Compensation and Benefit Plans

Employee Savings Plan

The 401(k) defined contribution savings plan is designed to supplement employees' retirement income. The following employer contributions were made for continuing operations:



	Edison International		SCE
(in millions)	Years ended December 31,
2014	$	71	$	70
2013	76		76
2012	85		84

Pension Plans and Postretirement Benefits Other Than Pensions

Pension Plans

Noncontributory defined benefit pension plans (some with cash balance features) cover most employees meeting minimum service requirements. SCE recognizes pension expense for its nonexecutive plan as calculated by the actuarial method used for ratemaking. The expected contributions (all by the employer) for Edison International and SCE are approximately $119 million and $92 million, respectively, for the year ending December 31, 2015. Annual contributions made by SCE to most of SCE's pension plans are anticipated to be recovered through CPUC-approved regulatory mechanisms. Annual contributions to these plans are expected to be, at a minimum, equal to the related annual expense.

The funded position of Edison International's pension is sensitive to changes in market conditions. Changes in overall interest rate levels significantly affect the company's liabilities, while assets held in the various trusts established to fund Edison International's long-term pension are affected by movements in the equity and bond markets. Due to SCE's regulatory recovery treatment, a regulatory asset has been recorded equal to the unfunded status (See Note 10).

Information on pension plan assets and benefit obligations for continuing and discontinued operations is shown below.



	Edison International						SCE
	Years ended December 31,
(in millions)	2014			2013			2014			2013
Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	4,178		$	4,948		$	3,721		$	4,434
Service cost	133			174			124			154
Interest cost	181			182			159			164
Actuarial (gain) loss	469			(330		)	386			(277		)
Curtailment gain	(5		)	—			—			—
Benefits paid	(449		)	(796		)	(391		)	(754		)
Other	10			—			—			—
Projected benefit obligation at end of year	$	4,517		$	4,178		$	3,999		$	3,721
Change in plan assets
Fair value of plan assets at beginning of year	$	3,477		$	3,542		$	3,236		$	3,320
Actual return on plan assets	257			540			240			505
Employer contributions	169			191			132			165
Benefits paid	(449		)	(796		)	(391		)	(754		)
Fair value of plan assets at end of year	$	3,454		$	3,477		$	3,217		$	3,236
Funded status at end of year	$	(1,063	)	$	(701	)	$	(782	)	$	(485	)
Amounts recognized in the consolidated balance sheets consist of ¹:
Current liabilities	$	(27	)	$	(15	)	$	(5	)	$	(5	)
Long-term liabilities	(1,036		)	(686		)	(777		)	(480		)
	$	(1,063	)	$	(701	)	$	(782	)	$	(485	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net loss	$	102		$	30		$	31		$	33
Amounts recognized as a regulatory asset:
Prior service cost	$	20		$	25		$	20		$	25
Net loss	640			328			640			328
	$	660		$	353		$	660		$	353
Total not yet recognized as expense	$	762		$	383		$	691		$	386
Accumulated benefit obligation at end of year	$	4,356		$	4,015		$	3,881		$	3,599
Pension plans with an accumulated benefit obligation in excess of plan assets:
Projected benefit obligation	$	4,517		$	4,178		$	3,999		$	3,721
Accumulated benefit obligation	4,356			4,015			3,881			3,599
Fair value of plan assets	3,454			3,477			3,217			3,236
Weighted-average assumptions used to determine obligations at end of year:
Discount rate	3.85		%	4.75		%	3.85		%	4.75		%
Rate of compensation increase	4.0		%	4.0		%	4.0		%	4.0		%


¹	The SCE liability excludes a long-term payable due to Edison International Parent of $121 million and $95 million at December 31, 2014 and 2013, respectively, related to certain SCE postretirement benefit obligations transferred to Edison International Parent.

Edison International and SCE adopted new mortality tables that the Society of Actuaries released in October 2014 that reflect an increase in life expectancy. At December 31, 2014, this adoption resulted in an increase in Edison International's pension plans' projected benefit obligation of $214 million, including $199 million for SCE.

Pension expense components for continuing operations are:



	Edison International									SCE
	Years ended December 31,
(in millions)	2014			2013			2012			2014			2013			2012
Service cost	$	133		$	162		$	163		$	128		$	159		$	160
Interest cost	181			170			183			164			167			180
Expected return on plan assets	(229		)	(222		)	(217		)	(213		)	(222		)	(217		)
Settlement costs¹	45			87			5			42			85			4
Curtailment gain	(4		)	—			—			—			—			—
Amortization of prior service cost	5			5			3			5			5			3
Amortization of net loss²	12			39			61			7			35			57
Expense under accounting standards	143			241			198			133			229			187
Regulatory adjustment (deferred)	8			(53		)	(19		)	8			(53		)	(19		)
Total expense recognized	$	151		$	188		$	179		$	141		$	176		$	168


¹	Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International was $3 million and $2 million for the years ended December 31, 2014 and 2013, respectively.


