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Pension and Other Postemployment Benefits
 12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS PENSION AND OTHER POSTEMPLOYMENT BENEFITS
FirstEnergy provides noncontributory qualified defined benefit pension plans that cover substantially all of its employees and non-qualified pension plans that cover certain employees. The plans provide defined benefits based on years of service and compensation levels. Under the cash-balance portion of the Pension Plan (for employees hired on or after January 1, 2014), FirstEnergy makes contributions to eligible employee retirement accounts based on a pay credit and an interest credit. In addition, FirstEnergy provides a minimum amount of noncontributory life insurance to retired employees in addition to optional contributory insurance. Health care benefits, which include certain employee contributions, deductibles and co-payments, are also available upon retirement to certain employees, their dependents and, under certain circumstances, their survivors. FirstEnergy recognizes the expected cost of providing pension and OPEB to employees and their beneficiaries and covered dependents from the time employees are hired until they become eligible to receive those benefits. FirstEnergy also has obligations to former or inactive employees after employment, but before retirement, for disability-related benefits.
FirstEnergy recognizes a pension and OPEB mark-to-market adjustment for the change in the fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement. The remaining components of pension and OPEB expense, primarily service costs, interest on obligations, assumed return on assets and prior service costs, are recorded on a monthly basis. The pension and OPEB mark-to-market adjustment for the years ended December 31, 2019, 2018, and 2017 were $676 million, $145 million, and $141 million, respectively. Of these amounts, approximately $2 million, $1 million, and $39 million, are included in discontinued operations for the years ended December 31, 2019, 2018, and 2017, respectively. In 2019, the pension and OPEB mark-to-market adjustment primarily reflects a 110 bps decrease in the discount rate used to measure benefit obligations and higher than expected asset returns.

FirstEnergy’s pension and OPEB funding policy is based on actuarial computations using the projected unit credit method. In January 2018, FirstEnergy satisfied its minimum required funding obligations to its qualified pension plan of $500 million and addressed anticipated required funding obligations through 2020 to its pension plan with an additional contribution of $750 million. On February 1, 2019, FirstEnergy made a $500 million voluntary cash contribution to the qualified pension plan. FirstEnergy expects no required contributions through 2021.
Pension and OPEB costs are affected by employee demographics (including age, compensation levels and employment periods), the level of contributions made to the plans and earnings on plan assets. Pension and OPEB costs may also be affected by changes in key assumptions, including anticipated rates of return on plan assets, the discount rates and health care trend rates used in determining the projected benefit obligations for pension and OPEB costs. FirstEnergy uses a December 31 measurement date for its pension and OPEB plans. The fair value of the plan assets represents the actual market value as of the measurement date.
FirstEnergy’s assumed rate of return on pension plan assets considers historical market returns and economic forecasts for the types of investments held by the pension trusts. In 2019, FirstEnergy’s pension and OPEB plan assets experienced gains of $1,492 million, or 20.2%, compared to losses of $371 million, or (4.0)%, in 2018 and gains of $999 million, or 15.1%, in 2017, and assumed a 7.50% rate of return for 2019, 2018 and 2017 which generated $569 million, $605 million and $478 million of expected returns on plan assets, respectively. The expected return on pension and OPEB assets is based on the trusts’ asset allocation targets and the historical performance of risk-based and fixed income securities. The gains or losses generated as a result of the difference between expected and actual returns on plan assets will decrease or increase future net periodic pension and OPEB cost as the difference is recognized annually in the fourth quarter of each fiscal year or whenever a plan is determined to qualify for remeasurement.

During 2019, the Society of Actuaries published new mortality tables that include more current data than the RP-2014 tables as well as new improvement scales. An analysis of FirstEnergy pension and OPEB plan mortality data indicated the use of the Pri-2012 mortality table with projection scale MP-2019 was most appropriate. As such, the Pri-2012 mortality table with projection scale MP-2019 was utilized to determine the 2019 benefit cost and obligation as of December 31, 2019 for the FirstEnergy pension and OPEB plans. The impact of using the Pri-2012 mortality table with projection scale MP-2019 resulted in a decrease to the projected benefit obligation approximately $29 million and $3 million for the pension and OPEB plans, respectively, and was included in the 2019 pension and OPEB mark-to-market adjustment.

