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Retirement Benefits | 12 Months Ended
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Dec. 31, 2011
Retirement Benefits | 12: RETIREMENT BENEFITS CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans. These plans include:
| • |  | a non-contributory, qualified defined benefit Pension Plan (closed to new non-union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005);
| • |  | a qualified cash balance Pension Plan for certain employees hired between July 1, 2003 and August 31, 2005;
| • |  | a non-contributory, qualified DCCP for employees hired on or after September 1, 2005;
| • |  | benefits to certain management employees under a non-contributory, nonqualified defined benefit SERP (closed to new participants as of March 31, 2006);
| • |  | a non-contributory, nonqualified DC SERP for certain management employees hired or promoted on or after April 1, 2006;
| • |  | health care and life insurance benefits under an OPEB plan;
| • |  | benefits to a selected group of management under a non-contributory, nonqualified EISP; and
| • |  | a contributory, qualified defined contribution 401(k) plan.
Pension Plan: Participants in the Pension Plan include CMS Energy's and Consumers' present employees, employees of their subsidiaries, and employees of Panhandle, a former CMS Energy subsidiary. Pension Plan trust assets are not distinguishable by company. CMS Energy and Consumers provide an employer contribution of five percent of base pay to the DCCP 401(k) plan for employees hired on or after September 1, 2005. On January 1, 2011, the employer contribution was increased to six percent. Employees are not required to contribute in order to receive the plan's employer contribution. Participants in the cash balance Pension Plan, effective July 1, 2003 to August 31, 2005, also participate in the DCCP as of September 1, 2005. Additional pay credits under the cash balance Pension Plan were discontinued as of September 1, 2005. DCCP expense for CMS Energy and Consumers was $7 million for the year ended December 31, 2011, $5 million for the year ended December 31, 2010, and $4 million for the year ended December 31, 2009. SERP: The SERP is a non-qualified plan as defined by the Internal Revenue Code. SERP benefits are paid from a rabbi trust established in 1988. SERP rabbi trust earnings are taxable. Presented in the following table are the funded status and fair value of trust assets for CMS Energy's and Consumers' SERP In Millions
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
Trust assets 1 |  | $ | 114 |  |  | $ | 91 |
ABO |  |  | 117 |  |  |  | 107 |
Contributions |  |  | 27 |  |  |  | 17 |
CONSUMERS |  |  |  |  |  |  |  |
Trust assets 1 |  | $ | 75 |  |  | $ | 57 |
ABO |  |  | 76 |  |  |  | 66 |
Contributions |  |  | 20 |  |  |  | 11 |
1 | Trust assets are included in other non-current assets on CMS Energy's and Consumers' consolidated balance sheets.
On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the SERP. The DC SERP provides participants benefits ranging from 5 percent to 15 percent of total compensation. The DC SERP requires a minimum of five years of participation before vesting. CMS Energy's and Consumers' contributions to the plan, if any, are placed in a grantor trust. For CMS Energy and Consumers, trust assets were less than $1 million at December 31, 2011 and December 31, 2010. DC SERP assets are included in other non-current assets on CMS Energy's and Consumers' consolidated balance sheets. CMS Energy's and Consumers' DC SERP expense was less than $1 million for each of the years ended December 31, 2011, 2010, and 2009. 401(k): The 401(k) plan employer match equals 60 percent of eligible contributions up to the first six percent of an employee's wages. The total 401(k) plan cost for CMS Energy, including Consumers, was $16 million for each of the years ended December 31, 2011, 2010, and 2009. The total 401(k) plan cost for Consumers was $16 million for the year ended December 31, 2011 and $15 million for each of the years ended December 31, 2010 and 2009. EISP: In 2002, CMS Energy and Consumers implemented a nonqualified EISP to provide flexibility in separation of employment by officers, a selected group of management, or other highly compensated employees. Terms of the plan include payment of a lump sum, payment of monthly benefits for life, payment of premiums for continuation of health care, or any other legally permissible term deemed to be in CMS Energy's and Consumers' best interest. EISP expense for CMS Energy and Consumers was less than $1 million for each of the years ended December 31, 2011, 2010, and 2009. The ABO for the EISP for CMS Energy, including Consumers, was $5 million at December 31, 2011 and 2010. The ABO for the EISP for Consumers was $1 million at December 31, 2011 and 2010. OPEB: Participants in the OPEB plan include all regular full-time employees covered by the employee health care plan on the day before retirement from either CMS Energy or Consumers at age 55 or older with at least ten full years of applicable continuous service. Regular full-time employees who qualify for Pension Plan disability retirement and have 15 years of applicable continuous service may also participate in the OPEB plan. Retiree health care costs were based on the assumption that costs would increase 7.5 percent in 2012 and 8.0 percent in 2011 for all retirees. The rate of increase was assumed to decline to five percent for all retirees by 2017 and thereafter. The assumptions used in the health care cost-trend rate affect service, interest, and PBO costs. Presented in the following table are the effects of a one-percentage-point change in the health care cost-trend assumption:
|  | One Percentage Point Increase |  |  | One Percentage Point Decrease |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
Effect on total service and interest cost component |  |  | $ 19 |  |  |  | $ (16) |
Effect on PBO |  |  | 245 |  |  |  | (2 13) |
CONSUMERS |  |  |  |  |  |  |  |
Effect on total service and interest cost component |  |  | $ 18 |  |  |  | $ (15) |
Effect on PBO |  |  | 238 |  |  |  | (207) |
Assumptions: Presented in the following tables are the weighted-average assumptions used in CMS Energy's and Consumers' retirement benefits plans to determine benefit obligations and net periodic benefit cost:
|  | Pension and SERP |  |  | OPEB |
December 31 |  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |  |  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |
Weighted Average for Benefit Obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  |  | 4.90 | % |  |  | 5.40 | % |  |  | 5.85 | % |  |  | 5.10 | % |  |  | 5.60 | % |  |  | 6.00 | %
Mortality table 2 |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension |  |  | 3.50 | % |  |  | 4.00 | % |  |  | 4.00 | % |  |  |  |  |  |  |  |  |  |  |  |
SERP |  |  | 5.50 | % |  |  | 5.50 | % |  |  | 5.50 | % |  |  |  |  |  |  |  |  |  |  |  |
|  | Pension and SERP |  |  | OPEB |
December 31 |  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |  |  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |
Weighted Average for Net Periodic Benefit Cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  |  | 5.40 | % |  |  | 5.85 | % |  |  | 6.50 | % |  |  | 5.60 | % |  |  | 6.00 | % |  |  | 6.50 | %
Expected long-term rate of return on plan assets 3 |  |  | 8.00 | % |  |  | 8.00 | % |  |  | 8.25 | % |  |  | 7.50 | % |  |  | 7.50 | % |  |  | 7.75 | %
Mortality table 2 |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension |  |  | 4.00 | % |  |  | 4.00 | % |  |  | 4.00 | % |  |  |  |  |  |  |  |  |  |  |  |
SERP |  |  | 5.50 | % |  |  | 5.50 | % |  |  | 5.50 | % |  |  |  |  |  |  |  |  |  |  |  |
1 | The discount rate reflects the rate at which benefits could be effectively settled and is equal to the equivalent single rate resulting from a yield curve analysis. This analysis incorporated the projected benefit payments specific to CMS Energy's and Consumers' Pension Plan and OPEB plan and the yields on high quality corporate bonds rated Aa or better.
2 | The mortality assumption was based on the RP-2000 mortality tables with projection of future mortality improvements using Scale AA, which aligned with the IRS prescriptions for cash funding valuations under the Pension Protection Act of 2006.
3 | CMS Energy and Consumers determined the long-term rate of return using the historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and Consumers review for reasonableness and appropriateness the forecasted returns for various classes of assets used to construct an expected return model. CMS Energy's and Consumers' expected long-term rate of return on Pension Plan assets was eight percent in 2011. The actual return on Pension Plan assets was four percent in 2011, 13 percent in 2010, and 21 percent in 2009.
