Employee Benefit Plans

12 Months Ended

Dec. 31, 2014

Employee Benefit Plans [Abstract]

Employee Benefit Plans

Note 13 Employee Benefit Plans

PENSION AND POSTRETIREMENT PLANS

We have a noncontributory, qualified defined benefit pension plan covering eligible employees. Benefits are determined using a cash balance formula where earnings credits are a percentage of eligible compensation. Earnings credit percentages for those employees who were plan participants on December 31, 2009 are frozen at their level earned to that point. Earnings credits for all employees who become participants on or after January 1, 2010 are a flat 3% of eligible compensation. Plan participants at December 31, 2009 earn interest based on 30-year Treasury securities with a minimum rate, while new participants on or after January 1, 2010 are not subject to the minimum rate. Pension contributions are based on an actuarially determined amount necessary to fund total benefits payable to plan participants.

We also maintain nonqualified supplemental retirement plans for certain employees and provide certain health care and life insurance benefits for qualifying retired employees (postretirement benefits) through various plans. The nonqualified pension and postretirement benefit plans are unfunded. PNC currently intends to begin funding some or all of the postretirement medical benefit obligations through a voluntary employee beneficiary association (VEBA) in mid-to-late 2015. PNC reserves the right to terminate plans or make plan changes at any time.

We use a measurement date of December 31 for plan assets and benefit obligations. A reconciliation of the changes in the projected benefit obligation for qualified pension, nonqualified pension and postretirement benefit plans as well as the change in plan assets for the qualified pension plan follows.

Table 109: Reconciliation of Changes in Projected Benefit Obligation and Change in Plan Assets
		Qualified				Nonqualified				Postretirement
		Pension				Pension				Benefits
December 31 (Measurement Date) – in millions			2014		2013		2014		2013		2014		2013
Accumulated benefit obligation at end of year		$	4,427	$	3,890	$	316	$	287
Projected benefit obligation at beginning of year		$	3,966	$	4,512	$	292	$	362	$	375	$	394
Service cost			103		113		3		3		5		6
Interest cost			187		170		12		12		16		14
Plan amendments			(7)
Actuarial (gains)/losses and changes in assumptions			504		(453)		40		(26)		4		(9)
Participant contributions											8		13
Federal Medicare subsidy on benefits paid											2		2
Benefits paid			(254)		(376)		(25)		(20)		(31)		(34)
Settlement payments									(39)				(11)
	Projected benefit obligation at end of year	$	4,499	$	3,966	$	322	$	292	$	379	$	375
Fair value of plan assets at beginning of year		$	4,252	$	4,009
Actual return on plan assets			359		619
Employer contribution						$	25	$	59	$	21	$	30
Participant contributions											8		13
Federal Medicare subsidy on benefits paid											2		2
Benefits paid			(254)		(376)		(25)		(20)		(31)		(34)
Settlement payments									(39)				(11)
	Fair value of plan assets at end of year	$	4,357	$	4,252
Funded status		$	(142)	$	286	$	(322)	$	(292)	$	(379)	$	(375)
Amounts recognized on the consolidated balance sheet
	Noncurrent asset			$	286
	Current liability					$	(31)	$	(28)	$	(25)	$	(29)
	Noncurrent liability	$	(142)				(291)		(264)		(354)		(346)
	Net amount recognized on the consolidated balance sheet	$	(142)	$	286	$	(322)	$	(292)	$	(379)	$	(375)
Amounts recognized in accumulated other comprehensive
	income consist of:
Prior service cost (credit)		$	(22)	$	(23)	$	1	$	1	$	(4)	$	(6)
Net actuarial loss			673		239		88		52		31		27
	Amount recognized in AOCI	$	651	$	216	$	89	$	53	$	27	$	21

At December 31,2014, the fair value of the qualified pension plan assets was less than both the accumulated benefit obligation and the projected benefit obligation.

The nonqualified pension plan is unfunded. Contributions from PNC and, in the case of the postretirement benefit plans, participant contributions cover all benefits paid under the nonqualified pension plan and postretirement benefit plans. The postretirement plan provides benefits to certain retirees that are at least actuarially equivalent to those provided by Medicare Part D and accordingly, we receive a federal subsidy as shown in Table 109.

