XML 98 R45.htm IDEA: XBRL DOCUMENT v3.6.0.2
Retirement and Postemployment Benefits (Tables)
12 Months Ended
Dec. 31, 2016
Defined Benefit Plan Disclosure [Line Items]  
Schedule Of Net Periodic Defined Benefit Costs (Credits)
The following table provides the components of net periodic defined benefit costs for PPL's domestic (U.S.) and WPD's (U.K.) pension and other postretirement benefit plans for the years ended December 31.
 
Pension Benefits
 
 
 
 
 
 
 
U.S.
 
U.K.
 
Other Postretirement Benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Net periodic defined benefit costs (credits):
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Service cost
$
66

 
$
96

 
$
97

 
$
69

 
$
79

 
$
71

 
$
7

 
$
11

 
$
12

Interest cost
174

 
194

 
224

 
235

 
314

 
354

 
26

 
26

 
31

Expected return on plan assets
(228
)
 
(258
)
 
(287
)
 
(504
)
 
(523
)
 
(521
)
 
(22
)
 
(26
)
 
(26
)
Amortization of:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Prior service cost (credit)
8

 
7

 
20

 

 

 

 

 
1

 

Actuarial (gain) loss
50

 
84

 
28

 
138

 
158

 
132

 
1

 

 
1

Net periodic defined benefit costs
(credits) prior to settlements and termination benefits
70

 
123

 
82

 
(62
)
 
28

 
36

 
12

 
12

 
18

Settlements
3

 

 

 

 

 

 

 

 

Termination benefits

 

 
13

 

 

 

 

 

 

Net periodic defined benefit costs
(credits)
$
73

 
$
123

 
$
95

 
$
(62
)
 
$
28

 
$
36

 
$
12

 
$
12

 
$
18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Changes in Plan Assets and Benefit Obligations Recognized in OCI and Regulatory Assets/Liabilities - Gross:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Divestiture (a)
$

 
$
(353
)
 
$

 
$

 
$

 
$

 
$

 
$
(6
)
 
$

Settlement
(3
)
 

 

 

 

 

 

 

 

Net (gain) loss
253

 
63

 
574

 
7

 
508

 
354

 
9

 
(9
)
 
22

Prior service cost
(credit)
15

 
18

 
(8
)
 

 

 

 

 

 
7

Amortization of:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Prior service (cost) credit
(8
)
 
(7
)
 
(20
)
 

 

 

 
(1
)
 
(1
)
 

Actuarial gain (loss)
(50
)
 
(85
)
 
(28
)
 
(138
)
 
(158
)
 
(132
)
 
(1
)
 

 
(1
)
Total recognized in OCI and
regulatory assets/liabilities (b)
207

 
(364
)
 
518

 
(131
)
 
350

 
222

 
7

 
(16
)
 
28

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total recognized in net periodic
defined benefit costs, OCI and regulatory assets/liabilities (b)
$
280

 
$
(241
)
 
$
613

 
$
(193
)
 
$
378

 
$
258

 
$
19

 
$
(4
)
 
$
46

 
(a)
As a result of the spinoff of PPL Energy Supply, amounts in AOCI were allocated to certain former active and inactive employees of PPL Energy Supply and included in the distribution. See Note 8 for additional details.
(b)
WPD is not subject to accounting for the effects of certain types of regulation as prescribed by GAAP. As a result, WPD does not record regulatory assets/liabilities.
Schedule of Amounts Recognized in Other Comprehensive Income and Regulatory Assets and Liabilities
For PPL's U.S. pension benefits and for other postretirement benefits, the amounts recognized in OCI and regulatory assets/liabilities for the years ended December 31 were as follows:
 
U.S. Pension Benefits
 
Other Postretirement Benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
OCI
$
236

 
$
(269
)
 
$
319

 
$
7

 
$
12

 
$
7

Regulatory assets/liabilities
(29
)
 
(95
)
 
199

 

 
(28
)
 
21

Total recognized in OCI and
regulatory assets/liabilities
$
207

 
$
(364
)
 
$
518

 
$
7

 
$
(16
)
 
$
28

Schedule of Amounts to be Amortized from AOCI and Regulatory Assets/Liabilities in Next Fiscal Year
The estimated amounts to be amortized from AOCI and regulatory assets/liabilities into net periodic defined benefit costs in 2017 are as follows:
 
Pension Benefits
 
U.S.
 
U.K.
Prior service cost (credit)
$
9

 
$

Actuarial (gain) loss
67

 
141

Total
$
76

 
$
141

 
 
 
 
Amortization from Balance Sheet:
 

 
 
AOCI
$
18

 
$
141

Regulatory assets/liabilities
58

 

Total
$
76

 
$
141

Schedule of Net Periodic Defined Benefit Costs Included in Income Statement
The following net periodic defined benefit costs (credits) were charged to operating expense or regulatory assets, excluding amounts charged to construction and other non-expense accounts. The U.K. pension benefits apply to PPL only.
 
Pension Benefits
 
 
 
 
 
 
 
U.S.
 
U.K.
 
Other Postretirement Benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
PPL
$
53

 
$
71

 
$
45

 
$
(95
)
 
$
(21
)
 
$
(9
)
 
$
7

 
$
8

 
$
10

PPL Electric (a)
10

 
15

 
12

 
 

 
 

 
 

 
1

 

 
2

LKE (b)
24

 
37

 
17

 
 

 
 

 
 

 
6

 
8

 
7

LG&E (b)
8

 
12

 
5

 
 

 
 

 
 

 
3

 
4

 
4

KU (a) (b)
5

 
9

 
3

 
 

 
 

 
 

 
2

 
2

 
2

 
(a)
PPL Electric and KU do not directly sponsor any defined benefit plans. PPL Electric and KU were allocated these costs of defined benefit plans sponsored by PPL Services (for PPL Electric) and by LKE (for KU), based on their participation in those plans, which management believes are reasonable.
(b)
As a result of the 2014 Kentucky rate case settlement that became effective July 1, 2015, the difference between net periodic defined benefit costs calculated in accordance with LKE's, LG&E's and KU's pension accounting policy and the net periodic defined benefit costs calculated using a 15 year amortization period for gains and losses is recorded as a regulatory asset. Of the costs charged to operating expense or regulatory assets, excluding amounts charged to construction and other non-expense accounts, $3 million for LG&E and $2 million for KU were recorded as regulatory assets in 2016 and $4 million for LG&E and $1 million for KU were recorded as regulatory assets in 2015.
Defined Benefit Plan Assumptions and Impact of One Point Change on Postretirement Plans
The following weighted-average assumptions were used in the valuation of the benefit obligations at December 31. The U.K. pension benefits apply to PPL only.
 
Pension Benefits
 
 
 
 
 
U.S.
 
U.K.
 
Other Postretirement Benefits
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
PPL
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.21
%
 
4.59
%
 
2.87
%
 
3.68
%
 
4.11
%
 
4.48
%
Rate of compensation increase
3.95
%
 
3.93
%
 
3.50
%
 
4.00
%
 
3.92
%
 
3.91
%
 
 
 
 
 
 
 
 
 
 
 
 
LKE
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.19
%
 
4.56
%
 
 

 
 

 
4.12
%
 
4.49
%
Rate of compensation increase
3.50
%
 
3.50
%
 
 

 
 

 
3.50
%
 
3.50
%
 
 
 
 
 
 
 
 
 
 
 
 
LG&E
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.13
%
 
4.49
%
 
 

 
 

 
 

 
 


The following weighted-average assumptions were used to determine the net periodic defined benefit costs for the years ended December 31. The U.K. pension benefits apply to PPL only.
 
