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PENSION AND OTHER POST-EMPLOYMENT BENEFITS
 12 Months Ended
Dec. 31, 2021
Retirement Benefits [Abstract]  
PENSION AND OTHER POST-EMPLOYMENT BENEFITS PENSION AND OTHER POST-EMPLOYMENT 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’s pension and OPEB funding policy is based on actuarial computations using the projected unit credit method. On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which, among other things, extended shortfall amortization periods and modification of the interest rate stabilization rules for single-employer plans thereby impacting funding requirements. As a result, FirstEnergy does not currently expect to have a required contribution to the pension plan based on various assumptions including annual expected rate of returns for assets of 7.50%. However, FirstEnergy may elect to contribute to the pension plan voluntarily.
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.
Discount Rate - 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. FirstEnergy utilizes 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.

Expected Return on Plan Assets - 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 2021, FirstEnergy’s qualified pension and OPEB plan assets experienced gains of $689 million or 7.9%, compared to gains of $1,225 million, or 14.7% in 2020, and losses of $1,492 million, or 20.2% in 2019 and assumed a 7.50% rate of return on plan assets in 2021, 2020 and 2019, which generated $688 million, $651 million and $569 million of expected returns on plan assets, respectively. The expected return on pension and OPEB assets is based on input from investment consultants, including 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 is recognized as a pension and OPEB mark-to-market adjustment in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for remeasurement.

Mortality Rates - During 2021, 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 plan mortality data indicated the use of the Pri-2012 mortality table with projection scale MP-2021, actuarially adjusted to reflect increased mortality rates due to COVID-19 based on mortality experience reported by the Center for Disease and Control Prevention in 2020 and 2021, was most appropriate and such was utilized to determine the 2021 benefit cost and obligation as of December 31, 2021, for the FirstEnergy pension and OPEB plans. The impact of using the Pri-2012 mortality table with projection scale MP-2021 (adjusted by FirstEnergy's actuary for COVID-19 impacts) resulted in a decrease to the projected benefit obligation of approximately $32 million and $2 million for the pension and OPEB plans, respectively, and was included in the 2021 pension and OPEB mark-to-market adjustment.

Net Periodic Benefit Costs - In addition to service costs, interest on obligations, expected return on plan assets, and prior service costs, FirstEnergy recognizes in net periodic benefit costs 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. Service costs, net of capitalization, are reported within Other operating expenses on FirstEnergy’s Consolidated Statements of Income. Non-service costs, other than the pension and OPEB mark-to-market adjustment, which is separately shown, are reported within Miscellaneous income, net, within Other Income (Expense) on FirstEnergy’s Consolidated Statements of Income.
Assumptions Used to Determine Net Periodic Benefit Cost for the Years Ended December (1)
PensionOPEB
202120202019202120202019
Service cost weighted-average discount rate (2)
3.10 %
3.60%/3.24%
4.66 %3.03 %
3.63%/3.29%
4.67 %
Interest cost weighted-average discount rate (3)
2.58 %
3.27%/2.90%
4.37 %1.66 %
2.71%/2.30%
3.89 %
Expected return on plan assets7.50 %7.50 %7.50 %7.50 %7.50 %7.50 %
Rate of compensation increase4.10 %4.10 %4.10 %N/AN/AN/A
(1)Excludes impact of pension and OPEB mark-to-market adjustment.
(2) Weighted-average discount rates effect from January 1, 2020, through February 26, 2020, were 3.60% and 3.63% for pension and OPEB service cost, respectively. Discount rates were 3.24% and 3.29% for pension and OPEB service cost, respectively, for the period February 27, 2020 through December 31, 2020.
(3) Weighted-average discount rates in effect from January 1, 2020, through February 26, 2020, were 3.27% and 2.71% for pension and OPEB interest cost, respectively. Discount rates were 2.90% and 2.30% for pension and OPEB interest cost, respectively, for the period February 27, 2020, through December 31, 2020.
Components of Net Periodic Benefit Costs (Credits) for the Years Ended December 31,PensionOPEB
202120202019202120202019
 (In millions)
Service cost $195 $194 $193 $4 $4 $3 
Interest cost 226 287 373 11 15 22 
Expected return on plan assets (652)(618)(540)(36)(33)(29)
Amortization of prior service costs (credits) (1)
3 12 7 (17)(46)(36)
Special termination costs (2)
— — 14 — — — 
One-time termination benefits (3)
— 8 — — — — 
Pension & OPEB mark-to-market (4)
(253)463 656 (129)14 20 
Net periodic benefit costs (credits)$(481)$346 $703 $(167)$(46)$(20)
(1) 2020 includes the acceleration of approximately $18 million in net credits as a result of the FES Debtors’ emergence during the first quarter of 2020 and is a component of discontinued operations in FirstEnergy’s Consolidated Statements of Income.
(2) Subject to a cap, FirstEnergy 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. The costs are a component of discontinued operations in FirstEnergy’s Consolidated Statements of Income.
(3) Costs represent additional benefits provided to FES and FENOC employees under the approved settlement agreement and are a component of discontinued operations.
(4) Of the total Pension and OPEB mark-to-market adjustment for 2019, approximately $2 million is included in discontinued operations.

