Pension and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2015

Pension and Other Postretirement Benefits

(9) PENSION AND OTHER POSTRETIREMENT BENEFITS

The following table shows changes in the benefit obligation and plan assets for the years ended December 31, 2015 and 2014:

	Pension Benefits						Other Postretirement Benefits
	2015			2014			2015			2014
	(millions of dollars)
Change in Benefit Obligation
Benefit obligation as of January 1	$	2,638		$	2,238		$	632		$	574
Service cost		57			44			7			7
Interest cost		109			109			24			26
Actuarial loss (gain)		(151	)		401			(61	)		59
Benefits paid		(163	)		(154	)		(39	)		(34	)
Benefit obligation as of December 31	$	2,490		$	2,638		$	563		$	632
Change in Plan Assets
Fair value of plan assets as of January 1	$	2,236		$	2,116		$	367		$	368
Actual return on plan assets		(61	)		268			1			21
Company and participant contributions		6			6			5			6
Benefits paid by plan		(163	)		(154	)		(25	)		(28	)
Fair value of plan assets as of December 31	$	2,018		$	2,236		$	348		$	367
Funded Status at end of year (plan assets less plan obligations)	$	(472	)	$	(402	)	$	(215	)	$	(265	)

At December 31, 2015 and 2014, the PHI Retirement Plan’s accumulated benefit obligation was approximately $2.3 billion and $2.4 billion, respectively. The accumulated benefit obligation differs from the pension benefit obligation presented in the table above in that the accumulated benefit obligation includes no assumption about future compensation levels.

The following table provides the amounts recorded in PHI’s consolidated balance sheets as of December 31, 2015 and 2014:

	Pension Benefits						Other Postretirement Benefits
	2015			2014			2015			2014
	(millions of dollars)
Regulatory asset	$	870		$	871		$	40		$	75
Current liabilities		(6	)		(6	)		—			—
Pension benefit obligation		(466	)		(396	)		—			—
Other postretirement benefit obligations		—			—			(215	)		(265	)
Deferred income tax liabilities		(162	)		(193	)		70			77
Accumulated other comprehensive loss, net of tax		28			37			—			—
Net amount recorded	$	264		$	313		$	(105	)	$	(113	)

Amounts included in AOCL (pre-tax) and Regulatory assets at December 31, 2015 and 2014 consist of:

	Pension Benefits				Other Postretirement Benefits
	2015		2014		2015			2014
	(millions of dollars)
Unrecognized net actuarial loss	$	910	$	925	$	128		$	176
Unamortized prior service cost (credit)		6		8		(88	)		(101	)
Total	$	916	$	933	$	40		$	75
Accumulated other comprehensive loss ($28 million and $37 million, net of tax, at December 31, 2015 and 2014, respectively)	$	46	$	62	$	—		$	—
Regulatory assets		870		871		40			75
Total	$	916	$	933	$	40		$	75

Under FASB guidance on regulated operations, a portion of actuarial gains and losses and prior service costs (credits) are included in Regulatory assets (liabilities) in the consolidated balance sheets to reflect expected regulatory recovery of such amounts, which otherwise would be recorded to AOCL. The table below provides the changes in plan assets and benefit obligations recognized in AOCL and Regulatory assets for the years ended December 31, 2015, 2014 and 2013:

	Pension Benefits									Other Postretirement Benefits
	2015			2014			2013			2015			2014			2013
	(millions of dollars)
Amounts amortized during the year:
Amortization of prior service (cost) credit	$	(2	)	$	(2	)	$	(2	)	$	13		$	13		$	11
Amortization of net actuarial loss		(65	)		(45	)		(67	)		(8	)		(3	)		(12	)
Amounts arising during the year:
Current year prior service cost (credit)		—			—			3			—			—			(124	)
Current year actuarial loss (gain)		50			276			(218	)		(39	)		62			(109	)
Total recognized in AOCL and Regulatory assets for the year ended December 31	$	(17	)	$	229		$	(284	)	$	(34	)	$	72		$	(234	)

The estimated net actuarial loss and prior service cost for the defined benefit pension plans that will be amortized from AOCL or Regulatory assets into net periodic benefit cost over the next reporting year are $63 million and $1 million, respectively. The estimated net actuarial loss and prior service credit for the OPEB plan that will be amortized from AOCL or Regulatory assets into net periodic benefit cost over the next reporting year are $7 million and $13 million, respectively.

