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Compensation and Benefit Plans
 12 Months Ended
Dec. 31, 2015
Compensation and Retirement Disclosure [Abstract]  
Compensation and Benefit Plans
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,
2015
$
73

 
$
72

2014
71

 
70

2013
76

 
76


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 $123 million and $94 million, respectively, for the year ending December 31, 2016. 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 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 1).
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)
2015
 
2014
 
2015
 
2014
Change in projected benefit obligation
 
 
 
 
 
 
 
Projected benefit obligation at beginning of year
$
4,517

 
$
4,178

 
$
3,999

 
$
3,721

Service cost
142

 
133

 
133

 
124

Interest cost
170

 
181

 
150

 
159

Actuarial (gain) loss
(149
)
 
469

 
(143
)
 
386

Curtailment gain
—

 
(5
)
 
—

 
—

Benefits paid
(305
)
 
(449
)
 
(261
)
 
(391
)
Other
(1
)
 
10

 
—

 
—

Projected benefit obligation at end of year
$
4,374

 
$
4,517

 
$
3,878

 
$
3,999

Change in plan assets
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
$
3,454

 
$
3,477

 
$
3,217

 
$
3,236

Actual return on plan assets
30

 
257

 
27

 
240

Employer contributions
119

 
169

 
97

 
132

Benefits paid
(305
)
 
(449
)
 
(261
)
 
(391
)
Fair value of plan assets at end of year
$
3,298

 
$
3,454

 
$
3,080

 
$
3,217

Funded status at end of year
$
(1,076
)
 
$
(1,063
)
 
$
(798
)
 
$
(782
)
Amounts recognized in the consolidated balance sheets consist of1:
 
 
 
 
 
 
 
Current liabilities
$
(27
)
 
$
(27
)
 
$
(4
)
 
$
(5
)
Long-term liabilities
(1,049
)
 
(1,036
)
 
(794
)
 
(777
)
 
$
(1,076
)
 
$
(1,063
)
 
$
(798
)
 
$
(782
)
Amounts recognized in accumulated other comprehensive loss consist of:
 
 
 
 
 
 
 
Net loss1
$
96

 
$
102

 
$
27

 
$
31

Amounts recognized as a regulatory asset:
 
 
 
 
 
 
 
Prior service cost
$
15

 
$
20

 
$
15

 
$
20

Net loss
660

 
640

 
660

 
640

 
$
675

 
$
660

 
$
675

 
$
660

Total not yet recognized as expense
$
771

 
$
762

 
$
702

 
$
691

Accumulated benefit obligation at end of year
$
4,200

 
$
4,356

 
$
3,744

 
$
3,881

Pension plans with an accumulated benefit obligation in excess of plan assets:
 
 
 
 
 
 
 
Projected benefit obligation
$
4,374

 
$
4,517

 
$
3,878

 
$
3,999

Accumulated benefit obligation
4,200

 
4,356

 
3,744

 
3,881

Fair value of plan assets
3,298

 
3,454

 
3,080

 
3,217

Weighted-average assumptions used to determine obligations at end of year:
 
 
 
 
 
 
 
Discount rate
4.18
%
 
3.85
%
 
4.18
%
 
3.85
%
Rate of compensation increase
4.00
%
 
4.00
%
 
4.00
%
 
4.00
%
1 
The SCE liability excludes a long-term payable due to Edison International Parent of $123 million and $121 million at December 31, 2015 and 2014, respectively, related to certain SCE postretirement benefit obligations transferred to Edison International Parent. SCE's accumulated other comprehensive loss of $27 million and $31 million at December 31, 2015 and 2014, respectively, excludes net loss of $18 million and $22 million related to these benefits.