Pension Benefits
 
 
 
 
 
 
 
U.S.
 
U.K.
 
Other Postretirement Benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
PPL
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate service cost (b)
4.59
%
 
4.25
%
 
5.12
%
 
3.90
%
 
3.85
%
 
4.41
%
 
4.48
%
 
4.09
%
 
4.91
%
Discount rate interest cost (b)
4.59
%
 
4.25
%
 
5.12
%
 
3.14
%
 
3.85
%
 
4.41
%
 
4.48
%
 
4.09
%
 
4.91
%
Rate of compensation increase
3.93
%
 
3.91
%
 
3.97
%
 
4.00
%
 
4.00
%
 
4.00
%
 
3.91
%
 
3.86
%
 
3.96
%
Expected return on plan assets (a)
7.00
%
 
7.00
%
 
7.00
%
 
7.20
%
 
7.19
%
 
7.19
%
 
6.11
%
 
6.06
%
 
5.96
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LKE
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.56
%
 
4.25
%
 
5.18
%
 
 

 
 

 
 

 
4.49
%
 
4.06
%
 
4.91
%
Rate of compensation increase
3.50
%
 
3.50
%
 
4.00
%
 
 

 
 

 
 

 
3.50
%
 
3.50
%
 
4.00
%
Expected return on plan assets (a)
7.00
%
 
7.00
%
 
7.00
%
 
 

 
 

 
 

 
6.82
%
 
6.82
%
 
6.75
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LG&E
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.49
%
 
4.20
%
 
5.13
%
 
 

 
 

 
 

 
 

 
 

 
 

Expected return on plan assets (a)
7.00
%
 
7.00
%
 
7.00
%
 
 

 
 

 
 

 
 

 
 

 
 

 
(a)
The expected long-term rates of return for pension and other postretirement benefits are based on management's projections using a best-estimate of expected returns, volatilities and correlations for each asset class. Each plan's specific current and expected asset allocations are also considered in developing a reasonable return assumption.
(b)
As of January 1, 2016, WPD began using individual spot rates from the yield curve used to discount the benefit obligation to measure service cost and interest cost. PPL's U.S. plans use a single discount rate derived from an individual bond matching model to measure the benefit obligation, service cost and interest cost. See Note 1 for additional details.

The following table provides the assumed health care cost trend rates for the years ended December 31:
 
2016
 
2015
 
2014
PPL and LKE
 
 
 
 
 
Health care cost trend rate assumed for next year
 
 
 
 
 
– obligations
7.0
%
 
6.8
%
 
7.2
%
– cost
6.8
%
 
7.2
%
 
7.6
%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
 
 
 
 
 
– obligations
5.0
%
 
5.0
%
 
5.0
%
– cost
5.0
%
 
5.0
%
 
5.0
%
Year that the rate reaches the ultimate trend rate
 
 
 
 
 
– obligations
2022

 
2020

 
2020

– cost
2020

 
2020

 
2020


A one percentage point change in the assumed health care costs trend rate assumption would have had the following effects on the other postretirement benefit plans in 2016:
 
One Percentage Point
 
Increase
 
Decrease
Effect on accumulated postretirement benefit obligation
 
 
 
PPL
$
5

 
$
(5
)
LKE
4

 
(4
)
Schedule of Funded Status of Defined Benefit Plans
The funded status of PPL's plans at December 31 was as follows:
 
Pension Benefits
 
 
 
 
 
U.S.
 
U.K.
 
Other Postretirement Benefits
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Change in Benefit Obligation
 

 
 

 
 

 
 

 
 

 
 

Benefit Obligation, beginning of period
$
3,863

 
$
5,399

 
$
8,404

 
$
8,523

 
$
596

 
$
716

Service cost
66

 
96

 
69

 
79

 
7

 
11

Interest cost
174

 
194

 
235

 
314

 
26

 
26

Participant contributions

 

 
14

 
15

 
14

 
13

Plan amendments
14

 
19

 

 

 

 

Actuarial (gain) loss
214

 
(193
)
 
484

 
200

 
11

 
(37
)
Divestiture (a)

 
(1,416
)
 

 

 

 
(76
)
Settlements
(9
)
 

 

 

 

 

Gross benefits paid
(243
)
 
(236
)
 
(357
)
 
(391
)
 
(64
)
 
(58
)
Federal subsidy

 

 

 

 
1

 
1

Currency conversion

 

 
(1,466
)
 
(336
)
 

 

Benefit Obligation, end of period
4,079

 
3,863

 
7,383

 
8,404

 
591

 
596

 
 
 
 
 
 
 
 
 
 
 
 
Change in Plan Assets
 

 
 

 
 

 
 

 
 

 
 

Plan assets at fair value, beginning of period
3,227

 
4,462

 
7,625

 
7,734

 
379

 
484

Actual return on plan assets
189

 
2

 
979

 
205

 
25

 
(2
)
Employer contributions
79

 
158

 
330

 
366

 
19

 
17

Participant contributions

 

 
14

 
15

 
14

 
13

Divestiture (a)

 
(1,159
)
 

 

 

 
(80
)
Settlements
(9
)
 

 

 

 

 

Gross benefits paid
(243
)
 
(236
)
 
(357
)
 
(391
)
 
(59
)
 
(53
)
Currency conversion

 

 
(1,380
)
 
(304
)
 

 

Plan assets at fair value, end of period
3,243

 
3,227

 
7,211

 
7,625

 
378

 
379

 
 
 
 
 
 
 
 
 
 
 
 
Funded Status, end of period
$
(836
)
 
$
(636
)
 
$
(172
)
 
$
(779
)
 
$
(213
)
 
$
(217
)
 
 
 
 
 
 
 
 
 
 
 
 
Amounts recognized in the Balance Sheets consist of:
 

 
 

 
 

 
 

 
 

 
 

Noncurrent asset
$

 
$

 
$
10

 
$

 
$
2

 
$
2

Current liability
(17
)
 
(10
)
 

 

 
(3
)
 
(3
)
Noncurrent liability
(819
)
 
(626
)
 
(182
)
 
(779
)
 
(212
)
 
(216
)
Net amount recognized, end of period
$
(836
)
 
$
(636
)
 
$
(172
)
 
$
(779
)
 
$
(213
)
 
$
(217
)
 
 
 
 
 
 
 
 
 
 
 
 
Amounts recognized in AOCI and regulatory assets/liabilities (pre-tax) consist of:
 

 
 

 
 

 
 

 
 

 
 

Prior service cost (credit)
$
59

 
$
53

 
$

 
$

 
$

 
$
1

Net actuarial (gain) loss
1,178

 
977

 
2,553

 
2,684

 
45

 
37

Total (b)
$
1,237

 
$
1,030

 
$
2,553

 
$
2,684

 
$
45

 
$
38

 
 
 
 
 
 
 
 
 
 
 
 
Total accumulated benefit obligation
for defined benefit pension plans
$
3,807

 
$
3,590

 
$
6,780

 
$
7,747

 
 

 
 

 
(a)
As a result of the spinoff of PPL Energy Supply, obligations and assets attributable to certain former active and inactive employees of PPL Energy Supply were transferred to Talen Energy plans.
(b)
WPD is not subject to accounting for the effects of certain types of regulation as prescribed by GAAP and as a result, does not record regulatory assets/liabilities.