Costs: Presented in the following tables are the costs and other changes in plan assets and benefit obligations incurred in CMS Energy's and Consumers' retirement benefits plans: In Millions
|  | Pension and SERP |
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Net periodic pension cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 49 |  |  | $ | 45 |  |  | $ | 41 |
Interest expense |  |  | 106 |  |  |  | 104 |  |  |  | 102 |
Expected return on plan assets |  |  | (112 | ) |  |  | (92 | ) |  |  | (86 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 65 |  |  |  | 52 |  |  |  | 41 |
Prior service cost |  |  | 5 |  |  |  | 5 |  |  |  | 6 |
Net periodic pension cost |  | $ | 113 |  |  | $ | 114 |  |  | $ | 104 |
Regulatory adjustment 1 |  |  | - |  |  |  | 30 |  |  |  | - |
Net periodic pension cost after regulatory adjustment |  | $ | 113 |  |  | $ | 144 |  |  | $ | 104 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Net periodic pension cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 48 |  |  | $ | 44 |  |  | $ | 40 |
Interest expense |  |  | 101 |  |  |  | 99 |  |  |  | 97 |
Expected return on plan assets |  |  | (109 | ) |  |  | (89 | ) |  |  | (83 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 63 |  |  |  | 50 |  |  |  | 40 |
Prior service cost |  |  | 5 |  |  |  | 5 |  |  |  | 5 |
Net periodic pension cost |  | $ | 108 |  |  | $ | 109 |  |  | $ | 99 |
Regulatory adjustment 1 |  |  | - |  |  |  | 30 |  |  |  | - |
Net periodic pension cost after regulatory adjustment |  | $ | 108 |  |  | $ | 139 |  |  | $ | 99 |
In Millions
|  | OPEB |
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Net periodic OPEB cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 27 |  |  | $ | 26 |  |  | $ | 24 |
Interest expense |  |  | 77 |  |  |  | 80 |  |  |  | 80 |
Expected return on plan assets |  |  | (66 | ) |  |  | (60 | ) |  |  | (50 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 30 |  |  |  | 32 |  |  |  | 33 |
Prior service credit |  |  | (20 | ) |  |  | (17 | ) |  |  | (10 | )
Net periodic OPEB cost |  | $ | 48 |  |  | $ | 61 |  |  | $ | 77 |
Regulatory adjustment 1 |  |  | - |  |  |  | 5 |  |  |  | - |
Net periodic OPEB cost after regulatory adjustment |  | $ | 48 |  |  | $ | 66 |  |  | $ | 77 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Net periodic OPEB cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 26 |  |  | $ | 25 |  |  | $ | 24 |
Interest expense |  |  | 74 |  |  |  | 77 |  |  |  | 77 |
Expected return on plan assets |  |  | (61 | ) |  |  | (56 | ) |  |  | (46 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 31 |  |  |  | 33 |  |  |  | 33 |
Prior service credit |  |  | (20 | ) |  |  | (16 | ) |  |  | (10 | )
Net periodic OPEB cost |  | $ | 50 |  |  | $ | 63 |  |  | $ | 78 |
Regulatory adjustment 1 |  |  | - |  |  |  | 5 |  |  |  | - |
Net periodic OPEB cost after regulatory adjustment |  | $ | 50 |  |  | $ | 68 |  |  | $ | 78 |
1 | Regulatory adjustments are the differences between amounts included in rates and the periodic benefit cost calculated. These regulatory adjustments were offset by surcharge revenues, which resulted in no impact to net income for the years presented. The pension and OPEB regulatory liability was less than $1 million at December 31, 2011 and 2010.
For CMS Energy, the estimated net loss and prior service cost for the defined benefit Pension Plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $79 million and from AOCI is $2 million. For Consumers, the estimated net loss and prior service cost for the defined benefit Pension Plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $79 million. For CMS Energy, the estimated net loss and prior service credit for OPEB plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $33 million, with a decrease from AOCI of $1 million. For Consumers, the estimated net loss and prior service credit for OPEB plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $33 million. CMS Energy and Consumers amortize net gains and losses in excess of ten percent of the greater of the PBO or the MRV over the average remaining service period. The estimated period of amortization of gains and losses for CMS Energy and Consumers was 11 years for pension and 13 years for OPEB for the year ended December 31, 2011, and 12 years for pension and 14 years for OPEB for each of the years ended December 31, 2010 and 2009. Prior service cost amortization is established in the year in which the prior service cost first occurred, and is based on the same amortization period for all future years until the prior service costs are fully amortized. CMS Energy and Consumers had new prior services credits for OPEB in 2010. The estimated period of amortization of these new prior service credits for CMS Energy and Consumers was ten years for OPEB for the year ended December 31, 2010. Reconciliations: Presented in the following tables are reconciliations of the funded status of CMS Energy's and Consumers' retirement benefits plans with their retirement benefits plans' liabilities:
In Millions |
Years Ended December 31 |  | Pension Plan |
|  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 1,896 |  |  | $ | 1,717 |
Service cost |  |  | 48 |  |  |  | 44 |
Interest cost |  |  | 100 |  |  |  | 98 |
Actuarial loss |  |  | 107 |  |  |  | 150 |
Benefits paid |  |  | (79 | ) |  |  | (113 | )
Benefit obligation at end of period 1 |  | $ | 2,072 |  |  | $ | 1,896 |
Plan assets at fair value at beginning of period |  | $ | 1,401 |  |  | $ | 1,007 |
Actual return on plan assets |  |  | 54 |  |  |  | 132 |
Company contribution |  |  | 250 |  |  |  | 375 |
Actual benefits paid 2 |  |  | (79 | ) |  |  | (113 | )
Plan assets at fair value at end of period |  | $ | 1,626 |  |  | $ | 1,401 |
Funded status at December 31 3,4 |  | $ | (446 | ) |  | $ | (495 | )
In Millions |
Years Ended December 31 |  | SERP |  |  |  |  | OPEB |
|  | 2011 |  |  |  | 2010 |  |  |  |  |  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 118 |  |  | $ | 106 |  |  |  |  | $ | 1,410 |  |  | $ | 1,423 |
Service cost |  |  | 1 |  |  |  | 1 |  |  |  |  |  | 27 |  |  |  | 26 |
Interest cost |  |  | 6 |  |  |  | 6 |  |  |  |  |  | 77 |  |  |  | 80 |
Plan amendments 5 |  |  | - |  |  |  | - |  |  |  |  |  | - |  |  |  | (101 | )
Actuarial loss |  |  | 8 |  |  |  | 11 |  |  |  |  |  | 180 |  |  |  | 36 |
Benefits paid |  |  | (6 | ) |  |  | (6 | ) |  |  |  |  | (53 | ) |  |  | (54 | )
Benefit obligation at end of period 1 |  | $ | 127 |  |  | $ | 118 |  |  |  |  | $ | 1,641 |  |  | $ | 1,410 |
Plan assets at fair value at beginning of period |  | $ | - |  |  | $ | - |  |  |  |  | $ | 887 |  |  | $ | 782 |
Actual return on plan assets |  |  | - |  |  |  | - |  |  |  |  |  | 23 |  |  |  | 88 |
Company contribution |  |  | 6 |  |  |  | 6 |  |  |  |  |  | 67 |  |  |  | 71 |
Actual benefits paid 2 |  |  | (6 | ) |  |  | (6 | ) |  |  |  |  | (53 | ) |  |  | (54 | )
Plan assets at fair value at end of period |  | $ | - |  |  | $ | - |  |  |  |  | $ | 924 |  |  | $ | 887 |
Funded status at December 31 3 |  | $ | (127 | ) |  | $ | (118 | ) |  |  |  | $ | (717 | ) |  | $ | (523 | )
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 77 |  |  | $ | 67 |  |  |  |  | $ | 1,358 |  |  | $ | 1,373 |
Service cost |  |  | 1 |  |  |  | 1 |  |  |  |  |  | 26 |  |  |  | 25 |
Interest cost |  |  | 4 |  |  |  | 4 |  |  |  |  |  | 74 |  |  |  | 77 |
Plan amendments 5 |  |  | - |  |  |  | - |  |  |  |  |  | - |  |  |  | (100 | )
Actuarial loss |  |  | 6 |  |  |  | 8 |  |  |  |  |  | 178 |  |  |  | 34 |
Benefits paid |  |  | (3 | ) |  |  | (3 | ) |  |  |  |  | (51 | ) |  |  | (51 | )
Benefit obligation at end of period 1 |  | $ | 85 |  |  | $ | 77 |  |  |  |  | $ | 1,585 |  |  | $ | 1,358 |
Plan assets at fair value at beginning of period |  | $ | - |  |  | $ | - |  |  |  |  | $ | 825 |  |  | $ | 725 |
Actual return on plan assets |  |  | - |  |  |  | - |  |  |  |  |  | 21 |  |  |  | 81 |
Company contribution |  |  | 3 |  |  |  | 3 |  |  |  |  |  | 66 |  |  |  | 70 |
Actual benefits paid 2 |  |  | (3 | ) |  |  | (3 | ) |  |  |  |  | (51 | ) |  |  | (51 | )
Plan assets at fair value at end of period |  | $ | - |  |  | $ | - |  |  |  |  | $ | 861 |  |  | $ | 825 |
Funded status at December 31 3 |  | $ | (85 | ) |  | $ | (77 | ) |  |  |  | $ | (724 | ) |  | $ | (533 | )
1 | The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy, which is tax-exempt, to sponsors of retiree health care benefit plans that provide a benefit that is actuarially equivalent to Medicare Part D. In 2010, the Health Care Acts repealed these tax-exempt deductions for years beginning after December 31, 2012. The Medicare Part D annualized reduction in net OPEB cost for CMS Energy was $26 million for 2011, $28 million for 2010, and $19 million for 2009. Consumers' Medicare Part D annualized reduction in net OPEB costs was $25 million for 2011, $26 million for 2010, and $18 million for 2009. The reduction for CMS Energy and Consumers included $9 million for 2011, $10 million for 2010, and $6 million for 2009 in capitalized OPEB costs.
