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Retirement Benefits | 12 Months Ended
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Dec. 31, 2013
Retirement Benefits | 11: 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 DB SERP (closed to new participants as of March 31, 2006);
| · |  | a non‑contributory, non‑qualified 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; 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. Pension Plan trust assets are not distinguishable by company. CMS Energy and Consumers provide an employer contribution of six percent of base pay to the DCCP 401(k) plan for employees hired on or after September 1, 2005. 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 $10 million for the year ended December 31, 2013, $8 million for the year ended December 31, 2012, and $7 million for the year ended December 31, 2011. DB SERP: The DB SERP is a non‑qualified plan as defined by the Internal Revenue Code. DB SERP benefits are paid from a rabbi trust established in 1988. DB SERP rabbi trust earnings are taxable. Presented in the following table are the fair value of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:
In Millions
Years Ended December 31 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Trust assets |  | $ | 136 |  | $ | 128 |
ABO |  |  | 122 |  |  | 130 |
Contributions |  |  | 16 |  |  | 13 |
Consumers |  |  |  |  |  |  |
Trust assets |  | $ | 96 |  | $ | 87 |
ABO |  |  | 82 |  |  | 86 |
Contributions |  |  | 13 |  |  | 9 |
DC SERP: On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the DB 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 $1 million at December 31, 2013 and December 31, 2012. 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, 2013, 2012, and 2011. 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, and for Consumers was $17 million for the year ended December 31, 2013 and $16 million for each of the years ended December 31, 2012 and 2011. 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 6.5 percent for those under 65 and 6.5 percent for those over 65 in 2014 and 8.0 percent for those under 65 and 7.5 percent for those over 65 in 2013. The rate of increase was assumed to decline to 4.75 percent for all retirees by 2024 and thereafter. In July 2013, CMS Energy and Consumers approved certain amendments to their OPEB Plan. Accordingly, CMS Energy and Consumers performed a remeasurement of the OPEB Plan as of July 1, 2013. As a result of these changes, CMS Energy’s (including Consumers’) OPEB liability decreased by $638 million, its OPEB regulatory asset of $580 million was eliminated, and an OPEB regulatory liability of $34 million was established as of July 1, 2013. CMS Energy’s accumulated other comprehensive loss decreased by $24 million. Consumers’ OPEB liability decreased by $614 million, its OPEB regulatory asset of $580 million was eliminated, and an OPEB regulatory liability of $34 million was established as of July 1, 2013. CMS Energy and Consumers also remeasured certain deferred tax assets as a result of the approved change to the Medicare drug program. Effective January 2015, CMS Energy and Consumers will no longer receive Medicare Part D drug subsidies. Accordingly, CMS Energy (including Consumers) decreased its deferred tax assets by $148 million, reduced its regulatory income tax liabilities by $144 million, and increased its income tax expense by $4 million. Consumers decreased its deferred tax assets by $144 million, and reduced its regulatory income tax liabilities by an equal amount. 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:
In Millions
| One Percentage | One Percentage |
Years Ended December 31 | Point Increase | Point Decrease |
CMS Energy, including Consumers |  |  |  |  |  |  |
Effect on total service and interest cost component |  | $ | 16 |  | $ | (14) |
Effect on PBO |  |  | 151 |  |  | (133) |
Consumers |  |  |  |  |  |  |
Effect on total service and interest cost component |  | $ | 16 |  | $ | (13) |
Effect on PBO |  |  | 147 |  |  | (130) |
Assumptions: Presented in the following table 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 DB SERP |  | OPEB |
December 31 | 2013 |  | 2012 |  | 2011 |  |  | 2013 |  | 2012 |  | 2011 |  |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average for benefit obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  | 4.90 | % |  | 4.10 | % |  | 4.90 | % |  |  | 5.10 | % |  | 4.40 | % |  | 5.10 | % |
Mortality table 2 |  | 2000 |  |  | 2000 |  |  | 2000 |  |  |  | 2000 |  |  | 2000 |  |  | 2000 |  |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension |  | 3.00 | % |  | 3.00 | % |  | 3.50 | % |  |  |  |  |  |  |  |  |  |  |
DB SERP |  | 5.50 | % |  | 5.50 | % |  | 5.50 | % |  |  |  |  |  |  |  |  |  |  |
Weighted average for net periodic benefit cost obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  | 4.10 | % |  | 4.90 | % |  | 5.40 | % |  |  | 4.40 | % |  | 5.10 | % |  | 5.60 | % |
Expected long-term rate of return on plan assets 3 |  | 7.75 | % |  | 7.75 | % |  | 8.00 | % |  |  | 7.25 | % |  | 7.25 | % |  | 7.50 | % |
Mortality table 2 |  | 2000 |  |  | 2000 |  |  | 2000 |  |  |  | 2000 |  |  | 2000 |  |  | 2000 |  |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension |  | 3.00 | % |  | 3.50 | % |  | 4.00 | % |  |  |  |  |  |  |  |  |  |  |
DB 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 7.75 percent in 2013. The actual return on Pension Plan assets was 12.5 percent in 2013, 14.1 percent in 2012, and 4.0 percent in 2011. Costs: Presented in the following table are the costs (credits) and other changes in plan assets and benefit obligations incurred in CMS Energy’s and Consumers’ retirement benefits plans:
In Millions
| Pension and DB SERP |  | OPEB |
Years Ended December 31 | 2013 | 2012 | 2011 |  | 2013 | 2012 | 2011 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net periodic cost (credit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 54 |  | $ | 49 |  | $ | 49 |  |  | $ | 29 |  | $ | 32 |  | $ | 27 |
Interest expense |  |  | 100 |  |  | 105 |  |  | 106 |  |  |  | 65 |  |  | 82 |  |  | 77 |
Expected return on plan assets |  |  | (127) |  |  | (125) |  |  | (112) |  |  |  | (77) |  |  | (66) |  |  | (66) |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 101 |  |  | 79 |  |  | 65 |  |  |  | 26 |  |  | 46 |  |  | 30 |
Prior service cost (credit) |  |  | 3 |  |  | 5 |  |  | 5 |  |  |  | (31) |  |  | (20) |  |  | (20) |
Net periodic cost (credit) |  | $ | 131 |  | $ | 113 |  | $ | 113 |  |  | $ | 12 |  | $ | 74 |  | $ | 48 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net periodic cost (credit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 52 |  | $ | 48 |  | $ | 48 |  |  | $ | 28 |  | $ | 31 |  | $ | 26 |
Interest expense |  |  | 96 |  |  | 100 |  |  | 101 |  |  |  | 63 |  |  | 79 |  |  | 74 |
Expected return on plan assets |  |  | (124) |  |  | (122) |  |  | (109) |  |  |  | (72) |  |  | (61) |  |  | (61) |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 98 |  |  | 77 |  |  | 63 |  |  |  | 27 |  |  | 47 |  |  | 31 |
Prior service cost (credit) |  |  | 3 |  |  | 5 |  |  | 5 |  |  |  | (30) |  |  | (20) |  |  | (20) |
Net periodic cost (credit) |  | $ | 125 |  | $ | 108 |  | $ | 108 |  |  | $ | 16 |  | $ | 76 |  | $ | 50 |
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 2014 from the regulatory asset is $57 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 2014 from the regulatory asset is $57 million. For CMS Energy, the estimated net loss and prior service credit for the OPEB Plan that will be amortized into net periodic benefit cost in 2014 from the regulatory liability is $37 million, with a decrease from AOCI of $1 million. For Consumers, the estimated net loss and prior service credit for the OPEB Plan that will be amortized into net periodic benefit cost in 2014 from the regulatory liability is $37 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 ten years for pension for the year ended December 31, 2013 and 11 years for pension for the years ended December 31, 2012 and 2011 and 13 years for OPEB for the years ended December 31, 2013, 2012, and 2011. Prior service cost (credit) amortization is established in the year in which the prior service cost (credit) first occurred, and is based on the same amortization period for all future years until the prior service cost (credit) is fully amortized. CMS Energy and Consumers had a new prior service credit for OPEB in 2013. The estimated period of amortization of this new prior service credit for CMS Energy and Consumers is ten years for OPEB for the year ended December 31, 2013. Reconciliations: Presented in the following table are reconciliations of the funded status of CMS Energy’s and Consumers’ retirement benefits plans with their retirement benefits plans’ liabilities:
In Millions
| Pension |  | DB SERP |  | OPEB |
Years Ended December 31 | 2013 | 2012 |  | 2013 | 2012 |  | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 2,354 |  | $ | 2,072 |  |  | $ | 144 |  | $ | 127 |  |  | $ | 1,729 |  | $ | 1,641 |
Service cost |  |  | 53 |  |  | 48 |  |  |  | 1 |  |  | 1 |  |  |  | 29 |  |  | 32 |
Interest cost |  |  | 94 |  |  | 99 |  |  |  | 6 |  |  | 6 |  |  |  | 65 |  |  | 82 |
Plan amendments |  |  | - |  |  | - |  |  |  | - |  |  | - |  |  |  | (208) | 2 |  | - |
Actuarial (gain) loss |  |  | (308) |  |  | 249 |  |  |  | (12) |  |  | 16 |  |  |  | (440) |  |  | 25 |
Benefits paid |  |  | (120) |  |  | (114) |  |  |  | (7) |  |  | (6) |  |  |  | (52) | 3 |  | (51) | 3
Benefit obligation at end of period |  | $ | 2,073 |  | $ | 2,354 |  |  | $ | 132 |  | $ | 144 |  |  | $ | 1,123 |  | $ | 1,729 | 4
Plan assets at fair value at beginning of period |  | $ | 1,727 |  | $ | 1,626 |  |  | $ | - |  | $ | - |  |  | $ | 1,047 |  | $ | 924 |
Actual return on plan assets |  |  | 206 |  |  | 215 |  |  |  | - |  |  | - |  |  |  | 150 |  |  | 108 |
Company contribution |  |  | 150 |  |  | - |  |  |  | 7 |  |  | 6 |  |  |  | 72 |  |  | 65 |
Actual benefits paid |  |  | (119) |  |  | (114) |  |  |  | (7) |  |  | (6) |  |  |  | (51) | 3 |  | (50) | 3
Plan assets at fair value at end of period |  | $ | 1,964 |  | $ | 1,727 |  |  | $ | - |  | $ | - |  |  | $ | 1,218 |  | $ | 1,047 |
Funded status |  | $ | (109) | 1 | $ | (627) | 1 |  | $ | (132) |  | $ | (144) |  |  | $ | 95 |  | $ | (682) |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  |  |  |  |  |  |  |  | $ | 100 |  | $ | 85 |  |  | $ | 1,670 |  | $ | 1,585 |
Service cost |  |  |  |  |  |  |  |  |  | 1 |  |  | 1 |  |  |  | 28 |  |  | 31 |
Interest cost |  |  |  |  |  |  |  |  |  | 4 |  |  | 4 |  |  |  | 63 |  |  | 79 |
Plan amendments |  |  |  |  |  |  |  |  |  | - |  |  | - |  |  |  | (200) | 2 |  | - |
Actuarial (gain) loss |  |  |  |  |  |  |  |  |  | (8) |  |  | 13 |  |  |  | (424) |  |  | 24 |
Benefits paid |  |  |  |  |  |  |  |  |  | (4) |  |  | (3) |  |  |  | (49) | 3 |  | (49) | 3
Benefit obligation at end of period |  |  |  |  |  |  |  |  | $ | 93 |  | $ | 100 |  |  | $ | 1,088 |  | $ | 1,670 | 4
Plan assets at fair value at beginning of period |  |  |  |  |  |  |  |  | $ | - |  | $ | - |  |  | $ | 978 |  | $ | 861 |
Actual return on plan assets |  |  |  |  |  |  |  |  |  | - |  |  | - |  |  |  | 141 |  |  | 101 |
