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Pension, OPEB and Savings Plans | 12 Months Ended
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Dec. 31, 2017
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] |
Pension, OPEB and Savings Plans | Pension, Other Postretirement Benefits (OPEB) and Savings Plans PSEG sponsors 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, PSE&G and Power 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 underfunded 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, GAAP 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 and prior service costs which had not been expensed. For PSE&G, the Regulatory Asset is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations. 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. As of December 31, 2016, PSEG merged its three qualified defined benefit pension plans (excluding Servco plans) into one plan, thereby also merging all of the pension plans’ assets. As a result, the total net periodic benefit costs, net of amounts capitalized, decreased by approximately $48 million for the year ended December 31, 2017, as compared to the 2017 amounts that would have been recognized had the plans not been merged. This is due to the amortization period for gains and losses for the merged plan resulting in lower amortization than that of the individual plans. No changes were made to the benefit formulas, vesting provisions, or to the employees covered by the plans. Amounts for Servco are not included in any of the following pension and OPEB benefit information for PSEG and its affiliates but rather are separately disclosed later in this note. 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, 2017 and 2016. 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 |
|  |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
|  |  | Millions |
| Change in Benefit Obligation |  |  |  |  |  |  |  |  |
| Benefit Obligation at Beginning of Year (A) |  | $ | 5,772 |  |  | $ | 5,522 |  |  | $ | 1,754 |  |  | $ | 1,612 |  |
| Service Cost |  | 114 |  |  | 109 |  |  | 17 |  |  | 17 |  |
| Interest Cost |  | 204 |  |  | 202 |  |  | 63 |  |  | 59 |  |
| Actuarial (Gain) Loss |  | 564 |  |  | 219 |  |  | 199 |  |  | 127 |  |
| Gross Benefits Paid |  | (295 | ) |  | (282 | ) |  | (57 | ) |  | (57 | ) |
| Plan Amendments |  | — |  |  | 2 |  |  | — |  |  | (4 | ) |
| Benefit Obligation at End of Year (A) |  | $ | 6,359 |  |  | $ | 5,772 |  |  | $ | 1,976 |  |  | $ | 1,754 |  |
| Change in Plan Assets |  |  |  |  |  |  |  |  |
| Fair Value of Assets at Beginning of Year |  | $ | 5,193 |  |  | $ | 5,039 |  |  | $ | 420 |  |  | $ | 374 |  |
| Actual Return on Plan Assets |  | 903 |  |  | 403 |  |  | 77 |  |  | 32 |  |
| Employer Contributions |  | 11 |  |  | 33 |  |  | 71 |  |  | 71 |  |
| Gross Benefits Paid |  | (295 | ) |  | (282 | ) |  | (57 | ) |  | (57 | ) |
| Fair Value of Assets at End of Year |  | $ | 5,812 |  |  | $ | 5,193 |  |  | $ | 511 |  |  | $ | 420 |  |
| Funded Status |  |  |  |  |  |  |  |  |
| Funded Status (Plan Assets less Benefit Obligation) |  | $ | (547 | ) |  | $ | (579 | ) |  | $ | (1,465 | ) |  | $ | (1,334 | ) |
| Additional Amounts Recognized in the Consolidated Balance Sheets |  |  |  |  |  |  |  |  |
| Current Accrued Benefit Cost |  | (10 | ) |  | (11 | ) |  | (10 | ) |  | (10 | ) |
| Noncurrent Accrued Benefit Cost |  | (537 | ) |  | (568 | ) |  | (1,455 | ) |  | (1,324 | ) |
| Amounts Recognized |  | $ | (547 | ) |  | $ | (579 | ) |  | $ | (1,465 | ) |  | $ | (1,334 | ) |
| Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (B) |  |  |
| Prior Service Cost |  | $ | (46 | ) |  | $ | (63 | ) |  | $ | (3 | ) |  | $ | (14 | ) |
| Net Actuarial Loss |  | 1,721 |  |  | 1,763 |  |  | 629 |  |  | 523 |  |
| Total |  | $ | 1,675 |  |  | $ | 1,700 |  |  | $ | 626 |  |  | $ | 509 |  |
(A) | Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for other benefits. The vested benefit obligation is the actuarial present value of the vested benefits to which the employee is currently entitled but based on the employee’s expected date of separation of retirement.
(B) | Includes $683 million ($406 million, after-tax) and $679 million ($398 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2017 and 2016, respectively. Also includes Regulatory Assets of $1,485 million and Deferred Assets of $133 million as of December 31, 2017 and Regulatory Assets of $1,396 million and Deferred Assets of $134 million as of December 31, 2016.
The pension benefits table above provides information relating to the funded status of the qualified, nonqualified pension and OPEB plans on an aggregate basis. As of December 31, 2017, PSEG had funded approximately 91% of its projected benefit obligation. This percentage does not include $231 million of assets in the Rabbi Trust as of December 31, 2017 which were used partially to fund the nonqualified pension plans. As of December 31, 2017, the nonqualified pension plans included in the projected benefit obligation in the above table were $167 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 $6.1 billion as of December 31, 2017 and $5.6 billion as of December 31, 2016. The following table provides the components of net periodic benefit cost for the years ended December 31, 2017, 2016 and 2015.
|  |  | Pension Benefits Years Ended December 31, |  | Other Benefits Years Ended December 31, |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
|  |  | Millions |
| Components of Net Periodic Benefit Cost |  |  |  |  |  |  |  |  |  |  |  |  |
| Service Cost |  | $ | 114 |  |  | $ | 109 |  |  | $ | 123 |  |  | $ | 17 |  |  | $ | 17 |  |  | 22 |  |
| Interest Cost |  | 204 |  |  | 202 |  |  | 234 |  |  | 63 |  |  | 59 |  |  | 67 |  |
| Expected Return on Plan Assets |  | (394 | ) |  | (394 | ) |  | (414 | ) |  | (34 | ) |  | (31 | ) |  | (31 | ) |
| Amortization of Net |  |  |  |  |  |  |  |  |  |  |  |  |
| Prior Service Credit |  | (18 | ) |  | (19 | ) |  | (19 | ) |  | (11 | ) |  | (14 | ) |  | (14 | ) |
| Actuarial Loss |  | 97 |  |  | 158 |  |  | 150 |  |  | 51 |  |  | 40 |  |  | 43 |  |
| Net Periodic Benefit Cost |  | $ | 3 |  |  | $ | 56 |  |  | $ | 74 |  |  | $ | 86 |  |  | $ | 71 |  |  | $ | 87 |  |
Pension costs and OPEB costs for PSEG, PSE&G and Power are detailed as follows:
|  |  | Pension Benefits Years Ended December 31, |  | Other Benefits Years Ended December 31, |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
|  |  | Millions |
| PSE&G |  | $ | (4 | ) |  | $ | 29 |  |  | $ | 40 |  |  | $ | 54 |  |  | $ | 43 |  |  | $ | 55 |  |
| Power |  | 1 |  |  | 16 |  |  | 21 |  |  | 27 |  |  | 23 |  |  | 27 |  |
| Other |  | 6 |  |  | 11 |  |  | 13 |  |  | 5 |  |  | 5 |  |  | 5 |  |
| Total Benefit Cost |  | $ | 3 |  |  | $ | 56 |  |  | $ | 74 |  |  | $ | 86 |  |  | $ | 71 |  |  | $ | 87 |  |
The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:
|  |  | Pension |  | OPEB |
|  |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
|  |  | Millions |
| Net Actuarial (Gain) Loss in Current Period |  | $ | 55 |  |  | $ | 211 |  |  | $ | 156 |  |  | $ | 125 |  |
| Amortization of Net Actuarial Gain (Loss) |  | (97 | ) |  | (158 | ) |  | (50 | ) |  | (40 | ) |
| Prior Service Cost (Credit) in current period |  | — |  |  | 1 |  |  | — |  |  | (3 | ) |
| Amortization of Prior Service Credit |  | 18 |  |  | 19 |  |  | 11 |  |  | 14 |  |
| Total |  | $ | (24 | ) |  | $ | 73 |  |  | $ | 117 |  |  | $ | 96 |  |
Amounts that are expected to be amortized from Accumulated Other Comprehensive Loss, Regulatory Assets and Deferred Assets into Net Periodic Benefit Cost in 2018 are as follows:
|  |  | Pension Benefits |  | Other Benefits |
|  |  | 2018 |  | 2018 |
|  |  | Millions |
| Actuarial Loss |  | $ | 85 |  |  | $ | 64 |  |
| Prior Service Credit |  | $ | (18 | ) |  | $ | (1 | ) |
The following assumptions were used to determine the benefit obligations and net periodic benefit costs:
|  |  | Pension Benefits |  | Other Benefits |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
| Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31 |  |  |
| Discount Rate |  | 3.73 | % |  | 4.29 | % |  | 4.54 | % |  | 3.76 | % |  | 4.37 | % |  | 4.58 | % |
| Rate of Compensation Increase |  | 3.90 | % |  | 3.61 | % |  | 3.61 | % |  | 3.90 | % |  | 3.61 | % |  | 3.61 | % |
| Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31 |  |  |
| Discount Rate |  | 4.29 | % |  | 4.54 | % |  | 4.20 | % |  | 4.37 | % |  | 4.58 | % |  | 4.21 | % |
| Service Cost Interest Rate |  | 4.53 | % |  | 4.81 | % |  | 4.20 | % |  | 4.64 | % |  | 4.87 | % |  | 4.21 | % |
| Interest Cost Interest Rate |  | 3.63 | % |  | 3.75 | % |  | 4.20 | % |  | 3.69 | % |  | 3.76 | % |  | 4.21 | % |
| Expected Return on Plan Assets |  | 7.80 | % |  | 8.00 | % |  | 8.00 | % |  | 7.80 | % |  | 8.00 | % |  | 8.00 | % |
| Rate of Compensation Increase |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |
| Assumed Health Care Cost Trend Rates as of December 31 |  |  |  |  |  |  |  |  |
| Health Care Costs |  |  |  |  |  |  |  |  |  |  |  |  |
| Immediate Rate |  |  |  |  |  |  |  | 7.93 | % |  | 7.55 | % |  | 7.75 | % |
| Ultimate Rate |  |  |  |  |  |  |  | 4.75 | % |  | 4.75 | % |  | 4.75 | % |
| Year Ultimate Rate Reached |  |  |  |  |  |  |  | 2026 |  |  | 2025 |  |  | 2025 |  |
|  |  |  |  |  |  |  |  | Millions |
| Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Total of Service Cost and Interest Cost |  |  |  |  |  |  |  | $ | 13 |  |  | $ | 11 |  |  | $ | 12 |  |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | 240 |  |  | $ | 191 |  |  | $ | 194 |  |
| Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Total of Service Cost and Interest Cost |  |  |  |  |  |  |  | $ | (10 | ) |  | $ | (9 | ) |  | $ | (10 | ) |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | (198 | ) |  | $ | (160 | ) |  | $ | (160 | ) |
Plan Assets The investments of pension 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 the 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, 2017, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 92% and 8%, respectively. The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2017 and 2016, including the fair value measurements and the levels of inputs used in determining those fair values.