2 | CMS Energy received payments of $5 million in each of 2011 and 2010 and $4 million in 2009 for the Medicare Part D subsidies. Consumers received payments of $5 million in each of 2011 and 2010 and $4 million in 2009 for the Medicare Part D subsidies.
3 | At December 31, 2011, CMS Energy classified $7 million as current liabilities and $1.3 billion as non-current liabilities on its consolidated balance sheets. At December 31, 2010, CMS Energy classified $7 million as current liabilities and $1.1 billion as non-current liabilities on its consolidated balance sheets. Current liabilities relate to SERP projected payments for the next year. At December 31, 2011, Consumers classified $4 million as current liabilities and $1.2 billion as non-current liabilities on its consolidated balance sheets. At December 31, 2010, Consumers classified $4 million as current liabilities and $1.1 billion as non-current liabilities on its consolidated balance sheets.
4 | At December 31, 2011, $414 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses. At December 31, 2010, $463 million of the funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses.
5 | Plan amendments reflect changes resulting from an agreement reached with the UWUA in April 2010 on a new five-year contract for UWUA members.
Presented in the following table are the Pension Plan PBO, ABO, and fair value of plan assets:
In Millions |
Years Ended December 31 |  | 2011 |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
Pension PBO |  | $ | 2,072 |  |  | $ | 1,896 |
Pension ABO |  |  | 1,765 |  |  |  | 1,517 |
Fair value of Pension Plan assets |  |  | 1,626 |  |  |  | 1,401 |
Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets, see Note 6, Regulatory Matters.
In Millions |
|  | Pension and SERP |  |  |  |  | OPEB |
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |  |  |  |  |  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 1,014 |  |  | $ | 914 |  |  |  |  | $ | 766 |  |  | $ | 579 |
Prior service cost (credit) |  |  | 17 |  |  |  | 23 |  |  |  |  |  | (132 | ) |  |  | (152 | )
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) |  |  | 81 |  |  |  | 72 |  |  |  |  |  | (5 | ) |  |  | (9 | )
Prior service cost (credit) |  |  | 2 |  |  |  | 2 |  |  |  |  |  | (3 | ) |  |  | (4 | )
Total amounts recognized in regulatory assets and AOCI |  | $ | 1,114 |  |  | $ | 1,011 |  |  |  |  | $ | 626 |  |  | $ | 414 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 1,014 |  |  | $ | 914 |  |  |  |  | $ | 766 |  |  | $ | 579 |
Prior service cost (credit) |  |  | 17 |  |  |  | 23 |  |  |  |  |  | (132 | ) |  |  | (152 | )
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 27 |  |  |  | 22 |  |  |  |  |  | - |  |  |  | - |
Prior service cost |  |  | - |  |  |  | 1 |  |  |  |  |  | - |  |  |  | - |
Total amounts recognized in regulatory assets and AOCI |  | $ | 1,058 |  |  | $ | 960 |  |  |  |  | $ | 634 |  |  | $ | 427 |
Plan Assets: Presented in the following tables are the fair values of CMS Energy's and Consumers' Pension Plan and OPEB plan assets at December 31, 2011 and 2010, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 4, Fair Value Measurements.
|  | Pension Plan |
December 31, 2011 |  | Total |  |  | Level 1 |  |  | Level 2 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 241 |  |  | $ | 241 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 24 |  |  |  | — |  |  |  | 24 |
Corporate debt 3 |  |  | 236 |  |  |  | — |  |  |  | 236 |
State and municipal bonds 5 |  |  | 10 |  |  |  | — |  |  |  | 10 |
Foreign corporate debt 6 |  |  | 23 |  |  |  | — |  |  |  | 23 |
Mutual funds 8 |  |  | 257 |  |  |  | 257 |  |  |  | — |
Pooled funds 9 |  |  | 835 |  |  |  | — |  |  |  | 835 |
Total |  | $ | 1,626 |  |  | $ | 498 |  |  | $ | 1,128 |
|  | Pension Plan |
December 31, 2010 |  | Total |  |  | Level 1 |  |  | Level 2 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 248 |  |  | $ | 248 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 57 |  |  |  | — |  |  |  | 57 |
Corporate debt 3 |  |  | 161 |  |  |  | — |  |  |  | 161 |
State and municipal bonds 5 |  |  | 8 |  |  |  | — |  |  |  | 8 |
Foreign corporate debt 6 |  |  | 17 |  |  |  | — |  |  |  | 17 |
Mutual funds 8 |  |  | 183 |  |  |  | 183 |  |  |  | — |
Pooled funds 9 |  |  | 727 |  |  |  | — |  |  |  | 727 |
Total |  | $ | 1,401 |  |  | $ | 431 |  |  | $ | 970 |
|  | OPEB Plan |
December 31, 2011 |  | Total |  |  | Level 1 |  |  | Level 2 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 64 |  |  | $ | 64 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 203 |  |  |  | — |  |  |  | 203 |
Corporate debt 4 |  |  | 28 |  |  |  | — |  |  |  | 28 |
State and municipal bonds 5 |  |  | 71 |  |  |  | — |  |  |  | 71 |
Foreign corporate debt 6 |  |  | 3 |  |  |  | — |  |  |  | 3 |
Common stocks 7 |  |  | 113 |  |  |  | 113 |  |  |  | — |
Mutual funds 8 |  |  | 31 |  |  |  | 31 |  |  |  | — |
Pooled funds 10 |  |  | 411 |  |  |  | — |  |  |  | 411 |
Total |  | $ | 924 |  |  | $ | 208 |  |  | $ | 716 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 60 |  |  | $ | 60 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 189 |  |  |  | — |  |  |  | 189 |
Corporate debt 4 |  |  | 26 |  |  |  | — |  |  |  | 26 |
State and municipal bonds 5 |  |  | 66 |  |  |  | — |  |  |  | 66 |
Foreign corporate debt 6 |  |  | 3 |  |  |  | — |  |  |  | 3 |
Common stocks 7 |  |  | 105 |  |  |  | 105 |  |  |  | — |
Mutual funds 8 |  |  | 29 |  |  |  | 29 |  |  |  | — |
Pooled funds 10 |  |  | 383 |  |  |  | — |  |  |  | 383 |
Total |  | $ | 861 |  |  | $ | 194 |  |  | $ | 667 |
|  | OPEB Plan |
December 31, 2010 |  | Total |  |  | Level 1 |  |  | Level 2 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 56 |  |  | $ | 56 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 181 |  |  |  | — |  |  |  | 181 |
Corporate debt 4 |  |  | 20 |  |  |  | — |  |  |  | 20 |
State and municipal bonds 5 |  |  | 36 |  |  |  | — |  |  |  | 36 |
Foreign corporate debt 6 |  |  | 2 |  |  |  | — |  |  |  | 2 |
Common stocks 7 |  |  | 154 |  |  |  | 154 |  |  |  | — |
Mutual funds 8 |  |  | 23 |  |  |  | 23 |  |  |  | — |
Pooled funds 10 |  |  | 415 |  |  |  | — |  |  |  | 415 |
Total |  | $ | 887 |  |  | $ | 233 |  |  | $ | 654 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 52 |  |  | $ | 52 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 168 |  |  |  | — |  |  |  | 168 |
Corporate debt 4 |  |  | 19 |  |  |  | — |  |  |  | 19 |
State and municipal bonds 5 |  |  | 34 |  |  |  | — |  |  |  | 34 |
Foreign corporate debt 6 |  |  | 2 |  |  |  | — |  |  |  | 2 |
Common stocks 7 |  |  | 143 |  |  |  | 143 |  |  |  | — |
Mutual funds 8 |  |  | 21 |  |  |  | 21 |  |  |  | — |
Pooled funds 10 |  |  | 386 |  |  |  | — |  |  |  | 386 |
Total |  | $ | 825 |  |  | $ | 216 |  |  | $ | 609 |
1 | Cash and short-term investments consist of money market funds with daily liquidity.
