EMPLOYEE BENEFIT PLANS

Dominion and Dominion Gas - Defined Benefit Plans

Dominion provides certain retirement benefits to eligible active employees, retirees and qualifying dependents. Dominion Gas participates in a number of the Dominion-sponsored retirement plans. Under the terms of its benefit plans, Dominion reserves the right to change, modify or terminate the plans. From time to time in the past, benefits have changed, and some of these changes have reduced benefits.

Dominion maintains qualified noncontributory defined benefit pension plans covering virtually all employees. Retirement benefits are based primarily on years of service, age and the employee's compensation. Dominion's funding policy is to contribute annually an amount that is in accordance with the provisions of ERISA. The pension program also provides benefits to certain retired executives under a company-sponsored nonqualified employee benefit plan. The nonqualified plan is funded through contributions to a grantor trust. Dominion also provides retiree healthcare and life insurance benefits with annual employee premiums based on several factors such as age, retirement date and years of service.

Pension benefits for Dominion Gas employees not represented by collective bargaining units are covered by the Dominion Pension Plan, a defined benefit pension plan sponsored by Dominion that provides benefits to multiple Dominion subsidiaries. Pension benefits for Dominion Gas employees represented by collective bargaining units are covered by separate pension plans for East Ohio and, for DTI, a plan that provides benefits to employees of both DTI and Hope. Employee compensation is the basis for allocating pension costs and obligations between DTI and Hope and determining East Ohio's share of total pension costs.

Retiree healthcare and life insurance benefits for Dominion Gas employees not represented by collective bargaining units are covered by the Dominion Retiree Health and Welfare Plan, a plan sponsored by Dominion that provides certain retiree healthcare and life insurance benefits to multiple Dominion subsidiaries. Retiree healthcare and life insurance benefits for Dominion Gas employees represented by collective bargaining units are covered by separate other postretirement benefit plans for East Ohio and, for DTI, a plan that provides benefits to both DTI and Hope. Employee headcount is the basis for allocating other postretirement benefit costs and obligations between DTI and Hope and determining East Ohio's share of total other postretirement benefit costs.

Pension and other postretirement benefit costs are affected by employee demographics (including age, compensation levels and years of service), the level of contributions made to the plans and earnings on plan assets. These costs may also be affected by changes in key assumptions, including expected long-term rates of return on plan assets, discount rates, healthcare cost trend rates, mortality rates and the rate of compensation increases.

Dominion uses December 31 as the measurement date for all of its employee benefit plans, including those in which Dominion Gas participates. Dominion uses the market-related value of pension plan assets to determine the expected return on plan assets, a component of net periodic pension cost, for all pension plans, including those in which Dominion Gas participates. The market-related value recognizes changes in fair value on a straight-line basis over a four-year period, which reduces year-to-year volatility. Changes in fair value are measured as the difference between the expected and actual plan asset returns, including dividends, interest and realized and unrealized investment gains and losses. Since the market-related value recognizes changes in fair value over a four-year period, the future market-related value of pension plan assets will be impacted as previously unrecognized changes in fair value are recognized.

Dominion's pension and other postretirement benefit plans hold investments in trusts to fund employee benefit payments.

Dominion's pension and other postretirement plan assets experienced aggregate actual losses of $72 million in 2015 and aggregate actual returns of $706 million in 2014, versus expected returns of $648 million and $610 million, respectively. Dominion Gas' pension and other postretirement plan assets for employees represented by collective bargaining units experienced aggregate actual losses of $13 million in 2015 and aggregate actual returns of $157 million in 2014, versus expected returns of $150 million and $138 million, respectively. Differences between actual and expected returns on plan assets are accumulated and amortized during future periods. As such, any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for such employee benefit plans and will be included in the determination of the amount of cash to be contributed to the employee benefit plans.

The Medicare Act introduced a federal subsidy to sponsors of retiree healthcare benefit plans that provide a prescription drug benefit that is at least actuarially equivalent to Medicare Part D. Dominion determined that the prescription drug benefit offered under its other postretirement benefit plans is at least actuarially equivalent to Medicare Part D. Dominion and Dominion Gas received a federal subsidy of $4 million and $1 million, respectively, for 2014. Effective January 1, 2013, Dominion changed its method of receiving the subsidy under Medicare Part D for retiree prescription drug coverage from the Retiree Drug Subsidy to the EGWP. This change reduced other postretirement benefit costs by approximately $20 million annually beginning in 2012. As a result of the adoption of the EGWP, Dominion begins to receive an increased level of Medicare Part D subsidies in the form of reduced costs rather than a direct reimbursement.

In October 2014, the Society of Actuaries published new mortality tables and mortality improvement scales. Such tables and scales are used to develop mortality assumptions for use in determining pension and other postretirement benefit liabilities and expense. Following evaluation of the new tables, Dominion changed its assumption for mortality rates to reflect a generational improvement scale. As a result of this change in assumption, at December 31, 2014 Dominion and Dominion Gas (for employees represented by collective bargaining units) increased their pension benefit obligations by $131 million and $10 million, respectively, and increased their accumulated postretirement benefit obligations by $32 million and $7 million, respectively. This change increased net periodic benefit cost for Dominion and Dominion Gas (for employees represented by collective bargaining units) by $25 million and $3 million, respectively, for 2015.

