EMPLOYEE BENEFIT PLANS

Dominion and Dominion Gas - Defined Benefit Plans

Dominion provides certain retirement benefits to eligible active employees, retirees and qualifying dependents. Dominion Gas participates in a number of the Dominion-sponsored retirement plans. Under the terms of its benefit plans, Dominion reserves the right to change, modify or terminate the plans. From time to time in the past, benefits have changed, and some of these changes have reduced benefits.

Dominion maintains qualified noncontributory defined benefit pension plans covering virtually all employees. Retirement benefits are based primarily on years of service, age and the employee's compensation. Dominion's funding policy is to contribute annually an amount that is in accordance with the provisions of ERISA. The pension programs also provide benefits to certain retired executives under company-sponsored nonqualified employee benefit plans. The nonqualified plans are funded through contributions to grantor trusts. Dominion also provides retiree healthcare and life insurance benefits with annual employee premiums based on several factors such as age, retirement date and years of service.

Pension benefits for Dominion Gas employees not represented by collective bargaining units are covered by the Dominion Pension Plan, a defined benefit pension plan sponsored by Dominion that provides benefits to multiple Dominion subsidiaries. Pension benefits for Dominion Gas employees represented by collective bargaining units are covered by separate pension plans for East Ohio and, for DTI, a plan that provides benefits to employees of both DTI and Hope. Employee compensation is the basis for allocating pension costs and obligations between DTI and Hope and determining East Ohio's share of total pension costs.

Retiree healthcare and life insurance benefits for Dominion Gas employees not represented by collective bargaining units are covered by the Dominion Retiree Health and Welfare Plan, a plan sponsored by Dominion that provides certain retiree healthcare and life insurance benefits to multiple Dominion subsidiaries. Retiree healthcare and life insurance benefits for Dominion Gas employees represented by collective bargaining units are covered by separate other postretirement benefit plans for East Ohio and, for DTI, a plan that provides benefits to both DTI and Hope. Employee headcount is the basis for allocating other postretirement benefit costs and obligations between DTI and Hope and determining East Ohio's share of total other postretirement benefit costs.

Pension and other postretirement benefit costs are affected by employee demographics (including age, compensation levels and years of service), the level of contributions made to the plans and earnings on plan assets. These costs may also be affected by changes in key assumptions, including expected long-term rates of return on plan assets, discount rates, healthcare cost trend rates, mortality rates and the rate of compensation increases.

Dominion uses December 31 as the measurement date for all of its employee benefit plans, including those in which Dominion Gas participates. Dominion uses the market-related value of pension plan assets to determine the expected return on plan assets, a component of net periodic pension cost, for all pension plans, including those in which Dominion Gas participates. The market-related value recognizes changes in fair value on a straight-line basis over a four-year period, which reduces year-to-year volatility. Changes in fair value are measured as the difference between the expected and actual plan asset returns, including dividends, interest and realized and unrealized investment gains and losses. Since the market-related value recognizes changes in fair value over a four-year period, the future market-related value of pension plan assets will be impacted as previously unrecognized changes in fair value are recognized.

Dominion's pension and other postretirement benefit plans hold investments in trusts to fund employee benefit payments.

Dominion's pension and other postretirement plan assets experienced aggregate actual returns of $534 million in 2016 and aggregate actual losses of $72 million in 2015, versus expected returns of $691 million and $648 million, respectively. Dominion Gas' pension and other postretirement plan assets for employees represented by collective bargaining units experienced aggregate actual returns of $130 million in 2016 and aggregate actual losses of $13 million in 2015, versus expected returns of $157 million and $150 million, respectively. Differences between actual and expected returns on plan assets are accumulated and amortized during future periods. As such, any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for such employee benefit plans and will be included in the determination of the amount of cash to be contributed to the employee benefit plans.

In October 2014, the Society of Actuaries published new mortality tables and mortality improvement scales. Such tables and scales are used to develop mortality assumptions for use in determining pension and other postretirement benefit liabilities and expense. Following evaluation of the new tables, Dominion changed its assumption for mortality rates to reflect a generational improvement scale. This change in assumption increased net periodic benefit cost for Dominion and Dominion Gas (for employees represented by collective bargaining units) by $25 million and $3 million, respectively, for 2015.

During 2016, Dominion and Dominion Gas (for employees represented by collective bargaining units) engaged their actuary to conduct an experience study of their employees demographics over a five-year period as compared to significant assumptions that were being used to determine pension and other postretirement benefit obligations and periodic costs. These assumptions primarily included mortality, retirement rates, termination rates, and salary increase rates. The changes in assumptions implemented as a result of the experience study resulted in increases of $290 million and $38 million in the pension and other postretirement benefits obligations, respectively, at December 31, 2016 for Dominion and $24 million and $9 million in the pension and other postretirement benefits obligations, respectively, at December 31, 2016 for Dominion Gas. In addition, these changes will increase net periodic benefit costs for Dominion by $42 million for 2017. The increase in net periodic benefit costs for Dominion Gas for 2017 is immaterial.

