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Compensation and Benefit Plans
 12 Months Ended
Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract]  
Compensation and Benefit Plans
Compensation and Benefit Plans
Employee Savings Plan
The 401(k) defined contribution savings plan is designed to supplement employees' retirement income. The following employer contributions were made for continuing operations:
 
Edison International
 
SCE
(in millions)
Years ended December 31,
2016
$
69

 
$
68

2015
73

 
72

2014
71

 
70


Pension Plans and Postretirement Benefits Other Than Pensions
Pension Plans
Noncontributory defined benefit pension plans (some with cash balance features) cover most employees meeting minimum service requirements. SCE recognizes pension expense for its nonexecutive plan as calculated by the actuarial method used for ratemaking. The expected contributions (all by the employer) for Edison International and SCE are approximately $136 million and $85 million, respectively, for the year ending December 31, 2017. Annual contributions made by SCE to most of SCE's pension plans are anticipated to be recovered through CPUC-approved regulatory mechanisms.
The funded position of Edison International's pension is sensitive to changes in market conditions. Changes in overall interest rate levels significantly affect the company's liabilities, while assets held in the various trusts established to fund Edison International's pension are affected by movements in the equity and bond markets. Due to SCE's regulatory recovery treatment, a regulatory asset has been recorded equal to the unfunded status (See Note 10).
Information on pension plan assets and benefit obligations for continuing and discontinued operations is shown below.
 
Edison International
 
SCE
 
Years ended December 31,
(in millions)
2016
 
2015
 
2016
 
2015
Change in projected benefit obligation
 
 
 
 
 
 
 
Projected benefit obligation at beginning of year
$
4,374

 
$
4,517

 
$
3,878

 
$
3,999

Service cost
139

 
142

 
132

 
133

Interest cost
171

 
170

 
150

 
150

Actuarial gain
(125
)
 
(149
)
 
(140
)
 
(143
)
Benefits paid
(275
)
 
(305
)
 
(229
)
 
(261
)
Other
—

 
(1
)
 
—

 
—

Projected benefit obligation at end of year
$
4,284

 
$
4,374

 
$
3,791

 
$
3,878

Change in plan assets
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
$
3,298

 
$
3,454

 
$
3,080

 
$
3,217

Actual return on plan assets
262

 
30

 
239

 
27

Employer contributions
103

 
119

 
82

 
97

Benefits paid
(275
)
 
(305
)
 
(229
)
 
(261
)
Fair value of plan assets at end of year
$
3,388

 
$
3,298

 
$
3,172

 
$
3,080

Funded status at end of year
$
(896
)
 
$
(1,076
)
 
$
(619
)
 
$
(798
)
Amounts recognized in the consolidated balance sheets consist of 1:
 
 
 
 
 
 
 
Long-term assets
$
2

 
$
—

 
$
—

 
$
—

Current liabilities
(50
)
 
(27
)
 
(4
)
 
(4
)
Long-term liabilities
(848
)
 
(1,049
)
 
(615
)
 
(794
)
 
$
(896
)
 
$
(1,076
)
 
$
(619
)
 
$
(798
)
Amounts recognized in accumulated other comprehensive loss consist of:
 
 
 
 
 
 
 
Prior service cost
$
(1
)
 
$
—

 
$
—

 
$
—

Net loss1
93

 
96

 
24

 
27

 
$
92

 
$
96

 
$
24

 
$
27

Amounts recognized as a regulatory asset
$
574

 
$
675

 
$
574

 
$
675

Total not yet recognized as expense
$
666

 
$
771

 
$
598

 
$
702

Accumulated benefit obligation at end of year
$
4,138

 
$
4,200

 
$
3,683

 
$
3,744

Pension plans with an accumulated benefit obligation in excess of plan assets:
 
 
 
 
 
 
 
Projected benefit obligation
$
4,284

 
$
4,374

 
$
3,791

 
$
3,878

Accumulated benefit obligation
4,138

 
4,200

 
3,683

 
3,744

Fair value of plan assets
3,388

 
3,298

 
3,172

 
3,080

Weighted-average assumptions used to determine obligations at end of year:
 
 
 
 
 
 
 
Discount rate
3.94
%
 
4.18
%
 
3.94
%
 
4.18
%
Rate of compensation increase
4.00
%
 
4.00
%
 
4.00
%
 
4.00
%
1 
The SCE liability excludes a long-term payable due to Edison International Parent of $124 million and $123 million at December 31, 2016 and 2015, respectively, related to certain SCE postretirement benefit obligations transferred to Edison International Parent. SCE's accumulated other comprehensive loss of $24 million and $27 million at December 31, 2016 and 2015, respectively, excludes net loss of $20 million and $18 million related to these benefits.
Pension expense components for continuing operations are:
 
Edison International
 
SCE
 
Years ended December 31,
(in millions)
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Service cost
$
139

 
$
142

 
$
133

 
$
136

 
$
139

 
$
128

Interest cost
172

 
170

 
181

 
156

 
155

 
164

Expected return on plan assets
(220
)
 
(233
)
 
(229
)
 
(205
)
 
(217
)
 