Dominion remeasured all of its pension and other postretirement benefit plans in the second quarter of 2013. The remeasurement resulted in a reduction in the pension benefit obligation of $354 million and a reduction in the accumulated postretirement benefit obligation of $78 million. For Dominion Gas employees represented by collective bargaining units, the remeasurement resulted in a reduction in the pension benefit obligation of $28 million and a reduction in the accumulated postretirement benefit obligation of $9 million. The impact of the remeasurement on net periodic benefit (credit) cost was recognized prospectively from the remeasurement date and reduced net periodic benefit cost for 2013 by $36 million, excluding the impacts of curtailments, and for Dominion Gas employees represented by collective bargaining units by $2 million. The discount rate used for the remeasurement was 4.80% for the pension plans and 4.70% for the other postretirement benefit plans. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2012.

In the fourth quarter of 2013, Dominion remeasured its other postretirement benefit plans as a result of a plan amendment that changed medical coverage for certain Medicare-eligible retirees effective April 2014. The remeasurement resulted in a reduction in the accumulated postretirement benefit obligation of $220 million. The impact of the remeasurement on net periodic benefit (credit) cost was recognized prospectively from the remeasurement date and reduced net periodic benefit cost for 2013 by $8 million. The amendment is expected to reduce net periodic benefit cost by $40 million to $60 million for each of the next five years. The discount rate used for the remeasurement was 4.80%. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2012.

In the third quarter of 2014, East Ohio remeasured its other postretirement benefit plan as a result of an amendment that changed medical coverage upon the attainment of age 65 for certain future retirees effective January 1, 2016. For employees represented by collective bargaining units, the remeasurement resulted in an increase in the accumulated postretirement benefit obligation of $22 million. The impact of the remeasurement on net periodic benefit credit was recognized prospectively from the remeasurement date and reduced net periodic benefit credit for 2014, for employees represented by collective bargaining units, by less than $1 million. The discount rate used for the remeasurement was 4.20% and the expected long-term rate of return used was 8.50%. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2013.

Funded Status

The following table summarizes the changes in pension plan and other postretirement benefit plan obligations and plan assets and includes a statement of the plans' funded status for Dominion and Dominion Gas (for employees represented by collective bargaining units):



	Pension Benefits						Other Postretirement Benefits
Year Ended December 31,	2015			2014			2015			2014
(millions, except percentages)
DOMINION
Changes in benefit obligation:
Benefit obligation at beginning of year	$	6,667		$	5,625		$	1,571		$	1,360
Service cost	126			114			40			32
Interest cost	287			290			67			67
Benefits paid	(246		)	(236		)	(79		)	(78		)
Actuarial (gains) losses during the year	(443		)	887			(138		)	177
Plan amendments⁽¹⁾	—			—			(31		)	9
Settlements and curtailments⁽²⁾	—			(13		)	—			—
Medicare Part D reimbursement	—			—			—			4
Benefit obligation at end of year	$	6,391		$	6,667		$	1,430		$	1,571
Changes in fair value of plan assets:
Fair value of plan assets at beginning of year	$	6,480		$	6,113		$	1,402		$	1,315
Actual return (loss) on plan assets	(71		)	601			(1		)	105
Employer contributions	3			15			12			12
Benefits paid	(246		)	(236		)	(31		)	(30		)
Settlements⁽²⁾	—			(13		)	—			—
Fair value of plan assets at end of year	$	6,166		$	6,480		$	1,382		$	1,402
Funded status at end of year	$	(225	)	$	(187	)	$	(48	)	$	(169	)
Amounts recognized in the Consolidated Balance Sheets at December 31:
Noncurrent pension and other postretirement benefit assets	$	931		$	946		$	12		$	10
Other current liabilities	(14		)	(13		)	(3		)	(3		)
Noncurrent pension and other postretirement benefit liabilities	(1,142		)	(1,120		)	(57		)	(176		)
Net amount recognized	$	(225	)	$	(187	)	$	(48	)	$	(169	)
Significant assumptions used to determine benefit obligations as of December 31:
Discount rate	4.96% - 4.99%			4.40		%	4.93% - 4.94%			4.40		%
Weighted average rate of increase for compensation	4.22		%	4.22		%	4.22		%	4.22		%
Expected long-term rate of return on plan assets	8.75		%	8.75		%	8.50		%	8.50		%
DOMINION GAS
Changes in benefit obligation:
Benefit obligation at beginning of year	$	638		$	563		$	320		$	269
Service cost	15			12			7			6
Interest cost	27			28			14			13
Benefits paid	(29		)	(29		)	(18		)	(16		)
Actuarial (gains) losses during the year	(43		)	64			(31		)	38
Plan amendments	—			—			—			9
Medicare Part D reimbursement	—			—			—			1
Benefit obligation at end of year	$	608		$	638		$	292		$	320
Changes in fair value of plan assets:
Fair value of plan assets at beginning of year	$	1,510		$	1,403		$	288		$	273
Actual return (loss) on plan assets	(14		)	136			1			21
Employer contributions	—			—			12			10
Benefits paid	(29		)	(29		)	(18		)	(16		)
Fair value of plan assets at end of year	$	1,467		$	1,510		$	283		$	288
Funded status at end of year	$	859		$	872		$	(9	)	$	(32	)
Amounts recognized in the Consolidated Balance Sheets at December 31:
Noncurrent pension and other postretirement benefit assets	$	859		$	872		$	—		$	—
Noncurrent pension and other postretirement benefit liabilities⁽³⁾	—			—			(9		)	(32		)
Net amount recognized	$	859		$	872		$	(9	)	$	(32	)
Significant assumptions used to determine benefit obligations as of December 31:
Discount rate	4.99		%	4.40		%	4.93		%	4.40		%
Weighted average rate of increase for compensation	3.93		%	3.93		%	3.93		%	3.93		%
Expected long-term rate of return on plan assets	8.75		%	8.75		%	8.50		%	8.50		%