Plan Amendments and Remeasurements

In the third quarter of 2016, Dominion remeasured an other postretirement benefit plan as a result of an amendment that changed post-65 retiree medical coverage for certain current and future Local 50 retirees effective April 1, 2017. The remeasurement resulted in a decrease in Dominion's accumulated postretirement benefit obligation of $37 million. The impact of the remeasurement on net periodic benefit credit was recognized prospectively from the remeasurement date and increased the net periodic benefit credit for 2016 by $9 million. The discount rate used for the remeasurement was 3.71% and the demographic and mortality assumptions were updated using plan-specific studies and mortality improvement scales. The expected long-term rate of return used was consistent with the measurement as of December 31, 2015.

In the third quarter of 2014, East Ohio remeasured its other postretirement benefit plan as a result of an amendment that changed medical coverage upon the attainment of age 65 for certain future retirees effective January 1, 2016. For employees represented by collective bargaining units, the remeasurement resulted in an increase in the accumulated postretirement benefit obligation of $22 million. The impact of the remeasurement on net periodic benefit credit was recognized prospectively from the remeasurement date and reduced net periodic benefit credit for 2014, for employees represented by collective bargaining units, by less than $1 million. The discount rate used for the remeasurement was 4.20% and the expected long-term rate of return used was 8.50%. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2013.

Funded Status

The following table summarizes the changes in pension plan and other postretirement benefit plan obligations and plan assets and includes a statement of the plans' funded status for Dominion and Dominion Gas (for employees represented by collective bargaining units):



	Pension Benefits						Other Postretirement Benefits
Year Ended December 31,	2016			2015			2016			2015
(millions, except percentages)
Dominion
Changes in benefit obligation:
Benefit obligation at beginning of year	$	6,391		$	6,667		$	1,430		$	1,571
Dominion Questar Combination	817			—			85			—
Service cost	118			126			31			40
Interest cost	317			287			65			67
Benefits paid	(286		)	(246		)	(83		)	(79		)
Actuarial (gains) losses during the year	784			(443		)	166			(138		)
Plan amendments⁽¹⁾	—			—			(216		)	(31		)
Settlements and curtailments⁽²⁾	(9		)	—			—			—
Benefit obligation at end of year	$	8,132		$	6,391		$	1,478		$	1,430
Changes in fair value of plan assets:
Fair value of plan assets at beginning of year	$	6,166		$	6,480		$	1,382		$	1,402
Dominion Questar Combination	704			—			45			—
Actual return (loss) on plan assets	426			(71		)	108			(1		)
Employer contributions	15			3			12			12
Benefits paid	(286		)	(246		)	(35		)	(31		)
Settlements⁽²⁾	(9		)	—			—			—
Fair value of plan assets at end of year	$	7,016		$	6,166		$	1,512		$	1,382
Funded status at end of year	$	(1,116	)	$	(225	)	$	34		$	(48	)
Amounts recognized in the Consolidated Balance Sheets at December 31:
Noncurrent pension and other postretirement benefit assets	$	930		$	931		$	148		$	12
Other current liabilities	(43		)	(14		)	(5		)	(3		)
Noncurrent pension and other postretirement benefit liabilities	(2,003		)	(1,142		)	(109		)	(57		)
Net amount recognized	$	(1,116	)	$	(225	)	$	34		$	(48	)
Significant assumptions used to determine benefit obligations as of December 31:
Discount rate	3.31% - 4.50%			4.96% - 4.99%			3.92% - 4.47%			4.93% - 4.94%
Weighted average rate of increase for compensation	4.09		%	4.22		%	3.29		%	4.22		%
Dominion Gas
Changes in benefit obligation:
Benefit obligation at beginning of year	$	608		$	638		$	292		$	320
Service cost	13			15			5			7
Interest cost	30			27			14			14
Benefits paid	(32		)	(29		)	(19		)	(18		)
Actuarial (gains) losses during the year	64			(43		)	28			(31		)
Benefit obligation at end of year	$	683		$	608		$	320		$	292
Changes in fair value of plan assets:
Fair value of plan assets at beginning of year	$	1,467		$	1,510		$	283		$	288
Actual return (loss) on plan assets	107			(14		)	23			1
Employer contributions	—			—			12			12
Benefits paid	(32		)	(29		)	(19		)	(18		)
Fair value of plan assets at end of year	$	1,542		$	1,467		$	299		$	283
Funded status at end of year	$	859		$	859		$	(21	)	$	(9	)
Amounts recognized in the Consolidated Balance Sheets at December 31:
Noncurrent pension and other postretirement benefit assets	$	859		$	859		$	—		$	—
Noncurrent pension and other postretirement benefit liabilities⁽³⁾	—			—			(21		)	(9		)
Net amount recognized	$	859		$	859		$	(21	)	$	(9	)
Significant assumptions used to determine benefit obligations as of December 31:
Discount rate	4.50		%	4.99		%	4.47		%	4.93		%
Weighted average rate of increase for compensation	4.11		%	3.93		%	n/a			3.93		%