Company contribution |  |  |  |  |  |  |  |  |  | 4 |  |  | 3 |  |  |  | 71 |  |  | 64 |
Actual benefits paid |  |  |  |  |  |  |  |  |  | (4) |  |  | (3) |  |  |  | (49) | 3 |  | (48) | 3
Plan assets at fair value at end of period |  |  |  |  |  |  |  |  | $ | - |  | $ | - |  |  | $ | 1,141 |  | $ | 978 |
Funded status |  |  |  |  |  |  |  |  | $ | (93) |  | $ | (100) |  |  | $ | 53 |  | $ | (692) |
1 At December 31, 2013, $86 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses. At December 31, 2012, $590 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses. 2 Plan amendments resulted from changing the Medicare drug program provided through the OPEB Plan from an employer-sponsored prescription drug plan with a retiree drug subsidy to an EGWP to begin on January 1, 2015, and from certain benefit changes to the OPEB Plan, to begin on January 1, 2016. 3 CMS Energy received payments of $5 million in each of 2013, 2012, and 2011 for the Medicare Part D subsidies. Consumers received payments of $4 million in 2013 and $5 million in each of 2012 and 2011 for the Medicare Part D subsidies. The Medicare Part D subsidy payments are used to pay OPEB Plan benefits. 4 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 subsidy annualized reduction in net OPEB cost for CMS Energy was $20 million for 2012 and $26 million for 2011. Consumers’ Medicare Part D subsidy annualized reduction in net OPEB costs was $19 million for 2012 and $25 million for 2011. The reduction for CMS Energy and Consumers included $7 million for 2012 and $9 million for 2011 in capitalized OPEB costs. Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit plans’ assets (liabilities):
In Millions
Years Ended December 31 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  | $ | (8) |  | $ | (7) |
Non-current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  |  | (124) |  |  | (137) |
OPEB |  |  | 95 |  |  | (682) |
Pension |  |  | (109) |  |  | (627) |
Consumers |  |  |  |  |  |  |
Current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  | $ | (5) |  | $ | (4) |
Non-current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  |  | (88) |  |  | (96) |
OPEB |  |  | 53 |  |  | (692) |
Pension |  |  | (86) |  |  | (590) |
Presented in the following table are the Pension Plan PBO, ABO, and fair value of plan assets:
In Millions
Years Ended December 31 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Pension PBO |  | $ | 2,073 |  | $ | 2,354 |
Pension ABO |  |  | 1,843 |  |  | 2,054 |
Fair value of Pension Plan assets |  |  | 1,964 |  |  | 1,727 |
Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets, regulatory liabilities, and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets and liabilities, see Note 2, Regulatory Matters.
In Millions
| Pension and DB SERP |  | OPEB |
Years Ended December 31 | 2013 | 2012 |  | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets (liabilities) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 625 |  | $ | 1,095 |  |  | $ | 184 |  | $ | 704 |
Prior service cost (credit) |  |  | 9 |  |  | 13 |  |  |  | (282) |  |  | (112) |
Regulatory assets (liabilities) |  | $ | 634 |  | $ | 1,108 |  |  | $ | (98) |  | $ | 592 |
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) |  |  | 69 |  |  | 98 |  |  |  | (26) |  |  | (7) |
Prior service cost (credit) |  |  | - |  |  | - |  |  |  | (10) |  |  | (3) |
Total amounts recognized in regulatory assets (liabilities) and AOCI |  | $ | 703 |  | $ | 1,206 |  |  | $ | (134) |  | $ | 582 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets (liabilities) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 625 |  | $ | 1,095 |  |  | $ | 184 |  | $ | 704 |
Prior service cost (credit) |  |  | 9 |  |  | 13 |  |  |  | (282) |  |  | (112) |
Regulatory assets (liabilities) |  | $ | 634 |  | $ | 1,108 |  |  | $ | (98) |  | $ | 592 |
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 25 |  |  | 38 |  |  |  | - |  |  | - |
Total amounts recognized in regulatory assets (liabilities) and AOCI |  | $ | 659 |  | $ | 1,146 |  |  | $ | (98) |  | $ | 592 |
Plan Assets: Presented in the following tables are the fair values of CMS Energy’s and Consumers’ Pension Plan and OPEB Plan assets, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.
In Millions
| Pension Plan |
| December 31, 2013 |  | December 31, 2012 |
| Total | Level 1 | Level 2 |  | Total | Level 1 | Level 2 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 109 |  | $ | 109 |  | $ | - |  |  | $ | 33 |  | $ | 33 |  | $ | - |
U.S. government and agencies securities |  |  | 25 |  |  | - |  |  | 25 |  |  |  | 26 |  |  | - |  |  | 26 |
Corporate debt |  |  | 188 |  |  | - |  |  | 188 |  |  |  | 277 |  |  | - |  |  | 277 |
State and municipal bonds |  |  | 5 |  |  | - |  |  | 5 |  |  |  | 8 |  |  | - |  |  | 8 |
Foreign corporate bonds |  |  | 20 |  |  | - |  |  | 20 |  |  |  | 27 |  |  | - |  |  | 27 |
Mutual funds |  |  | 449 |  |  | 449 |  |  | - |  |  |  | 319 |  |  | 319 |  |  | - |
Pooled funds |  |  | 1,168 |  |  | - |  |  | 1,168 |  |  |  | 1,037 |  |  | - |  |  | 1,037 |
Total |  | $ | 1,964 |  | $ | 558 |  | $ | 1,406 |  |  | $ | 1,727 |  | $ | 352 |  | $ | 1,375 |
In Millions
| OPEB Plan |
| December 31, 2013 |  | December 31, 2012 |
| Total | Level 1 | Level 2 |  | Total | Level 1 | Level 2 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 44 |  | $ | 44 |  | $ | - |  |  | $ | 118 |  | $ | 118 |  | $ | - |
U.S. government and agencies securities |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 4 |  |  | - |  |  | 4 |
Corporate debt |  |  | 26 |  |  | - |  |  | 26 |  |  |  | 38 |  |  | - |  |  | 38 |
State and municipal bonds |  |  | 1 |  |  | - |  |  | 1 |  |  |  | 1 |  |  | - |  |  | 1 |