2 | U.S. government and agencies securities consist of U.S. Treasury notes and other debt securities backed by the U.S. government and related agencies. These securities were valued based on quoted market prices.
3 | At December 31, 2011, corporate debt investments in the Pension Plan comprised investment grade bonds (69 percent) and non-investment grade, high-yield bonds (31 percent) of U.S. issuers from diverse industries. At December 31, 2010, corporate debt investments in the Pension Plan comprised investment grade bonds (61 percent) and non-investment grade, high-yield bonds (39 percent) of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields presently available on comparable securities of issuers with similar credit ratings.
4 | At December 31, 2011, corporate debt investments in the OPEB plan comprised investment grade bonds (69 percent) and non-investment grade, high-yield bonds (31 percent) of U.S. issuers from diverse industries. At December 31, 2010, corporate debt investments in the OPEB plan comprised investment grade bonds (61 percent) and non-investment grade, high-yield bonds (39 percent) of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields presently available on comparable securities of issuers with similar credit ratings.
5 | State and municipal bonds were valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds was derived from various observable inputs, including benchmark yields, reported securities trades, broker/dealer quotes, bond ratings, and general information on market movements for investment grade state and municipal securities normally considered by market participants when pricing such debt securities.
6 | Foreign corporate debt securities were valued based on quoted market prices, when available, or on yields available on comparable securities of issuers with similar credit ratings.
7 | Common stocks in the OPEB plan consist of equity securities with low transaction costs that were actively managed and tracked by the S&P 500 Index. These securities were valued at their quoted closing prices.
8 | Mutual funds represent shares in registered investment companies that are priced based on the quoted NAV that is the basis for transactions to buy or sell shares in the funds.
9 | Pooled funds in the Pension Plan include both common and collective trust funds as well as special funds that contain only employee benefit plan assets from two or more unrelated benefit plans. At December 31, 2011, these funds comprised investments in U.S. equity securities (53 percent), foreign equity securities (22 percent), foreign fixed-income securities (16 percent), U.S. fixed-income securities (five percent), and alternative investments (four percent). At December 31, 2010, these funds comprised investments in U.S. equity securities (55 percent), foreign equity securities (24 percent), foreign fixed-income securities (14 percent), U.S. fixed-income securities (four percent), and alternative investments (three percent). These investments were valued at the quoted NAV provided by the fund managers that is the basis for transactions to buy or sell shares in the funds.
10 | Pooled funds in the OPEB plan include both common and collective trust funds as well as special funds that contain only employee benefit plan assets from two or more unrelated benefit plans. At December 31, 2011, these funds comprised investments in U.S. equity securities (88 percent), foreign equity securities (six percent), foreign fixed-income securities (four percent), U.S. fixed-income securities (one percent), and alternative investments (one percent). At December 31, 2010, these funds comprised investments in U.S. equity securities (89 percent), foreign equity securities (six percent), foreign fixed-income securities (three percent), U.S. fixed-income securities (one percent), and alternative investments (one percent). These investments are valued at the quoted NAV provided by the fund managers that is the basis for transactions to buy or sell shares in the funds.
Presented in the following table are the contributions to CMS Energy's and Consumers' OPEB plan and Pension Plan:
In Millions |
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
OPEB 1 |  |  |  |  |  |  |  |
VEBA trust |  | $ | 48 |  |  | $ | 57 |
401(h) component |  |  | 19 |  |  |  | 14 |
|  | $ | 67 |  |  | $ | 71 |
Pension 2 |  | $ | 250 |  |  | $ | 375 |
CONSUMERS |  |  |  |  |  |  |  |
OPEB 1 |  |  |  |  |  |  |  |
VEBA trust |  | $ | 47 |  |  | $ | 57 |
401(h) component |  |  | 19 |  |  |  | 13 |
|  | $ | 66 |  |  | $ | 70 |
Pension 2 |  | $ | 245 |  |  | $ | 366 |
1 | CMS Energy, including Consumers, plans to contribute $65 million to the OPEB plan in 2012 and Consumers plans to contribute $64 million to the OPEB plan in 2012.
2 | CMS Energy, including Consumers, does not plan to contribute to the Pension Plan in 2012.
Contributions include required and discretionary amounts. Actual future contributions will depend on future investment performance, changes in discount rates, and various factors related to the populations participating in the plans. In 2011, CMS Energy reached its target asset allocation for Pension Plan assets of 50 percent equity, 30 percent fixed income, and 20 percent alternative-strategy investments. This target asset allocation is expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plan. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P MidCap and SmallCap Indexes and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers as well as high-yield and global bond funds. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. CMS Energy and Consumers use annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation. CMS Energy and Consumers established union and non-union VEBA trusts to fund their future retiree health and life insurance benefits. These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non-utility subsidiaries. CMS Energy and Consumers have a target asset allocation of 60 percent equity and 40 percent fixed-income investments. CMS Energy and Consumers invest the equity portions of the union and non-union health care VEBA trusts in an S&P 500 Index fund. CMS Energy and Consumers invest the fixed-income portion of the union health care VEBA trust in domestic investment grade taxable instruments. CMS Energy and Consumers invest the fixed-income portion of the non-union health care VEBA trust in a diversified mix of domestic tax-exempt securities. The investment selections of each VEBA trust are influenced by the tax consequences, as well as the objective of generating asset returns that will meet the medical and life insurance costs of retirees. Benefit Payments: Presented in the following table are the expected benefit payments for each of the next five years and the five-year period thereafter:
In Millions |
|  |  | Pension |  |  |  | SERP |  |  |  | OPEB | 1
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
2012 |  | $ | 111 |  |  | $ | 7 |  |  | $ | 70 |
2013 |  |  | 120 |  |  |  | 7 |  |  |  | 73 |
2014 |  |  | 129 |  |  |  | 7 |  |  |  | 76 |
2015 |  |  | 138 |  |  |  | 8 |  |  |  | 80 |
2016 |  |  | 144 |  |  |  | 8 |  |  |  | 83 |
2017-2021 |  |  | 777 |  |  |  | 44 |  |  |  | 466 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
2012 |  | $ | 108 |  |  | $ | 4 |  |  | $ | 67 |
2013 |  |  | 117 |  |  |  | 4 |  |  |  | 70 |
2014 |  |  | 126 |  |  |  | 4 |  |  |  | 73 |
2015 |  |  | 134 |  |  |  | 4 |  |  |  | 76 |
2016 |  |  | 140 |  |  |  | 4 |  |  |  | 80 |
2017-2021 |  |  | 757 |  |  |  | 23 |  |  |  | 445 |
1 | CMS Energy's and Consumers' OPEB benefit payments are net of employee contributions and expected Medicare Part D prescription drug subsidy payments. For CMS Energy, subsidies to be received are estimated to be $6 million for 2012, $7 million for each of 2013 and 2014, $8 million for each of 2015 and 2016, and $49 million combined for 2017 through 2021. For Consumers, subsidies to be received are estimated to be $6 million for each of 2012 and 2013, $7 million for each of 2014 and 2015, $8 million for 2016, and $47 million combined for 2017 through 2021.
Collective Bargaining Agreements: At December 31, 2011, unions represented 42 percent of CMS Energy's employees and 44 percent of Consumers' employees. The UWUA represents Consumers' operating, maintenance, construction, and call center employees. The USW represents Zeeland employees. Union contracts expire in 2015.