The table below provides the components of net periodic benefit costs recognized for the years ended December 31, 2015, 2014 and 2013:

	Pension Benefits									Other Postretirement Benefits
	2015			2014			2013			2015			2014			2013
	(millions of dollars)
Service cost	$	57		$	44		$	53		$	7		$	7		$	8
Interest cost		109			109			100			24			26			29
Expected return on plan assets		(140	)		(141	)		(145	)		(22	)		(24	)		(20	)
Amortization of prior service cost (credit)		2			2			2			(13	)		(13	)		(11	)
Amortization of net actuarial loss		65			45			67			8			3			12
Net periodic benefit cost	$	93		$	59		$	77		$	4		$	(1	)	$	18

The table below provides the split of the combined pension and other postretirement net periodic benefit costs among subsidiaries for the years ended December 31, 2015, 2014 and 2013:

	2015		2014		2013
	(millions of dollars)
Pepco	$	30	$	22	$	34
DPL		15		7		18
ACE		15		13		17
Other subsidiaries		37		16		26
Total	$	97	$	58	$	95

The following weighted average assumptions were used to determine the benefit obligations at December 31, 2015 and 2014:

	Pension Benefits						Other Postretirement Benefits
	2015			2014			2015			2014
Discount rate		4.65% /4.55	% (a)		4.20	%		4.55	%		4.15	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%		5.00	%
Health care cost trend rate assumed for current year – pre 65		—			—			6.33	%		6.67	%
Health care cost trend rate assumed for current year – post 65		—			—			5.40	%		5.50	%
Rate to which the cost trend rate is assumed to decline for all eligible retirees (the ultimate trend rate)		—			—			5.00	%		5.00	%
Year that the cost trend rate reaches the ultimate trend rate		—			—			2020			2020

(a) The discount rate for the qualified and nonqualified pension plans was 4.65% and 4.55%, respectively.

Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects, in millions of dollars:

	1-Percentage- Point Increase		1-Percentage- Point Decrease
Increase (decrease) in total service and interest cost	$	1	$	(1	)
Increase (decrease) in postretirement benefit obligation	$	15	$	(18	)

The following weighted average assumptions were used to determine the net periodic benefit cost for the years ended December 31, 2015, 2014 and 2013:

	Pension Benefits									Other Postretirement Benefits
	2015			2014			2013			2015			2014			2013
Discount rate		4.20	%		5.05	%		4.15	%		4.15	%		5.00	%		4.10%/4.95	% (a)
Expected long-term return on plan assets		6.50	%		7.00	%		7.00	%		6.75	%		7.25	%		7.00	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%
Health care cost trend rate		—			—			—			6.67	%		7.00	%		7.50	%

(a) The discount rate was updated for remeasurement to 4.95% on July 1, 2013.

PHI utilizes an analytical tool developed by its actuaries to select the discount rate. The analytical tool utilizes a high-quality bond portfolio with cash flows that match the benefit payments expected to be made under the plans.

PHI uses a building block approach to estimate the expected rate of return on plan assets. Under this approach, the percentage of plan assets in each asset class according to PHI’s target asset allocation, at the beginning of the year, is applied to the expected asset return for the related asset class. PHI incorporates long-term assumptions for real returns, inflation expectations, volatility and correlations among asset classes to determine expected returns for a given asset allocation. The pension and postretirement benefit plan assets consist of equity, fixed income, real estate and private equity investments. PHI periodically reviews its asset mix and rebalances assets to the target allocation.