For PPL's U.S. pension and other postretirement benefit plans, the amounts recognized in AOCI and regulatory assets/liabilities at December 31 were as follows:
 
U.S. Pension Benefits
 
Other Postretirement Benefits
 
2016
 
2015
 
2016
 
2015
AOCI
$
357

 
$
275

 
$
20

 
$
18

Regulatory assets/liabilities
880

 
755

 
25

 
20

Total
$
1,237

 
$
1,030

 
$
45

 
$
38

Schedule of Projected or Accumulated Benefit Obligations In Excess of Plan Assets
The following tables provide information on pension plans where the projected benefit obligation (PBO) or accumulated benefit obligation (ABO) exceed the fair value of plan assets:
 
U.S.
 
U.K.
 
PBO in excess of plan assets
 
PBO in excess of plan assets
 
2016
 
2015
 
2016
 
2015
Projected benefit obligation
$
4,079

 
$
3,863

 
$
3,403

 
$
8,404

Fair value of plan assets
3,243

 
3,227

 
3,221

 
7,625

 
 
 
 
 
 
 
 
 
U.S.
 
U.K.
 
ABO in excess of plan assets
 
ABO in excess of plan assets
 
2016
 
2015
 
2016
 
2015
Accumulated benefit obligation
$
3,807

 
$
3,590

 
$
657

 
$
3,532

Fair value of plan assets
3,243

 
3,227

 
643

 
3,287

Schedules of Asset Allocation of U.S. Pension Trusts Assets
The asset allocation for the trust and the target allocation by portfolio at December 31 are as follows:
 
Percentage of trust assets
 
2016
 
2016 (a)
 
2015
 
Target Asset
Allocation (a)
Growth Portfolio
52
%
 
51
%
 
50
%
Equity securities
30
%
 
25
%
 
 
Debt securities (b)
12
%
 
13
%
 
 
Alternative investments
10
%
 
13
%
 
 
Immunizing Portfolio
46
%
 
47
%
 
48
%
Debt securities (b)
43
%
 
42
%
 
 
Derivatives
3
%
 
5
%
 
 
Liquidity Portfolio
2
%
 
2
%
 
2
%
Total
100
%
 
100
%
 
100
%
 
(a)
Allocations exclude consideration of a group annuity contract held by the LG&E and KU Retirement Plan.
(b)
Includes commingled debt funds, which PPL treats as debt securities for asset allocation purposes.
Schedule of Fair Value of Financial Assets for U.S. Pension Plan Assets
The fair value of net assets in the Master Trust by asset class and level within the fair value hierarchy was:
 
December 31, 2016
 
December 31, 2015
 
 
 
Fair Value Measurements Using
 
 
 
Fair Value Measurements Using
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
PPL Services Corporation Master Trust
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
181

 
$
181

 
$

 
$

 
$
225

 
$
225

 
$

 
$

Equity securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Equity
152

 
152

 

 

 
172

 
172

 

 

U.S. Equity fund measured at NAV (a)
272

 

 

 

 
197

 

 

 

International equity fund at NAV (a)
551

 

 

 

 
454

 

 

 

Commingled debt measured at NAV (a)
546

 

 

 

 
514

 

 

 

Debt securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury and U.S. government sponsored
agency
381

 
381

 

 

 
501

 
492

 
9

 

Corporate
850

 

 
837

 
13

 
747

 

 
737

 
10

Other
8

 

 
8

 

 
14

 

 
14

 

Alternative investments:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commodities measured at NAV (a)

 

 

 

 
70

 

 

 

Real estate measured at NAV (a)
102

 

 

 

 
118

 

 

 

Private equity measured at NAV (a)
80

 

 

 

 
81

 

 

 

Hedge funds measured at NAV (a)
167

 

 
 

 
 

 
171

 

 

 

Derivatives:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest rate swaps and swaptions
61

 

 
61

 

 
80

 

 
80

 

Other
3

 

 
3

 

 
11

 

 
11

 

Insurance contracts
27

 

 

 
27

 
32

 

 

 
32

PPL Services Corporation Master Trust assets, at
fair value
3,381

 
$
714

 
$
909

 
$
40

 
3,387

 
$
889

 
$
851

 
$
42

Receivables and payables, net (b)
(15
)
 


 
 

 
 

 
(49
)
 
 

 
 

 
 

401(h) accounts restricted for other
postretirement benefit obligations
(123
)
 
 

 
 

 
 

 
(111
)
 
 

 
 

 
 

Total PPL Services Corporation Master Trust
pension assets
$
3,243

 
 

 
 

 
 

 
$
3,227

 
 

 
 

 
 

 
(a)
In accordance with accounting guidance certain investments that are measured at fair value using the net asset value per share (NAV), or its equivalent, practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.
(b)
Receivables and payables represent amounts for investments sold/purchased but not yet settled along with interest and dividends earned but not yet received.
Reconciliation of U.S. Pension Trust Assets Classified as Level 3 Included in Earnings
A reconciliation of the Master Trust assets classified as Level 3 at December 31, 2016 is as follows:
 
Corporate
debt
 
Insurance
contracts
 
Total
Balance at beginning of period
$
10

 
$
32

 
$
42

Actual return on plan assets
 
 
 
 
 
Relating to assets still held at the reporting date

 
1

 
1

Purchases, sales and settlements
3

 
(6
)
 
(3
)
Balance at end of period
$
13

 
$
27

 
$
40

 
A reconciliation of the Master Trust assets classified as Level 3 at December 31, 2015 is as follows: 
 
Corporate
debt
 
Insurance
contracts
 
Total
Balance at beginning of period
$
21

 
$
33

 
$
54

Actual return on plan assets
 
 
 
 
 
Relating to assets still held at the reporting date

 
2

 
2

Relating to assets sold during the period
(1
)
 

 
(1
)
Purchases, sales and settlements
(10
)
 
(3
)
 
(13
)
Balance at end of period
$
10

 
$
32

 
$
42

Schedules of Target Allocation of U.S. Other Postretirement Benefit Plans VEBA Trust
The asset allocation for the PPL VEBA trusts, excluding LKE, and the target allocation, by asset class, at December 31 are detailed below.
 