In March 2010, the Patient Protection and Affordable Care Act (PPACA) was enacted. Key aspects of the PPACA which are reflected in our consolidated financial statements include the excise tax on high-cost health plans beginning in 2018 and fees for the Transitional Reinsurance Program and the Patient-Centered Outcomes Research Institute. These provisions did not have a significant effect on our postretirement medical liability or costs. The Early Retiree Reinsurance Program (ERRP) was established by the PPACA. Congress appropriated funding of $5.0 billion for this temporary ERRP to provide financial assistance to employers, unions, and state and local governments to help them maintain coverage for early retirees age 55 and older who are not yet eligible for Medicare, including their spouses, surviving spouses, and dependents. In 2014, PNC did not receive reimbursement related to the 2013 plan year and did not receive reimbursement in 2013 related to the 2012 plan year. In 2012, the amount of reimbursement PNC received related to the 2011 plan year was not significant.

PNC PENSION PLAN ASSETS

Assets related to our qualified pension plan (the Plan) are held in trust (the Trust). Effective July 1, 2011, the trustee is The Bank of New York Mellon. The Trust is exempt from tax pursuant to section 501(a) of the Internal Revenue Code (the Code). The Plan is qualified under section 401(a) of the Code. Plan assets consist primarily of listed domestic and international equity securities, U.S. government and agency securities, corporate debt securities, and real estate investments. The Plan held no PNC common stock as of December 31,2014 and December 31, 2013.

The PNC Financial Services Group, Inc. Administrative Committee (the Administrative Committee) adopted the Pension Plan Investment Policy Statement, including target allocations and allowable ranges, on August 13, 2008. On February 25, 2010, the Administrative Committee amended the investment policy to include a dynamic asset allocation approach and also updated target allocation ranges for certain asset categories. On February 24, 2014, the Administrative Committee amended the investment policy to update the target allocation ranges for certain asset categories.

The long-term investment strategy for pension plan assets is to:

• Meet present and future benefit obligations to all participants and beneficiaries,

• Cover reasonable expenses incurred to provide such benefits, including expenses incurred in the administration of the Trust and the Plan,

• Provide sufficient liquidity to meet benefit and expense payment requirements on a timely basis, and

• Provide a total return that, over the long term, maximizes the ratio of trust assets to liabilities by maximizing investment return, at an appropriate level of risk.

Under the dynamic asset allocation strategy, scenarios are outlined in which the Administrative Committee has the ability to make short to intermediate term asset allocation shifts based on factors such as the Plan’s funded status, the Administrative Committee’s view of return on equities relative to long term expectations, the Administrative Committee’s view on the direction of interest rates and credit spreads, and other relevant financial or economic factors which would be expected to impact the ability of the Trust to meet its obligation to participants and beneficiaries. Accordingly, the allowable asset allocation ranges have been updated to incorporate the flexibility required by the dynamic allocation policy.

The Plan’s specific investment objective is to meet or exceed the investment policy benchmark over the long term. The investment policy benchmark compares actual performance to a weighted market index, and measures the contribution of active investment management and policy implementation. This investment objective is expected to be achieved over the long term (one or more market cycles) and is measured over rolling five-year periods. Total return calculations are time-weighted and are net of investment-related fees and expenses.

The asset strategy allocations for the Trust at the end of 2014 and 2013, and the target allocation range at the end of 2014, by asset category, are as follows.

Table 110: Asset Strategy Allocations
					Percentage
					of Plan
	Target				Assets by
	Allocation				Strategy at
	Range				December 31
PNC Pension Plan					2014		2013
Asset Category
Domestic Equity	20	-	40	%	34	%	33	%
International Equity	10	-	25	%	23	%	23	%
Private Equity	0	-	15	%	6	%	4	%
Total Equity	40	-	70	%	63	%	60	%
Domestic Fixed Income	10	-	40	%	17	%	21	%
High Yield Fixed Income	0	-	25	%	13	%	13	%
Total Fixed Income	10	-	65	%	30	%	34	%
Real estate	0	-	15	%	5	%	5	%
Other	0	-	5	%	2	%	1	%
Total					100	%	100	%

The asset category represents the allocation of Plan assets in accordance with the investment objective of each of the Plan’s investment managers. Certain domestic equity investment managers utilize derivatives and fixed income securities as described in their Investment Management Agreements to achieve their investment objective under the Investment Policy Statement. Other investment managers may invest in eligible securities outside of their assigned asset category to meet their investment objectives. The actual percentage of the fair value of total Plan assets held as of December 31,2014 for equity securities, fixed income securities, real estate and all other assets are 69%, 22%, 5% and 4%, respectively.