(213
)
Settlement costs1
—

 
—

 
45

 
—

 
—

 
42

Curtailment gain
—

 
—

 
(4
)
 
—

 
—

 
—

Amortization of prior service cost
4

 
5

 
5

 
4

 
5

 
5

Amortization of net loss2
27

 
40

 
12

 
23

 
35

 
7

Expense under accounting standards
122

 
124

 
143

 
114

 
117

 
133

Regulatory adjustment (deferred)
(21
)
 
(6
)
 
8

 
(21
)
 
(6
)
 
8

Total expense recognized
$
101

 
$
118

 
$
151

 
$
93

 
$
111

 
$
141


1 
Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International was zero for the both the years ended December 31, 2016 and 2015 and $3 million for the year ended December 31, 2014.
2 
Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International and SCE was $10 million and $6 million, respectively, for the year ended December 31, 2016. The amount reclassified for Edison International and SCE was $14 million and $8 million, respectively, for the year ended December 31, 2015. The amount reclassified for Edison International and SCE was $9 million and $4 million, respectively, for the year ended December 31, 2014.
Under GAAP, a settlement is recorded when lump-sum payments exceed estimated annual service and interest costs. Lump-sum payments to employees retiring in 2014 from the SCE Retirement Plan (primarily due to workforce reductions described below) exceeded the estimated service and interest costs for that year. A settlement requires re-measurement of both the plan pension obligations and plan assets as of the date of the settlement. Re-measurement assumption changes result in actuarial gains and losses which are combined with previous unrecognized gains and losses. After re-measurement, GAAP requires an acceleration of a portion of unrecognized net losses attributable to such lump-sum payments as additional pension expense as reflected in the above table. The additional pension expense related to SCE did not impact net income as such amounts are probable of recovery through future rates.
Other changes in pension plan assets and benefit obligations recognized in other comprehensive loss for continuing operations:
 
Edison International
 
SCE
 
Years ended December 31,
(in millions)
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Net loss (gain)
$
6

 
$
7

 
$
85

 
$
4

 
$
(9
)
 
$
37

Amortization of net loss and other
(10
)
 
(15
)
 
(13
)
 
(6
)
 
(9
)
 
(4
)
Total recognized in other comprehensive loss
$
(4
)
 
$
(8
)
 
$
72

 
$
(2
)
 
$
(18
)
 
$
33

Total recognized in expense and other comprehensive loss
$
97

 
$
110

 
$
223

 
$
91

 
$
93

 
$
174


In accordance with authoritative guidance on rate-regulated enterprises, SCE records regulatory assets and liabilities instead of charges and credits to other comprehensive income (loss) for the portion of SCE's postretirement benefit plans that are recoverable in utility rates. The estimated pension amounts that will be amortized to expense in 2017 for continuing operations are as follows:
(in millions)
Edison International
 
SCE
Unrecognized net loss to be amortized1
$
19

 
$
15

Unrecognized prior service cost to be amortized
3

 
3


1 
The amount of net loss expected to be reclassified from other comprehensive loss for Edison International's continuing operations and SCE is $10 million and $6 million, respectively.
Edison International and SCE used the following weighted-average assumptions to determine pension expense for continuing operations:
 
Years ended December 31,
 
2016
 
2015
 
2014
Discount rate
4.18
%
 
3.85
%
 
4.50
%
Rate of compensation increase
4.00
%
 
4.00
%
 
4.00
%
Expected long-term return on plan assets
7.00
%
 
7.00
%
 
7.00
%

The following benefit payments, which reflect expected future service, are expected to be paid:
 
Edison International
 
SCE
(in millions)
Years ended December 31,
2017
$
346

 
$
271

2018
332

 
298

2019
344

 
300

2020
341

 
304

2021
341

 
304

2022 – 2026
1,566

 
1,396


Postretirement Benefits Other Than Pensions ("PBOP(s)")
Most employees retiring at or after age 55 with at least 10 years of service may be eligible for postretirement medical, dental, vision and life insurance benefits. Eligibility for a company contribution toward the cost of these benefits in retirement depends on a number of factors, including the employee's years of service, age, hire date, and retirement date. Under the terms of the Edison International Welfare Benefit Plan ("PBOP Plan") each participating employer (Edison International or its participating subsidiaries) is responsible for the costs and expenses of all PBOP benefits with respect to its employees and former employees. A participating employer may terminate the PBOP benefits with respect to its employees and former employees, as may SCE (as Plan sponsor), and, accordingly, the participants' PBOP benefits are not vested benefits.
The expected contributions (substantially all of which are expected to be made by SCE) for PBOP benefits are $21 million for the year ended December 31, 2017. Annual contributions related to SCE employees made to SCE plans are anticipated to be recovered through CPUC-approved regulatory mechanisms and are expected to be, at a minimum, equal to the total annual expense for these plans.
SCE has established three voluntary employee beneficiary associations trusts ("VEBA Trusts") that can only be used to pay for retiree health care benefits of SCE. Once funded into the VEBA Trusts, neither SCE nor Edison International can subsequently terminate benefits and recover remaining amounts in the VEBA Trusts. Participants of the PBOP Plan do not have a beneficial interest in the VEBA Trusts. The VEBA Trust assets are sensitive to changes in market conditions. Changes in overall interest rate levels significantly affect the company's liabilities, while assets held in the various trusts established to fund Edison International's other postretirement benefits are affected by movements in the equity and bond markets. Due to SCE's regulatory recovery treatment, the unfunded status is offset by a regulatory asset.
Information on PBOP Plan assets and benefit obligations is shown below:
 