(1)	2015 amount relates primarily to a plan amendment that changed retiree medical benefits for certain nonunion employees after Medicare eligibility.


(2)	Relates primarily to a settlement charge for certain executives.


(3)	Reflected in other deferred credits and other liabilities in Dominion Gas' Consolidated Balance Sheets.

The ABO for all of Dominion's defined benefit pension plans was $5.8 billion and $6.0 billion at December 31, 2015 and 2014, respectively. The ABO for the defined benefit pension plans covering Dominion Gas employees represented by collective bargaining units was $578 million and $604 million at December 31, 2015 and 2014, respectively.

Under its funding policies, Dominion evaluates plan funding requirements annually, usually in the fourth quarter after receiving updated plan information from its actuary. Based on the funded status of each plan and other factors, Dominion determines the amount of contributions for the current year, if any, at that time. During 2015, Dominion and Dominion Gas made no contributions to the qualified defined benefit pension plans and no contributions are currently expected in 2016. In July 2012, the MAP 21 Act was signed into law. This Act includes an increase in the interest rates used to determine plan sponsors' pension contributions for required funding purposes. In 2014, the HATFA of 2014 was signed into law. Similar to the MAP 21 Act, the HATFA of 2014 adjusts the rules for calculating interest rates used in determining funding obligations. It is estimated that the new interest rates will reduce required pension contributions through 2019. Dominion believes that required pension contributions will rise subsequent to 2019, resulting in an estimated $200 million reduction in net cumulative required contributions over a 10-year period.

Certain regulatory authorities have held that amounts recovered in utility customers' rates for other postretirement benefits, in excess of benefits actually paid during the year, must be deposited in trust funds dedicated for the sole purpose of paying such benefits. Accordingly, certain of Dominion's subsidiaries, including Dominion Gas, fund other postretirement benefit costs through VEBAs. Dominion's remaining subsidiaries do not prefund other postretirement benefit costs but instead pay claims as presented. Dominion’s contributions to VEBAs, all of which pertained to Dominion Gas employees, totaled $12 million for both 2015 and 2014, and Dominion expects to contribute approximately $12 million to the Dominion VEBAs in 2016, all of which pertains to Dominion Gas employees.

Dominion and Dominion Gas do not expect any pension or other postretirement plan assets to be returned during 2016.

The following table provides information on the benefit obligations and fair value of plan assets for plans with a benefit obligation in excess of plan assets for Dominion and Dominion Gas (for employees represented by collective bargaining units):



	Pension Benefits				Other Postretirement Benefits
As of December 31,	2015		2014		2015		2014
(millions)
DOMINION
Benefit obligation	$	5,728	$	5,970	$	359	$	1,564
Fair value of plan assets	4,571		4,838		299		1,385
DOMINION GAS
Benefit obligation	$	—	$	—	$	292	$	320
Fair value of plan assets	—		—		283		288

The following table provides information on the ABO and fair value of plan assets for Dominion’s pension plans with an ABO in excess of plan assets:

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) plans:



	Estimated Future Benefit Payments
	Pension Benefits		Other Postretirement Benefits
(millions)
DOMINION
2016	$	288	$	92
2017	303		96
2018	324		99
2019	337		100
2020	359		102
2021-2025	2,023		512

DOMINION GAS
2016	$	35	$	18
2017	37		19
2018	39		21
2019	40		21
2020	41		21
2021-2025	208		107

Plan Assets

Dominion's overall objective for investing its pension and other postretirement plan assets is to achieve appropriate long-term rates of return commensurate with prudent levels of risk. As a participating employer in various pension plans sponsored by Dominion, Dominion Gas is subject to Dominion's investment policies for such plans. To minimize risk, funds are broadly diversified among asset classes, investment strategies and investment advisors. The strategic target asset allocations for Dominion's pension funds are 28% U.S. equity, 18% non-U.S. equity, 35% fixed income, 3% real estate and 16% other alternative investments. U.S. equity includes investments in large-cap, mid-cap and small-cap companies located in the United States. Non-U.S. equity includes investments in large-cap and small-cap companies located outside of the United States including both developed and emerging markets. Fixed income includes corporate debt instruments of companies from diversified industries and U.S. Treasuries. The U.S. equity, non-U.S. equity and fixed income investments are in individual securities as well as mutual funds. Real estate includes equity REITs and investments in partnerships. Other alternative investments include partnership investments in private equity, debt and hedge funds that follow several different strategies.