²	Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International and SCE was $9 million and $4 million, respectively, for the year ended December 31, 2014. The amount reclassified for Edison International and SCE was $11 million and $7 million, respectively, for the year ended December 31, 2013.

Under GAAP, a settlement is recorded when lump-sum payments exceed estimated annual service and interest costs. Lump-sum payments to employees retiring in 2014 and 2013 from the SCE Retirement Plan (primarily due to workforce reductions described below) exceeded the estimated service and interest costs for those years. A settlement requires re-measurement of both the plan pension obligations and plan assets as of the date of the settlement. Re-measurement assumption changes result in actuarial gains and losses which are combined with previous unrecognized gains and losses. After re-measurement, GAAP requires an acceleration of a portion of unrecognized net losses attributable to such lump-sum payments as additional pension expense as reflected in the above table. The additional pension expense related to SCE did not impact net income as such amounts are probable of recovery through future rates.

The SCE Retirement Plan experienced total actuarial losses of $374 million, including $357 million for SCE during 2014 and gains of $563 million, including $558 million for SCE during 2013. The actuarial losses in 2014 were primarily due to a decrease in the discount rate (from 4.75% at December 31, 2013 to 4.00% as of August 31, 2014 and 3.85% as of December 31, 2014) due to lower interest rates. The actuarial gains in 2013 were primarily due to an increase in the discount rate (from 3.75% at December 31, 2012 to 4.25% as of May 31, 2013, 4.50% as of August 31, 2013 and 4.75% as of December 31, 2013) due to higher interest rates and better than expected performance of the plan assets.

Other changes in pension plan assets and benefit obligations recognized in other comprehensive loss for continuing operations:



	Edison International									SCE
	Years ended December 31,
(in millions)	2014			2013			2012			2014			2013			2012
Net (gain) loss	$	85		$	(33	)	$	36		$	37		$	(24	)	$	20
Amortization of net loss and other	(13		)	(13		)	(10		)	(4		)	(7		)	(6		)
Total recognized in other comprehensive loss	$	72		$	(46	)	$	26		$	33		$	(31	)	$	14
Total recognized in expense and other comprehensive loss	$	223		$	142		$	205		$	174		$	145		$	182

In accordance with authoritative guidance on rate-regulated enterprises, SCE records regulatory assets and liabilities instead of charges and credits to other comprehensive income (loss) for the portion of SCE's postretirement benefit plans that are recoverable in utility rates. The estimated pension amounts that will be amortized to expense in 2015 for continuing operations are as follows:



(in millions)	Edison International		SCE
Unrecognized net loss to be amortized¹	$	34	$	30
Unrecognized prior service cost to be amortized	5		5


¹	The amount of net loss expected to be reclassified from other comprehensive loss for Edison International's continuing operations and SCE is $12 million and $8 million, respectively.

Edison International and SCE used the following weighted-average assumptions to determine pension expense for continuing operations:



	Years ended December 31,
	2014		2013		2012
Discount rate	4.5	%	4.13	%	4.5	%
Rate of compensation increase	4.0	%	4.5	%	4.5	%
Expected long-term return on plan assets	7.0	%	7.0	%	7.5	%

The following benefit payments, which reflect expected future service, are expected to be paid:



	Edison International		SCE
(in millions)	Years ended December 31,
2015	$	489	$	448
2016	302		261
2017	302		263
2018	303		273
2019	316		281
2020 – 2024	1,557		1,414

Postretirement Benefits Other Than Pensions ("PBOP(s)")

Most employees retiring at or after age 55 with at least 10 years of service may be eligible for postretirement medical, dental, vision and life insurance benefits. Eligibility for a company contribution toward the cost of these benefits in retirement depends on a number of factors, including the employee's years of service, hire date, and retirement date. Under the terms of the Edison International Health and Welfare Plan ("PBOP Plan") each participating employer (Edison International or its participating subsidiaries) is responsible for the costs and expenses of all PBOP benefits with respect to its employees and former employees. A participating employer may terminate the PBOP benefits with respect to its employees and former employees, as may SCE (as Plan sponsor), and, accordingly, the participants' PBOP benefits are not vested benefits.

The expected contributions (substantially all of which are expected to be made by SCE) for PBOP benefits are $59 million for the year ended December 31, 2015. Annual contributions related to SCE employees made to SCE plans are anticipated to be recovered through CPUC-approved regulatory mechanisms and are expected to be, at a minimum, equal to the total annual expense for these plans.