Percentage of plan assets
 
Target Asset
Allocation
 
2016
 
2015
 
2016
Asset Class
 
 
 
 
 
U.S. Equity securities
48
%
 
48
%
 
45
%
Debt securities (a)
50
%
 
50
%
 
50
%
Cash and cash equivalents (b)
2
%
 
2
%
 
5
%
Total
100
%
 
100
%
 
100
%
 

(a)
Includes commingled debt funds and debt securities.
(b)
Includes money market funds.
Schedule of Fair Value of Financial Assets for U.S. Postretirement Benefits
The fair value of assets in the U.S. other postretirement benefit plans by asset class and level within the fair value hierarchy was:
 
December 31, 2016
 
December 31, 2015
 
 
 
Fair Value Measurement Using
 
 
 
Fair Value Measurement Using
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Money market funds
$
5

 
$
5

 
$

 
$

 
$
6

 
$
6

 
$

 
$

U.S. Equity securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Large-cap equity fund measure at NAV (a)
123

 

 

 

 
129

 

 

 

Commingled debt fund measured at NAV (a)
114

 

 

 

 
109

 

 

 

Debt securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Municipalities
12

 

 
12

 

 
23

 

 
23

 

Total VEBA trust assets, at fair value
254

 
$
5

 
$
12

 
$

 
267

 
$
6

 
$
23

 
$

Receivables and payables, net (b)
1

 
 

 
 

 
 

 
1

 
 

 
 

 
 
401(h) account assets
123

 
 

 
 

 
 

 
111

 
 

 
 

 
 
Total other postretirement benefit plan assets
$
378

 
 

 
 

 
 

 
$
379

 
 

 
 

 
 

 
(a)
In accordance with accounting guidance certain investments that are measured at fair value using the net asset value per share (NAV), or its equivalent, practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.
(b)
Receivables and payables represent amounts for investments sold/purchased but not yet settled along with interest and dividends earned but not yet received.
Schedules of Asset Allocation of U.K. Pension Plan Assets
The asset allocation and target allocation at December 31 of WPD's pension plans are detailed below.
 
 
 
 
 
Target Asset
 
Percentage of plan assets
 
Allocation
 
2016
 
2015
 
2016
Asset Class
 
 
 
 
 
Cash and cash equivalents
1
%
 
1
%
 
1
%
Equity securities
 
 
 
 
 
U.K.
3
%
 
3
%
 
3
%
European (excluding the U.K.)
2
%
 
2
%
 
2
%
Asian-Pacific
2
%
 
2
%
 
2
%
North American
3
%
 
3
%
 
3
%
Emerging markets
3
%
 
4
%
 
1
%
Global equities
6
%
 
6
%
 
3
%
Currency
%
 
1
%
 
%
Global Tactical Asset Allocation
33
%
 
31
%
 
40
%
Debt securities (a)
41
%
 
40
%
 
39
%
Alternative investments
6
%
 
7
%
 
6
%
Total
100
%
 
100
%
 
100
%
 

(a)
Includes commingled debt funds.
Schedule of Fair Value of Financial Assets for U.K. Pension Plan Assets
The fair value of assets in the U.K. pension plans by asset class and level within the fair value hierarchy was:
 
December 31, 2016
 
December 31, 2015
 
 
 
Fair Value Measurement Using
 
 
 
Fair Value Measurement Using
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Cash and cash equivalents
$
42

 
$
42

 
$

 
$

 
$
55

 
$
55

 
$

 
$

Equity securities measured at NAV (a) :
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
U.K. companies
210

 

 

 

 
274

 

 

 

European companies (excluding the U.K.)
177

 

 

 

 
190

 

 

 

Asian-Pacific companies
140

 

 

 

 
132

 

 

 

North American companies
227

 

 

 

 
220

 

 

 

Emerging markets companies
209

 

 

 

 
284

 

 

 

Global Equities
466

 

 

 

 
500

 

 

 

Currency

 

 

 

 
39

 

 

 

Other
2,363

 

 

 

 
2,384

 

 

 
 
Commingled debt:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
U.K. corporate bonds

 

 

 

 
2

 

 

 

U.K. gilts

 

 

 

 
3

 

 

 

Debt Securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
U.K. corporate bonds
2

 

 
2

 

 
364

 

 
364

 

U.K. gilts
2,940

 

 
2,940

 

 
2,645

 

 
2,645

 

Alternative investments:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Real estate measured at NAV (a)
435

 

 

 

 
533

 

 

 

Fair value - U.K. pension plans
$
7,211

 
$
42

 
$
2,942

 
$

 
$
7,625

 
$
55

 
$
3,009

 
$

 
(a)
In accordance with accounting guidance certain investments that are measured at fair value using the net asset value per share (NAV), or its equivalent, practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.
Schedule of Expected Cash Flows - U.S. Defined Benefit Plans - Expected Payments and Related Federal Subsidy
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plans and the following federal subsidy payments are expected to be received by PPL.
 
 
 
Other Postretirement
 
Pension
 
Benefit
Payment
 
Expected
Federal
Subsidy
2017
$
251

 
$
52

 
$
1

2018
252

 
51

 
1

2019
261

 
51

 
1

2020
263

 
50

 

2021
267

 
49

 

2022-2026
1,344

 
228

 
2

Schedule of Expected Cash Flows - U.K. Pension Plans - Expected Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plans.
 
Pension
2017
$
314

2018
317

2019
322

2020
326

2021
329

2022-2026
1,693

Expected Employer Contributions to U.S. Savings Plans
Substantially all employees of PPL's subsidiaries are eligible to participate in deferred savings plans (401(k)s). Employer contributions to the plans were:
 
2016
 
2015
 
2014
PPL
$
35

 
$
34

 
$
33

PPL Electric
6

 
6

 
6

LKE
17

 
16

 
15

LG&E
5

 
5

 
5

KU
4

 
4

 
4

PPL Electric Utilities Corp [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Schedule of Funded Status of Defined Benefit Plans
Allocations to PPL Electric resulted in liabilities at December 31 as follows:
 
2016
 
2015
Pension
$
281

 
$
183

Other postretirement benefits
72

 
67

LG And E And KU Energy LLC [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Schedule Of Net Periodic Defined Benefit Costs (Credits)
The following table provides the components of net periodic defined benefit costs for LKE's pension and other postretirement benefit plans for the years ended December 31.
 
Pension Benefits
 
Other Postretirement Benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Net periodic defined benefit costs (credits):
 

 
 

 
 

 
 

 
 

 
 

Service cost
$
23

 
$
26

 
$
21

 
$
5

 
$
5

 
$
4

Interest cost
71

 
68

 
66

 
9

 
9

 
9

Expected return on plan assets
(91
)
 
(88
)
 
(82
)
 
(6
)
 
(6
)
 
(4
)
Amortization of:
 

 
 

 
 

 
 

 
 

 
 

Prior service cost
8

 
7

 
5

 
3

 
3

 
2

Actuarial (gain) loss (a)
21

 
37

 
12

 
(1
)
 

 
(1
)
Net periodic defined benefit costs
$
32

 
$
50

 
$
22

 
$
10

 
$
11

 
$
10

 
 
 
 
 
 
 
 
 
 
 
 
Other Changes in Plan Assets and Benefit Obligations Recognized in OCI and
Regulatory Assets/Liabilities - Gross:
 

 
 

 
 

 
 

 
 

 
 

Net (gain) loss
$
119

 
$
20

 
$
162

 
$
6

 
$
(15
)
 
$
26

Prior service cost

 
19

 
23

 

 

 
6

Amortization of:
 

 
 

 
 

 
 

 
 

 
 

Prior service credit
(8
)
 
(7
)
 
(5
)
 
(3
)
 
(3
)
 
(2
)
Actuarial gain (loss)
(21
)
 
(37
)
 
(12
)
 
1

 

 
1

Total recognized in OCI and
regulatory assets/liabilities
90

 
(5
)
 
168

 
4

 
(18
)
 
31

 
 
 
 
 
 
 
 
 
 
 
 
Total recognized in net periodic
defined benefit costs, OCI and
regulatory assets/liabilities
$
122

