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Pension, OPEB and Savings Plans
 12 Months Ended
Dec. 31, 2013
Pension, OPEB and Savings Plans
Note 12. Pension, Other Postretirement Benefits (OPEB) and Savings Plans
PSEG sponsors several qualified and nonqualified pension plans and OPEB plans covering PSEG’s and its participating affiliates’ current and former employees who meet certain eligibility criteria. Eligible employees participate in non-contributory pension and OPEB plans sponsored by PSEG and administered by Services. In addition, represented and nonrepresented employees are eligible for participation in PSEG’s two defined contribution plans described below.
PSEG, Power and PSE&G are required to record the under or over funded positions of their defined benefit pension and OPEB plans on their respective balance sheets. Such funding positions of each PSEG company are required to be measured as of the date of its respective year-end Consolidated Balance Sheets. For under funded plans, the liability is equal to the difference between the plan’s benefit obligation and the fair value of plan assets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. For OPEB plans, the benefit obligation is the accumulated postretirement benefit obligation. In addition, accounting guidance requires that the total unrecognized costs for defined benefit pension and OPEB plans be recorded as an after-tax charge to Accumulated Other Comprehensive Income (Loss), a separate component of Stockholders’ Equity. However, for PSE&G, because the amortization of the unrecognized costs is being collected from customers, the accumulated unrecognized costs are recorded as a Regulatory Asset. The unrecognized costs represent actuarial gains or losses, prior service costs and transition obligations arising from the adoption of the revised accounting guidance for pensions and OPEB, which had not been expensed.
For Power, the charge to Accumulated Other Comprehensive Income (Loss) is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations. For PSE&G, the Regulatory Asset is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations.
The following table provides a roll-forward of the changes in the benefit obligation and the fair value of plan assets during each of the two years in the periods ended December 31, 2013 and 2012. It also provides the funded status of the plans and the amounts recognized and amounts not recognized on the Consolidated Balance Sheets at the end of both years.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
Millions
 
 
Change in Benefit Obligation
 
 
 
 
 
 
 
 
 
 
Benefit Obligation at Beginning of Year (A)
 
$
5,235

 
$
4,572

 
$
1,538

 
$
1,338

 
 
Service Cost
 
116

 
101

 
21

 
17

 
 
Interest Cost
 
215

 
223

 
63

 
65

 
 
Actuarial (Gain) Loss
 
(501
)
 
586

 
(144
)
 
182

 
 
Gross Benefits Paid
 
(253
)
 
(248
)
 
(64
)
 
(69
)
 
 
Medicare Subsidy Receipts
 
—

 
—

 
—

 
5

 
 
Special Termination Benefits
 
—

 
1

 
—

 
—

 
 
Benefit Obligation at End of Year (A)
 
$
4,812

 
$
5,235

 
$
1,414

 
$
1,538

 
 
Change in Plan Assets
 
 
 
 
 
 
 
 
 
 
Fair Value of Assets at Beginning of Year
 
$
4,357

 
$
3,831

 
$
253

 
$
211

 
 
Actual Return on Plan Assets
 
857

 
541

 
52

 
31

 
 
Employer Contributions
 
155

 
233

 
78

 
75

 
 
Gross Benefits Paid
 
(253
)
 
(248
)
 
(64
)
 
(69
)
 
 
Medicare Subsidy Receipts
 
—

 
—

 
—

 
5

 
 
Fair Value of Assets at End of Year
 
$
5,116

 
$
4,357

 
$
319

 
$
253

 
 
Funded Status
 
 
 
 
 
 
 
 
 
 
Funded Status (Plan Assets less Benefit Obligation)
 
$
304

 
$
(878
)
 
$
(1,095
)
 
$
(1,285
)
 
 
Additional Amounts Recognized in the Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
 
Noncurrent Assets
 
$
434

 
$
6

 
$
—

 
$
—

 
 
Current Accrued Benefit Cost
 
(9
)
 
(8
)
 
—

 
—

 
 
Noncurrent Accrued Benefit Cost
 
(121
)
 
(876
)
 
(1,095
)
 
(1,285
)
 
 
Amounts Recognized
 
$
304

 
$
(878
)
 
$
(1,095
)
 
$
(1,285
)
 
 
Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (B)
 
 
 
 
Prior Service Cost
 
$
(120
)
 
$
(139
)
 
$
(53
)
 
$
(67
)
 
 
Net Actuarial Loss
 
977

 
2,174

 
310

 
527

 
 
Total
 
$
857

 
$
2,035

 
$
257

 
$
460

 
 
 
 
 
 
 
 
 
 
 
 
(A)
Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for Other benefits.
(B)
Includes $408 million ($238 million, after-tax) and $827 million ($485 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2013 and 2012, respectively.
The pension benefits table above provides information relating to the funded status of all qualified and nonqualified pension plans and OPEB plans on an aggregate basis. As of December 31, 2013, PSEG had funded approximately 106% of its projected benefit obligation. This percentage does not include $179 million of assets in the Rabbi Trust as of December 31, 2013 which were used partially to fund the nonqualified pension plans. As of December 31, 2013, the nonqualified pension plans included in the benefit obligation in the above table and in the projected benefit obligation were $130 million. The fair values of the Rabbi Trust assets are included in Other Special Funds on the Consolidated Balance Sheets.
 
Accumulated Benefit Obligation
The accumulated benefit obligation for all PSEG’s defined benefit pension plans was $4.5 billion as of December 31, 2013 and $4.9 billion as of December 31, 2012.
The following table provides the components of net periodic benefit cost for the years ended December 31, 2013, 2012 and 2011.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits Years Ended December 31,
 
Other Benefits Years Ended December 31,
 
 
 
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
 
 
 
Millions
 
 
Components of Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service Cost
 
$
116

 
$
101

 
$
92

 
$
21

 
$
17

 
$
14

 
 
Interest Cost
 
215

 
223

 
228

 
63

 
65

 
61

 
 
Expected Return on Plan Assets
 
(348
)
 
(306
)
 
(334
)
 
(21
)
 
(17
)
 
(18
)
 
 
Amortization of Net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transition Obligation
 
—

 
—

 
—

 
—

 
2

 
4

 
 
Prior Service Cost
 
(19
)
 
(18
)
 
(11
)
 
(14
)
 
(14
)
 
(13
)
 
 
Actuarial Loss
 
188

 
167

 
119

 
42

 
31

 
14

 
 
Net Periodic Benefit Cost
 
$
152

 
$
167

 
$
94

 
$
91

 
$
84

 
$
62

 
 
Special Termination Benefits
 
—

 
1

 
—

 
—

 
—

 
—

 
 
Effect of Regulatory Asset
 
—

 
—

 
—

 
—

 
19

 
19

 
 
Total Benefit Costs, Including Effect of Regulatory Asset

$
152

 
$
168

 
$
94

 
$
91

 
$
103

 
$
81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Pension costs and OPEB costs for PSEG, Power and PSE&G are detailed as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
Years Ended December 31,
 
Other Benefits
Years Ended December 31,
 
 
 
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
 
 
 
Millions
 
 
Power
 
$
43

 
$
52

 
$
29

 
$
23

 
$
18

 
$
12

 
 
PSE&G
 
91

 
97

 
51

 
65

 
82

 
67

 
 
Other
 
18

 
19

 
14

 
3

 
3

 
2

 
 
Total Benefit Costs
 
$
152

 
$
168

 
$
94

 
$
91

 
$
103

 
$
81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension
 
OPEB
 
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
Millions
 
 
Net Actuarial (Gain) Loss in Current Period
 
$
(1,009
)
 
