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Employee Benefits | 12 Months Ended
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Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract] |
EMPLOYEE BENEFITS | EMPLOYEE BENEFITS Pension and Other Postretirement Employee Benefits We and our subsidiaries have defined benefit pension plans that cover substantially all of our employees, as well as several unfunded nonqualified retirement plans. In addition, we and our subsidiaries offer multiple OPEB plans to employees. The benefits for a portion of these plans are funded through irrevocable trusts, as allowed for income tax purposes. We also offer medical, dental, and life insurance benefits to active employees and their dependents. We expense the costs of these benefits as incurred. Generally, former Wisconsin Energy Corporation employees who started with the company after 1995 receive a benefit based on a percentage of their annual salary plus an interest credit, while employees who started before 1996 receive a benefit based upon years of service and final average salary. New Wisconsin Energy Corporation management employees hired after December 31, 2014 receive a 6% annual company contribution to their 401(k) savings plan instead of being enrolled in the defined benefit plans. For former Integrys employees, the defined benefit pension plans are closed to all new hires. In addition, the service accruals for the defined benefit pension plans were frozen for non-union employees as of January 1, 2013. These employees receive an annual company contribution to their 401(k) savings plan, which is calculated based on age, wages, and full years of vesting service as of December 31 each year. We use a year-end measurement date to measure the funded status of all of our pension and OPEB plans. Due to the regulated nature of our business, we have concluded that substantially all of the unrecognized costs resulting from the recognition of the funded status of our pension and OPEB plans qualify as a regulatory asset. The following tables provide a reconciliation of the changes in our plans' benefit obligations and fair value of assets:
|  | Pension Costs |  | OPEB Costs
(in millions) |  | 2016 |  | 2015 |  | 2016 |  | 2015
Change in benefit obligation |  |  |  |  |  |  |  |
Obligation at January 1 |  | $ | 3,083.0 |  |  | $ | 1,505.5 |  |  | $ | 842.0 |  |  | $ | 397.7 |
Obligation assumed from acquisition |  | — |  |  | 1,594.0 |  |  | — |  |  | 493.0 |
Service cost |  | 45.4 |  |  | 30.4 |  |  | 26.1 |  |  | 20.7 |
Interest cost |  | 130.8 |  |  | 94.3 |  |  | 37.0 |  |  | 26.7 |
Participant contributions |  | — |  |  | — |  |  | 16.4 |  |  | 12.7 |
Plan amendments |  | (3.0 | ) |  | — |  |  | (18.9 | ) |  | — |
Actuarial loss (gain) |  | 71.7 |  |  | 14.6 |  |  | (36.5 | ) |  | (74.0 | )
Benefit payments |  | (269.1 | ) |  | (156.0 | ) |  | (49.1 | ) |  | (36.2 | )
Federal subsidy on benefits paid |  | N/A |  |  | N/A |  |  | 1.4 |  |  | 1.6 |
Plan curtailment |  | — |  |  | 0.2 |  |  | — |  |  | (0.2 | )