Effective in 2019, FirstEnergy changed the approach utilized to estimate the service cost and interest cost components of net periodic benefit cost for pension and OPEB plans. Historically, FirstEnergy estimated these components utilizing a single, weighted average discount rate derived from the yield curve used to measure the benefit obligation. FirstEnergy has elected to use a spot rate approach in the estimation of the components of benefit cost by applying specific spot rates along the full yield curve to the relevant projected cash flows, as this provides a better estimate of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. This election is considered a change in estimate and, accordingly, accounted for prospectively, and did not have a material impact on FirstEnergy's financial statements.
Following adoption of ASU 2017-07, "Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" in 2018, service costs, net of capitalization, continue to be reported within Other operating expenses on the FirstEnergy Consolidated Statements of Income (Loss). Non-service costs are reported within Miscellaneous income, net, within Other Income (Expense).
PensionOPEB
Obligations and Funded Status - Qualified and Non-Qualified Plans2019201820192018
(In millions)
Change in benefit obligation:
Benefit obligation as of January 1$9,462 $10,167 $608 $731 
Service cost193 224 3 5 
Interest cost373 372 22 25 
Plan participants’ contributions— — 4 3 
Plan amendments2 5 — 5 
Special termination benefits14 31 — 8 
Medicare retiree drug subsidy— — 1 1 
Annuity purchase— (129)— — 
Actuarial (gain) loss1,535 (710)64 (121)
Benefits paid(529)(498)(48)(49)
Benefit obligation as of December 31$11,050 $9,462 $654 $608 
Change in fair value of plan assets:
Fair value of plan assets as of January 1$6,984 $6,704 $408 $439 
Actual return on plan assets1,419 (363)73 (8)
Annuity purchase— (129)— — 
Company contributions521 1,270 21 22 
Plan participants’ contributions— — 4 3 
Benefits paid(529)(498)(48)(48)
Fair value of plan assets as of December 31$8,395 $6,984 $458 $408 
Funded Status:
Qualified plan$(2,203)$(2,093)$— $— 
Non-qualified plans(452)(385)— — 
Funded Status (Net liability as of December 31)$(2,655)$(2,478)$(196)$(200)
Accumulated benefit obligation$10,439 $8,951 $— $— 
Amounts Recognized in AOCI:
Prior service cost (credit)$24 $30 $(85)$(121)
    
Assumptions Used to Determine Benefit Obligations
(as of December 31)
Discount rate3.34 %4.44 %3.18 %4.30 %
Rate of compensation increase4.10 %4.10 %N/AN/A
Cash balance weighted average interest crediting rate 2.57 %3.34 %N/AN/A
Assumed Health Care Cost Trend Rates
(as of December 31)
Health care cost trend rate assumed (pre/post-Medicare)N/AN/A6.0-5.5%6.0-5.5%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)N/AN/A4.5 %4.5 %
Year that the rate reaches the ultimate trend rateN/AN/A20282028
Allocation of Plan Assets (as of December 31)
Equity securities29 %34 %54 %48 %
Fixed Income36 %34 %30 %35 %
Hedge funds9 %11 %— %— %
Insurance-linked securities2 %2 %— %— %
Real estate funds7 %10 %— %— %
Derivatives— %2 %— %— %
Private equity funds4 %2 %— %— %
Cash and short-term securities13 %5 %16 %17 %
Total100 %100 %100 %100 %
Components of Net Periodic Benefit Costs for the Years Ended December 31,PensionOPEB
201920182017201920182017
 (In millions)
Service cost $193 $224 $208 $3 $5 $5 
Interest cost 373 372 390 22 25 27 
Expected return on plan assets (540)(574)(448)(29)(31)(30)
Amortization of prior service costs (credits) 7 7 7 (36)(81)(81)
Special termination costs (1)
14 31 — — 8 — 
Pension & OPEB mark-to-market adjustment656 227 108 20 (82)13 
Net periodic benefit costs (credits)$703 $287 $265 $(20)$(156)$(66)
(1) Subject to a cap, FirstEnergy has agreed to fund a pension enhancement through its pension plan, for voluntary enhanced retirement packages offered to certain FES employees, as well as offer certain other employee benefits (approximately $14 million recognized for the year ended December 31, 2019).
Assumptions Used to Determine Net Periodic Benefit Cost for the Years Ended December 31,*PensionOPEB
201920182017201920182017
Weighted-average discount rate4.44 %3.75 %4.25 %4.30 %3.50 %4.00 %
Expected long-term return on plan assets7.50 %7.50 %7.50 %7.50 %7.50 %7.50 %
Rate of compensation increase4.10 %4.20 %4.20 %N/AN/AN/A
*Excludes impact of pension and OPEB mark-to-market adjustment.