$
350

 
$
(175
)
 
$
169

 
 
Amortization of Net Actuarial Gain (Loss)
 
(188
)
 
(167
)
 
(42
)
 
(32
)
 
 
Amortization of Prior Service Credit
 
19

 
19

 
14

 
14

 
 
Amortization of Transition Asset
 
—

 
—

 
—

 
(2
)
 
 
Total
 
$
(1,178
)
 
$
202

 
$
(203
)
 
$
149

 
 
 
 
 
 
 
 
 
 
 
 


Amounts that are expected to be amortized from Accumulated Other Comprehensive Loss, Regulatory Assets and Deferred Assets into Net Periodic Benefit Cost in 2014 are as follows:
 
 
 
 
 
 
 
 
 
 
Pension
Benefits
 
Other
Benefits
 
 
 
 
2014
 
2014
 
 
 
 
Millions
 
 
Actuarial (Gain) Loss
 
$
56

 
$
23

 
 
Prior Service Cost
 
$
(19
)
 
$
(14
)
 
 
 
 
 
 
 
 

The following assumptions were used to determine the benefit obligations and net periodic benefit costs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
 
 
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
 
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31
 
 
 
 
Discount Rate
 
5.00
%
 
4.20
%
 
5.00
%
 
5.01
%
 
4.20
%
 
5.00
%
 
 
Rate of Compensation Increase
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
 
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31
 
 
 
 
Discount Rate
 
4.20
%
 
5.00
%
 
5.40
%
 
4.20
%
 
5.00
%
 
5.38
%
 
 
Expected Return on Plan Assets
 
8.00
%
 
8.00
%
 
8.50
%
 
8.00
%
 
8.00
%
 
8.50
%
 
 
Rate of Compensation Increase
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
 
Assumed Health Care Cost Trend Rates as of December 31
 
 
 
 
 
 
 
 
 
 
Administrative Expense
 
 
 
 
 
 
 
3.00
%
 
3.00
%
 
5.00
%
 
 
Dental Costs
 
 
 
 
 
 
 
5.00
%
 
6.00
%
 
6.00
%
 
 
Pre-65 Medical Costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Immediate Rate
 
 
 
 
 
 
 
8.00
%
 
8.88
%
 
8.00
%
 
 
Ultimate Rate
 
 
 
 
 
 
 
5.00
%
 
5.00
%
 
5.00
%
 
 
Year Ultimate Rate Reached
 
 
 
 
 
 
 
2021

 
2023

 
2016

 
 
Post-65 Medical Costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Immediate Rate
 
 
 
 
 
 
 
7.88
%
 
7.98
%
 
8.25
%
 
 
Ultimate Rate
 
 
 
 
 
 
 
5.00
%
 
5.00
%
 
5.00
%
 
 
Year Ultimate Rate Reached
 
 
 
 
 
 
 
2021

 
2019

 
2017

 
 
Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs
 
 
 
 
 
 
 
 
 
 
 
 
Millions
 
 
Total of Service Cost and Interest Cost
 
 
 
 
 
 
 
$
12

 
$
12

 
$
11

 
 
Postretirement Benefit Obligation
 
 
 
 
 
 
 
$
161

 
$
180

 
$
155

 
 
Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs
 
 
 
 
Total of Service Cost and Interest Cost
 
 
 
 
 
 
 
$
(9
)
 
$
(9
)
 
$
(9
)
 
 
Postretirement Benefit Obligation
 
 
 
 
 
 
 
$
(134
)
 
$
(149
)
 
$
(128
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Plan Assets
All the investments of pension plans and OPEB plans are held in a trust account by the Trustee and consist of an undivided interest in an investment account of the Master Trust. The investments in the pension and OPEB plans are measured at fair value within a hierarchy that prioritizes the inputs to fair value measurements into three levels. See Note 17. Fair Value Measurements for more information on fair value guidance. Use of the Master Trust permits the commingling of pension plan assets and OPEB plan assets for investment and administrative purposes. Although assets of both plans are commingled in the Master Trust, the Trustee maintains supporting records for the purpose of allocating the net gain or loss of the investment account to the respective participating plans. The net investment income of the investment assets is allocated by the Trustee to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. As of December 31, 2013, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 94% and 6%, respectively.
The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2013 and 2012, including the fair value measurements and the levels of inputs used in determining those fair values.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Fair Value Measurements as of December 31, 2013
 
 
 
 
 
 
Quoted Market Prices
for Identical Assets
 
Significant Other
Observable Inputs
 
Significant
Unobservable Inputs
 
 
Description
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
Millions
 
 
Temporary Investment Funds (A)
 
$
93

 
$
52

 
$
41

 
$
—

 
 
Common Stocks (B)
 

 
 
 
 
 
 
 
 
Commingled—United States
 
2,264

 
2,264

 
—

 
—

 
 
Commingled—International
 
1,016

 
1,016

 
—

 
—

 
 
Other
 
704

 
704

 
—

 
—

 
 
Bonds (C)
 

 
 
 
 
 
 
 
 
Government (United States & Foreign)
 
596

 
—

 
596

 
—

 
 
Other
 
737

 
—

 
737

 
—

 
 
Private Equity (D)
 
25

 
—

 
—

 
25

 
 
Total
 
$
5,435

 
$
4,036

 
$
1,374

 
$
25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Fair Value Measurements as of December 31, 2012
 
 
 
 
 
 
Quoted Market Prices
for Identical Assets
 
Significant Other
Observable Inputs
 
Significant
Unobservable Inputs
 
 
Description
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
Millions
 
 
Temporary Investment Funds (A)
 
$
67

 
$
—

 
$
67

 
$
—

 
 
Common Stocks (B)
 
 
 
 
 
 
 
 
 
 
Commingled—United States
 
1,928

 
1,928

 
—

 
—

 
 
Commingled—International
 
839

 
839

 
—

 
—

 
 
Other
 
431

 
431

 
—

 
—

 
 
Bonds (C)
 
 
 
 
 
 
 
 
 
 
Government (United States & Foreign)
 
623

 
—

 
623

 
—

 
 
Other
 
691

 
—

 
691

 
—

 
 
Private Equity (D)
 
31

 
—

 
—

 
31

 
 
Total
 
$
4,610

 
$
3,198

 
$
1,381

 
$
31

 
 
 
 
 
 
 
 
 
 
 
 
(A)
Certain open-ended mutual funds with mainly short-term investments are valued based on unadjusted quoted prices in active market (Level 1). Certain temporary investments are valued using inputs such as time-to-maturity, coupon rate, quality rating and current yield (Level 2).
(B)
Wherever possible, fair values of equity investments in stocks and in commingled funds are derived from quoted market prices as substantially all of these instruments have active markets (primarily Level 1). Most investments in stocks are priced utilizing the principal market close price or in some cases midpoint, bid or ask price.
(C)
Investments in fixed income securities including bond funds are priced using an evaluated pricing approach or the most recent exchange or quoted bid (primarily Level 2).
(D)
Limited partnership interests in private equity funds are valued using significant unobservable inputs as there is little, if any, market activity. In addition, there may be transfer restrictions on private equity securities. The process for determining the fair value of such securities relied on commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. These inputs require significant management judgment or estimation (primarily Level 3).
Reconciliations of the beginning and ending balances of the Pension and OPEB Plans’ Level 3 assets for the years ended December 31, 2013 and 2012 are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
January 1, 2013
 