 
$
45

 
$
190

 
$
14

 
$
(7
)
 
$
41

 
(a)
As a result of the 2014 Kentucky rate case settlement that became effective July 1, 2015, the difference between actuarial (gain)/loss calculated in accordance with LKE's pension accounting policy and actuarial (gain)/loss calculated using a 15 year amortization period was $6 million in 2016 and $9 million in 2015.
Schedule of Amounts Recognized in Other Comprehensive Income and Regulatory Assets and Liabilities
For LKE's pension and other postretirement benefits, the amounts recognized in OCI and regulatory assets/liabilities for the years ended December 31 were as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
OCI
$
42

 
$
4

 
$
84

 
$
2

 
$
(2
)
 
$
9

Regulatory assets/liabilities
48

 
(9
)
 
84

 
2

 
(16
)
 
22

Total recognized in OCI and
regulatory assets/liabilities
$
90

 
$
(5
)
 
$
168

 
$
4

 
$
(18
)
 
$
31

Schedule of Amounts to be Amortized from AOCI and Regulatory Assets/Liabilities in Next Fiscal Year
The estimated amounts to be amortized from AOCI and regulatory assets/liabilities into net periodic defined benefit costs for LKE in 2017 are as follows.
 
Pension
Benefits
 
Other
Postretirement
Benefits
Prior service cost
$
8

 
$
1

Actuarial Loss
30

 

Total
$
38

 
$
1

 
 
 
 
Amortization from Balance Sheet:
 

 
 
AOCI
$
5

 
$

Regulatory assets/liabilities
33

 
1

Total
$
38

 
$
1

Defined Benefit Plan Assumptions and Impact of One Point Change on Postretirement Plans
The following weighted-average assumptions were used in the valuation of the benefit obligations at December 31. The U.K. pension benefits apply to PPL only.
 
Pension Benefits
 
 
 
 
 
U.S.
 
U.K.
 
Other Postretirement Benefits
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
PPL
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.21
%
 
4.59
%
 
2.87
%
 
3.68
%
 
4.11
%
 
4.48
%
Rate of compensation increase
3.95
%
 
3.93
%
 
3.50
%
 
4.00
%
 
3.92
%
 
3.91
%
 
 
 
 
 
 
 
 
 
 
 
 
LKE
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.19
%
 
4.56
%
 
 

 
 

 
4.12
%
 
4.49
%
Rate of compensation increase
3.50
%
 
3.50
%
 
 

 
 

 
3.50
%
 
3.50
%
 
 
 
 
 
 
 
 
 
 
 
 
LG&E
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.13
%
 
4.49
%
 
 

 
 

 
 

 
 


The following weighted-average assumptions were used to determine the net periodic defined benefit costs for the years ended December 31. The U.K. pension benefits apply to PPL only.
 
Pension Benefits
 
 
 
 
 
 
 
U.S.
 
U.K.
 
Other Postretirement Benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
PPL
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate service cost (b)
4.59
%
 
4.25
%
 
5.12
%
 
3.90
%
 
3.85
%
 
4.41
%
 
4.48
%
 
4.09
%
 
4.91
%
Discount rate interest cost (b)
4.59
%
 
4.25
%
 
5.12
%
 
3.14
%
 
3.85
%
 
4.41
%
 
4.48
%
 
4.09
%
 
4.91
%
Rate of compensation increase
3.93
%
 
3.91
%
 
3.97
%
 
4.00
%
 
4.00
%
 
4.00
%
 
3.91
%
 
3.86
%
 
3.96
%
Expected return on plan assets (a)
7.00
%
 
7.00
%
 
7.00
%
 
7.20
%
 
7.19
%
 
7.19
%
 
6.11
%
 
6.06
%
 
5.96
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LKE
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.56
%
 
4.25
%
 
5.18
%
 
 

 
 

 
 

 
4.49
%
 
4.06
%
 
4.91
%
Rate of compensation increase
3.50
%
 
3.50
%
 
4.00
%
 
 

 
 

 
 

 
3.50
%
 
3.50
%
 
4.00
%
Expected return on plan assets (a)
7.00
%
 
7.00
%
 
7.00
%
 
 

 
 

 
 

 
6.82
%
 
6.82
%
 
6.75
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LG&E
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.49
%
 
4.20
%
 
5.13
%
 
 

 
 

 
 

 
 

 
 

 
 

Expected return on plan assets (a)
7.00
%
 
7.00
%
 
7.00
%
 
 

 
 

 
 

 
 

 
 

 
 

 
(a)
The expected long-term rates of return for pension and other postretirement benefits are based on management's projections using a best-estimate of expected returns, volatilities and correlations for each asset class. Each plan's specific current and expected asset allocations are also considered in developing a reasonable return assumption.
(b)
As of January 1, 2016, WPD began using individual spot rates from the yield curve used to discount the benefit obligation to measure service cost and interest cost. PPL's U.S. plans use a single discount rate derived from an individual bond matching model to measure the benefit obligation, service cost and interest cost. See Note 1 for additional details.

The following table provides the assumed health care cost trend rates for the years ended December 31:
 
2016
 
2015
 
2014
PPL and LKE
 
 
 
 
 
Health care cost trend rate assumed for next year
 
 
 
 
 
– obligations
7.0
%
 
6.8
%
 
7.2
%
– cost
6.8
%
 
7.2
%
 
7.6
%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
 
 
 
 
 
– obligations
5.0
%
 
5.0
%
 
5.0
%
– cost
5.0
%
 
5.0
%
 
5.0
%
Year that the rate reaches the ultimate trend rate
 
 
 
 
 
– obligations
2022

 
2020

 
2020

– cost
2020

 
2020

 
2020


A one percentage point change in the assumed health care costs trend rate assumption would have had the following effects on the other postretirement benefit plans in 2016:
 
One Percentage Point
 
Increase
 
Decrease
Effect on accumulated postretirement benefit obligation
 
 
 
PPL
$
5

 
$
(5
)
LKE
4

 
(4
)
Schedule of Funded Status of Defined Benefit Plans
The funded status of LKE's plans at December 31 was as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
2016
 
2015
 
2016
 
2015
Change in Benefit Obligation
 

 
 

 
 

 
 

Benefit Obligation, beginning of period
$
1,588

 
$
1,608

 
$
216

 
$
234

Service cost
23

 
26

 
5

 
5

Interest cost
71

 
68

 
9

 
9

Participant contributions

 

 
7

 
7

Plan amendments (a)

 
19

 

 

Actuarial (gain) loss
96

 
(74
)
 
4

 
(22
)
Gross benefits paid (a)
(109
)
 
(59
)
 
(21
)
 
(18
)
Federal subsidy

 

 

 
1

Benefit Obligation, end of period
1,669

 
1,588

 
220

 
216

 
 
 
 
 
 
 
 
Change in Plan Assets
 

 
 

 
 

 
 

Plan assets at fair value, beginning of period
1,289

 
1,301

 
88

 
82

Actual return on plan assets
69

 
(7
)
 
4

 

Employer contributions
66

 
54

 
20

 
17

Participant contributions

 

 
7

 
7

Gross benefits paid
(109
)
 
(59
)
 
(21
)
 
(18
)
Plan assets at fair value, end of period
1,315

 
1,289

 
98

 
88

 
 
 
 
 
 
 
 
Funded Status, end of period
$
(354
)
 