Dominion also utilizes common/collective trust funds as an investment vehicle for its defined benefit plans. A common/collective trust fund is a pooled fund operated by a bank or trust company for investment of the assets of various organizations and individuals in a well-diversified portfolio. Common/collective trust funds are funds of grouped assets that follow various investment strategies.

Strategic investment policies are established for Dominion's prefunded benefit plans based upon periodic asset/liability studies. Factors considered in setting the investment policy include employee demographics, liability growth rates, future discount rates, the funded status of the plans and the expected long-term rate of return on plan assets. Deviations from the plans' strategic allocation are a function of Dominion's assessments regarding short-term risk and reward opportunities in the capital markets and/or short-term market movements which result in the plans' actual asset allocations varying from the strategic target asset allocations. Through periodic rebalancing, actual allocations are brought back in line with the target. Future asset/liability studies will focus on strategies to further reduce pension and other postretirement plan risk, while still achieving attractive levels of returns. Financial derivatives may be used to obtain or manage market exposures and to hedge assets and liabilities.

For fair value measurement policies and procedures related to pension and other postretirement benefit plan assets, see Note 6.

The fair values of Dominion's and Dominion Gas’ (for employees represented by collective bargaining units) pension plan assets by asset category are as follows:



At December 31,	2015								2014
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
(millions)
DOMINION
Cash equivalents	$	16	$	—	$	—	$	16	$	13	$	25	$	—	$	38
U.S. equity:
Large Cap	1,178		—		—		1,178		1,313		—		—		1,313
Other	475		—		—		475		530		—		—		530
Non-U.S. equity:
Large Cap	286		—		—		286		234		—		—		234
Other	493		—		—		493		403		—		—		403
Common/collective trust funds⁽¹⁾	—		330		—		330		—		360		—		360
Fixed income:
Corporate debt instruments	40		672		—		712		45		666		—		711
U.S. Treasury securities and agency debentures	60		298		—		358		74		342		—		416
State and municipal	20		54		—		74		10		60		—		70
Other securities	9		61		—		70		6		80		—		86
Real estate-REITs	90		—		—		90		40		—		—		40
Total recorded at fair value	$	2,667	$	1,415	$	—	$	4,082	$	2,668	$	1,533	$	—	$	4,201
Assets recorded at NAV⁽²⁾:
Common/collective trust funds⁽¹⁾							1,200								1,235
Real estate-Partnerships							153								209
Other alternative investments:
Private equity							465								518
Debt							170								144
Hedge funds							86								162
Total recorded at NAV							$	2,074							$	2,268
Total⁽³⁾							$	6,156							$	6,469
DOMINION GAS
Cash equivalents	$	4	$	—	$	—	$	4	$	3	$	6	$	—	$	9
U.S. equity:
Large Cap	280		—		—		280		306		—		—		306
Other	113		—		—		113		124		—		—		124
Non-U.S. equity:
Large Cap	68		—		—		68		54		—		—		54
Other	117		—		—		117		94		—		—		94
Common/collective trust funds⁽⁴⁾	—		78		—		78		—		84		—		84
Fixed income:
Corporate debt instruments	9		160		—		169		11		155		—		166
U.S. Treasury securities and agency debentures	14		71		—		85		17		80		—		97
State and municipal	5		13		—		18		2		14		—		16
Other securities	2		14		—		16		1		19		—		20
Real estate-REITs:	22		—		—		22		9		—		—		9
Total recorded at fair value	$	634	$	336	$	—	$	970	$	621	$	358	$	—	$	979
Assets recorded at NAV⁽²⁾:
Common/collective trust funds⁽⁴⁾							286								288
Real estate-Partnerships							36								48
Other alternative investments:
Private equity							111								121
Debt							40								34
Hedge funds							21								38
Total recorded at NAV							$	494							$	529
Total⁽⁵⁾							$	1,464							$	1,508

(1) Common/collective trust funds include $330 million and $360 million of John Hancock insurance contracts held at December 31, 2015 and 2014, respectively. See below for a description of the individual investments included within this line item, and the nature and risk of each respective fund.

(2) These investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheets.

(3)

Includes net assets related to pending sales of securities of $112 million, net accrued income of $16 million, and excludes net assets related to pending purchases of securities of $118 million at December 31, 2015. Includes net assets related to pending sales of securities of $31 million, net accrued income of $18 million, and excludes net assets related to pending purchases of securities of $38 million at December 31, 2014.


(4)	Common/collective trust funds include $78 million and $84 million of John Hancock insurance contracts held at December 31, 2015 and 2014, respectively. See below for a description of the individual investments included within this line item, and the nature and risk of each respective fund.