Purchases/
(Sales)
 
Transfer
In/ (Out)
 
Actual
Return on
Asset Sales
 
Actual
Return on
Assets Still
Held
 
Balance as of December 31, 2013
 
 
 
 
Millions
 
 
Private Equity
 
$
31

 
$
(11
)
 
$
—

 
$
11

 
$
(6
)
 
$
25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
January 1, 2012
 
Purchases/
(Sales)
 
Transfer
In/ (Out)
 
Actual
Return on
Asset Sales
 
Actual
Return on
Assets Still
Held
 
Balance as of December 31, 2012
 
 
 
 
Millions
 
 
Pooled Real Estate
 
$
36

 
$
(38
)
 
$
—

 
$
2

 
$
—

 
$
—

 
 
Private Equity
 
$
37

 
$
(6
)
 
$
—

 
$
5

 
$
(5
)
 
$
31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The following table provides the percentage of fair value of total plan assets for each major category of plan assets held for the qualified pension and OPEB plans as of the measurement date, December 31:
 
 
 
 
 
 
 
 
 
 
As of December 31,
 
 
Investments
 
2013
 
2012
 
 
Equity Securities
 
73
%
 
69
%
 
 
Fixed Income Securities
 
25

 
29

 
 
Other Investments
 
2

 
2

 
 
Total Percentage
 
100
%
 
100
%
 
 
 
 
 
 
 
 

PSEG utilizes forecasted returns, risk, and correlation of all asset classes in order to develop a portfolio designed to produce the maximum return opportunity per unit of risk. In 2011, PSEG completed its latest asset/liability study. The results from the study indicated that a long-term target asset allocation of 70% equities and 30% fixed income is consistent with the funds’ financial objectives. Derivative financial instruments are used by the plans’ investment managers primarily to adjust the fixed income duration of the portfolio and hedge the currency risk component of foreign investments. The expected long-term rate of return on plan assets was 8.00% as of December 31, 2013 and will remain unchanged for 2014. This expected return was determined based on the study discussed above, including a premium for active management and considered the plans’ historical annualized rate of return since inception, which was 9.5%.
Plan Contributions
PSEG does not anticipate making additional contributions into its pension plans during 2014. PSEG may contribute up to $14 million into its OPEB plan during 2014.
Estimated Future Benefit Payments
The following pension benefit and postretirement benefit payments are expected to be paid to plan participants.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year
 
 
Pension
Benefits
 
Other Benefits
 
 
 
 
 
Millions
 
 
2014
 
 
$
256

 
$
77

 
 
2015
 
 
263

 
78

 
 
2016
 
 
272

 
80

 
 
2017
 
 
282

 
82

 
 
2018
 
 
293

 
84

 
 
2019-2023
 
 
1,647

 
458

 
 
Total
 
 
$
3,013

 
$
859

 
 
 
 
 
 
 
 
 

Long Island Electric Utility Servco LLC (ServCo) Pension and OPEB
PSEG Long Island (PSEG LI) and the Long Island Power Authority (LIPA) entered into a twelve year Amended and Restated Operations Services Agreement (OSA) effective January 1, 2014 to operate LIPA’s electric transmission and distribution (T&D) system in Long Island, New York. ServCo, a wholly owned subsidiary of PSEG LI, has created benefit plans that provide substantially the same benefits to its employees as those previously provided by National Grid Electric Services LLC (NGES), the predecessor T&D manager for LIPA. Such benefits include defined benefit and cash balance pension plans and health and welfare plans for union, nonunion and management employees. Since the vast majority of ServCo's employees had worked under NGES' T&D operations services arrangement with LIPA, ServCo's plans provide certain of those employees with pension and OPEB vested credit for prior years' services earned while working for NGES. The OSA provides for all of these employee benefit costs to be funded by LIPA. ServCo amounts are not included in any of the preceding pension and OPEB disclosures.
401(k) Plans
PSEG sponsors two 401(k) plans, which are Employee Retirement Income Security Act defined contribution retirement plans. Eligible represented employees of PSEG's subsidiaries participate in the PSEG Employee Savings Plan (Savings Plan), while eligible non-represented employees of PSEG's subsidiaries participate in the PSEG Thrift and Tax-Deferred Savings Plan (Thrift Plan). Eligible employees may contribute up to 50% of their compensation to these plans. PSEG matches 50% of such employee contributions up to 7% of pay for Savings Plan participants and up to 8% of pay for Thrift Plan participants.
The amount paid for employer matching contributions to the plans for PSEG, Power and PSE&G are detailed as follows:
 
 
 
 
 
 
 
 
 
 
 
 
Thrift Plan and Savings Plan
 
 
 
 
Years Ended December 31,
 
 
 
 
2013
 
2012
 
2011
 
 
 
 
Millions
 
 
Power
 
$
10

 
$
10

 
$
8

 
 
PSE&G
 
19

 
18

 
14

 
 
Other
 
4

 
4

 
2

 
 
Total Employer Matching Contributions
 
$
33

 
$
32

 
$
24

 
 
 
 
 
 
 
 
 
 
Power [Member]
  
Pension, OPEB and Savings Plans
Note 12. Pension, Other Postretirement Benefits (OPEB) and Savings Plans
PSEG sponsors several qualified and nonqualified pension plans and OPEB plans covering PSEG’s and its participating affiliates’ current and former employees who meet certain eligibility criteria. Eligible employees participate in non-contributory pension and OPEB plans sponsored by PSEG and administered by Services. In addition, represented and nonrepresented employees are eligible for participation in PSEG’s two defined contribution plans described below.
PSEG, Power and PSE&G are required to record the under or over funded positions of their defined benefit pension and OPEB plans on their respective balance sheets. Such funding positions of each PSEG company are required to be measured as of the date of its respective year-end Consolidated Balance Sheets. For under funded plans, the liability is equal to the difference between the plan’s benefit obligation and the fair value of plan assets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. For OPEB plans, the benefit obligation is the accumulated postretirement benefit obligation. In addition, accounting guidance requires that the total unrecognized costs for defined benefit pension and OPEB plans be recorded as an after-tax charge to Accumulated Other Comprehensive Income (Loss), a separate component of Stockholders’ Equity. However, for PSE&G, because the amortization of the unrecognized costs is being collected from customers, the accumulated unrecognized costs are recorded as a Regulatory Asset. The unrecognized costs represent actuarial gains or losses, prior service costs and transition obligations arising from the adoption of the revised accounting guidance for pensions and OPEB, which had not been expensed.
For Power, the charge to Accumulated Other Comprehensive Income (Loss) is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations. For PSE&G, the Regulatory Asset is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations.
The following table provides a roll-forward of the changes in the benefit obligation and the fair value of plan assets during each of the two years in the periods ended December 31, 2013 and 2012. It also provides the funded status of the plans and the amounts recognized and amounts not recognized on the Consolidated Balance Sheets at the end of both years.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
Millions
 
 
Change in Benefit Obligation
 
 
 
 
 
 
 
 
 
 
Benefit Obligation at Beginning of Year (A)
 
$
5,235

 
$
4,572

 
$
1,538

 
$
1,338

 
 
Service Cost
 
116

 
101

 
21

 
17

 
 
Interest Cost
 
215

 
223

 
63

 
65

 
 
Actuarial (Gain) Loss
 
(501
)
 
586

 
(144
)
 
182

 
 
Gross Benefits Paid
 
(253
)
 
(248
)
 
(64
)
 
(69
)
 