|  |  | Recurring Fair Value Measurements as of December 31, 2017 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Cash Equivalents (A) |  | $ | 133 |  |  | $ | 117 |  |  | $ | 16 |  |  | $ | — |  |
| Equity Securities |  |  |  |  |  |  |  |  |  |
| Common Stock (B) |  | 1,275 |  |  | 1,275 |  |  | — |  |  | — |  |
| Commingled (C) |  | 1,401 |  |  | 1,218 |  |  | 183 |  |  | — |  |
| Preferred Stock (B) |  | 6 |  |  | 6 |  |  | — |  |  | — |  |
| Debt Securities (D) |  |  |  |  |  |  |  |  |  |
| U.S. Treasury |  | 571 |  |  | — |  |  | 571 |  |  | — |  |
| Government—Other |  | 272 |  |  | — |  |  | 272 |  |  | — |  |
| Corporate |  | 963 |  |  | — |  |  | 963 |  |  | — |  |
| Subtotal Fair Value |  | $ | 4,621 |  |  | $ | 2,616 |  |  | $ | 2,005 |  |  | $ | — |  |
| Measured at net asset value practical expedient |  |  |  |  |  |  |  |  |
| Commingled—Equities (E) |  | 1,675 |  |  |  |  |  |  |  |
| Private Equity (F) |  | 14 |  |  |  |  |  |  |  |
| Total Fair Value (G) |  | $ | 6,310 |  |  |  |  |  |  |  |  |  |  |
|  |  | Recurring Fair Value Measurements as of December 31, 2016 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Cash Equivalents (A) |  | $ | 107 |  |  | $ | 105 |  |  | $ | 2 |  |  | $ | — |  |
| Equity Securities |  |  |  |  |  |  |  |  |  |
| Common Stock (B) |  | 944 |  |  | 944 |  |  | — |  |  | — |  |
| Commingled (C) |  | 1,387 |  |  | 1,247 |  |  | 140 |  |  | — |  |
| Preferred Stock (B) |  | 1 |  |  | 1 |  |  | — |  |  | — |  |
| Debt Securities (D) |  |  |  |  |  |  |  |  |  |
| U.S. Treasury |  | 441 |  |  | — |  |  | 441 |  |  | — |  |
| Government—Other |  | 263 |  |  | — |  |  | 263 |  |  | — |  |
| Corporate |  | 836 |  |  | — |  |  | 836 |  |  | — |  |
| Subtotal Fair Value |  | $ | 3,979 |  |  | $ | 2,297 |  |  | $ | 1,682 |  |  | $ | — |  |
| Measured at net asset value practical expedient |  |  |  |  |  |  |  |  |
| Commingled—Equities (E) |  | 1,604 |  |  |  |  |  |  |  |
| Private Equity (F) |  | 16 |  |  |  |  |  |  |  |
| Total Fair Value (G) |  | $ | 5,599 |  |  |  |  |  |  |  |  |  |  |
(A) | The Collective Investment Fund publishes a daily net asset value (NAV) which participants may use for daily redemptions without restrictions (Level 1). Certain temporary investments are valued using inputs such as time-to-maturity, coupon rate, quality rating and current yield (Level 2).
(B) | Common stocks and preferred stocks are measured using observable data in active markets and considered Level 1.
(C) | Commingled Funds that allow daily redemption at their daily published NAV without restrictions are classified as Level 1. Commingled Funds that publish daily NAV but with certain near term redemption restrictions which prevent redemption at the published daily NAV are classified as Level 2.
(D) | Debt securities include mainly investment grade corporate and municipal bonds, US Treasury obligations and Federal Agency asset-backed securities with a wide range of maturities. These investments are valued using an evaluated pricing approach that varies by asset class and reflects observable market information such as the most recent exchange price or quoted bid for similar securities. Market-based standard inputs typically include benchmark yields, reported trades, broker/dealer quotes and issuer spreads or the most recent quoted for similar securities which are a Level 2 measure.
(E) | In 2016, as part of the implementation of the accounting guidance on investments measured at fair value using NAV as a practical expedient, certain commingled equity funds have been removed from the fair value hierarchy as they are measured at fair value using the NAV per share (or its equivalent) practical expedient. These funds do not meet the definition of readily determinable fair value due to limitations in published NAV (last business day of the month) and include certain redemption restrictions ranging from five to fifteen days advance notice prior to redemption days and limitations on withdrawals over 25% of the total fund. The objectives of these funds are mainly tracking the S&P Index or achieving long-term growth through investment in foreign equity securities and the MSCI Emerging Markets Index.
(F) | Private equity investments primarily include various limited partnerships that invest in either operating companies through acquisitions or developing a portfolio of non-US distressed investments to maximize total return on capital. These investments are valued at NAV (or its equivalent) on an annual basis and have significant redemption restrictions preventing redemption until fund liquidation and limited ability to sell these investments. Fund liquidation is not expected to occur for several more years. These investments have been removed from the fair value hierarchy in accordance with the guidance on NAV practical expedient.
(G) | Excludes net receivable of $13 million and $14 million at December 31, 2017 and 2016, respectively, which consists of interest, dividends and receivables and payables related to pending securities sales and purchases.
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 |  | 2017 |  | 2016 |
| Equity Securities |  | 69 | % |  | 70 | % |
| Debt Securities |  | 29 |  |  | 28 |  |
| 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. PSEG’s latest asset/liability study indicates 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 7.8% for 2017 and will be 7.8% for 2018. 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. Plan Contributions PSEG has no planned contributions to its pension plans in 2018. PSEG plans to make discretionary contributions of $14 million into its OPEB plan during 2018. 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 |
| 2018 |  |  | $ | 337 |  |  | $ | 88 |  |
| 2019 |  |  | 331 |  |  | 92 |  |
| 2020 |  |  | 341 |  |  | 96 |  |
| 2021 |  |  | 352 |  |  | 101 |  |
| 2022 |  |  | 364 |  |  | 105 |  |
| 2023-2027 |  |  | 1,954 |  |  | 560 |  |
| Total |  |  | $ | 3,679 |  |  | $ | 1,042 |  |
401(k) Plans PSEG sponsors two 401(k) plans, which are Employee Retirement Income Security Act (ERISA) 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, not to exceed the IRS maximums, including any catch-up contributions for those employees age 50 and above. 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, PSE&G and Power are detailed as follows:
|  |  | Thrift Plan and Savings Plan |
|  |  | Years Ended December 31, |
|  |  | 2017 |  | 2016 |  | 2015 |
|  |  | Millions |
| PSE&G |  | $ | 25 |  |  | $ | 24 |  |  | $ | 22 |  |
| Power |  | 11 |  |  | 12 |  |  | 12 |  |
| Other |  | 5 |  |  | 5 |  |  | 5 |  |
| Total Employer Matching Contributions |  | $ | 41 |  |  | $ | 41 |  |  | $ | 39 |  |
Servco Pension and OPEB At the direction of LIPA, effective January 1, 2014, Servco established 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 system manager for LIPA. 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 benefit plans cover all employees of Servco for current service. Under the OSA, all of these and any future employee benefit costs are to be funded by LIPA. See Note 4. Variable Interest Entity. These obligations, as well as the offsetting long-term receivable, are separately presented on the Consolidated Balance Sheet of PSEG. The following table provides a roll-forward of the changes in Servco’s benefit obligation and the fair value of its plan assets during the years ended December 31, 2017 and 2016. 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 |
|  |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
|  |  |  |  | Millions |
| Change in Benefit Obligation |  |  |  |  |  |  |  |  |
| Benefit Obligation at Beginning of Year |  | $ | 262 |  |  | $ | 211 |  |  | $ | 452 |  |  | $ | 375 |  |
| Service Cost |  | 27 |  |  | 24 |  |  | 15 |  |  | 12 |  |
| Interest Cost |  | 11 |  |  | 9 |  |  | 19 |  |  | 17 |  |
| Actuarial (Gain) Loss |  | 22 |  |  | 14 |  |  | 60 |  |  | 50 |  |
| Gross Benefits Paid |  | (2 | ) |  | (1 | ) |  | (4 | ) |  | (2 | ) |
| Plan Amendments |  | — |  |  | 5 |  |  | — |  |  | — |  |
| Benefit Obligation at End of Year (A) |  | $ | 320 |  |  | $ | 262 |  |  | $ | 542 |  |  | $ | 452 |  |
| Change in Plan Assets |  |  |  |  |  |  |  |  |
| Fair Value of Assets at Beginning of Year |  | $ | 134 |  |  | $ | 97 |  |  | $ | — |  |  | $ | — |  |
| Actual Return on Plan Assets |  | 24 |  |  | 10 |  |  | — |  |  | — |  |
| Employer Contributions |  | 35 |  |  | 28 |  |  | 4 |  |  | 2 |  |
| Gross Benefits Paid |  | (2 | ) |  | (1 | ) |  | (4 | ) |  | (2 | ) |
| Fair Value of Assets at End of Year |  | $ | 191 |  |  | $ | 134 |  |  | $ | — |  |  | $ | — |  |
| Funded Status |  |  |  |  |  |  |  |  |
| Funded Status (Plan Assets less Benefit Obligation) |  | $ | (129 | ) |  | $ | (128 | ) |  | $ | (542 | ) |  | $ | (452 | ) |
| Additional Amounts Recognized in the Consolidated Balance Sheets |  |  |  |  |  |  |  |  |
| Accrued Pension Costs of Servco |  | $ | (129 | ) |  | $ | (128 | ) |  | N/A |  |  | N/A |  |
| OPEB Costs of Servco |  | N/A |  |  | N/A |  |  | (542 | ) |  | (452 | ) |
| Amounts Recognized (B) |  | $ | (129 | ) |  | $ | (128 | ) |  | $ | (542 | ) |  | $ | (452 | ) |
(A) | Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for other benefits. The vested benefit obligation is the actuarial present value of the vested benefits to which the employee is currently entitled but based on the employee’s expected date of separation of retirement.