The average remaining service periods for participating employees of the benefit plans was approximately 11 years for both 2015 and 2014. PHI utilizes plan census data to estimate these average remaining service periods. PHI uses mortality tables and mortality improvement scales issued by the Society of Actuaries to estimate participants’ life expectancy. In 2014, the Society of Actuaries issued updated mortality tables and mortality improvement scales which PHI applied in determining its benefit obligations as of December 31, 2014. In 2015, the Society of Actuaries modified the tables issued in 2014 to reflect updated mortality improvement experience. PHI applied these modified tables in determining its benefit obligations as of December 31, 2015.

Benefit Plan Modifications

During 2013, PHI approved two amendments to its other postretirement benefits plan. These amendments impacted the retiree health care and the retiree life insurance benefits, and were effective on January 1, 2014. As a result of the amendments, which were cumulatively significant, PHI remeasured its accumulated postretirement benefit obligation for other postretirement benefits as of July 1, 2013. The remeasurement resulted in a $193 million reduction of the accumulated postretirement benefit obligation, which included recording a prior service credit of $124 million, which will be amortized over approximately ten years, and a $69 million reduction from a change in the discount rate from 4.10% as of December 31, 2012 to 4.95% as of July 1, 2013. The remeasurement resulted in a $19 million reduction in net periodic benefit cost for other postretirement benefits during 2014, when compared to 2013. Approximately 36% of net periodic other postretirement benefit costs were capitalized in 2014.

Plan Assets

Investment Policies and Strategies

In developing its allocation policy for the assets in the PHI Retirement Plan and the other postretirement benefit plan, PHI examined projections of asset returns and volatility over a long-term horizon. In connection with this analysis, PHI evaluated the risk and return tradeoffs of alternative asset classes and asset mixes given long-term historical relationships as well as prospective capital market returns. PHI also conducted an asset-liability study to match projected asset growth with projected liability growth to determine whether there is sufficient liquidity for projected benefit payments. PHI developed its asset mix guidelines by incorporating the results of these analyses with an assessment of its risk posture, and taking into account industry practices. PHI periodically evaluates its investment strategy to ensure that plan assets are sufficient to meet the benefit obligations of the plans. As part of the ongoing evaluation, PHI may make changes to its targeted asset allocations and investment strategy.

PHI’s pension investment strategy is designed to meet the following investment objectives:

• Generate investment returns that, in combination with funding contributions from PHI, provide adequate funding to meet all current and future benefit obligations of the plan,

• Provide investment results that meet or exceed the assumed long-term rate of return, while maintaining the funded status of the plan at acceptable levels,

• Improve funded status over time, and

• Decrease contribution and expense volatility as funded status improves.

To achieve these investment objectives, PHI’s investment strategy divides the pension program into two primary portfolios:

Return-Seeking Assets - These assets are intended to provide investment returns in excess of pension liability growth and reduce existing deficits in the funded status of the plan. The category includes a diversified mix of U.S. large and small cap equities, non-U.S. developed and emerging market equities, real estate, and private equity.

Liability-Hedging Assets - These assets are intended to reflect the sensitivity of the plan’s liabilities to changes in discount rates. This category includes a diversified mix of long duration, primarily investment grade credit and U.S. treasury securities.

PHI follows an asset-liability management strategy for PHI Retirement Plan assets in order to reduce the effects of future volatility of the fair value of its pension plan assets relative to its pension plan liabilities. For example, in 2015, this strategy uses a 68% target allocation to fixed income investments, primarily in high quality, longer-maturity fixed income securities. The PHI Retirement Plan asset allocations at December 31, 2015 and 2014, by asset category, were as follows:

Asset Category	Plan Assets at December 31,						Target Plan Asset Allocation
	2015			2014			2015			2014
Equity		28	%		28	%		27	%		27	%
Fixed Income		66	%		65	%		68	%		68	%
Other (real estate, private equity)		6	%		7	%		5	%		5	%
Total		100	%		100	%		100	%		100	%

PHI’s other postretirement benefit plan asset allocations at December 31, 2015 and 2014, by asset category, were as follows:

Asset Category	Plan Assets at December 31,						Target Plan Asset Allocation
	2015			2014			2015			2014
Equity		63	%		64	%		60	%		60	%
Fixed Income		34	%		34	%		35	%		35	%
Cash		3	%		2	%		5	%		5	%
Total		100	%		100	%		100	%		100	%

PHI will rebalance the plan asset portfolios when the actual allocations fall outside the ranges outlined in the investment policy or as funded status improves over a reasonable period of time.