SCE has established three voluntary employee beneficiary associations trusts ("VEBA Trusts") that can only be used to pay for retiree health care benefits of SCE. Once funded into the VEBA Trusts, neither SCE nor Edison International can subsequently terminate benefits and recover remaining amounts in the VEBA Trusts. Participants of the PBOP Plan do not have a beneficial interest in the VEBA Trusts. The VEBA Trust assets are sensitive to changes in market conditions. Changes in overall interest rate levels significantly affect the company's liabilities, while assets held in the various trusts established to fund Edison International's other postretirement benefits are affected by movements in the equity and bond markets. Due to SCE's regulatory recovery treatment, the unfunded status is offset by a regulatory asset.

Information on PBOP Plan assets and benefit obligations is shown below:



	Edison International						SCE
	Years ended December 31,
(in millions)	2014			2013			2014			2013
Change in benefit obligation
Benefit obligation at beginning of year	$	2,220		$	2,460		$	2,211		$	2,452
Service cost	40			49			40			48
Interest cost	117			98			117			97
Special termination benefits	3			11			3			11
Actuarial (gain) loss	582			(313		)	582			(312		)
Plan participants' contributions	19			18			19			18
Benefits paid	(197		)	(103		)	(197		)	(103		)
Benefit obligation at end of year	$	2,784		$	2,220		$	2,775		$	2,211
Change in plan assets
Fair value of plan assets at beginning of year	$	2,065		$	1,800		$	2,065		$	1,800
Actual return on assets	180			317			180			317
Employer contributions	19			33			19			33
Plan participants' contributions	19			18			19			18
Benefits paid	(197		)	(103		)	(197		)	(103		)
Fair value of plan assets at end of year	$	2,086		$	2,065		$	2,086		$	2,065
Funded status at end of year	$	(698	)	$	(155	)	$	(689	)	$	(146	)
Amounts recognized in the consolidated balance sheets consist of:
Current liabilities	$	(15	)	$	(17	)	$	(15	)	$	(16	)
Long-term liabilities	(683		)	(138		)	(674		)	(130		)
	$	(698	)	$	(155	)	$	(689	)	$	(146	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net loss	$	4		$	4		$	—		$	—
Amounts recognized as a regulatory asset (liability):
Prior service credit	$	(19	)	$	(54	)	$	(19	)	$	(54	)
Net loss	577			69			577			69
	$	558		$	15		$	558		$	15
Total not yet recognized as expense	$	562		$	19		$	558		$	15
Weighted-average assumptions used to determine obligations at end of year:
Discount rate	4.16		%	5.0		%	4.16		%	5.0		%
Assumed health care cost trend rates:
Rate assumed for following year	7.75		%	7.75		%	7.75		%	7.75		%
Ultimate rate	5.0		%	5.0		%	5.0		%	5.0		%
Year ultimate rate reached	2021			2020			2021			2020

Edison International and SCE adopted new mortality tables that the Society of Actuaries released in October 2014 that reflect an increase in life expectancy. At December 31, 2014, this adoption resulted in an increase in Edison International's PBOP plans' accumulated projected benefit obligation of $308 million, including $307 million for SCE.

PBOP expense components for continuing operations are:



	Edison International									SCE
	Years ended December 31,
(in millions)	2014			2013			2012			2014			2013			2012
Service cost	$	40		$	49		$	47		$	40		$	48		$	47
Interest cost	117			98			108			117			97			108
Expected return on plan assets	(108		)	(114		)	(108		)	(108		)	(114		)	(109		)
Special termination benefits¹	3			11			2			3			11			2
Amortization of prior service credit	(36		)	(36		)	(35		)	(35		)	(35		)	(35		)
Amortization of net loss	6			24			39			5			24			39
Total expense	$	22		$	32		$	53		$	22		$	31		$	52


¹	Due to the reduction in workforce, SCE has incurred costs for extended retiree health care coverage.

In accordance with authoritative guidance on rate-regulated enterprises, SCE records regulatory assets and liabilities instead of charges and credits to other comprehensive income (loss) for the portion of SCE's postretirement benefit plans that are recoverable in utility rates. The estimated PBOP amounts that will be amortized to expense in 2015 for continuing operations are as follows:



(in millions)	Edison International			SCE
Unrecognized net loss to be amortized	$	23		$	23
Unrecognized prior service credit to be amortized	(12		)	(12		)

Edison International and SCE used the following weighted-average assumptions to determine PBOP expense for continuing operations:



	Years ended December 31,
	2014		2013		2012
Discount rate	5.0	%	4.25	%	4.75	%
Expected long-term return on plan assets	5.5	%	6.7	%	7.0	%
Assumed health care cost trend rates:
Current year	7.8	%	8.5	%	9.5	%
Ultimate rate	5.0	%	5.0	%	5.25	%
Year ultimate rate reached	2020		2020		2019

