - | | | 7,638 | | 3.0 | % | | Subtotal - Equities | | | 116,399 | | | 7,638 | | | - | | | - | | | 124,037 | | 48.5 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 1,561 | | | - | | | - | | | 1,561 | | 0.6 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 33,640 | | | - | | | - | | | 33,640 | | 13.2 | % | | | Corporate Debt | | | - | | | 58,549 | | | 379 | | | - | | | 58,928 | | 23.0 | % | | | Foreign Debt | | | - | | | 11,337 | | | - | | | - | | | 11,337 | | 4.4 | % | | | State and Local Government | | | - | | | 2,857 | | | - | | | - | | | 2,857 | | 1.1 | % | | | Other - Asset Backed | | | - | | | 1,546 | | | - | | | - | | | 1,546 | | 0.6 | % | | Subtotal - Fixed Income | | | - | | | 109,490 | | | 379 | | | - | | | 109,869 | | 42.9 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 9,712 | | | - | | | 9,712 | | 3.8 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 9,535 | | | - | | | 9,535 | | 3.7 | % | | Securities Lending | | | - | | | 12,771 | | | - | | | - | | | 12,771 | | 5.0 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (14,020) | | | (14,020) | | (5.5) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | - | | | 5,517 | | | - | | | - | | | 5,517 | | 2.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | (1,560) | | | (1,560) | | (0.6) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 116,399 | | $ | 135,416 | | $ | 19,626 | | $ | (15,580) | | $ | 255,861 | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of assets classified as Level 3 in the fair value hierarchy by Registrant Subsidiary for pension assets: | | | | Corporate | | Real | | Alternative | | Total | | SWEPCo | | Debt | | Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2011 | | $ | - | | $ | 4,844 | | $ | 7,569 | | $ | 12,413 | | Actual Return on Plan Assets | | | | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | - | | | 1,355 | | | 563 | | | 1,918 | | | Relating to Assets Sold During the Period | | | - | | | - | | | 194 | | | 194 | | Purchases and Sales | | | - | | | 3,513 | | | 1,209 | | | 4,722 | | Transfers into Level 3 | | | 379 | | | - | | | - | | | 379 | | Transfers out of Level 3 | | | - | | | - | | | - | | | - | | Balance as of December 31, 2011 | | $ | 379 | | $ | 9,712 | | $ | 9,535 | | $ | 19,626 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2011: | SWEPCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 23,770 | | $ | - | | $ | - | | $ | - | | $ | 23,770 | | 24.7 | % | | | International | | | 25,999 | | | - | | | - | | | - | | | 25,999 | | 27.0 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 6,778 | | | - | | | - | | | 6,778 | | 7.0 | % | | Subtotal - Equities | | | 49,769 | | | 6,778 | | | - | | | - | | | 56,547 | | 58.7 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 4,731 | | | - | | | - | | | 4,731 | | 4.9 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 5,522 | | | - | | | - | | | 5,522 | | 5.7 | % | | | Corporate Debt | | | - | | | 10,399 | | | - | | | - | | | 10,399 | | 10.8 | % | | | Foreign Debt | | | - | | | 2,205 | | | - | | | - | | | 2,205 | | 2.3 | % | | | State and Local Government | | | - | | | 575 | | | - | | | - | | | 575 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 131 | | | - | | | - | | | 131 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 23,563 | | | - | | | - | | | 23,563 | | 24.4 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 3,160 | | | - | | | - | | | 3,160 | | 3.3 | % | | | United States Bonds | | | - | | | 10,788 | | | - | | | - | | | 10,788 | | 11.2 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents | | | 1,149 | | | 1,601 | | | - | | | - | | | 2,750 | | 2.9 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (a) | | | - | | | - | | | - | | | (444) | | | (444) | | (0.5) | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 50,918 | | $ | 45,890 | | $ | - | | $ | (444) | | $ | 96,364 | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | |
(a) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables present the classification of pension plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | SWEPCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 78,585 | | $ | 160 | | $ | - | | $ | - | | $ | 78,745 | | 35.1 | % | | | International | | | 23,458 | | | - | | | - | | | - | | | 23,458 | | 10.4 | % | | | Real Estate Investment Trusts | | | 6,540 | | | - | | | - | | | - | | | 6,540 | | 2.9 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | International | | | - | | | 9,469 | | | - | | | - | | | 9,469 | | 4.2 | % | | Subtotal - Equities | | | 108,583 | | | 9,629 | | | - | | | - | | | 118,212 | | 52.6 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 36,914 | | | - | | | - | | | 36,914 | | 16.4 | % | | | Corporate Debt | | | - | | | 39,111 | | | - | | | - | | | 39,111 | | 17.4 | % | | | Foreign Debt | | | - | | | 7,402 | | | - | | | - | | | 7,402 | | 3.3 | % | | | State and Local Government | | | - | | | 1,323 | | | - | | | - | | | 1,323 | | 0.6 | % | | | Other - Asset Backed | | | - | | | 2,977 | | | - | | | - | | | 2,977 | | 1.3 | % | | Subtotal - Fixed Income | | | - | | | 87,727 | | | - | | | - | | | 87,727 | | 39.0 | % | | | | | | | | | | | | | | | | | | | | | | Real Estate | | | - | | | - | | | 4,844 | | | - | | | 4,844 | | 2.2 | % | | | | | | | | | | | | | | | | | | | | | | Alternative Investments | | | - | | | - | | | 7,569 | | | - | | | 7,569 | | 3.4 | % | | Securities Lending | | | - | | | 14,806 | | | - | | | - | | | 14,806 | | 6.6 | % | | Securities Lending Collateral (a) | | | - | | | - | | | - | | | (16,058) | | | (16,058) | | (7.1) | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (b) | | | - | | | 7,389 | | | - | | | 93 | | | 7,482 | | 3.3 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (c) | | | - | | | - | | | - | | | 36 | | | 36 | | - | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 108,583 | | $ | 119,551 | | $ | 12,413 | | $ | (15,929) | | $ | 224,618 | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | |
(a) Amounts in "Other" column primarily represent an obligation to repay cash collateral received as part of the Securities Lending Program. (b) Amounts in "Other" column primarily represent foreign currency holdings. (c) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. The following tables set forth a reconciliation of changes in the fair value of real estate and alternative investments classified as Level 3 in the fair value hierarchy for pension assets by Registrant Subsidiary: | | | | | | Alternative | | Total | | SWEPCo | | Real Estate | | Investments | | Level 3 | | | | | (in thousands) | | Balance as of January 1, 2010 | | $ | 5,654 | | $ | 6,602 | | $ | 12,256 | | Actual Return on Plan Assets | | | | | | | | | | | | Relating to Assets Still Held as of the Reporting Date | | | (810) | | | 156 | | | (654) | | | Relating to Assets Sold During the Period | | | - | | | 51 | | | 51 | | Purchases and Sales | | | - | | | 760 | | | 760 | | Transfers into Level 3 | | | - | | | - | | | - | | Transfers out of Level 3 | | | - | | | - | | | - | | Balance as of December 31, 2010 | | $ | 4,844 | | $ | 7,569 | | $ | 12,413 |
The following tables present the classification of OPEB plan assets within the fair value hierarchy by Registrant Subsidiary at December 31, 2010: | SWEPCo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End | | Asset Class | | Level 1 | | Level 2 | | Level 3 | | Other | | Total | | Allocation | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Equities: | | | | | | | | | | | | | | | | | | | | | Domestic | | $ | 37,225 | | $ | - | | $ | - | | $ | - | | $ | 37,225 | | 40.0 | % | | | International | | | 14,051 | | | - | | | - | | | - | | | 14,051 | | 15.1 | % | | | Common Collective Trust - | | | | | | | | | | | | | | | | | | | | | | Global | | | - | | | 7,314 | | | - | | | - | | | 7,314 | | 7.9 | % | | Subtotal - Equities | | | 51,276 | | | 7,314 | | | - | | | - | | | 58,590 | | 63.0 | % | | | | | | | | | | | | | | | | | | | | | | Fixed Income: | | | | | | | | | | | | | | | | | | | | | Common Collective Trust - Debt | | | - | | | 3,042 | | | - | | | - | | | 3,042 | | 3.3 | % | | | United States Government and | | | | | | | | | | | | | | | | | | | | | | Agency Securities | | | - | | | 5,971 | | | - | | | - | | | 5,971 | | 6.4 | % | | | Corporate Debt | | | - | | | 7,014 | | | - | | | - | | | 7,014 | | 7.5 | % | | | Foreign Debt | | | - | | | 1,581 | | | - | | | - | | | 1,581 | | 1.7 | % | | | State and Local Government | | | - | | | 223 | | | - | | | - | | | 223 | | 0.2 | % | | | Other - Asset Backed | | | - | | | 60 | | | - | | | - | | | 60 | | 0.1 | % | | Subtotal - Fixed Income | | | - | | | 17,891 | | | - | | | - | | | 17,891 | | 19.2 | % | | | | | | | | | | | | | | | | | | | | | | Trust Owned Life Insurance: | | | | | | | | | | | | | | | | | | | | | International Equities | | | - | | | 3,127 | | | - | | | - | | | 3,127 | | 3.3 | % | | | United States Bonds | | | - | | | 10,361 | | | - | | | - | | | 10,361 | | 11.1 | % | | | | | | | | | | | | | | | | | | | | | | Cash and Cash Equivalents (a) | | | 1,307 | | | 1,596 | | | - | | | 55 | | | 2,958 | | 3.2 | % | | Other - Pending Transactions and | | | | | | | | | | | | | | | | | | | | | Accrued Income (b) | | | - | | | - | | | - | | | 170 | | | 170 | | 0.2 | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 52,583 | | $ | 40,289 | | $ | - | | $ | 225 | | $ | 93,097 | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | |
(a) Amounts in "Other" column primarily represent foreign currency holdings. (b) Amounts in "Other" column primarily represent accrued interest, dividend receivables and transactions pending settlement. Determination of Pension Expense The determination of pension expense or income is based on a market-related valuation of assets which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded. Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 672,967 | | $ | 569,855 | | $ | 1,005,608 | | $ | 269,230 | | $ | 269,809 | Nonqualified Pension Plans | | | 234 | | | 168 | | | 821 | | | 1,368 | | | 1,223 | Total as of December 31, 2011 | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | Qualified Pension Plan | | $ | 646,513 | | $ | 551,702 | | $ | 973,802 | | $ | 261,535 | | $ | 260,838 | Nonqualified Pension Plans | | | 221 | | | 994 | | | 799 | | | 1,326 | | | 1,133 | Total as of December 31, 2010 | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 |
For the underfunded pension plans that had an accumulated benefit obligation in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets of these plans at December 31, 2011 and 2010 were as follows: | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 681,450 | | $ | 581,677 | | $ | 1,020,890 | | $ | 277,448 | | $ | 277,594 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 673,201 | | $ | 570,023 | | $ | 1,006,429 | | $ | 270,598 | | $ | 271,032 | Fair Value of Plan Assets | | | 570,756 | | | 503,926 | | | 925,939 | | | 245,769 | | | 255,861 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2011 | | $ | (102,445) | | $ | (66,097) | | $ | (80,490) | | $ | (24,829) | | $ | (15,171) | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | | (in thousands) | Projected Benefit Obligation | $ | 652,219 | | $ | 560,982 | | $ | 984,089 | | $ | 268,180 | | $ | 267,206 | | | | | | | | | | | | | | | | | | Accumulated Benefit Obligation | | $ | 646,734 | | $ | 552,696 | | $ | 974,601 | | $ | 262,861 | | $ | 261,971 | Fair Value of Plan Assets | | | 512,836 | | | 451,688 | | | 799,281 | | | 213,576 | | | 224,618 | Underfunded Accumulated Benefit | | | | | | | | | | | | | | | | Obligation as of December 31, 2010 | | $ | (133,898) | | $ | (101,008) | | $ | (175,320) | | $ | (49,285) | | $ | (37,353) |