Risk Management

Pension and other postretirement benefit plan assets may be invested in separately managed accounts in which there is ownership of individual securities, shares of commingled funds or mutual funds, or limited partnerships. Commingled funds and mutual funds are subject to detailed policy guidelines set forth in the fund’s prospectus or fund declaration, and limited partnerships are subject to the terms of the partnership agreement.

Separate account investment managers are responsible for achieving a level of diversification in their portfolio that is consistent with their investment approach and their role in PHI’s overall investment structure. Separate account investment managers must follow risk management guidelines established by PHI unless authorized in writing by PHI.

Derivative instruments are permissible in an investment portfolio to the extent they comply with policy guidelines and are consistent with risk and return objectives. Under no circumstances may such instruments be used speculatively or to leverage the portfolio. Separately managed accounts are prohibited from holding securities issued by the following firms:

• PHI and its subsidiaries,

• PHI’s pension plan trustee, its parent or its affiliates,

• PHI’s pension plan consultant, its parent or its affiliates, and

• PHI’s pension plan investment manager, its parent or its affiliates.

Fair Value of Plan Assets

As defined in the FASB guidance on fair value measurement (ASC 820), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The FASB’s fair value framework includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Investments are classified within the fair value hierarchy as follows:

Level 1: Investments are valued using quoted prices in active markets for identical instruments.

Level 2: Investments are valued using other significant observable inputs (e.g., quoted prices for similar investments, interest rates, credit risks, etc).

Level 3: Investments are valued using significant unobservable inputs, including internal assumptions.

There were no significant transfers between level 1 and level 2 during the years ended December 31, 2015 and 2014.

In accordance with new FASB guidance on fair value measurement, certain investments that are measured at fair value using the NAV per share as a practical expedient are no longer classified within the fair value hierarchy and are no longer assigned a level. The fair value measurements table at December 31, 2014, was reclassified to conform to the current year presentation, see Note (3), “Newly Adopted Accounting Standards,” for additional information.

The following tables present the fair values of PHI’s pension and other postretirement benefit plan assets by asset category included in and excluded from the fair value hierarchy levels, as of December 31, 2015 and 2014:

			Fair Value Measurements at December 31, 2015
	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
Asset Category
Pension Plan Assets:
Equity:
Domestic (a)	$	311	$	120	$	191	$	—
International (b)		216		215		—		1
Fixed Income (c)		820		—		810		10
Cash Equivalents (d)		50		50		—		—
		1,397	$	385	$	1,001	$	11
Investments measured at fair value using net asset value as a practical expedient:
Equity:
Domestic (a)		33
Fixed Income (c)		504
Other:
Private Equity		38
Real Estate		46
Pension Plan Assets Total	$	2,018
Other Postretirement Plan Assets:
Equity (e)	$	197	$	197	$	—	$	—
Fixed Income (f)		120		120		—		—
Cash Equivalents		9		9		—		—
		326	$	326	$	—	$	—
Investments measured at fair value using net asset value as a practical expedient:
Equity (e)		22
Postretirement Plan Assets Total	$	348

(a) Domestic equity assets predominantly include domestic common stock and commingled funds.

(b) International equity assets predominantly include foreign common and preferred stock and warrants.

(c) Fixed income assets predominantly include corporate bonds, government bonds, municipal/provincial bonds, collateralized mortgage obligations and commingled funds.

(d) Cash equivalents predominantly include cash investments in short-term investment funds.

(e) Equity assets include domestic and international commingled funds.

(f) Fixed income assets include fixed income commingled funds.