We believe that, over the long term, asset allocation is the single greatest determinant of risk. Asset allocation will deviate from the target percentages due to market movement, cash flows, investment manager performance and implementation of shifts under the dynamic allocation policy. Material deviations from the asset allocation targets can alter the expected return and risk of the Trust. On the other hand, frequent rebalancing to the asset allocation targets may result in significant transaction costs, which can impair the Trust’s ability to meet its investment objective. Accordingly, the Trust portfolio is periodically rebalanced to maintain asset allocation within the target ranges described above.

In addition to being diversified across asset classes, the Trust is diversified within each asset class. Secondary diversification provides a reasonable basis for the expectation that no single security or class of securities will have a disproportionate impact on the total risk and return of the Trust.

The Administrative Committee selects investment managers for the Trust based on the contributions that their respective investment styles and processes are expected to make to the investment performance of the overall portfolio. The managers’ Investment Objectives and Guidelines, which are a part of each manager’s Investment Management Agreement, document performance expectations and each manager’s role in the portfolio. The Administrative Committee uses the Investment Objectives and Guidelines to establish, guide, control and measure the strategy and performance for each manager.

The purpose of investment manager guidelines is to:

• Establish the investment objective and performance standards for each manager,

• Provide the manager with the capability to evaluate the risks of all financial instruments or other assets in which the manager’s account is invested, and

• Prevent the manager from exposing its account to excessive levels of risk, undesired or inappropriate risk, or disproportionate concentration of risk.

The guidelines also indicate which investments and strategies the manager is permitted to use to achieve its performance objectives, and which investments and strategies it is prohibited from using.

Where investment strategies permit the use of derivatives and/or currency management, language is incorporated in the managers’ guidelines to define allowable and prohibited transactions and/or strategies. Derivatives are typically employed by investment managers to modify risk/return characteristics of their portfolio(s), implement asset allocation changes in a cost-effective manner, or reduce transaction costs. Under the managers’ investment guidelines, derivatives may not be used solely for speculation or leverage. Derivatives are to be used only in circumstances where they offer the most efficient economic means of improving the risk/reward profile of the portfolio.

BlackRock receives compensation for providing investment management services. The Asset Management Group business segment also receives compensation for payor-related services. Compensation for such services is paid by PNC and was not significant for 2014, 2013 or 2012. Non-affiliate service providers for the Trust are compensated from Plan assets.

FAIR VALUE MEASUREMENTS

As further described in Note 7 Fair Value, GAAP establishes the framework for measuring fair value, including a hierarchy used to classify the inputs used in measuring fair value.

A description of the valuation methodologies used for assets measured at fair value at both December 31,2014 and December 31, 2013 follows:

• Money market and mutual funds are valued at the net asset value of the shares held by the pension plan at year end.

• U.S. government and agency securities, corporate debt, common stock and preferred stock are valued at the closing price reported on the active market on which the individual securities are traded. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models or quoted prices of securities with similar characteristics. Such securities are generally classified within Level 2 of the valuation hierarchy but may be a Level 3 depending on the level of liquidity and activity in the market for the security.

• The collective trust fund investments are valued based upon the units of such collective trust fund held by the Plan at year end multiplied by the respective unit value. The unit value of the collective trust fund is based upon significant observable inputs, although it is not based upon quoted marked prices in an active market. The underlying investments of the collective trust funds consist primarily of equity securities, debt obligations, short-term investments, and other marketable securities. Due to the nature of these securities, there are no unfunded commitments or redemption restrictions.

