Defined Benefits

9 Months Ended

Sep. 30, 2015

9. Defined Benefits

(PPL)

PPL performed a remeasurement of the assets and the obligations for the PPL Retirement Plan and PPL Postretirement Benefit plans as of May 31, 2015 to allow for separation of those plans for PPL and Talen Energy as required in accordance with the spinoff transaction agreements. The net pension obligations for all active PPL Energy Supply employees and for individuals who terminated employment from PPL Energy Supply on or after July 1, 2000 were distributed and removed from PPL’s Balance Sheet. The net other postretirement benefit obligations for all active PPL Energy Supply employees were distributed and removed from PPL’s Balance Sheet. In addition, the net nonqualified pension plan obligations for all PPL Energy Supply active and inactive employees were retained by PPL. As a result, PPL distributed and removed from its Balance Sheet $244 million of net accrued pension obligations and $7 million of other postretirement benefit obligations. See Note 8 for additional information on the spinoff of PPL Energy Supply.

(PPL, LKE and LG&E)

Certain net periodic defined benefit costs are applied to accounts that are further distributed between capital and expense, including certain costs allocated to applicable subsidiaries for plans sponsored by PPL Services and LKE. Additionally, as a result of the LG&E and KU rate case settlement that became effective July 1, 2015, the difference between pension cost calculated in accordance with LG&E and KU’s pension accounting policy and pension cost calculated using a 15 year amortization period for actuarial gains and losses is recorded as a regulatory asset. See Note 6 for further information. Following are the net periodic defined benefit costs (credits) of the plans sponsored by PPL and its subsidiaries, LKE and its subsidiaries and LG&E for the periods ended September 30:

			Pension Benefits
			Three Months								Nine Months
			U.S.				U.K.				U.S.				U.K.
			2015		2014 (c)		2015		2014		2015 (b)		2014 (c)		2015		2014
PPL
Service cost			$	20	$	24	$	21	$	18	$	76	$	73	$	60	$	54
Interest cost				42		56		80		90		152		168		236		268
Expected return on plan assets				(56)		(72)		(133)		(133)		(201)		(216)		(393)		(395)
Amortization of:
		Prior service cost		1		5						5		15
		Actuarial (gain) loss		18		8		39		34		65		22		118		100
Net periodic defined benefit
	costs (credits) prior to
	termination benefits			25		21		7		9		97		62		21		27
Termination benefits (a)						(7)								13
Net periodic defined benefit
	costs (credits)		$	25	$	14	$	7	$	9	$	97	$	75	$	21	$	27


		Pension Benefits
		Three Months				Nine Months
		2015		2014		2015		2014
LKE
Service cost		$	7	$	5	$	20	$	16
Interest cost			17		17		51		50
Expected return on plan assets			(22)		(21)		(66)		(62)
Amortization of:
	Prior service cost		1		1		5		3
	Actuarial (gain) loss		9		4		26		10
Net periodic defined benefit costs (credits)		$	12	$	6	$	36	$	17

LG&E
Service cost						$	1	$	1
Interest cost		$	3	$	4		10		11
Expected return on plan assets			(5)		(4)		(15)		(14)
Amortization of:
	Prior service cost		1		1		2		2
	Actuarial (gain) loss		3		1		9		4
Net periodic defined benefit costs (credits)		$	2	$	2	$	7	$	4

(a) The three and nine months ended September 30, 2014 include termination benefits of $(2) million and $2 million for PPL Electric. The remaining $(5) million and $11 million relate to PPL Energy Supply and are reflected in discontinued operations.

(b) For the nine months ended September 30, 2015, the total net periodic defined benefit cost includes $18 million reflected in discontinued operations related to costs allocated from PPL's plans to PPL Energy Supply prior to the spinoff.

(c) For the three and nine months ended September 30, 2014, the total net periodic defined benefit cost includes $1 million and $29 million reflected in discontinued operations related to costs allocated from PPL's plans to PPL Energy Supply.

	Other Postretirement Benefits
	Three Months				Nine Months
	2015		2014		2015		2014
PPL
Service cost	$	2	$	3	$	9	$	9
Interest cost		6		7		20		23
Expected return on plan assets		(6)		(6)		(20)		(19)
Net periodic defined benefit costs (credits)	$	2	$	4	$	9	$	13


LKE
Service cost		$	1	$	1	$	4	$	3
Interest cost			2		2		7		7
Expected return on plan assets			(1)		(1)		(4)		(4)
Amortization of:
	Prior service cost		1		1		2		2
Net periodic defined benefit costs (credits)		$	3	$	3	$	9	$	8

(PPL Electric, LG&E and KU)

In addition to the specific plans it sponsors, LG&E is allocated costs of defined benefit plans sponsored by LKE based on its participation in those plans, which management believes are reasonable. PPL Electric and KU do not directly sponsor any defined benefit plans. PPL Electric is allocated costs of defined benefit plans sponsored by PPL Services and KU is allocated costs of defined benefit plans sponsored by LKE based on their participation in those plans, which management believes are reasonable. For the periods ended September 30, PPL Services allocated the following net periodic defined benefit costs to PPL Electric, and LKE allocated the following net periodic defined benefit costs to LG&E and KU.

	Three Months				Nine Months
	2015		2014		2015		2014

PPL Electric (a)	$	8	$	3	$	24	$	18

LG&E			3			2			10			6
KU			4			2			13			6

(a) The three and nine months ended September 30, 2014 include $(2) million and $2 million of termination benefits for PPL Electric related to a one-time voluntary retirement window offered to certain bargaining unit employees.