 
Medicare Subsidy Receipts
 
—

 
—

 
—

 
5

 
 
Special Termination Benefits
 
—

 
1

 
—

 
—

 
 
Benefit Obligation at End of Year (A)
 
$
4,812

 
$
5,235

 
$
1,414

 
$
1,538

 
 
Change in Plan Assets
 
 
 
 
 
 
 
 
 
 
Fair Value of Assets at Beginning of Year
 
$
4,357

 
$
3,831

 
$
253

 
$
211

 
 
Actual Return on Plan Assets
 
857

 
541

 
52

 
31

 
 
Employer Contributions
 
155

 
233

 
78

 
75

 
 
Gross Benefits Paid
 
(253
)
 
(248
)
 
(64
)
 
(69
)
 
 
Medicare Subsidy Receipts
 
—

 
—

 
—

 
5

 
 
Fair Value of Assets at End of Year
 
$
5,116

 
$
4,357

 
$
319

 
$
253

 
 
Funded Status
 
 
 
 
 
 
 
 
 
 
Funded Status (Plan Assets less Benefit Obligation)
 
$
304

 
$
(878
)
 
$
(1,095
)
 
$
(1,285
)
 
 
Additional Amounts Recognized in the Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
 
Noncurrent Assets
 
$
434

 
$
6

 
$
—

 
$
—

 
 
Current Accrued Benefit Cost
 
(9
)
 
(8
)
 
—

 
—

 
 
Noncurrent Accrued Benefit Cost
 
(121
)
 
(876
)
 
(1,095
)
 
(1,285
)
 
 
Amounts Recognized
 
$
304

 
$
(878
)
 
$
(1,095
)
 
$
(1,285
)
 
 
Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (B)
 
 
 
 
Prior Service Cost
 
$
(120
)
 
$
(139
)
 
$
(53
)
 
$
(67
)
 
 
Net Actuarial Loss
 
977

 
2,174

 
310

 
527

 
 
Total
 
$
857

 
$
2,035

 
$
257

 
$
460

 
 
 
 
 
 
 
 
 
 
 
 
(A)
Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for Other benefits.
(B)
Includes $408 million ($238 million, after-tax) and $827 million ($485 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2013 and 2012, respectively.
The pension benefits table above provides information relating to the funded status of all qualified and nonqualified pension plans and OPEB plans on an aggregate basis. As of December 31, 2013, PSEG had funded approximately 106% of its projected benefit obligation. This percentage does not include $179 million of assets in the Rabbi Trust as of December 31, 2013 which were used partially to fund the nonqualified pension plans. As of December 31, 2013, the nonqualified pension plans included in the benefit obligation in the above table and in the projected benefit obligation were $130 million. The fair values of the Rabbi Trust assets are included in Other Special Funds on the Consolidated Balance Sheets.
 
Accumulated Benefit Obligation
The accumulated benefit obligation for all PSEG’s defined benefit pension plans was $4.5 billion as of December 31, 2013 and $4.9 billion as of December 31, 2012.
The following table provides the components of net periodic benefit cost for the years ended December 31, 2013, 2012 and 2011.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits Years Ended December 31,
 
Other Benefits Years Ended December 31,
 
 
 
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
 
 
 
Millions
 
 
Components of Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service Cost
 
$
116

 
$
101

 
$
92

 
$
21

 
$
17

 
$
14

 
 
Interest Cost
 
215

 
223

 
228

 
63

 
65

 
61

 
 
Expected Return on Plan Assets
 
(348
)
 
(306
)
 
(334
)
 
(21
)
 
(17
)
 
(18
)
 
 
Amortization of Net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transition Obligation
 
—

 
—

 
—

 
—

 
2

 
4

 
 
Prior Service Cost
 
(19
)
 
(18
)
 
(11
)
 
(14
)
 
(14
)
 
(13
)
 
 
Actuarial Loss
 
188

 
167

 
119

 
42

 
31

 
14

 
 
Net Periodic Benefit Cost
 
$
152

 
$
167

 
$
94

 
$
91

 
$
84

 
$
62

 
 
Special Termination Benefits
 
—

 
1

 
—

 
—

 
—

 
—

 
 
Effect of Regulatory Asset
 
—

 
—

 
—

 
—

 
19

 
19

 
 
Total Benefit Costs, Including Effect of Regulatory Asset

$
152

 
$
168

 
$
94

 
$
91

 
$
103

 
$
81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Pension costs and OPEB costs for PSEG, Power and PSE&G are detailed as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
Years Ended December 31,
 
Other Benefits
Years Ended December 31,
 
 
 
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
 
 
 
Millions
 
 
Power
 
$
43

 
$
52

 
$
29

 
$
23

 
$
18

 
$
12

 
 
PSE&G
 
91

 
97

 
51

 
65

 
82

 
67

 
 
Other
 
18

 
19

 
14

 
3

 
3

 
2

 
 
Total Benefit Costs
 
$
152

 
$
168

 
$
94

 
$
91

 
$
103

 
$
81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension
 
OPEB
 
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
Millions
 
 
Net Actuarial (Gain) Loss in Current Period
 
$
(1,009
)
 
$
350

 
$
(175
)
 
$
169

 
 
Amortization of Net Actuarial Gain (Loss)
 
(188
)
 
(167
)
 
(42
)
 
(32
)
 
 
Amortization of Prior Service Credit
 
19

 
19

 
14

 
14

 
 
Amortization of Transition Asset
 
—

 
—

 
—

 
(2
)
 
 
Total
 
$
(1,178
)
 
$
202

 
$
(203
)
 
$
149

 
 
 
 
 
 
 
 
 
 
 
 


Amounts that are expected to be amortized from Accumulated Other Comprehensive Loss, Regulatory Assets and Deferred Assets into Net Periodic Benefit Cost in 2014 are as follows:
 
 
 
 
 
 
 
 
 
 
Pension
Benefits
 
Other
Benefits
 
 
 
 
2014
 
2014
 
 
 
 
Millions
 
 
Actuarial (Gain) Loss
 
$
56

 
$
23

 
 
Prior Service Cost
 
$
(19
)
 
$
(14
)
 
 
 
 
 
 
 
 

The following assumptions were used to determine the benefit obligations and net periodic benefit costs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
 
 
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
 
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31
 
 
 
 
Discount Rate
 
5.00
%
 
4.20
%
 
5.00
%
 
5.01
%
 
4.20
%
 
5.00
%
 
 
Rate of Compensation Increase
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
 
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31
 
 
 
 
Discount Rate
 
4.20
%
 
5.00
%
 
5.40
%
 
4.20
%
 
5.00
%
 
5.38
%
 
 
Expected Return on Plan Assets
 
8.00
%
 
8.00
%
 
8.50
%
 
8.00
%
 
8.00
%
 
8.50
%
 
 
Rate of Compensation Increase
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
 
Assumed Health Care Cost Trend Rates as of December 31
 
 
 
 
 
 
 
 
 
 
Administrative Expense
 
 
 
 
 
 
 
3.00
%
 
3.00
%
 
5.00
%
 
 
Dental Costs
 
 
 
 
 
 
 
5.00
%
 
6.00
%
 
6.00
%
 
 
Pre-65 Medical Costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Immediate Rate
 
 
 
 
 
 
 
8.00
%
 
8.88
%
 
8.00
%
 
 
Ultimate Rate
 
 
 
 
 
 
 
5.00
%
 
5.00
%
 
5.00
%
 
 
Year Ultimate Rate Reached
 
 
 