In 2015 and 2014, Edison International and SCE adopted new mortality tables that the Society of Actuaries released in October each year that reflect changes in life expectancy. At December 31, 2015 and 2014, this adoption resulted in a change in Edison International's pension plans' projected benefit obligation of $(34) million and $214 million, respectively, including $(31) million and $199 million, respectively, for SCE.
Pension expense components for continuing operations are:
 
Edison International
 
SCE
 
Years ended December 31,
(in millions)
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Service cost
$
142

 
$
133

 
$
162

 
$
139

 
$
128

 
$
159

Interest cost
170

 
181

 
170

 
155

 
164

 
167

Expected return on plan assets
(233
)
 
(229
)
 
(222
)
 
(217
)
 
(213
)
 
(222
)
Settlement costs1
—

 
45

 
87

 
—

 
42

 
85

Curtailment gain
—

 
(4
)
 
—

 
—

 
—

 
—

Amortization of prior service cost
5

 
5

 
5

 
5

 
5

 
5

Amortization of net loss2
40

 
12

 
39

 
35

 
7

 
35

Expense under accounting standards
124

 
143

 
241

 
117

 
133

 
229

Regulatory adjustment (deferred)
(6
)
 
8

 
(53
)
 
(6
)
 
8

 
(53
)
Total expense recognized
$
118

 
$
151

 
$
188

 
$
111

 
$
141

 
$
176


1 
Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International was zero for the year ended December 31, 2015 and $3 million for the year ended December 31, 2014.
2 
Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International and SCE was $14 million and $8 million, respectively, for the year ended December 31, 2015. The amount reclassified for Edison International and SCE was $9 million and $4 million, respectively, for the year ended December 31, 2014.
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. 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.
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)
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Net loss (gain)
$
7

 
$
85

 
$
(33
)
 
$
(9
)
 
$
37

 
$
(24
)
Amortization of net loss and other
(15
)
 
(13
)
 
(13
)
 
(9
)
 
(4
)
 
(7
)
Total recognized in other comprehensive loss
$
(8
)
 
$
72

 
$
(46
)
 
$
(18
)
 
$
33

 
$
(31
)
Total recognized in expense and other comprehensive loss
$
110

 
$
223

 
$
142

 
$
93

 
$
174

 
$
145


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 2016 for continuing operations are as follows:
(in millions)
Edison International
 
SCE
Unrecognized net loss to be amortized1
$
36

 
$
32

Unrecognized prior service cost to be amortized
4

 
4


1 
The amount of net loss expected to be reclassified from other comprehensive loss for Edison International's continuing operations and SCE is $11 million and $6 million, respectively.
Edison International and SCE used the following weighted-average assumptions to determine pension expense for continuing operations:
 
Years ended December 31,
 
2015
 
2014
 
2013
Discount rate
3.85
%
 
4.50
%
 
4.13
%
Rate of compensation increase
4.00
%
 
4.00
%
 
4.50
%
Expected long-term return on plan assets
7.00
%
 
7.00
%
 
7.00
%

The following benefit payments, which reflect expected future service, are expected to be paid:
 
Edison International
 
SCE
(in millions)
Years ended December 31,
2016
$
311

 
$
265

2017
310

 
270

2018
314

 
280

2019
327

 
286

2020
327

 
290

2021 – 2025
1,590

 
1,447


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 $33 million for the year ended December 31, 2016. 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)
2015
 
2014
 
2015
 
2014
Change in benefit obligation
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
2,784

 
$
2,220

 
$
2,775

 
$
2,211

Service cost
46

 
40

 
46

 
40

Interest cost
102

 
117

 
102

 
117

Special termination benefits
(2
)
 
3

 
(2
)
 
3

Actuarial (gain) loss
(500
)
 
582

 
(500
)
 
582

Plan participants' contributions
20

 
19

 
20

 
19

Benefits paid
(100
)
 
(197
)
 
(100
)
 
(197
)
Benefit obligation at end of year
$
2,350

 
$
2,784

 
$
2,341

 
$
2,775

Change in plan assets
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
$
2,086

