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Retirement Benefits | 12 Months Ended
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Dec. 31, 2014
Retirement Benefits | 12:RETIREMENT BENEFITS Benefit Plans: 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 DB 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 C ash B alance P ension P lan 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;
| · |  | a contributory, qualified defined contribution 401(k) plan; and
| · |  | health care and life insurance benefits under an OPEB Plan.
DB Pension Plan: Participants in the DB Pension Plan include present and former employees of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. DB Pension Plan trust assets are not distinguishable by company. DCCP and Cash Balance Pension Plan: 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 C ash B alance P ension P lan, effective July 1, 2003 to August 31, 2005, also participate in the DCCP as of September 1, 2005. Additional pay credits under the C ash B alance P ension P lan were discontinued as of September 1, 2005. DCCP expense for CMS Energy and Consumers was $13 million for the year ended December 31, 2014, $10 million for the year ended December 31, 2013, and $8 million for the year ended December 31, 2012. 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 values of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:
In Millions
Years Ended December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Trust assets |  | $ | 131 |  | $ | 136 |
ABO |  |  | 145 |  |  | 122 |
Contributions |  |  | - |  |  | 16 |
Consumers |  |  |  |  |  |  |
Trust assets |  | $ | 93 |  | $ | 96 |
ABO |  |  | 99 |  |  | 82 |
Contributions |  |  | - |  |  | 13 |
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 $2 million at December 31, 2014 and $1 million at December 31, 2013. 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, 2014, 2013, and 2012. 401(k) Plan: 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 $18 million for the year ended December 31, 2014, $17 million for the year ended December 31, 2013, and $16 million for the year ended December 31, 2012. OPEB Plan: 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 DB 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 in 2015 and 2014. The rate of increase was assumed to decline to 4.75 percent by 2024 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:
In Millions
| One Percentage | One Percentage |
Year Ended December 31, 2014 | Point Increase | Point Decrease |
CMS Energy, including Consumers |  |  |  |  |  |  |
Effect on total service and interest cost component |  | $ | 13 |  | $ | (11) |
Effect on PBO |  |  | 188 |  |  | (165) |
Consumers |  |  |  |  |  |  |
Effect on total service and interest cost component |  | $ | 12 |  | $ | (10) |
Effect on PBO |  |  | 183 |  |  | (161) |
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:
| DB Pension Plan and DB SERP |  | OPEB Plan |
December 31 | 2014 |  | 2013 |  | 2012 |  |  | 2014 |  | 2013 |  | 2012 |  |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average for benefit obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  | 4.10 | % |  | 4.90 | % |  | 4.10 | % |  |  | 4.30 | % |  | 5.10 | % |  | 4.40 | % |
Mortality table 2 |  | 2014 |  |  | 2000 |  |  | 2000 |  |  |  | 2014 |  |  | 2000 |  |  | 2000 |  |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
DB Pension Plan |  | 3.00 | % |  | 3.00 | % |  | 3.00 | % |  |  |  |  |  |  |  |  |  |  |
DB SERP |  | 5.50 | % |  | 5.50 | % |  | 5.50 | % |  |  |  |  |  |  |  |  |  |  |
Weighted average for net periodic benefit cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  | 4.90 | % |  | 4.10 | % |  | 4.90 | % |  |  | 5.10 | % |  | 4.40 | % |  | 5.10 | % |
Expected long-term rate of return on plan assets 3 |  | 7.50 | % |  | 7.75 | % |  | 7.75 | % |  |  | 7.25 | % |  | 7.25 | % |  | 7.25 | % |
Mortality table 2 |  | 2000 |  |  | 2000 |  |  | 2000 |  |  |  | 2000 |  |  | 2000 |  |  | 2000 |  |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
DB Pension Plan |  | 3.00 | % |  | 3.00 | % |  | 3.50 | % |  |  |  |  |  |  |  |  |  |  |
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’ DB Pension Plan and OPEB Plan and the yields on high quality corporate bonds rated Aa or better.
| 2 |  | The mortality assumption for 2014 for benefit obligations was based on the new RP‑2014 mortality table, with projection scale MP‑2014. The mortality assumption for 2013 and 2012 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. The mortality assumption for all three years for net periodic benefit cost was based on the RP‑2000 mortality table.
| 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 DB Pension Plan assets was 7.5 percent in 2014. The actual return on DB Pension Plan assets was 7.4 percent in 2014, 12.5 percent in 2013, and 14.1 percent in 2012.