• Limited partnerships are valued by investment managers based on recent financial information used to estimate fair value. Other investments held by the pension plan include derivative financial instruments and real estate, which are recorded at estimated fair value as determined by third-party appraisals and pricing models, and group annuity contracts, which are measured at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations considering the credit-worthiness of the issuer.

These methods may result in fair value calculations that may not be indicative of net realizable values or future fair values. Furthermore, while the pension plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31,2014 and 2013.

Table 111: Pension Plan Assets - Fair Value Hierarchy
	Fair Value Measurements Using:
			Quoted Prices in		Significant
			Active Markets		Other		Significant
	December 31		For Identical		Observable		Unobservable
	2014		Assets		Inputs		Inputs
In millions	Fair Value		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	121	$	121
U.S. government and agency securities		294		147	$	147
Corporate debt (a)		648				638	$	10
Common stock		1,041		1,040		1
Preferred stock		6				6
Mutual funds		220		2		218
Interest in Collective Funds (b)		1,698				1,589		109
Limited partnerships		274				2		272
Other		55		(4)		59
Total	$	4,357	$	1,306	$	2,660	$	391

		Fair Value Measurements Using:
				Quoted Prices in		Significant
				Active Markets		Other		Significant
		December 31		For Identical		Observable		Unobservable
		2013		Assets		Inputs		Inputs
In millions		Fair Value		(Level 1)		(Level 2)		(Level 3)
Money market funds		$	130	$	130
U.S. government and agency securities			316		192	$	124
Corporate debt (a)			751				738	$	13
Common stock			1,055		1,053		2
Preferred Stock			15				15
Mutual funds			199		4		195
Interest in Collective Funds (c)			1,572				1,474		98
Limited partnerships			184				2		182
Other			30				30
Total		$	4,252	$	1,379	$	2,580	$	293
(a)	Corporate debt includes $63 million and $84 million of non-agency mortgage-backed securities as of December 31, 2014 and 2013, respectively.
(b)	The benefit plans own commingled funds that invest in equity securities. The funds seek to mirror the benchmark of the S&P 500 Index, Morgan Stanley Capital International ACWI X US Index, Morgan Stanley Capital EAFE Index, Morgan Stanley Capital Emerging Markets Index and the NCREIF ODCE NOF Index with the exception of the BlackRock Index Fund.
(c)	The benefit plans own commingled funds that invest in equity and fixed income securities. The funds seek to mirror the performance of the S&P 500 Index, Russell 3000 Index, Morgan Stanley Capital International ACWI X US Index and the Dow Jones U.S. Select Real Estate Securities Index. The commingled fund that holds fixed income securities invests in domestic investment grade securities and seeks to mimic the performance of the Barclays Aggregate Bond Index.

The following summarizes changes in the fair value of the pension plan’s Level 3 assets during 2014 and 2013.

Table 112: Rollforward of Pension Plan Level 3 Assets
.
		Interest in Collective Funds	Corporate Debt			Limited Partnerships
In millions
January 1, 2014	$	98	$	13	$	182
Net realized gain/(loss) on sale of investments		3		3		48
Net unrealized gain/(loss) on assets held at end of year		4				58
Purchases		5				92
Sales		(1)		(6)		(108)
December 31, 2014	$	109	$	10	$	272

		Interest in Collective Funds		Corporate Debt		Limited Partnerships
In millions
January 1, 2013	$	88	$	22	$	127
Net realized gain/(loss) on sale of investments		7		7		10
Net unrealized gain/(loss) on assets held at end of year		3		(1)		21
Purchases		87		40		48
Sales		(87)		(55)		(24)
December 31, 2013	$	98	$	13	$	182

The following table provides information regarding our estimated future cash flows related to our various plans.