 
$
2,065

 
$
2,086

 
$
2,065

Actual return on assets
6

 
180

 
6

 
180

Employer contributions
24

 
19

 
24

 
19

Plan participants' contributions
20

 
19

 
20

 
19

Benefits paid
(100
)
 
(197
)
 
(100
)
 
(197
)
Fair value of plan assets at end of year
$
2,036

 
$
2,086

 
$
2,036

 
$
2,086

Funded status at end of year
$
(314
)
 
$
(698
)
 
$
(305
)
 
$
(689
)
Amounts recognized in the consolidated balance sheets consist of:
 
 
 
 
 
 
 
Current liabilities
$
(15
)
 
$
(15
)
 
$
(15
)
 
$
(15
)
Long-term liabilities
(299
)
 
(683
)
 
(290
)
 
(674
)
 
$
(314
)
 
$
(698
)
 
$
(305
)
 
$
(689
)
Amounts recognized in accumulated other comprehensive loss consist of:
 
 
 
 
 
 
 
    Net loss
$
4

 
$
4

 
$
—

 
$
—

Amounts recognized as a regulatory (liability) asset:
 
 
 
 
 
 
 
Prior service credit
$
(9
)
 
$
(19
)
 
$
(9
)
 
$
(19
)
Net loss
183

 
577

 
183

 
577

 
$
174

 
$
558

 
$
174

 
$
558

Total not yet recognized as expense
$
178

 
$
562

 
$
174

 
$
558

Weighted-average assumptions used to determine obligations at end of year:
 
 
 
 
 
 
 
Discount rate
4.55
%
 
4.16
%
 
4.55
%
 
4.16
%
Assumed health care cost trend rates:
 
 
 
 
 
 
 
Rate assumed for following year
7.50
%
 
7.75
%
 
7.50
%
 
7.75
%
Ultimate rate
5.00
%
 
5.00
%
 
5.00
%
 
5.00
%
Year ultimate rate reached
2022

 
2021

 
2022

 
2021


During 2015, the PBOP plan had actuarial gains of $500 million primarily related to $300 million in experience gains, $140 million of income from an increase in the discount rate (from 4.16% at December 31, 2014 to 4.55% as of December 31, 2015) due to higher interest rates, and the adoption of new mortality tables, as discussed below.
In 2015 and 2014, Edison International and SCE adopted new mortality tables that the Society of Actuaries released in October each year that reflect changes in life expectancy. At December 31, 2015 and 2014, this adoption resulted in a change in Edison International's PBOP plans' accumulated postretirement benefit obligation of $(62) million and $308 million, respectively, including $(61) million and $307 million, respectively, for SCE.
PBOP expense components for continuing operations are:
 
Edison International
 
SCE
 
Years ended December 31,
(in millions)
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Service cost
$
46

 
$
40

 
$
49

 
$
46

 
$
40

 
$
48

Interest cost
102

 
117

 
98

 
102

 
117

 
97

Expected return on plan assets
(116
)
 
(108
)
 
(114
)
 
(116
)
 
(108
)
 
(114
)
Special termination benefits1
1

 
3

 
11

 
1

 
3

 
11

Amortization of prior service credit
(12
)
 
(36
)
 
(36
)
 
(12
)
 
(35
)
 
(35
)
Amortization of net loss
3

 
6

 
24

 
2

 
5

 
24

Total expense
$
24

 
$
22

 
$
32

 
$
23

 
$
22

 
$
31


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 2016 for continuing operations are as follows:
    
Edison International
 
SCE
Unrecognized prior service credit to be amortized
$
(3
)
 
$
(3
)

Edison International and SCE used the following weighted-average assumptions to determine PBOP expense for continuing operations:
 
Years ended December 31,
 
2015
 
2014
 
2013
Discount rate
4.16
%
 
5.00
%
 
4.25
%
Expected long-term return on plan assets
5.50
%
 
5.50
%
 
6.70
%
Assumed health care cost trend rates:
 
 
 
 
 
