Employee Retirement Benefits

Employee Pension Plan and Other Benefits Plans - NEE sponsors a qualified noncontributory defined benefit pension plan for substantially all employees of NEE and its subsidiaries. NEE also has a supplemental executive retirement plan (SERP), which includes a non-qualified supplemental defined benefit pension component that provides benefits to a select group of management and highly compensated employees, and sponsors a contributory postretirement plan for other benefits for retirees of NEE and its subsidiaries meeting certain eligibility requirements. The total accrued benefit cost of the SERP and postretirement plans is approximately $325 million ($222 million for FPL) and $321 million ($230 million for FPL) at December 31, 2016 and 2015, respectively.

Pension Plan Assets, Benefit Obligations and Funded Status - The changes in assets, benefit obligations and the funded status of the pension plan are as follows:



	2016			2015
	(millions)
Change in pension plan assets:
Fair value of plan assets at January 1	$	3,563		$	3,698
Actual return on plan assets	217			(8		)
Benefit payments	(129		)	(127		)
Fair value of plan assets at December 31	$	3,651		$	3,563
Change in pension benefit obligation:
Obligation at January 1	$	2,408		$	2,454
Service cost	62			70
Interest cost	105			97
Plan amendments	(19		)	—
Actuarial losses (gains) - net	47			(86		)
Benefit payments	(129		)	(127		)
Obligation at December 31^(a)	$	2,474		$	2,408
Funded status:
Prepaid pension benefit costs at NEE at December 31	$	1,177		$	1,155
Prepaid pension benefit costs at FPL at December 31	$	1,301		$	1,243

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(a)	NEE's accumulated pension benefit obligation, which includes no assumption about future salary levels, at December 31, 2016 and 2015 was approximately $2,439 million and $2,366 million, respectively.

NEE's unrecognized amounts included in accumulated other comprehensive income (loss) yet to be recognized as components of prepaid pension benefit costs are as follows:



	2016			2015
	(millions)
Unrecognized prior service benefit (cost) (net of $2 tax expense and $1 tax benefit, respectively)	$	3		$	(2	)
Unrecognized losses (net of $55 and $38 tax benefit, respectively)	(87		)	(60		)
Total	$	(84	)	$	(62	)

NEE's unrecognized amounts included in regulatory assets yet to be recognized as components of net prepaid pension benefit costs are as follows:



	2016			2015
	(millions)
Unrecognized prior service cost (benefit)	$	(4	)	$	9
Unrecognized losses	280			232
Total	$	276		$	241

The following table provides the assumptions used to determine the benefit obligation for the pension plan. These rates are used in determining net periodic income in the following year.



	2016		2015
Discount rate^(a)	4.09	%	4.35	%
Salary increase	4.10	%	4.10	%

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(a)	Beginning in 2017, NEE changed its method of estimating the interest cost component of net periodic benefit costs and will use a full yield curve approach by applying a specific spot rate along the yield curve rather than a single weighted-average discount rate. Such change is not expected to have a material impact on the pension and postretirement plans' net periodic benefit costs.

NEE's investment policy for the pension plan recognizes the benefit of protecting the plan's funded status, thereby avoiding the necessity of future employer contributions. Its broad objectives are to achieve a high rate of total return with a prudent level of risk taking while maintaining sufficient liquidity and diversification to avoid large losses and preserve capital over the long term.

The NEE pension plan fund's current target asset allocation, which is expected to be reached over time, is 45% equity investments, 32% fixed income investments, 13% alternative investments and 10% convertible securities. The pension fund's investment strategy emphasizes traditional investments, broadly diversified across the global equity and fixed income markets, using a combination of different investment styles and vehicles. The pension fund's equity and fixed income holdings consist of both directly held securities as well as commingled investment arrangements such as common and collective trusts, pooled separate accounts, registered investment companies and limited partnerships. The pension fund's convertible security assets are principally direct holdings of convertible securities and include a convertible security oriented limited partnership. The pension fund's alternative investments consist primarily of private equity and real estate oriented investments in limited partnerships as well as absolute return oriented limited partnerships that use a broad range of investment strategies on a global basis.

The fair value measurements of NEE's pension plan assets by fair value hierarchy level are as follows:



	December 31, 2016^(a)
	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(millions)
Equity securities^(b)	$	879	$	16	$	3	$	898
Equity commingled vehicles^(c)	—		845		—		845
U.S. Government and municipal bonds	143		12		—		155
Corporate debt securities^(d)	3		246		1		250
Asset-backed securities	—		124		—		124
Debt security commingled vehicles	—		22		—		22
Convertible securities^(e)	21		277		—		298
Total investments in the fair value hierarchy	$	1,046	$	1,542	$	4	2,592
Total investments measured at net asset value^(f)							1,059
Total fair value of plan assets							$	3,651

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(a)	See Note 4 for discussion of fair value measurement techniques and inputs.