Obligation at December 31 |  | $ | 3,058.8 |  |  | $ | 3,083.0 |  |  | $ | 818.4 |  |  | $ | 842.0 |
Change in fair value of plan assets |  |  |  |  |  |  |  |
Fair value at January 1 |  | $ | 2,755.1 |  |  | $ | 1,444.6 |  |  | $ | 749.8 |  |  | $ | 333.5 |
Assets received from acquisition |  | — |  |  | 1,420.9 |  |  | — |  |  | 442.1 |
Actual return on plan assets |  | 199.4 |  |  | (62.1 | ) |  | 51.5 |  |  | (15.6 | )
Employer contributions |  | 23.8 |  |  | 107.7 |  |  | 4.9 |  |  | 13.3 |
Participant contributions |  | — |  |  | — |  |  | 16.4 |  |  | 12.7 |
Benefit payments |  | (269.1 | ) |  | (156.0 | ) |  | (49.1 | ) |  | (36.2 | )
Fair value at December 31 |  | $ | 2,709.2 |  |  | $ | 2,755.1 |  |  | $ | 773.5 |  |  | $ | 749.8 |
Funded status at December 31 |  | $ | (349.6 | ) |  | $ | (327.9 | ) |  | $ | (44.9 | ) |  | $ | (92.2 | )
The amounts recognized on our balance sheets at December 31 related to the funded status of the benefit plans were as follows:
|  | Pension Costs |  | OPEB Costs
(in millions) |  | 2016 |  | 2015 |  | 2016 |  | 2015
Other long-term assets |  | $ | 74.4 |  |  | $ | 74.1 |  |  | $ | 29.7 |  |  | $ | 50.1 |
Pension and OPEB obligations * |  | 424.0 |  |  | 402.0 |  |  | 74.6 |  |  | 142.3 |
Total net liabilities |  | $ | (349.6 | ) |  | $ | (327.9 | ) |  | $ | (44.9 | ) |  | $ | (92.2 | )
* | Includes $0.8 million of pension and $0.4 million of OPEB obligations classified as liabilities held for sale as of December 31, 2015. These amounts are included in other current liabilities on our balance sheets.
The accumulated benefit obligation for all defined benefit pension plans was $2,939.9 million and $2,936.4 million as of December 31, 2016, and 2015, respectively. The following table shows information for pension plans with an accumulated benefit obligation in excess of plan assets. Amounts presented are as of December 31:
(in millions) |  | 2016 |  | 2015
Projected benefit obligation |  | $ | 1,667.0 |  |  | $ | 1,706.6 |
Accumulated benefit obligation |  | 1,549.5 |  |  | 1,560.5 |
Fair value of plan assets |  | 1,242.9 |  |  | 1,304.6 |
The following table shows the amounts that have not yet been recognized in our net periodic benefit cost as of December 31:
|  | Pension Costs |  | OPEB Costs
(in millions) |  | 2016 |  | 2015 |  | 2016 |  | 2015
Accumulated other comprehensive loss (pre-tax) (1) |  |  |  |  |  |  |  |
Net actuarial loss (gain) |  | $ | 12.0 |  |  | $ | 11.4 |  |  | $ | (1.0 | ) |  | $ | (0.6 | )
Total |  | $ | 12.0 |  |  | $ | 11.4 |  |  | $ | (1.0 | ) |  | $ | (0.6 | )
Net regulatory assets (2) |  |  |  |  |  |  |  |
Net actuarial loss |  | $ | 1,240.7 |  |  | $ | 798.1 |  |  | $ | 25.8 |  |  | $ | 23.7 |
Prior service costs (credits) |  | 10.5 |  |  | 4.7 |  |  | (87.9 | ) |  | (3.3 | )
Total |  | $ | 1,251.2 |  |  | $ | 802.8 |  |  | $ | (62.1 | ) |  | $ | 20.4 |
(1) | Amounts related to the nonregulated entities are included in accumulated other comprehensive loss.
(2) | Amounts related to the utilities and WBS are recorded as net regulatory assets or liabilities.