Edison International
 
SCE
 
Years ended December 31,
(in millions)
2016
 
2015
 
2016
 
2015
Change in benefit obligation
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
2,350

 
$
2,784

 
$
2,341

 
$
2,775

Service cost
35

 
46

 
34

 
46

Interest cost
97

 
102

 
97

 
102

Special termination benefits
2

 
(2
)
 
2

 
(2
)
Plan Amendments
(6
)
 
—

 
(6
)
 
—

Actuarial gain
(110
)
 
(500
)
 
(110
)
 
(500
)
Plan participants' contributions
19

 
20

 
19

 
20

Benefits paid
(111
)
 
(100
)
 
(111
)
 
(100
)
Benefit obligation at end of year
$
2,276

 
$
2,350

 
$
2,266

 
$
2,341

Change in plan assets
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
$
2,036

 
$
2,086

 
$
2,036

 
$
2,086

Actual return on assets
137

 
6

 
137

 
6

Employer contributions
21

 
24

 
21

 
24

Plan participants' contributions
19

 
20

 
19

 
20

Benefits paid
(111
)
 
(100
)
 
(111
)
 
(100
)
Fair value of plan assets at end of year
$
2,102

 
$
2,036

 
$
2,102

 
$
2,036

Funded status at end of year
$
(174
)
 
$
(314
)
 
$
(164
)
 
$
(305
)
Amounts recognized in the consolidated balance sheets consist of:
 
 
 
 
 
 
 
Current liabilities
$
(14
)
 
$
(15
)
 
$
(13
)
 
$
(15
)
Long-term liabilities
(160
)
 
(299
)
 
(151
)
 
(290
)
 
$
(174
)
 
$
(314
)
 
$
(164
)
 
$
(305
)
Amounts recognized in accumulated other comprehensive loss consist of:
 
 
 
 
 
 
 
    Net loss
$
4

 
$
4

 
$
—

 
$
—

Amounts recognized as a regulatory asset
$
136

 
$
174

 
$
136

 
$
174

Total not yet recognized as expense
$
140

 
$
178

 
$
136

 
$
174

Weighted-average assumptions used to determine obligations at end of year:
 
 
 
 
 
 
 
Discount rate
4.29
%
 
4.55
%
 
4.29
%
 
4.55
%
Assumed health care cost trend rates:
 
 
 
 
 
 
 
Rate assumed for following year
7.00
%
 
7.50
%
 
7.00
%
 
7.50
%
Ultimate rate
5.00
%
 
5.00
%
 
5.00
%
 
5.00
%
Year ultimate rate reached
2022

 
2022

 
2022

 
2022


During 2016 and 2015, the PBOP plan had actuarial gains of $110 million and $500 million, respectively. The 2016 actuarial gain is primarily related to $165 million in experience gain, offsetting by $95 million loss from a decrease in the discount rate (from 4.55% as of December 31, 2015 to 4.29% as of December 31, 2016), and the adoption of new mortality tables, as discussed below. The 2015 actuarial gain is primarily related to $300 million in experience gains, $140 million of income from an increase in the discount rate (from 4.16% at December 31, 2014 to 4.55% as of December 31, 2015) due to higher interest rates, and the adoption of new mortality tables, as discussed below.
In 2016 and 2015, Edison International and SCE adopted new mortality tables that the Society of Actuaries released in October each year that reflect changes in life expectancy. At December 31, 2016 and 2015, this adoption resulted in a change in Edison International's PBOP plans' accumulated postretirement benefit obligation of $(40) million and $(62) million, respectively, including $(40) million and $(61) million, respectively, for SCE.
PBOP expense components for continuing operations are:
 
Edison International
 
SCE
 
Years ended December 31,
(in millions)
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Service cost
$
35

 
$
46

 
$
40

 
$
34

 
$
46

 
$
40

Interest cost
97

 
102

 
117

 
97

 
102

 
117

Expected return on plan assets
(112
)
 
(116
)
 
(108
)
 
(112
)
 
(116
)
 
(108
)
Special termination benefits1
2

 
1

 
3

 
2

 
1

 
3

Amortization of prior service credit
(2
)
 
(12
)
 
(36
)
 
(2
)
 
(12
)
 
(35
)
Amortization of net loss
—

 
3

 
6

 
—

 
2

 
5

Total expense
$
20

 
$
24

 
$
22

 
$
19

 
$
23

 
$
22


1 
Due to the reduction in workforce, SCE has incurred costs for extended retiree health care coverage.
In accordance with authoritative guidance on rate-regulated enterprises, SCE records regulatory assets and liabilities instead of charges and credits to other comprehensive income (loss) for the portion of SCE's postretirement benefit plans that are recoverable in utility rates. The estimated PBOP amounts that will be amortized to expense in 2017 for continuing operations are as follows:
    
