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Benefit Plans and Other Postretirement Benefits | 12 Months Ended
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Dec. 31, 2018
Retirement Benefits [Abstract] |
Benefit Plans and Other Postretirement Benefits | Benefit Plans and Other Postretirement Benefits NRG sponsors and operates defined benefit pension and other postretirement plans. NRG pension benefits are available to eligible non-union and union employees through various defined benefit pension plans. These benefits are based on pay, service history and age at retirement. Most pension benefits are provided through tax-qualified plans. NRG also provides postretirement health and welfare benefits for certain groups of employees. Cost sharing provisions vary by the terms of any applicable collective bargaining agreements. NRG maintains two separate qualified pension plans, the NRG Pension Plan for Bargained Employees and the NRG Pension Plan. Employees of NRG participate in each of the pension plans, depending upon whether their employment is covered by a bargaining agreement. NRG and GenOn entered into a Restructuring Support Agreement in which NRG agreed to retain GenOn's pension liability for service provided by GenOn employees prior to the completion of the GenOn reorganization. NRG determined that the retention of this liability was probable and recorded the estimated accumulated pension benefit obligation as of December 31, 2017 of $92 million, which reflects a $13 million contribution made by NRG to the plan in 2017, in other non-current liabilities with a corresponding loss from discontinued operations. NRG also agreed to retain the liability for GenOn's post-employment and retiree health and welfare benefits with the obligation capped at $25 million. NRG's obligation for both of these liabilities was revalued at GenOn's emergence from bankruptcy. NRG expects to contribute $41 million to the Company's pension plans in 2019, of which $13 million relates to GenOn. NRG Defined Benefit Plans The annual net periodic benefit cost/(credit) related to NRG's pension and other postretirement benefit plans include the following components:
| Year Ended December 31,
| Pension Benefits
| 2018 |  | 2017 |  | 2016
| (In millions)
Service cost benefits earned | $ | 23 |  |  | $ | 26 |  |  | $ | 30 |
Interest cost on benefit obligation | 44 |  |  | 43 |  |  | 43 |
Expected return on plan assets | (62 | ) |  | (58 | ) |  | (60 | )
Amortization of unrecognized net loss | — |  |  | 4 |  |  | 2 |
Settlement/curtailment expense | 7 |  |  | — |  |  | — |
Net periodic benefit cost | $ | 12 |  |  | $ | 15 |  |  | $ | 15 |
| Year Ended December 31,
| Other Postretirement Benefits
| 2018 |  | 2017 |  | 2016
| (In millions)
Service cost benefits earned | $ | 1 |  |  | $ | 1 |  |  | $ | 2 |
Interest cost on benefit obligation | 4 |  |  | 4 |  |  | 6 |
Amortization of unrecognized prior service credit | (10 | ) |  | (9 | ) |  | (5 | )
Amortization of unrecognized net (gain)/loss | — |  |  | (1 | ) |  | — |
Curtailment gain | (10 | ) |  | — |  |  | — |
Net periodic benefit (credit)/cost | $ | (15 | ) |  | $ | (5 | ) |  | $ | 3 |
A comparison of the pension benefit obligation, other postretirement benefit obligations and related plan assets for NRG's plans on a combined basis is as follows:
| As of December 31,
| Pension Benefits |  | Other Postretirement Benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
| (In millions)
Benefit obligation at January 1 | $ | 1,329 |  |  | $ | 1,241 |  |  | $ | 128 |  |  | $ | 128 |
Service cost | 23 |  |  | 26 |  |  | 1 |  |  | 1 |
Interest cost | 44 |  |  | 43 |  |  | 4 |  |  | 4 |
Plan amendments | 17 |  |  | — |  |  | (28 | ) |  | (1 | )
Actuarial (gain)/loss | (95 | ) |  | 77 |  |  | (6 | ) |  | 6 |
Employee and retiree contributions | — |  |  | — |  |  | 3 |  |  | 3 |