 
 
 
 
2021

 
2023

 
2016

 
 
Post-65 Medical Costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Immediate Rate
 
 
 
 
 
 
 
7.88
%
 
7.98
%
 
8.25
%
 
 
Ultimate Rate
 
 
 
 
 
 
 
5.00
%
 
5.00
%
 
5.00
%
 
 
Year Ultimate Rate Reached
 
 
 
 
 
 
 
2021

 
2019

 
2017

 
 
Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs
 
 
 
 
 
 
 
 
 
 
 
 
Millions
 
 
Total of Service Cost and Interest Cost
 
 
 
 
 
 
 
$
12

 
$
12

 
$
11

 
 
Postretirement Benefit Obligation
 
 
 
 
 
 
 
$
161

 
$
180

 
$
155

 
 
Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs
 
 
 
 
Total of Service Cost and Interest Cost
 
 
 
 
 
 
 
$
(9
)
 
$
(9
)
 
$
(9
)
 
 
Postretirement Benefit Obligation
 
 
 
 
 
 
 
$
(134
)
 
$
(149
)
 
$
(128
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Plan Assets
All the investments of pension plans and OPEB plans are held in a trust account by the Trustee and consist of an undivided interest in an investment account of the Master Trust. The investments in the pension and OPEB plans are measured at fair value within a hierarchy that prioritizes the inputs to fair value measurements into three levels. See Note 17. Fair Value Measurements for more information on fair value guidance. Use of the Master Trust permits the commingling of pension plan assets and OPEB plan assets for investment and administrative purposes. Although assets of both plans are commingled in the Master Trust, the Trustee maintains supporting records for the purpose of allocating the net gain or loss of the investment account to the respective participating plans. The net investment income of the investment assets is allocated by the Trustee to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. As of December 31, 2013, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 94% and 6%, respectively.
The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2013 and 2012, including the fair value measurements and the levels of inputs used in determining those fair values.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Fair Value Measurements as of December 31, 2013
 
 
 
 
 
 
Quoted Market Prices
for Identical Assets
 
Significant Other
Observable Inputs
 
Significant
Unobservable Inputs
 
 
Description
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
Millions
 
 
Temporary Investment Funds (A)
 
$
93

 
$
52

 
$
41

 
$
—

 
 
Common Stocks (B)
 

 
 
 
 
 
 
 
 
Commingled—United States
 
2,264

 
2,264

 
—

 
—

 
 
Commingled—International
 
1,016

 
1,016

 
—

 
—

 
 
Other
 
704

 
704

 
—

 
—

 
 
Bonds (C)
 

 
 
 
 
 
 
 
 
Government (United States & Foreign)
 
596

 
—

 
596

 
—

 
 
Other
 
737

 
—

 
737

 
—

 
 
Private Equity (D)
 
25

 
—

 
—

 
25

 
 
Total
 
$
5,435

 
$
4,036

 
$
1,374

 
$
25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Fair Value Measurements as of December 31, 2012
 
 
 
 
 
 
Quoted Market Prices
for Identical Assets
 
Significant Other
Observable Inputs
 
Significant
Unobservable Inputs
 
 
Description
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
Millions
 
 
Temporary Investment Funds (A)
 
$
67

 
$
—

 
$
67

 
$
—

 
 
Common Stocks (B)
 
 
 
 
 
 
 
 
 
 
Commingled—United States
 
1,928

 
1,928

 
—

 
—

 
 
Commingled—International
 
839

 
839

 
—

 
—

 
 
Other
 
431

 
431

 
—

 
—

 
 
Bonds (C)
 
 
 
 
 
 
 
 
 
 
Government (United States & Foreign)
 
623

 
—

 
623

 
—

 
 
Other
 
691

 
—

 
691

 
—

 
 
Private Equity (D)
 
31

 
—

 
—

 
31

 
 
Total
 
$
4,610

 
$
3,198

 
$
1,381

 
$
31

 
 
 
 
 
 
 
 
 
 
 
 
(A)
Certain open-ended mutual funds with mainly short-term investments are valued based on unadjusted quoted prices in active market (Level 1). Certain temporary investments are valued using inputs such as time-to-maturity, coupon rate, quality rating and current yield (Level 2).
(B)
Wherever possible, fair values of equity investments in stocks and in commingled funds are derived from quoted market prices as substantially all of these instruments have active markets (primarily Level 1). Most investments in stocks are priced utilizing the principal market close price or in some cases midpoint, bid or ask price.
(C)
Investments in fixed income securities including bond funds are priced using an evaluated pricing approach or the most recent exchange or quoted bid (primarily Level 2).
(D)
Limited partnership interests in private equity funds are valued using significant unobservable inputs as there is little, if any, market activity. In addition, there may be transfer restrictions on private equity securities. The process for determining the fair value of such securities relied on commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. These inputs require significant management judgment or estimation (primarily Level 3).
Reconciliations of the beginning and ending balances of the Pension and OPEB Plans’ Level 3 assets for the years ended December 31, 2013 and 2012 are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
January 1, 2013
 
Purchases/
(Sales)
 
Transfer
In/ (Out)
 
Actual
Return on
Asset Sales
 
Actual
Return on
Assets Still
Held
 
Balance as of December 31, 2013
 
 
 
 
Millions
 
 
Private Equity
 
$
31

 
$
(11
)
 
$
—

 
$
11

 
$
(6
)
 
$
25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
January 1, 2012
 
Purchases/
(Sales)
 
Transfer
In/ (Out)
 
Actual
Return on
Asset Sales
 
Actual
Return on
Assets Still
Held
 
Balance as of December 31, 2012
 
 
 
 
Millions
 
 
Pooled Real Estate
 
$
36

 
$
(38
)
 
$
—

 
$
2

 
$
—

 
$
—

 
 
Private Equity
 
$
37

 
$
(6
)
 
$
—

 
$
5

 
$
(5
)
 
$
31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The following table provides the percentage of fair value of total plan assets for each major category of plan assets held for the qualified pension and OPEB plans as of the measurement date, December 31:
 
 
 
 
 
 
 
 
 
 
As of December 31,
 
 
Investments
 
2013
 
2012
 
 
Equity Securities
 
73
%
 
69
%
 
 
Fixed Income Securities
 
25

 
29

 
 
Other Investments
 
2

 
2

 
 
Total Percentage
 
100
%
 
100
%
 
 
 
 
 
 
 
 

PSEG utilizes forecasted returns, risk, and correlation of all asset classes in order to develop a portfolio designed to produce the maximum return opportunity per unit of risk. In 2011, PSEG completed its latest asset/liability study. The results from the study indicated that a long-term target asset allocation of 70% equities and 30% fixed income is consistent with the funds’ financial objectives. Derivative financial instruments are used by the plans’ investment managers primarily to adjust the fixed income duration of the portfolio and hedge the currency risk component of foreign investments. The expected long-term rate of return on plan assets was 8.00% as of December 31, 2013 and will remain unchanged for 2014. This expected return was determined based on the study discussed above, including a premium for active management and considered the plans’ historical annualized rate of return since inception, which was 9.5%.
Plan Contributions
PSEG does not anticipate making additional contributions into its pension plans during 2014. PSEG may contribute up to $14 million into its OPEB plan during 2014.
Estimated Future Benefit Payments
The following pension benefit and postretirement benefit payments are expected to be paid to plan participants.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year
 
 
Pension
Benefits
 
Other Benefits
 
 
 
 
 
Millions
 
 
2014
 
 
$
256

 
$
77

 
 