The following table shows the estimated amounts that will be amortized into net periodic benefit cost during 2017:
(in millions) |  | Pension Costs |  | OPEB Costs
Net actuarial loss |  | $ | 87.2 |  |  | $ | 5.8 |
Prior service costs (credits) |  | 3.0 |  |  | (11.2 | )
Total 2017 – estimated amortization |  | $ | 90.2 |  |  | $ | (5.4 | )
The components of net periodic benefit cost (including amounts capitalized to our balance sheets) for the years ended December 31 were as follows:
|  | Pension Costs |  | OPEB Costs
(in millions) |  | 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
Service cost |  | $ | 45.4 |  |  | $ | 30.4 |  |  | $ | 10.1 |  |  | $ | 26.1 |  |  | $ | 20.7 |  |  | $ | 8.5 |
Interest cost |  | 130.8 |  |  | 94.3 |  |  | 68.1 |  |  | 37.0 |  |  | 26.7 |  |  | 17.8 |
Expected return on plan assets |  | (195.9 | ) |  | (155.6 | ) |  | (98.6 | ) |  | (52.7 | ) |  | (39.6 | ) |  | (23.7 | )
Plan settlement |  | 16.5 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Plan curtailment |  | — |  |  | (0.3 | ) |  | — |  |  | — |  |  | — |  |  | — |
Amortization of prior service cost (credit) |  | 3.4 |  |  | 2.2 |  |  | 2.1 |  |  | (9.4 | ) |  | (6.4 | ) |  | (1.8 | )
Amortization of net actuarial loss |  | 82.9 |  |  | 68.5 |  |  | 36.7 |  |  | 8.5 |  |  | 3.9 |  |  | 1.2 |
Net periodic benefit cost |  | $ | 83.1 |  |  | $ | 39.5 |  |  | $ | 18.4 |  |  | $ | 9.5 |  |  | $ | 5.3 |  |  | $ | 2.0 |
The weighted-average assumptions used to determine the benefit obligations for the plans were as follows for the years ended December 31:
|  | Pension |  | OPEB
|  | 2016 |  | 2015 |  | 2016 |  | 2015
Discount rate |  | 4.16% |  | 4.46% |  | 4.14% |  | 4.38%
Rate of compensation increase |  | 3.60% |  | 4.00% |  | N/A |  | N/A
Assumed medical cost trend rate |  | N/A |  | N/A |  | 7.00% |  | 7.50%
Ultimate trend rate |  | N/A |  | N/A |  | 5.00% |  | 5.00%
Year ultimate trend rate is reached |  | N/A |  | N/A |  | 2021 |  | 2021
The weighted-average assumptions used to determine the net periodic benefit cost for the plans were as follows for the years ended December 31:
|  | Pension Costs
|  | 2016 |  | 2015 |  | 2014
Discount rate |  | 4.35% |  | 4.11% |  | 5.00%
Expected return on plan assets |  | 7.12% |  | 7.37% |  | 7.25%
Rate of compensation increase |  | 3.75% |  | 4.00% |  | 4.00%
|  | OPEB Costs
|  | 2016 |  | 2015 |  | 2014
Discount rate |  | 4.38% |  | 4.09% |  | 4.95%
Expected return on plan assets |  | 7.25% |  | 7.54% |  | 7.50%
Assumed medical cost trend rate (Pre 65/Post 65) |  | 7.50% |  | 7.50% |  | 7.50%
Ultimate trend rate |  | 5.00% |  | 5.00% |  | 5.00%
Year ultimate trend rate is reached |  | 2021 |  | 2021 |  | 2021
We consult with our investment advisors on an annual basis to help us forecast expected long-term returns on plan assets by reviewing historical returns as well as calculating expected total trust returns using the weighted-average of long-term market returns for each of the major target asset categories utilized in the fund. For 2017, the expected return on assets assumption is 7.11% for the pension plans and 7.25% for the OPEB plans. Assumed health care cost trend rates have a significant effect on the amounts reported by us for health care plans. For the year ended December 31, 2016, a one-percentage-point change in assumed health care cost trend rates would have had the following effects:
(in millions) |  | 1% Increase |  | 1% Decrease
Effect on total of service and interest cost components of net periodic postretirement health care benefit cost |  | $ | 8.5 |  |  | $ | (6.9 | )
Effect on health care component of the accumulated postretirement benefit obligations |  | 49.6 |  |  | (39.5 | )