(b)	Includes foreign investments of $370 million.


(c)	Includes foreign investments of $261 million.


(d)	Includes foreign investments of $67 million.


(e)	Includes foreign investments of $31 million.


(f)	Includes foreign investments of $282 million.



	December 31, 2015^(a)
	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(millions)
Equity securities^(b)	$	910	$	21	$	1	$	932
Equity commingled vehicles^(c)	—		792		—		792
U.S. Government and municipal bonds	110		13		—		123
Corporate debt securities^(d)	2		277		1		280
Asset-backed securities	—		167		—		167
Debt security commingled vehicles	—		21		—		21
Convertible securities^(e)	16		258		—		274
Total investments in the fair value hierarchy	$	1,038	$	1,549	$	2	2,589
Total investments measured at net asset value^(f)							974
Total fair value of plan assets							$	3,563

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(a)	See Note 4 for discussion of fair value measurement techniques and inputs.


(b)	Includes foreign investments of $384 million.


(c)	Includes foreign investments of $249 million.


(d)	Includes foreign investments of $68 million.


(e)	Includes foreign investments of $23 million.


(f)	Includes foreign investments of $283 million.

Expected Cash Flows - The following table provides information about benefit payments expected to be paid by the pension plan for each of the following calendar years (in millions):



2017	$	155
2018	$	156
2019	$	160
2020	$	163
2021	$	170
2022 - 2026	$	879

Net Periodic (Income) Cost - The components of net periodic (income) cost for the plans are as follows:



	Pension Benefits									Postretirement Benefits
	2016			2015			2014			2016			2015			2014
				(millions)
Service cost	$	62		$	70		$	61		$	2		$	3		$	3
Interest cost	105			97			101			13			13			16
Expected return on plan assets	(260		)	(253		)	(241		)	(1		)	(1		)	(1		)
Amortization of prior service cost (benefit)	1			1			5			(2		)	(3		)	(3		)
Amortization of losses	—			—			—			—			2			—
Net periodic (income) cost at NEE	$	(92	)	$	(85	)	$	(74	)	$	12		$	14		$	15
Net periodic (income) cost at FPL	$	(58	)	$	(55	)	$	(47	)	$	9		$	11		$	11

Other Comprehensive Income - The components of net periodic income (cost) recognized in OCI for the pension plan are as follows:



	2016			2015			2014
	(millions)
Prior service benefit (net of $3 and $3 tax expense, respectively)	$	4		$	—		$	4
Net losses (net of $16, $27 and $29 tax benefit, respectively)	(26		)	(44		)	(45		)
Amortization of prior service benefit	—			—			1
Total	$	(22	)	$	(44	)	$	(40	)

Regulatory Assets (Liabilities) - The components of net periodic (income) cost recognized during the year in regulatory assets (liabilities) for the pension plan are as follows:



	2016			2015
	(millions)
Prior service benefit	$	(12	)	$	—
Unrecognized losses	48			104
Amortization of prior service benefit	(1		)	(1		)
Total	$	35		$	103

The assumptions used to determine net periodic income for the pension plan are as follows:



	2016		2015		2014
Discount rate	4.35	%	3.95	%	4.80	%
Salary increase	4.10	%	4.10	%	4.00	%
Expected long-term rate of return^(a)(b)	7.35	%	7.35	%	7.75	%

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(a)

In developing the expected long-term rate of return on assets assumption for its pension plan, NEE evaluated input, including other qualitative and quantitative factors, from its actuaries and consultants, as well as information available in the marketplace. NEE considered different models, capital market return assumptions and historical returns for a portfolio with an equity/bond asset mix similar to its pension fund. NEE also considered its pension fund's historical compounded returns.


(b)	In 2016 and 2015, an expected long-term rate of return of 7.75% is presented net of investment management fees.

Employee Contribution Plan - NEE offers an employee retirement savings plan which allows eligible participants to contribute a percentage of qualified compensation through payroll deductions. NEE makes matching contributions to participants' accounts. Defined contribution expense pursuant to this plan was approximately $52 million, $63 million and $59 million for NEE ($32 million, $40 million and $37 million for FPL) for the years ended December 31, 2016, 2015 and 2014, respectively.