Consumers Energy Company [Member] |
Retirement Benefits | 12: RETIREMENT BENEFITS CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans. These plans include:
| • |  | a non-contributory, qualified defined benefit Pension Plan (closed to new non-union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005);
| • |  | a qualified cash balance Pension Plan for certain employees hired between July 1, 2003 and August 31, 2005;
| • |  | a non-contributory, qualified DCCP for employees hired on or after September 1, 2005;
| • |  | benefits to certain management employees under a non-contributory, nonqualified defined benefit SERP (closed to new participants as of March 31, 2006);
| • |  | a non-contributory, nonqualified DC SERP for certain management employees hired or promoted on or after April 1, 2006;
| • |  | health care and life insurance benefits under an OPEB plan;
| • |  | benefits to a selected group of management under a non-contributory, nonqualified EISP; and
| • |  | a contributory, qualified defined contribution 401(k) plan.
Pension Plan: Participants in the Pension Plan include CMS Energy's and Consumers' present employees, employees of their subsidiaries, and employees of Panhandle, a former CMS Energy subsidiary. Pension Plan trust assets are not distinguishable by company. CMS Energy and Consumers provide an employer contribution of five percent of base pay to the DCCP 401(k) plan for employees hired on or after September 1, 2005. On January 1, 2011, the employer contribution was increased to six percent. Employees are not required to contribute in order to receive the plan's employer contribution. Participants in the cash balance Pension Plan, effective July 1, 2003 to August 31, 2005, also participate in the DCCP as of September 1, 2005. Additional pay credits under the cash balance Pension Plan were discontinued as of September 1, 2005. DCCP expense for CMS Energy and Consumers was $7 million for the year ended December 31, 2011, $5 million for the year ended December 31, 2010, and $4 million for the year ended December 31, 2009. SERP: The SERP is a non-qualified plan as defined by the Internal Revenue Code. SERP benefits are paid from a rabbi trust established in 1988. SERP rabbi trust earnings are taxable. Presented in the following table are the funded status and fair value of trust assets for CMS Energy's and Consumers' SERP In Millions
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
Trust assets 1 |  | $ | 114 |  |  | $ | 91 |
ABO |  |  | 117 |  |  |  | 107 |
Contributions |  |  | 27 |  |  |  | 17 |
CONSUMERS |  |  |  |  |  |  |  |
Trust assets 1 |  | $ | 75 |  |  | $ | 57 |
ABO |  |  | 76 |  |  |  | 66 |
Contributions |  |  | 20 |  |  |  | 11 |
1 | Trust assets are included in other non-current assets on CMS Energy's and Consumers' consolidated balance sheets.
On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the SERP. The DC SERP provides participants benefits ranging from 5 percent to 15 percent of total compensation. The DC SERP requires a minimum of five years of participation before vesting. CMS Energy's and Consumers' contributions to the plan, if any, are placed in a grantor trust. For CMS Energy and Consumers, trust assets were less than $1 million at December 31, 2011 and December 31, 2010. DC SERP assets are included in other non-current assets on CMS Energy's and Consumers' consolidated balance sheets. CMS Energy's and Consumers' DC SERP expense was less than $1 million for each of the years ended December 31, 2011, 2010, and 2009. 401(k): The 401(k) plan employer match equals 60 percent of eligible contributions up to the first six percent of an employee's wages. The total 401(k) plan cost for CMS Energy, including Consumers, was $16 million for each of the years ended December 31, 2011, 2010, and 2009. The total 401(k) plan cost for Consumers was $16 million for the year ended December 31, 2011 and $15 million for each of the years ended December 31, 2010 and 2009. EISP: In 2002, CMS Energy and Consumers implemented a nonqualified EISP to provide flexibility in separation of employment by officers, a selected group of management, or other highly compensated employees. Terms of the plan include payment of a lump sum, payment of monthly benefits for life, payment of premiums for continuation of health care, or any other legally permissible term deemed to be in CMS Energy's and Consumers' best interest. EISP expense for CMS Energy and Consumers was less than $1 million for each of the years ended December 31, 2011, 2010, and 2009. The ABO for the EISP for CMS Energy, including Consumers, was $5 million at December 31, 2011 and 2010. The ABO for the EISP for Consumers was $1 million at December 31, 2011 and 2010. OPEB: Participants in the OPEB plan include all regular full-time employees covered by the employee health care plan on the day before retirement from either CMS Energy or Consumers at age 55 or older with at least ten full years of applicable continuous service. Regular full-time employees who qualify for Pension Plan disability retirement and have 15 years of applicable continuous service may also participate in the OPEB plan. Retiree health care costs were based on the assumption that costs would increase 7.5 percent in 2012 and 8.0 percent in 2011 for all retirees. The rate of increase was assumed to decline to five percent for all retirees by 2017 and thereafter. The assumptions used in the health care cost-trend rate affect service, interest, and PBO costs. Presented in the following table are the effects of a one-percentage-point change in the health care cost-trend assumption:
|  | One Percentage Point Increase |  |  | One Percentage Point Decrease |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
Effect on total service and interest cost component |  |  | $ 19 |  |  |  | $ (16) |
Effect on PBO |  |  | 245 |  |  |  | (2 13) |
CONSUMERS |  |  |  |  |  |  |  |
Effect on total service and interest cost component |  |  | $ 18 |  |  |  | $ (15) |
Effect on PBO |  |  | 238 |  |  |  | (207) |
Assumptions: Presented in the following tables are the weighted-average assumptions used in CMS Energy's and Consumers' retirement benefits plans to determine benefit obligations and net periodic benefit cost: Weighted Average for Benefit Obligations
|  | Pension and SERP |  |  | OPEB |
December 31 |  | 2011 |  |  | 2010 |  |  | 2009 |  |  | 2011 |  |  | 2010 |  |  | 2009 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  |  | 4.90 | % |  |  | 5.40 | % |  |  | 5.85 | % |  |  | 5.10 | % |  |  | 5.60 | % |  |  | 6.00 | %
Mortality table 2 |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension |  |  | 3.50 | % |  |  | 4.00 | % |  |  | 4.00 | % |  |  |  |  |  |  |  |  |  |  |  |
SERP |  |  | 5.50 | % |  |  | 5.50 | % |  |  | 5.50 | % |  |  |  |  |  |  |  |  |  |  |  |
Weighted Average for Net Periodic Benefit Cost
December 31 |  | Pension and SERP |  |  | OPEB |
| 2011 |  |  | 2010 |  |  | 2009 |  |  | 2011 |  |  | 2010 |  |  | 2009 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  |  | 5.40 | % |  |  | 5.85 | % |  |  | 6.50 | % |  |  | 5.60 | % |  |  | 6.00 | % |  |  | 6.50 | %
Expected long-term rate of return on plan assets 3 |  |  | 8.00 | % |  |  | 8.00 | % |  |  | 8.25 | % |  |  | 7.50 | % |  |  | 7.50 | % |  |  | 7.75 | %
Mortality table 2 |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |  |  |  | 2000 |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension |  |  | 4.00 | % |  |  | 4.00 | % |  |  | 4.00 | % |  |  |  |  |  |  |  |  |  |  |  |
SERP |  |  | 5.50 | % |  |  | 5.50 | % |  |  | 5.50 | % |  |  |  |  |  |  |  |  |  |  |  |
1 | The discount rate reflects the rate at which benefits could be effectively settled and is equal to the equivalent single rate resulting from a yield curve analysis. This analysis incorporated the projected benefit payments specific to CMS Energy's and Consumers' Pension Plan and OPEB plan and the yields on high quality corporate bonds rated Aa or better.
2 | The mortality assumption was based on the RP-2000 mortality tables with projection of future mortality improvements using Scale AA, which aligned with the IRS prescriptions for cash funding valuations under the Pension Protection Act of 2006.
3 | CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and Consumers review for reasonableness and appropriateness the forecasted returns for various classes of assets used to construct an expected return model. CMS Energy's and Consumers' expected long-term rate of return on Pension Plan assets was eight percent in 2011. The actual return on Pension Plan assets was four percent in 2011, 13 percent in 2010, and 21 percent in 2009.