Edison International
 
SCE
Unrecognized prior service credit to be amortized
$
(2
)
 
$
(2
)

Edison International and SCE used the following weighted-average assumptions to determine PBOP expense for continuing operations:
 
Years ended December 31,
 
2016
 
2015
 
2014
Discount rate
4.55
%
 
4.16
%
 
5.00
%
Expected long-term return on plan assets
5.60
%
 
5.50
%
 
5.50
%
Assumed health care cost trend rates:
 
 
 
 
 
Current year
7.50
%
 
7.75
%
 
7.75
%
Ultimate rate
5.00
%
 
5.00
%
 
5.00
%
Year ultimate rate reached
2022

 
2021

 
2020


A one-percentage-point change in assumed health care cost trend rate would have the following effects on continuing operations:
 
Edison International
 
SCE
(in millions)
One-Percentage-Point Increase
 
One-Percentage-Point Decrease
 
One-Percentage-Point Increase
 
One-Percentage-Point Decrease
Effect on accumulated benefit obligation as of December 31, 2016
$
244

 
$
(200
)
 
$
243

 
$
(199
)
Effect on annual aggregate service and interest costs
11

 
(9
)
 
11

 
(9
)

The following benefit payments are expected to be paid:
 
Edison International
 
SCE
(in millions)
Years ended December 31,
2017
$
98

 
$
98

2018
102

 
102

2019
105

 
105

2020
109

 
109

2021
113

 
112

2022 – 2026
612

 
609


Plan Assets
Description of Pension and Postretirement Benefits Other than Pensions Investment Strategies
The investment of plan assets is overseen by a fiduciary investment committee. Plan assets are invested using a combination of asset classes, and may have active and passive investment strategies within asset classes. Target allocations for 2016 pension plan assets were 29% for U.S. equities, 17% for non-U.S. equities, 35% for fixed income, 15% for opportunistic and/or alternative investments and 4% for other investments. Target allocations for 2016 PBOP plan assets (except for Represented VEBA which is 85% for fixed income, 10% for opportunistic/private equities, and 5% global equities) are 41% for U.S. equities, 17% for non-U.S. equities, 34% for fixed income, 7% for opportunistic and/or alternative investments, and 1% for other investments. Edison International employs multiple investment management firms. Investment managers within each asset class cover a range of investment styles and approaches. Risk is managed through diversification among multiple asset classes, managers, styles and securities. Plan asset classes and individual manager performances are measured against targets. Edison International also monitors the stability of its investment managers' organizations.
Allowable investment types include:
•
United States Equities: Common and preferred stocks of large, medium, and small companies which are predominantly United States-based.
•
Non-United States Equities: Equity securities issued by companies domiciled outside the United States and in depository receipts which represent ownership of securities of non-United States companies.
•
Fixed Income: Fixed income securities issued or guaranteed by the United States government, non-United States governments, government agencies and instrumentalities including municipal bonds, mortgage backed securities and corporate debt obligations. A portion of the fixed income positions may be held in debt securities that are below investment grade.
Opportunistic, Alternative and Other Investments:
•
Opportunistic: Investments in short to intermediate term market opportunities. Investments may have fixed income and/or equity characteristics and may be either liquid or illiquid.
•
Alternative: Limited partnerships that invest in non-publicly traded entities.
•
Other: Investments diversified among multiple asset classes such as global equity, fixed income currency and commodities markets. Investments are made in liquid instruments within and across markets. The investment returns are expected to approximate the plans' expected investment returns.
Asset class portfolio weights are permitted to range within plus or minus 3%. Where approved by the fiduciary investment committee, futures contracts are used for portfolio rebalancing and to reallocate portfolio cash positions. Where authorized, a few of the plans' investment managers employ limited use of derivatives, including futures contracts, options, options on futures and interest rate swaps in place of direct investment in securities to gain efficient exposure to markets. Derivatives are not used to leverage the plans or any portfolios.
Determination of the Expected Long-Term Rate of Return on Assets
The overall expected long-term rate of return on assets assumption is based on the long-term target asset allocation for plan assets and capital markets return forecasts for asset classes employed. A portion of the PBOP trust asset returns are subject to taxation, so the expected long-term rate of return for these assets is determined on an after-tax basis.
Capital Markets Return Forecasts
SCE's capital markets return forecast methodologies primarily use a combination of historical market data, current market conditions, proprietary forecasting expertise, complex models to develop asset class return forecasts and a building block approach. The forecasts are developed using variables such as real risk-free interest, inflation, and asset class specific risk premiums. For equities, the risk premium is based on an assumed average equity risk premium of 5% over cash. The forecasted return on private equity and opportunistic investments are estimated at a 2% premium above public equity, reflecting a premium for higher volatility and lower liquidity. For fixed income, the risk premium is based off of a comprehensive modeling of credit spreads.
Fair Value of Plan Assets
The PBOP Plan and the Southern California Edison Company Retirement Plan Trust (Master Trust) assets include investments in equity securities, U.S. treasury securities, other fixed-income securities, common/collective funds, mutual funds, other investment entities, foreign exchange and interest rate contracts, and partnership/joint ventures. Equity securities, U.S. treasury securities, mutual and money market funds are classified as Level 1 as fair value is determined by observable, unadjusted quoted market prices in active or highly liquid and transparent markets. The fair value of the underlying investments in equity mutual funds are based on stock-exchange prices. The fair value of the underlying investments in fixed-income mutual funds and other fixed income securities including municipal bonds are based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids, offers and relevant credit information. Foreign exchange and interest rate contracts are classified as Level 2 because the values are based on observable prices but are not traded on an exchange. Futures contracts trade on an exchange and therefore are classified as Level 1. Common/collective funds and partnerships are measured at fair value using the net asset value per share ("NAV") and have not been classified in the fair value hierarchy. Other investment entities are valued similarly to common/collective funds and are therefore classified as NAV. The Level 1 registered investment companies are either mutual or money market funds. The remaining funds in this category are readily redeemable and classified as NAV and are discussed further at Note 8 to the pension plan master trust investments table below.
Edison International reviews the process/procedures of both the pricing services and the trustee to gain an understanding of the inputs/assumptions and valuation techniques used to price each asset type/class. The trustee and Edison International's validation procedures for pension and PBOP equity and fixed income securities are the same as the nuclear decommissioning trusts. For further discussion see Note 4. The values of Level 1 mutual and money market funds are publicly quoted. The trustees obtain the values of common/collective and other investment funds from the fund managers. The values of partnerships are based on partnership valuation statements updated for cash flows. SCE's investment managers corroborate the trustee fair values.
Pension Plan
The following table sets forth the Master Trust investments for Edison International and SCE that were accounted for at fair value as of December 31, 2016 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
 