(B) | Amounts equal to the accrued pension and OPEB costs of Servco are offset in Long-Term Receivable of VIE on PSEG’s Consolidated Balance Sheets.
Pension and OPEB costs of Servco are accounted for according to the OSA. Servco recognizes expenses for contributions to its pension plan trusts and for OPEB payments made to retirees. Operating Revenues are recognized for the reimbursement of these costs. The pension-related revenues and costs for 2017, 2016 and 2015 were $35 million, $28 million and $30 million, respectively. Servco has contributed its entire planned contribution amount to its pension plan trusts during 2017. The OPEB-related revenues earned and costs incurred were $4 million and $2 million in 2017 and 2016, respectively, and immaterial for 2015. The following assumptions were used to determine the benefit obligations of Servco:
|  |  | Pension Benefits |  | Other Benefits |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
| Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31 |  |  |
| Discount Rate |  | 3.90 | % |  | 4.61 | % |  | 4.92 | % |  | 3.96 | % |  | 4.71 | % |  | 4.97 | % |
| Rate of Compensation Increase |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |
| Assumed Health Care Cost Trend Rates as of December 31 |  |  |  |  |  |  |  |  |
| Health Care Costs |  |  |  |  |  |  |  |  |  |  |  |  |
| Immediate Rate |  |  |  |  |  |  |  | 7.69 | % |  | 7.55 | % |  | 7.55 | % |
| Ultimate Rate |  |  |  |  |  |  |  | 4.75 | % |  | 4.75 | % |  | 4.75 | % |
| Year Ultimate Rate Reached |  |  |  |  |  |  |  | 2026 |  |  | 2025 |  |  | 2025 |  |
|  |  |  |  |  |  |  |  | Millions |
| Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | 131 |  |  | $ | 97 |  |  | $ | 75 |  |
| Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | (99 | ) |  | $ | (75 | ) |  | $ | (60 | ) |
Plan Assets All the investments of Servco’s pension 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 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. The Actuary 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 Actuary to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. The following tables present information about Servco’s investments measured at fair value on a recurring basis as of December 31, 2017 and 2016, including the fair value measurements and the levels of inputs used in determining those fair values.
|  |  | Recurring Fair Value Measurements as of December 31, 2017 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Commingled Equities (A) |  | $ | 137 |  |  | $ | — |  |  | $ | 137 |  |  | $ | — |  |
| Commingled Bonds (A) |  | 54 |  |  | — |  |  | 54 |  |  | — |  |
| Total |  | $ | 191 |  |  | $ | — |  |  | $ | 191 |  |  | $ | — |  |
|  |  | Recurring Fair Value Measurements as of December 31, 2016 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Commingled Equities (A) |  | $ | 96 |  |  | $ | — |  |  | $ | 96 |  |  | $ | — |  |
| Commingled Bonds (A) |  | 38 |  |  | — |  |  | 38 |  |  | — |  |
| Total |  | $ | 134 |  |  | $ | — |  |  | $ | 134 |  |  | $ | — |  |
(A) | Investments in commingled equity and bond funds have a readily determinable fair value as they publish a daily NAV available to investors which is the basis for current transactions and contain certain redemption restrictions requiring advance notice of one to two days for withdrawals (Level 2).
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 of Servco as of the measurement date, December 31:
|  |  | As of December 31, |
| Investments |  | 2017 |  | 2016 |
| Equity Securities |  | 72 | % |  | 71 | % |
| Debt Securities |  | 28 |  |  | 29 |  |
| Total Percentage |  | 100 | % |  | 100 | % |
Servco 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. The results from Servco’s latest asset/liability study indicated that a long-term target asset allocation of 70% equities and 30% fixed income is consistent with the funds’ financial objectives. The expected long-term rate of return on plan assets was 7.6% for 2017 and will be 7.6% for 2018. This expected return was determined based on the study discussed above, including a premium for active management. Plan Contributions Servco plans to contribute $40 million into its pension plan during 2018. Estimated Future Benefit Payments The following pension benefit and postretirement benefit payments are expected to be paid to Servco’s plan participants:
| Year |  |  | Pension Benefits |  | Other Benefits |
|  |  |  | Millions |
| 2018 |  |  | $ | 3 |  |  | $ | 4 |  |
| 2019 |  |  | 4 |  |  | 6 |  |
| 2020 |  |  | 5 |  |  | 8 |  |
| 2021 |  |  | 7 |  |  | 9 |  |
| 2022 |  |  | 9 |  |  | 12 |  |
| 2023-2027 |  |  | 78 |  |  | 87 |  |
| Total |  |  | $ | 106 |  |  | $ | 126 |  |
Servco 401(k) Plans Servco sponsors two 401(k) plans, which are defined contribution retirement plans subject to ERISA. Eligible non-represented employees of Servco participate in the Long Island Electric Utility Servco LLC Incentive Thrift Plan I (Thrift Plan I), and eligible represented employees of Servco participate in the Long Island Electric Utility Servco LLC Incentive Thrift Plan II (Thrift Plan II). Participants in the Plans may contribute up to 50% of their eligible compensation to these plans, not to exceed the IRS maximums, including any Catch-Up Contributions for those employees age 50 and above. Servco does not provide an employer match or core contribution for employees in Thrift Plan II. For employees in Thrift Plan I, Servco matches 50% of such employee contributions up to 8% of eligible compensation and provides core contributions (based on years of service and age) to employees who do not participate in Servco’s Retirement Income Plan. The amounts expensed by Servco for employer matching contributions for the years ended December 31, 2017, 2016 and 2015 were $6 million, $5 million and $4 million, respectively, and pursuant to the OSA, Servco recognizes Operating Revenues for the reimbursement of these costs.
PSE&G [Member] |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] |
Pension, OPEB and Savings Plans | Pension, Other Postretirement Benefits (OPEB) and Savings Plans PSEG sponsors 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, PSE&G and Power 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 underfunded 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, GAAP 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 and prior service costs which had not been expensed. For PSE&G, the Regulatory Asset is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations. 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. As of December 31, 2016, PSEG merged its three qualified defined benefit pension plans (excluding Servco plans) into one plan, thereby also merging all of the pension plans’ assets. As a result, the total net periodic benefit costs, net of amounts capitalized, decreased by approximately $48 million for the year ended December 31, 2017, as compared to the 2017 amounts that would have been recognized had the plans not been merged. This is due to the amortization period for gains and losses for the merged plan resulting in lower amortization than that of the individual plans. No changes were made to the benefit formulas, vesting provisions, or to the employees covered by the plans. Amounts for Servco are not included in any of the following pension and OPEB benefit information for PSEG and its affiliates but rather are separately disclosed later in this note. 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, 2017 and 2016. 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 |
|  |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
|  |  | Millions |
| Change in Benefit Obligation |  |  |  |  |  |  |  |  |
| Benefit Obligation at Beginning of Year (A) |  | $ | 5,772 |  |  | $ | 5,522 |  |  | $ | 1,754 |  |  | $ | 1,612 |  |
| Service Cost |  | 114 |  |  | 109 |  |  | 17 |  |  | 17 |  |
| Interest Cost |  | 204 |  |  | 202 |  |  | 63 |  |  | 59 |  |
| Actuarial (Gain) Loss |  | 564 |  |  | 219 |  |  | 199 |  |  | 127 |  |
| Gross Benefits Paid |  | (295 | ) |  | (282 | ) |  | (57 | ) |  | (57 | ) |
| Plan Amendments |  | — |  |  | 2 |  |  | — |  |  | (4 | ) |
| Benefit Obligation at End of Year (A) |  | $ | 6,359 |  |  | $ | 5,772 |  |  | $ | 1,976 |  |  | $ | 1,754 |  |
| Change in Plan Assets |  |  |  |  |  |  |  |  |
| Fair Value of Assets at Beginning of Year |  | $ | 5,193 |  |  | $ | 5,039 |  |  | $ | 420 |  |  | $ | 374 |  |
| Actual Return on Plan Assets |  | 903 |  |  | 403 |  |  | 77 |  |  | 32 |  |
| Employer Contributions |  | 11 |  |  | 33 |  |  | 71 |  |  | 71 |  |
| Gross Benefits Paid |  | (295 | ) |  | (282 | ) |  | (57 | ) |  | (57 | ) |
| Fair Value of Assets at End of Year |  | $ | 5,812 |  |  | $ | 5,193 |  |  | $ | 511 |  |  | $ | 420 |  |
| Funded Status |  |  |  |  |  |  |  |  |
| Funded Status (Plan Assets less Benefit Obligation) |  | $ | (547 | ) |  | $ | (579 | ) |  | $ | (1,465 | ) |  | $ | (1,334 | ) |
| Additional Amounts Recognized in the Consolidated Balance Sheets |  |  |  |  |  |  |  |  |
| Current Accrued Benefit Cost |  | (10 | ) |  | (11 | ) |  | (10 | ) |  | (10 | ) |
| Noncurrent Accrued Benefit Cost |  | (537 | ) |  | (568 | ) |  | (1,455 | ) |  | (1,324 | ) |
| Amounts Recognized |  | $ | (547 | ) |  | $ | (579 | ) |  | $ | (1,465 | ) |  | $ | (1,334 | ) |
| Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (B) |  |  |
| Prior Service Cost |  | $ | (46 | ) |  | $ | (63 | ) |  | $ | (3 | ) |  | $ | (14 | ) |
| Net Actuarial Loss |  | 1,721 |  |  | 1,763 |  |  | 629 |  |  | 523 |  |
| Total |  | $ | 1,675 |  |  | $ | 1,700 |  |  | $ | 626 |  |  | $ | 509 |  |
(A) | Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for other benefits. The vested benefit obligation is the actuarial present value of the vested benefits to which the employee is currently entitled but based on the employee’s expected date of separation of retirement.