Plan Assets Current pension trust assets and amounts which are expected to be contributed to the trusts in the future are expected to be adequate to meet pension payment obligations to current and future retirees. The Investment Trust Policy Committee oversees investment matters related to all of our funded benefit plans. The Committee works with external actuaries and investment consultants on an on-going basis to establish and monitor investment strategies and target asset allocations. Forecasted cash flows for plan liabilities are regularly updated based on annual valuation results. Target allocations are determined utilizing projected benefit payment cash flows and risk analyses of appropriate investments. They are intended to reduce risk, provide long-term financial stability for the plans and maintain funded levels which meet long-term plan obligations while preserving sufficient liquidity for near-term benefit payments. The Wisconsin Energy Corporation pension trust target asset allocations are 35% equity investments, 55% fixed income investments, and 10% private equity and real estate investments. The Integrys pension trust target asset allocation is 60% equity investments and 40% fixed income investments. The Wisconsin Energy Corporation OPEB trusts' target asset allocations are 60% equity investments and 40% fixed income investments. The two largest OPEB trusts for Integrys have target asset allocations of 50% equity investments and 50% fixed income, and 45% equity investments and 55% fixed income, respectively. Equity securities include investments in large-cap, mid-cap, and small-cap companies primarily located in the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage and other asset backed securities, commercial paper, and United States Treasuries. Pension and OPEB plan investments are recorded at fair value. See Note 1(s), Fair Value Measurements, for more information regarding the fair value hierarchy and the classification of fair value measurements based on the types of inputs used. Following our adoption of ASU 2015-07 on January 1, 2016, the assets that are not subject to leveling are investments that are valued using the net asset value per share (or its equivalent) practical expedient. We have applied this approach retrospectively to the 2015 table for comparability. The following tables provide the fair values of our investments by asset class:
|  | December 31, 2016
|  | Pension Plan Assets |  | OPEB Assets
(in millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Asset Class |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 3.7 |  |  | $ | 58.0 |  |  | $ | — |  |  | $ | 61.7 |  |  | $ | 28.8 |  |  | $ | 3.4 |  |  | $ | — |  |  | $ | 32.2 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States Equity |  | 273.9 |  |  | 0.1 |  |  | — |  |  | 274.0 |  |  | 34.3 |  |  | — |  |  | — |  |  | 34.3 |
International Equity |  | 54.1 |  |  | 0.6 |  |  | — |  |  | 54.7 |  |  | 3.5 |  |  | 0.2 |  |  | — |  |  | 3.7 |
Fixed income securities: * |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States Bonds |  | — |  |  | 861.3 |  |  | 0.8 |  |  | 862.1 |  |  | — |  |  | 137.9 |  |  | — |  |  | 137.9 |
International Bonds |  | — |  |  | 75.9 |  |  | — |  |  | 75.9 |  |  | — |  |  | 8.8 |  |  | — |  |  | 8.8 |
Private Equity and Real Estate |  | — |  |  | — |  |  | 14.6 |  |  | 14.6 |  |  | — |  |  | — |  |  | 1.3 |  |  | 1.3 |
|  | $ | 331.7 |  |  | $ | 995.9 |  |  | $ | 15.4 |  |  | $ | 1,343.0 |  |  | $ | 66.6 |  |  | $ | 150.3 |  |  | $ | 1.3 |  |  | $ | 218.2 |
Investments measured at net asset value |  |  |  |  |  |  |  | $ | 1,366.2 |  |  |  |  |  |  |  |  | $ | 555.3 |
Total |  | $ | 331.7 |  |  | $ | 995.9 |  |  | $ | 15.4 |  |  | $ | 2,709.2 |  |  | $ | 66.6 |  |  | $ | 150.3 |  |  | $ | 1.3 |  |  | $ | 773.5 |
* | This category represents investment grade bonds of United States and foreign issuers denominated in United States dollars from diverse industries.