Amounts in the tables above include FES Debtors' share of the net periodic pension and OPEB costs (credits) of $242 million and $(19) million, respectively, for the year ended December 31, 2019. The FES Debtors' share of the net periodic pension and OPEB costs (credits) were $64 million and $(25) million, respectively, for the year ended December 31, 2018, and $60 million and $(17) million, respectively, for the year ended December 31, 2017. The 2019 special termination costs associated with FES' voluntary enhanced retirement package are a component of Discontinued operations in FirstEnergy's Consolidated Statements of Income (Loss). Following the FES Debtors’ voluntary bankruptcy filing, FE has billed the FES Debtors approximately $37 million and $42 million for their share of pension and OPEB service costs for the years ended December 31, 2019 and 2018, respectively. 
In selecting an assumed discount rate, FirstEnergy considers currently available rates of return on high-quality fixed income investments expected to be available during the period to maturity of the pension and OPEB obligations. The assumed rates of return on plan assets consider historical market returns and economic forecasts for the types of investments held by FirstEnergy’s pension trusts. The long-term rate of return is developed considering the portfolio’s asset allocation strategy.
The following tables set forth pension financial assets that are accounted for at fair value by level within the fair value hierarchy. See Note 10, "Fair Value Measurements," for a description of each level of the fair value hierarchy. There were no significant transfers between levels during 2019 and 2018.
December 31, 2019Asset Allocation
Level 1Level 2Level 3Total
(In millions)
Cash and short-term securities$— $1,069 $— $1,069 13 %
Equities1,532 828 — 2,360 29 %
Fixed income:
Corporate bonds— 2,064 — 2,064 25 %
Other(3)
— 880 — 880 11 %
Alternatives:
Derivatives(40)— — (40)— %
Total (1)
$1,492 $4,841 $— $6,333 78 %
Private equity funds (2)
342 4 %
Insurance-linked securities (2)
186 2 %
Hedge funds (2)
774 9 %
Real estate funds (2)
584 7 %
Total Investments$8,219 100 %
(1)Excludes $176 million as of December 31, 2019, of receivables, payables, taxes and accrued income associated with financial instruments reflected within the fair value table.
(2)Net Asset Value used as a practical expedient to approximate fair value.
(3)Includes insurance annuities, bank loans and emerging markets debt.
December 31, 2018Asset Allocation
Level 1Level 2Level 3Total
(In millions)
Cash and short-term securities$— $342 $— $342 5 %
Equities1,115 1,256 — 2,371 34 %
Fixed income:
Government bonds— 59 — 59 1 %
Corporate bonds— 1,674 — 1,674 23 %
Other(4)
— 667 — 667 10 %
Alternatives:
Derivatives108 — — 108 2 %
Total (1)
$1,223 $3,998 $— $5,221 75 %
Private equity funds (2)
143 2 %
Insurance-linked securities (2)
108 2 %
Hedge funds (3)
779 11 %
Real estate funds (3)
665 10 %
Total Investments$6,916 100 %
(1)Excludes $68 million as of December 31, 2018, of receivables, payables, taxes and accrued income associated with financial instruments reflected within the fair value table.
(2)Net asset value used as a practical expedient to approximate fair value.
(3)The classification of Level 2 and 3 assets from the prior year, $779 million and $665 million, respectively, was adjusted in the current year presentation and included outside of the fair value hierarchy table as of December 31, 2018, as investments for which Net Asset Value is used as a practical expedient to approximate fair value in accordance with ASU 2015-07 "Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)". 
(4)Includes insurance annuities, bank loans and emerging markets debt.
As of December 31, 2019 and 2018, the OPEB trust investments measured at fair value were as follows:
December 31, 2019Asset Allocation
Level 1Level 2Level 3Total
(In millions)
Cash and short-term securities$— $72 $— $72 16 %
Equity investment:
Domestic246 — — 246 54 %
Fixed income:
Government bonds— 100 — 100 22 %
Corporate bonds— 34 — 34 7 %
Mortgage-backed securities (non-government)5 — 5 1 %
Total (1)
$246 $211 $— $457 100 %
(1) Excludes $1 million as of December 31, 2019, of receivables, payables, taxes and accrued income associated with financial instruments reflected within the fair value table.
December 31, 2018Asset Allocation
Level 1Level 2Level 3Total
(In millions)
Cash and short-term securities$— $71 $— $71 17 %
Equity investment:
Domestic196 — — 196 48 %
Fixed income:
Government bonds— 107 — 107 26 %
Corporate bonds— 32 — 32 8 %
Mortgage-backed securities (non-government)4 — 4 1 %
Total (1)
$196 $214 $— $410 100 %
(1) Excludes $(2) million as of December 31, 2018, of receivables, payables, taxes and accrued income associated with financial instruments reflected within the fair value table.

FirstEnergy follows a total return investment approach using a mix of equities, fixed income and other available investments while taking into account the pension plan liabilities to optimize the long-term return on 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 portfolio contains a diversified blend of equity and fixed-income investments. Equity investments are diversified across U.S. and non-U.S. stocks, as well as growth, value, and small and large capitalization funds. Other assets such as real estate and private equity are used to enhance long-term returns while improving portfolio diversification. Derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives are not used to leverage the portfolio beyond the market value of the underlying investments. Investment risk is measured and monitored on a continuing basis through periodic investment portfolio reviews, annual liability measurements and periodic asset/liability studies.
FirstEnergy’s target asset allocations for its pension and OPEB trust portfolios for 2019 and 2018 are shown in the following table:
Target Asset Allocations
20192018
Equities38 %38 %
Fixed income30 %30 %
Hedge funds8 %8 %
Real estate10 %10 %
Alternative investments8 %8 %
Cash6 %6 %
100 %100 %
Taking into account estimated employee future service, FirstEnergy expects to make the following benefit payments from plan assets and other payments, net of participant contributions:
OPEB
PensionBenefit PaymentsSubsidy Receipts
(In millions)
2020$547 $52 $(1)
2021564 49 (1)
2022573 48 (1)
2023586 47 (1)
2024593 46 (1)
Years 2025-20293,099 208 (3)