A one-percentage-point change in assumed health care cost trend rate would have the following effects on continuing operations:



	Edison International					SCE
(in millions)	One-Percentage-Point Increase		One-Percentage-Point Decrease			One-Percentage-Point Increase		One-Percentage-Point Decrease
Effect on accumulated benefit obligation as of December 31, 2014	$	335	$	(271	)	$	334	$	(270	)
Effect on annual aggregate service and interest costs	15		(12		)	15		(12		)

The following benefit payments are expected to be paid:



	Edison International		SCE
(in millions)	Years ended December 31,
2015	$	108	$	108
2016	114		113
2017	119		119
2018	124		124
2019	128		128
2020 – 2024	707		705

Plan Assets

Description of Pension and Postretirement Benefits Other than Pensions Investment Strategies

The investment of plan assets is overseen by a fiduciary investment committee. Plan assets are invested using a combination of asset classes, and may have active and passive investment strategies within asset classes. Target allocations for 2014 pension plan assets were 30% for U.S. equities, 16% for non-U.S. equities, 35% for fixed income, 15% for opportunistic and/or alternative investments and 4% for other investments. Target allocations for 2014 PBOP plan assets (except for Represented VEBA which is 85% for fixed income, 10% for opportunistic/private equities, and 5% global equities) are 41% for U.S. equities, 17% for non-U.S. equities, 34% for fixed income, 7% for opportunistic and/or alternative investments, and 1% for other investments. Edison International employs multiple investment management firms. Investment managers within each asset class cover a range of investment styles and approaches. Risk is managed through diversification among multiple asset classes, managers, styles and securities. Plan, asset class and individual manager performance is measured against targets. Edison International also monitors the stability of its investment managers' organizations.

Allowable investment types include:


•	United States Equities: Common and preferred stocks of large, medium, and small companies which are predominantly United States-based.


•	Non-United States Equities: Equity securities issued by companies domiciled outside the United States and in depository receipts which represent ownership of securities of non-United States companies.


•	Fixed Income: Fixed income securities issued or guaranteed by the United States government, non-United States governments, government agencies and instrumentalities including municipal bonds, mortgage backed securities and corporate debt obligations. A portion of the fixed income positions may be held in debt securities that are below investment grade.

Opportunistic, Alternative and Other Investments:


•	Opportunistic: Investments in short to intermediate term market opportunities. Investments may have fixed income and/or equity characteristics and may be either liquid or illiquid.


•	Alternative: Limited partnerships that invest in non-publicly traded entities.


•	Other: Investments diversified among multiple asset classes such as global equity, fixed income currency and commodities markets. Investments are made in liquid instruments within and across markets. The investment returns are expected to approximate the plans' expected investment returns.

Asset class portfolio weights are permitted to range within plus or minus 3%. Where approved by the fiduciary investment committee, futures contracts are used for portfolio rebalancing and to reallocate portfolio cash positions. Where authorized, a few of the plans' investment managers employ limited use of derivatives, including futures contracts, options, options on futures and interest rate swaps in place of direct investment in securities to gain efficient exposure to markets. Derivatives are not used to leverage the plans or any portfolios.

Determination of the Expected Long-Term Rate of Return on Assets

The overall expected long-term rate of return on assets assumption is based on the long-term target asset allocation for plan assets and capital markets return forecasts for asset classes employed. A portion of the PBOP trust asset returns are subject to taxation, so the expected long-term rate of return for these assets is determined on an after-tax basis.

Capital Markets Return Forecasts

SCE's capital markets return forecast methodologies primarily use a combination of historical market data, current market conditions, proprietary forecasting expertise, complex models to develop asset class return forecasts and a building block approach. The forecasts are developed using variables such as real risk-free interest, inflation, and asset class specific risk premiums. For equities, the risk premium is based on an assumed average equity risk premium of 5% over cash. The forecasted return on private equity and opportunistic investments are estimated at a 2% premium above public equity, reflecting a premium for higher volatility and lower liquidity. For fixed income, the risk premium is based off of a comprehensive modeling of credit spreads.