|  | December 31, 2015
|  | Pension Plan Assets |  | OPEB Assets
(in millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Asset Class |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 17.0 |  |  | $ | 29.6 |  |  | $ | — |  |  | $ | 46.6 |  |  | $ | 10.5 |  |  | $ | 1.0 |  |  | $ | — |  |  | $ | 11.5 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States Equity |  | 132.6 |  |  | 3.4 |  |  | — |  |  | 136.0 |  |  | 24.6 |  |  | 0.1 |  |  | — |  |  | 24.7 |
International Equity |  | 103.9 |  |  | — |  |  | — |  |  | 103.9 |  |  | 21.4 |  |  | — |  |  | — |  |  | 21.4 |
Fixed income securities: * |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States Bonds |  | 11.4 |  |  | 797.3 |  |  | — |  |  | 808.7 |  |  | 0.3 |  |  | 122.0 |  |  | — |  |  | 122.3 |
International Bonds |  | — |  |  | 80.3 |  |  | — |  |  | 80.3 |  |  | — |  |  | 8.1 |  |  | — |  |  | 8.1 |
Private Equity and Real Estate |  | — |  |  | — |  |  | 5.5 |  |  | 5.5 |  |  | — |  |  | — |  |  | 0.4 |  |  | 0.4 |
|  | $ | 264.9 |  |  | $ | 910.6 |  |  | $ | 5.5 |  |  | $ | 1,181.0 |  |  | $ | 56.8 |  |  | $ | 131.2 |  |  | $ | 0.4 |  |  | $ | 188.4 |
Investments measured at net asset value |  |  |  |  |  |  |  | $ | 1,574.1 |  |  |  |  |  |  |  |  | $ | 561.4 |
Total |  | $ | 264.9 |  |  | $ | 910.6 |  |  | $ | 5.5 |  |  | $ | 2,755.1 |  |  | $ | 56.8 |  |  | $ | 131.2 |  |  | $ | 0.4 |  |  | $ | 749.8 |
* | This category represents investment grade bonds of United States and foreign issuers denominated in United States dollars from diverse industries.
The following tables set forth a reconciliation of changes in the fair value of pension and OPEB plan assets categorized as Level 3 in the fair value hierarchy:
|  | Private Equity and Real Estate |  | United States Bonds
(in millions) |  | Pension |  | OPEB |  | Pension
Beginning balance at January 1, 2016 |  | $ | 5.5 |  |  | $ | 0.4 |  |  | $ | — |
Realized and unrealized gains |  | 0.5 |  |  | 0.1 |  |  | — |
Purchases |  | 8.6 |  |  | 0.8 |  |  | 0.8 |
Ending balance at December 31, 2016 |  | $ | 14.6 |  |  | $ | 1.3 |  |  | $ | 0.8 |
|  | Private Equity and Real Estate
(in millions) |  | Pension |  | OPEB
Beginning balance at January 1, 2015 |  | $ | — |  |  | $ | — |
Purchases |  | 5.5 |  |  | 0.4 |
Ending balance at December 31, 2015 |  | $ | 5.5 |  |  | $ | 0.4 |
Cash Flows In January 2017, we contributed $100.0 million to the pension plans. We expect to contribute an additional $13.2 million to the pension plans and $0.1 million to the OPEB plans in 2017, dependent upon various factors affecting us, including our liquidity position and possible tax law changes. The following table shows the payments, reflecting expected future service, that we expect to make for pension and OPEB:
(in millions) |  | Pension Costs |  | OPEB Costs
2017 |  | $ | 215.7 |  |  | $ | 41.8 |
2018 |  | 217.1 |  |  | 49.6 |
2019 |  | 226.5 |  |  | 49.0 |
2020 |  | 233.1 |  |  | 50.9 |
2021 |  | 230.0 |  |  | 53.1 |
2022-2026 |  | 1,031.5 |  |  | 278.5 |
Savings Plans We sponsor 401(k) savings plans which allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan-specified guidelines. A percentage of employee contributions are matched by us through a contribution into the employee's savings plan account, up to certain limits. Certain employees participate in a defined contribution pension plan, in which amounts are contributed to the employee's savings plan account based on the employee's wages, age, and years of service. Total costs incurred under all of these plans were $44.3 million in 2016, $48.0 million in 2015, and $14.2 million in 2014.

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