Costs: Presented in the following tables are the costs and other changes in plan assets and benefit obligations incurred in CMS Energy's and Consumers' retirement benefits plans: In Millions
|  | Pension and SERP |
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Net periodic pension cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 49 |  |  | $ | 45 |  |  | $ | 41 |
Interest expense |  |  | 106 |  |  |  | 104 |  |  |  | 102 |
Expected return on plan assets |  |  | (112 | ) |  |  | (92 | ) |  |  | (86 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 65 |  |  |  | 52 |  |  |  | 41 |
Prior service cost |  |  | 5 |  |  |  | 5 |  |  |  | 6 |
Net periodic pension cost |  | $ | 113 |  |  | $ | 114 |  |  | $ | 104 |
Regulatory adjustment 1 |  |  | - |  |  |  | 30 |  |  |  | - |
Net periodic pension cost after regulatory adjustment |  | $ | 113 |  |  | $ | 144 |  |  | $ | 104 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Net periodic pension cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 48 |  |  | $ | 44 |  |  | $ | 40 |
Interest expense |  |  | 101 |  |  |  | 99 |  |  |  | 97 |
Expected return on plan assets |  |  | (109 | ) |  |  | (89 | ) |  |  | (83 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 63 |  |  |  | 50 |  |  |  | 40 |
Prior service cost |  |  | 5 |  |  |  | 5 |  |  |  | 5 |
Net periodic pension cost |  | $ | 108 |  |  | $ | 109 |  |  | $ | 99 |
Regulatory adjustment 1 |  |  | - |  |  |  | 30 |  |  |  | - |
Net periodic pension cost after regulatory adjustment |  | $ | 108 |  |  | $ | 139 |  |  | $ | 99 |
In Millions
|  | OPEB |
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Net periodic OPEB cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 27 |  |  | $ | 26 |  |  | $ | 24 |
Interest expense |  |  | 77 |  |  |  | 80 |  |  |  | 80 |
Expected return on plan assets |  |  | (66 | ) |  |  | (60 | ) |  |  | (50 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 30 |  |  |  | 32 |  |  |  | 33 |
Prior service credit |  |  | (20 | ) |  |  | (17 | ) |  |  | (10 | )
Net periodic OPEB cost |  | $ | 48 |  |  | $ | 61 |  |  | $ | 77 |
Regulatory adjustment 1 |  |  | - |  |  |  | 5 |  |  |  | - |
Net periodic OPEB cost after regulatory adjustment |  | $ | 48 |  |  | $ | 66 |  |  | $ | 77 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Net periodic OPEB cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 26 |  |  | $ | 25 |  |  | $ | 24 |
Interest expense |  |  | 74 |  |  |  | 77 |  |  |  | 77 |
Expected return on plan assets |  |  | (61 | ) |  |  | (56 | ) |  |  | (46 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 31 |  |  |  | 33 |  |  |  | 33 |
Prior service credit |  |  | (20 | ) |  |  | (16 | ) |  |  | (10 | )
Net periodic OPEB cost |  | $ | 50 |  |  | $ | 63 |  |  | $ | 78 |
Regulatory adjustment 1 |  |  | - |  |  |  | 5 |  |  |  | - |
Net periodic OPEB cost after regulatory adjustment |  | $ | 50 |  |  | $ | 68 |  |  | $ | 78 |
1 | Regulatory adjustments are the differences between amounts included in rates and the periodic benefit cost calculated. These regulatory adjustments were offset by surcharge revenues, which resulted in no impact to net income for the years presented. The pension and OPEB regulatory liability was less than $1 million at December 31, 2011 and 2010.
For CMS Energy, the estimated net loss and prior service cost for the defined benefit Pension Plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $79 million and from AOCI is $2 million. For Consumers, the estimated net loss and prior service cost for the defined benefit Pension Plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $79 million. For CMS Energy, the estimated net loss and prior service credit for OPEB plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $33 million, with a decrease from AOCI of $1 million. For Consumers, the estimated net loss and prior service credit for OPEB plans that will be amortized into net periodic benefit cost in 2012 from the regulatory asset is $33 million. CMS Energy and Consumers amortize net gains and losses in excess of ten percent of the greater of the PBO or the MRV over the average remaining service period. The estimated period of amortization of gains and losses for CMS Energy and Consumers was 11 years for pension and 13 years for OPEB for the year ended December 31, 2011, and 12 years for pension and 14 years for OPEB for each of the years ended December 31, 2010 and 2009. Prior service cost amortization is established in the year in which the prior service cost first occurred, and is based on the same amortization period for all future years until the prior service costs are fully amortized. CMS Energy and Consumers had new prior services credits for OPEB in 2010. The estimated period of amortization of these new prior service credits for CMS Energy and Consumers was ten years for OPEB for year ended December 31, 2010. Reconciliations: Presented in the following tables are reconciliations of the funded status of CMS Energy's and Consumers' retirement benefits plans with their retirement benefits plans' liabilities:
In Millions |
Years Ended December 31 |  | Pension Plan |
|  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 1,896 |  |  | $ | 1,717 |
Service cost |  |  | 48 |  |  |  | 44 |
Interest cost |  |  | 100 |  |  |  | 98 |
Actuarial loss |  |  | 107 |  |  |  | 150 |
Benefits paid |  |  | (79 | ) |  |  | (113 | )
Benefit obligation at end of period 1 |  | $ | 2,072 |  |  | $ | 1,896 |
Plan assets at fair value at beginning of period |  | $ | 1,401 |  |  | $ | 1,007 |
Actual return on plan assets |  |  | 54 |  |  |  | 132 |
Company contribution |  |  | 250 |  |  |  | 375 |
Actual benefits paid 2 |  |  | (79 | ) |  |  | (113 | )
Plan assets at fair value at end of period |  | $ | 1,626 |  |  | $ | 1,401 |
Funded status at December 31 3,4 |  | $ | (446 | ) |  | $ | (495 | )
In Millions |
Years Ended December 31 |  | SERP |  |  |  |  | OPEB |
|  | 2011 |  |  |  | 2010 |  |  |  |  |  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 118 |  |  | $ | 106 |  |  |  |  | $ | 1,410 |  |  | $ | 1,423 |
Service cost |  |  | 1 |  |  |  | 1 |  |  |  |  |  | 27 |  |  |  | 26 |
Interest cost |  |  | 6 |  |  |  | 6 |  |  |  |  |  | 77 |  |  |  | 80 |
Plan amendments 5 |  |  | - |  |  |  | - |  |  |  |  |  | - |  |  |  | (101 | )
Actuarial loss |  |  | 8 |  |  |  | 11 |  |  |  |  |  | 180 |  |  |  | 36 |
Benefits paid |  |  | (6 | ) |  |  | (6 | ) |  |  |  |  | (53 | ) |  |  | (54 | )
Benefit obligation at end of period 1 |  | $ | 127 |  |  | $ | 118 |  |  |  |  | $ | 1,641 |  |  | $ | 1,410 |
Plan assets at fair value at beginning of period |  | $ | - |  |  | $ | - |  |  |  |  | $ | 887 |  |  | $ | 782 |
Actual return on plan assets |  |  | - |  |  |  | - |  |  |  |  |  | 23 |  |  |  | 88 |
Company contribution |  |  | 6 |  |  |  | 6 |  |  |  |  |  | 67 |  |  |  | 71 |
Actual benefits paid 2 |  |  | (6 | ) |  |  | (6 | ) |  |  |  |  | (53 | ) |  |  | (54 | )
Plan assets at fair value at end of period |  | $ | - |  |  | $ | - |  |  |  |  | $ | 924 |  |  | $ | 887 |
Funded status at December 31 3 |  | $ | (127 | ) |  | $ | (118 | ) |  |  |  | $ | (717 | ) |  | $ | (523 | )
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 77 |  |  | $ | 67 |  |  |  |  | $ | 1,358 |  |  | $ | 1,373 |
Service cost |  |  | 1 |  |  |  | 1 |  |  |  |  |  | 26 |  |  |  | 25 |
Interest cost |  |  | 4 |  |  |  | 4 |  |  |  |  |  | 74 |  |  |  | 77 |
Plan amendments 5 |  |  | - |  |  |  | - |  |  |  |  |  | - |  |  |  | (100 | )
Actuarial loss |  |  | 6 |  |  |  | 8 |  |  |  |  |  | 178 |  |  |  | 34 |
Benefits paid |  |  | (3 | ) |  |  | (3 | ) |  |  |  |  | (51 | ) |  |  | (51 | )
Benefit obligation at end of period 1 |  | $ | 85 |  |  | $ | 77 |  |  |  |  | $ | 1,585 |  |  | $ | 1,358 |
Plan assets at fair value at beginning of period |  | $ | - |  |  | $ | - |  |  |  |  | $ | 825 |  |  | $ | 725 |
Actual return on plan assets |  |  | - |  |  |  | - |  |  |  |  |  | 21 |  |  |  | 81 |
Company contribution |  |  | 3 |  |  |  | 3 |  |  |  |  |  | 66 |  |  |  | 70 |
Actual benefits paid 2 |  |  | (3 | ) |  |  | (3 | ) |  |  |  |  | (51 | ) |  |  | (51 | )
Plan assets at fair value at end of period |  | $ | - |  |  | $ | - |  |  |  |  | $ | 861 |  |  | $ | 825 |
Funded status at December 31 3 |  | $ | (85 | ) |  | $ | (77 | ) |  |  |  | $ | (724 | ) |  | $ | (533 | )
1 | The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy, which is tax-exempt, to sponsors of retiree health care benefit plans that provide a benefit that is actuarially equivalent to Medicare Part D. In 2010, the Health Care Acts repealed these tax-exempt deductions for years beginning after December 31, 2012. The Medicare Part D annualized reduction in net OPEB cost for CMS Energy was $26 million for 2011, $28 million for 2010, and $19 million for 2009. Consumers' Medicare Part D annualized reduction in net OPEB costs was $25 million for 2011, $26 million for 2010, and $18 million for 2009. The reduction for CMS Energy and Consumers included $9 million for 2011, $10 million for 2010, and $6 million for 2009 in capitalized OPEB costs.