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
| DB Pension Plan and DB SERP |  | OPEB Plan |
Years Ended December 31 | 2014 | 2013 | 2012 |  | 2014 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net periodic cost (credit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 42 |  | $ | 54 |  | $ | 49 |  |  | $ | 20 |  | $ | 29 |  | $ | 32 |
Interest expense |  |  | 105 |  |  | 100 |  |  | 105 |  |  |  | 56 |  |  | 65 |  |  | 82 |
Expected return on plan assets |  |  | (135) |  |  | (127) |  |  | (125) |  |  |  | (88) |  |  | (77) |  |  | (66) |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 60 |  |  | 101 |  |  | 79 |  |  |  | 2 |  |  | 26 |  |  | 46 |
Prior service cost (credit) |  |  | 1 |  |  | 3 |  |  | 5 |  |  |  | (41) |  |  | (31) |  |  | (20) |
Net periodic cost (credit) |  | $ | 73 |  | $ | 131 |  | $ | 113 |  |  | $ | (51) |  | $ | 12 |  | $ | 74 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net periodic cost (credit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 41 |  | $ | 52 |  | $ | 48 |  |  | $ | 20 |  | $ | 28 |  | $ | 31 |
Interest expense |  |  | 100 |  |  | 96 |  |  | 100 |  |  |  | 54 |  |  | 63 |  |  | 79 |
Expected return on plan assets |  |  | (131) |  |  | (124) |  |  | (122) |  |  |  | (83) |  |  | (72) |  |  | (61) |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 59 |  |  | 98 |  |  | 77 |  |  |  | 3 |  |  | 27 |  |  | 47 |
Prior service cost (credit) |  |  | 1 |  |  | 3 |  |  | 5 |  |  |  | (40) |  |  | (30) |  |  | (20) |
Net periodic cost (credit) |  | $ | 70 |  | $ | 125 |  | $ | 108 |  |  | $ | (46) |  | $ | 16 |  | $ | 76 |
Presented in the following table are the estimated net loss and prior service cost (credit) that will be amortized into net periodic benefit cost in 2015 from or to the associated regulatory asset and AOCI:
In Millions
| DB Pension Plan | OPEB Plan |
CMS Energy, including Consumers |  |  |  |  |  |  |
Regulatory asset |  | $ | 89 |  | $ | (18) |
AOCI |  |  | 3 |  |  | (2) |
Consumers |  |  |  |  |  |  |
Regulatory asset |  | $ | 89 |  | $ | (18) |
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 the DB P ension Plan for the year s ended December 31, 2014 and 2013 and 11 years for the DB P ension Plan for the year ended December 31, 2012 and 13 years for OPEB for the years ended December 31, 2014, 2013, and 2012. 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 201 3. The estimated period of amortization of this new prior service credit for CMS Energy and Consumers is ten years. 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
| DB Pension Plan |  | DB SERP |  | OPEB Plan |
Years Ended December 31 | 2014 | 2013 |  | 2014 | 2013 |  | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 2,073 |  | $ | 2,354 |  |  | $ | 132 |  | $ | 144 |  |  | $ | 1,123 |  | $ | 1,729 |
Service cost |  |  | 41 |  |  | 53 |  |  |  | 1 |  |  | 1 |  |  |  | 20 |  |  | 29 |
Interest cost |  |  | 99 |  |  | 94 |  |  |  | 6 |  |  | 6 |  |  |  | 56 |  |  | 65 |
Plan amendments |  |  | - |  |  | - |  |  |  | - |  |  | - |  |  |  | - |  |  | (208) | 2
Actuarial (gain) loss |  |  | 458 |  |  | (308) |  |  |  | 24 |  |  | (12) |  |  |  | 230 |  |  | (440) |
Benefits paid |  |  | (124) |  |  | (120) |  |  |  | (7) |  |  | (7) |  |  |  | (51) | 3 |  | (52) | 3
Benefit obligation at end of period |  | $ | 2,547 |  | $ | 2,073 |  |  | $ | 156 |  | $ | 132 |  |  | $ | 1,378 |  | $ | 1,123 |
Plan assets at fair value at beginning of period |  | $ | 1,964 |  | $ | 1,727 |  |  | $ | - |  | $ | - |  |  | $ | 1,218 |  | $ | 1,047 |
Actual return on plan assets |  |  | 139 |  |  | 206 |  |  |  | - |  |  | - |  |  |  | 72 |  |  | 150 |
Company contribution |  |  | - |  |  | 150 |  |  |  | 7 |  |  | 7 |  |  |  | 25 |  |  | 72 |
Actual benefits paid |  |  | (124) |  |  | (119) |  |  |  | (7) |  |  | (7) |  |  |  | (50) | 3 |  | (51) | 3
Plan assets at fair value at end of period |  | $ | 1,979 |  | $ | 1,964 |  |  | $ | - |  | $ | - |  |  | $ | 1,265 |  | $ | 1,218 |
Funded status |  | $ | (568) | 1 | $ | (109) | 1 |  | $ | (156) |  | $ | (132) |  |  | $ | (113) |  | $ | 95 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  |  |  |  |  |  |  |  | $ | 93 |  | $ | 100 |  |  | $ | 1,088 |  | $ | 1,670 |
Service cost |  |  |  |  |  |  |  |  |  | 1 |  |  | 1 |  |  |  | 20 |  |  | 28 |
Interest cost |  |  |  |  |  |  |  |  |  | 4 |  |  | 4 |  |  |  | 54 |  |  | 63 |
Plan amendments |  |  |  |  |  |  |  |  |  | - |  |  | - |  |  |  | - |  |  | (200) | 2
Actuarial (gain) loss |  |  |  |  |  |  |  |  |  | 17 |  |  | (8) |  |  |  | 223 |  |  | (424) |
Benefits paid |  |  |  |  |  |  |  |  |  | (4) |  |  | (4) |  |  |  | (49) | 3 |  | (49) | 3
Benefit obligation at end of period |  |  |  |  |  |  |  |  | $ | 111 |  | $ | 93 |  |  | $ | 1,336 |  | $ | 1,088 |
Plan assets at fair value at beginning of period |  |  |  |  |  |  |  |  | $ | - |  | $ | - |  |  | $ | 1,141 |  | $ | 978 |
Actual return on plan assets |  |  |  |  |  |  |  |  |  | - |  |  | - |  |  |  | 68 |  |  | 141 |
Company contribution |  |  |  |  |  |  |  |  |  | 4 |  |  | 4 |  |  |  | 25 |  |  | 71 |
Actual benefits paid |  |  |  |  |  |  |  |  |  | (4) |  |  | (4) |  |  |  | (48) | 3 |  | (49) | 3
Plan assets at fair value at end of period |  |  |  |  |  |  |  |  | $ | - |  | $ | - |  |  | $ | 1,186 |  | $ | 1,141 |
Funded status |  |  |  |  |  |  |  |  | $ | (111) |  | $ | (93) |  |  | $ | (150) |  | $ | 53 |
| 1 |  | At December 31, 2014, $532 million of the total funded status of the DB Pension Plan was attributable to Consumers, based on an allocation of expenses. At December 31, 2013, $86 million of the total funded status of the DB 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 that began 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 $4 million in 2014 and $5 million in each of 2013 and 2012 for the Medicare Part D subsidies. Consumers received payments of $4 million in each of 2014 and 2013 and $5 million in 2012 for the Medicare Part D subsidies. The Medicare Part D subsidy payments are used to pay OPEB Plan benefits.