(1)	2016 amount relates primarily to a plan amendment that changed post-65 retiree medical coverage for certain current and future Local 50 retirees effective April 1, 2017. 2015 amount relates primarily to a plan amendment that changed retiree medical benefits for certain nonunion employees after Medicare eligibility.


(2)	Relates primarily to a settlement for certain executives.


(3)	Reflected in other deferred credits and other liabilities in Dominion Gas' Consolidated Balance Sheets.

The ABO for all of Dominion's defined benefit pension plans was $7.3 billion and $5.8 billion at December 31, 2016 and 2015, respectively. The ABO for the defined benefit pension plans covering Dominion Gas employees represented by collective bargaining units was $640 million and $578 million at December 31, 2016 and 2015, respectively.

Under its funding policies, Dominion evaluates plan funding requirements annually, usually in the fourth quarter after receiving updated plan information from its actuary. Based on the funded status of each plan and other factors, Dominion determines the amount of contributions for the current year, if any, at that time. During 2016, Dominion and Dominion Gas made no contributions to the qualified defined benefit pension plans and no contributions are currently expected in 2017. In January 2017, Dominion made a $75 million contribution to Dominion Questar's qualified pension plan to satisfy a regulatory condition to closing of the Dominion Questar Combination. In July 2012, the MAP 21 Act was signed into law. This Act includes an increase in the interest rates used to determine plan sponsors' pension contributions for required funding purposes. In 2014, the HATFA of 2014 was signed into law. Similar to the MAP 21 Act, the HATFA of 2014 adjusts the rules for calculating interest rates used in determining funding obligations. It is estimated that the new interest rates will reduce required pension contributions through 2019. Dominion believes that required pension contributions will rise subsequent to 2019, resulting in an estimated $200 million reduction in net cumulative required contributions over a 10-year period.

Certain regulatory authorities have held that amounts recovered in utility customers' rates for other postretirement benefits, in excess of benefits actually paid during the year, must be deposited in trust funds dedicated for the sole purpose of paying such benefits. Accordingly, certain of Dominion's subsidiaries, including Dominion Gas, fund other postretirement benefit costs through VEBAs. Dominion's remaining subsidiaries do not prefund other postretirement benefit costs but instead pay claims as presented. Dominion’s contributions to VEBAs, all of which pertained to Dominion Gas employees, totaled $12 million for both 2016 and 2015, and Dominion expects to contribute approximately $12 million to the Dominion VEBAs in 2017, all of which pertains to Dominion Gas employees.

Dominion and Dominion Gas do not expect any pension or other postretirement plan assets to be returned during 2017.

The following table provides information on the benefit obligations and fair value of plan assets for plans with a benefit obligation in excess of plan assets for Dominion and Dominion Gas (for employees represented by collective bargaining units):



	Pension Benefits				Other Postretirement Benefits
As of December 31,	2016		2015		2016		2015
(millions)
Dominion
Benefit obligation	$	7,386	$	5,728	$	470	$	359
Fair value of plan assets	5,340		4,571		356		299
Dominion Gas
Benefit obligation	$	—	$	—	$	320	$	292
Fair value of plan assets	—		—		299		283

The following table provides information on the ABO and fair value of plan assets for Dominion’s pension plans with an ABO in excess of plan assets:

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) plans:



	Estimated Future Benefit Payments
	Pension Benefits		Other Postretirement Benefits
(millions)
Dominion
2017	$	380	$	92
2018	361		96
2019	373		97
2020	398		99
2021	415		100
2022-2026	2,345		490
Dominion Gas
2017	$	33	$	17
2018	35		18
2019	37		19
2020	38		19
2021	40		20
2022-2026	211		101