Level 2
 
Level 3
 
NAV1
 
Total
U.S. government and agency securities2
$
217

 
$
309

 
$
—

 
$
—

 
$
526

Corporate stocks3
720

 
15

 
—

 
—

 
735

Corporate bonds4
—

 
725

 
—

 
—

 
725

Common/collective funds5
—

 
—

 
—

 
692

 
692

Partnerships/joint ventures6
—

 
—

 
—

 
333

 
333

Other investment entities7
—

 
—

 
—

 
253

 
253

Registered investment companies8
124

 
—

 
—

 
6

 
130

Interest-bearing cash
42

 
—

 
—

 
—

 
42

Other
—

 
112

 
—

 
—

 
112

Total
$
1,103

 
$
1,161

 
$
—

 
$
1,284

 
$
3,548

Receivables and payables, net
 

 
 

 
 
 
 

 
(160
)
Net plan assets available for benefits
 

 
 

 
 
 
 

 
$
3,388

SCE's share of net plan assets
 
 
 
 
 
 
 
 
$
3,172

The following table sets forth the Master Trust investments that were accounted for at fair value as of December 31, 2015 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
 
Level 2
 
Level 3
 
NAV1
 
Total
U.S. government and agency securities2
$
127

 
$
298

 
$
—

 
$
—

 
$
425

Corporate stocks3
720

 
16

 
—

 
—

 
736

Corporate bonds4
—

 
755

 
—

 
—

 
755

Common/collective funds5
—

 
—

 
—

 
640

 
640

Partnerships/joint ventures6
—

 
—

 
—

 
325

 
325

Other investment entities7
—

 
—

 
—

 
263

 
263

Registered investment companies8
117

 
—

 
—

 
4

 
121

Interest-bearing cash
6

 
—

 
—

 
—

 
6

Other
1

 
96

 
—

 
—

 
97

Total
$
971

 
$
1,165

 
$
—

 
$
1,232

 
$
3,368

Receivables and payables, net
 

 
 

 
 
 
 

 
(70
)
Net plan assets available for benefits
 

 
 

 
 
 
 

 
$
3,298

SCE's share of net plan assets
 
 
 
 
 
 
 
 
$
3,080

1 
These investments are measured at fair value using the net asset value per share practical expedient and have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the net plan assets available for benefits.
2 
Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
3 
Corporate stocks are diversified. At December 31, 2016 and 2015, respectively, performance for actively managed separate accounts is primarily benchmarked against the Russell Indexes (62%) and (59%) and Morgan Stanley Capital International (MSCI) index (38%) and (41%).
4 
Corporate bonds are diversified. At December 31, 2016 and 2015, respectively, this category includes $76 million and $123 million for collateralized mortgage obligations and other asset backed securities of which $27 million and $25 million are below investment grade.
5 
At December 31, 2016 and 2015, respectively, the common/collective assets were invested in equity index funds that seek to track performance of the Standard and Poor's (S&P 500) Index (45% and 46%) and Russell 1000 indexes (15% and 14%). At December 31, 2016 and 2015, 15% and 16% of the assets in this category are in index funds which seek to track performance in the MSCI All Country World Index exUS and MSCI Europe, Australasia and Far East (EAFE) Index, respectively. A non-index U.S. equity fund representing 23% and 22% of this category for 2016 and 2015, respectively, is actively managed.
6 
At December 31, 2016 and 2015, respectively, 55% and 51% are invested in private equity funds with investment strategies that include branded consumer products, clean technology and California geographic focus companies, 22% and 20% are invested in publicly traded fixed income securities, 18% and 14% are invested in a broad range of financial assets in all global markets and 4% and 15% of the remaining partnerships are invested in asset backed securities, including distressed mortgages and commercial and residential loans and debt and equity of banks.
7 
Other investment entities were primarily invested in (1) emerging market equity securities, (2) a hedge fund that invests through liquid instruments in a global diversified portfolio of equity, fixed income, interest rate, foreign currency and commodities markets, and (3) domestic mortgage backed securities.
8 
Level 1 of registered investment companies primarily consisted of a global equity mutual fund which seeks to outperform the MSCI World Total Return Index. The funds classified as NAV primarily consisted of a fixed income securities fund.
At December 31, 2016 and 2015, respectively, approximately 69% and 63% of the publicly traded equity investments, including equities in the common/collective funds, were located in the United States.
Postretirement Benefits Other than Pensions
The following table sets forth the VEBA Trust assets for Edison International and SCE that were accounted for at fair value as of December 31, 2016 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
 