(5)

Includes net assets related to pending sales of securities of $27 million, net accrued income of $4 million, and excludes net assets related to pending purchases of securities of $28 million at December 31, 2015. Includes net assets related to pending sales of securities of $7 million, net accrued income of $4 million, and excludes net assets related to pending purchases of securities of $9 million at December 31, 2014.

The fair values of Dominion's and Dominion Gas’ (for employees represented by collective bargaining units) other postretirement plan assets by asset category are as follows:



At December 31,	2015								2014
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
(millions)
DOMINION
Cash equivalents	$	1	$	1	$	—	$	2	$	1	$	7	$	—	$	8
U.S. equity:
Large Cap	468		—		—		468		514		—		—		514
Other	26		—		—		26		28		—		—		28
Non-U.S. equity:
Large Cap	107		—		—		107		102		—		—		102
Other	27		—		—		27		21		—		—		21
Common/collective trust funds⁽¹⁾	—		18		—		18		—		19		—		19
Fixed income:
Corporate debt instruments	2		37		—		39		3		35		—		38
U.S. Treasury securities and agency debentures	3		17		—		20		4		18		—		22
State and municipal	1		3		—		4		1		3		—		4
Other securities	1		3		—		4		—		4		—		4
Real estate-REITs	37		—		—		37		2		—		—		2
Total recorded at fair value	$	673	$	79	$	—	$	752	$	676	$	86	$	—	$	762
Assets recorded at NAV⁽²⁾:
Common/collective trust funds⁽¹⁾							543								536
Real estate-Partnerships							14								19
Other alternative investments:
Private equity							54								58
Debt							14								18
Hedge funds							5								9
Total recorded at NAV							$	630							$	640
Total							$	1,382							$	1,402
DOMINION GAS
Cash equivalents	$	—	$	—	$	—	$	—	$	—	$	2	$	—	$	2
U.S. equity-Large Cap	102		—		—		102		113		—		—		113
Non-U.S. equity-Large Cap	24		—		—		24		26		—		—		26
Real estate-REITs	11		—		—		11		—		—		—		—
Total recorded at fair value	$	137	$	—	$	—	$	137	$	139	$	2	$	—	$	141
Assets recorded at NAV⁽²⁾:
Common/collective trust funds⁽³⁾							132								129
Real estate-Partnerships							2								2
Other alternative investments:
Private equity							11								12
Debt							1								4
Total recorded at NAV							$	146							$	147
Total							$	283							$	288

(1) Common/collective trust funds include $18 million and $19 million of John Hancock insurance contracts held at December 31, 2015 and 2014, respectively. See below for a description of the individual investments included within this line item, and the nature and risk of each respective fund.


(3)	See below for a description of the individual investments included within this line item, and the nature and risk of each respective fund.

Investments in Common/Collective Trust Funds in Dominion’s pension and other postretirement plans, including those in which Dominion Gas participates, are stated at fair value as determined by the issuer of the Common/Collective Trust Funds based on the fair value of the underlying investments. The Common/Collective Trusts do not have any unfunded commitments, and do not have any applicable liquidation periods or defined terms/periods to be held. The majority of the Common/Collective Trust Funds have limited withdrawal or redemption rights during the term of the investment. Strategies of the Common/Collective Trust Funds are as follows:

Dominion and Dominion Gas

•

Wells Fargo Closed End Bond Trust-The Fund invests in stocks, bonds or a combination of both. Shares of the Fund are traded on a stock exchange and are subject to market risk like stocks, bonds and mutual funds. The Fund may invest in a less liquid portfolio of stocks and bonds because the fund does not need to sell securities to meet shareholder redemptions as mutual funds in order to keep a percentage of its portfolio in cash to pay back investors who withdraw shares.


•	JPMorgan Core Bond Trust-The Fund seeks to maximize total return by investing primarily in a diversified portfolio of intermediate- and long-term debt securities. The Fund invests primarily in investment-grade bonds; it generally maintains an average weighted maturity between four and 12 years. It may shorten its average weighted maturity if deemed appropriate for temporary defensive purposes.

•

SSgA Russell 2000 Value Index Common Trust-The Fund measures the performance of the small-cap value segment of the U.S. equity universe. The Russell 2000 Value Index is constructed to provide a comprehensive and unbiased barometer for the small-cap value segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect value characteristics.

•

NT Common Short-Term Investment Fund-The Fund seeks to maximize current income on cash reserves to the extent consistent with principal preservation and maintenance of liquidity from a portfolio of approved money market instruments with short maturities. Liquidity is emphasized to provide for redemption of units at par on any business day. Principal preservation is a primary objective. Within quality, maturity, and sector diversification guidelines, investments are made in those securities with the most attractive yields.

Dominion

•

SSgA Daily MSCI Emerging Markets Index Non-Lending Fund-The Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the MSCI Emerging Markets Index over the long term. The Fund may invest directly or indirectly in securities and other instruments, including in other pooled investment vehicles sponsored or managed by, or otherwise affiliated with the Trustee (State Street Bank and Trust Company).