As part of the annual measurement of benefit obligations, CMS Energy recorded an actuarial loss at December 31, 2014 of $458 million for the DB Pension Plan and $230 million for the OPEB Plan. Consumers recorded an actuarial loss at December 31, 2014 of $223 million for the OPEB Plan. Recognition of these actuarial losses at December 31, 2014 increased CMS Energy’s and Consumers’ benefit obligations and decreased the funded status of the plans. The changes were primarily the result of lowering the discount rates used in calculating the plans’ obligation and using the RP‑2014 mortality table. Presented in the following table are the increases to the plans’ actuarial losses resulting from these changes:
In Millions
| DB Pension Plan | OPEB Plan |
CMS Energy, including Consumers |  |  |  |  |  |  |
Discount rate change |  | $ | 235 |  | $ | 155 |
RP-2014 mortality table |  |  | 150 |  |  | 145 |
Consumers |  |  |  |  |  |  |
Discount rate change |  |  |  |  | $ | 150 |
RP-2014 mortality table |  |  |  |  |  | 141 |
Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit plans’ assets (liabilities):
In Millions
December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  | $ | (8) |  | $ | (8) |
Non-current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  |  | (148) |  |  | (124) |
OPEB Plan |  |  | (113) |  |  | 95 |
DB Pension Plan |  |  | (568) |  |  | (109) |
Consumers |  |  |  |  |  |  |
Current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  | $ | (5) |  | $ | (5) |
Non-current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  |  | (106) |  |  | (88) |
OPEB Plan |  |  | (150) |  |  | 53 |
DB Pension Plan |  |  | (532) |  |  | (86) |
Presented in the following table are the DB Pension Plan PBO, ABO, and fair value of plan assets:
In Millions
December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
DB Pension Plan PBO |  | $ | 2,547 |  | $ | 2,073 |
DB Pension Plan ABO |  |  | 2,257 |  |  | 1,843 |
Fair value of DB Pension Plan assets |  |  | 1,979 |  |  | 1,964 |
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 3, Regulatory Matters.
In Millions
| DB Pension Plan and DB SERP |  | OPEB Plan |
Years Ended December 31 | 2014 | 2013 |  | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets (liabilities) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 1,012 |  | $ | 625 |  |  | $ | 419 |  | $ | 184 |
Prior service cost (credit) |  |  | 7 |  |  | 9 |  |  |  | (243) |  |  | (282) |
Regulatory assets (liabilities) |  | $ | 1,019 |  | $ | 634 |  |  | $ | 176 |  | $ | (98) |
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) |  |  | 99 |  |  | 69 |  |  |  | (18) |  |  | (26) |
Prior service cost (credit) |  |  | 1 |  |  | - |  |  |  | (8) |  |  | (10) |
Total amounts recognized in regulatory assets (liabilities) and AOCI |  | $ | 1,119 |  | $ | 703 |  |  | $ | 150 |  | $ | (134) |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets (liabilities) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 1,012 |  | $ | 625 |  |  | $ | 419 |  | $ | 184 |
Prior service cost (credit) |  |  | 7 |  |  | 9 |  |  |  | (243) |  |  | (282) |
Regulatory assets (liabilities) |  | $ | 1,019 |  | $ | 634 |  |  | $ | 176 |  | $ | (98) |
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) |  |  | 39 |  |  | 25 |  |  |  | - |  |  | - |
Total amounts recognized in regulatory assets (liabilities) and AOCI |  | $ | 1,058 |  | $ | 659 |  |  | $ | 176 |  | $ | (98) |
Plan Assets: Presented in the following tables are the fair values of CMS Energy’s and Consumers’ DB 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 6, Fair Value Measurements.
In Millions
| DB Pension Plan |
| December 31, 2014 |  | December 31, 2013 |
| Total | Level 1 | Level 2 |  | Total | Level 1 | Level 2 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 31 |  | $ | 31 |  | $ | - |  |  | $ | 109 |  | $ | 109 |  | $ | - |
U.S. government and agencies securities |  |  | 30 |  |  | - |  |  | 30 |  |  |  | 25 |  |  | - |  |  | 25 |
Corporate debt |  |  | 222 |  |  | - |  |  | 222 |  |  |  | 188 |  |  | - |  |  | 188 |
State and municipal bonds |  |  | 8 |  |  | - |  |  | 8 |  |  |  | 5 |  |  | - |  |  | 5 |
Foreign corporate bonds |  |  | 21 |  |  | - |  |  | 21 |  |  |  | 20 |  |  | - |  |  | 20 |
Mutual funds |  |  | 598 |  |  | 598 |  |  | - |  |  |  | 449 |  |  | 449 |  |  | - |
Pooled funds |  |  | 1,069 |  |  | - |  |  | 1,069 |  |  |  | 1,168 |  |  | - |  |  | 1,168 |
Total |  | $ | 1,979 |  | $ | 629 |  | $ | 1,350 |  |  | $ | 1,964 |  | $ | 558 |  | $ | 1,406 |
In Millions
| OPEB Plan |
| December 31, 2014 |  | December 31, 2013 |
| Total | Level 1 | Level 2 |  | Total | Level 1 | Level 2 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 19 |  | $ | 19 |  | $ | - |  |  | $ | 44 |  | $ | 44 |  | $ | - |
U.S. government and agencies securities |  |  | 5 |  |  | - |  |  | 5 |  |  |  | 3 |  |  | - |  |  | 3 |
Corporate debt |  |  | 33 |  |  | - |  |  | 33 |  |  |  | 26 |  |  | - |  |  | 26 |
State and municipal bonds |  |  | 1 |  |  | - |  |  | 1 |  |  |  | 1 |  |  | - |  |  | 1 |
Foreign corporate bonds |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 3 |  |  | - |  |  | 3 |
Common stocks |  |  | 69 |  |  | 69 |  |  | - |  |  |  | 71 |  |  | 71 |  |  | - |
Mutual funds |  |  | 438 |  |  | 438 |  |  | - |  |  |  | 343 |  |  | 343 |  |  | - |
Pooled funds |  |  | 697 |  |  | - |  |  | 697 |  |  |  | 727 |  |  | - |  |  | 727 |