			Fair Value Measurements at December 31, 2014
	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
Asset Category
Pension Plan Assets:
Equity:
Domestic (a)	$	341	$	128	$	213	$	—
International (b)		255		254		—		1
Fixed Income (c)		916		—		905		11
Cash Equivalents (d)		45		45		—		—
		1,557	$	427	$	1,118	$	12
Investments measured at fair value using net asset value as a practical expedient:
Equity:
Domestic (a)		35
Fixed Income (c)		543
Other:
Private Equity		47
Real Estate		54
Pension Plan Assets Total	$	2,236
Other Postretirement Plan Assets:
Equity (e)	$	208	$	208	$	—	$	—
Fixed Income (f)		126		126		—		—
Cash Equivalents		6		6		—		—
		340	$	340	$	—	$	—
Investments measured at fair value using net asset value as a practical expedient:
Equity (e)		27
Postretirement Plan Assets Total	$	367

(a) Domestic equity assets predominantly include domestic common stock and commingled funds.

(b) International equity assets predominantly include foreign common and preferred stock and warrants.

(c) Fixed income assets predominantly include corporate bonds, government bonds, municipal/provincial bonds, collateralized mortgage obligations and commingled funds.

(d) Cash equivalents predominantly include cash investments in short-term investment funds.

(e) Equity assets include domestic and international commingled funds.

(f) Fixed income assets include fixed income commingled funds.

There were no significant concentrations of risk in pension and OPEB plan assets at December 31, 2015 and 2014.

Valuation Techniques Used to Determine Fair Value

Equity

Equity securities are primarily comprised of securities issued by public companies in domestic and foreign markets plus investments in commingled funds, which are valued on a daily basis. PHI can exchange shares of the publicly traded securities and the fair values are primarily sourced from the closing prices on stock exchanges where there is active trading, therefore they would be classified as level 1 investments. If there is less active trading, then the publicly traded securities would typically be priced using observable data, such as bid/ask prices, and these measurements would be classified as level 2 investments. Investments that are not publicly traded and valued using unobservable inputs would be classified as level 3 investments. Investments that are measured at fair value using the NAV per share as a practical expedient are not classified within the fair value hierarchy.

Commingled funds with publicly quoted prices and active trading are classified as level 1 investments. For commingled funds that are not publicly traded and have ongoing subscription and redemption activity or have redemption restrictions, the fair value of the investment is the NAV per fund share, derived from the underlying securities’ quoted prices in active markets, and are not classified within the fair value hierarchy.

Fixed Income

Fixed income investments are primarily comprised of fixed income securities and fixed income commingled funds. The prices for direct investments in fixed income securities are generated on a daily basis. Like the equity securities, fair values generated from active trading on exchanges are classified as level 1 investments. Prices generated from less active trading with wider bid/ask prices are classified as level 2 investments. If prices are based on uncorroborated and unobservable inputs, then the investments are classified as level 3 investments. Investments that are measured at fair value using the NAV per share as a practical expedient are not classified within the fair value hierarchy.

Commingled funds with publicly quoted prices and active trading are classified as level 1 investments. For commingled funds that are not publicly traded and have ongoing subscription and redemption activity or redemption restrictions, the fair value of the investment is the NAV per fund share, derived from the underlying securities’ quoted prices in active markets, and are not classified within the fair value hierarchy.

Other – Private Equity and Real Estate

Investments in private equity and real estate funds are primarily invested in privately held real estate investment properties, trusts and partnerships, as well as equity and debt issued by public or private companies. As a practical expedient, PHI’s interest in the fund or partnership is estimated at NAV. PHI’s interest in these funds cannot be readily redeemed due to the inherent lack of liquidity and the primarily long-term nature of the underlying assets. Distribution is made through the liquidation of the underlying assets. PHI views these investments as part of a long-term investment strategy. These investments are valued by each investment manager based on the underlying assets. The majority of the underlying assets are valued using significant unobservable inputs and often require significant management judgment or estimation based on the best available information. Market data includes observations of the trading multiples of public companies considered comparable to the private companies being valued. The funds utilize valuation techniques consistent with the market, income and cost approaches to measure the fair value of certain real estate investments. In accordance with FASB guidance on fair value measurement, PHI does not classify these investments within the fair value hierarchy.