Current year
7.75
%
 
7.75
%
 
8.50
%
Ultimate rate
5.00
%
 
5.00
%
 
5.00
%
Year ultimate rate reached
2021

 
2020

 
2020


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, 2015
$
251

 
$
(206
)
 
$
250

 
$
(205
)
Effect on annual aggregate service and interest costs
12

 
(9
)
 
12

 
(9
)

The following benefit payments are expected to be paid:
 
Edison International
 
SCE
(in millions)
Years ended December 31,
2016
$
101

 
$
101

2017
106

 
106

2018
111

 
110

2019
115

 
114

2020
119

 
118

2021 – 2025
649

 
646


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 2015 pension plan assets were 29% for U.S. equities, 17% for non-U.S. equities, 35% for fixed income, 15% for opportunistic and/or alternative investments and 4% for other investments. Target allocations for 2015 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 classes and individual manager performances are 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, 2015 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
$
127

 
$
298

 
$
—

 
$
425

Corporate stocks2
720

 
16

 
—

 
736

Corporate bonds3
—

 
755

 
—

 
755

Common/collective funds4
—

 
640

 
—

 
640

Partnerships/joint ventures5
—

 
111

 
214

 
325

Other investment entities6
—

 
263

 
—

 
263

Registered investment companies7
117

 
4

 
—

 
121

Interest-bearing cash
6

 
—

 
—

 
6

Other
1

 
96

 
—

 
97

Total
$
971

 
$
2,183

 
$
214

 
$
3,368

Receivables and payables, net
 

 
 

 
 

 
(70
)
Net plan assets available for benefits
 

 
 

 
 

 
$
3,298

SCE's share of net plan assets
 
 
 
 
 
 
$
3,080

The following table sets forth the Master Trust investments 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

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 both 2015 and 2014, performance for actively managed separate accounts is primarily benchmarked against the Russell Indexes (59%) and Morgan Stanley Capital International (MSCI) index (41%).
3 
Corporate bonds are diversified. At December 31, 2015 and 2014, respectively, this category includes $123 million and $102 million for collateralized mortgage obligations and other asset backed securities of which $25 million and $15 million are below investment grade.
4 
At December 31, 2015 and 2014, 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 (46% and 32%), Russell 1000 indexes (14% and 18%) and the MSCI Europe, Australasia and Far East (EAFE) Index (16% and 20%). A non-index U.S. equity fund representing 22% and 27% of this category for 2015 and 2014, respectively, is actively managed.
5 
Partnerships/joint venture Level 2 investments consist primarily of a partnership which invests in publicly traded fixed income securities. At December 31, 2015 and 2014, respectively, 22% and 55% 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. At December 31, 2015 and 2014, respectively, 78% and 45% of the Level 3 partnerships are invested in private equity funds with investment strategies that include branded consumer products, clean technology and California geographic focus companies.
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, 2015 and 2014, approximately 63% 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 Edison International's and SCE's Level 3 investments:
(in millions)
2015
 
2014
Fair value, net at beginning of period
$
289

 
$
390

Actual return on plan assets:
 
 
 
Relating to assets still held at end of period
47

 
114

Relating to assets sold during the period
(17
)
 
(44
)
Purchases
38

 
13

Dispositions
(143
)
 
(184
)
Transfers in and/or out of Level 3
—

 
—

Fair value, net at end of period
$
214

 
$
289


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, 2015 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
 
Level 2
 
Level 3
 
Total
Common/collective funds1
$
—

 
$
424

 
$
—

 
$
424

Corporate stocks2
222

 
—

 
—

 
222

Corporate notes and bonds3
—

 
867

 
—

 
867

Partnerships4
—

 
20

 
73

 
93

U.S. government and agency securities5
200

 
42

 
—

 
242

Registered investment companies6
60

 
3

 
—

 
63

Interest bearing cash
31

 
—

 
—

 
31

Other7
5

 
113

 
—

 
118

Total
$
518

 
$
1,469

 
$
73

 
$
2,060

Receivables and payables, net
 

 
 