Table 113: Estimated Cash Flows
		Postretirement Benefits
									Reduction in PNC
									Benefit Payments
		Qualified		Nonqualified		Gross PNC			Due to Medicare
In millions		Pension		Pension		Benefit Payments			Part D Subsidy
Estimated 2015 employer contributions		$	200	$	31	$	200	$	2
Estimated future benefit payments
	2015	$	259	$	31	$	27	$	2
	2016		265		29		28		2
	2017		277		27		29		2
	2018		281		27		30		2
	2019		282		25		30		2
	2020-2024		1,474		112		141		7

The qualified pension plan contributions are deposited into the Trust, and the qualified pension plan benefit payments are paid from the Trust. In February 2015, PNC made a $200 million voluntary contribution to the Trust. Notwithstanding the contribution, we do not expect to be required to make a contribution to the qualified plan for 2015 based on the funding calculations under the Pension Protection Act of 2006. For the other plans, total contributions and the benefit payments are the same and represent expected benefit amounts, which are paid from general assets. Postretirement benefits are net of participant contributions. If PNC decides to fund, or partially fund, postretirement medical benefits in the future, as is its current intention, this will also be reflected in estimated cash flows at that time.

The qualified pension plan contributions are deposited into the Trust, and the qualified pension plan benefit payments are paid from the Trust. In February 2015, PNC made a $200 million voluntary contribution to the Trust. Notwithstanding the contribution, we do not expect to be required to make a contribution to the qualified plan for 2015 based on the funding calculations under the Pension Protection Act of 2006. For the other plans, total contributions and the benefit payments are the same and represent expected benefit amounts, which are paid from general assets. Postretirement benefits are net of participant contributions. If PNC decides to fund, or partially fund, postretirement medical benefits in the future, as is its current intention, this will also be reflected in estimated cash flows at that time.

The components of net periodic benefit cost/(income) and other amounts recognized in Other comprehensive income (OCI) were as follows.

Table 114: Components of Net Periodic Benefit Cost
			Qualified Pension Plan						Nonqualified Pension Plan						Postretirement Benefits
Year ended December 31 – in millions				2014		2013		2012		2014		2013		2012		2014		2013		2012
Net periodic cost consists of:
Service cost			$	103	$	113	$	101	$	3	$	3	$	4	$	5	$	6	$	5
Interest cost				187		170		191		12		12		14		16		14		16
Expected return on plan assets				(289)		(288)		(284)
Amortization of prior service cost/(credit)				(8)		(8)		(8)								(2)		(3)		(3)
Amortization of actuarial (gain)/loss						87		89		4		8		6						(1)
Settlement (gain)/loss												7						1
Net periodic cost (benefit)				(7)		74		89		19		30		24		19		18		17
Other changes in plan assets and benefit
	obligations recognized in Other
	comprehensive income:
Current year prior service cost/(credit)				(7)
Amortization of prior service (cost)/credit				8		8		8								2		3		3
Current year actuarial loss/(gain)				434		(784)		112		40		(26)		27		4		(9)		(18)
Amortization of actuarial gain/(loss)						(87)		(89)		(4)		(15)		(6)				(1)
	Total recognized in OCI			435		(863)		31		36		(41)		21		6		(7)		(15)
	Total recognized in net periodic cost
		and OCI	$	428	$	(789)	$	120	$	55	$	(11)	$	45	$	25	$	11	$	2

The weighted-average assumptions used (as of the beginning of each year) to determine the net periodic costs shown above were as follows.

Table 115: Net Periodic Costs - Assumptions
		Net Periodic Cost Determination
Year ended December 31		2014		2013		2012
Discount rate
	Qualified pension	4.75	%	3.80	%	4.60	%
	Nonqualified pension	4.35		3.45		4.20
	Postretirement benefits	4.50		3.60		4.40
Rate of compensation increase (average)		4.00		4.00		4.00
Assumed health care cost trend rate
	Initial trend	7.75		8.00		8.00
	Ultimate trend	5.00		5.00		5.00
	Year ultimate reached	2025		2019		2019
Expected long-term return on plan assets		7.00		7.50		7.75

The weighted-average assumptions used (as of the end of each year) to determine year end obligations for pension and postretirement benefits were as follows.

Table 116: Other Pension Assumptions
Year ended December 31		2014		2013
Discount rate
	Qualified pension	3.95	%	4.75	%
	Nonqualified pension	3.65		4.35
	Postretirement benefits	3.80		4.50
Rate of compensation increase (average)		4.00		4.00
Assumed health care cost trend rate
	Initial trend	7.50		7.75
	Ultimate trend	5.00		5.00
	Year ultimate reached	2025		2025

The discount rates are determined independently for each plan by comparing the expected future benefits that will be paid under each plan with yields available on high quality corporate bonds of similar duration. For this analysis, 10% of bonds with the highest yields and 40% with the lowest yields were removed from the bond universe.