Curtailment gain | (20 | ) |  | — |  |  | (7 | ) |  | — |
Benefit payments | (76 | ) |  | (58 | ) |  | (12 | ) |  | (13 | )
Benefit obligation at December 31 | 1,222 |  |  | 1,329 |  |  | 83 |  |  | 128 |
Fair value of plan assets at January 1 | 1,104 |  |  | 953 |  |  | — |  |  | — |
Actual return on plan assets | (80 | ) |  | 173 |  |  | — |  |  | — |
Employee and retiree contributions | — |  |  | — |  |  | 3 |  |  | 3 |
Employer contributions | 33 |  |  | 36 |  |  | 9 |  |  | 10 |
Benefit payments | (76 | ) |  | (58 | ) |  | (12 | ) |  | (13 | )
Fair value of plan assets at December 31 | 981 |  |  | 1,104 |  |  | — |  |  | — |
Funded status at December 31 — excess of obligation over assets | $ | (241 | ) |  | $ | (225 | ) |  | $ | (83 | ) |  | $ | (128 | )
Less: GenOn postretirement obligation(a) | — |  |  | — |  |  | — |  |  | 38 |
Add: Retained obligation in bankruptcy proceeding(a) | — |  |  | — |  |  | — |  |  | (25 | )
Net obligation for NRG | $ | (241 | ) |  | $ | (225 | ) |  | $ | (83 | ) |  | $ | (115 | )
(a) | NRG's liability for GenOn's other postretirement benefit plans was capped at $25 million, with the final liability assumed determined as of GenOn's emergence from bankruptcy. As of December 31, 2017, the liability was $38 million so NRG's obligation was recorded at the $25 million cap. Upon emergence, the retained liability was $23 million, therefore NRG is obligated for the full retained liability of the plans.
Amounts recognized in NRG's balance sheets were as follows:
| As of December 31,
| Pension Benefits |  | Other Postretirement Benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
| (In millions)
Current liabilities | $ | — |  |  | $ | — |  |  | $ | 7 |  |  | $ | 7 |
Less: GenOn other postretirement benefits | — |  |  | — |  |  | — |  |  | (3 | )
Total current liabilities | $ | — |  |  | $ | — |  |  | $ | 7 |  |  | $ | 4 |
Non-current liabilities | $ | 241 |  |  | $ | 225 |  |  | $ | 76 |  |  | $ | 121 |
Less: GenOn other postretirement benefits | — |  |  | — |  |  | — |  |  | (10 | )
Total non-current liabilities | $ | 241 |  |  | $ | 225 |  |  | $ | 76 |  |  | $ | 111 |
Amounts recognized in NRG's accumulated OCI that have not yet been recognized as components of net periodic benefit cost were as follows:
| As of December 31,
| Pension Benefits |  | Other Postretirement Benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
| (In millions)
Net loss/(gain) | $ | 90 |  |  | $ | 53 |  |  | $ | (9 | ) |  | $ | (4 | )
Prior service cost/(credit) | 3 |  |  | 3 |  |  | (53 | ) |  | (37 | )
Total accumulated OCI | $ | 93 |  |  | $ | 56 |  |  | $ | (62 | ) |  | $ | (41 | )
Less: GenOn (deconsolidated June 14, 2017) | — |  |  | (22 | ) |  | — |  |  | 10 |
Net accumulated OCI | $ | 93 |  |  | $ | 34 |  |  | $ | (62 | ) |  | $ | (31 | )
Other changes in plan assets and benefit obligations recognized in OCI were as follows:
| Year Ended December 31,
| Pension Benefits |  | Other Postretirement Benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
| (In millions)
Net actuarial loss/(gain) | $ | 47 |  |  | $ | (37 | ) |  | $ | (5 | ) |  | $ | 6 |
Amortization of net actuarial (gain)/loss | — |  |  | (4 | ) |  | — |  |  | 1 |
Curtailment | (27 | ) |  | — |  |  | 2 |  |  | — |
Prior service credit | 17 |  |  | — |  |  | (28 | ) |  | (1 | )
Amortization of prior service cost | — |  |  | — |  |  | 10 |  |  | 9 |
Total recognized in OCI | $ | 37 |  |  | $ | (41 | ) |  | $ | (21 | ) |  | $ | 15 |
Less: GenOn (deconsolidated June 14, 2017) | — |  |  | 15 |  |  | $ | — |  |  | $ | 2 |
Net recognized in OCI | $ | 37 |  |  | $ | (26 | ) |  | $ | (21 | ) |  | $ | 17 |
Less: GenOn post deconsolidation net periodic benefit cost | — |  |  | — |  |  | — |  |  | 1 |
Net periodic benefit cost/(credit) | 12 |  |  | 15 |  |  | (15 | ) |  | (5 | )
Net recognized in net periodic pension cost/(credit) and OCI | $ | 49 |  |  | $ | (11 | ) |  | $ | (36 | ) |  | $ | 13 |