$
(299
)
 
$
(122
)
 
$
(128
)
 
Pension Benefits
 
Other Postretirement Benefits
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Amounts recognized in the Balance Sheets consist of:
 

 
 

 
 

 
 

Noncurrent asset
$

 
$

 
$
2

 
$
2

Current liability
(4
)
 
(3
)
 
(3
)
 
(3
)
Noncurrent liability
(350
)
 
(296
)
 
(121
)
 
(127
)
Net amount recognized, end of period
$
(354
)
 
$
(299
)
 
$
(122
)
 
$
(128
)
 
 
 
 
 
 
 
 
Amounts recognized in AOCI and regulatory assets/liabilities (pre-tax) consist of:
 

 
 

 
 

 
 

Prior service cost
$
45

 
$
54

 
$
6

 
$
9

Net actuarial (gain) loss
436

 
338

 
(13
)
 
(19
)
Total
$
481

 
$
392

 
$
(7
)
 
$
(10
)
 
 
 
 
 
 
 
 
Total accumulated benefit obligation
for defined benefit pension plans
$
1,531

 
$
1,452

 
 

 
 

 
(a)
The pension plans were amended in December 2015 to allow active participants and terminated vested participants who had not previously elected a form of payment of their benefit to elect to receive their accrued pension benefit as a one-time lump-sum payment effective January 1, 2016. The projected benefit obligation at December 31, 2015 increased by $19 million as a result of the amendment. Gross benefits paid by the plans include $53 million of lump-sum cash payments made to participants during 2016 in connection with these offerings.

The amounts recognized in AOCI and regulatory assets/liabilities at December 31 were as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
2016
 
2015
 
2016
 
2015
AOCI
$
111

 
$
70

 
$
8

 
$
7

Regulatory assets/liabilities
370

 
322

 
(15
)
 
(17
)
Total
$
481

 
$
392

 
$
(7
)
 
$
(10
)
Schedule of Projected or Accumulated Benefit Obligations In Excess of Plan Assets
The following tables provide information on pension plans where the projected benefit obligation (PBO) or accumulated benefit obligations (ABO) exceed the fair value of plan assets: 
 
PBO in excess of plan assets
 
2016
 
2015
Projected benefit obligation
$
1,669

 
$
1,588

Fair value of plan assets
1,315

 
1,289

 
 
 
 
 
ABO in excess of plan assets
 
2016
 
2015
Accumulated benefit obligation
$
1,531

 
$
1,452

Fair value of plan assets
1,315

 
1,289

Schedules of Asset Allocation of U.S. Pension Trusts Assets
The asset allocation for the trust and the target allocation by portfolio at December 31 are as follows:
 
Percentage of trust assets
 
2016
 
2016 (a)
 
2015
 
Target Asset
Allocation (a)
Growth Portfolio
52
%
 
51
%
 
50
%
Equity securities
30
%
 
25
%
 
 
Debt securities (b)
12
%
 
13
%
 
 
Alternative investments
10
%
 
13
%
 
 
Immunizing Portfolio
46
%
 
47
%
 
48
%
Debt securities (b)
43
%
 
42
%
 
 
Derivatives
3
%
 
5
%
 
 
Liquidity Portfolio
2
%
 
2
%
 
2
%
Total
100
%
 
100
%
 
100
%
 
(a)
Allocations exclude consideration of a group annuity contract held by the LG&E and KU Retirement Plan.
(b)
Includes commingled debt funds, which PPL treats as debt securities for asset allocation purposes.
Schedule of Fair Value of Financial Assets for U.S. Pension Plan Assets
The fair value of net assets in the Master Trust by asset class and level within the fair value hierarchy was:
 
December 31, 2016
 
December 31, 2015
 
 
 
Fair Value Measurements Using
 
 
 
Fair Value Measurements Using
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
PPL Services Corporation Master Trust
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
181

 
$
181

 
$

 
$

 
$
225

 
$
225

 
$

 
$

Equity securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Equity
152

 
152

 

 

 
172

 
172

 

 

U.S. Equity fund measured at NAV (a)
272

 

 

 

 
197

 

 

 

International equity fund at NAV (a)
551

 

 

 

 
454

 

 

 

Commingled debt measured at NAV (a)
546

 

 

 

 
514

 

 

 

Debt securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury and U.S. government sponsored
agency
381

 
381

 

 

 
501

 
492

 
9

 

Corporate
850

 

 
837

 
13

 
747

 

 
737

 
10

Other
8

 

 
8

 

 
14

 

 
14

 

Alternative investments:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commodities measured at NAV (a)

 

 

 

 
70

 

 

 

Real estate measured at NAV (a)
102

 

 

 

 
118

 

 

 

Private equity measured at NAV (a)
80

 

 

 

 
81

 

 

 

Hedge funds measured at NAV (a)
167

 

 
 

 
 

 
171

 

 

 

Derivatives:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest rate swaps and swaptions
61

 

 
61

 

 
80

 

 
80

 

Other
3

 

 
3

 

 
11

 

 
11

 

Insurance contracts
27

 

 

 
27

 
32

 

 

 
32

PPL Services Corporation Master Trust assets, at
fair value
3,381

 
$
714

 
$
909

 
$
40

 
3,387

 
$
889

 
$
851

 
$
42

Receivables and payables, net (b)
(15
)
 


 
 

 
 

 
(49
)
 
 

 
 

 
 

401(h) accounts restricted for other
postretirement benefit obligations
(123
)
 
 

 
 

 
 

 
(111
)
 
 

 
 

 
 

Total PPL Services Corporation Master Trust
pension assets
$
3,243

 
 

 
 

 
 

 
$
3,227

 
 

 
 

 
 

 
(a)
In accordance with accounting guidance certain investments that are measured at fair value using the net asset value per share (NAV), or its equivalent, practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.
(b)
Receivables and payables represent amounts for investments sold/purchased but not yet settled along with interest and dividends earned but not yet received.
Reconciliation of U.S. Pension Trust Assets Classified as Level 3 Included in Earnings
A reconciliation of the Master Trust assets classified as Level 3 at December 31, 2016 is as follows:
 
Corporate
debt
 
Insurance
contracts
 
Total
Balance at beginning of period
$
10

 
$
32

 
$
42

Actual return on plan assets
 
 
 
 
 
Relating to assets still held at the reporting date

 
1

 
1

Purchases, sales and settlements
3

 
(6
)
 
(3
)
Balance at end of period
$
13

 
$
27

 
$
40

 
A reconciliation of the Master Trust assets classified as Level 3 at December 31, 2015 is as follows: 
 
Corporate
debt
 
Insurance
contracts
 
Total
Balance at beginning of period
$
21

 
$
33

 
$
54

Actual return on plan assets
 
 
 
 
 
Relating to assets still held at the reporting date

 
2

 
2

Relating to assets sold during the period
(1
)
 

 
(1
)
Purchases, sales and settlements
(10
)
 
(3
)
 
(13
)
Balance at end of period
$
10

 
$
32

 
$
42

Schedule of Fair Value of Financial Assets for U.S. Postretirement Benefits
The fair value of assets in the U.S. other postretirement benefit plans by asset class and level within the fair value hierarchy was:
 
December 31, 2016
 
December 31, 2015
 
 
 
Fair Value Measurement Using
 
 
 