Foreign corporate bonds |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 4 |  |  | - |  |  | 4 |
Common stocks |  |  | 71 |  |  | 71 |  |  | - |  |  |  | 75 |  |  | 75 |  |  | - |
Mutual funds |  |  | 343 |  |  | 343 |  |  | - |  |  |  | 300 |  |  | 300 |  |  | - |
Pooled funds |  |  | 727 |  |  | - |  |  | 727 |  |  |  | 507 |  |  | - |  |  | 507 |
Total |  | $ | 1,218 |  | $ | 458 |  | $ | 760 |  |  | $ | 1,047 |  | $ | 493 |  | $ | 554 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 41 |  | $ | 41 |  | $ | - |  |  | $ | 111 |  | $ | 111 |  | $ | - |
U.S. government and agencies securities |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 3 |  |  | - |  |  | 3 |
Corporate debt |  |  | 25 |  |  | - |  |  | 25 |  |  |  | 35 |  |  | - |  |  | 35 |
State and municipal bonds |  |  | 1 |  |  | - |  |  | 1 |  |  |  | 1 |  |  | - |  |  | 1 |
Foreign corporate bonds |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 3 |  |  | - |  |  | 3 |
Common stocks |  |  | 66 |  |  | 66 |  |  | - |  |  |  | 70 |  |  | 70 |  |  | - |
Mutual funds |  |  | 321 |  |  | 321 |  |  | - |  |  |  | 281 |  |  | 281 |  |  | - |
Pooled funds |  |  | 681 |  |  | - |  |  | 681 |  |  |  | 474 |  |  | - |  |  | 474 |
Total |  | $ | 1,141 |  | $ | 428 |  | $ | 713 |  |  | $ | 978 |  | $ | 462 |  | $ | 516 |
Cash and Short-term Investments: Cash and short-term investments consist of money market funds with daily liquidity. U.S. Government and Agencies Securities: 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. Corporate Debt: At December 31, 2013, corporate debt investments in the Pension Plan and OPEB Plan comprised investment grade bonds of U.S. issuers from diverse industries. At December 31, 2012, corporate debt investments in the Pension Plan and OPEB Plan comprised investment grade bonds (68 percent) and non‑investment grade, high-yield bonds (32 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. State and Municipal Bonds: 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. Foreign Corporate Bonds: 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. Common Stocks: 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. Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted NAVs that are publicly available and are the basis for transactions to buy or sell shares in the funds. Pooled Funds: Pooled funds in the Pension Plan and 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, 2013, these funds comprised investments in U.S. equity securities (Pension: 61 percent; OPEB: 60 percent), foreign equity securities (Pension: 28 percent; OPEB: 20 percent), foreign fixed-income securities (Pension: three percent; OPEB: four percent), U.S. fixed-income securities (Pension: four percent; OPEB: 14 percent), and alternative investments (Pension: four percent; OPEB: two percent). At December 31, 2012, these funds comprised investments in U.S. equity securities (Pension: 51 percent; OPEB: 65 percent), foreign equity securities (Pension: 26 percent; OPEB: 21 percent), foreign fixed-income securities (Pension: 14 percent; OPEB: nine percent), U.S. fixed-income securities (Pension: four percent; OPEB: three percent), and alternative investments (Pension: five percent; OPEB: two 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. 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 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |
OPEB 1 |  |  |  |  |  |  |
VEBA trust |  | $ | 55 |  | $ | 45 |
401(h) component |  |  | 17 |  |  | 20 |
|  | $ | 72 |  | $ | 65 |
Pension 2 |  | $ | 150 |  | $ | - |
Consumers |  |  |  |  |  |  |
OPEB 1 |  |  |  |  |  |  |
VEBA trust |  | $ | 55 |  | $ | 45 |
401(h) component |  |  | 16 |  |  | 19 |
|  | $ | 71 |  | $ | 64 |
Pension 2 |  | $ | 147 |  | $ | - |
| 1 |  | CMS Energy, including Consumers, plans to contribute $75 million to the OPEB Plan in 2014, of which Consumers plans to contribute $74 million.
| 2 |  | CMS Energy, including Consumers, does not presently plan to contribute to the Pension Plan in 2014.
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. In 2012, CMS Energy and Consumers adjusted their target asset allocation to 50 percent equity, 20 percent fixed income, and 30 percent alternative-strategy investments. This target 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 SmallCap Index and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers. 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. 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 | DB SERP | OPEB 1 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
2014 |  | $ | 119 |  | $ | 8 |  | $ | 58 |
2015 |  |  | 127 |  |  | 8 |  |  | 59 |
2016 |  |  | 134 |  |  | 8 |  |  | 61 |
2017 |  |  | 139 |  |  | 8 |  |  | 64 |
2018 |  |  | 144 |  |  | 8 |  |  | 66 |
2019-2023 |  |  | 760 |  |  | 48 |  |  | 364 |
Consumers |  |  |  |  |  |  |  |  |  |
2014 |  | $ | 116 |  | $ | 4 |  | $ | 56 |
2015 |  |  | 124 |  |  | 5 |  |  | 57 |
2016 |  |  | 131 |  |  | 5 |  |  | 59 |
2017 |  |  | 136 |  |  | 5 |  |  | 61 |
2018 |  |  | 140 |  |  | 5 |  |  | 64 |
2019-2023 |  |  | 740 |  |  | 27 |  |  | 349 |
| 1 |  | CMS Energy’s and Consumers’ OPEB benefit payments are net of employee contributions and expected Medicare Part D subsidy payments for 2014. CMS Energy and Consumers plan to change the Medicare drug program provided through the OPEB Plan from an employer-sponsored drug plan to an EGWP to begin on January 1, 2015; therefore, no Medicare Part D subsidy is expected after 2014. For CMS Energy, subsidies to be received are estimated to be $6 million for 2014. For Consumers, subsidies to be received are estimated to be $5 million for 2014.