Fair Value of Plan Assets

The PBOP Plan and the Southern California Edison Company Retirement Plan Trust (Master Trust) assets include investments in equity securities, U.S. treasury securities, other fixed-income securities, common/collective funds, mutual funds, other investment entities, foreign exchange and interest rate contracts, and partnership/joint ventures. Equity securities, U.S. treasury securities, mutual and money market funds are classified as Level 1 as fair value is determined by observable, unadjusted quoted market prices in active or highly liquid and transparent markets. Common/collective funds are valued at the net asset value ("NAV") of shares held. Although common/collective funds are determined by observable prices, they are classified as Level 2 because they trade in markets that are less active and transparent. The fair value of the underlying investments in equity mutual funds and equity common/collective funds are based upon stock-exchange prices. The fair value of the underlying investments in fixed-income common/collective funds, fixed-income mutual funds and other fixed income securities including municipal bonds are based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids, offers and relevant credit information. Foreign exchange and interest rate contracts are classified as Level 2 because the values are based on observable prices but are not traded on an exchange. Futures contracts trade on an exchange and therefore are classified as Level 1. The partnerships classified as Level 2 can be readily redeemed at NAV and the underlying investments are liquid, publicly traded fixed-income securities which have observable prices. The remaining partnerships/joint ventures are classified as Level 3 because fair value is determined primarily based upon management estimates of future cash flows. Other investment entities are valued similarly to common/collective funds and are therefore classified as Level 2. The Level 1 registered investment companies are either mutual or money market funds. The remaining funds in this category are readily redeemable at NAV and classified as Level 2 and are discussed further at footnote 7 to the pension plan master trust investments table below.

Edison International reviews the process/procedures of both the pricing services and the trustee to gain an understanding of the inputs/assumptions and valuation techniques used to price each asset type/class. The trustee and Edison International's validation procedures for pension and PBOP equity and fixed income securities are the same as the nuclear decommissioning trusts. For further discussion see Note 4. The values of Level 1 mutual and money market funds are publicly quoted. The trustees obtain the values of common/collective and other investment funds from the fund managers. The values of partnerships are based on partnership valuation statements updated for cash flows. SCE's investment managers corroborate the trustee fair values.

Pension Plan

The following table sets forth the Master Trust investments for Edison International and SCE that were accounted for at fair value as of December 31, 2014 by asset class and level within the fair value hierarchy:



(in millions)	Level 1		Level 2		Level 3		Total
U.S. government and agency securities¹	$	140	$	329	$	—	$	469
Corporate stocks²	716		14		—		730
Corporate bonds³	—		801		—		801
Common/collective funds⁴	—		524		—		524
Partnerships/joint ventures⁵	—		110		289		399
Other investment entities⁶	—		278		—		278
Registered investment companies⁷	113		30		—		143
Interest-bearing cash	10		—		—		10
Other	5		100		—		105
Total	$	984	$	2,186	$	289	$	3,459
Receivables and payables, net							(5		)
Net plan assets available for benefits							$	3,454
SCE's share of net plan assets							$	3,217

The following table sets forth the Master Trust investments that were accounted for at fair value as of December 31, 2013 by asset class and level within the fair value hierarchy:



(in millions)	Level 1		Level 2		Level 3		Total
U.S. government and agency securities¹	$	195	$	471	$	—	$	666
Corporate stocks²	653		—		—		653
Corporate bonds³	—		553		—		553
Common/collective funds⁴	—		546		—		546
Partnerships/joint ventures⁵	—		148		390		538
Other investment entities⁶	—		282		—		282
Registered investment companies⁷	112		81		—		193
Interest-bearing cash	12		—		—		12
Other	6		109		—		115
Total	$	978	$	2,190	$	390	$	3,558
Receivables and payables, net							(81		)
Net plan assets available for benefits							$	3,477
SCE's share of net plan assets							$	3,236


¹	Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.


²	Corporate stocks are diversified. For 2014 and 2013, respectively, performance is primarily benchmarked against the Russell Indexes (59% and 51%) and Morgan Stanley Capital International (MSCI) index (41% and 49%).


³	Corporate bonds are diversified. At December 31, 2014 and 2013, respectively, this category includes $102 million and $78 million for collateralized mortgage obligations and other asset backed securities of which $15 million and $15 million are below investment grade.

⁴

At December 31, 2014 and 2013, respectively, the common/collective assets were invested in equity index funds that seek to track performance of the Standard and Poor's (S&P 500) Index (32% and 27%), Russell 1000 indexes (18% and 28%) and the MSCI Europe, Australasia and Far East (EAFE) Index (20% and 15%). A non-index U.S. equity fund representing 27% and 23% of this category for 2014 and 2013, respectively, is actively managed. Another fund representing 3% and 6% of this category for 2014 and 2013, respectively, is a global asset allocation fund.

⁵

Partnerships/joint venture Level 2 investments consist primarily of a partnership which invests in publicly traded fixed income securities, primarily from the banking and finance industry and U.S. government agencies. At December 31, 2014 and 2013, respectively, approximately 55% and 64% of the Level 3 partnerships are invested in (1) asset backed securities, including distressed mortgages and (2) commercial and residential loans and debt and equity of banks. The remaining Level 3 partnerships are invested in small private equity and venture capital funds. Investment strategies for these funds include branded consumer products, early stage technology, California geographic focus, and diversified US and non-US fund-of-funds.