Total |  | $ | 1,265 |  | $ | 526 |  | $ | 739 |  |  | $ | 1,218 |  | $ | 458 |  | $ | 760 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 18 |  | $ | 18 |  | $ | - |  |  | $ | 41 |  | $ | 41 |  | $ | - |
U.S. government and agencies securities |  |  | 4 |  |  | - |  |  | 4 |  |  |  | 3 |  |  | - |  |  | 3 |
Corporate debt |  |  | 31 |  |  | - |  |  | 31 |  |  |  | 25 |  |  | - |  |  | 25 |
State and municipal bonds |  |  | 1 |  |  | - |  |  | 1 |  |  |  | 1 |  |  | - |  |  | 1 |
Foreign corporate bonds |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 3 |  |  | - |  |  | 3 |
Common stocks |  |  | 65 |  |  | 65 |  |  | - |  |  |  | 66 |  |  | 66 |  |  | - |
Mutual funds |  |  | 411 |  |  | 411 |  |  | - |  |  |  | 321 |  |  | 321 |  |  | - |
Pooled funds |  |  | 653 |  |  | - |  |  | 653 |  |  |  | 681 |  |  | - |  |  | 681 |
Total |  | $ | 1,186 |  | $ | 494 |  | $ | 692 |  |  | $ | 1,141 |  | $ | 428 |  | $ | 713 |
Cash and Short-T erm 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: Corporate debt investments consisted of investment grade bonds 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 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. Presented in the following table are the investment components of these funds:
| DB Pension Plan |  | OPEB Plan |
December 31 | 2014 |  | 2013 |  |  | 2014 |  | 2013 |  |
U.S. equity securities |  | 64 | % |  | 61 | % |  |  | 62 | % |  | 60 | % |
Foreign equity securities |  | 16 |  |  | 28 |  |  |  | 12 |  |  | 20 |  |
U.S. fixed-income securities |  | 9 |  |  | 4 |  |  |  | 18 |  |  | 14 |  |
Foreign fixed-income securities |  | 6 |  |  | 3 |  |  |  | 5 |  |  | 4 |  |
Alternative investments |  | 5 |  |  | 4 |  |  |  | 3 |  |  | 2 |  |
|  | 100 | % |  | 100 | % |  |  | 100 | % |  | 100 | % |
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. CMS Energy’s target asset allocation for DB Pension Plan assets is 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’s and Consumers’ target asset allocation for these trusts is 50 percent equity, 20 percent fixed income, and 30 percent alternative-strategy investments. CMS Energy and Consumers plan to adjust their target asset allocation in 2015 to 50 percent equity, 25 percent fixed income, and 25 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. Contributions: Presented in the following table are the contributions to CMS Energy’s and Consumers’ OPEB Plan and DB Pension Plan:
In Millions
Years Ended December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
OPEB Plan 1 |  |  |  |  |  |  |
VEBA trust |  | $ | 16 |  | $ | 55 |
401(h) component |  |  | 9 |  |  | 17 |
|  | $ | 25 |  | $ | 72 |
DB Pension Plan 2 |  | $ | - |  | $ | 150 |
Consumers |  |  |  |  |  |  |
OPEB Plan 1 |  |  |  |  |  |  |
VEBA trust |  | $ | 16 |  | $ | 55 |
401(h) component |  |  | 9 |  |  | 16 |
|  | $ | 25 |  | $ | 71 |
DB Pension Plan 2 |  | $ | - |  | $ | 147 |
| 1 |  | CMS Energy, including Consumers, plans to contribute $29 million to the OPEB Plan in 2015, of which Consumers plans to contribute $29 million.
| 2 |  | Neither CMS Energy nor Consumers plans to contribute to the DB Pension Plan in 2015.
Contributions comprise required amounts and discretionary contributions. Actual future contributions will depend on future investment performance, discount rates, and various factors related to the DB Pension Plan and OPEB Plan participants. Following amendments to the OPEB Plan in July 2013, Consumers’ OPEB costs decreased substantially and, as a result, the OPEB Plan was fully funded at December 31, 2013. In May 2014, Consumers filed an application with the MPSC requesting approval to suspend contributions to Consumers’ OPEB Plan during 2014 and 2015 if the OPEB Plan continued to be fully funded. Consumers’ electric and gas rates still reflect the higher OPEB costs, and previous MPSC orders required Consumers to contribute to the OPEB Plan the associated amount collected in rates annually. In September 2014, the MPSC approved a settlement agreement addressing Consumers’ OPEB Plan funding application. Under the settlement agreement, Consumers contributed $25 million to the plan in 2014 and will contribute $29 million in February 2015. Consumers will then suspend further contributions until the MPSC determines funding requirements in future general rate cases. 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
| DB Pension Plan | DB SERP | OPEB Plan |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
2015 |  | $ | 134 |  | $ | 8 |  | $ | 56 |
2016 |  |  | 141 |  |  | 8 |  |  | 58 |
2017 |  |  | 147 |  |  | 8 |  |  | 61 |
2018 |  |  | 152 |  |  | 8 |  |  | 64 |
2019 |  |  | 156 |  |  | 9 |  |  | 67 |
2020-2024 |  |  | 810 |  |  | 50 |  |  | 367 |
Consumers |  |  |  |  |  |  |  |  |  |
2015 |  | $ | 131 |  | $ | 5 |  | $ | 53 |
2016 |  |  | 137 |  |  | 5 |  |  | 56 |
2017 |  |  | 143 |  |  | 5 |  |  | 59 |
2018 |  |  | 148 |  |  | 5 |  |  | 62 |
2019 |  |  | 152 |  |  | 5 |  |  | 64 |
2020-2024 |  |  | 789 |  |  | 30 |  |  | 352 |
Collective Bargaining Agreements: At December 31, 2014, unions represented 41 percent of CMS Energy’s employees and 43 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 Benefit Plans: 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 DB 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 C ash B alance P ension P lan 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;
| · |  | a contributory, qualified defined contribution 401(k) plan; and
| · |  | health care and life insurance benefits under an OPEB Plan.