As a result of GenOn's deconsolidation during 2017, NRG reduced the loss recorded in other comprehensive income by $28 million related to GenOn's pension and other postretirement benefits. The Company's estimated unrecognized loss and unrecognized prior service cost for NRG's pension plan that will be amortized from accumulated OCI to net periodic cost over the next fiscal year is $4 million and $0 million, respectively. The Company's estimated unrecognized gain and unrecognized prior service credit for NRG's postretirement plan that will be amortized from accumulated OCI to net periodic cost over the next fiscal year is less than $1 million and $13 million, respectively. The following table presents the balances of significant components of NRG's pension plan:
| As of December 31,
| Pension Benefits
| 2018 |  | 2017
| (In millions)
Projected benefit obligation | $ | 1,222 |  |  | $ | 1,329 |
Accumulated benefit obligation | 1,188 |  |  | 1,255 |
Fair value of plan assets | 981 |  |  | 1,104 |
NRG's market-related value of its plan assets is the fair value of the assets. The fair values of the Company's pension plan assets by asset category and their level within the fair value hierarchy are as follows:
| Fair Value Measurements as of December 31, 2018
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Total
| (In millions)
Common/collective trust investment — U.S. equity | $ | — |  |  | $ | 183 |  |  | $ | 183 |
Common/collective trust investment — non-U.S. equity | — |  |  | 53 |  |  | 53 |
Common/collective trust investment — non-core assets | — |  |  | 117 |  |  | 117 |
Common/collective trust investment — fixed income | — |  |  | 256 |  |  | 256 |
Short-term investment fund | 12 |  |  | — |  |  | 12 |
Subtotal fair value | $ | 12 |  |  | $ | 609 |  |  | $ | 621 |
Measured at net asset value practical expedient |  |  |  |  |  |  |  |
Common/collective trust investment — non-U.S. equity |  |  |  |  |  |  | 70 |
Common/collective trust investment — fixed income |  |  |  |  |  |  | 249 |
Common/collective trust investment — non-core assets |  |  |  |  | 16 |
Partnerships/joint ventures |  |  |  |  |  |  | 25 |
Total fair value |  |  |  |  |  |  | $ | 981 |
| Fair Value Measurements as of December 31, 2017
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Total
| (In millions)
Common/collective trust investment — U.S. equity | $ | — |  |  | $ | 256 |  |  | $ | 256 |
Common/collective trust investment — non-U.S. equity | — |  |  | 66 |  |  | 66 |
Common/collective trust investment — non-core assets | — |  |  | 178 |  |  | 178 |
Common/collective trust investment — fixed income | — |  |  | 230 |  |  | 230 |
Short-term investment fund | 5 |  |  | — |  |  | 5 |
Subtotal fair value | $ | 5 |  |  | $ | 730 |  |  | $ | 735 |
Measured at net asset value practical expedient |  |  |  |  |  |  |  |
Common/collective trust investment — non-U.S. equity |  |  |  |  |  |  | 94 |
Common/collective trust investment — fixed income |  |  |  |  |  |  | 233 |
Partnerships/joint ventures |  |  |  |  |  |  | 42 |
Total fair value |  |  |  |  |  |  | $ | 1,104 |
In accordance with ASC 820, the Company determines the level in the fair value hierarchy within which each fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement in its entirety. The fair value of the common/collective trust investments is valued at fair value which is equal to the sum of the market value of all of the fund's underlying investments. Certain common/collective trust investments have readily determinable fair value as they publish daily net asset value, or NAV, per share and are categorized as Level 2. Certain other common/collective trust investments and partnerships/joint ventures use NAV per share, or its equivalent, as a practical expedient for valuation, and thus have been removed from the fair value hierarchy table. The following table presents the significant assumptions used to calculate NRG's benefit obligations:
| As of December 31,
| Pension Benefits |  | Other Postretirement Benefits
Weighted-Average Assumptions | 2018 |  | 2017 |  | 2018 |  | 2017
Discount rate | 4.38 | % |  | 3.71 | % |  | 4.37 | % |  | 3.71 | %
Rate of compensation increase | 3.00 | % |  | 3.00 | % |  | — | % |  | — |
Health care trend rate | — |  |  | — |  |  | 7.8% grading to 4.5% in 2025 |  |  | 8.2% grading to 4.5% in 2025 |
The following table presents the significant assumptions used to calculate NRG's benefit expense:
| As of December 31,
| Pension Benefits |  | Other Postretirement Benefits
Weighted-Average Assumptions | 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
Discount rate | 3.71%/4.04% |  |  | 4.26 | % |  | 4.52 | % |  | 3.71%/4.08% |  |  | 4.29 | % |  | 4.55 | %
Expected return on plan assets | 6.17 | % |  | 6.85 | % |  | 6.65 | % |  | — |  |  | — |  |  | — |
Rate of compensation increase | 3.00 | % |  | 3.00 | % |  | 3.00 | % |  | — |  |  | — |  |  | — |
Health care trend rate | — |  |  | — |  |  | — |  |  | 8.2% grading to 4.5% in 2025 |  |  | 7.0% grading to 5.0% in 2025 |  |  | 7.25% grading to 5.0% in 2025 |
NRG uses December 31 of each respective year as the measurement date for the Company's pension and other postretirement benefit plans. The Company sets the discount rate assumptions on an annual basis for each of NRG's defined benefit retirement plans as of December 31. The discount rate assumptions represent the current rate at which the associated liabilities could be effectively settled at December 31. The Company utilizes the Aon AA Above Median, or AA-AM, yield curve to select the appropriate discount rate assumption for each retirement plan. The AA-AM yield curve is a hypothetical AA yield curve represented by a series of annualized individual spot discount rates from 6 months to 99 years. Each bond issue used to build this yield curve must be non-callable, and have an average rating of AA when averaging available Moody's Investor Services, Standard & Poor's and Fitch ratings. NRG employs a total return investment approach, whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The Investment Committee reviews the asset mix periodically and as the plan assets increase in future years, the Investment Committee may examine other asset classes such as real estate or private equity. NRG employs a building block approach to determining the long-term rate of return assumption for plan assets, with proper consideration given to diversification and rebalancing. Historical markets are studied and long-term historical relationships between equities and fixed income are preserved, consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. Peer data and historical returns are reviewed to check for reasonableness and appropriateness. In 2016, NRG changed the approach utilized to estimate the service cost and interest cost components of net periodic benefit cost for pension and postretirement benefit plans. Historically, the Company estimated these components by using a single weighted average discount rate derived from the yield curve used to measure the benefit obligation. The Company has elected to use a spot rate approach in the estimation of the components of benefit cost by applying specific spot rates along the yield curve to the relevant projected cash flows, as this provides a better estimate of service and interest costs. This election is considered a change in estimate and, accordingly, has been accounted for starting in 2016. This change does not affect the measurement of NRG's total benefit obligation. The target allocations of NRG's pension plan assets were as follows for the year ended December 31, 2018:
U.S. equity | 22 | %
Non-U.S. equity | 14 | %
Non-core assets | 19 | %
U.S. fixed income | 45 | %