•

SSgA Daily MSCI ACWI Ex-USA Index Non-Lending Fund-The Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the MSCI ACWI Ex-USA Index over the long term. The Fund may invest directly or indirectly in securities and other instruments, including in other pooled investment vehicles sponsored or managed by, or otherwise affiliated with the Trustee (State Street Bank and Trust Company).

•

SSgA S&P 400 MidCap Index-The Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of its benchmark index (the Index) over the long term. The S&P MidCap 400 is comprised of approximately 400 U.S. mid-cap securities and accounts for approximately 7% coverage of the U.S. stock market capitalization. SSgA will typically attempt to invest in the equity securities comprising the Index, in approximately the same proportions as they are represented in the Index.

•

SSgA S&P 500 Flagship Non-Lending Fund-The Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the S&P 500 Index over the long term. The S&P 500 is comprised of approximately 500 large-cap U.S. equities and captures approximately 80% coverage of available market capitalization. SSgA will typically attempt to invest in the equity securities comprising the S&P 500 Index, in approximately the same proportions as they are represented in the Index.

•

CF Goldman Sachs GSTCO Long Duration Fund-The Fund seeks to generate total return and prudent investment management through investments in fixed income securities. The Fund is actively managed and benchmarked versus the Barclays U.S. Long Government /Credit Index. At least 75% of the Fund’s total assets will be rated investment grade or better by a NRSRO at the time of purchase. The Fund may invest up to 25% of its total assets at the time of purchase in non-investment grade securities. The Fund may invest in non-dollar denominated securities that are fully hedged, unhedged or partially hedged.


•	JPMorgan Chase Bank U.S. Active Core Plus Equity Fund-The Fund seeks to outperform the S&P 500 Index (the Benchmark), gross of fees, over a market cycle. The Fund invests primarily in a portfolio of long and short positions in equity securities of large and mid capitalization U.S. companies with characteristics similar to those of the Benchmark.


•	NT Collective Russell 2000 Growth Index-The Fund seeks an investment return that approximates the overall performance of the common stocks included in the Russell 2000 Growth Index. The Fund primarily invests in common stocks of one or more companies that are deemed to be representative of the industry diversification of the entire Russell 2000 Growth Index.

•

NT Collective Short-Term Investment Fund-The Fund is composed of high-grade money market instruments with short-term maturities. The Fund's objective is to provide an investment vehicle for cash reserves while offering a competitive rate of return. Liquidity is emphasized to provide for redemption of units on any business day. Principal preservation is also a prime objective. Admissions and withdrawals are made daily. Interest is accrued daily and distributed monthly.

Investments in Group Insurance Annuity Contracts with John Hancock were entered into after 1992 and are stated at fair value based on the fair value of the underlying securities as provided by the managers and include investments in U.S. government securities, corporate debt instruments, and state and municipal debt securities.

Net Periodic Benefit (Credit) Cost

Net periodic benefit (credit) cost is reflected in other operations and maintenance expense in the Consolidated Statements of Income. The components of the provision for net periodic benefit (credit) cost and amounts recognized in other comprehensive income and regulatory assets and liabilities for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) plans are as follows:



	Pension Benefits									Other Postretirement Benefits
Year Ended December 31,	2015			2014			2013			2015			2014			2013
(millions, except percentages)
DOMINION
Service cost	$	126		$	114		$	131		$	40		$	32		$	43
Interest cost	287			290			271			67			67			73
Expected return on plan assets	(531		)	(499		)	(462		)	(117		)	(111		)	(92		)
Amortization of prior service (credit) cost	2			3			3			(27		)	(28		)	(15		)
Amortization of net actuarial loss	160			111			165			6			2			7
Settlements and curtailments⁽¹⁾	—			1			(2		)	—			—			(15		)
Special termination benefits	—			—			—			—			—			1
Net periodic benefit (credit) cost	$	44		$	20		$	106		$	(31	)	$	(38	)	$	2
Changes in plan assets and benefit obligations recognized in other comprehensive income and regulatory assets and liabilities:
Current year net actuarial (gain) loss	$	159		$	784		$	(968	)	$	(18	)	$	183		$	(255	)
Prior service (credit) cost	—			—			1			(31		)	9			(215		)
Settlements and curtailments⁽¹⁾	—			(1		)	(22		)	—			—			(7		)
Less amounts included in net periodic benefit cost:
Amortization of net actuarial loss	(160		)	(111		)	(165		)	(6		)	(2		)	(7		)
Amortization of prior service credit (cost)	(2		)	(3		)	(3		)	27			28			15
Total recognized in other comprehensive income and regulatory assets and liabilities	$	(3	)	$	669		$	(1,157	)	$	(28	)	$	218		$	(469	)
Significant assumptions used to determine periodic cost:
Discount rate	4.40		%	5.20% - 5.30%			4.40% - 4.80%			4.40		%	4.20% - 5.10%			4.40% - 4.80%
Expected long-term rate of return on plan assets	8.75		%	8.75		%	8.50		%	8.50		%	8.50		%	7.75		%
Weighted average rate of increase for compensation	4.22		%	4.21		%	4.21		%	4.22		%	4.22		%	4.22		%
Healthcare cost trend rate⁽²⁾										7.00		%	7.00		%	7.00		%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)⁽²⁾										5.00		%	5.00		%	4.60		%
Year that the rate reaches the ultimate trend rate⁽²⁾⁽³⁾										2019			2018			2062
DOMINION GAS
Service cost	$	15		$	12		$	13		$	7		$	6		$	7
Interest cost	27			28			27			14			13			12
Expected return on plan assets	(126		)	(115		)	(106		)	(24		)	(23		)	(19		)
Amortization of prior service (credit) cost	1			1			1			(1		)	(1		)	(3		)
Amortization of net actuarial loss	20			19			26			2			—			2
Net periodic benefit (credit) cost	$	(63	)	$	(55	)	$	(39	)	$	(2	)	$	(5	)	$	(1	)
Changes in plan assets and benefit obligations recognized in other comprehensive income and regulatory assets and liabilities:
Current year net actuarial (gain) loss	$	97		$	43		$	(127	)	$	(9	)	$	40		$	(40	)
Prior service cost	—			—			—			—			10			—
Less amounts included in net periodic benefit cost:
Amortization of net actuarial loss	(20		)	(19		)	(26		)	(2		)	—			(2		)
Amortization of prior service credit (cost)	(1		)	(1		)	(1		)	1			1			3
Total recognized in other comprehensive income and regulatory assets and liabilities	$	76		$	23		$	(154	)	$	(10	)	$	51		$	(39	)
Significant assumptions used to determine periodic cost:
Discount rate	4.40		%	5.20		%	4.40% - 4.80%			4.40		%	4.20% - 5.00%			4.40% - 4.70%
Expected long-term rate of return on plan assets	8.75		%	8.75		%	8.50		%	8.50		%	8.50		%	7.75		%
Weighted average rate of increase for compensation	3.93		%	3.93		%	3.93		%	3.93		%	3.93		%	3.93		%
Healthcare cost trend rate⁽²⁾										7.00		%	7.00		%	7.00		%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)⁽²⁾										5.00		%	5.00		%	4.60		%
Year that the rate reaches the ultimate trend rate⁽²⁾⁽³⁾										2019			2018			2062


(1)	2013 amounts relate primarily to the decommissioning of Kewaunee.


(2)	Assumptions used to determine net periodic cost for the following year.


(3)	The Society of Actuaries model used to determine healthcare cost trend rates was updated in 2014. The new model converges to the ultimate trend rate much more quickly than previous models.

The components of AOCI and regulatory assets and liabilities for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) plans that have not been recognized as components of net periodic benefit (credit) cost are as follows:



	Pension Benefits				Other Postretirement Benefits
At December 31,	2015		2014		2015			2014
(millions)
DOMINION
Net actuarial loss	$	2,381	$	2,382	$	114		$	139
Prior service (credit) cost	5		7		(237		)	(233		)
Total⁽¹⁾	$	2,386	$	2,389	$	(123	)	$	(94	)
DOMINION GAS
Net actuarial loss	$	380	$	303	$	33		$	43
Prior service (credit) cost	1		1		7			7
Total⁽²⁾	$	381	$	304	$	40		$	50

(1)

As of December 31, 2015, of the $2.4 billion and $(123) million related to pension benefits and other postretirement benefits, $1.4 billion and $(90) million, respectively, are included in AOCI, with the remainder included in regulatory assets and liabilities. As of December 31, 2014, of the $2.4 billion and $(94) million related to pension benefits and other postretirement benefits, $1.4 billion and $(81) million, respectively, are included in AOCI, with the remainder included in regulatory assets and liabilities.

(2)

As of December 31, 2015, of the $381 million related to pension benefits, $138 million is included in AOCI, with the remainder included in regulatory assets and liabilities; the $40 million related to other postretirement benefits is included entirely in regulatory assets and liabilities. As of December 31, 2014, of the $304 million related to pension benefits, $112 million is included in AOCI, with the remainder included in regulatory assets and liabilities; the $50 million related to other postretirement benefits is included entirely in regulatory assets and liabilities.

The following table provides the components of AOCI and regulatory assets and liabilities for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) plans as of December 31, 2015 that are expected to be amortized as components of net periodic benefit (credit) cost in 2016:



	Pension Benefits		Other Postretirement Benefits
(millions)
DOMINION
Net actuarial loss	$	111	$	5
Prior service (credit) cost	1		(28		)
DOMINION GAS
Net actuarial loss	$	13	$	1
Prior service (credit) cost	—		1

The expected long-term rates of return on plan assets, discount rates, healthcare cost trend rates and mortality are critical assumptions in determining net periodic benefit (credit) cost. Dominion develops assumptions, which are then compared to the forecasts of an independent investment advisor (except for the expected long-term rates of return) to ensure reasonableness. An internal committee selects the final assumptions used for Dominion's pension and other postretirement plans, including those in which Dominion Gas participates, including discount rates, expected long-term rates of return, healthcare cost trend rates and mortality rates.