Plan Assets

Dominion's overall objective for investing its pension and other postretirement plan assets is to achieve appropriate long-term rates of return commensurate with prudent levels of risk. As a participating employer in various pension plans sponsored by Dominion, Dominion Gas is subject to Dominion's investment policies for such plans. To minimize risk, funds are broadly diversified among asset classes, investment strategies and investment advisors. The strategic target asset allocations for Dominion's pension funds are 28% U.S. equity, 18% non-U.S. equity, 35% fixed income, 3% real estate and 16% other alternative investments. U.S. equity includes investments in large-cap, mid-cap and small-cap companies located in the U.S. Non-U.S. equity includes investments in large-cap and small-cap companies located outside of the U.S. including both developed and emerging markets. Fixed income includes corporate debt instruments of companies from diversified industries and U.S. Treasuries. The U.S. equity, non-U.S. equity and fixed income investments are in individual securities as well as mutual funds. Real estate includes equity real estate investment trusts and investments in partnerships. Other alternative investments include partnership investments in private equity, debt and hedge funds that follow several different strategies.

Dominion also utilizes common/collective trust funds as an investment vehicle for its defined benefit plans. A common/collective trust fund is a pooled fund operated by a bank or trust company for investment of the assets of various organizations and individuals in a well-diversified portfolio. Common/collective trust funds are funds of grouped assets that follow various investment strategies.

Strategic investment policies are established for Dominion's prefunded benefit plans based upon periodic asset/liability studies. Factors considered in setting the investment policy include employee demographics, liability growth rates, future discount rates, the funded status of the plans and the expected long-term rate of return on plan assets. Deviations from the plans' strategic allocation are a function of Dominion's assessments regarding short-term risk and reward opportunities in the capital markets and/or short-term market movements which result in the plans' actual asset allocations varying from the strategic target asset allocations. Through periodic rebalancing, actual allocations are brought back in line with the target. Future asset/liability studies will focus on strategies to further reduce pension and other postretirement plan risk, while still achieving attractive levels of returns. Financial derivatives may be used to obtain or manage market exposures and to hedge assets and liabilities.

For fair value measurement policies and procedures related to pension and other postretirement benefit plan assets, see Note 6.

The fair values of Dominion's and Dominion Gas’ (for employees represented by collective bargaining units) pension plan assets by asset category are as follows:



At December 31,	2016								2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
(millions)
Dominion
Cash and cash equivalents	$	12	$	2	$	—	$	14	$	16	$	—	$	—	$	16
Common and preferred stocks:
U.S.	1,705		—		—		1,705		1,736		—		—		1,736
International	928		—		—		928		786		—		—		786
Insurance contracts	—		334		—		334		—		330		—		330
Corporate debt instruments	35		682		—		717		44		695		—		739
Government securities	13		522		—		535		85		390		—		475
Total recorded at fair value	$	2,693	$	1,540	$	—	$	4,233	$	2,667	$	1,415	$	—	$	4,082
Assets recorded at NAV⁽¹⁾:
Common/collective trust funds⁽²⁾							1,960								1,200
Alternative investments:
Real estate funds							121								153
Private equity funds							506								465
Debt funds							153								170
Hedge funds							25								86
Total recorded at NAV							$	2,765							$	2,074
Total investments⁽³⁾							$	6,998							$	6,156
Dominion Gas
Cash and cash equivalents	$	3	$	—	$	—	$	3	$	4	$	—	$	—	$	4
Common and preferred stocks:
U.S.	375		—		—		375		413		—		—		413
International	203		—		—		203		187		—		—		187
Insurance contracts	—		73		—		73		—		78		—		78
Corporate debt instruments	8		150		—		158		10		165		—		175
Government securities	3		115		—		118		20		93		—		113
Total recorded at fair value	$	592	$	338	$	—	$	930	$	634	$	336	$	—	$	970
Assets recorded at NAV⁽¹⁾:
Common/collective trust funds⁽⁴⁾							430								286
Alternative investments:
Real estate funds							27								36
Private equity funds							111								111
Debt funds							34								40
Hedge funds							6								21
Total recorded at NAV							$	608							$	494
Total investments⁽⁵⁾							$	1,538							$	1,464

(1) These investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient are not required to be categorized in the fair value hierarchy.

(2)

Also included in the common collective trust funds is the Northern Trust Collective Short-Term Investment Fund, totaling $167 million and $125 million at December 31, 2016 and 2015, respectively, which is comprised of money market instruments with short-term maturities used for temporary investment. Liquidity is emphasized to provide for redemption of units on any business day. Principal preservation is also a prime objective. Admissions and withdrawals are made daily. Interest is accrued daily and distributed monthly.

(3)

Includes net assets related to pending sales of securities of $46 million, net accrued income of $19 million, and excludes net assets related to pending purchases of securities of $47 million at December 31, 2016. Includes net assets related to pending sales of securities of $112 million, net accrued income of $16 million, and excludes net assets related to pending purchases of securities of $118 million at December 31, 2015.