(B) | Includes $683 million ($406 million, after-tax) and $679 million ($398 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2017 and 2016, respectively. Also includes Regulatory Assets of $1,485 million and Deferred Assets of $133 million as of December 31, 2017 and Regulatory Assets of $1,396 million and Deferred Assets of $134 million as of December 31, 2016.
The pension benefits table above provides information relating to the funded status of the qualified, nonqualified pension and OPEB plans on an aggregate basis. As of December 31, 2017, PSEG had funded approximately 91% of its projected benefit obligation. This percentage does not include $231 million of assets in the Rabbi Trust as of December 31, 2017 which were used partially to fund the nonqualified pension plans. As of December 31, 2017, the nonqualified pension plans included in the projected benefit obligation in the above table were $167 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 $6.1 billion as of December 31, 2017 and $5.6 billion as of December 31, 2016. The following table provides the components of net periodic benefit cost for the years ended December 31, 2017, 2016 and 2015.
|  |  | Pension Benefits Years Ended December 31, |  | Other Benefits Years Ended December 31, |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
|  |  | Millions |
| Components of Net Periodic Benefit Cost |  |  |  |  |  |  |  |  |  |  |  |  |
| Service Cost |  | $ | 114 |  |  | $ | 109 |  |  | $ | 123 |  |  | $ | 17 |  |  | $ | 17 |  |  | 22 |  |
| Interest Cost |  | 204 |  |  | 202 |  |  | 234 |  |  | 63 |  |  | 59 |  |  | 67 |  |
| Expected Return on Plan Assets |  | (394 | ) |  | (394 | ) |  | (414 | ) |  | (34 | ) |  | (31 | ) |  | (31 | ) |
| Amortization of Net |  |  |  |  |  |  |  |  |  |  |  |  |
| Prior Service Credit |  | (18 | ) |  | (19 | ) |  | (19 | ) |  | (11 | ) |  | (14 | ) |  | (14 | ) |
| Actuarial Loss |  | 97 |  |  | 158 |  |  | 150 |  |  | 51 |  |  | 40 |  |  | 43 |  |
| Net Periodic Benefit Cost |  | $ | 3 |  |  | $ | 56 |  |  | $ | 74 |  |  | $ | 86 |  |  | $ | 71 |  |  | $ | 87 |  |
Pension costs and OPEB costs for PSEG, PSE&G and Power are detailed as follows:
|  |  | Pension Benefits Years Ended December 31, |  | Other Benefits Years Ended December 31, |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
|  |  | Millions |
| PSE&G |  | $ | (4 | ) |  | $ | 29 |  |  | $ | 40 |  |  | $ | 54 |  |  | $ | 43 |  |  | $ | 55 |  |
| Power |  | 1 |  |  | 16 |  |  | 21 |  |  | 27 |  |  | 23 |  |  | 27 |  |
| Other |  | 6 |  |  | 11 |  |  | 13 |  |  | 5 |  |  | 5 |  |  | 5 |  |
| Total Benefit Cost |  | $ | 3 |  |  | $ | 56 |  |  | $ | 74 |  |  | $ | 86 |  |  | $ | 71 |  |  | $ | 87 |  |
The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:
|  |  | Pension |  | OPEB |
|  |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
|  |  | Millions |
| Net Actuarial (Gain) Loss in Current Period |  | $ | 55 |  |  | $ | 211 |  |  | $ | 156 |  |  | $ | 125 |  |
| Amortization of Net Actuarial Gain (Loss) |  | (97 | ) |  | (158 | ) |  | (50 | ) |  | (40 | ) |
| Prior Service Cost (Credit) in current period |  | — |  |  | 1 |  |  | — |  |  | (3 | ) |
| Amortization of Prior Service Credit |  | 18 |  |  | 19 |  |  | 11 |  |  | 14 |  |
| Total |  | $ | (24 | ) |  | $ | 73 |  |  | $ | 117 |  |  | $ | 96 |  |
Amounts that are expected to be amortized from Accumulated Other Comprehensive Loss, Regulatory Assets and Deferred Assets into Net Periodic Benefit Cost in 2018 are as follows:
|  |  | Pension Benefits |  | Other Benefits |
|  |  | 2018 |  | 2018 |
|  |  | Millions |
| Actuarial Loss |  | $ | 85 |  |  | $ | 64 |  |
| Prior Service Credit |  | $ | (18 | ) |  | $ | (1 | ) |
The following assumptions were used to determine the benefit obligations and net periodic benefit costs:
|  |  | Pension Benefits |  | Other Benefits |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
| Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31 |  |  |
| Discount Rate |  | 3.73 | % |  | 4.29 | % |  | 4.54 | % |  | 3.76 | % |  | 4.37 | % |  | 4.58 | % |
| Rate of Compensation Increase |  | 3.90 | % |  | 3.61 | % |  | 3.61 | % |  | 3.90 | % |  | 3.61 | % |  | 3.61 | % |
| Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31 |  |  |
| Discount Rate |  | 4.29 | % |  | 4.54 | % |  | 4.20 | % |  | 4.37 | % |  | 4.58 | % |  | 4.21 | % |
| Service Cost Interest Rate |  | 4.53 | % |  | 4.81 | % |  | 4.20 | % |  | 4.64 | % |  | 4.87 | % |  | 4.21 | % |
| Interest Cost Interest Rate |  | 3.63 | % |  | 3.75 | % |  | 4.20 | % |  | 3.69 | % |  | 3.76 | % |  | 4.21 | % |
| Expected Return on Plan Assets |  | 7.80 | % |  | 8.00 | % |  | 8.00 | % |  | 7.80 | % |  | 8.00 | % |  | 8.00 | % |
| Rate of Compensation Increase |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |
| Assumed Health Care Cost Trend Rates as of December 31 |  |  |  |  |  |  |  |  |
| Health Care Costs |  |  |  |  |  |  |  |  |  |  |  |  |
| Immediate Rate |  |  |  |  |  |  |  | 7.93 | % |  | 7.55 | % |  | 7.75 | % |
| Ultimate Rate |  |  |  |  |  |  |  | 4.75 | % |  | 4.75 | % |  | 4.75 | % |
| Year Ultimate Rate Reached |  |  |  |  |  |  |  | 2026 |  |  | 2025 |  |  | 2025 |  |
|  |  |  |  |  |  |  |  | Millions |
| Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Total of Service Cost and Interest Cost |  |  |  |  |  |  |  | $ | 13 |  |  | $ | 11 |  |  | $ | 12 |  |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | 240 |  |  | $ | 191 |  |  | $ | 194 |  |
| Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Total of Service Cost and Interest Cost |  |  |  |  |  |  |  | $ | (10 | ) |  | $ | (9 | ) |  | $ | (10 | ) |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | (198 | ) |  | $ | (160 | ) |  | $ | (160 | ) |
Plan Assets The investments of pension 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 the 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, 2017, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 92% and 8%, respectively. The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2017 and 2016, including the fair value measurements and the levels of inputs used in determining those fair values.
|  |  | Recurring Fair Value Measurements as of December 31, 2017 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Cash Equivalents (A) |  | $ | 133 |  |  | $ | 117 |  |  | $ | 16 |  |  | $ | — |  |
| Equity Securities |  |  |  |  |  |  |  |  |  |
| Common Stock (B) |  | 1,275 |  |  | 1,275 |  |  | — |  |  | — |  |
| Commingled (C) |  | 1,401 |  |  | 1,218 |  |  | 183 |  |  | — |  |
| Preferred Stock (B) |  | 6 |  |  | 6 |  |  | — |  |  | — |  |
| Debt Securities (D) |  |  |  |  |  |  |  |  |  |
| U.S. Treasury |  | 571 |  |  | — |  |  | 571 |  |  | — |  |
| Government—Other |  | 272 |  |  | — |  |  | 272 |  |  | — |  |
| Corporate |  | 963 |  |  | — |  |  | 963 |  |  | — |  |
| Subtotal Fair Value |  | $ | 4,621 |  |  | $ | 2,616 |  |  | $ | 2,005 |  |  | $ | — |  |
| Measured at net asset value practical expedient |  |  |  |  |  |  |  |  |
| Commingled—Equities (E) |  | 1,675 |  |  |  |  |  |  |  |
| Private Equity (F) |  | 14 |  |  |  |  |  |  |  |
| Total Fair Value (G) |  | $ | 6,310 |  |  |  |  |  |  |  |  |  |  |
|  |  | Recurring Fair Value Measurements as of December 31, 2016 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Cash Equivalents (A) |  | $ | 107 |  |  | $ | 105 |  |  | $ | 2 |  |  | $ | — |  |
| Equity Securities |  |  |  |  |  |  |  |  |  |
| Common Stock (B) |  | 944 |  |  | 944 |  |  | — |  |  | — |  |
| Commingled (C) |  | 1,387 |  |  | 1,247 |  |  | 140 |  |  | — |  |
| Preferred Stock (B) |  | 1 |  |  | 1 |  |  | — |  |  | — |  |
| Debt Securities (D) |  |  |  |  |  |  |  |  |  |
| U.S. Treasury |  | 441 |  |  | — |  |  | 441 |  |  | — |  |
| Government—Other |  | 263 |  |  | — |  |  | 263 |  |  | — |  |
| Corporate |  | 836 |  |  | — |  |  | 836 |  |  | — |  |
| Subtotal Fair Value |  | $ | 3,979 |  |  | $ | 2,297 |  |  | $ | 1,682 |  |  | $ | — |  |
| Measured at net asset value practical expedient |  |  |  |  |  |  |  |  |
| Commingled—Equities (E) |  | 1,604 |  |  |  |  |  |  |  |
| Private Equity (F) |  | 16 |  |  |  |  |  |  |  |
| Total Fair Value (G) |  | $ | 5,599 |  |  |  |  |  |  |  |  |  |  |
(A) | The Collective Investment Fund publishes a daily net asset value (NAV) which participants may use for daily redemptions without restrictions (Level 1). Certain temporary investments are valued using inputs such as time-to-maturity, coupon rate, quality rating and current yield (Level 2).