2 | CMS Energy received payments of $5 million in each of 2011 and 2010 and $4 million in 2009 for the Medicare Part D subsidies. Consumers received payments of $5 million in each of 2011 and 2010 and $4 million in 2009 for the Medicare Part D subsidies.
3 | At December 31, 2011, CMS Energy classified $7 million as current liabilities and $1.3 billion as non-current liabilities on its consolidated balance sheets. At December 31, 2010, CMS Energy classified $7 million as current liabilities and $1.1 billion as non-current liabilities on its consolidated balance sheets. Current liabilities relate to SERP projected payments for the next year. At December 31, 2011, Consumers classified $4 million as current liabilities and $1.2 billion as non-current liabilities on its consolidated balance sheets. At December 31, 2010, Consumers classified $4 million as current liabilities and $1.1 billion as non-current liabilities on its consolidated balance sheets.
4 | At December 31, 2011, $414 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses. At December 31, 2010, $463 million of the funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses.
5 | Plan amendments reflect changes resulting from an agreement reached with the UWUA in April 2010 on a new five-year contract for UWUA members.
Presented in the following table are the Pension Plan PBO, ABO, and fair value of plan assets:
In Millions |
Years Ended December 31 |  | 2011 |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
Pension PBO |  | $ | 2,072 |  |  | $ | 1,896 |
Pension ABO |  |  | 1,765 |  |  |  | 1,517 |
Fair value of Pension Plan assets |  |  | 1,626 |  |  |  | 1,401 |
Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets, see Note 6, Regulatory Matters.
In Millions |
|  | Pension and SERP |  |  |  |  | OPEB |
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |  |  |  |  |  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 1,014 |  |  | $ | 914 |  |  |  |  | $ | 766 |  |  | $ | 579 |
Prior service cost (credit) |  |  | 17 |  |  |  | 23 |  |  |  |  |  | (132 | ) |  |  | (152 | )
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) |  |  | 81 |  |  |  | 72 |  |  |  |  |  | (5 | ) |  |  | (9 | )
Prior service cost (credit) |  |  | 2 |  |  |  | 2 |  |  |  |  |  | (3 | ) |  |  | (4 | )
Total amounts recognized in regulatory assets and AOCI |  | $ | 1,114 |  |  | $ | 1,011 |  |  |  |  | $ | 626 |  |  | $ | 414 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 1,014 |  |  | $ | 914 |  |  |  |  | $ | 766 |  |  | $ | 579 |
Prior service cost (credit) |  |  | 17 |  |  |  | 23 |  |  |  |  |  | (132 | ) |  |  | (152 | )
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 27 |  |  |  | 22 |  |  |  |  |  | - |  |  |  | - |
Prior service cost |  |  | - |  |  |  | 1 |  |  |  |  |  | - |  |  |  | - |
Total amounts recognized in regulatory assets and AOCI |  | $ | 1,058 |  |  | $ | 960 |  |  |  |  | $ | 634 |  |  | $ | 427 |
Plan Assets: Presented in the following tables are the fair values of CMS Energy's and Consumers' Pension Plan and OPEB plan assets at December 31, 2011 and 2010, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 4, Fair Value Measurements.
|  | Pension Plan |
December 31, 2011 |  | Total |  |  | Level 1 |  |  | Level 2 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 241 |  |  | $ | 241 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 24 |  |  |  | — |  |  |  | 24 |
Corporate debt 3 |  |  | 236 |  |  |  | — |  |  |  | 236 |
State and municipal bonds 5 |  |  | 10 |  |  |  | — |  |  |  | 10 |
Foreign corporate debt 6 |  |  | 23 |  |  |  | — |  |  |  | 23 |
Mutual funds 8 |  |  | 257 |  |  |  | 257 |  |  |  | — |
Pooled funds 9 |  |  | 835 |  |  |  | — |  |  |  | 835 |
Total |  | $ | 1,626 |  |  | $ | 498 |  |  | $ | 1,128 |
|  | Pension Plan |
December 31, 2010 |  | Total |  |  | Level 1 |  |  | Level 2 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 248 |  |  | $ | 248 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 57 |  |  |  | — |  |  |  | 57 |
Corporate debt 3 |  |  | 161 |  |  |  | — |  |  |  | 161 |
State and municipal bonds 5 |  |  | 8 |  |  |  | — |  |  |  | 8 |
Foreign corporate debt 6 |  |  | 17 |  |  |  | — |  |  |  | 17 |
Mutual funds 8 |  |  | 183 |  |  |  | 183 |  |  |  | — |
Pooled funds 9 |  |  | 727 |  |  |  | — |  |  |  | 727 |
Total |  | $ | 1,401 |  |  | $ | 431 |  |  | $ | 970 |
|  | OPEB Plan |
December 31, 2011 |  | Total |  |  | Level 1 |  |  | Level 2 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 64 |  |  | $ | 64 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 203 |  |  |  | — |  |  |  | 203 |
Corporate debt 4 |  |  | 28 |  |  |  | — |  |  |  | 28 |
State and municipal bonds 5 |  |  | 71 |  |  |  | — |  |  |  | 71 |
Foreign corporate debt 6 |  |  | 3 |  |  |  | — |  |  |  | 3 |
Common stocks 7 |  |  | 113 |  |  |  | 113 |  |  |  | — |
Mutual funds 8 |  |  | 31 |  |  |  | 31 |  |  |  | — |
Pooled funds 10 |  |  | 411 |  |  |  | — |  |  |  | 411 |
Total |  | $ | 924 |  |  | $ | 208 |  |  | $ | 716 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 60 |  |  | $ | 60 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 189 |  |  |  | — |  |  |  | 189 |
Corporate debt 4 |  |  | 26 |  |  |  | — |  |  |  | 26 |
State and municipal bonds 5 |  |  | 66 |  |  |  | — |  |  |  | 66 |
Foreign corporate debt 6 |  |  | 3 |  |  |  | — |  |  |  | 3 |
Common stocks 7 |  |  | 105 |  |  |  | 105 |  |  |  | — |
Mutual funds 8 |  |  | 29 |  |  |  | 29 |  |  |  | — |
Pooled funds 10 |  |  | 383 |  |  |  | — |  |  |  | 383 |
Total |  | $ | 861 |  |  | $ | 194 |  |  | $ | 667 |
|  | OPEB Plan |
December 31, 2010 |  | Total |  |  | Level 1 |  |  | Level 2 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 56 |  |  | $ | 56 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 181 |  |  |  | — |  |  |  | 181 |
Corporate debt 4 |  |  | 20 |  |  |  | — |  |  |  | 20 |
State and municipal bonds 5 |  |  | 36 |  |  |  | — |  |  |  | 36 |
Foreign corporate debt 6 |  |  | 2 |  |  |  | — |  |  |  | 2 |
Common stocks 7 |  |  | 154 |  |  |  | 154 |  |  |  | — |
Mutual funds 8 |  |  | 23 |  |  |  | 23 |  |  |  | — |
Pooled funds 10 |  |  | 415 |  |  |  | — |  |  |  | 415 |
Total |  | $ | 887 |  |  | $ | 233 |  |  | $ | 654 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments 1 |  | $ | 52 |  |  | $ | 52 |  |  | $ | — |
U.S. government and agencies securities 2 |  |  | 168 |  |  |  | — |  |  |  | 168 |
Corporate debt 4 |  |  | 19 |  |  |  | — |  |  |  | 19 |
State and municipal bonds 5 |  |  | 34 |  |  |  | — |  |  |  | 34 |
Foreign corporate debt 6 |  |  | 2 |  |  |  | — |  |  |  | 2 |
Common stocks 7 |  |  | 143 |  |  |  | 143 |  |  |  | — |
Mutual funds 8 |  |  | 21 |  |  |  | 21 |  |  |  | — |
Pooled funds 10 |  |  | 386 |  |  |  | — |  |  |  | 386 |
Total |  | $ | 825 |  |  | $ | 216 |  |  | $ | 609 |
1 | Cash and short-term investments consist of money market funds with daily liquidity.