(4)

Also included in the common collective trust funds is the Northern Trust Collective Short-Term Investment Fund, totaling $37 million and $30 million at December 31, 2016 and 2015, respectively, which is comprised of money market instruments with short-term maturities used for temporary investment. Liquidity is emphasized to provide for redemption of units on any business day. Principal preservation is also a prime objective. Admissions and withdrawals are made daily. Interest is accrued daily and distributed monthly.

(5)

Includes net assets related to pending sales of securities of $10 million, net accrued income of $4 million, and excludes net assets related to pending purchases of securities of $10 million at December 31, 2016. Includes net assets related to pending sales of securities of $27 million, net accrued income of $4 million, and excludes net assets related to pending purchases of securities of $28 million at December 31, 2015.

The fair values of Dominion's and Dominion Gas’ (for employees represented by collective bargaining units) other postretirement plan assets by asset category are as follows:



At December 31,	2016								2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
(millions)
Dominion
Cash and cash equivalents	$	1	$	1	$	—	$	2	$	1	$	1	$	—	$	2
Common and preferred stocks:
U.S.	571		—		—		571		531		—		—		531
International	143		—		—		143		134		—		—		134
Insurance contracts	—		19		—		19		—		18		—		18
Corporate debt instruments	2		40		—		42		3		38		—		41
Government securities	1		30		—		31		4		22		—		26
Total recorded at fair value	$	718	$	90	$	—	$	808	$	673	$	79	$	—	$	752
Assets recorded at NAV⁽¹⁾:
Common/collective trust funds⁽²⁾							621								543
Alternative investments:
Real estate funds							9								14
Private equity funds							59								54
Debt funds							12								14
Hedge funds							1								5
Total recorded at NAV							$	702							$	630
Total investments⁽³⁾							$	1,510							$	1,382
Dominion Gas
Common and preferred stocks:
U.S.	$	121	$	—	$	—	$	121	$	113	$	—	$	—	$	113
International	24		—		—		24		24		—		—		24
Total recorded at fair value	$	145	$	—	$	—	$	145	$	137	$	—	$	—	$	137
Assets recorded at NAV⁽¹⁾:
Common/collective trust funds⁽⁴⁾							140								132
Alternative investments:
Real estate funds							1								2
Private equity funds							12								11
Debt funds							1								1
Total recorded at NAV							$	154							$	146
Total investments							$	299							$	283

(1) These investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient are not required to be categorized in the fair value

hierarchy.

(2)

Also included in the common collective trust funds is the Northern Trust Collective Short-Term Investment Fund, totaling $16 million and $9 million at December 31, 2016 and 2015, respectively, which is comprised of money market instruments with short-term maturities used for temporary investment. Liquidity is emphasized to provide for redemption of units on any business day. Principal preservation is also a prime objective. Admissions and withdrawals are made daily. Interest is accrued daily and distributed monthly.


(3)	Includes net assets related to pending sales of securities of $5 million, net accrued income of $2 million, and excludes net assets related to pending purchases of securities of $5 million at December 31, 2016.

(4)

Also included in the common collective trust funds is the Northern Trust Collective Short-Term Investment Fund, totaling $2 million and $3 million at December 31, 2016 and 2015, respectively, which is comprised of money market instruments with short-term maturities used for temporary investment. Liquidity is emphasized to provide for redemption of units on any business day. Principal preservation is also a prime objective. Admissions and withdrawals are made daily. Interest is accrued daily and distributed monthly.

The Plan’s investments are determined based on the fair values of the investments and the underlying investments, which have been determined as follows:

• Cash and Cash Equivalents—Investments are held primarily in short-term notes and treasury bills, which are valued at cost

plus accrued interest.

• Common and Preferred Stocks—Investments are valued at the closing price reported on the active market on which the

individual securities are traded.

• Insurance Contracts—Investments in Group Annuity Contracts with John Hancock were entered into after 1992 and are

stated at fair value based on the fair value of the underlying securities as provided by the managers and include investments

in U.S. government securities, corporate debt instruments, state and municipal debt securities.

• Corporate Debt Instruments—Investments are valued using pricing models maximizing the use of observable inputs for

similar securities. This includes basing value on yields currently available on comparable securities of issuers with similar

credit ratings. When quoted prices are not available for identical or similar instruments, the instrument is valued under a

discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but

includes adjustments for certain risks that may not be observable, such as credit and liquidity risks or a broker quote, if

available.

• Government Securities—Investments are valued using pricing models maximizing the use of observable inputs for similar

securities.