2015
 
 
263

 
78

 
 
2016
 
 
272

 
80

 
 
2017
 
 
282

 
82

 
 
2018
 
 
293

 
84

 
 
2019-2023
 
 
1,647

 
458

 
 
Total
 
 
$
3,013

 
$
859

 
 
 
 
 
 
 
 
 

Long Island Electric Utility Servco LLC (ServCo) Pension and OPEB
PSEG Long Island (PSEG LI) and the Long Island Power Authority (LIPA) entered into a twelve year Amended and Restated Operations Services Agreement (OSA) effective January 1, 2014 to operate LIPA’s electric transmission and distribution (T&D) system in Long Island, New York. ServCo, a wholly owned subsidiary of PSEG LI, has created benefit plans that provide substantially the same benefits to its employees as those previously provided by National Grid Electric Services LLC (NGES), the predecessor T&D manager for LIPA. Such benefits include defined benefit and cash balance pension plans and health and welfare plans for union, nonunion and management employees. Since the vast majority of ServCo's employees had worked under NGES' T&D operations services arrangement with LIPA, ServCo's plans provide certain of those employees with pension and OPEB vested credit for prior years' services earned while working for NGES. The OSA provides for all of these employee benefit costs to be funded by LIPA. ServCo amounts are not included in any of the preceding pension and OPEB disclosures.
401(k) Plans
PSEG sponsors two 401(k) plans, which are Employee Retirement Income Security Act defined contribution retirement plans. Eligible represented employees of PSEG's subsidiaries participate in the PSEG Employee Savings Plan (Savings Plan), while eligible non-represented employees of PSEG's subsidiaries participate in the PSEG Thrift and Tax-Deferred Savings Plan (Thrift Plan). Eligible employees may contribute up to 50% of their compensation to these plans. PSEG matches 50% of such employee contributions up to 7% of pay for Savings Plan participants and up to 8% of pay for Thrift Plan participants.
The amount paid for employer matching contributions to the plans for PSEG, Power and PSE&G are detailed as follows:
 
 
 
 
 
 
 
 
 
 
 
 
Thrift Plan and Savings Plan
 
 
 
 
Years Ended December 31,
 
 
 
 
2013
 
2012
 
2011
 
 
 
 
Millions
 
 
Power
 
$
10

 
$
10

 
$
8

 
 
PSE&G
 
19

 
18

 
14

 
 
Other
 
4

 
4

 
2

 
 
Total Employer Matching Contributions
 
$
33

 
$
32

 
$
24

 
 
 
 
 
 
 
 
 
 
PSE&G [Member]
  
Pension, OPEB and Savings Plans
Note 12. Pension, Other Postretirement Benefits (OPEB) and Savings Plans
PSEG sponsors several qualified and nonqualified pension plans and OPEB plans covering PSEG’s and its participating affiliates’ current and former employees who meet certain eligibility criteria. Eligible employees participate in non-contributory pension and OPEB plans sponsored by PSEG and administered by Services. In addition, represented and nonrepresented employees are eligible for participation in PSEG’s two defined contribution plans described below.
PSEG, Power and PSE&G are required to record the under or over funded positions of their defined benefit pension and OPEB plans on their respective balance sheets. Such funding positions of each PSEG company are required to be measured as of the date of its respective year-end Consolidated Balance Sheets. For under funded plans, the liability is equal to the difference between the plan’s benefit obligation and the fair value of plan assets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. For OPEB plans, the benefit obligation is the accumulated postretirement benefit obligation. In addition, accounting guidance requires that the total unrecognized costs for defined benefit pension and OPEB plans be recorded as an after-tax charge to Accumulated Other Comprehensive Income (Loss), a separate component of Stockholders’ Equity. However, for PSE&G, because the amortization of the unrecognized costs is being collected from customers, the accumulated unrecognized costs are recorded as a Regulatory Asset. The unrecognized costs represent actuarial gains or losses, prior service costs and transition obligations arising from the adoption of the revised accounting guidance for pensions and OPEB, which had not been expensed.
For Power, the charge to Accumulated Other Comprehensive Income (Loss) is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations. For PSE&G, the Regulatory Asset is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations.
The following table provides a roll-forward of the changes in the benefit obligation and the fair value of plan assets during each of the two years in the periods ended December 31, 2013 and 2012. It also provides the funded status of the plans and the amounts recognized and amounts not recognized on the Consolidated Balance Sheets at the end of both years.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
Millions
 
 
Change in Benefit Obligation
 
 
 
 
 
 
 
 
 
 
Benefit Obligation at Beginning of Year (A)
 
$
5,235

 
$
4,572

 
$
1,538

 
$
1,338

 
 
Service Cost
 
116

 
101

 
21

 
17

 
 
Interest Cost
 
215

 
223

 
63

 
65

 
 
Actuarial (Gain) Loss
 
(501
)
 
586

 
(144
)
 
182

 
 
Gross Benefits Paid
 
(253
)
 
(248
)
 
(64
)
 
(69
)
 
 
Medicare Subsidy Receipts
 
—

 
—

 
—

 
5

 
 
Special Termination Benefits
 
—

 
1

 
—

 
—

 
 
Benefit Obligation at End of Year (A)
 
$
4,812

 
$
5,235

 
$
1,414

 
$
1,538

 
 
Change in Plan Assets
 
 
 
 
 
 
 
 
 
 
Fair Value of Assets at Beginning of Year
 
$
4,357

 
$
3,831

 
$
253

 
$
211

 
 
Actual Return on Plan Assets
 
857

 
541

 
52

 
31

 
 
Employer Contributions
 
155

 
233

 
78

 
75

 
 
Gross Benefits Paid
 
(253
)
 
(248
)
 
(64
)
 
(69
)
 
 
Medicare Subsidy Receipts
 
—

 
—

 
—

 
5

 
 
Fair Value of Assets at End of Year
 
$
5,116

 
$
4,357

 
$
319

 
$
253

 
 
Funded Status
 
 
 
 
 
 
 
 
 
 
Funded Status (Plan Assets less Benefit Obligation)
 
$
304

 
$
(878
)
 
$
(1,095
)
 
$
(1,285
)
 
 
Additional Amounts Recognized in the Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
 
Noncurrent Assets
 
$
434

 
$
6

 
$
—

 
$
—

 
 
Current Accrued Benefit Cost
 
(9
)
 
(8
)
 
—

 
—

 
 
Noncurrent Accrued Benefit Cost
 
(121
)
 
(876
)
 
(1,095
)
 
(1,285
)
 
 
Amounts Recognized
 
$
304

 
$
(878
)
 
$
(1,095
)
 
$
(1,285
)
 
 
Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (B)
 
 
 
 
Prior Service Cost
 
$
(120
)
 
$
(139
)
 
$
(53
)
 
$
(67
)
 
 
Net Actuarial Loss
 
977

 
2,174

 
310

 
527

 
 
Total
 
$
857

 
$
2,035

 
$
257

 
$
460

 
 
 
 
 
 
 
 
 
 
 
 
(A)
Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for Other benefits.
(B)
Includes $408 million ($238 million, after-tax) and $827 million ($485 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2013 and 2012, respectively.
The pension benefits table above provides information relating to the funded status of all qualified and nonqualified pension plans and OPEB plans on an aggregate basis. As of December 31, 2013, PSEG had funded approximately 106% of its projected benefit obligation. This percentage does not include $179 million of assets in the Rabbi Trust as of December 31, 2013 which were used partially to fund the nonqualified pension plans. As of December 31, 2013, the nonqualified pension plans included in the benefit obligation in the above table and in the projected benefit obligation were $130 million. The fair values of the Rabbi Trust assets are included in Other Special Funds on the Consolidated Balance Sheets.
 