DB Pension Plan: Participants in the DB Pension Plan include present and former employees of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. DB Pension Plan trust assets are not distinguishable by company. DCCP and Cash Balance Pension Plan: 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 C ash B alance P ension P lan, effective July 1, 2003 to August 31, 2005, also participate in the DCCP as of September 1, 2005. Additional pay credits under the C ash B alance P ension P lan were discontinued as of September 1, 2005. DCCP expense for CMS Energy and Consumers was $13 million for the year ended December 31, 2014, $10 million for the year ended December 31, 2013, and $8 million for the year ended December 31, 2012. 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 values of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:
In Millions
Years Ended December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Trust assets |  | $ | 131 |  | $ | 136 |
ABO |  |  | 145 |  |  | 122 |
Contributions |  |  | - |  |  | 16 |
Consumers |  |  |  |  |  |  |
Trust assets |  | $ | 93 |  | $ | 96 |
ABO |  |  | 99 |  |  | 82 |
Contributions |  |  | - |  |  | 13 |
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 $2 million at December 31, 2014 and $1 million at December 31, 2013. 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, 2014, 2013, and 2012. 401(k) Plan: 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 $18 million for the year ended December 31, 2014, $17 million for the year ended December 31, 2013, and $16 million for the year ended December 31, 2012. OPEB Plan: 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 DB 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 in 2015 and 2014. The rate of increase was assumed to decline to 4.75 percent by 2024 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:
In Millions
| One Percentage | One Percentage |
Year Ended December 31, 2014 | Point Increase | Point Decrease |
CMS Energy, including Consumers |  |  |  |  |  |  |
Effect on total service and interest cost component |  | $ | 13 |  | $ | (11) |
Effect on PBO |  |  | 188 |  |  | (165) |
Consumers |  |  |  |  |  |  |
Effect on total service and interest cost component |  | $ | 12 |  | $ | (10) |
Effect on PBO |  |  | 183 |  |  | (161) |
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:
| DB Pension Plan and DB SERP |  | OPEB Plan |
December 31 | 2014 |  | 2013 |  | 2012 |  |  | 2014 |  | 2013 |  | 2012 |  |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average for benefit obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  | 4.10 | % |  | 4.90 | % |  | 4.10 | % |  |  | 4.30 | % |  | 5.10 | % |  | 4.40 | % |
Mortality table 2 |  | 2014 |  |  | 2000 |  |  | 2000 |  |  |  | 2014 |  |  | 2000 |  |  | 2000 |  |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
DB Pension Plan |  | 3.00 | % |  | 3.00 | % |  | 3.00 | % |  |  |  |  |  |  |  |  |  |  |
DB SERP |  | 5.50 | % |  | 5.50 | % |  | 5.50 | % |  |  |  |  |  |  |  |  |  |  |
Weighted average for net periodic benefit cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate 1 |  | 4.90 | % |  | 4.10 | % |  | 4.90 | % |  |  | 5.10 | % |  | 4.40 | % |  | 5.10 | % |
Expected long-term rate of return on plan assets 3 |  | 7.50 | % |  | 7.75 | % |  | 7.75 | % |  |  | 7.25 | % |  | 7.25 | % |  | 7.25 | % |
Mortality table 2 |  | 2000 |  |  | 2000 |  |  | 2000 |  |  |  | 2000 |  |  | 2000 |  |  | 2000 |  |
Rate of compensation increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
DB Pension Plan |  | 3.00 | % |  | 3.00 | % |  | 3.50 | % |  |  |  |  |  |  |  |  |  |  |
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’ DB Pension Plan and OPEB Plan and the yields on high quality corporate bonds rated Aa or better.
| 2 |  | The mortality assumption for 2014 for benefit obligations was based on the new RP‑2014 mortality table, with projection scale MP‑2014. The mortality assumption for 2013 and 2012 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. The mortality assumption for all three years for net periodic benefit cost was based on the RP‑2000 mortality table.
| 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 DB Pension Plan assets was 7.5 percent in 2014. The actual return on DB Pension Plan assets was 7.4 percent in 2014, 12.5 percent in 2013, and 14.1 percent in 2012.
