RETIREMENT BENEFITS AND TRUSTEED ASSETS

Pension Plan Benefits

DTE Energy has qualified defined benefit retirement plans for eligible represented and non-represented employees. The plans are noncontributory and provide traditional retirement benefits based on the employee's years of benefit service, average final compensation, and age at retirement. In addition, certain represented and non-represented employees are covered under cash balance provisions that determine benefits on annual employer contributions and interest credits. DTE Energy also maintains supplemental nonqualified, noncontributory, retirement benefit plans for selected management employees. These plans provide for benefits that supplement those provided by DTE Energy’s other retirement plans.

DTE Electric participates in various plans that provide pension and other postretirement benefits for DTE Energy and its affiliates. The plans are sponsored by the LLC. DTE Electric is allocated net periodic benefit costs for its share of the amounts of the combined plans.

The Registrants’ policy is to fund pension costs by contributing amounts consistent with the provisions of the Pension Protection Act of 2006 and additional amounts when it deems appropriate. DTE Energy contributed $179 million, including $145 million of DTE Electric contributions, to the qualified pension plans in 2016. At the discretion of management, and depending upon financial market conditions, DTE Energy anticipates making up to $310 million in contributions, including $270 million of DTE Electric contributions, to the pension plans in 2017.

Net pension cost for DTE Energy includes the following components:



	2016			2015			2014
	(In millions)
Service cost	$	92		$	100		$	83
Interest cost	219			210			212
Expected return on plan assets	(309		)	(296		)	(273		)
Amortization of:
Net actuarial loss	164			205			157
Prior service cost	1			—			—
Other	—			2			—
Net pension cost	$	167		$	221		$	179



	2016			2015
	(In millions)
Other changes in plan assets and benefit obligations recognized in Regulatory assets and Other comprehensive income (loss)
Net actuarial loss	$	197		$	19
Amortization of net actuarial loss	(164		)	(205		)
Prior service credit	7			—
Amortization of prior service cost	(1		)	—
Total recognized in Regulatory assets and Other comprehensive income (loss)	$	39		$	(186	)
Total recognized in net periodic pension cost, Regulatory assets, and Other comprehensive income (loss)	$	206		$	35
Estimated amounts to be amortized from Regulatory assets and Accumulated other comprehensive income (loss) into net periodic benefit cost during next fiscal year
Net actuarial loss	$	172		$	162
Prior service cost	$	1		$	—

Net pension cost for DTE Electric includes the following components:



	2016			2015			2014
	(In millions)
Service cost	$	71		$	77		$	64
Interest cost	166			160			162
Expected return on plan assets	(220		)	(210		)	(194		)
Amortization of:
Net actuarial loss	118			147			110
Prior service cost	1			1			2
Other	—			1			—
Net pension cost	$	136		$	176		$	144



	2016			2015
	(In millions)
Other changes in plan assets and benefit obligations recognized in Regulatory assets and Other comprehensive income (loss)
Net actuarial (gain) loss	$	167		$	(13	)
Amortization of net actuarial loss	(115		)	(147		)
Prior service credit	(1		)	—
Amortization of prior service cost	(1		)	(1		)
Total recognized in Regulatory assets and Other comprehensive income (loss)	$	50		$	(161	)
Total recognized in net periodic pension cost, Regulatory assets, and Other comprehensive income (loss)	$	186		$	15
Estimated amounts to be amortized from Regulatory assets and Accumulated other comprehensive income (loss) into net periodic benefit cost during next fiscal year
Net actuarial loss	$	122		$	115
Prior service cost	$	1		$	1

The following table reconciles the obligations, assets, and funded status of the plans as well as the amounts recognized as prepaid pension cost or pension liability in the Registrants' Consolidated Statements of Financial Position at December 31:



	DTE Energy						DTE Electric
	2016			2015			2016			2015
	(In millions)
Accumulated benefit obligation, end of year	$	4,753		$	4,569		$	3,548		$	3,401
Change in projected benefit obligation
Projected benefit obligation, beginning of year	$	4,971		$	5,269		$	3,685		$	4,018
Service cost	92			100			69			75
Interest cost	219			210			162			156
Plan amendments	7			—			(1		)	—
Actuarial (gain) loss	141			(357		)	124			(273		)
Transfer due to plan sponsorship change	—			—			—			(99		)
Special termination benefits	—			2			—			—
Benefits paid	(259		)	(253		)	(194		)	(192		)
Projected benefit obligation, end of year	$	5,171		$	4,971		$	3,845		$	3,685
Change in plan assets
Plan assets at fair value, beginning of year	$	3,832		$	3,981		$	2,709		$	2,812
Actual return on plan assets	253			(79		)	177			(56		)
Company contributions	186			183			145			145
Benefits paid	(259		)	(253		)	(194		)	(192		)
Plan assets at fair value, end of year	$	4,012		$	3,832		$	2,837		$	2,709
Funded status of the plans	$	(1,159	)	$	(1,139	)	$	(1,008	)	$	(976	)
Amount recorded as:
Current liabilities	$	(7	)	$	(6	)	$	—		$	—
Noncurrent liabilities	(1,152		)	(1,133		)	(1,008		)	(976		)
	$	(1,159	)	$	(1,139	)	$	(1,008	)	$	(976	)
Amounts recognized in Accumulated other comprehensive income (loss), pre-tax
Net actuarial loss	$	163		$	180		$	—		$	—
Prior service cost (credit)	8			(1		)	—			—
	$	171		$	179		$	—		$	—
Amounts recognized in Regulatory assets^(a)
Net actuarial loss	$	2,163		$	2,113		$	1,641		$	1,588
Prior service cost (credit)	(4		)	(1		)	1			4
	$	2,159		$	2,112		$	1,642		$	1,592

______________________________________

(a)See Note 9 to the Consolidated Financial Statements, "Regulatory Matters."

At December 31, 2016, the benefits related to DTE Energy's qualified and nonqualified pension plans and DTE Electric's qualified pension plans expected to be paid in each of the next five years and in the aggregate for the five fiscal years thereafter are as follows:



	DTE Energy		DTE Electric
	(In millions)
2017	$	285	$	218
2018	297		225
2019	306		232
2020	315		239
2021	322		245
2022-2026	1,695		1,272
Total	$	3,220	$	2,431

Assumptions used in determining the projected benefit obligation and net pension costs of the Registrants are:



	2016	2015	2014
Projected benefit obligation
Discount rate	4.25%	4.50%	4.12%
Rate of compensation increase	4.65%	4.65%	4.65%
Net pension costs
Discount rate	4.50%	4.12%	4.95%
Rate of compensation increase	4.65%	4.65%	4.20%
Expected long-term rate of return on plan assets	7.75%	7.75%	7.75%

The Registrants employ a formal process in determining the long-term rate of return for various asset classes. Management reviews historic financial market risks and returns and long-term historic relationships between the asset classes of equities, fixed income, and other assets, consistent with the widely accepted capital market principle that asset classes with higher volatility generate a greater return over the long-term. Current market factors such as inflation, interest rates, asset class risks, and asset class returns are evaluated and considered before long-term capital market assumptions are determined. The long-term portfolio return is also established employing a consistent formal process, with due consideration of diversification, active investment management, and rebalancing. Peer data is reviewed to check for reasonableness. As a result of this process, the Registrants have long-term rate of return assumptions for the pension plans of 7.50% and other postretirement benefit plans of 7.75% for 2017. The Registrants believe these rates are a reasonable assumption for the long-term rate of return on plan assets for 2017 given the current investment strategy.

The Registrants employ a total return investment approach whereby a mix of equities, fixed income, and other investments are used to maximize the long-term return on plan assets consistent with prudent levels of risk, with consideration given to the liquidity needs of the plan. Risk tolerance is established through consideration of future plan cash flows, plan funded status, and corporate financial considerations. The investment portfolio contains a diversified blend of equity, fixed income, and other investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, growth and value stocks, and large and small market capitalizations. Fixed income securities generally include market duration bonds of companies from diversified industries, mortgage-backed securities, non-U.S. securities, bank loans, and U.S. Treasuries. Pension assets include long duration U.S. government and diversified corporate bonds intended to partially mitigate liability volatility caused by changes in discount rates. Other assets, such as private markets and hedge funds, are used to enhance long-term returns while improving portfolio diversification. Derivatives may be utilized in a risk controlled manner, to potentially increase the portfolio beyond the market value of invested assets and/or reduce portfolio investment risk. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews.

Target allocations for the Registrants' pension plan assets as of December 31, 2016 are listed below:



U.S. Large Capitalization (Cap) Equity Securities	22	%
U.S. Small Cap and Mid Cap Equity Securities	5
Non-U.S. Equity Securities	20
Fixed Income Securities	25
Hedge Funds and Similar Investments	20
Private Equity and Other	8
	100	%

The following tables provide the fair value measurement amounts for the Registrants' pension plan assets at December 31, 2016 and 2015^(a)(b):