Collective Bargaining Agreements: At December 31, 2013, unions represented 43 percent of CMS Energy’s employees and 45 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 | 11: 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 DB SERP (closed to new participants as of March 31, 2006);
| · |  | a non‑contributory, non‑qualified 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; 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. Pension Plan trust assets are not distinguishable by company. CMS Energy and Consumers provide an employer contribution of six percent of base pay to the DCCP 401(k) plan for employees hired on or after September 1, 2005. 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 $10 million for the year ended December 31, 2013, $8 million for the year ended December 31, 2012, and $7 million for the year ended December 31, 2011. DB SERP: The DB SERP is a non‑qualified plan as defined by the Internal Revenue Code. DB SERP benefits are paid from a rabbi trust established in 1988. DB SERP rabbi trust earnings are taxable. Presented in the following table are the fair value of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:
In Millions
Years Ended December 31 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Trust assets |  | $ | 136 |  | $ | 128 |
ABO |  |  | 122 |  |  | 130 |
Contributions |  |  | 16 |  |  | 13 |
Consumers |  |  |  |  |  |  |
Trust assets |  | $ | 96 |  | $ | 87 |
ABO |  |  | 82 |  |  | 86 |
Contributions |  |  | 13 |  |  | 9 |
DC SERP: On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the DB 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 $1 million at December 31, 2013 and December 31, 2012. 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, 2013, 2012, and 2011. 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, and for Consumers was $17 million for the year ended December 31, 2013 and $16 million for each of the years ended December 31, 2012 and 2011. 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 6.5 percent for those under 65 and 6.5 percent for those over 65 in 2014 and 8.0 percent for those under 65 and 7.5 percent for those over 65 in 2013. The rate of increase was assumed to decline to 4.75 percent for all retirees by 2024 and thereafter. In July 2013, CMS Energy and Consumers approved certain amendments to their OPEB Plan. Accordingly, CMS Energy and Consumers performed a remeasurement of the OPEB Plan as of July 1, 2013. As a result of these changes, CMS Energy’s (including Consumers’) OPEB liability decreased by $638 million, its OPEB regulatory asset of $580 million was eliminated, and an OPEB regulatory liability of $34 million was established as of July 1, 2013. CMS Energy’s accumulated other comprehensive loss decreased by $24 million. Consumers’ OPEB liability decreased by $614 million, its OPEB regulatory asset of $580 million was eliminated, and an OPEB regulatory liability of $34 million was established as of July 1, 2013. CMS Energy and Consumers also remeasured certain deferred tax assets as a result of the approved change to the Medicare drug program. Effective January 2015, CMS Energy and Consumers will no longer receive Medicare Part D drug subsidies. Accordingly, CMS Energy (including Consumers) decreased its deferred tax assets by $148 million, reduced its regulatory income tax liabilities by $144 million, and increased its income tax expense by $4 million. Consumers decreased its deferred tax assets by $144 million, and reduced its regulatory income tax liabilities by an equal amount. 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:
In Millions
| One Percentage | One Percentage |
Years Ended December 31 | Point Increase | Point Decrease |
CMS Energy, including Consumers |  |  |  |  |  |  |
Effect on total service and interest cost component |  | $ | 16 |  | $ | (14) |
Effect on PBO |  |  | 151 |  |  | (133) |
Consumers |  |  |  |  |  |  |
Effect on total service and interest cost component |  | $ | 16 |  | $ | (13) |
Effect on PBO |  |  | 147 |  |  | (130) |
Assumptions: Presented in the following table 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 DB SERP |  | OPEB |
December 31 | 2013 |  | 2012 |  | 2011 |  |  | 2013 |  | 2012 |  | 2011 |  |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average for benefit obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  | 4.90 | % |  | 4.10 | % |  | 4.90 | % |  |  | 5.10 | % |  | 4.40 | % |  | 5.10 | % |
Mortality table 2 |  | 2000 |  |  | 2000 |  |  | 2000 |  |  |  | 2000 |  |  | 2000 |  |  | 2000 |  |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension |  | 3.00 | % |  | 3.00 | % |  | 3.50 | % |  |  |  |  |  |  |  |  |  |  |
DB SERP |  | 5.50 | % |  | 5.50 | % |  | 5.50 | % |  |  |  |  |  |  |  |  |  |  |
Weighted average for net periodic benefit cost obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  | 4.10 | % |  | 4.90 | % |  | 5.40 | % |  |  | 4.40 | % |  | 5.10 | % |  | 5.60 | % |
Expected long-term rate of return on plan assets 3 |  | 7.75 | % |  | 7.75 | % |  | 8.00 | % |  |  | 7.25 | % |  | 7.25 | % |  | 7.50 | % |
Mortality table 2 |  | 2000 |  |  | 2000 |  |  | 2000 |  |  |  | 2000 |  |  | 2000 |  |  | 2000 |  |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension |  | 3.00 | % |  | 3.50 | % |  | 4.00 | % |  |  |  |  |  |  |  |  |  |  |
DB 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 7.75 percent in 2013. The actual return on Pension Plan assets was 12.5 percent in 2013, 14.1 percent in 2012, and 4.0 percent in 2011. Costs: Presented in the following table are the costs (credits) and other changes in plan assets and benefit obligations incurred in CMS Energy’s and Consumers’ retirement benefits plans:
In Millions
| Pension and DB SERP |  | OPEB |
Years Ended December 31 | 2013 | 2012 | 2011 |  | 2013 | 2012 | 2011 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net periodic cost (credit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 54 |  | $ | 49 |  | $ | 49 |  |  | $ | 29 |  | $ | 32 |  | $ | 27 |
Interest expense |  |  | 100 |  |  | 105 |  |  | 106 |  |  |  | 65 |  |  | 82 |  |  | 77 |
Expected return on plan assets |  |  | (127) |  |  | (125) |  |  | (112) |  |  |  | (77) |  |  | (66) |  |  | (66) |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 101 |  |  | 79 |  |  | 65 |  |  |  | 26 |  |  | 46 |  |  | 30 |
Prior service cost (credit) |  |  | 3 |  |  | 5 |  |  | 5 |  |  |  | (31) |  |  | (20) |  |  | (20) |
Net periodic cost (credit) |  | $ | 131 |  | $ | 113 |  | $ | 113 |  |  | $ | 12 |  | $ | 74 |  | $ | 48 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net periodic cost (credit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 52 |  | $ | 48 |  | $ | 48 |  |  | $ | 28 |  | $ | 31 |  | $ | 26 |
Interest expense |  |  | 96 |  |  | 100 |  |  | 101 |  |  |  | 63 |  |  | 79 |  |  | 74 |
Expected return on plan assets |  |  | (124) |  |  | (122) |  |  | (109) |  |  |  | (72) |  |  | (61) |  |  | (61) |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 98 |  |  | 77 |  |  | 63 |  |  |  | 27 |  |  | 47 |  |  | 31 |
Prior service cost (credit) |  |  | 3 |  |  | 5 |  |  | 5 |  |  |  | (30) |  |  | (20) |  |  | (20) |
Net periodic cost (credit) |  | $ | 125 |  | $ | 108 |  | $ | 108 |  |  | $ | 16 |  | $ | 76 |  | $ | 50 |
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 2014 from the regulatory asset is $57 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 2014 from the regulatory asset is $57 million. For CMS Energy, the estimated net loss and prior service credit for the OPEB Plan that will be amortized into net periodic benefit cost in 2014 from the regulatory liability is $37 million, with a decrease from AOCI of $1 million. For Consumers, the estimated net loss and prior service credit for the OPEB Plan that will be amortized into net periodic benefit cost in 2014 from the regulatory liability is $37 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 ten years for pension for the year ended December 31, 2013 and 11 years for pension for the years ended December 31, 2012 and 2011 and 13 years for OPEB for the years ended December 31, 2013, 2012, and 2011. Prior service cost (credit) amortization is established in the year in which the prior service cost (credit) first occurred, and is based on the same amortization period for all future years until the prior service cost (credit) is fully amortized. CMS Energy and Consumers had a new prior service credit for OPEB in 2013. The estimated period of amortization of this new prior service credit for CMS Energy and Consumers is ten years for OPEB for the year ended December 31, 2013. Reconciliations: Presented in the following table are reconciliations of the funded status of CMS Energy’s and Consumers’ retirement benefits plans with their retirement benefits plans’ liabilities:
In Millions
| Pension |  | DB SERP |  | OPEB |
Years Ended December 31 | 2013 | 2012 |  | 2013 | 2012 |  | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 2,354 |  | $ | 2,072 |  |  | $ | 144 |  | $ | 127 |  |  | $ | 1,729 |  | $ | 1,641 |
Service cost |  |  | 53 |  |  | 48 |  |  |  | 1 |  |  | 1 |  |  |  | 29 |  |  | 32 |
Interest cost |  |  | 94 |  |  | 99 |  |  |  | 6 |  |  | 6 |  |  |  | 65 |  |  | 82 |
Plan amendments |  |  | - |  |  | - |  |  |  | - |  |  | - |  |  |  | (208) | 2 |  | - |
Actuarial (gain) loss |  |  | (308) |  |  | 249 |  |  |  | (12) |  |  | 16 |  |  |  | (440) |  |  | 25 |
Benefits paid |  |  | (120) |  |  | (114) |  |  |  | (7) |  |  | (6) |  |  |  | (52) | 3 |  | (51) | 3
Benefit obligation at end of period |  | $ | 2,073 |  | $ | 2,354 |  |  | $ | 132 |  | $ | 144 |  |  | $ | 1,123 |  | $ | 1,729 | 4
Plan assets at fair value at beginning of period |  | $ | 1,727 |  | $ | 1,626 |  |  | $ | - |  | $ | - |  |  | $ | 1,047 |  | $ | 924 |
Actual return on plan assets |  |  | 206 |  |  | 215 |  |  |  | - |  |  | - |  |  |  | 150 |  |  | 108 |
Company contribution |  |  | 150 |  |  | - |  |  |  | 7 |  |  | 6 |  |  |  | 72 |  |  | 65 |
Actual benefits paid |  |  | (119) |  |  | (114) |  |  |  | (7) |  |  | (6) |  |  |  | (51) | 3 |  | (50) | 3
Plan assets at fair value at end of period |  | $ | 1,964 |  | $ | 1,727 |  |  | $ | - |  | $ | - |  |  | $ | 1,218 |  | $ | 1,047 |
Funded status |  | $ | (109) | 1 | $ | (627) | 1 |  | $ | (132) |  | $ | (144) |  |  | $ | 95 |  | $ | (682) |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  |  |  |  |  |  |  |  | $ | 100 |  | $ | 85 |  |  | $ | 1,670 |  | $ | 1,585 |
Service cost |  |  |  |  |  |  |  |  |  | 1 |  |  | 1 |  |  |  | 28 |  |  | 31 |
Interest cost |  |  |  |  |  |  |  |  |  | 4 |  |  | 4 |  |  |  | 63 |  |  | 79 |
Plan amendments |  |  |  |  |  |  |  |  |  | - |  |  | - |  |  |  | (200) | 2 |  | - |
Actuarial (gain) loss |  |  |  |  |  |  |  |  |  | (8) |  |  | 13 |  |  |  | (424) |  |  | 24 |
Benefits paid |  |  |  |  |  |  |  |  |  | (4) |  |  | (3) |  |  |  | (49) | 3 |  | (49) | 3
Benefit obligation at end of period |  |  |  |  |  |  |  |  | $ | 93 |  | $ | 100 |  |  | $ | 1,088 |  | $ | 1,670 | 4
Plan assets at fair value at beginning of period |  |  |  |  |  |  |  |  | $ | - |  | $ | - |  |  | $ | 978 |  | $ | 861 |
Actual return on plan assets |  |  |  |  |  |  |  |  |  | - |  |  | - |  |  |  | 141 |  |  | 101 |
Company contribution |  |  |  |  |  |  |  |  |  | 4 |  |  | 3 |  |  |  | 71 |  |  | 64 |
Actual benefits paid |  |  |  |  |  |  |  |  |  | (4) |  |  | (3) |  |  |  | (49) | 3 |  | (48) | 3