(B) | Common stocks and preferred stocks are measured using observable data in active markets and considered Level 1.
(C) | Commingled Funds that allow daily redemption at their daily published NAV without restrictions are classified as Level 1. Commingled Funds that publish daily NAV but with certain near term redemption restrictions which prevent redemption at the published daily NAV are classified as Level 2.
(D) | Debt securities include mainly investment grade corporate and municipal bonds, US Treasury obligations and Federal Agency asset-backed securities with a wide range of maturities. These investments are valued using an evaluated pricing approach that varies by asset class and reflects observable market information such as the most recent exchange price or quoted bid for similar securities. Market-based standard inputs typically include benchmark yields, reported trades, broker/dealer quotes and issuer spreads or the most recent quoted for similar securities which are a Level 2 measure.
(E) | In 2016, as part of the implementation of the accounting guidance on investments measured at fair value using NAV as a practical expedient, certain commingled equity funds have been removed from the fair value hierarchy as they are measured at fair value using the NAV per share (or its equivalent) practical expedient. These funds do not meet the definition of readily determinable fair value due to limitations in published NAV (last business day of the month) and include certain redemption restrictions ranging from five to fifteen days advance notice prior to redemption days and limitations on withdrawals over 25% of the total fund. The objectives of these funds are mainly tracking the S&P Index or achieving long-term growth through investment in foreign equity securities and the MSCI Emerging Markets Index.
(F) | Private equity investments primarily include various limited partnerships that invest in either operating companies through acquisitions or developing a portfolio of non-US distressed investments to maximize total return on capital. These investments are valued at NAV (or its equivalent) on an annual basis and have significant redemption restrictions preventing redemption until fund liquidation and limited ability to sell these investments. Fund liquidation is not expected to occur for several more years. These investments have been removed from the fair value hierarchy in accordance with the guidance on NAV practical expedient.
(G) | Excludes net receivable of $13 million and $14 million at December 31, 2017 and 2016, respectively, which consists of interest, dividends and receivables and payables related to pending securities sales and purchases.
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 |  | 2017 |  | 2016 |
| Equity Securities |  | 69 | % |  | 70 | % |
| Debt Securities |  | 29 |  |  | 28 |  |
| 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. PSEG’s latest asset/liability study indicates 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 7.8% for 2017 and will be 7.8% for 2018. 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. Plan Contributions PSEG has no planned contributions to its pension plans in 2018. PSEG plans to make discretionary contributions of $14 million into its OPEB plan during 2018. 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 |
| 2018 |  |  | $ | 337 |  |  | $ | 88 |  |
| 2019 |  |  | 331 |  |  | 92 |  |
| 2020 |  |  | 341 |  |  | 96 |  |
| 2021 |  |  | 352 |  |  | 101 |  |
| 2022 |  |  | 364 |  |  | 105 |  |
| 2023-2027 |  |  | 1,954 |  |  | 560 |  |
| Total |  |  | $ | 3,679 |  |  | $ | 1,042 |  |
401(k) Plans PSEG sponsors two 401(k) plans, which are Employee Retirement Income Security Act (ERISA) 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, not to exceed the IRS maximums, including any catch-up contributions for those employees age 50 and above. 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, PSE&G and Power are detailed as follows:
|  |  | Thrift Plan and Savings Plan |
|  |  | Years Ended December 31, |
|  |  | 2017 |  | 2016 |  | 2015 |
|  |  | Millions |
| PSE&G |  | $ | 25 |  |  | $ | 24 |  |  | $ | 22 |  |
| Power |  | 11 |  |  | 12 |  |  | 12 |  |
| Other |  | 5 |  |  | 5 |  |  | 5 |  |
| Total Employer Matching Contributions |  | $ | 41 |  |  | $ | 41 |  |  | $ | 39 |  |
Servco Pension and OPEB At the direction of LIPA, effective January 1, 2014, Servco established 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 system manager for LIPA. 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 benefit plans cover all employees of Servco for current service. Under the OSA, all of these and any future employee benefit costs are to be funded by LIPA. See Note 4. Variable Interest Entity. These obligations, as well as the offsetting long-term receivable, are separately presented on the Consolidated Balance Sheet of PSEG. The following table provides a roll-forward of the changes in Servco’s benefit obligation and the fair value of its plan assets during the years ended December 31, 2017 and 2016. 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 |
|  |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
|  |  |  |  | Millions |
| Change in Benefit Obligation |  |  |  |  |  |  |  |  |
| Benefit Obligation at Beginning of Year |  | $ | 262 |  |  | $ | 211 |  |  | $ | 452 |  |  | $ | 375 |  |
| Service Cost |  | 27 |  |  | 24 |  |  | 15 |  |  | 12 |  |
| Interest Cost |  | 11 |  |  | 9 |  |  | 19 |  |  | 17 |  |
| Actuarial (Gain) Loss |  | 22 |  |  | 14 |  |  | 60 |  |  | 50 |  |
| Gross Benefits Paid |  | (2 | ) |  | (1 | ) |  | (4 | ) |  | (2 | ) |
| Plan Amendments |  | — |  |  | 5 |  |  | — |  |  | — |  |
| Benefit Obligation at End of Year (A) |  | $ | 320 |  |  | $ | 262 |  |  | $ | 542 |  |  | $ | 452 |  |
| Change in Plan Assets |  |  |  |  |  |  |  |  |
| Fair Value of Assets at Beginning of Year |  | $ | 134 |  |  | $ | 97 |  |  | $ | — |  |  | $ | — |  |
| Actual Return on Plan Assets |  | 24 |  |  | 10 |  |  | — |  |  | — |  |
| Employer Contributions |  | 35 |  |  | 28 |  |  | 4 |  |  | 2 |  |
| Gross Benefits Paid |  | (2 | ) |  | (1 | ) |  | (4 | ) |  | (2 | ) |
| Fair Value of Assets at End of Year |  | $ | 191 |  |  | $ | 134 |  |  | $ | — |  |  | $ | — |  |
| Funded Status |  |  |  |  |  |  |  |  |
| Funded Status (Plan Assets less Benefit Obligation) |  | $ | (129 | ) |  | $ | (128 | ) |  | $ | (542 | ) |  | $ | (452 | ) |
| Additional Amounts Recognized in the Consolidated Balance Sheets |  |  |  |  |  |  |  |  |
| Accrued Pension Costs of Servco |  | $ | (129 | ) |  | $ | (128 | ) |  | N/A |  |  | N/A |  |
| OPEB Costs of Servco |  | N/A |  |  | N/A |  |  | (542 | ) |  | (452 | ) |
| Amounts Recognized (B) |  | $ | (129 | ) |  | $ | (128 | ) |  | $ | (542 | ) |  | $ | (452 | ) |
(A) | Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for other benefits. The vested benefit obligation is the actuarial present value of the vested benefits to which the employee is currently entitled but based on the employee’s expected date of separation of retirement.
(B) | Amounts equal to the accrued pension and OPEB costs of Servco are offset in Long-Term Receivable of VIE on PSEG’s Consolidated Balance Sheets.
Pension and OPEB costs of Servco are accounted for according to the OSA. Servco recognizes expenses for contributions to its pension plan trusts and for OPEB payments made to retirees. Operating Revenues are recognized for the reimbursement of these costs. The pension-related revenues and costs for 2017, 2016 and 2015 were $35 million, $28 million and $30 million, respectively. Servco has contributed its entire planned contribution amount to its pension plan trusts during 2017. The OPEB-related revenues earned and costs incurred were $4 million and $2 million in 2017 and 2016, respectively, and immaterial for 2015. The following assumptions were used to determine the benefit obligations of Servco:
|  |  | Pension Benefits |  | Other Benefits |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
| Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31 |  |  |
| Discount Rate |  | 3.90 | % |  | 4.61 | % |  | 4.92 | % |  | 3.96 | % |  | 4.71 | % |  | 4.97 | % |
| Rate of Compensation Increase |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |
| Assumed Health Care Cost Trend Rates as of December 31 |  |  |  |  |  |  |  |  |
| Health Care Costs |  |  |  |  |  |  |  |  |  |  |  |  |
| Immediate Rate |  |  |  |  |  |  |  | 7.69 | % |  | 7.55 | % |  | 7.55 | % |
| Ultimate Rate |  |  |  |  |  |  |  | 4.75 | % |  | 4.75 | % |  | 4.75 | % |
| Year Ultimate Rate Reached |  |  |  |  |  |  |  | 2026 |  |  | 2025 |  |  | 2025 |  |
|  |  |  |  |  |  |  |  | Millions |
| Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | 131 |  |  | $ | 97 |  |  | $ | 75 |  |
| Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | (99 | ) |  | $ | (75 | ) |  | $ | (60 | ) |
Plan Assets All the investments of Servco’s pension 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 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. The Actuary 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 Actuary to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. The following tables present information about Servco’s investments measured at fair value on a recurring basis as of December 31, 2017 and 2016, including the fair value measurements and the levels of inputs used in determining those fair values.
|  |  | Recurring Fair Value Measurements as of December 31, 2017 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Commingled Equities (A) |  | $ | 137 |  |  | $ | — |  |  | $ | 137 |  |  | $ | — |  |
| Commingled Bonds (A) |  | 54 |  |  | — |  |  | 54 |  |  | — |  |
| Total |  | $ | 191 |  |  | $ | — |  |  | $ | 191 |  |  | $ | — |  |
|  |  | Recurring Fair Value Measurements as of December 31, 2016 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Commingled Equities (A) |  | $ | 96 |  |  | $ | — |  |  | $ | 96 |  |  | $ | — |  |
| Commingled Bonds (A) |  | 38 |  |  | — |  |  | 38 |  |  | — |  |
| Total |  | $ | 134 |  |  | $ | — |  |  | $ | 134 |  |  | $ | — |  |
(A) | Investments in commingled equity and bond funds have a readily determinable fair value as they publish a daily NAV available to investors which is the basis for current transactions and contain certain redemption restrictions requiring advance notice of one to two days for withdrawals (Level 2).