Fair Value Measurement Using
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Money market funds
$
5

 
$
5

 
$

 
$

 
$
6

 
$
6

 
$

 
$

U.S. Equity securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Large-cap equity fund measure at NAV (a)
123

 

 

 

 
129

 

 

 

Commingled debt fund measured at NAV (a)
114

 

 

 

 
109

 

 

 

Debt securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Municipalities
12

 

 
12

 

 
23

 

 
23

 

Total VEBA trust assets, at fair value
254

 
$
5

 
$
12

 
$

 
267

 
$
6

 
$
23

 
$

Receivables and payables, net (b)
1

 
 

 
 

 
 

 
1

 
 

 
 

 
 
401(h) account assets
123

 
 

 
 

 
 

 
111

 
 

 
 

 
 
Total other postretirement benefit plan assets
$
378

 
 

 
 

 
 

 
$
379

 
 

 
 

 
 

 
(a)
In accordance with accounting guidance certain investments that are measured at fair value using the net asset value per share (NAV), or its equivalent, practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.
(b)
Receivables and payables represent amounts for investments sold/purchased but not yet settled along with interest and dividends earned but not yet received.
Schedule of Expected Cash Flows - U.S. Defined Benefit Plans - Expected Payments and Related Federal Subsidy
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plans and the following federal subsidy payments are expected to be received by LKE.
 
 
 
Other Postretirement
 
Pension
 
Benefit
Payment
 
Expected
Federal
Subsidy
2017
$
105

 
$
14

 
$

2018
108

 
14

 

2019
110

 
15

 
1

2020
111

 
16

 

2021
113

 
16

 

2022-2026
569

 
82

 
2

Louisville Gas And Electric Co [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Schedule Of Net Periodic Defined Benefit Costs (Credits)
The following table provides the components of net periodic defined benefit costs for LG&E's pension benefit plan for the years ended December 31.
 
Pension Benefits
 
2016
 
2015
 
2014
Net periodic defined benefit costs (credits):
 

 
 

 
 

Service cost
$
1

 
$
1

 
$
1

Interest cost
15

 
14

 
15

Expected return on plan assets
(21
)
 
(20
)
 
(19
)
Amortization of:
 

 
 

 
 

Prior service cost
4

 
3

 
2

Actuarial loss (a)
7

 
11

 
6

Net periodic defined benefit costs
$
6

 
$
9

 
$
5

 
 
 
 
 
 
Other Changes in Plan Assets and Benefit Obligations
Recognized in Regulatory Assets - Gross:
 

 
 

 
 

Net loss
$
22

 
$
8

 
$
14

Prior service cost

 
10

 
9

Amortization of:
 

 
 

 
 

Prior service credit
(4
)
 
(3
)
 
(2
)
Actuarial gain
(7
)
 
(11
)
 
(6
)
Total recognized in regulatory assets/liabilities
11

 
4

 
15

 
 
 
 
 
 
Total recognized in net periodic defined benefit costs and regulatory assets
$
17

 
$
13

 
$
20

 
(a)
As a result of the 2014 Kentucky rate case settlement that became effective July 1, 2015, the difference between actuarial (gain)/loss calculated in accordance with LG&E's pension accounting policy and actuarial (gain)/loss calculated using a 15 year amortization period was $5 million
Schedule of Amounts to be Amortized from AOCI and Regulatory Assets/Liabilities in Next Fiscal Year
The estimated amounts to be amortized from regulatory assets into net periodic defined benefit costs for LG&E in 2017 are as follows.
 
Pension
Benefits
Prior service cost
$
4

Actuarial loss
9

Total
$
13

Schedule of Net Periodic Defined Benefit Costs Included in Income Statement
In the table above, LG&E amounts include costs for the specific plans it sponsors and the following allocated costs of defined benefit plans sponsored by LKE, based on its participation in those plans, which management believes are reasonable:
 
Pension Benefits
 
Other Postretirement Benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
LG&E Non-Union Only
$
4

 
$
5

 
$
2

 
$
3

 
$
4

 
$
4

Defined Benefit Plan Assumptions and Impact of One Point Change on Postretirement Plans
The following weighted-average assumptions were used in the valuation of the benefit obligations at December 31. The U.K. pension benefits apply to PPL only.
 
Pension Benefits
 
 
 
 
 
U.S.
 
U.K.
 
Other Postretirement Benefits
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
PPL
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.21
%
 
4.59
%
 
2.87
%
 
3.68
%
 
4.11
%
 
4.48
%
Rate of compensation increase
3.95
%
 
3.93
%
 
3.50
%
 
4.00
%
 
3.92
%
 
3.91
%
 
 
 
 
 
 
 
 
 
 
 
 
LKE
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.19
%
 
4.56
%
 
 

 
 

 
4.12
%
 
4.49
%
Rate of compensation increase
3.50
%
 
3.50
%
 
 

 
 

 
3.50
%
 
3.50
%
 
 
 
 
 
 
 
 
 
 
 
 
LG&E
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.13
%
 
4.49
%
 
 

 
 

 
 

 
 


The following weighted-average assumptions were used to determine the net periodic defined benefit costs for the years ended December 31. The U.K. pension benefits apply to PPL only.
 
Pension Benefits
 
 
 
 
 
 
 
U.S.
 
U.K.
 
Other Postretirement Benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
PPL
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate service cost (b)
4.59
%
 
4.25
%
 
5.12
%
 
3.90
%
 
3.85
%
 
4.41
%
 
4.48
%
 
4.09
%
 
4.91
%
Discount rate interest cost (b)
4.59
%
 
4.25
%
 
5.12
%
 
3.14
%
 
3.85
%
 
4.41
%
 
4.48
%
 
4.09
%
 
4.91
%
Rate of compensation increase
3.93
%
 
3.91
%
 
3.97
%
 
4.00
%
 
4.00
%
 
4.00
%
 
3.91
%
 
3.86
%
 
3.96
%
Expected return on plan assets (a)
7.00
%
 
7.00
%
 
7.00
%
 
7.20
%
 
7.19
%
 
7.19
%
 
6.11
%
 
6.06
%
 
5.96
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LKE
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.56
%
 
4.25
%
 
5.18
%
 
 

 
 

 
 

 
4.49
%
 
4.06
%
 
4.91
%
Rate of compensation increase
3.50
%
 
3.50
%
 
4.00
%
 
 

 
 

 
 

 
3.50
%
 
3.50
%
 
4.00
%
Expected return on plan assets (a)
7.00
%
 
7.00
%
 
7.00
%
 
 

 
 

 
 

 
6.82
%
 
6.82
%
 
6.75
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LG&E
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.49
%
 
4.20
%
 
5.13
%
 
 

 
 

 
 

 
 

 
 

 
 

Expected return on plan assets (a)
7.00
%
 
7.00
%
 
7.00
%
 
 

 
 

 
 

 
 

 
 

 
 

 
(a)
The expected long-term rates of return for pension and other postretirement benefits are based on management's projections using a best-estimate of expected returns, volatilities and correlations for each asset class. Each plan's specific current and expected asset allocations are also considered in developing a reasonable return assumption.
(b)
As of January 1, 2016, WPD began using individual spot rates from the yield curve used to discount the benefit obligation to measure service cost and interest cost. PPL's U.S. plans use a single discount rate derived from an individual bond matching model to measure the benefit obligation, service cost and interest cost. See Note 1 for additional details.
Schedule of Funded Status of Defined Benefit Plans
The funded status of LG&E's plan at December 31, was as follows:
 