Plan assets are currently invested in a diversified blend of equity and fixed-income investments. Furthermore, equity investments are diversified across U.S., non-U.S., global, and emerging market equities, as well as among growth, value, small and large capitalization stocks. Investment risk and performance are monitored on an ongoing basis through quarterly portfolio reviews of each asset fund class to a related performance benchmark, if applicable, and annual pension liability measurements. Performance benchmarks are composed of the following indices:
Asset Class |  | Index
U.S. equities |  | Dow Jones U.S. Total Stock Market Index
Non-U.S. equities |  | MSCI All Country World Ex-U.S. IMI Index
Non-core assets(a) |  | Various (per underlying asset class)
Fixed income securities |  | Barclays Capital Long Term Government/Credit Index & Barclays Strips 20+ Index
(a) | Non-Core Assets are defined as diversifying asset classes approved by the Investment Committee that are intended to enhance returns and/or reduce volatility of the U.S. and non-U.S. equities. Asset classes considered Non-Core include, but may not be limited to: Emerging Market Equity, Emerging Market Debt, Non-US Developed Market Small Cap, High Yield Fixed Income, Real Estate, Bank Loans, Global Infrastructure and other Alternatives.
NRG's expected future benefit payments for each of the next five years, and in the aggregate for the five years thereafter, are as follows:
|  |  | Other Postretirement Benefit
| Pension Benefit Payments |  | Benefit Payments |  | Medicare Prescription Drug Reimbursements
| (In millions)
2019 | $ | 72 |  |  | $ | 7 |  |  | $ | — |
2020 | 76 |  |  | 7 |  |  | — |
2021 | 79 |  |  | 7 |  |  | — |
2022 | 82 |  |  | 6 |  |  | — |
2023 | 85 |  |  | 6 |  |  | — |
2024-2028 | 418 |  |  | 26 |  |  | 1 |
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. The impact of a one-percentage-point change in assumed health care cost trend rates is immaterial on total service and interest costs components but would have the following effect:
| 1-Percentage- Point Increase |  | 1-Percentage- Point Decrease
| (In millions)
Effect on postretirement benefit obligation | 5 |  |  | (4 | )
STP Defined Benefit Plans NRG has a 44% undivided ownership interest in STP, as discussed further in Note 26, Jointly Owned Plants. STPNOC, which operates and maintains STP, provides its employees a defined benefit pension plan, as well as postretirement health and welfare benefits. Although NRG does not sponsor the STP plan, it reimburses STPNOC for 44% of the contributions made towards its retirement plan obligations. For the years ended December 31, 2018 and December 31, 2017, NRG reimbursed STPNOC $13 million and $8 million, respectively, for its contribution to the plans. In 2019, NRG expects to reimburse STPNOC $18 million for its contribution to the plans. The Company has recognized the following in its statement of financial position, statement of operations and accumulated OCI related to its 44% interest in STP:
| As of December 31,
| Pension Benefits |  | Other Postretirement Benefits
| 2018 |  | 2017 |  | 2018 |  | 2017
| (In millions)
Funded status — STPNOC benefit plans | $ | (78 | ) |  | $ | (76 | ) |  | $ | (19 | ) |  | $ | (24 | )
Net periodic benefit cost/(credit) | 8 |  |  | 8 |  |  | (7 | ) |  | (3 | )
Other changes in plan assets and benefit obligations recognized in other comprehensive (loss)/income | (7 | ) |  | (6 | ) |  | 2 |  |  | 5 |
Defined Contribution Plans NRG's employees are also eligible to participate in defined contribution 401(k) plans. The Company's contributions to these plans were as follows:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
| (In millions)
Company contributions to defined contribution plans | $ | 28 |  |  | $ | 56 |  |  | $ | 55 |

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