⁶	Other investment entities were primarily invested in (1) emerging market equity securities, (2) a hedge fund that invests through liquid instruments in a global diversified portfolio of equity, fixed income, interest rate, foreign currency and commodities markets, and (3) domestic mortgage backed securities.


⁷	Level 1 of registered investment companies primarily consisted of a global equity mutual fund which seeks to outperform the MSCI World Total Return Index. Level 2 primarily consisted of a short-term bond fund.

At December 31, 2014 and 2013, approximately 65% and 67%, respectively, of the publicly traded equity investments, including equities in the common/collective funds, were located in the United States.

The following table sets forth a summary of changes in the fair value of Edison International's and SCE's Level 3 investments:



(in millions)	2014			2013
Fair value, net at beginning of period	$	390		$	414
Actual return on plan assets:
Relating to assets still held at end of period	114			61
Relating to assets sold during the period	(44		)	10
Purchases	13			45
Dispositions	(184		)	(140		)
Transfers in and/or out of Level 3	—			—
Fair value, net at end of period	$	289		$	390

Postretirement Benefits Other than Pensions

The following table sets forth the VEBA Trust assets for SCE that were accounted for at fair value as of December 31, 2014 by asset class and level within the fair value hierarchy:



(in millions)	Level 1		Level 2		Level 3		Total
Common/collective funds¹	$	—	$	431	$	—	$	431
Corporate stocks²	250		—		—		250
Corporate notes and bonds³	—		883		—		883
Partnerships⁴	—		19		105		124
U.S. government and agency securities⁵	207		36		—		243
Registered investment companies⁶	64		5		—		69
Interest bearing cash	29		—		—		29
Other⁷	5		125		—		130
Total	$	555	$	1,499	$	105	$	2,159
Receivables and payables, net							(73		)
Combined net plan assets available for benefits							$	2,086

The following table sets forth the VEBA Trust assets for SCE that were accounted for at fair value as of December 31, 2013 by asset class and level within the fair value hierarchy:



(in millions)	Level 1		Level 2		Level 3		Total
Common/collective funds¹	$	—	$	863	$	—	$	863
Corporate stocks²	451		—		—		451
Corporate notes and bonds³	—		250		—		250
Partnerships⁴	—		20		164		184
U.S. government and agency securities⁵	118		36		—		154
Registered investment companies⁶	52		5		—		57
Interest bearing cash	19		—		—		19
Other⁷	7		78		—		85
Total	$	647	$	1,252	$	164	$	2,063
Receivables and payables, net							2
Combined net plan assets available for benefits							$	2,065

At December 31, 2014 and 2013, respectively, 38% and 60% of the common/collective assets are invested in a large cap index fund which seeks to track performance of the Russell 1000 index. 41% and 23% of the assets in this category are in index funds which seek to track performance in the MSCI Europe, Australasia and Far East (EAFE) Index. 4% and 6% of this category are invested in a privately managed bond fund and 17% and 7% in a fund which invests in equity securities the fund manager believes are undervalued.


²	Corporate stock performance is primarily benchmarked against the Russell Indexes (47% and 50%) and the MSCI All Country World (ACWI) index (53% and 50%) for 2014 and 2013, respectively.


³	Corporate notes and bonds are diversified and include approximately $31 million and $29 million for commercial collateralized mortgage obligations and other asset backed securities at December 31, 2014 and 2013, respectively.


⁴	At December 31, 2014 and 2013, respectively, 50% and 78% of the Level 3 partnerships category is invested in (1) asset backed securities including distressed mortgages, (2) distressed companies and (3) commercial and residential loans and debt and equity of banks.


⁵	Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association.


⁶	Level 1 registered investment companies consist of an investment grade corporate bond mutual fund and a money market fund.


⁷	Other includes $111 million and $76 million of municipal securities at December 31, 2014 and 2013, respectively.

At December 31, 2014 and 2013, approximately 71% and 65%, respectively, of the publicly traded equity investments, including equities in the common/collective funds, were located in the United States.

The following table sets forth a summary of changes in the fair value of PBOP Level 3 investments:



(in millions)	2014			2013
Fair value, net at beginning of period	$	164		$	166
Actual return on plan assets
Relating to assets still held at end of period	18			24
Relating to assets sold during the period	(1		)	5
Purchases	9			23
Dispositions	(85		)	(54		)
Transfers in and/or out of Level 3	—			—
Fair value, net at end of period	$	105		$	164

Stock-Based Compensation

Edison International maintains a shareholder approved incentive plan (the 2007 Performance Incentive Plan) that includes stock-based compensation. The maximum number of shares of Edison International's common stock authorized to be issued or transferred pursuant to awards under the 2007 Performance Incentive Plan, as amended, is 49.5 million shares, plus the number of any shares subject to awards issued under Edison International's prior plans and outstanding as of April 26, 2007, which expire, cancel or terminate without being exercised or shares being issued ("carry-over shares"). As of December 31, 2014, Edison International had approximately 20 million shares remaining for future issuance under its stock-based compensation plans.