 
 

 
(24
)
Combined net plan assets available for benefits
 

 
 

 
 

 
$
2,036

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

1 
At both December 31, 2015 and 2014, 38% of the common/collective assets are invested in a large cap index fund which seeks to track performance of the Russell 1000 index. 41% of the assets in this category are in index funds which seek to track performance in the MSCI All Country World Index Investable Market Index and MSCI Europe, Australasia and Far East (EAFE) Index. 17% in a non-index U.S. equity fund which is actively managed.
2 
Corporate stock performance for actively managed separate accounts is primarily benchmarked against the Russell Indexes (47%) and the MSCI All Country World Index (53%) for both 2015 and 2014.
3 
Corporate notes and bonds are diversified and include approximately $27 million and $31 million for commercial collateralized mortgage obligations and other asset backed securities at December 31, 2015 and 2014, respectively.
4 
At December 31, 2015 and 2014, respectively, 29% and 50% 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. At December 31, 2015 and 2014, respectively, 71% and 50% of the Level 3 partnerships are invested in private equity and venture capital funds. Investment strategies for these funds include branded consumer products, clean and information technology and healthcare.
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 a money market fund.
7 
Other includes $97 million and $111 million of municipal securities at December 31, 2015 and 2014, respectively.
At both December 31, 2015 and 2014, approximately 71% 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)
2015
 
2014
Fair value, net at beginning of period
$
105

 
$
164

Actual return on plan assets
 
 
 
Relating to assets still held at end of period
(6
)
 
18

Relating to assets sold during the period
15

 
(1
)
Purchases
7

 
9

Dispositions
(47
)
 
(85
)
Transfers in and/or out of Level 3
—

 
—

Fair value, net at end of period
$
74

 
$
105


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, 2015, Edison International had approximately 18 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)
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Stock-based compensation expense1:
 
 
 
 
 
 
 
 
 
 
 
   Stock options
$
14

 
$
16

 
$
15

 
$
8

 
$
8

 
$
11

   Performance shares
7

 
16

 
4

 
4

 
8

 
2

   Restricted stock units
7

 
7

 
7

 
4

 
4

 
4

   Other
1

 
1

 
1

 
—

 
—

 
—

Total stock-based compensation expense
$
29

 
$
40

 
$
27

 
$
16

 
$
20

 
$
17

Income tax benefits related to stock compensation expense
$
12

 
$
16

 
$
11

 
$
7

 
$
8

 
$
7

Excess tax benefits2
15

 
15

 
5

 
23

 
20

 
2

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 closing price at the grant date. Prior to 2007, average of the high and low price was used. 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,
 
2015
 
2014
 
2013
Expected terms (in years)
5.9
 
6.0
 
6.2
Risk-free interest rate
1.6% – 2.1%
 
1.8% – 2.1%
 
1.0% – 2.1%
Expected dividend yield
2.6% – 3.2%
 
2.4% – 2.7%
 
2.7% – 3.1%
Weighted-average expected dividend yield
2.6%
 
2.7%
 
2.8%
Expected volatility
16.4% – 17.0%
 
17.8% – 19.1%
 
17.7% – 18.6%
Weighted-average volatility
16.5%
 
18.9%
 
17.7%

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 2015. The volatility period used was 71 months, 72 months and 74 months at December 31, 2015, 2014 and 2013, 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, 2014
13,618,735

 
$
42.84

 
 
 
 

Granted
2,030,342

 
63.57

 
 
 
 

Expired
—

 
—

 
 
 
 

Forfeited
(171,107
)
 
51.87

 
 
 
 

Exercised
(2,611,373
)
 
43.14

 
 
 
 

Outstanding at December 31, 2015
12,866,597

 
45.93

 
5.84
 
 

Vested and expected to vest at December 31, 2015
12,762,577

 
45.81

 
5.82
 
$
180

Exercisable at December 31, 2015
8,928,807

 
40.79

 
4.73
 
$
165

SCE:
 