Level 2
 
Level 3
 
NAV1
 
Total
U.S. government and agency securities2
$
222

 
$
59

 
$
—

 
$
—

 
$
281

Corporate stocks3
230

 
—

 
—

 
—

 
230

Corporate notes and bonds4
—

 
877

 
—

 
—

 
877

Common/collective funds5
—

 
—

 
—

 
462

 
462

Partnerships6
—

 
—

 
—

 
79

 
79

Registered investment companies7
48

 
—

 
—

 
1

 
49

Interest bearing cash
48

 
—

 
—

 
—

 
48

Other8
4

 
103

 
—

 
—

 
107

Total
$
552

 
$
1,039

 
$
—

 
$
542

 
$
2,133

Receivables and payables, net
 

 
 

 
 
 
 

 
(31
)
Combined net plan assets available for benefits
 

 
 

 
 
 
 

 
$
2,102

The following table sets forth the VEBA Trust assets for SCE that were accounted for at fair value as of December 31, 2015 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
 
Level 2
 
Level 3
 
NAV1
 
Total
U.S. government and agency securities2
$
200

 
$
42

 
$
—

 
$
—

 
$
242

Corporate stocks3
222

 
—

 
—

 
—

 
222

Corporate notes and bonds4
—

 
867

 
—

 
—

 
867

Common/collective funds5
—

 
—

 
—

 
424

 
424

Partnerships6
—

 
—

 
—

 
93

 
93

Registered investment companies7
60

 
—

 
—

 
3

 
63

Interest bearing cash
31

 
—

 
—

 
—

 
31

Other8
5

 
113

 
—

 
—

 
118

Total
$
518

 
$
1,022

 
$
—

 
$
520

 
$
2,060

Receivables and payables, net
 

 
 

 
 
 
 

 
(24
)
Combined net plan assets available for benefits
 

 
 

 
 
 
 

 
$
2,036

1 
These investments are measured at fair value using the net asset value per share practical expedient and have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the net plan assets available for benefits.
2 
Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association.
3 
Corporate stock performance for actively managed separate accounts is primarily benchmarked against the Russell Indexes (47%) and the MSCI All Country World Index (53%) for both 2016 and 2015.
4 
Corporate notes and bonds are diversified and include approximately $47 million and $27 million for commercial collateralized mortgage obligations and other asset backed securities at December 31, 2016 and 2015, respectively.
5 
At December 31, 2016 and 2015, respectively, 39% and 38% of the common/collective assets are invested in a large cap index fund which seeks to track performance of the Russell 1000 index. 39% and 41% of the remaining assets in this category are in index funds which seek to track performance in the MSCI All Country World Index Investable Market Index and MSCI Europe, Australasia and Far East (EAFE) Index. 18% and 17% in a non-index U.S. equity fund which is actively managed.
6 
At December 31, 2016 and 2015, respectively, 59% and 56% of the partnerships are invested in private equity and venture capital funds. Investment strategies for these funds include branded consumer products, clean and information technology and healthcare. 31% and 21% are invested in a broad range of financial assets in all global markets. 9% and 23% of the remaining partnerships category is invested in asset backed securities including distressed mortgages, distressed companies and commercial and residential loans and debt and equity of banks.
7 
Level 1 registered investment companies consist of a money market fund.
8 
Other includes $76 million and $97 million of municipal securities at December 31, 2016 and 2015, respectively.
At December 31, 2016 and 2015, respectively, approximately 63% and 71% of the publicly traded equity investments, including equities in the common/collective funds, were located in the United States.
Stock-Based Compensation
Edison International maintains a shareholder approved incentive plan (the 2007 Performance Incentive Plan) that includes stock-based compensation. The maximum number of shares of Edison International's common stock authorized to be issued or transferred pursuant to awards under the 2007 Performance Incentive Plan, as amended, is 66 million shares, plus the number of any shares awarded under Edison International's prior plans that are outstanding as of April 26, 2007, which expire, cancel or terminate without being exercised or shares being issued ("carry-over shares"). As of December 31, 2016, Edison International had approximately 32 million shares remaining available for new award grants under its stock-based compensation plans.
The following table summarizes total expense and tax benefits (expense) associated with stock based compensation:
 