The following table summarizes total expense and tax benefits (expense) associated with stock based compensation:



	Edison International							SCE
	Years ended December 31,
(in millions)	2014		2013		2012			2014		2013		2012
Stock-based compensation expense¹:
Stock options	$	16	$	15	$	18		$	8	$	11	$	10
Performance shares	16		4		7			8		2		4
Restricted stock units	7		7		9			4		4		5
Other	1		1		1			—		—		—
Total stock-based compensation expense	$	40	$	27	$	35		$	20	$	17	$	19
Income tax benefits related to stock compensation expense	$	16	$	11	$	14		$	8	$	7	$	8
Excess tax benefits (expense)²	15		5		(6		)	20		2		(13		)


¹	Reflected in "Operation and maintenance" on Edison International's and SCE's consolidated statements of income.


²	Reflected in "Settlements of stock-based compensation, net" in the financing section of Edison International's and SCE's consolidated statements of cash flows and in "Common stock" in Edison International's consolidated balance sheets and "Additional paid-in capital" in SCE's consolidated balance sheets.

Stock Options

Under various plans, Edison International has granted stock options at exercise prices equal to the average of the high and low price and, beginning in 2007, at the closing price at the grant date. Edison International may grant stock options and other awards related to or with a value derived from its common stock to directors and certain employees. Options generally expire 10 years after the grant date and vest over a period of four years of continuous service, with expense recognized evenly over the requisite service period, except for awards granted to retirement-eligible participants, as discussed in "Stock-Based Compensation" in Note 1. Additionally, Edison International will substitute cash awards to the extent necessary to pay tax withholding or any government levies.

The fair value for each option granted was determined as of the grant date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires various assumptions noted in the following table:



	Years ended December 31,
	2014	2013	2012
Expected terms (in years)	6.0	6.2	6.9
Risk-free interest rate	1.8% – 2.1%	1.0% – 2.1%	1.1% – 1.7%
Expected dividend yield	2.4% – 2.7%	2.7% – 3.1%	2.8% – 3.1%
Weighted-average expected dividend yield	2.7%	2.8%	3.0%
Expected volatility	17.8% – 19.1%	17.7% – 18.6%	17.4% – 18.3%
Weighted-average volatility	18.9%	17.7%	18.3%

The expected term represents the period of time for which the options are expected to be outstanding and is primarily based on historical exercise and post-vesting cancellation experience and stock price history. The risk-free interest rate for periods within the contractual life of the option is based on a zero coupon U.S. Treasury STRIPS (separate trading of registered interest and principal of securities) whose maturity equals the option's expected term on the measurement date. Expected volatility is based on the historical volatility of Edison International's common stock for the length of the option's expected term for 2014. The volatility period used was 72 months, 74 months and 83 months at December 31, 2014, 2013 and 2012, respectively.

The following is a summary of the status of Edison International's stock options:



			Weighted-Average
	Stock options		Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Edison International:
Outstanding at December 31, 2013	17,226,845		$	40.22
Granted	2,070,819		52.67
Expired	(20,841	)	49.95
Forfeited	(278,134	)	46.20
Exercised	(5,379,954	)	38.03
Outstanding at December 31, 2014	13,618,735		42.84		5.81
Vested and expected to vest at December 31, 2014	13,216,820		42.68		5.75	$	301
Exercisable at December 31, 2014	7,989,189		39.43		4.32	$	208
SCE:
Outstanding at December 31, 2013	9,045,998		$	40.28
Granted	1,194,281		53.21
Expired	(20,841	)	49.95
Forfeited	(205,286	)	47.27
Exercised	(3,210,425	)	38.54
Transfers, net	(801,567	)	37.95
Outstanding at December 31, 2014	6,002,160		43.82		6.29
Vested and expected to vest at December 31, 2014	5,762,299		43.63		6.22	$	126
Exercisable at December 31, 2014	2,997,941		39.61		4.63	$	78

At December 31, 2014, total unrecognized compensation cost related to stock options and the weighted-average period the cost is expected to be recognized are as follows:



(in millions)	Edison International		SCE
Unrecognized compensation cost, net of expected forfeitures	$	13	$	9
Weighted-average period (in years)	2.3		2.4