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 of Servco as of the measurement date, December 31:
|  |  | As of December 31, |
| Investments |  | 2017 |  | 2016 |
| Equity Securities |  | 72 | % |  | 71 | % |
| Debt Securities |  | 28 |  |  | 29 |  |
| Total Percentage |  | 100 | % |  | 100 | % |
Servco 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. The results from Servco’s latest asset/liability study indicated that a long-term target asset allocation of 70% equities and 30% fixed income is consistent with the funds’ financial objectives. The expected long-term rate of return on plan assets was 7.6% for 2017 and will be 7.6% for 2018. This expected return was determined based on the study discussed above, including a premium for active management. Plan Contributions Servco plans to contribute $40 million into its pension plan during 2018. Estimated Future Benefit Payments The following pension benefit and postretirement benefit payments are expected to be paid to Servco’s plan participants:
| Year |  |  | Pension Benefits |  | Other Benefits |
|  |  |  | Millions |
| 2018 |  |  | $ | 3 |  |  | $ | 4 |  |
| 2019 |  |  | 4 |  |  | 6 |  |
| 2020 |  |  | 5 |  |  | 8 |  |
| 2021 |  |  | 7 |  |  | 9 |  |
| 2022 |  |  | 9 |  |  | 12 |  |
| 2023-2027 |  |  | 78 |  |  | 87 |  |
| Total |  |  | $ | 106 |  |  | $ | 126 |  |
Servco 401(k) Plans Servco sponsors two 401(k) plans, which are defined contribution retirement plans subject to ERISA. Eligible non-represented employees of Servco participate in the Long Island Electric Utility Servco LLC Incentive Thrift Plan I (Thrift Plan I), and eligible represented employees of Servco participate in the Long Island Electric Utility Servco LLC Incentive Thrift Plan II (Thrift Plan II). Participants in the Plans may contribute up to 50% of their eligible compensation to these plans, not to exceed the IRS maximums, including any Catch-Up Contributions for those employees age 50 and above. Servco does not provide an employer match or core contribution for employees in Thrift Plan II. For employees in Thrift Plan I, Servco matches 50% of such employee contributions up to 8% of eligible compensation and provides core contributions (based on years of service and age) to employees who do not participate in Servco’s Retirement Income Plan. The amounts expensed by Servco for employer matching contributions for the years ended December 31, 2017, 2016 and 2015 were $6 million, $5 million and $4 million, respectively, and pursuant to the OSA, Servco recognizes Operating Revenues for the reimbursement of these costs.
Power [Member] |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] |
Pension, OPEB and Savings Plans | Pension, Other Postretirement Benefits (OPEB) and Savings Plans PSEG sponsors 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, PSE&G and Power 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 underfunded 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, GAAP 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 and prior service costs which had not been expensed. For PSE&G, the Regulatory Asset is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations. 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. As of December 31, 2016, PSEG merged its three qualified defined benefit pension plans (excluding Servco plans) into one plan, thereby also merging all of the pension plans’ assets. As a result, the total net periodic benefit costs, net of amounts capitalized, decreased by approximately $48 million for the year ended December 31, 2017, as compared to the 2017 amounts that would have been recognized had the plans not been merged. This is due to the amortization period for gains and losses for the merged plan resulting in lower amortization than that of the individual plans. No changes were made to the benefit formulas, vesting provisions, or to the employees covered by the plans. Amounts for Servco are not included in any of the following pension and OPEB benefit information for PSEG and its affiliates but rather are separately disclosed later in this note. 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, 2017 and 2016. 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 |
|  |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
|  |  | Millions |
| Change in Benefit Obligation |  |  |  |  |  |  |  |  |
| Benefit Obligation at Beginning of Year (A) |  | $ | 5,772 |  |  | $ | 5,522 |  |  | $ | 1,754 |  |  | $ | 1,612 |  |
| Service Cost |  | 114 |  |  | 109 |  |  | 17 |  |  | 17 |  |
| Interest Cost |  | 204 |  |  | 202 |  |  | 63 |  |  | 59 |  |
| Actuarial (Gain) Loss |  | 564 |  |  | 219 |  |  | 199 |  |  | 127 |  |
| Gross Benefits Paid |  | (295 | ) |  | (282 | ) |  | (57 | ) |  | (57 | ) |
| Plan Amendments |  | — |  |  | 2 |  |  | — |  |  | (4 | ) |
| Benefit Obligation at End of Year (A) |  | $ | 6,359 |  |  | $ | 5,772 |  |  | $ | 1,976 |  |  | $ | 1,754 |  |
| Change in Plan Assets |  |  |  |  |  |  |  |  |
| Fair Value of Assets at Beginning of Year |  | $ | 5,193 |  |  | $ | 5,039 |  |  | $ | 420 |  |  | $ | 374 |  |
| Actual Return on Plan Assets |  | 903 |  |  | 403 |  |  | 77 |  |  | 32 |  |
| Employer Contributions |  | 11 |  |  | 33 |  |  | 71 |  |  | 71 |  |
| Gross Benefits Paid |  | (295 | ) |  | (282 | ) |  | (57 | ) |  | (57 | ) |
| Fair Value of Assets at End of Year |  | $ | 5,812 |  |  | $ | 5,193 |  |  | $ | 511 |  |  | $ | 420 |  |
| Funded Status |  |  |  |  |  |  |  |  |
| Funded Status (Plan Assets less Benefit Obligation) |  | $ | (547 | ) |  | $ | (579 | ) |  | $ | (1,465 | ) |  | $ | (1,334 | ) |
| Additional Amounts Recognized in the Consolidated Balance Sheets |  |  |  |  |  |  |  |  |
| Current Accrued Benefit Cost |  | (10 | ) |  | (11 | ) |  | (10 | ) |  | (10 | ) |
| Noncurrent Accrued Benefit Cost |  | (537 | ) |  | (568 | ) |  | (1,455 | ) |  | (1,324 | ) |
| Amounts Recognized |  | $ | (547 | ) |  | $ | (579 | ) |  | $ | (1,465 | ) |  | $ | (1,334 | ) |
| Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (B) |  |  |
| Prior Service Cost |  | $ | (46 | ) |  | $ | (63 | ) |  | $ | (3 | ) |  | $ | (14 | ) |
| Net Actuarial Loss |  | 1,721 |  |  | 1,763 |  |  | 629 |  |  | 523 |  |
| Total |  | $ | 1,675 |  |  | $ | 1,700 |  |  | $ | 626 |  |  | $ | 509 |  |
(A) | Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for other benefits. The vested benefit obligation is the actuarial present value of the vested benefits to which the employee is currently entitled but based on the employee’s expected date of separation of retirement.
(B) | Includes $683 million ($406 million, after-tax) and $679 million ($398 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2017 and 2016, respectively. Also includes Regulatory Assets of $1,485 million and Deferred Assets of $133 million as of December 31, 2017 and Regulatory Assets of $1,396 million and Deferred Assets of $134 million as of December 31, 2016.
The pension benefits table above provides information relating to the funded status of the qualified, nonqualified pension and OPEB plans on an aggregate basis. As of December 31, 2017, PSEG had funded approximately 91% of its projected benefit obligation. This percentage does not include $231 million of assets in the Rabbi Trust as of December 31, 2017 which were used partially to fund the nonqualified pension plans. As of December 31, 2017, the nonqualified pension plans included in the projected benefit obligation in the above table were $167 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 $6.1 billion as of December 31, 2017 and $5.6 billion as of December 31, 2016. The following table provides the components of net periodic benefit cost for the years ended December 31, 2017, 2016 and 2015.