 
 
 
 
 
 
Outstanding at December 31, 2014
6,002,160

 
$
43.82

 
 
 
 

Granted
1,099,566

 
63.52

 
 
 
 

Expired
—

 
—

 
 
 
 

Forfeited
(109,719
)
 
53.45

 
 
 
 

Exercised
(1,085,438
)
 
41.74

 
 
 
 

Transfers, net
(66,512
)
 
40.88

 
 
 
 
Outstanding at December 31, 2015
5,840,057

 
47.77

 
6.20
 
 

Vested and expected to vest at December 31, 2015
5,771,064

 
47.62

 
6.17
 
$
72

Exercisable at December 31, 2015
3,751,272

 
42.17

 
4.99
 
$
64


At December 31, 2015, 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)
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Stock options:
 
 
 
 
 
 
 
 
 
 
 
Weighted average grant date fair value per option granted
$
7.54

 
$
7.26

 
$
5.40

 
$
7.53

 
$
7.34

 
$
5.38

Fair value of options vested
20

 
17

 
17

 
11

 
9

 
10

Cash used to purchase shares to settle options
170

 
300

 
199

 
69

 
181

 
130

Cash from participants to exercise stock options
113

 
205

 
140

 
45

 
125

 
92

Value of options exercised
57

 
95

 
59

 
24

 
56

 
38

Tax benefits from options exercised
23

 
39

 
24

 
10

 
23

 
15


Performance Shares
A target number of contingent performance shares were awarded to executives in March 2015, 2014 and 2013 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 awarded in 2014 and 2013 that are earned are settled half in cash and half in common stock, while performance shares awarded in 2015 that are earned are settled solely in cash. 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, 2014
128,300

 
$
55.66

 
127,975

 
$
92.92

Granted
—

 
—

 
109,154

 
 

Forfeited
(4,035
)
 
55.93

 
(5,183
)
 
 
Vested1
(66,486
)
 
50.85

 
(66,317
)
 
 

Nonvested at December 31, 2015
57,779

 
61.18

 
165,629

 
68.44

SCE:
 
 
 
 
 
 
 
Nonvested at December 31, 2014
71,797

 
$
56.06

 
71,520

 
$
92.33

Granted
—

 
—

 
59,213

 
 

Forfeited
(1,717
)
 
56.89

 
(2,867
)
 
 
Vested1
(36,891
)
 
50.82

 
(36,748
)
 
 

Affiliate transfers, net
(726
)
 
54.81

 
(725
)
 
 
Nonvested at December 31, 2015
32,463

 
62.01

 
90,393

 
68.64


1 
Relates to performance shares that will be paid in 2016 as performance targets were met at December 31, 2015.
Restricted Stock Units
Restricted stock units were awarded to Edison International's and SCE's executives in March 2015, 2014 and 2013 and vest and become payable on January 2, 2018, January 3, 2017 and December 31, 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 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, 2014
433,319

 
$
47.89

 
231,364

 
$
48.26

Granted
120,469

 
63.57

 
65,237

 
63.52

Forfeited
(10,210
)
 
52.09

 
(5,108
)
 
54.04

Vested
(295,435
)
 
45.74

 
(155,046
)
 
45.98

Affiliate transfers, net
—

 
—

 
(2,072
)
 
45.35

Nonvested at December 31, 2015
248,143

 
57.89

 
134,375

 
58.13


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
SCE continues to focus on productivity improvements to mitigate rate pressure from its capital program, optimize its cost structure and improve operational efficiency, which is expected to result in further workforce reductions through 2016. During the year ended December 31, 2015, SCE increased the estimated impact for approved workforce reductions. The following table provides a summary of changes in the accrued severance liability associated with these reductions:

(in millions)
 
 
Balance at January 1, 2015
 
$
35

Additions
 
26

Payments
 
(39
)
Balance at December 31, 2015
 
$
22


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 statements of income.