Supplemental Data on Stock Options



	Edison International						SCE
	Years ended December 31,
(in millions, except per award amounts)	2014		2013		2012		2014		2013		2012
Stock options:
Weighted average grant date fair value per option granted	$	7.26	$	5.40	$	5.22	$	7.34	$	5.38	$	5.22
Fair value of options vested	17		17		17		9		10		10
Cash used to purchase shares to settle options	300		199		169		181		130		96
Cash from participants to exercise stock options	205		140		101		125		92		59
Value of options exercised	95		59		68		56		38		37
Tax benefits from options exercised	39		24		27		23		15		15

Performance Shares

A target number of contingent performance shares were awarded to executives in March 2014, 2013 and 2012 and vest at the end of a three year period for each grant. The vesting of the grants is dependent upon market and financial performance conditions and service conditions as defined in the grants for each of the years. The number of performance shares earned from each year's grants could range from zero to twice the target number (plus additional units credited as dividend equivalents). Performance shares earned are settled half in cash and half in common stock; however, Edison International has discretion under certain of the awards to pay the half subject to cash settlement in common stock. The portion of performance shares that can be settled in cash is classified as a share-based liability award. The fair value of these shares is remeasured at each reporting period and the related compensation expense is adjusted. The portion of performance shares payable in common stock is classified as a share-based equity award. Compensation expense related to these shares is based on the grant-date fair value, which for each share is determined as the closing price of Edison International common stock on the grant date; however, with respect to the portion of the performance shares payable in common stock that is subject to the financial performance condition defined in the grants, the number of performance shares expected to be earned is subject to revision and updated at each reporting period, with a related adjustment of compensation expense. Performance shares expense is recognized ratably over the requisite service period based on the fair values determined (subject to the adjustments discussed above), except for awards granted to retirement-eligible participants.

The fair value of market condition performance shares is determined using a Monte Carlo simulation valuation model.

The following is a summary of the status of Edison International's nonvested performance shares:



	Equity Awards				Liability Awards
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Fair Value
Edison International:
Nonvested at December 31, 2013	156,697		$	51.17	156,304		$	51.72
Granted	61,599		61.10		61,448
Forfeited	(4,672	)	54.32		(4,664	)
Vested¹	(85,324	)	51.42		(85,113	)
Nonvested at December 31, 2014	128,300		55.66		127,975		92.92
SCE:
Nonvested at December 31, 2013	90,661		$	51.19	90,357		$	51.22
Granted	35,516		61.85		35,390
Forfeited	(4,668	)	54.37		(4,664	)
Vested¹	(44,293	)	51.47		(44,150	)
Affiliate transfers, net	(5,419	)	51.44		(5,413	)
Nonvested at December 31, 2014	71,797		56.06		71,520		92.33


¹	Relates to performance shares that will be paid in 2015 as performance targets were met at December 31, 2014.

Restricted Stock Units

Restricted stock units were awarded to Edison International's and SCE's executives in March 2014, 2013 and 2012 and vest and become payable in January 2017, 2016 and 2015, respectively. Each restricted stock unit awarded includes a dividend equivalent feature and is a contractual right to receive one share of Edison International common stock, if vesting requirements are satisfied. The vesting of Edison International's restricted stock units is dependent upon continuous service through the end of the three-calendar-year-plus-two-days vesting period.

The following is a summary of the status of Edison International's nonvested restricted stock units:



	Edison International				SCE
	Restricted Stock Units		Weighted-Average Grant Date Fair Value		Restricted Stock Units		Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2013	539,689		$	42.70	292,839		$	42.98
Granted	142,704		52.67		82,114		53.17
Forfeited	(10,513	)	48.21		(10,509	)	48.23
Vested	(238,561	)	38.83		(115,772	)	38.98
Affiliate transfers, net	—		—		(17,308	)	44.23
Nonvested at December 31, 2014	433,319		47.89		231,364		48.26

The fair value for each restricted stock unit awarded is determined as the closing price of Edison International common stock on the grant date.

Workforce Reductions

In 2012, SCE commenced a broad-based effort to reduce its costs and to improve its operational and service excellence. As part of this effort, SCE made a series of workforce reductions. In addition, in June 2013, SCE announced plans to permanently retire San Onofre, which resulted in additional workforce reductions. During 2014, SCE increased the estimated impact for workforce reductions related to transferring certain information technology activities to third parties and revised its estimate of remaining educational benefits expected to be incurred under the severance program. Through December 31, 2014, SCE's share of estimated cash severance for all of these workforce reductions totaled $215 million. The following table provides a summary of changes in the accrued severance liability associated with these reductions:



(in millions)
Balance at January 1, 2014	$	54
Additions	3
Payments	(22		)
Balance at December 31, 2014	$	35

The liability presented in the table above is reflected in "Other current liabilities" on the consolidated balance sheets. The severance costs are included in "Operation and maintenance" on the consolidated income statements.