Plan assets at fair value at end of period |  |  |  |  |  |  |  |  | $ | - |  | $ | - |  |  | $ | 1,141 |  | $ | 978 |
Funded status |  |  |  |  |  |  |  |  | $ | (93) |  | $ | (100) |  |  | $ | 53 |  | $ | (692) |
1 At December 31, 2013, $86 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses. At December 31, 2012, $590 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses. 2 Plan amendments resulted from changing the Medicare drug program provided through the OPEB Plan from an employer-sponsored prescription drug plan with a retiree drug subsidy to an EGWP to begin on January 1, 2015, and from certain benefit changes to the OPEB Plan, to begin on January 1, 2016. 3 CMS Energy received payments of $5 million in each of 2013, 2012, and 2011 for the Medicare Part D subsidies. Consumers received payments of $4 million in 2013 and $5 million in each of 2012 and 2011 for the Medicare Part D subsidies. The Medicare Part D subsidy payments are used to pay OPEB Plan benefits. 4 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 subsidy annualized reduction in net OPEB cost for CMS Energy was $20 million for 2012 and $26 million for 2011. Consumers’ Medicare Part D subsidy annualized reduction in net OPEB costs was $19 million for 2012 and $25 million for 2011. The reduction for CMS Energy and Consumers included $7 million for 2012 and $9 million for 2011 in capitalized OPEB costs. Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit plans’ assets (liabilities):
In Millions
Years Ended December 31 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  | $ | (8) |  | $ | (7) |
Non-current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  |  | (124) |  |  | (137) |
OPEB |  |  | 95 |  |  | (682) |
Pension |  |  | (109) |  |  | (627) |
Consumers |  |  |  |  |  |  |
Current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  | $ | (5) |  | $ | (4) |
Non-current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  |  | (88) |  |  | (96) |
OPEB |  |  | 53 |  |  | (692) |
Pension |  |  | (86) |  |  | (590) |
Presented in the following table are the Pension Plan PBO, ABO, and fair value of plan assets:
In Millions
Years Ended December 31 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Pension PBO |  | $ | 2,073 |  | $ | 2,354 |
Pension ABO |  |  | 1,843 |  |  | 2,054 |
Fair value of Pension Plan assets |  |  | 1,964 |  |  | 1,727 |
Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets, regulatory liabilities, and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets and liabilities, see Note 2, Regulatory Matters.
In Millions
| Pension and DB SERP |  | OPEB |
Years Ended December 31 | 2013 | 2012 |  | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets (liabilities) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 625 |  | $ | 1,095 |  |  | $ | 184 |  | $ | 704 |
Prior service cost (credit) |  |  | 9 |  |  | 13 |  |  |  | (282) |  |  | (112) |
Regulatory assets (liabilities) |  | $ | 634 |  | $ | 1,108 |  |  | $ | (98) |  | $ | 592 |
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) |  |  | 69 |  |  | 98 |  |  |  | (26) |  |  | (7) |
Prior service cost (credit) |  |  | - |  |  | - |  |  |  | (10) |  |  | (3) |
Total amounts recognized in regulatory assets (liabilities) and AOCI |  | $ | 703 |  | $ | 1,206 |  |  | $ | (134) |  | $ | 582 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets (liabilities) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 625 |  | $ | 1,095 |  |  | $ | 184 |  | $ | 704 |
Prior service cost (credit) |  |  | 9 |  |  | 13 |  |  |  | (282) |  |  | (112) |
Regulatory assets (liabilities) |  | $ | 634 |  | $ | 1,108 |  |  | $ | (98) |  | $ | 592 |
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 25 |  |  | 38 |  |  |  | - |  |  | - |
Total amounts recognized in regulatory assets (liabilities) and AOCI |  | $ | 659 |  | $ | 1,146 |  |  | $ | (98) |  | $ | 592 |
Plan Assets: Presented in the following tables are the fair values of CMS Energy’s and Consumers’ Pension Plan and OPEB Plan assets, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.
In Millions
| Pension Plan |
| December 31, 2013 |  | December 31, 2012 |
| Total | Level 1 | Level 2 |  | Total | Level 1 | Level 2 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 109 |  | $ | 109 |  | $ | - |  |  | $ | 33 |  | $ | 33 |  | $ | - |
U.S. government and agencies securities |  |  | 25 |  |  | - |  |  | 25 |  |  |  | 26 |  |  | - |  |  | 26 |
Corporate debt |  |  | 188 |  |  | - |  |  | 188 |  |  |  | 277 |  |  | - |  |  | 277 |
State and municipal bonds |  |  | 5 |  |  | - |  |  | 5 |  |  |  | 8 |  |  | - |  |  | 8 |
Foreign corporate bonds |  |  | 20 |  |  | - |  |  | 20 |  |  |  | 27 |  |  | - |  |  | 27 |
Mutual funds |  |  | 449 |  |  | 449 |  |  | - |  |  |  | 319 |  |  | 319 |  |  | - |
Pooled funds |  |  | 1,168 |  |  | - |  |  | 1,168 |  |  |  | 1,037 |  |  | - |  |  | 1,037 |
Total |  | $ | 1,964 |  | $ | 558 |  | $ | 1,406 |  |  | $ | 1,727 |  | $ | 352 |  | $ | 1,375 |
In Millions
| OPEB Plan |
| December 31, 2013 |  | December 31, 2012 |
| Total | Level 1 | Level 2 |  | Total | Level 1 | Level 2 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 44 |  | $ | 44 |  | $ | - |  |  | $ | 118 |  | $ | 118 |  | $ | - |
U.S. government and agencies securities |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 4 |  |  | - |  |  | 4 |
Corporate debt |  |  | 26 |  |  | - |  |  | 26 |  |  |  | 38 |  |  | - |  |  | 38 |
State and municipal bonds |  |  | 1 |  |  | - |  |  | 1 |  |  |  | 1 |  |  | - |  |  | 1 |
Foreign corporate bonds |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 4 |  |  | - |  |  | 4 |
Common stocks |  |  | 71 |  |  | 71 |  |  | - |  |  |  | 75 |  |  | 75 |  |  | - |
