Company: PCG-PB
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001004980-25-000010
Chunk: 87

Company: PG&E Corp
Filing Date: 2025-02-13
Form: 10-K
Item: Item 7
Chunk 87
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 average rate of future compensation increases, the health care cost trend rate, and the expected return on plan assets.  PG&E Corporation and the Utility review these assumptions on an annual basis and adjust them as necessary.  While PG&E Corporation and the Utility believe that the assumptions used are appropriate, significant differences in actual experience, plan changes or amendments, or significant changes in assumptions may materially affect the recorded pension and other postretirement benefit obligations and future plan expenses.  See Note 12 of the Notes to the Consolidated Financial Statements in Item 8.

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In establishing health care cost assumptions, PG&E Corporation and the Utility consider recent cost trends and projections from industry experts.  This evaluation suggests that current rates of inflation are expected to continue in the near term.  In recognition of continued high inflation in health care costs and given the design of PG&E Corporation’s plans, the assumed health care cost trend rate for 2025 was 7.5%, gradually decreasing to the ultimate trend rate of approximately 4.5% in 2033 and beyond.

Expected rates of return on plan assets were developed by estimating future stock and bond returns and then applying these returns to the target asset allocations of the employee benefit plan trusts, resulting in a weighted average rate of return on plan assets.  Returns on fixed-income debt investments were projected based on real maturity and credit spreads added to a long-term inflation rate.  Returns on equity investments were projected based on estimates of dividend yield and real earnings growth added to a long-term inflation rate.  For the Utility’s defined benefit pension plan, the assumed return of 6.4% compares to a ten-year actual return of 5.1%.

The rate used to discount pension benefits and other benefits was based on a yield curve developed from market data of approximately 858 Aa-grade non-callable bonds at December 31, 2024.  This yield curve has discount rates that vary based on the duration of the obligations.  The estimated future cash flows for the pension and other postretirement benefit obligations were matched to the corresponding rates on the yield curve to derive a weighted average discount rate.

The following reflects the sensitivity of pension costs and projected benefit obligation to changes in certain actuarial assumptions:

(in millions)Increase(Decrease) inAssumptionIncrease in 2024 PensionCostsIncrease in ProjectedBenefit Obligation atDecember 31, 2024Discount rate(0.50)%$(1)$1,093 Rate of return on plan assets(0.50)%