The investments in private equity and real estate funds require capital commitments, which may be called over a specific number of years. Unfunded capital commitments as of December 31, 2015 and 2014 totaled $9 million and $11 million, respectively.

Reconciliations of the beginning and ending balances of PHI’s fair value measurements using significant unobservable inputs (level 3) for investments in the pension plan for the years ended December 31, 2015 and 2014 are shown below:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Equity		Fixed Income			Total Level 3
			(millions of dollars)
Balance as of January 1, 2015	$	1	$	11		$	12
Transfer in (out) of Level 3		—		—			—
Purchases		—		—			—
Sales		—		—			—
Settlements		—		(1	)		(1	)
Unrealized gain (loss)		—		—			—
Realized gain		—		—			—
Balance as of December 31, 2015	$	1	$	10		$	11
	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Equity		Fixed Income			Total Level 3
			(millions of dollars)
Balance as of January 1, 2014	$	1	$	11		$	12
Transfer in (out) of Level 3		—		—			—
Purchases		—		—			—
Sales		—		—			—
Settlements		—		—			—
Unrealized gain (loss)		—		—			—
Realized gain		—		—			—
Balance as of December 31, 2014	$	1	$	11		$	12

Cash Flows

Contributions - PHI Retirement Plan

PHI’s funding policy with regard to the PHI Retirement Plan is to maintain a funding level that is at least equal to the target liability as defined under the Pension Protection Act of 2006, as modified by subsequent legislation. During 2015 and 2014, PHI, Pepco, DPL and ACE did not make any discretionary tax-deductible contributions to the PHI Retirement Plan as its assets met or exceeded the funding target level for 2015 and 2014.

Contributions - Other Postretirement Benefit Plan

In 2015 and 2014, Pepco contributed $2 million and $1 million, respectively, DPL made no contributions in either year, and ACE contributed $3 million and $3 million, respectively, to the other postretirement benefit plan. In 2015 and 2014, no contributions were made by PHI’s other subsidiaries.

Expected Benefit Payments

Estimated future benefit payments to participants in PHI’s pension and other postretirement benefit plans, which reflect expected future service as appropriate, are as follows:

Years	Pension Benefits		Other Postretirement Benefits
	(millions of dollars)
2016	$	143	$	38
2017		143		38
2018		148		38
2019		153		38
2020		158		38
2021 through 2025		836		189

Pepco Holdings Retirement Savings Plan

Pepco Holdings has a defined contribution retirement savings plan. Participation in the plan is voluntary. All participants are 100% vested and have a nonforfeitable interest in their own contributions and in the Pepco Holdings’ company matching contributions, including any earnings or losses thereon. Pepco Holdings’ matching contributions were $14 million, $13 million and $12 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Potomac Electric Power Co [Member]

Pension and Other Postretirement Benefits

(8) PENSION AND OTHER POSTRETIREMENT BENEFITS

Pepco accounts for its participation in PHI’s single-employer plans, the PHI Retirement Plan and its other postretirement benefits plan, the Pepco Holdings, Inc. Welfare Plan for Retirees (the OPEB Plan), as participation in multiemployer plans. For 2015, 2014 and 2013, Pepco was responsible for $30 million, $22 million and $34 million, respectively, of the pension and other postretirement net periodic benefit cost incurred by PHI. For the years ended December 31, 2015, 2014 and 2013, Pepco made no discretionary tax-deductible contributions to the PHI Retirement Plan. Pepco made contributions of $2 million, $1 million and $6 million, respectively, to the OPEB Plan for the years ended December 31, 2015, 2014 and 2013. At December 31, 2015 and 2014, Pepco’s Prepaid pension expense of $291 million and $316 million, respectively, and Other postretirement benefit obligations of $49 million and $57 million, respectively, effectively represent assets and benefit obligations resulting from Pepco’s participation in the Pepco Holdings benefit plans.

