CENTERPOINT ENERGY HOUSTON ELECTRIC LLC | 2013 | FY | 3

CenterPoint Houston is required to fund a portion of its obligations in accordance with rate orders. The net postretirement benefit cost includes the following components:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(in millions)
Service cost - benefits earned during the period
$
1

 
$
—

 
$
—

Interest cost on accumulated benefit obligation
13

 
16

 
16

Expected return on plan assets
(7
)
 
(7
)
 
(9
)
Amortization of transition obligation
6

 
6

 
6

Amortization of prior service cost
(1
)
 
—

 
—

Amortization of loss
4

 
3

 
1

Benefit enhancement
—

 
1

 
1

Net postretirement benefit cost
$
16

 
$
19

 
$
15


CenterPoint Houston used the following assumptions to determine net postretirement benefit costs:
 
Year Ended December 31,
 
2013
 
2012
 
2011
Discount rate
3.90
%
 
4.80
%
 
5.20
%
Expected return on plan assets
6.00
%
 
6.00
%
 
7.50
%
CenterPoint Houston expects to contribute $7 million to its postretirement benefits plan in 2014. The following benefit payments are expected to be paid by the postretirement benefit plan (in millions): 
 
Postretirement Benefit Plan
 
Benefit
Payments
 
Medicare
Subsidy Receipts
2014
$
21

 
$
(2
)
2015
22

 
(2
)
2016
23

 
(2
)
2017
24

 
(3
)
2018
25

 
(3
)
2019-2023
135

 
(18
)
Following are reconciliations of CenterPoint Houston’s beginning and ending balances of its postretirement benefit plan’s benefit obligation, plan assets and funded status for 2013 and 2012.  The measurement dates for plan assets and obligations were December 31, 2013 and 2012.
 
Year Ended December 31,
 
2013
 
2012
 
(in millions)
Change in Benefit Obligation
 
 
 
Accumulated benefit obligation, beginning of year
$
351

 
$
335

Service cost
1

 
—

Interest cost
13

 
16

Benefits paid
(19
)
 
(21
)
Participant contributions
3

 
2

Medicare drug reimbursement
1

 
2

Actuarial (gain) loss
(39
)
 
17

Accumulated benefit obligation, end of year
$
311

 
$
351

Change in Plan Assets
 

 
 

Plan assets, beginning of year
$
115

 
$
116

Benefits paid
(19
)
 
(21
)
Employer contributions
9

 
9

Participant contributions
3

 
2

Actual investment return
6

 
9

Plan assets, end of year
$
114

 
$
115

Amounts Recognized in Balance Sheets
 

 
 

Other liabilities-benefit obligations
$
(197
)
 
$
(236
)
Net liability, end of year
$
(197
)
 
$
(236
)
Actuarial Assumptions
 

 
 

Discount rate
4.75
%
 
3.90
%
Expected long-term return on assets
6.00
%
 
6.00
%
Healthcare cost trend rate assumed for the next year - Pre 65
7.00
%
 
9.00
%
Healthcare cost trend rate assumed for the next year - Post 65
7.50
%
 
9.00
%
Prescription drug cost trend rate assumed for the next year
7.00
%
 
9.00
%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)
5.50
%
 
5.50
%
Year that the healthcare rate reaches the ultimate trend rate
2018

 
2017

Year that the prescription drug rate reaches the ultimate trend rate
2018

 
2017

As part of the investment strategy discussed above, CenterPoint Houston has adopted and maintained the following asset allocation ranges for its postretirement benefit plans:
U.S. equity
13-23%
International equity
3-13%
Fixed income
68-78%
Cash
0-2%

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