Edison International
 
SCE
 
Years ended December 31,
(in millions)
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Stock-based compensation expense1:
 
 
 
 
 
 
 
 
 
 
 
   Stock options
$
14

 
$
14

 
$
16

 
$
7

 
$
8

 
$
8

   Performance shares
13

 
7

 
16

 
6

 
4

 
8

   Restricted stock units
6

 
7

 
7

 
3

 
4

 
4

   Other
1

 
1

 
1

 
—

 
—

 
—

Total stock-based compensation expense
$
34

 
$
29

 
$
40

 
$
16

 
$
16

 
$
20

Income tax benefits related to stock compensation expense
$
41

 
$
12

 
$
16

 
$
20

 
$
7

 
$
8

Excess tax benefits2
—

 
15

 
15

 
—

 
23

 
20

1 
Reflected in "Operation and maintenance" on Edison International's and SCE's consolidated statements of income.
2 
Reflected in "Settlements of stock-based compensation, net" in the financing section of Edison International's and SCE's consolidated statements of cash flows, "Common stock" in Edison International's consolidated balance sheets and "Additional paid-in capital" in SCE's consolidated balance sheets. Edison International and SCE adopted the new accounting guidance for shared-based payments, see Note 1 for further information.
Stock Options
Under various plans, Edison International has granted stock options at exercise prices equal to the closing price at the grant date. Prior to 2007, average of the high and low price was used. Edison International may grant stock options and other awards related to, or with a value derived from, its common stock to directors and certain employees. Options generally expire 10 years after the grant date and vest over a period of four years of continuous service, with expense recognized evenly over the requisite service period, except for awards granted to retirement-eligible participants, as discussed in "Stock-Based Compensation" in Note 1. Additionally, Edison International will substitute cash awards to the extent necessary to pay tax withholding or any government levies.
The fair value for each option granted was determined as of the grant date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires various assumptions noted in the following table:
 
Years ended December 31,
 
2016
 
2015
 
2014
Expected terms (in years)
5.9
 
5.9
 
6.0
Risk-free interest rate
1.2% – 2.2%
 
1.6% – 2.1%
 
1.8% – 2.1%
Expected dividend yield
2.5% – 3.0%
 
2.6% – 3.2%
 
2.4% – 2.7%
Weighted-average expected dividend yield
2.9%
 
2.6%
 
2.7%
Expected volatility
17.2% – 17.5%
 
16.4% – 17.0%
 
17.8% – 19.1%
Weighted-average volatility
17.4%
 
16.5%
 
18.9%

The expected term represents the period of time for which the options are expected to be outstanding and is primarily based on historical exercise and post-vesting cancellation experience and stock price history. The risk-free interest rate for periods within the contractual life of the option is based on a zero coupon U.S. Treasury STRIPS (separate trading of registered interest and principal of securities) whose maturity equals the option's expected term on the measurement date. Expected volatility is based on the historical volatility of Edison International's common stock for the length of the option's expected term for 2016. The volatility period used was 71 months, 71 months and 72 months at December 31, 2016, 2015 and 2014, respectively.
The following is a summary of the status of Edison International's stock options:
 
 
 
Weighted-Average
 
 
 
Stock options
 
Exercise
Price
 
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic Value
(in millions)
Edison International:
 
 
 
 
 
 
 
Outstanding at December 31, 2015
12,866,597

 
$
45.93

 
 
 
 

Granted
2,120,009

 
67.41

 
 
 
 

Expired
—

 
—

 
 
 
 

Forfeited
(274,166
)
 
64.02

 
 
 
 

Exercised
(3,167,939
)
 
42.93

 
 
 
 

Outstanding at December 31, 2016
11,544,501

 
50.26

 
6.02
 
 

Vested and expected to vest at December 31, 2016
11,437,110

 
50.12

 
5.99
 
$
250

Exercisable at December 31, 2016
7,685,341

 
$
43.99

 
4.93
 
$
215

SCE:
 
 
 
 
 
 
 
Outstanding at December 31, 2015
5,840,057

 
$
47.77

 
 
 
 

Granted
959,478

 
67.36

 
 
 
 

Expired
—

 
—

 
 
 
 

Forfeited
(120,842
)
 
61.96

 
 
 
 

Exercised
(1,705,053
)
 
44.59

 
 
 
 

Transfers, net
(246,224
)
 
59.29

 
 
 
 
Outstanding at December 31, 2016
4,727,416

 
51.81

 
6.24
 
 

Vested and expected to vest at December 31, 2016
4,667,784

 
51.63

 
6.21
 
$
95

Exercisable at December 31, 2016
2,782,770

 
$
44.04

 
4.84
 
$
78


At December 31, 2016, total unrecognized compensation cost related to stock options and the weighted-average period the cost is expected to be recognized are as follows:
(in millions)
Edison International
 
SCE
Unrecognized compensation cost, net of expected forfeitures
$
13

 
$
8

Weighted-average period (in years)
2.3

 
2.3


Supplemental Data on Stock Options
 
Edison International
 
SCE
 
Years ended December 31,
(in millions, except per award amounts)
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Stock options:
 