2 | U.S. government and agencies securities consist of U.S. Treasury notes and other debt securities backed by the U.S. government and related agencies. These securities were valued based on quoted market prices.
3 | At December 31, 2011, corporate debt investments in the Pension Plan comprised investment grade bonds (69 percent) and non-investment grade, high-yield bonds (31 percent) of U.S. issuers from diverse industries. At December 31, 2010, corporate debt investments in the Pension Plan comprised investment grade bonds (61 percent) and non-investment grade, high-yield bonds (39 percent) of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields presently available on comparable securities of issuers with similar credit ratings.
4 | At December 31, 2011, corporate debt investments in the OPEB plan comprised investment grade bonds (69 percent) and non-investment grade, high-yield bonds (31 percent) of U.S. issuers from diverse industries. At December 31, 2010, corporate debt investments in the OPEB plan comprised investment grade bonds (61 percent) and non-investment grade, high-yield bonds (39 percent) of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields presently available on comparable securities of issuers with similar credit ratings.
5 | State and municipal bonds were valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds was derived from various observable inputs, including benchmark yields, reported securities trades, broker/dealer quotes, bond ratings, and general information on market movements for investment grade state and municipal securities normally considered by market participants when pricing such debt securities.
6 | Foreign corporate debt securities were valued based on quoted market prices, when available, or on yields available on comparable securities of issuers with similar credit ratings.
7 | Common stocks in the OPEB plan consist of equity securities with low transaction costs that were actively managed and tracked by the S&P 500 Index. These securities were valued at their quoted closing prices.
8 | Mutual funds represent shares in registered investment companies that are priced based on the quoted NAV that is the basis for transactions to buy or sell shares in the funds.
9 | Pooled funds in the Pension Plan include both common and collective trust funds as well as special funds that contain only employee benefit plan assets from two or more unrelated benefit plans. At December 31, 2011, these funds comprised investments in U.S. equity securities (53 percent), foreign equity securities (22 percent), foreign fixed-income securities (16 percent), U.S. fixed-income securities (five percent), and alternative investments (four percent). At December 31, 2010, these funds comprised investments in U.S. equity securities (55 percent), foreign equity securities (24 percent), foreign fixed-income securities (14 percent), U.S. fixed-income securities (four percent), and alternative investments (three percent). These investments were valued at the quoted NAV provided by the fund managers that is the basis for transactions to buy or sell shares in the funds.
10 | Pooled funds in the OPEB plan include both common and collective trust funds as well as special funds that contain only employee benefit plan assets from two or more unrelated benefit plans. At December 31, 2011, these funds comprised investments in U.S. equity securities (88 percent), foreign equity securities (six percent), foreign fixed-income securities (four percent), U.S. fixed-income securities (one percent), and alternative investments (one percent). At December 31, 2010, these funds comprised investments in U.S. equity securities (89 percent), foreign equity securities (six percent), foreign fixed-income securities (three percent), U.S. fixed-income securities (one percent), and alternative investments (one percent). These investments are valued at the quoted NAV provided by the fund managers that is the basis for transactions to buy or sell shares in the funds.
Presented in the following table are the contributions to CMS Energy's and Consumers' OPEB plan and Pension Plan:
In Millions |
Years Ended December 31 |  |  | 2011 |  |  |  | 2010 |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |
OPEB 1 |  |  |  |  |  |  |  |
VEBA trust |  | $ | 48 |  |  | $ | 57 |
401(h) component |  |  | 19 |  |  |  | 14 |
|  | $ | 67 |  |  | $ | 71 |
Pension 2 |  | $ | 250 |  |  | $ | 375 |
CONSUMERS |  |  |  |  |  |  |  |
OPEB 1 |  |  |  |  |  |  |  |
VEBA trust |  | $ | 47 |  |  | $ | 57 |
401(h) component |  |  | 19 |  |  |  | 13 |
|  | $ | 66 |  |  | $ | 70 |
Pension 2 |  | $ | 245 |  |  | $ | 366 |
1 | CMS Energy, including Consumers, plans to contribute $65 million to the OPEB plan in 2012 and Consumers plans to contribute $64 million to the OPEB plan in 2012.
2 | CMS Energy, including Consumers, does not plan to contribute to the Pension Plan in 2012.
Contributions include required and discretionary amounts. Actual future contributions will depend on future investment performance, changes in discount rates, and various factors related to the populations participating in the plans. In 2011, CMS Energy reached its target asset allocation for Pension Plan assets of 50 percent equity, 30 percent fixed income, and 20 percent alternative-strategy investments. This target asset allocation is expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plan. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P MidCap and SmallCap Indexes and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers as well as high-yield and global bond funds. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. CMS Energy and Consumers use annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation. CMS Energy and Consumers established union and non-union VEBA trusts to fund their future retiree health and life insurance benefits. These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non-utility subsidiaries. CMS Energy and Consumers have a target asset allocation of 60 percent equity and 40 percent fixed-income investments. CMS Energy and Consumers invest the equity portions of the union and non-union health care VEBA trusts in an S&P 500 Index fund. CMS Energy and Consumers invest the fixed-income portion of the union health care VEBA trust in domestic investment grade taxable instruments. CMS Energy and Consumers invest the fixed-income portion of the non-union health care VEBA trust in a diversified mix of domestic tax-exempt securities. The investment selections of each VEBA trust are influenced by the tax consequences, as well as the objective of generating asset returns that will meet the medical and life insurance costs of retirees. Benefit Payments: Presented in the following table are the expected benefit payments for each of the next five years and the five-year period thereafter:
In Millions |
|  |  | Pension |  |  |  | SERP |  |  |  | OPEB | 1
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
2012 |  | $ | 111 |  |  | $ | 7 |  |  | $ | 70 |
2013 |  |  | 120 |  |  |  | 7 |  |  |  | 73 |
2014 |  |  | 129 |  |  |  | 7 |  |  |  | 76 |
2015 |  |  | 138 |  |  |  | 8 |  |  |  | 80 |
2016 |  |  | 144 |  |  |  | 8 |  |  |  | 83 |
2017-2021 |  |  | 777 |  |  |  | 44 |  |  |  | 466 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
2012 |  | $ | 108 |  |  | $ | 4 |  |  | $ | 67 |
2013 |  |  | 117 |  |  |  | 4 |  |  |  | 70 |
2014 |  |  | 126 |  |  |  | 4 |  |  |  | 73 |
2015 |  |  | 134 |  |  |  | 4 |  |  |  | 76 |
2016 |  |  | 140 |  |  |  | 4 |  |  |  | 80 |
2017-2021 |  |  | 757 |  |  |  | 23 |  |  |  | 445 |
1 | CMS Energy's and Consumers' OPEB benefit payments are net of employee contributions and expected Medicare Part D prescription drug subsidy payments. For CMS Energy, subsidies to be received are estimated to be $6 million for 2012, $7 million for each of 2013 and 2014, $8 million for each of 2015 and 2016, and $49 million combined for 2017 through 2021. For Consumers, subsidies to be received are estimated to be $6 million for each of 2012 and 2013, $7 million for each of 2014 and 2015, $8 million for 2016, and $47 million combined for 2017 through 2021.
Collective Bargaining Agreements: At December 31, 2011, unions represented 42 percent of CMS Energy's employees and 44 percent of Consumers' employees. The UWUA represents Consumers' operating, maintenance, construction, and call center employees. The USW represents Zeeland employees. Union contracts expire in 2015.

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- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 87 -Paragraph 264 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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