The annual pension and OPEB mark-to-market adjustments, (gains) or losses, for the years ended December 31, 2021, 2020, and 2019 were $(382) million, $477 million (including $423 million in the first quarter of 2020), and $676 million, respectively. Of these annual pension and OPEB mark-to-market amounts, approximately $(31) million, $40 million and $47 million were allocated to the Transmission Companies and certain of FirstEnergy's utilities under forward-looking formula rates, and expected to be refunded or recovered through formula transmission rates, respectively. The 2021 pension and OPEB mark-to-market adjustment primarily reflects an approximate 35 bps increase in the discount rate used to measure pension benefit obligations.

Under the approved bankruptcy settlement agreement, upon emergence, FES and FENOC employees ceased earning years of service under the FirstEnergy pension and OPEB plans. The emergence on February 27, 2020, triggered a remeasurement of the affected pension and OPEB plans and as a result, FirstEnergy recognized a non-cash, pre-tax pension and OPEB mark-to-market adjustment of approximately $423 million in the first quarter of 2020. In the fourth quarter 2020, FirstEnergy recognized a $54 million pension and OPEB mark-to-market adjustment.
PensionOPEB
Obligations and Funded Status - Qualified and Non-Qualified Plans2021202020212020
(In millions)
Change in benefit obligation:
Benefit obligation as of January 1$11,935 $11,050$676 $654
Service cost195 1944 4
Interest cost226 28711 15
Plan participants’ contributions— —4 4
Plan amendments— 9— —
Medicare retiree drug subsidy— —1 1
Actuarial loss (gain)(280)1,011(101)41
Benefits paid(597)(616)(46)(43)
Benefit obligation as of December 31$11,479 $11,935$549 $676
Change in fair value of plan assets:
Fair value of plan assets as of January 1$8,968 $8,395$502 $458
Actual return on plan assets625 1,16564 60
Company contributions24 2424 23
Plan participants’ contributions— —4 4
Benefits paid(597)(616)(46)(43)
Fair value of plan assets as of December 31$9,020 $8,968$548 $502
Funded Status:
Qualified plan$(1,974)$(2,500)$— $—
Non-qualified plans(485)(467)— —
Funded Status (Net liability as of December 31)$(2,459)$(2,967)$(1)$(174)
Accumulated benefit obligation$10,927 $11,376 $— $— 
Amounts Recognized in AOCI:
Prior service cost (credit)$9 $12 $(21)$(39)
Assumptions Used to Determine Benefit Obligations    
(as of December 31)
Discount rate3.02 %2.67 %2.84 %2.45 %
Rate of compensation increase4.10 %4.10 %N/AN/A
Cash balance weighted average interest crediting rate2.57 %2.57 %N/AN/A
Assumed Health Care Cost Trend Rates
(as of December 31)
Health care cost trend rate assumed (pre/post-Medicare)N/AN/A
5.75%-5.25%
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
The following tables set forth pension financial assets that are accounted for at fair value by level within the fair value hierarchy. See Note 8, "Fair Value Measurements," for a description of each level of the fair value hierarchy. There were no significant transfers between levels during 2021 and 2020.
December 31, 2021Asset Allocation
Level 1Level 2Level 3Total
(In millions)
Cash and short-term securities$— $746 $— $746 8 %
Public equity2,867 286 — 3,153 35 %
Fixed income— 2,453 — 2,453 27 %
Derivatives20 — — 20 — %
Total (1)
$2,887 $3,485 $— $6,372 70 %
Private - equity and debt funds (2)
811 9 %
Insurance-linked securities (2)
320 4 %
Hedge funds (2)
678 7 %
Real estate funds (2)
886 10 %
Total Investments$9,067 100 %
(1)Excludes $(47) million as of December 31, 2021, 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.

December 31, 2020Asset Allocation
Level 1Level 2Level 3Total
(In millions)
Cash and short-term securities$— $1,493 $— $1,493 17 %
Public equity1,903 162 — 2,065 23 %
Fixed income— 3,059 — 3,059 35 %
Derivatives(13)— — (13)— %
Total (1)
$1,890 $4,714 $— $6,604 75 %
Private - equity and debt funds (2)
465 5 %
Insurance-linked securities (2)
323 4 %
Hedge funds (3)
645 7 %
Real estate funds (2)
815 9 %
Total Investments$8,852 100 %
(1)Excludes $116 million as of December 31, 2020, 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.

As of December 31, 2021, and 2020, the OPEB trust investments measured at fair value were as follows:
December 31, 2021Asset Allocation
Level 1Level 2Level 3Total
(In millions)
Cash and short-term securities$— $95 $— $95 17 %
Public equity278 — — 278 51 %
Fixed income— 175 — 175 32 %
Total $278 $270 $— $548 100 %

December 31, 2020Asset Allocation
Level 1Level 2Level 3Total
(In millions)
Cash and short-term securities$— $84 $— $84 17 %
Public equity283 — — 283 55 %
Fixed income:— 145 — 145 28 %
Total (1)
$283 $229 $— $512 100 %
(1) Excludes $(10) million as of December 31, 2020, 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 2021 and 2020 are shown in the following table:
Target Asset Allocations
20212020
Equities38 %38 %
Fixed income30 %30 %
Hedge funds8 %8 %
Real estate10 %10 %
Alternative investments8 %8 %
Cash and short-term securities6 %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)
2022$566 $44 $(1)
2023575 41 (1)
2024581 39 (1)
2025590 38 — 
2026598 37 — 
Years 2027-20303,075 164 (2)