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
| DB Pension Plan and DB SERP |  | OPEB Plan |
Years Ended December 31 | 2014 | 2013 | 2012 |  | 2014 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net periodic cost (credit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 42 |  | $ | 54 |  | $ | 49 |  |  | $ | 20 |  | $ | 29 |  | $ | 32 |
Interest expense |  |  | 105 |  |  | 100 |  |  | 105 |  |  |  | 56 |  |  | 65 |  |  | 82 |
Expected return on plan assets |  |  | (135) |  |  | (127) |  |  | (125) |  |  |  | (88) |  |  | (77) |  |  | (66) |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 60 |  |  | 101 |  |  | 79 |  |  |  | 2 |  |  | 26 |  |  | 46 |
Prior service cost (credit) |  |  | 1 |  |  | 3 |  |  | 5 |  |  |  | (41) |  |  | (31) |  |  | (20) |
Net periodic cost (credit) |  | $ | 73 |  | $ | 131 |  | $ | 113 |  |  | $ | (51) |  | $ | 12 |  | $ | 74 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net periodic cost (credit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 41 |  | $ | 52 |  | $ | 48 |  |  | $ | 20 |  | $ | 28 |  | $ | 31 |
Interest expense |  |  | 100 |  |  | 96 |  |  | 100 |  |  |  | 54 |  |  | 63 |  |  | 79 |
Expected return on plan assets |  |  | (131) |  |  | (124) |  |  | (122) |  |  |  | (83) |  |  | (72) |  |  | (61) |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | 59 |  |  | 98 |  |  | 77 |  |  |  | 3 |  |  | 27 |  |  | 47 |
Prior service cost (credit) |  |  | 1 |  |  | 3 |  |  | 5 |  |  |  | (40) |  |  | (30) |  |  | (20) |
Net periodic cost (credit) |  | $ | 70 |  | $ | 125 |  | $ | 108 |  |  | $ | (46) |  | $ | 16 |  | $ | 76 |
Presented in the following table are the estimated net loss and prior service cost (credit) that will be amortized into net periodic benefit cost in 2015 from or to the associated regulatory asset and AOCI:
In Millions
| DB Pension Plan | OPEB Plan |
CMS Energy, including Consumers |  |  |  |  |  |  |
Regulatory asset |  | $ | 89 |  | $ | (18) |
AOCI |  |  | 3 |  |  | (2) |
Consumers |  |  |  |  |  |  |
Regulatory asset |  | $ | 89 |  | $ | (18) |
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 the DB P ension Plan for the year s ended December 31, 2014 and 2013 and 11 years for the DB P ension Plan for the year ended December 31, 2012 and 13 years for OPEB for the years ended December 31, 2014, 2013, and 2012. 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 201 3. The estimated period of amortization of this new prior service credit for CMS Energy and Consumers is ten years. 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
| DB Pension Plan |  | DB SERP |  | OPEB Plan |
Years Ended December 31 | 2014 | 2013 |  | 2014 | 2013 |  | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 2,073 |  | $ | 2,354 |  |  | $ | 132 |  | $ | 144 |  |  | $ | 1,123 |  | $ | 1,729 |
Service cost |  |  | 41 |  |  | 53 |  |  |  | 1 |  |  | 1 |  |  |  | 20 |  |  | 29 |
Interest cost |  |  | 99 |  |  | 94 |  |  |  | 6 |  |  | 6 |  |  |  | 56 |  |  | 65 |
Plan amendments |  |  | - |  |  | - |  |  |  | - |  |  | - |  |  |  | - |  |  | (208) | 2
Actuarial (gain) loss |  |  | 458 |  |  | (308) |  |  |  | 24 |  |  | (12) |  |  |  | 230 |  |  | (440) |
Benefits paid |  |  | (124) |  |  | (120) |  |  |  | (7) |  |  | (7) |  |  |  | (51) | 3 |  | (52) | 3
Benefit obligation at end of period |  | $ | 2,547 |  | $ | 2,073 |  |  | $ | 156 |  | $ | 132 |  |  | $ | 1,378 |  | $ | 1,123 |
Plan assets at fair value at beginning of period |  | $ | 1,964 |  | $ | 1,727 |  |  | $ | - |  | $ | - |  |  | $ | 1,218 |  | $ | 1,047 |
Actual return on plan assets |  |  | 139 |  |  | 206 |  |  |  | - |  |  | - |  |  |  | 72 |  |  | 150 |
Company contribution |  |  | - |  |  | 150 |  |  |  | 7 |  |  | 7 |  |  |  | 25 |  |  | 72 |
Actual benefits paid |  |  | (124) |  |  | (119) |  |  |  | (7) |  |  | (7) |  |  |  | (50) | 3 |  | (51) | 3
Plan assets at fair value at end of period |  | $ | 1,979 |  | $ | 1,964 |  |  | $ | - |  | $ | - |  |  | $ | 1,265 |  | $ | 1,218 |
Funded status |  | $ | (568) | 1 | $ | (109) | 1 |  | $ | (156) |  | $ | (132) |  |  | $ | (113) |  | $ | 95 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of period |  |  |  |  |  |  |  |  | $ | 93 |  | $ | 100 |  |  | $ | 1,088 |  | $ | 1,670 |
Service cost |  |  |  |  |  |  |  |  |  | 1 |  |  | 1 |  |  |  | 20 |  |  | 28 |
Interest cost |  |  |  |  |  |  |  |  |  | 4 |  |  | 4 |  |  |  | 54 |  |  | 63 |
Plan amendments |  |  |  |  |  |  |  |  |  | - |  |  | - |  |  |  | - |  |  | (200) | 2
Actuarial (gain) loss |  |  |  |  |  |  |  |  |  | 17 |  |  | (8) |  |  |  | 223 |  |  | (424) |
Benefits paid |  |  |  |  |  |  |  |  |  | (4) |  |  | (4) |  |  |  | (49) | 3 |  | (49) | 3
Benefit obligation at end of period |  |  |  |  |  |  |  |  | $ | 111 |  | $ | 93 |  |  | $ | 1,336 |  | $ | 1,088 |
Plan assets at fair value at beginning of period |  |  |  |  |  |  |  |  | $ | - |  | $ | - |  |  | $ | 1,141 |  | $ | 978 |
Actual return on plan assets |  |  |  |  |  |  |  |  |  | - |  |  | - |  |  |  | 68 |  |  | 141 |
Company contribution |  |  |  |  |  |  |  |  |  | 4 |  |  | 4 |  |  |  | 25 |  |  | 71 |
Actual benefits paid |  |  |  |  |  |  |  |  |  | (4) |  |  | (4) |  |  |  | (48) | 3 |  | (49) | 3
Plan assets at fair value at end of period |  |  |  |  |  |  |  |  | $ | - |  | $ | - |  |  | $ | 1,186 |  | $ | 1,141 |
Funded status |  |  |  |  |  |  |  |  | $ | (111) |  | $ | (93) |  |  | $ | (150) |  | $ | 53 |
| 1 |  | At December 31, 2014, $532 million of the total funded status of the DB Pension Plan was attributable to Consumers, based on an allocation of expenses. At December 31, 2013, $86 million of the total funded status of the DB 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 that began 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 $4 million in 2014 and $5 million in each of 2013 and 2012 for the Medicare Part D subsidies. Consumers received payments of $4 million in each of 2014 and 2013 and $5 million in 2012 for the Medicare Part D subsidies. The Medicare Part D subsidy payments are used to pay OPEB Plan benefits.