Dominion determines the expected long-term rates of return on plan assets for its pension plans and other postretirement benefit plans, including those in which Dominion Gas participates, by using a combination of:


•	Expected inflation and risk-free interest rate assumptions;


•	Historical return analysis to determine long term historic returns as well as historic risk premiums for various asset classes;


•	Expected future risk premiums, asset volatilities and correlations;


•	Forecasts of an independent investment advisor;


•	Forward-looking return expectations derived from the yield on long-term bonds and the expected long-term returns of major stock market indices; and


•	Investment allocation of plan assets.

Dominion determines discount rates from analyses of AA/Aa rated bonds with cash flows matching the expected payments to be made under its plans, including those in which Dominion Gas participates.

Dominion develops its mortality assumption using plan-specific studies and projects mortality improvement using scales developed by the Society of Actuaries for all its plans, including those in which Dominion Gas participates.

Assumed healthcare cost trend rates have a significant effect on the amounts reported for Dominion's retiree healthcare plans, including those in which Dominion Gas participates. A one percentage point change in assumed healthcare cost trend rates would have had the following effects for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) other postretirement benefit plans:



	Other Postretirement Benefits
	One percentage point increase		One percentage point decrease
(millions)
DOMINION
Effect on net periodic cost for 2016	$	21	$	(13	)
Effect on other postretirement benefit obligation at December 31, 2015	157		(129		)
DOMINION GAS
Effect on net periodic cost for 2016	$	5	$	(3	)
Effect on other postretirement benefit obligation at December 31, 2015	34		(26		)

Dominion Gas (Employees Not Represented by Collective Bargaining Units) and Virginia Power - Participation in Defined Benefit Plans

Virginia Power employees and Dominion Gas employees not represented by collective bargaining units are covered by the Dominion Pension Plan described above. As participating employers, Virginia Power and Dominion Gas are subject to Dominion's funding policy, which is to contribute annually an amount that is in accordance with ERISA. During 2015, Virginia Power and Dominion Gas made no contributions to the Dominion Pension Plan, and no contributions to this plan are currently expected in 2016. Virginia Power's net periodic pension cost related to this plan was $97 million, $75 million and $96 million in 2015, 2014 and 2013, respectively. Dominion Gas' net periodic pension credit related to this plan was $(38) million, $(37) million and $(27) million in 2015, 2014 and 2013, respectively. Net periodic pension (credit) cost is reflected in other operations and maintenance expense in their respective Consolidated Statements of Income. The funded status of various Dominion subsidiary groups and employee compensation are the basis for determining the share of total pension costs for participating Dominion subsidiaries. See Note 24 for Virginia Power and Dominion Gas amounts due to/from Dominion related to this plan.

Retiree healthcare and life insurance benefits, for Virginia Power employees and for Dominion Gas employees not represented by collective bargaining units, are covered by the Dominion Retiree Health and Welfare Plan described above. Virginia Power's net periodic benefit (credit) cost related to this plan was $(16) million, $(18) million and $5 million in 2015, 2014 and 2013, respectively. Dominion Gas' net periodic benefit (credit) cost related to this plan was $(5) million, $(5) million and less than $1 million for 2015, 2014 and 2013, respectively. Net periodic benefit (credit) cost is reflected in other operations and maintenance expenses in their respective Consolidated Statements of Income. Employee headcount is the basis for determining the share of total other postretirement benefit costs for participating Dominion subsidiaries. See Note 24 for Virginia Power and Dominion Gas amounts due to/from Dominion related to this plan.

Dominion holds investments in trusts to fund employee benefit payments for the pension and other postretirement benefit plans in which Virginia Power and Dominion Gas' employees participate. Any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for such employee benefit plans and will be included in the determination of the amount of cash that Virginia Power and Dominion Gas will provide to Dominion for their shares of employee benefit plan contributions.

Certain regulatory authorities have held that amounts recovered in rates for other postretirement benefits, in excess of benefits actually paid during the year, must be deposited in trust funds dedicated for the sole purpose of paying such benefits. Accordingly, Virginia Power and Dominion Gas fund other postretirement benefit costs through VEBAs. During 2015 and 2014, Virginia Power made no contributions to the VEBA and does not expect to contribute to the VEBA in 2016. Dominion Gas made no contributions to the VEBAs for employees not represented by collective bargaining units during 2015 and does not expect to contribute in 2016. Dominion Gas' contributions to VEBAs for employees not represented by collective bargaining units were $1 million for 2014.

Defined Contribution Plans

Dominion also sponsors defined contribution employee savings plans that cover substantially all employees. During 2015, 2014 and 2013, Dominion recognized $43 million, $41 million and $40 million, respectively, as employer matching contributions to these plans. Dominion Gas participates in these employee savings plans, both specific to Dominion Gas and that cover multiple Dominion subsidiaries. During 2015, 2014 and 2013, Dominion Gas recognized $7 million as employer matching contributions to these plans. Virginia Power also participates in these employee savings plans. During 2015, 2014 and 2013, Virginia Power recognized $18 million, $17 million and $16 million, respectively, as employer matching contributions to these plans.

As of December 31,

(millions)

Accumulated benefit obligation

Fair value of plan assets