Other Postretirement Benefit Plan Amendments

During 2013, PHI approved two amendments to its other postretirement benefits plan. These amendments impacted the retiree medical plan and the retiree life insurance benefits, and became effective on January 1, 2014. As a result of the amendments, which were cumulatively significant, PHI remeasured its projected benefit obligation for other postretirement benefits as of July 1, 2013. The remeasurement resulted in a $7 million reduction in Pepco’s net periodic benefit cost for other postretirement benefits in 2014, when compared to 2013. Approximately 40% of net periodic other postretirement benefit costs were capitalized in 2014.

Delmarva Power & Light Co/De [Member]

Pension and Other Postretirement Benefits

(9) PENSION AND OTHER POSTRETIREMENT BENEFITS

DPL accounts for its participation in PHI’s single-employer plans, the PHI Retirement Plan and its other postretirement benefits plan, the Pepco Holdings, Inc. Welfare Plan for Retirees (the OPEB Plan), as participation in multiemployer plans. For 2015, 2014 and 2013, DPL was responsible for $15 million, $7 million and $18 million, respectively, of the pension and other postretirement net periodic benefit cost incurred by PHI. DPL made a discretionary tax-deductible contribution to the PHI Retirement Plan of zero, zero and $10 million for the years ended December 31, 2015, 2014 and 2013, respectively. In addition, DPL made contributions of zero, zero and $3 million, respectively, to the OPEB Plan for the years ended December 31, 2015, 2014 and 2013. At December 31, 2015 and 2014, DPL’s Prepaid pension expense of $205 million and $220 million, respectively, and Other postretirement benefit obligations of $19 million and $21 million, respectively, effectively represent assets and benefit obligations resulting from DPL’s participation in the PHI benefit plans.

Other Postretirement Benefit Plan Amendments

During 2013, PHI approved two amendments to its other postretirement benefits plan. These amendments impacted the retiree medical plan and the retiree life insurance benefits, and became effective on January 1, 2014. As a result of the amendments, which were cumulatively significant, PHI remeasured its projected benefit obligation for other postretirement benefits as of July 1, 2013. The remeasurement resulted in a $4 million reduction in DPL’s net periodic benefit cost for other postretirement benefits in 2014, when compared to 2013.

Atlantic City Electric Co [Member]

Pension and Other Postretirement Benefits

(8) PENSION AND OTHER POSTRETIREMENT BENEFITS

ACE accounts for its participation in PHI’s single-employer plans, the PHI Retirement Plan and its other postretirement benefits plan, the Pepco Holdings, Inc. Welfare Plan for Retirees (the OPEB Plan), as participation in multiemployer plans. For 2015, 2014 and 2013, ACE was responsible for $15 million, $13 million and $17 million, respectively, of the pension and other postretirement net periodic benefit cost incurred by PHI. ACE made discretionary tax-deductible contributions of zero, zero and $30 million to the PHI Retirement Plan for the years ended December 31, 2015, 2014 and 2013, respectively. In addition, ACE made contributions of $3 million, $3 million and $6 million to the OPEB Plan for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015 and 2014, ACE’s Prepaid pension expense of $83 million and $96 million, and Other postretirement benefit obligations of $33 million and $36 million, respectively, effectively represent assets and benefit obligations resulting from ACE’s participation in these PHI benefit plans.

Other Postretirement Benefit Plan Amendments

During 2013, PHI approved two amendments to its other postretirement benefits plan. These amendments impacted the retiree medical plan and the retiree life insurance benefits, and became effective on January 1, 2014. As a result of the amendments, which were cumulatively significant, PHI remeasured its projected benefit obligation for other postretirement benefits as of July 1, 2013. The remeasurement resulted in a $3 million reduction in ACE’s net periodic benefit cost for other postretirement benefits in 2014, when compared to 2013. Approximately 45% of net periodic other postretirement benefit costs were capitalized in 2014.