|  |  | Pension Benefits Years Ended December 31, |  | Other Benefits Years Ended December 31, |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
|  |  | Millions |
| Components of Net Periodic Benefit Cost |  |  |  |  |  |  |  |  |  |  |  |  |
| Service Cost |  | $ | 114 |  |  | $ | 109 |  |  | $ | 123 |  |  | $ | 17 |  |  | $ | 17 |  |  | 22 |  |
| Interest Cost |  | 204 |  |  | 202 |  |  | 234 |  |  | 63 |  |  | 59 |  |  | 67 |  |
| Expected Return on Plan Assets |  | (394 | ) |  | (394 | ) |  | (414 | ) |  | (34 | ) |  | (31 | ) |  | (31 | ) |
| Amortization of Net |  |  |  |  |  |  |  |  |  |  |  |  |
| Prior Service Credit |  | (18 | ) |  | (19 | ) |  | (19 | ) |  | (11 | ) |  | (14 | ) |  | (14 | ) |
| Actuarial Loss |  | 97 |  |  | 158 |  |  | 150 |  |  | 51 |  |  | 40 |  |  | 43 |  |
| Net Periodic Benefit Cost |  | $ | 3 |  |  | $ | 56 |  |  | $ | 74 |  |  | $ | 86 |  |  | $ | 71 |  |  | $ | 87 |  |
Pension costs and OPEB costs for PSEG, PSE&G and Power are detailed as follows:
|  |  | Pension Benefits Years Ended December 31, |  | Other Benefits Years Ended December 31, |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
|  |  | Millions |
| PSE&G |  | $ | (4 | ) |  | $ | 29 |  |  | $ | 40 |  |  | $ | 54 |  |  | $ | 43 |  |  | $ | 55 |  |
| Power |  | 1 |  |  | 16 |  |  | 21 |  |  | 27 |  |  | 23 |  |  | 27 |  |
| Other |  | 6 |  |  | 11 |  |  | 13 |  |  | 5 |  |  | 5 |  |  | 5 |  |
| Total Benefit Cost |  | $ | 3 |  |  | $ | 56 |  |  | $ | 74 |  |  | $ | 86 |  |  | $ | 71 |  |  | $ | 87 |  |
The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:
|  |  | Pension |  | OPEB |
|  |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
|  |  | Millions |
| Net Actuarial (Gain) Loss in Current Period |  | $ | 55 |  |  | $ | 211 |  |  | $ | 156 |  |  | $ | 125 |  |
| Amortization of Net Actuarial Gain (Loss) |  | (97 | ) |  | (158 | ) |  | (50 | ) |  | (40 | ) |
| Prior Service Cost (Credit) in current period |  | — |  |  | 1 |  |  | — |  |  | (3 | ) |
| Amortization of Prior Service Credit |  | 18 |  |  | 19 |  |  | 11 |  |  | 14 |  |
| Total |  | $ | (24 | ) |  | $ | 73 |  |  | $ | 117 |  |  | $ | 96 |  |
Amounts that are expected to be amortized from Accumulated Other Comprehensive Loss, Regulatory Assets and Deferred Assets into Net Periodic Benefit Cost in 2018 are as follows:
|  |  | Pension Benefits |  | Other Benefits |
|  |  | 2018 |  | 2018 |
|  |  | Millions |
| Actuarial Loss |  | $ | 85 |  |  | $ | 64 |  |
| Prior Service Credit |  | $ | (18 | ) |  | $ | (1 | ) |
The following assumptions were used to determine the benefit obligations and net periodic benefit costs:
|  |  | Pension Benefits |  | Other Benefits |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
| Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31 |  |  |
| Discount Rate |  | 3.73 | % |  | 4.29 | % |  | 4.54 | % |  | 3.76 | % |  | 4.37 | % |  | 4.58 | % |
| Rate of Compensation Increase |  | 3.90 | % |  | 3.61 | % |  | 3.61 | % |  | 3.90 | % |  | 3.61 | % |  | 3.61 | % |
| Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31 |  |  |
| Discount Rate |  | 4.29 | % |  | 4.54 | % |  | 4.20 | % |  | 4.37 | % |  | 4.58 | % |  | 4.21 | % |
| Service Cost Interest Rate |  | 4.53 | % |  | 4.81 | % |  | 4.20 | % |  | 4.64 | % |  | 4.87 | % |  | 4.21 | % |
| Interest Cost Interest Rate |  | 3.63 | % |  | 3.75 | % |  | 4.20 | % |  | 3.69 | % |  | 3.76 | % |  | 4.21 | % |
| Expected Return on Plan Assets |  | 7.80 | % |  | 8.00 | % |  | 8.00 | % |  | 7.80 | % |  | 8.00 | % |  | 8.00 | % |
| Rate of Compensation Increase |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |  | 3.61 | % |
| Assumed Health Care Cost Trend Rates as of December 31 |  |  |  |  |  |  |  |  |
| Health Care Costs |  |  |  |  |  |  |  |  |  |  |  |  |
| Immediate Rate |  |  |  |  |  |  |  | 7.93 | % |  | 7.55 | % |  | 7.75 | % |
| Ultimate Rate |  |  |  |  |  |  |  | 4.75 | % |  | 4.75 | % |  | 4.75 | % |
| Year Ultimate Rate Reached |  |  |  |  |  |  |  | 2026 |  |  | 2025 |  |  | 2025 |  |
|  |  |  |  |  |  |  |  | Millions |
| Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Total of Service Cost and Interest Cost |  |  |  |  |  |  |  | $ | 13 |  |  | $ | 11 |  |  | $ | 12 |  |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | 240 |  |  | $ | 191 |  |  | $ | 194 |  |
| Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Total of Service Cost and Interest Cost |  |  |  |  |  |  |  | $ | (10 | ) |  | $ | (9 | ) |  | $ | (10 | ) |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | (198 | ) |  | $ | (160 | ) |  | $ | (160 | ) |
Plan Assets The investments of pension 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 the 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, 2017, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 92% and 8%, respectively. The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2017 and 2016, including the fair value measurements and the levels of inputs used in determining those fair values.
|  |  | Recurring Fair Value Measurements as of December 31, 2017 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Cash Equivalents (A) |  | $ | 133 |  |  | $ | 117 |  |  | $ | 16 |  |  | $ | — |  |
| Equity Securities |  |  |  |  |  |  |  |  |  |
| Common Stock (B) |  | 1,275 |  |  | 1,275 |  |  | — |  |  | — |  |
| Commingled (C) |  | 1,401 |  |  | 1,218 |  |  | 183 |  |  | — |  |
| Preferred Stock (B) |  | 6 |  |  | 6 |  |  | — |  |  | — |  |
| Debt Securities (D) |  |  |  |  |  |  |  |  |  |
| U.S. Treasury |  | 571 |  |  | — |  |  | 571 |  |  | — |  |
| Government—Other |  | 272 |  |  | — |  |  | 272 |  |  | — |  |
| Corporate |  | 963 |  |  | — |  |  | 963 |  |  | — |  |
| Subtotal Fair Value |  | $ | 4,621 |  |  | $ | 2,616 |  |  | $ | 2,005 |  |  | $ | — |  |
| Measured at net asset value practical expedient |  |  |  |  |  |  |  |  |
| Commingled—Equities (E) |  | 1,675 |  |  |  |  |  |  |  |
| Private Equity (F) |  | 14 |  |  |  |  |  |  |  |
| Total Fair Value (G) |  | $ | 6,310 |  |  |  |  |  |  |  |  |  |  |
|  |  | Recurring Fair Value Measurements as of December 31, 2016 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Cash Equivalents (A) |  | $ | 107 |  |  | $ | 105 |  |  | $ | 2 |  |  | $ | — |  |
| Equity Securities |  |  |  |  |  |  |  |  |  |
| Common Stock (B) |  | 944 |  |  | 944 |  |  | — |  |  | — |  |
| Commingled (C) |  | 1,387 |  |  | 1,247 |  |  | 140 |  |  | — |  |
| Preferred Stock (B) |  | 1 |  |  | 1 |  |  | — |  |  | — |  |
| Debt Securities (D) |  |  |  |  |  |  |  |  |  |
| U.S. Treasury |  | 441 |  |  | — |  |  | 441 |  |  | — |  |
| Government—Other |  | 263 |  |  | — |  |  | 263 |  |  | — |  |
| Corporate |  | 836 |  |  | — |  |  | 836 |  |  | — |  |
| Subtotal Fair Value |  | $ | 3,979 |  |  | $ | 2,297 |  |  | $ | 1,682 |  |  | $ | — |  |
| Measured at net asset value practical expedient |  |  |  |  |  |  |  |  |
| Commingled—Equities (E) |  | 1,604 |  |  |  |  |  |  |  |
| Private Equity (F) |  | 16 |  |  |  |  |  |  |  |
| Total Fair Value (G) |  | $ | 5,599 |  |  |  |  |  |  |  |  |  |  |
(A) | The Collective Investment Fund publishes a daily net asset value (NAV) which participants may use for daily redemptions without restrictions (Level 1). Certain temporary investments are valued using inputs such as time-to-maturity, coupon rate, quality rating and current yield (Level 2).
(B) | Common stocks and preferred stocks are measured using observable data in active markets and considered Level 1.
(C) | Commingled Funds that allow daily redemption at their daily published NAV without restrictions are classified as Level 1. Commingled Funds that publish daily NAV but with certain near term redemption restrictions which prevent redemption at the published daily NAV are classified as Level 2.
(D) | Debt securities include mainly investment grade corporate and municipal bonds, US Treasury obligations and Federal Agency asset-backed securities with a wide range of maturities. These investments are valued using an evaluated pricing approach that varies by asset class and reflects observable market information such as the most recent exchange price or quoted bid for similar securities. Market-based standard inputs typically include benchmark yields, reported trades, broker/dealer quotes and issuer spreads or the most recent quoted for similar securities which are a Level 2 measure.
(E) | In 2016, as part of the implementation of the accounting guidance on investments measured at fair value using NAV as a practical expedient, certain commingled equity funds have been removed from the fair value hierarchy as they are measured at fair value using the NAV per share (or its equivalent) practical expedient. These funds do not meet the definition of readily determinable fair value due to limitations in published NAV (last business day of the month) and include certain redemption restrictions ranging from five to fifteen days advance notice prior to redemption days and limitations on withdrawals over 25% of the total fund. The objectives of these funds are mainly tracking the S&P Index or achieving long-term growth through investment in foreign equity securities and the MSCI Emerging Markets Index.
(F) | Private equity investments primarily include various limited partnerships that invest in either operating companies through acquisitions or developing a portfolio of non-US distressed investments to maximize total return on capital. These investments are valued at NAV (or its equivalent) on an annual basis and have significant redemption restrictions preventing redemption until fund liquidation and limited ability to sell these investments. Fund liquidation is not expected to occur for several more years. These investments have been removed from the fair value hierarchy in accordance with the guidance on NAV practical expedient.
(G) | Excludes net receivable of $13 million and $14 million at December 31, 2017 and 2016, respectively, which consists of interest, dividends and receivables and payables related to pending securities sales and purchases.