• Common/Collective Trust Funds—Common/collective trust funds invest in debt and equity securities and other instruments with characteristics similar to those of the funds’ benchmarks. The primary objectives of the funds are to seek investment returns that approximate the overall performance of their benchmark indexes. These benchmarks are major equity indices, fixed income indices, and money market indices that focus on growth, income, and liquidity strategies, as applicable. Investments in common/collective trust funds are stated at the NAV as determined by the issuer of the common/collective trust funds and is based on the fair value of the underlying investments held by the fund less its liabilities. The NAV is used as a practical expedient to estimate fair value. The common/collective trust funds do not have any unfunded commitments, and do not have any applicable liquidation periods or defined terms/periods to be held. The majority of the common/collective trust funds have limited withdrawal or redemption rights during the term of the investment.

• Alternative Investments—Investments in real estate funds, private equity funds, debt funds and hedge funds are stated at

fair value based on the NAV of the Plan’s proportionate share of the partnership, joint venture or other alternative

investment’s fair value as determined by reference to audited financial statements or NAV statements provided by the

investment manager. The NAV is used as a practical expedient to estimate fair value.

Net Periodic Benefit (Credit) Cost

Net periodic benefit (credit) cost is reflected in other operations and maintenance expense in the Consolidated Statements of Income. The components of the provision for net periodic benefit (credit) cost and amounts recognized in other comprehensive income and regulatory assets and liabilities for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) plans are as follows:



	Pension Benefits									Other Postretirement Benefits
Year Ended December 31,	2016			2015			2014			2016			2015			2014
(millions, except percentages)
Dominion
Service cost	$	118		$	126		$	114		$	31		$	40		$	32
Interest cost	317			287			290			65			67			67
Expected return on plan assets	(573		)	(531		)	(499		)	(118		)	(117		)	(111		)
Amortization of prior service (credit) cost	1			2			3			(35		)	(27		)	(28		)
Amortization of net actuarial loss	111			160			111			8			6			2
Settlements and curtailments	1			—			1			—			—			—
Net periodic benefit (credit) cost	$	(25	)	$	44		$	20		$	(49	)	$	(31	)	$	(38	)
Changes in plan assets and benefit obligations recognized in other comprehensive income and regulatory assets and liabilities:
Current year net actuarial (gain) loss	$	931		$	159		$	784		$	178		$	(18	)	$	183
Prior service (credit) cost	—			—			—			(216		)	(31		)	9
Settlements and curtailments	(1		)	—			(1		)	—			—			—
Less amounts included in net periodic benefit cost:
Amortization of net actuarial loss	(111		)	(160		)	(111		)	(8		)	(6		)	(2		)
Amortization of prior service credit (cost)	(1		)	(2		)	(3		)	35			27			28
Total recognized in other comprehensive income and regulatory assets and liabilities	$	818		$	(3	)	$	669		$	(11	)	$	(28	)	$	218
Significant assumptions used to determine periodic cost:
Discount rate	2.87% - 4.99%			4.40		%	5.20% - 5.30%			3.56% - 4.94%			4.40		%	4.20% - 5.10%
Expected long-term rate of return on plan assets	8.75		%	8.75		%	8.75		%	8.50		%	8.50		%	8.50		%
Weighted average rate of increase for compensation	4.22		%	4.22		%	4.21		%	4.22		%	4.22		%	4.22		%
Healthcare cost trend rate⁽¹⁾										7.00		%	7.00		%	7.00		%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)⁽¹⁾										5.00		%	5.00		%	5.00		%
Year that the rate reaches the ultimate trend rate⁽¹⁾⁽²⁾										2020			2019			2018
Dominion Gas
Service cost	$	13		$	15		$	12		$	5		$	7		$	6
Interest cost	30			27			28			14			14			13
Expected return on plan assets	(134		)	(126		)	(115		)	(23		)	(24		)	(23		)
Amortization of prior service (credit) cost	—			1			1			1			(1		)	(1		)
Amortization of net actuarial loss	13			20			19			1			2			—
Net periodic benefit (credit) cost	$	(78	)	$	(63	)	$	(55	)	$	(2	)	$	(2	)	$	(5	)
Changes in plan assets and benefit obligations recognized in other comprehensive income and regulatory assets and liabilities:
Current year net actuarial (gain) loss	$	91		$	97		$	43		$	28		$	(9	)	$	40
Prior service cost	—			—			—			—			—			10
Less amounts included in net periodic benefit cost:
Amortization of net actuarial loss	(13		)	(20		)	(19		)	(1		)	(2		)	—
Amortization of prior service credit (cost)	—			(1		)	(1		)	(1		)	1			1
Total recognized in other comprehensive income and regulatory assets and liabilities	$	78		$	76		$	23		$	26		$	(10	)	$	51
Significant assumptions used to determine periodic cost:
Discount rate	4.99		%	4.40		%	5.20		%	4.93		%	4.40		%	4.20% - 5.00%
Expected long-term rate of return on plan assets	8.75		%	8.75		%	8.75		%	8.50		%	8.50		%	8.50		%
Weighted average rate of increase for compensation	3.93		%	3.93		%	3.93		%	3.93		%	3.93		%	3.93		%
Healthcare cost trend rate⁽¹⁾										7.00		%	7.00		%	7.00		%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)⁽¹⁾										5.00		%	5.00		%	5.00		%
Year that the rate reaches the ultimate trend rate⁽¹⁾⁽²⁾										2020			2019			2018


(1)	Assumptions used to determine net periodic cost for the following year.