Estimated Future Benefit Payments and Contributions The estimated pension benefit payments for the unfunded plan and contributions to the trust are at least the minimum amount required by the Employee Retirement Income Security Act plus payment of unfunded nonqualified benefits. For the qualified pension plan, additional discretionary contributions may be made to the trust to maintain the funded status of the plan. The contributions to the OPEB plans are generally based on the amount of the OPEB plans' periodic benefit costs for accounting purposes as provided in agreements with state regulatory authorities, plus the additional discretionary contribution of the Medicare subsidy receipts. The following table provides the estimated contributions and payments by Registrant Subsidiary for 2012: | | | | | Other Postretirement | | Company | | Pension Plans | | Benefit Plans | | | | (in thousands) | | APCo | | $ | 33,442 | | $ | 16,775 | | I&M | | | 23,938 | | | 13,465 | | OPCo | | | 39,095 | | | 19,705 | | PSO | | | 11,612 | | | 5,982 | | SWEPCo | | | 9,089 | | | 7,089 |
The tables below reflect the total benefits expected to be paid from the plan or from the Registrant Subsidiary's assets. The payments include the participants' contributions to the plan for their share of the cost. In December 2011, the prescription drug plan was amended for certain participants. The impact of the change is reflected in the Benefit Plan Obligation table as a plan amendment. As a result of this amendment to the plan, the Medicare subsidy receipts in the following table are reduced from prior published estimates. Future benefit payments are dependent on the number of employees retiring, whether the retiring employees elect to receive pension benefits as annuities or as lump sum distributions, future integration of the benefit plans with changes to Medicare and other legislation, future levels of interest rates and variances in actuarial results. The estimated payments for the pension benefits and OPEB are as follows: Pension Plans | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 44,506 | | $ | 34,963 | | $ | 69,978 | | $ | 19,989 | | $ | 19,329 | 2013 | | | 45,202 | | | 35,686 | | | 72,422 | | | 20,472 | | | 20,281 | 2014 | | | 47,192 | | | 37,289 | | | 76,712 | | | 22,199 | | | 22,080 | 2015 | | | 46,327 | | | 37,831 | | | 75,063 | | | 22,020 | | | 22,288 | 2016 | | | 48,178 | | | 39,781 | | | 75,042 | | | 21,847 | | | 22,331 | Years 2017 to 2021, in Total | | | 248,647 | | | 213,381 | | | 371,555 | | | 113,723 | | | 115,691 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Benefit Payments | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 27,515 | | $ | 17,849 | | $ | 36,517 | | $ | 7,833 | | $ | 8,302 | 2013 | | | 27,741 | | | 18,289 | | | 36,412 | | | 8,120 | | | 8,628 | 2014 | | | 28,782 | | | 19,085 | | | 37,271 | | | 8,438 | | | 9,179 | 2015 | | | 29,668 | | | 20,117 | | | 38,306 | | | 8,934 | | | 9,598 | 2016 | | | 30,657 | | | 21,358 | | | 39,774 | | | 9,467 | | | 10,214 | Years 2017 to 2021, in Total | | | 168,810 | | | 123,258 | | | 218,695 | | | 54,491 | | | 61,146 | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans: Medicare Subsidy Receipts | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | | | (in thousands) | 2012 | | $ | 1,777 | | $ | 1,096 | | $ | 2,276 | | $ | 618 | | $ | 586 | 2013 | | | 272 | | | 28 | | | 43 | | | - | | | - | 2014 | | | 287 | | | 27 | | | 48 | | | - | | | - | 2015 | | | 298 | | | 26 | | | 59 | | | - | | | - | 2016 | | | 307 | | | 26 | | | 67 | | | - | | | - | Years 2017 to 2021, in Total | | | 1,578 | | | 110 | | | 536 | | | - | | | - |