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 |  | 2017 |  | 2016 |
| Equity Securities |  | 69 | % |  | 70 | % |
| Debt Securities |  | 29 |  |  | 28 |  |
| 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. PSEG’s latest asset/liability study indicates 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 7.8% for 2017 and will be 7.8% for 2018. 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. Plan Contributions PSEG has no planned contributions to its pension plans in 2018. PSEG plans to make discretionary contributions of $14 million into its OPEB plan during 2018. 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 |
| 2018 |  |  | $ | 337 |  |  | $ | 88 |  |
| 2019 |  |  | 331 |  |  | 92 |  |
| 2020 |  |  | 341 |  |  | 96 |  |
| 2021 |  |  | 352 |  |  | 101 |  |
| 2022 |  |  | 364 |  |  | 105 |  |
| 2023-2027 |  |  | 1,954 |  |  | 560 |  |
| Total |  |  | $ | 3,679 |  |  | $ | 1,042 |  |
401(k) Plans PSEG sponsors two 401(k) plans, which are Employee Retirement Income Security Act (ERISA) 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, not to exceed the IRS maximums, including any catch-up contributions for those employees age 50 and above. 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, PSE&G and Power are detailed as follows:
|  |  | Thrift Plan and Savings Plan |
|  |  | Years Ended December 31, |
|  |  | 2017 |  | 2016 |  | 2015 |
|  |  | Millions |
| PSE&G |  | $ | 25 |  |  | $ | 24 |  |  | $ | 22 |  |
| Power |  | 11 |  |  | 12 |  |  | 12 |  |
| Other |  | 5 |  |  | 5 |  |  | 5 |  |
| Total Employer Matching Contributions |  | $ | 41 |  |  | $ | 41 |  |  | $ | 39 |  |
Servco Pension and OPEB At the direction of LIPA, effective January 1, 2014, Servco established 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 system manager for LIPA. 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 benefit plans cover all employees of Servco for current service. Under the OSA, all of these and any future employee benefit costs are to be funded by LIPA. See Note 4. Variable Interest Entity. These obligations, as well as the offsetting long-term receivable, are separately presented on the Consolidated Balance Sheet of PSEG. The following table provides a roll-forward of the changes in Servco’s benefit obligation and the fair value of its plan assets during the years ended December 31, 2017 and 2016. 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 |
|  |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
|  |  |  |  | Millions |
| Change in Benefit Obligation |  |  |  |  |  |  |  |  |
| Benefit Obligation at Beginning of Year |  | $ | 262 |  |  | $ | 211 |  |  | $ | 452 |  |  | $ | 375 |  |
| Service Cost |  | 27 |  |  | 24 |  |  | 15 |  |  | 12 |  |
| Interest Cost |  | 11 |  |  | 9 |  |  | 19 |  |  | 17 |  |
| Actuarial (Gain) Loss |  | 22 |  |  | 14 |  |  | 60 |  |  | 50 |  |
| Gross Benefits Paid |  | (2 | ) |  | (1 | ) |  | (4 | ) |  | (2 | ) |
| Plan Amendments |  | — |  |  | 5 |  |  | — |  |  | — |  |
| Benefit Obligation at End of Year (A) |  | $ | 320 |  |  | $ | 262 |  |  | $ | 542 |  |  | $ | 452 |  |
| Change in Plan Assets |  |  |  |  |  |  |  |  |
| Fair Value of Assets at Beginning of Year |  | $ | 134 |  |  | $ | 97 |  |  | $ | — |  |  | $ | — |  |
| Actual Return on Plan Assets |  | 24 |  |  | 10 |  |  | — |  |  | — |  |
| Employer Contributions |  | 35 |  |  | 28 |  |  | 4 |  |  | 2 |  |
| Gross Benefits Paid |  | (2 | ) |  | (1 | ) |  | (4 | ) |  | (2 | ) |
| Fair Value of Assets at End of Year |  | $ | 191 |  |  | $ | 134 |  |  | $ | — |  |  | $ | — |  |
| Funded Status |  |  |  |  |  |  |  |  |
| Funded Status (Plan Assets less Benefit Obligation) |  | $ | (129 | ) |  | $ | (128 | ) |  | $ | (542 | ) |  | $ | (452 | ) |
| Additional Amounts Recognized in the Consolidated Balance Sheets |  |  |  |  |  |  |  |  |
| Accrued Pension Costs of Servco |  | $ | (129 | ) |  | $ | (128 | ) |  | N/A |  |  | N/A |  |
| OPEB Costs of Servco |  | N/A |  |  | N/A |  |  | (542 | ) |  | (452 | ) |
| Amounts Recognized (B) |  | $ | (129 | ) |  | $ | (128 | ) |  | $ | (542 | ) |  | $ | (452 | ) |
(A) | Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for other benefits. The vested benefit obligation is the actuarial present value of the vested benefits to which the employee is currently entitled but based on the employee’s expected date of separation of retirement.
(B) | Amounts equal to the accrued pension and OPEB costs of Servco are offset in Long-Term Receivable of VIE on PSEG’s Consolidated Balance Sheets.
Pension and OPEB costs of Servco are accounted for according to the OSA. Servco recognizes expenses for contributions to its pension plan trusts and for OPEB payments made to retirees. Operating Revenues are recognized for the reimbursement of these costs. The pension-related revenues and costs for 2017, 2016 and 2015 were $35 million, $28 million and $30 million, respectively. Servco has contributed its entire planned contribution amount to its pension plan trusts during 2017. The OPEB-related revenues earned and costs incurred were $4 million and $2 million in 2017 and 2016, respectively, and immaterial for 2015. The following assumptions were used to determine the benefit obligations of Servco:
|  |  | Pension Benefits |  | Other Benefits |
|  |  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015 |
| Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31 |  |  |
| Discount Rate |  | 3.90 | % |  | 4.61 | % |  | 4.92 | % |  | 3.96 | % |  | 4.71 | % |  | 4.97 | % |
| Rate of Compensation Increase |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |  | 3.25 | % |
| Assumed Health Care Cost Trend Rates as of December 31 |  |  |  |  |  |  |  |  |
| Health Care Costs |  |  |  |  |  |  |  |  |  |  |  |  |
| Immediate Rate |  |  |  |  |  |  |  | 7.69 | % |  | 7.55 | % |  | 7.55 | % |
| Ultimate Rate |  |  |  |  |  |  |  | 4.75 | % |  | 4.75 | % |  | 4.75 | % |
| Year Ultimate Rate Reached |  |  |  |  |  |  |  | 2026 |  |  | 2025 |  |  | 2025 |  |
|  |  |  |  |  |  |  |  | Millions |
| Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | 131 |  |  | $ | 97 |  |  | $ | 75 |  |
| Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs |  |  |
| Postretirement Benefit Obligation |  |  |  |  |  |  |  | $ | (99 | ) |  | $ | (75 | ) |  | $ | (60 | ) |
Plan Assets All the investments of Servco’s pension 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 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. The Actuary 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 Actuary to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. The following tables present information about Servco’s investments measured at fair value on a recurring basis as of December 31, 2017 and 2016, including the fair value measurements and the levels of inputs used in determining those fair values.
|  |  | Recurring Fair Value Measurements as of December 31, 2017 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Commingled Equities (A) |  | $ | 137 |  |  | $ | — |  |  | $ | 137 |  |  | $ | — |  |
| Commingled Bonds (A) |  | 54 |  |  | — |  |  | 54 |  |  | — |  |
| Total |  | $ | 191 |  |  | $ | — |  |  | $ | 191 |  |  | $ | — |  |
|  |  | Recurring Fair Value Measurements as of December 31, 2016 |
|  |  |  |  | Quoted Market Prices for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
| Description |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  |  | Millions |
| Commingled Equities (A) |  | $ | 96 |  |  | $ | — |  |  | $ | 96 |  |  | $ | — |  |
| Commingled Bonds (A) |  | 38 |  |  | — |  |  | 38 |  |  | — |  |
| Total |  | $ | 134 |  |  | $ | — |  |  | $ | 134 |  |  | $ | — |  |
(A) | Investments in commingled equity and bond funds have a readily determinable fair value as they publish a daily NAV available to investors which is the basis for current transactions and contain certain redemption restrictions requiring advance notice of one to two days for withdrawals (Level 2).
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 of Servco as of the measurement date, December 31:
|  |  | As of December 31, |
| Investments |  | 2017 |  | 2016 |
| Equity Securities |  | 72 | % |  | 71 | % |
| Debt Securities |  | 28 |  |  | 29 |  |
| Total Percentage |  | 100 | % |  | 100 | % |
Servco 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. The results from Servco’s latest asset/liability study indicated that a long-term target asset allocation of 70% equities and 30% fixed income is consistent with the funds’ financial objectives. The expected long-term rate of return on plan assets was 7.6% for 2017 and will be 7.6% for 2018. This expected return was determined based on the study discussed above, including a premium for active management. Plan Contributions Servco plans to contribute $40 million into its pension plan during 2018. Estimated Future Benefit Payments The following pension benefit and postretirement benefit payments are expected to be paid to Servco’s plan participants:
| Year |  |  | Pension Benefits |  | Other Benefits |
|  |  |  | Millions |
| 2018 |  |  | $ | 3 |  |  | $ | 4 |  |
| 2019 |  |  | 4 |  |  | 6 |  |
| 2020 |  |  | 5 |  |  | 8 |  |
| 2021 |  |  | 7 |  |  | 9 |  |
| 2022 |  |  | 9 |  |  | 12 |  |
| 2023-2027 |  |  | 78 |  |  | 87 |  |
| Total |  |  | $ | 106 |  |  | $ | 126 |  |
Servco 401(k) Plans Servco sponsors two 401(k) plans, which are defined contribution retirement plans subject to ERISA. Eligible non-represented employees of Servco participate in the Long Island Electric Utility Servco LLC Incentive Thrift Plan I (Thrift Plan I), and eligible represented employees of Servco participate in the Long Island Electric Utility Servco LLC Incentive Thrift Plan II (Thrift Plan II). Participants in the Plans may contribute up to 50% of their eligible compensation to these plans, not to exceed the IRS maximums, including any Catch-Up Contributions for those employees age 50 and above. Servco does not provide an employer match or core contribution for employees in Thrift Plan II. For employees in Thrift Plan I, Servco matches 50% of such employee contributions up to 8% of eligible compensation and provides core contributions (based on years of service and age) to employees who do not participate in Servco’s Retirement Income Plan. The amounts expensed by Servco for employer matching contributions for the years ended December 31, 2017, 2016 and 2015 were $6 million, $5 million and $4 million, respectively, and pursuant to the OSA, Servco recognizes Operating Revenues for the reimbursement of these costs.

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