(2)	The Society of Actuaries model used to determine healthcare cost trend rates was updated in 2014. The new model converges to the ultimate trend rate much more quickly than previous models.

The components of AOCI and regulatory assets and liabilities for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) plans that have not been recognized as components of net periodic benefit (credit) cost are as follows:



	Pension Benefits				Other Postretirement Benefits
At December 31,	2016		2015		2016			2015
(millions)
Dominion
Net actuarial loss	$	3,200	$	2,381	$	283		$	114
Prior service (credit) cost	4		5		(419		)	(237		)
Total⁽¹⁾	$	3,204	$	2,386	$	(136	)	$	(123	)
Dominion Gas
Net actuarial loss	$	458	$	380	$	60		$	33
Prior service (credit) cost	—		1		7			7
Total⁽²⁾	$	458	$	381	$	67		$	40

(1)

As of December 31, 2016, of the $3.2 billion and $(136) million related to pension benefits and other postretirement benefits, $1.9 billion and $(103) million, respectively, are included in AOCI, with the remainder included in regulatory assets and liabilities. As of December 31, 2015, of the $2.4 billion and $(123) million related to pension benefits and other postretirement benefits, $1.4 billion and $(90) million, respectively, are included in AOCI, with the remainder included in regulatory assets and liabilities.

(2)

As of December 31, 2016, of the $458 million related to pension benefits, $167 million is included in AOCI, with the remainder included in regulatory assets and liabilities; the $67 million related to other postretirement benefits is included entirely in regulatory assets and liabilities. As of December 31, 2015, of the $381 million related to pension benefits, $138 million is included in AOCI, with the remainder included in regulatory assets and liabilities; the $40 million related to other postretirement benefits is included entirely in regulatory assets and liabilities.

The following table provides the components of AOCI and regulatory assets and liabilities for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) plans as of December 31, 2016 that are expected to be amortized as components of net periodic benefit (credit) cost in 2017:



	Pension Benefits		Other Postretirement Benefits
(millions)
Dominion
Net actuarial loss	$	161	$	13
Prior service (credit) cost	1		(47		)
Dominion Gas
Net actuarial loss	$	16	$	2
Prior service (credit) cost	—		1

The expected long-term rates of return on plan assets, discount rates, healthcare cost trend rates and mortality are critical assumptions in determining net periodic benefit (credit) cost. Dominion develops assumptions, which are then compared to the forecasts of an independent investment advisor (except for the expected long-term rates of return) to ensure reasonableness. An internal committee selects the final assumptions used for Dominion's pension and other postretirement plans, including those in which Dominion Gas participates, including discount rates, expected long-term rates of return, healthcare cost trend rates and mortality rates.

Dominion determines the expected long-term rates of return on plan assets for its pension plans and other postretirement benefit plans, including those in which Dominion Gas participates, by using a combination of:


•	Expected inflation and risk-free interest rate assumptions;


•	Historical return analysis to determine long term historic returns as well as historic risk premiums for various asset classes;


•	Expected future risk premiums, asset volatilities and correlations;


•	Forecasts of an independent investment advisor;


•	Forward-looking return expectations derived from the yield on long-term bonds and the expected long-term returns of major stock market indices; and


•	Investment allocation of plan assets.

Dominion determines discount rates from analyses of AA/Aa rated bonds with cash flows matching the expected payments to be made under its plans, including those in which Dominion Gas participates.

Mortality rates are developed from actual and projected plan experience for postretirement benefit plans. Dominion’s actuary conducts an experience study periodically as part of the process to select its best estimate of mortality. Dominion considers both standard mortality tables and improvement factors as well as the plans’ actual experience when selecting a best estimate. During 2016, Dominion conducted a new experience study as scheduled and, as a result, updated its mortality assumptions for all its plans, including those in which Dominion Gas participates.