 
 
 
 
 
 
 
 
 
 
Weighted average grant date fair value per option granted
$
7.38

 
$
7.54

 
$
7.26

 
$
7.50

 
$
7.53

 
$
7.34

Fair value of options vested
11

 
20

 
17

 
5

 
11

 
9

Cash used to purchase shares to settle options
220

 
170

 
300

 
118

 
69

 
181

Cash from participants to exercise stock options
136

 
113

 
205

 
77

 
45

 
125

Value of options exercised
84

 
57

 
95

 
41

 
24

 
56

Tax benefits from options exercised
34

 
23

 
39

 
17

 
10

 
23


Performance Shares
A target number of contingent performance shares were awarded to executives in March 2016, 2015 and 2014 and vest at December 31, 2018, 2017 and 2016, respectively. The vesting of the grants is dependent upon market and financial performance and service conditions as defined in the grants for each of the years. The number of performance shares earned from each year's grants could range from zero to twice the target number (plus additional units credited as dividend equivalents). Performance shares awarded in 2014 that are earned are settled half in cash and half in common stock, while performance shares awarded in 2016 and 2015 that are earned are settled solely in cash. The portion of performance shares that can be settled in cash is classified as a share-based liability award. The fair value of these shares is remeasured at each reporting period, and the related compensation expense is adjusted. The portion of performance shares payable in common stock is classified as a share-based equity award. Compensation expense related to these shares is based on the grant-date fair value, which for each share is determined as the closing price of Edison International common stock on the grant date. However, with respect to the portion of the performance shares payable in common stock that is subject to the financial performance condition defined in the grants, the number of performance shares expected to be earned is subject to revision and updated at each reporting period, with a related adjustment to compensation expense. Performance shares expense is recognized ratably over the requisite service period based on the fair values determined (subject to the adjustments discussed above), except for awards granted to retirement-eligible participants.
The fair value of market condition performance shares is determined using a Monte Carlo simulation valuation model.
The following is a summary of the status of Edison International's nonvested performance shares:
 
Equity Awards
 
Liability Awards
 
Shares
 
Weighted-Average
Grant Date
Fair Value
 
Shares
 
Weighted-Average
Fair Value
Edison International:
 
 
 
 
 
 
 
Nonvested at December 31, 2015
57,779

 
$
61.18

 
165,629

 
$
68.44

Granted
—

 
—

 
111,754

 
 

Forfeited
(1,258
)
 
60.83

 
(13,502
)
 
 
Vested1
(56,521
)
 
61.18

 
(56,384
)
 
 

Nonvested at December 31, 2016
—

 
—

 
207,497

 
84.30

SCE:
 
 
 
 
 
 
 
Nonvested at December 31, 2015
32,463

 
$
62.01

 
90,393

 
$
68.64

Granted
—

 
—

 
50,599

 
 

Forfeited
(1,012
)
 
49.73

 
(5,751
)
 
 
Vested1
(29,080
)
 
50.75

 
(28,963
)
 
 

Affiliate transfers, net
(2,371
)
 
72.10

 
(9,611
)
 
 
Nonvested at December 31, 2016
—

 
—

 
96,667

 
84.25


1 
Relates to performance shares that will be paid in 2017 as performance targets were met at December 31, 2016.
Restricted Stock Units
Restricted stock units were awarded to Edison International's and SCE's executives in March 2016, 2015 and 2014 and vest and become payable on January 2, 2019, January 2, 2018 and January 3, 2017, respectively. Each restricted stock unit awarded includes a dividend equivalent feature and is a contractual right to receive one share of Edison International common stock, if vesting requirements are satisfied. The vesting of Edison International's restricted stock units is dependent upon continuous service through the end of the vesting period, except for awards granted to retirement-eligible participants.
The following is a summary of the status of Edison International's nonvested restricted stock units:
 
Edison International
 
SCE
 
Restricted
Stock Units
 
Weighted-Average
Grant Date
Fair Value
 
Restricted
Stock Units
 
Weighted-Average
Grant Date
Fair Value
Nonvested at December 31, 2015
248,143

 
$
57.89

 
134,375

 
$
58.13

Granted
123,266

 
67.42

 
55,800

 
67.37

Forfeited
(16,435
)
 
63.73

 
(7,580
)
 
61.45

Vested
(9,579
)
 
52.01

 
(8,032
)
 
56.53

Affiliate transfers, net
—

 
—

 
(13,775
)
 
62.09

Nonvested at December 31, 2016
345,395

 
61.05

 
160,788

 
60.80


The fair value for each restricted stock unit awarded is determined as the closing price of Edison International common stock on the grant date.
Workforce Reductions
SCE continues to focus on productivity improvements to mitigate rate pressure from its capital program, optimize its cost structure and improve operational efficiency. During the year ended December 31, 2016, SCE increased the estimated impact for approved workforce reductions.

The following table provides a summary of changes in the accrued severance liability associated with these reductions:

(in millions)
 
 
Balance at January 1, 2016
 
$
22

Additions
 
21

Payments
 
(40
)
Balance at December 31, 2016
 
$
3


Severance costs are included in "Operation and maintenance" on the consolidated income statements.