As part of the annual measurement of benefit obligations, CMS Energy recorded an actuarial loss at December 31, 2014 of $458 million for the DB Pension Plan and $230 million for the OPEB Plan. Consumers recorded an actuarial loss at December 31, 2014 of $223 million for the OPEB Plan. Recognition of these actuarial losses at December 31, 2014 increased CMS Energy’s and Consumers’ benefit obligations and decreased the funded status of the plans. The changes were primarily the result of lowering the discount rates used in calculating the plans’ obligation and using the RP‑2014 mortality table. Presented in the following table are the increases to the plans’ actuarial losses resulting from these changes:
In Millions
| DB Pension Plan | OPEB Plan |
CMS Energy, including Consumers |  |  |  |  |  |  |
Discount rate change |  | $ | 235 |  | $ | 155 |
RP-2014 mortality table |  |  | 150 |  |  | 145 |
Consumers |  |  |  |  |  |  |
Discount rate change |  |  |  |  | $ | 150 |
RP-2014 mortality table |  |  |  |  |  | 141 |
Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit plans’ assets (liabilities):
In Millions
December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  | $ | (8) |  | $ | (8) |
Non-current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  |  | (148) |  |  | (124) |
OPEB Plan |  |  | (113) |  |  | 95 |
DB Pension Plan |  |  | (568) |  |  | (109) |
Consumers |  |  |  |  |  |  |
Current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  | $ | (5) |  | $ | (5) |
Non-current assets (liabilities) |  |  |  |  |  |  |
DB SERP |  |  | (106) |  |  | (88) |
OPEB Plan |  |  | (150) |  |  | 53 |
DB Pension Plan |  |  | (532) |  |  | (86) |
Presented in the following table are the DB Pension Plan PBO, ABO, and fair value of plan assets:
In Millions
December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
DB Pension Plan PBO |  | $ | 2,547 |  | $ | 2,073 |
DB Pension Plan ABO |  |  | 2,257 |  |  | 1,843 |
Fair value of DB Pension Plan assets |  |  | 1,979 |  |  | 1,964 |
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 3, Regulatory Matters.
In Millions
| DB Pension Plan and DB SERP |  | OPEB Plan |
Years Ended December 31 | 2014 | 2013 |  | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets (liabilities) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 1,012 |  | $ | 625 |  |  | $ | 419 |  | $ | 184 |
Prior service cost (credit) |  |  | 7 |  |  | 9 |  |  |  | (243) |  |  | (282) |
Regulatory assets (liabilities) |  | $ | 1,019 |  | $ | 634 |  |  | $ | 176 |  | $ | (98) |
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) |  |  | 99 |  |  | 69 |  |  |  | (18) |  |  | (26) |
Prior service cost (credit) |  |  | 1 |  |  | - |  |  |  | (8) |  |  | (10) |
Total amounts recognized in regulatory assets (liabilities) and AOCI |  | $ | 1,119 |  | $ | 703 |  |  | $ | 150 |  | $ | (134) |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets (liabilities) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 1,012 |  | $ | 625 |  |  | $ | 419 |  | $ | 184 |
Prior service cost (credit) |  |  | 7 |  |  | 9 |  |  |  | (243) |  |  | (282) |
Regulatory assets (liabilities) |  | $ | 1,019 |  | $ | 634 |  |  | $ | 176 |  | $ | (98) |
AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) |  |  | 39 |  |  | 25 |  |  |  | - |  |  | - |
Total amounts recognized in regulatory assets (liabilities) and AOCI |  | $ | 1,058 |  | $ | 659 |  |  | $ | 176 |  | $ | (98) |
Plan Assets: Presented in the following tables are the fair values of CMS Energy’s and Consumers’ DB 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 6, Fair Value Measurements.
In Millions
| DB Pension Plan |
| December 31, 2014 |  | December 31, 2013 |
| Total | Level 1 | Level 2 |  | Total | Level 1 | Level 2 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 31 |  | $ | 31 |  | $ | - |  |  | $ | 109 |  | $ | 109 |  | $ | - |
U.S. government and agencies securities |  |  | 30 |  |  | - |  |  | 30 |  |  |  | 25 |  |  | - |  |  | 25 |
Corporate debt |  |  | 222 |  |  | - |  |  | 222 |  |  |  | 188 |  |  | - |  |  | 188 |
State and municipal bonds |  |  | 8 |  |  | - |  |  | 8 |  |  |  | 5 |  |  | - |  |  | 5 |
Foreign corporate bonds |  |  | 21 |  |  | - |  |  | 21 |  |  |  | 20 |  |  | - |  |  | 20 |
Mutual funds |  |  | 598 |  |  | 598 |  |  | - |  |  |  | 449 |  |  | 449 |  |  | - |
Pooled funds |  |  | 1,069 |  |  | - |  |  | 1,069 |  |  |  | 1,168 |  |  | - |  |  | 1,168 |
Total |  | $ | 1,979 |  | $ | 629 |  | $ | 1,350 |  |  | $ | 1,964 |  | $ | 558 |  | $ | 1,406 |
In Millions
| OPEB Plan |
| December 31, 2014 |  | December 31, 2013 |
| Total | Level 1 | Level 2 |  | Total | Level 1 | Level 2 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 19 |  | $ | 19 |  | $ | - |  |  | $ | 44 |  | $ | 44 |  | $ | - |
U.S. government and agencies securities |  |  | 5 |  |  | - |  |  | 5 |  |  |  | 3 |  |  | - |  |  | 3 |
Corporate debt |  |  | 33 |  |  | - |  |  | 33 |  |  |  | 26 |  |  | - |  |  | 26 |
State and municipal bonds |  |  | 1 |  |  | - |  |  | 1 |  |  |  | 1 |  |  | - |  |  | 1 |
Foreign corporate bonds |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 3 |  |  | - |  |  | 3 |
Common stocks |  |  | 69 |  |  | 69 |  |  | - |  |  |  | 71 |  |  | 71 |  |  | - |
Mutual funds |  |  | 438 |  |  | 438 |  |  | - |  |  |  | 343 |  |  | 343 |  |  | - |