Accumulated Benefit Obligation
The accumulated benefit obligation for all PSEG’s defined benefit pension plans was $4.5 billion as of December 31, 2013 and $4.9 billion as of December 31, 2012.
The following table provides the components of net periodic benefit cost for the years ended December 31, 2013, 2012 and 2011.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits Years Ended December 31,
 
Other Benefits Years Ended December 31,
 
 
 
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
 
 
 
Millions
 
 
Components of Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service Cost
 
$
116

 
$
101

 
$
92

 
$
21

 
$
17

 
$
14

 
 
Interest Cost
 
215

 
223

 
228

 
63

 
65

 
61

 
 
Expected Return on Plan Assets
 
(348
)
 
(306
)
 
(334
)
 
(21
)
 
(17
)
 
(18
)
 
 
Amortization of Net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transition Obligation
 
—

 
—

 
—

 
—

 
2

 
4

 
 
Prior Service Cost
 
(19
)
 
(18
)
 
(11
)
 
(14
)
 
(14
)
 
(13
)
 
 
Actuarial Loss
 
188

 
167

 
119

 
42

 
31

 
14

 
 
Net Periodic Benefit Cost
 
$
152

 
$
167

 
$
94

 
$
91

 
$
84

 
$
62

 
 
Special Termination Benefits
 
—

 
1

 
—

 
—

 
—

 
—

 
 
Effect of Regulatory Asset
 
—

 
—

 
—

 
—

 
19

 
19

 
 
Total Benefit Costs, Including Effect of Regulatory Asset

$
152

 
$
168

 
$
94

 
$
91

 
$
103

 
$
81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Pension costs and OPEB costs for PSEG, Power and PSE&G are detailed as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
Years Ended December 31,
 
Other Benefits
Years Ended December 31,
 
 
 
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
 
 
 
Millions
 
 
Power
 
$
43

 
$
52

 
$
29

 
$
23

 
$
18

 
$
12

 
 
PSE&G
 
91

 
97

 
51

 
65

 
82

 
67

 
 
Other
 
18

 
19

 
14

 
3

 
3

 
2

 
 
Total Benefit Costs
 
$
152

 
$
168

 
$
94

 
$
91

 
$
103

 
$
81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension
 
OPEB
 
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
Millions
 
 
Net Actuarial (Gain) Loss in Current Period
 
$
(1,009
)
 
$
350

 
$
(175
)
 
$
169

 
 
Amortization of Net Actuarial Gain (Loss)
 
(188
)
 
(167
)
 
(42
)
 
(32
)
 
 
Amortization of Prior Service Credit
 
19

 
19

 
14

 
14

 
 
Amortization of Transition Asset
 
—

 
—

 
—

 
(2
)
 
 
Total
 
$
(1,178
)
 
$
202

 
$
(203
)
 
$
149

 
 
 
 
 
 
 
 
 
 
 
 


Amounts that are expected to be amortized from Accumulated Other Comprehensive Loss, Regulatory Assets and Deferred Assets into Net Periodic Benefit Cost in 2014 are as follows:
 
 
 
 
 
 
 
 
 
 
Pension
Benefits
 
Other
Benefits
 
 
 
 
2014
 
2014
 
 
 
 
Millions
 
 
Actuarial (Gain) Loss
 
$
56

 
$
23

 
 
Prior Service Cost
 
$
(19
)
 
$
(14
)
 
 
 
 
 
 
 
 

The following assumptions were used to determine the benefit obligations and net periodic benefit costs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
 
 
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
 
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31
 
 
 
 
Discount Rate
 
5.00
%
 
4.20
%
 
5.00
%
 
5.01
%
 
4.20
%
 
5.00
%
 
 
Rate of Compensation Increase
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
 
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31
 
 
 
 
Discount Rate
 
4.20
%
 
5.00
%
 
5.40
%
 
4.20
%
 
5.00
%
 
5.38
%
 
 
Expected Return on Plan Assets
 
8.00
%
 
8.00
%
 
8.50
%
 
8.00
%
 
8.00
%
 
8.50
%
 
 
Rate of Compensation Increase
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
4.61
%
 
 
Assumed Health Care Cost Trend Rates as of December 31
 
 
 
 
 
 
 
 
 
 
Administrative Expense
 
 
 
 
 
 
 
3.00
%
 
3.00
%
 
5.00
%
 
 
Dental Costs
 
 
 
 
 
 
 
5.00
%
 
6.00
%
 
6.00
%
 
 
Pre-65 Medical Costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Immediate Rate
 
 
 
 
 
 
 
8.00
%
 
8.88
%
 
8.00
%
 
 
Ultimate Rate
 
 
 
 
 
 
 
5.00
%
 
5.00
%
 
5.00
%
 
 
Year Ultimate Rate Reached
 
 
 
 
 
 
 
2021

 
2023

 
2016

 
 
Post-65 Medical Costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Immediate Rate
 
 
 
 
 
 
 
7.88
%
 
7.98
%
 
8.25
%
 
 
Ultimate Rate
 
 
 
 
 
 
 
5.00
%
 
5.00
%
 
5.00
%
 
 
Year Ultimate Rate Reached
 
 
 
 
 
 
 
2021

 
2019

 
2017

 
 
Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs
 
 
 
 
 
 
 
 
 
 
 
 
Millions
 
 
Total of Service Cost and Interest Cost
 
 
 
 
 
 
 
$
12

 
$
12

 
$
11

 
 
Postretirement Benefit Obligation
 
 
 
 
 
 
 
$
161

 
$
180

 
$
155

 
 
Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs
 
 
 
 
Total of Service Cost and Interest Cost
 
 
 
 
 
 
 
$
(9
)
 
$
(9
)
 
$
(9
)
 
 
Postretirement Benefit Obligation
 
 
 
 
 
 
 
$
(134
)
 
$
(149
)
 
$
(128
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Plan Assets
All the investments of pension plans and OPEB plans are held in a trust account by the Trustee and consist of an undivided interest in an investment account of the Master Trust. The investments in the pension and OPEB plans are measured at fair value within a hierarchy that prioritizes the inputs to fair value measurements into three levels. See Note 17. Fair Value Measurements for more information on fair value guidance. Use of the Master Trust permits the commingling of pension plan assets and OPEB plan assets for investment and administrative purposes. Although assets of both plans are commingled in the Master Trust, the Trustee maintains supporting records for the purpose of allocating the net gain or loss of the investment account to the respective participating plans. The net investment income of the investment assets is allocated by the Trustee to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. As of December 31, 2013, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 94% and 6%, respectively.
The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2013 and 2012, including the fair value measurements and the levels of inputs used in determining those fair values.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Fair Value Measurements as of December 31, 2013
 
 
 
 
 
 
Quoted Market Prices
for Identical Assets
 
Significant Other
Observable Inputs
 
Significant
Unobservable Inputs
 
 
Description
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
Millions
 
 
Temporary Investment Funds (A)
 
$
93

 
$
52

 
$
41

 
$
—

 
 
Common Stocks (B)
 

 
 
 
 
 
 
 
 
Commingled—United States
 
2,264

 
2,264

 
—

 
—

 
 
Commingled—International
 
1,016

 
1,016

 
—

 
—

 
 