Components of Net Periodic Benefit Cost The following tables provide the components of net periodic benefit cost by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | | | Other Postretirement | | SWEPCo | | Pension Plans | | Benefit Plans | | | | | Years Ended December 31, | | | | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | Service Cost | | $ | 6,573 | | $ | 7,046 | | $ | 6,757 | | $ | 3,029 | | $ | 3,108 | | $ | 2,817 | | Interest Cost | | | 13,331 | | | 15,093 | | | 15,557 | | | 6,969 | | | 6,940 | | | 6,735 | | Expected Return on Plan Assets | | | (18,380) | | | (19,489) | | | (20,083) | | | (7,200) | | | (6,646) | | | (5,120) | | Amortization of Transition Obligation | | | - | | | - | | | - | | | - | | | 2,461 | | | 2,461 | | Amortization of Prior Service Cost (Credit) | | | (795) | | | (796) | | | (916) | | | 258 | | | - | | | - | | Amortization of Net Actuarial Loss | | | 6,759 | | | 5,242 | | | 3,516 | | | 1,785 | | | 1,711 | | | 2,560 | | Net Periodic Benefit Cost | | | 7,488 | | | 7,096 | | | 4,831 | | | 4,841 | | | 7,574 | | | 9,453 | | Capitalized Portion | | | (2,636) | | | (2,406) | | | (1,546) | | | (1,704) | | | (2,568) | | | (3,025) | | Net Periodic Benefit Cost Recognized as | | | | | | | | | | | | | | | | | | | | | Expense | | $ | 4,852 | | $ | 4,690 | | $ | 3,285 | | $ | 3,137 | | $ | 5,006 | | $ | 6,428 |
Estimated amounts expected to be amortized to net periodic benefit costs and the impact on each Registrant Subsidiary's balance sheet during 2012 are shown in the following tables: | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Pension Plan - Components | | (in thousands) | Net Actuarial Loss | | $ | 19,816 | | $ | 16,915 | | $ | 29,690 | | $ | 8,074 | | $ | 8,077 | Prior Service Cost (Credit) | | | 475 | | | 407 | | | 743 | | | (948) | | | (793) | Total Estimated 2012 Amortization | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | Pension Plans - | | | | | | | | | | | | | | | | Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 20,190 | | $ | 16,303 | | $ | 16,299 | | $ | 7,126 | | $ | 7,284 | Deferred Income Taxes | | | 35 | | | 357 | | | 4,947 | | | - | | | - | Net of Tax AOCI | | | 66 | | | 662 | | | 9,187 | | | - | | | - | Total | $ | 20,291 | | $ | 17,322 | | $ | 30,433 | | $ | 7,126 | | $ | 7,284 | | | | | | | | | | | | | | | | | | | | APCo | | I&M | | OPCo | | PSO | | SWEPCo | Other Postretirement Benefit Plans - | | (in thousands) | Components | | | | | | | | | | | | | | | | Net Actuarial Loss | | $ | 10,671 | | $ | 7,325 | | $ | 13,951 | | $ | 3,296 | | $ | 3,822 | Prior Service Credit | | | (2,862) | | | (2,383) | | | (3,873) | | | (1,079) | | | (933) | Transition Obligation | | | 780 | | | 132 | | | 104 | | | - | | | - | Total Estimated 2012 Amortization | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 | | | | | | | | | | | | | | | | | | Other Postretirement Benefit Plans - Expected to be Recorded as | | | | | | | | | | | Regulatory Asset | | $ | 3,049 | | $ | 4,400 | | $ | 4,565 | | $ | 2,217 | | $ | 1,804 | Deferred Income Taxes | | | 1,939 | | | 236 | | | 1,966 | | | - | | | 380 | Net of Tax AOCI | | | 3,601 | | | 438 | | | 3,651 | | | - | | | 705 | Total | $ | 8,589 | | $ | 5,074 | | $ | 10,182 | | $ | 2,217 | | $ | 2,889 |
American Electric Power System Retirement Savings Plans The Registrant Subsidiaries participate in an AEP sponsored defined contribution retirement savings plan, the American Electric Power System Retirement Savings Plan, for substantially all employees who are not members of the United Mine Workers of America (UMWA). This qualified plan offers participants an opportunity to contribute a portion of their pay, includes features under Section 401(k) of the Internal Revenue Code and provides for company matching contributions. The matching contributions to the plan are 100% of the first 1% of eligible employee contributions and 70% of the next 5% of contributions. The 2009 contributions below for SWEPCo include a legacy savings plan of an acquired subsidiary. The following table provides the cost for matching contributions to the retirement savings plans by Registrant Subsidiary for the years ended December 31, 2011, 2010 and 2009: | | | | Years Ended December 31, | | Company | | 2011 | | 2010 | | 2009 | | | | | (in thousands) | | APCo | | $ | 7,432 | | $ | 7,284 | | $ | 8,673 | | I&M | | | 9,541 | | | 8,969 | | | 10,315 | | OPCo | | | 10,166 | | | 9,706 | | | 11,640 | | PSO | | | 3,626 | | | 3,505 | | | 4,083 | | SWEPCo | | | 4,438 | | | 3,866 | | | 5,269 |
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