Assumed healthcare cost trend rates have a significant effect on the amounts reported for Dominion's retiree healthcare plans, including those in which Dominion Gas participates. A one percentage point change in assumed healthcare cost trend rates would have had the following effects for Dominion’s and Dominion Gas’ (for employees represented by collective bargaining units) other postretirement benefit plans:



	Other Postretirement Benefits
	One percentage point increase		One percentage point decrease
(millions)
Dominion
Effect on net periodic cost for 2017	$	23	$	(18	)
Effect on other postretirement benefit obligation at December 31, 2016	152		(127		)
Dominion Gas
Effect on net periodic cost for 2017	$	5	$	(4	)
Effect on other postretirement benefit obligation at December 31, 2016	41		(34		)

Dominion Gas (Employees Not Represented by Collective Bargaining Units) and Virginia Power - Participation in Defined Benefit Plans

Virginia Power employees and Dominion Gas employees not represented by collective bargaining units are covered by the Dominion Pension Plan described above. As participating employers, Virginia Power and Dominion Gas are subject to Dominion's funding policy, which is to contribute annually an amount that is in accordance with ERISA. During 2016, Virginia Power and Dominion Gas made no contributions to the Dominion Pension Plan, and no contributions to this plan are currently expected in 2017. Virginia Power's net periodic pension cost related to this plan was $79 million, $97 million and $75 million in 2016, 2015 and 2014, respectively. Dominion Gas' net periodic pension credit related to this plan was $(45) million, $(38) million and $(37) million in 2016, 2015 and 2014, respectively. Net periodic pension (credit) cost is reflected in other operations and maintenance expense in their respective Consolidated Statements of Income. The funded status of various Dominion subsidiary groups and employee compensation are the basis for determining the share of total pension costs for participating Dominion subsidiaries. See Note 24 for Virginia Power and Dominion Gas amounts due to/from Dominion related to this plan.

Retiree healthcare and life insurance benefits, for Virginia Power employees and for Dominion Gas employees not represented by collective bargaining units, are covered by the Dominion Retiree Health and Welfare Plan described above. Virginia Power's net periodic benefit (credit) cost related to this plan was $(29) million, $(16) million and $(18) million in 2016, 2015 and 2014, respectively. Dominion Gas' net periodic benefit (credit) cost related to this plan was $(4) million, $(5) million and $(5) million for 2016, 2015 and 2014, respectively. Net periodic benefit (credit) cost is reflected in other operations and maintenance expenses in their respective Consolidated Statements of Income. Employee headcount is the basis for determining the share of total other postretirement benefit costs for participating Dominion subsidiaries. See Note 24 for Virginia Power and Dominion Gas amounts due to/from Dominion related to this plan.

Dominion holds investments in trusts to fund employee benefit payments for the pension and other postretirement benefit plans in which Virginia Power and Dominion Gas' employees participate. Any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for such employee benefit plans and will be included in the determination of the amount of cash that Virginia Power and Dominion Gas will provide to Dominion for their shares of employee benefit plan contributions.

Certain regulatory authorities have held that amounts recovered in rates for other postretirement benefits, in excess of benefits actually paid during the year, must be deposited in trust funds dedicated for the sole purpose of paying such benefits. Accordingly, Virginia Power and Dominion Gas fund other postretirement benefit costs through VEBAs. During 2016 and 2015, Virginia Power made no contributions to the VEBA and does not expect to contribute to the VEBA in 2017. Dominion Gas made no contributions to the VEBAs for employees not represented by collective bargaining units during 2016 and 2015 and does not expect to contribute in 2017.

Defined Contribution Plans

Dominion also sponsors defined contribution employee savings plans that cover substantially all employees. During 2016, 2015 and 2014, Dominion recognized $44 million, $43 million and $41 million, respectively, as employer matching contributions to these plans. Dominion Gas participates in these employee savings plans, both specific to Dominion Gas and that cover multiple Dominion subsidiaries. During 2016, 2015 and 2014, Dominion Gas recognized $7 million as employer matching contributions to these plans. Virginia Power also participates in these employee savings plans. During 2016, 2015 and 2014, Virginia Power recognized $19 million, $18 million and $17 million, respectively, as employer matching contributions to these plans.

Organizational Design Initiative

In the first quarter of 2016, the Companies announced an organizational design initiative that reduced their total workforces during 2016. The goal of the organizational design initiative was to streamline leadership structure and push decision making lower while also improving efficiency. For the year ended December 31, 2016, Dominion recorded a $65 million ($40 million after-tax) charge, including $33 million ($20 million after-tax) at Virginia Power and $8 million ($5 million after-tax) at Dominion Gas, primarily reflected in other operations and maintenance expense in their Consolidated Statements of Income due to severance pay and other costs related to the organizational design initiative. The terms of the severance under the organizational design initiative were consistent with the Companies’ existing severance plans.

As of December 31,

(millions)

Accumulated benefit obligation

Fair value of plan assets