Mutual funds |  |  | 343 |  |  | 343 |  |  | - |  |  |  | 300 |  |  | 300 |  |  | - |
Pooled funds |  |  | 727 |  |  | - |  |  | 727 |  |  |  | 507 |  |  | - |  |  | 507 |
Total |  | $ | 1,218 |  | $ | 458 |  | $ | 760 |  |  | $ | 1,047 |  | $ | 493 |  | $ | 554 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 41 |  | $ | 41 |  | $ | - |  |  | $ | 111 |  | $ | 111 |  | $ | - |
U.S. government and agencies securities |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 3 |  |  | - |  |  | 3 |
Corporate debt |  |  | 25 |  |  | - |  |  | 25 |  |  |  | 35 |  |  | - |  |  | 35 |
State and municipal bonds |  |  | 1 |  |  | - |  |  | 1 |  |  |  | 1 |  |  | - |  |  | 1 |
Foreign corporate bonds |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 3 |  |  | - |  |  | 3 |
Common stocks |  |  | 66 |  |  | 66 |  |  | - |  |  |  | 70 |  |  | 70 |  |  | - |
Mutual funds |  |  | 321 |  |  | 321 |  |  | - |  |  |  | 281 |  |  | 281 |  |  | - |
Pooled funds |  |  | 681 |  |  | - |  |  | 681 |  |  |  | 474 |  |  | - |  |  | 474 |
Total |  | $ | 1,141 |  | $ | 428 |  | $ | 713 |  |  | $ | 978 |  | $ | 462 |  | $ | 516 |
Cash and Short-term Investments: Cash and short-term investments consist of money market funds with daily liquidity. U.S. Government and Agencies Securities: 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. Corporate Debt: At December 31, 2013, corporate debt investments in the Pension Plan and OPEB Plan comprised investment grade bonds of U.S. issuers from diverse industries. At December 31, 2012, corporate debt investments in the Pension Plan and OPEB Plan comprised investment grade bonds (68 percent) and non‑investment grade, high-yield bonds (32 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. State and Municipal Bonds: 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. Foreign Corporate Bonds: 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. Common Stocks: 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. Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted NAVs that are publicly available and are the basis for transactions to buy or sell shares in the funds. Pooled Funds: Pooled funds in the Pension Plan and 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, 2013, these funds comprised investments in U.S. equity securities (Pension: 61 percent; OPEB: 60 percent), foreign equity securities (Pension: 28 percent; OPEB: 20 percent), foreign fixed-income securities (Pension: three percent; OPEB: four percent), U.S. fixed-income securities (Pension: four percent; OPEB: 14 percent), and alternative investments (Pension: four percent; OPEB: two percent). At December 31, 2012, these funds comprised investments in U.S. equity securities (Pension: 51 percent; OPEB: 65 percent), foreign equity securities (Pension: 26 percent; OPEB: 21 percent), foreign fixed-income securities (Pension: 14 percent; OPEB: nine percent), U.S. fixed-income securities (Pension: four percent; OPEB: three percent), and alternative investments (Pension: five percent; OPEB: two 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. 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 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |
OPEB 1 |  |  |  |  |  |  |
VEBA trust |  | $ | 55 |  | $ | 45 |
401(h) component |  |  | 17 |  |  | 20 |
|  | $ | 72 |  | $ | 65 |
Pension 2 |  | $ | 150 |  | $ | - |
Consumers |  |  |  |  |  |  |
OPEB 1 |  |  |  |  |  |  |
VEBA trust |  | $ | 55 |  | $ | 45 |
401(h) component |  |  | 16 |  |  | 19 |
|  | $ | 71 |  | $ | 64 |
Pension 2 |  | $ | 147 |  | $ | - |
| 1 |  | CMS Energy, including Consumers, plans to contribute $75 million to the OPEB Plan in 2014, of which Consumers plans to contribute $74 million.
| 2 |  | CMS Energy, including Consumers, does not presently plan to contribute to the Pension Plan in 2014.
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. In 2012, CMS Energy and Consumers adjusted their target asset allocation to 50 percent equity, 20 percent fixed income, and 30 percent alternative-strategy investments. This target 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 SmallCap Index and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers. 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. 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 | DB SERP | OPEB 1 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
2014 |  | $ | 119 |  | $ | 8 |  | $ | 58 |
2015 |  |  | 127 |  |  | 8 |  |  | 59 |
2016 |  |  | 134 |  |  | 8 |  |  | 61 |
2017 |  |  | 139 |  |  | 8 |  |  | 64 |
2018 |  |  | 144 |  |  | 8 |  |  | 66 |
2019-2023 |  |  | 760 |  |  | 48 |  |  | 364 |
Consumers |  |  |  |  |  |  |  |  |  |
2014 |  | $ | 116 |  | $ | 4 |  | $ | 56 |
2015 |  |  | 124 |  |  | 5 |  |  | 57 |
2016 |  |  | 131 |  |  | 5 |  |  | 59 |
2017 |  |  | 136 |  |  | 5 |  |  | 61 |
2018 |  |  | 140 |  |  | 5 |  |  | 64 |
2019-2023 |  |  | 740 |  |  | 27 |  |  | 349 |
| 1 |  | CMS Energy’s and Consumers’ OPEB benefit payments are net of employee contributions and expected Medicare Part D subsidy payments for 2014. CMS Energy and Consumers plan to change the Medicare drug program provided through the OPEB Plan from an employer-sponsored drug plan to an EGWP to begin on January 1, 2015; therefore, no Medicare Part D subsidy is expected after 2014. For CMS Energy, subsidies to be received are estimated to be $6 million for 2014. For Consumers, subsidies to be received are estimated to be $5 million for 2014.
Collective Bargaining Agreements: At December 31, 2013, unions represented 43 percent of CMS Energy’s employees and 45 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 + Details
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