Other
 
704

 
704

 
—

 
—

 
 
Bonds (C)
 

 
 
 
 
 
 
 
 
Government (United States & Foreign)
 
596

 
—

 
596

 
—

 
 
Other
 
737

 
—

 
737

 
—

 
 
Private Equity (D)
 
25

 
—

 
—

 
25

 
 
Total
 
$
5,435

 
$
4,036

 
$
1,374

 
$
25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Fair Value Measurements as of December 31, 2012
 
 
 
 
 
 
Quoted Market Prices
for Identical Assets
 
Significant Other
Observable Inputs
 
Significant
Unobservable Inputs
 
 
Description
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
Millions
 
 
Temporary Investment Funds (A)
 
$
67

 
$
—

 
$
67

 
$
—

 
 
Common Stocks (B)
 
 
 
 
 
 
 
 
 
 
Commingled—United States
 
1,928

 
1,928

 
—

 
—

 
 
Commingled—International
 
839

 
839

 
—

 
—

 
 
Other
 
431

 
431

 
—

 
—

 
 
Bonds (C)
 
 
 
 
 
 
 
 
 
 
Government (United States & Foreign)
 
623

 
—

 
623

 
—

 
 
Other
 
691

 
—

 
691

 
—

 
 
Private Equity (D)
 
31

 
—

 
—

 
31

 
 
Total
 
$
4,610

 
$
3,198

 
$
1,381

 
$
31

 
 
 
 
 
 
 
 
 
 
 
 
(A)
Certain open-ended mutual funds with mainly short-term investments are valued based on unadjusted quoted prices in active market (Level 1). Certain temporary investments are valued using inputs such as time-to-maturity, coupon rate, quality rating and current yield (Level 2).
(B)
Wherever possible, fair values of equity investments in stocks and in commingled funds are derived from quoted market prices as substantially all of these instruments have active markets (primarily Level 1). Most investments in stocks are priced utilizing the principal market close price or in some cases midpoint, bid or ask price.
(C)
Investments in fixed income securities including bond funds are priced using an evaluated pricing approach or the most recent exchange or quoted bid (primarily Level 2).
(D)
Limited partnership interests in private equity funds are valued using significant unobservable inputs as there is little, if any, market activity. In addition, there may be transfer restrictions on private equity securities. The process for determining the fair value of such securities relied on commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. These inputs require significant management judgment or estimation (primarily Level 3).
Reconciliations of the beginning and ending balances of the Pension and OPEB Plans’ Level 3 assets for the years ended December 31, 2013 and 2012 are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
January 1, 2013
 
Purchases/
(Sales)
 
Transfer
In/ (Out)
 
Actual
Return on
Asset Sales
 
Actual
Return on
Assets Still
Held
 
Balance as of December 31, 2013
 
 
 
 
Millions
 
 
Private Equity
 
$
31

 
$
(11
)
 
$
—

 
$
11

 
$
(6
)
 
$
25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
January 1, 2012
 
Purchases/
(Sales)
 
Transfer
In/ (Out)
 
Actual
Return on
Asset Sales
 
Actual
Return on
Assets Still
Held
 
Balance as of December 31, 2012
 
 
 
 
Millions
 
 
Pooled Real Estate
 
$
36

 
$
(38
)
 
$
—

 
$
2

 
$
—

 
$
—

 
 
Private Equity
 
$
37

 
$
(6
)
 
$
—

 
$
5

 
$
(5
)
 
$
31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The following table provides the percentage of fair value of total plan assets for each major category of plan assets held for the qualified pension and OPEB plans as of the measurement date, December 31:
 
 
 
 
 
 
 
 
 
 
As of December 31,
 
 
Investments
 
2013
 
2012
 
 
Equity Securities
 
73
%
 
69
%
 
 
Fixed Income Securities
 
25

 
29

 
 
Other Investments
 
2

 
2

 
 
Total Percentage
 
100
%
 
100
%
 
 
 
 
 
 
 
 

PSEG utilizes forecasted returns, risk, and correlation of all asset classes in order to develop a portfolio designed to produce the maximum return opportunity per unit of risk. In 2011, PSEG completed its latest asset/liability study. The results from the study indicated that a long-term target asset allocation of 70% equities and 30% fixed income is consistent with the funds’ financial objectives. Derivative financial instruments are used by the plans’ investment managers primarily to adjust the fixed income duration of the portfolio and hedge the currency risk component of foreign investments. The expected long-term rate of return on plan assets was 8.00% as of December 31, 2013 and will remain unchanged for 2014. This expected return was determined based on the study discussed above, including a premium for active management and considered the plans’ historical annualized rate of return since inception, which was 9.5%.
Plan Contributions
PSEG does not anticipate making additional contributions into its pension plans during 2014. PSEG may contribute up to $14 million into its OPEB plan during 2014.
Estimated Future Benefit Payments
The following pension benefit and postretirement benefit payments are expected to be paid to plan participants.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year
 
 
Pension
Benefits
 
Other Benefits
 
 
 
 
 
Millions
 
 
2014
 
 
$
256

 
$
77

 
 
2015
 
 
263

 
78

 
 
2016
 
 
272

 
80

 
 
2017
 
 
282

 
82

 
 
2018
 
 
293

 
84

 
 
2019-2023
 
 
1,647

 
458

 
 
Total
 
 
$
3,013

 
$
859

 
 
 
 
 
 
 
 
 

Long Island Electric Utility Servco LLC (ServCo) Pension and OPEB
PSEG Long Island (PSEG LI) and the Long Island Power Authority (LIPA) entered into a twelve year Amended and Restated Operations Services Agreement (OSA) effective January 1, 2014 to operate LIPA’s electric transmission and distribution (T&D) system in Long Island, New York. ServCo, a wholly owned subsidiary of PSEG LI, has created benefit plans that provide substantially the same benefits to its employees as those previously provided by National Grid Electric Services LLC (NGES), the predecessor T&D manager for LIPA. Such benefits include defined benefit and cash balance pension plans and health and welfare plans for union, nonunion and management employees. Since the vast majority of ServCo's employees had worked under NGES' T&D operations services arrangement with LIPA, ServCo's plans provide certain of those employees with pension and OPEB vested credit for prior years' services earned while working for NGES. The OSA provides for all of these employee benefit costs to be funded by LIPA. ServCo amounts are not included in any of the preceding pension and OPEB disclosures.
401(k) Plans
PSEG sponsors two 401(k) plans, which are Employee Retirement Income Security Act defined contribution retirement plans. Eligible represented employees of PSEG's subsidiaries participate in the PSEG Employee Savings Plan (Savings Plan), while eligible non-represented employees of PSEG's subsidiaries participate in the PSEG Thrift and Tax-Deferred Savings Plan (Thrift Plan). Eligible employees may contribute up to 50% of their compensation to these plans. PSEG matches 50% of such employee contributions up to 7% of pay for Savings Plan participants and up to 8% of pay for Thrift Plan participants.
The amount paid for employer matching contributions to the plans for PSEG, Power and PSE&G are detailed as follows:
 
 
 
 
 
 
 
 
 
 
 
 
Thrift Plan and Savings Plan
 
 
 
 
Years Ended December 31,
 
 
 
 
2013
 
2012
 
2011
 
 
 
 
Millions
 
 
Power
 
$
10

 
$
10

 
$
8

 
 
PSE&G
 
19

 
18

 
14

 
 
Other
 
4

 
4

 
2

 
 
Total Employer Matching Contributions
 
$
33

 
$
32

 
$
24