The expected return on plan assets is a long-term assumption established by considering historical and anticipated returns of the asset classes invested in by the pension plan and the allocation strategy currently in place among those classes. We review this assumption at each measurement date and adjust it if warranted. This assumption will be changed from 7.00% to 6.75% for determining 2015 net periodic cost.

The health care cost trend rate assumptions shown in the preceding tables relate only to the postretirement benefit plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects.

Table 117: Effect of One Percent Change in Assumed Health Care Cost
Year ended December 31, 2014
In millions		Increase	Decrease
Effect on year end benefit obligation	$	12	(10)

Unamortized actuarial gains and losses and prior service costs and credits are recognized in AOCI each December 31, with amortization of these amounts through net periodic benefit cost. The estimated amounts that will be amortized in 2015 are as follows.

Table 118: Estimated Amortization of Unamortized Actuarial Gains and Losses - 2015
	2015 Estimate
Year ended December 31		Qualified		Nonqualified	Postretirement
In millions		Pension		Pension	Benefits
Prior service (credit)	$	(9)			$	(1)
Net actuarial loss		29	$	8
Total	$	20	$	8	$	(1)

PNC has historically utilized a version of the Society of Actuaries’ (SOA) published mortality tables in developing its best estimate of mortality. On October 27, 2014, the SOA published updated mortality tables and an updated mortality improvement scale, which both reflect longer life expectancy. Based on an evaluation of the mortality experience of PNC's qualified pension plan and the updated SOA study, PNC adopted an adjusted version of the SOA's new mortality table and improvement scale for purposes of measuring pension and other postretirement benefit obligations at year-end 2014. The change to the mortality assumption increased the total year-end obligations by approximately $145 million.

DEFINED CONTRIBUTION PLANS

Our PNC Incentive Savings Plan (ISP) is a qualified defined contribution plan that covers all eligible PNC employees. Employees hired prior to January 1, 2010 became 100% vested immediately, while employees hired on or after January 1, 2010 become 100% vested after three years of service. Employee benefits expense related to the ISP was $108 million in 2014, $120 million in 2013 and $111 million in 2012, representing cash contributed to the ISP by PNC.

Under the ISP, employee contributions up to 4% of eligible compensation as defined by the ISP are matched 100%, subject to IRS Code limitations. PNC will contribute a minimum matching contribution of $2,000 annually for employees who contribute at least 4% of eligible compensation every pay period he or she is eligible during the year. This amount is prorated for certain employees, including part-time employees and those who are eligible for the company match for less than a full year. Additionally, PNC makes an annual true-up matching contribution to ensure that eligible participants receive the full company match available. Effective January 1, 2012, in the case of both the minimum and true-up matching contributions, eligible employees must remain employed on the last day of the applicable plan year in order to receive the contribution. Minimum matching contributions made with respect to the 2014 and 2013 plan years are immediately 100% vested. Effective January 1, 2015, newly-hired full-time employees and part-time employees who become eligible to participate in the ISP after that date will be automatically enrolled in the ISP with a deferral rate equal to 4% of eligible compensation in the absence of an affirmative election otherwise.

The ISP is a 401(k) Plan and includes an employee stock ownership (ESOP) feature. Employee contributions are invested in a number of investment options, including pre mixed portfolios and individual core funds, available under the ISP at the direction of the employee. Although employees were also historically permitted to direct the investment of their contributions into the PNC common stock fund, this fund was frozen to future investments of such contributions effective January 1, 2010. All shares of PNC common stock held by the ISP are part of the ESOP. Effective January 1, 2011, employer matching contributions were made in cash.

We also maintain a nonqualified supplemental savings plan for certain employees, known as The PNC Financial Services Group, Inc. Supplemental Incentive Savings Plan. Effective January 1, 2012, the Supplemental Incentive Savings Plan was frozen to new participants and for any deferrals of amounts earned on or after such date. It was replaced by a new plan called The PNC Financial Services Group, Inc. Deferred Compensation and Incentive Plan.