Pooled funds |  |  | 697 |  |  | - |  |  | 697 |  |  |  | 727 |  |  | - |  |  | 727 |
Total |  | $ | 1,265 |  | $ | 526 |  | $ | 739 |  |  | $ | 1,218 |  | $ | 458 |  | $ | 760 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset category |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 18 |  | $ | 18 |  | $ | - |  |  | $ | 41 |  | $ | 41 |  | $ | - |
U.S. government and agencies securities |  |  | 4 |  |  | - |  |  | 4 |  |  |  | 3 |  |  | - |  |  | 3 |
Corporate debt |  |  | 31 |  |  | - |  |  | 31 |  |  |  | 25 |  |  | - |  |  | 25 |
State and municipal bonds |  |  | 1 |  |  | - |  |  | 1 |  |  |  | 1 |  |  | - |  |  | 1 |
Foreign corporate bonds |  |  | 3 |  |  | - |  |  | 3 |  |  |  | 3 |  |  | - |  |  | 3 |
Common stocks |  |  | 65 |  |  | 65 |  |  | - |  |  |  | 66 |  |  | 66 |  |  | - |
Mutual funds |  |  | 411 |  |  | 411 |  |  | - |  |  |  | 321 |  |  | 321 |  |  | - |
Pooled funds |  |  | 653 |  |  | - |  |  | 653 |  |  |  | 681 |  |  | - |  |  | 681 |
Total |  | $ | 1,186 |  | $ | 494 |  | $ | 692 |  |  | $ | 1,141 |  | $ | 428 |  | $ | 713 |
Cash and Short-T erm 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: Corporate debt investments consisted of investment grade bonds 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 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. Presented in the following table are the investment components of these funds:
| DB Pension Plan |  | OPEB Plan |
December 31 | 2014 |  | 2013 |  |  | 2014 |  | 2013 |  |
U.S. equity securities |  | 64 | % |  | 61 | % |  |  | 62 | % |  | 60 | % |
Foreign equity securities |  | 16 |  |  | 28 |  |  |  | 12 |  |  | 20 |  |
U.S. fixed-income securities |  | 9 |  |  | 4 |  |  |  | 18 |  |  | 14 |  |
Foreign fixed-income securities |  | 6 |  |  | 3 |  |  |  | 5 |  |  | 4 |  |
Alternative investments |  | 5 |  |  | 4 |  |  |  | 3 |  |  | 2 |  |
|  | 100 | % |  | 100 | % |  |  | 100 | % |  | 100 | % |
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. CMS Energy’s target asset allocation for DB Pension Plan assets is 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’s and Consumers’ target asset allocation for these trusts is 50 percent equity, 20 percent fixed income, and 30 percent alternative-strategy investments. CMS Energy and Consumers plan to adjust their target asset allocation in 2015 to 50 percent equity, 25 percent fixed income, and 25 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. Contributions: Presented in the following table are the contributions to CMS Energy’s and Consumers’ OPEB Plan and DB Pension Plan:
In Millions
Years Ended December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
OPEB Plan 1 |  |  |  |  |  |  |
VEBA trust |  | $ | 16 |  | $ | 55 |
401(h) component |  |  | 9 |  |  | 17 |
|  | $ | 25 |  | $ | 72 |
DB Pension Plan 2 |  | $ | - |  | $ | 150 |
Consumers |  |  |  |  |  |  |
OPEB Plan 1 |  |  |  |  |  |  |
VEBA trust |  | $ | 16 |  | $ | 55 |
401(h) component |  |  | 9 |  |  | 16 |
|  | $ | 25 |  | $ | 71 |
DB Pension Plan 2 |  | $ | - |  | $ | 147 |
| 1 |  | CMS Energy, including Consumers, plans to contribute $29 million to the OPEB Plan in 2015, of which Consumers plans to contribute $29 million.
| 2 |  | Neither CMS Energy nor Consumers plans to contribute to the DB Pension Plan in 2015.
Contributions comprise required amounts and discretionary contributions. Actual future contributions will depend on future investment performance, discount rates, and various factors related to the DB Pension Plan and OPEB Plan participants. Following amendments to the OPEB Plan in July 2013, Consumers’ OPEB costs decreased substantially and, as a result, the OPEB Plan was fully funded at December 31, 2013. In May 2014, Consumers filed an application with the MPSC requesting approval to suspend contributions to Consumers’ OPEB Plan during 2014 and 2015 if the OPEB Plan continued to be fully funded. Consumers’ electric and gas rates still reflect the higher OPEB costs, and previous MPSC orders required Consumers to contribute to the OPEB Plan the associated amount collected in rates annually. In September 2014, the MPSC approved a settlement agreement addressing Consumers’ OPEB Plan funding application. Under the settlement agreement, Consumers contributed $25 million to the plan in 2014 and will contribute $29 million in February 2015. Consumers will then suspend further contributions until the MPSC determines funding requirements in future general rate cases. 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
| DB Pension Plan | DB SERP | OPEB Plan |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
2015 |  | $ | 134 |  | $ | 8 |  | $ | 56 |
2016 |  |  | 141 |  |  | 8 |  |  | 58 |
2017 |  |  | 147 |  |  | 8 |  |  | 61 |
2018 |  |  | 152 |  |  | 8 |  |  | 64 |
2019 |  |  | 156 |  |  | 9 |  |  | 67 |
2020-2024 |  |  | 810 |  |  | 50 |  |  | 367 |
Consumers |  |  |  |  |  |  |  |  |  |
2015 |  | $ | 131 |  | $ | 5 |  | $ | 53 |
2016 |  |  | 137 |  |  | 5 |  |  | 56 |
2017 |  |  | 143 |  |  | 5 |  |  | 59 |
2018 |  |  | 148 |  |  | 5 |  |  | 62 |
2019 |  |  | 152 |  |  | 5 |  |  | 64 |
2020-2024 |  |  | 789 |  |  | 30 |  |  | 352 |
Collective Bargaining Agreements: At December 31, 2014, unions represented 41 percent of CMS Energy’s employees and 43 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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