Pension Benefits
 
2016
 
2015
Change in Benefit Obligation
 

 
 

Benefit Obligation, beginning of period
$
326

 
$
331

Service cost
1

 
1

Interest cost
15

 
14

Plan amendments (a)

 
10

Actuarial (gain) loss
15

 
(15
)
Gross benefits paid (b)
(28
)
 
(15
)
Benefit Obligation, end of period
329

 
326

 
 
 
 
Change in Plan Assets
 

 
 

Plan assets at fair value, beginning of period
297

 
301

Actual return on plan assets
14

 
(2
)
Employer contributions
35

 
13

Gross benefits paid
(28
)
 
(15
)
Plan assets at fair value, end of period
318

 
297

 
 
 
 
Funded Status, end of period
$
(11
)
 
$
(29
)
 
 
 
 
Amounts recognized in the Balance Sheets consist of:
 

 
 

Noncurrent liability
$
(11
)
 
$
(29
)
Net amount recognized, end of period
$
(11
)
 
$
(29
)
 
 
 
 
Amounts recognized in regulatory assets (pre-tax) consist of:
 

 
 

Prior service cost
$
25

 
$
29

Net actuarial loss
110

 
95

Total
$
135

 
$
124

 
 
 
 
Total accumulated benefit obligation for defined benefit pension plan
$
329

 
$
326

 
(a)
The pension plan was amended in December 2015 to allow active participants and terminated vested participants who had not previously elected a form of payment of their benefit to elect to receive their accrued pension benefit as a one-time lump-sum payment effective January 1, 2016. The projected benefit obligation at December 31, 2015 increased by $10 million as a result of the amendment.
(b)
The pension plan was amended in December 2015 to allow active participants and terminated vested participants who had not previously elected a form of payment of their benefit to elect to receive their accrued pension benefit as a one-time lump-sum payment effective January 1, 2016. Gross benefits paid by the plan include $14 million of lump-sum cash payments made to the participants during 2016 in connection with this offering.

Allocations to LG&E resulted in liabilities at December 31 as follows:
 
2016
 
2015
Pension
$
42

 
$
26

Other postretirement benefits
76

 
77

Schedules of Asset Allocation of U.S. Pension Trusts Assets
The asset allocation for the trust and the target allocation by portfolio at December 31 are as follows:
 
Percentage of trust assets
 
2016
 
2016 (a)
 
2015
 
Target Asset
Allocation (a)
Growth Portfolio
52
%
 
51
%
 
50
%
Equity securities
30
%
 
25
%
 
 
Debt securities (b)
12
%
 
13
%
 
 
Alternative investments
10
%
 
13
%
 
 
Immunizing Portfolio
46
%
 
47
%
 
48
%
Debt securities (b)
43
%
 
42
%
 
 
Derivatives
3
%
 
5
%
 
 
Liquidity Portfolio
2
%
 
2
%
 
2
%
Total
100
%
 
100
%
 
100
%
 
(a)
Allocations exclude consideration of a group annuity contract held by the LG&E and KU Retirement Plan.
(b)
Includes commingled debt funds, which PPL treats as debt securities for asset allocation purposes.
Schedule of Fair Value of Financial Assets for U.S. Pension Plan Assets
The fair value of net assets in the Master Trust by asset class and level within the fair value hierarchy was:
 
December 31, 2016
 
December 31, 2015
 
 
 
Fair Value Measurements Using
 
 
 
Fair Value Measurements Using
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
PPL Services Corporation Master Trust
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
181

 
$
181

 
$

 
$

 
$
225

 
$
225

 
$

 
$

Equity securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Equity
152

 
152

 

 

 
172

 
172

 

 

U.S. Equity fund measured at NAV (a)
272

 

 

 

 
197

 

 

 

International equity fund at NAV (a)
551

 

 

 

 
454

 

 

 

Commingled debt measured at NAV (a)
546

 

 

 

 
514

 

 

 

Debt securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury and U.S. government sponsored
agency
381

 
381

 

 

 
501

 
492

 
9

 

Corporate
850

 

 
837

 
13

 
747

 

 
737

 
10

Other
8

 

 
8

 

 
14

 

 
14

 

Alternative investments:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commodities measured at NAV (a)

 

 

 

 
70

 

 

 

Real estate measured at NAV (a)
102

 

 

 

 
118

 

 

 

Private equity measured at NAV (a)
80

 

 

 

 
81

 

 

 

Hedge funds measured at NAV (a)
167

 

 
 

 
 

 
171

 

 

 

Derivatives:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest rate swaps and swaptions
61

 

 
61

 

 
80

 

 
80

 

Other
3

 

 
3

 

 
11

 

 
11

 

Insurance contracts
27

 

 

 
27

 
32

 

 

 
32

PPL Services Corporation Master Trust assets, at
fair value
3,381

 
$
714

 
$
909

 
$
40

 
3,387

 
$
889

 
$
851

 
$
42

Receivables and payables, net (b)
(15
)
 


 
 

 
 

 
(49
)
 
 

 
 

 
 

401(h) accounts restricted for other
postretirement benefit obligations
(123
)
 
 

 
 

 
 

 
(111
)
 
 

 
 

 
 

Total PPL Services Corporation Master Trust
pension assets
$
3,243

 
 

 
 

 
 

 
$
3,227

 
 

 
 

 
 

 
(a)
In accordance with accounting guidance certain investments that are measured at fair value using the net asset value per share (NAV), or its equivalent, practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.
(b)
Receivables and payables represent amounts for investments sold/purchased but not yet settled along with interest and dividends earned but not yet received.
Reconciliation of U.S. Pension Trust Assets Classified as Level 3 Included in Earnings
A reconciliation of the Master Trust assets classified as Level 3 at December 31, 2016 is as follows:
 
Corporate
debt
 
Insurance
contracts
 
Total
Balance at beginning of period
$
10

 
$
32

 
$
42

Actual return on plan assets
 
 
 
 
 
Relating to assets still held at the reporting date

 
1

 
1

Purchases, sales and settlements
3

 
(6
)
 
(3
)
Balance at end of period
$
13

 
$
27

 
$
40

 
A reconciliation of the Master Trust assets classified as Level 3 at December 31, 2015 is as follows: 
 
Corporate
debt
 
Insurance
contracts
 
Total
Balance at beginning of period
$
21

 
$
33

 
$
54

Actual return on plan assets
 
 
 
 
 
Relating to assets still held at the reporting date

 
2

 
2

Relating to assets sold during the period
(1
)
 

 
(1
)
Purchases, sales and settlements
(10
)
 
(3
)
 
(13
)
Balance at end of period
$
10

 
$
32

 
$
42

Schedule of Expected Cash Flows - U.S. Defined Benefit Plans - Expected Payments and Related Federal Subsidy
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plan.
 
Pension
2017
$
25

2018
25

2019
25

2020
25

2021
24

2022-2026
110

Kentucky Utilities Co [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Schedule of Funded Status of Defined Benefit Plans
Allocations to KU resulted in liabilities at December 31 as follows.
 
2016
 
2015
Pension
$
62

 
$
46

Other postretirement benefits
40

 
42