	December 31, 2016											December 31, 2015
	Level 1			Level 2			Other^(c)		Total			Level 1			Level 2			Other^(c)		Total
	(In millions)
DTE Energy asset category:
Short-term Investments^(d)	$	—		$	22		$	—	$	22		$	23		$	—		$	—	$	23
Equity Securities
U.S. Large Cap^(e)	875			5			—		880			842			—			—		842
U.S. Small Cap and Mid Cap^(f)	229			3			—		232			219			—			—		219
Non-U.S.^(g)	479			18			269		766			510			—			251		761
Fixed Income Securities^(h)	1			1,037			52		1,090			5			974			50		1,029
Hedge Funds and Similar Investments⁽ⁱ⁾	231			—			578		809			220			—			548		768
Private Equity and Other^(j)	—			—			213		213			—			—			190		190
Securities Lending^(k)	(53		)	(25		)	—		(78		)	(129		)	(25		)	—		(154		)
Securities Lending Collateral^(k)	53			25			—		78			129			25			—		154
DTE Energy Total	$	1,815		$	1,085		$	1,112	$	4,012		$	1,819		$	974		$	1,039	$	3,832

DTE Electric asset category:
Short-term Investments^(d)	$	—		$	16		$	—	$	16		$	16		$	—		$	—	$	16
Equity Securities
U.S. Large Cap^(e)	622			4			—		626			599			—			—		599
U.S. Small Cap and Mid Cap^(f)	165			2			—		167			157			—			—		157
Non-U.S.^(g)	344			13			191		548			367			—			178		545
Fixed Income Securities^(h)	—			745			—		745			4			699			—		703
Hedge Funds and Similar Investments⁽ⁱ⁾	166			—			416		582			158			—			394		552
Private Equity and Other^(j)	—			—			153		153			—			—			137		137
Securities Lending^(k)	(38		)	(18		)	—		(56		)	(93		)	(18		)	—		(111		)
Securities Lending Collateral^(k)	38			18			—		56			93			18			—		111
DTE Electric Total	$	1,297		$	780		$	760	$	2,837		$	1,301		$	699		$	709	$	2,709

_______________________________________


(a)	For a description of levels within the fair value hierarchy, see Note 12 to the Consolidated Financial Statements, "Fair Value."

(b)

Certain December 31, 2015 balances have been adjusted for the adoption of accounting guidance which eliminates the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share (or its equivalent) practical expedient. See Note 3 to the Consolidated Financial Statements, "New Accounting Pronouncements," for additional information related to the new accounting standard.


(c)	Amounts represent assets valued at NAV as a practical expedient for fair value.


(d)	This category predominantly represents certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets or valuations from brokers or pricing services.


(e)	This category represents portfolios of large capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained.


(f)	This category represents portfolios of small and medium capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained.


(g)	This category primarily consists of portfolios of non-U.S. developed and emerging market equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as NAV assets.


(h)	This category includes corporate bonds from diversified industries, U.S. Treasuries, and mortgage-backed securities. Pricing for investments in this category is obtained from quoted prices in actively traded markets and quotations from broker or pricing services. Non-exchange traded securities and exchange-traded securities held in commingled funds are classified as NAV assets.


(i)	This category utilizes a diversified group of strategies that attempt to capture financial market inefficiencies and includes publicly traded mutual funds, commingled funds and limited partnership funds. Pricing for mutual funds in this category is obtained from quoted prices in actively traded markets. Commingled funds or limited partnership funds are classified as NAV assets.


(j)	This category includes a diversified group of funds and strategies that primarily invests in private equity partnerships. This category also includes investments in timber and private mezzanine debt. All pricing for investments in this category are classified as NAV assets.


(k)	The Registrants have a securities lending program with a third-party agent. The program allows the agent to lend certain securities from the Registrants' pension trusts to selected entities against receipt of collateral (in the form of cash) as provided for and determined in accordance with their securities lending agency agreements.

The pension trust holds debt and equity securities directly and indirectly through commingled funds and institutional mutual funds. Exchange-traded debt and equity securities held directly are valued using quoted market prices in actively traded markets. The commingled funds and institutional mutual funds hold exchange-traded equity or debt securities and are valued based on stated NAVs. Non-exchange traded fixed income securities are valued by the trustee based upon quotations available from brokers or pricing services. A primary price source is identified by asset type, class, or issue for each security. The trustee monitors prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustee challenges an assigned price and determines that another price source is considered to be preferable. The Registrants have obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, the Registrants selectively corroborate the fair values of securities by comparison of market-based price sources.

There were no significant transfers between Level 2 and Level 1 in the years ended December 31, 2016 and 2015 for either of the Registrants.

Other Postretirement Benefits

The Registrants participate in defined benefit plans sponsored by the LLC that provide certain other postretirement health care and life insurance benefits for employees who are eligible for these benefits. The Registrants' policy is to fund certain trusts to meet its other postretirement benefit obligations. Separate qualified VEBA and other benefit trusts exist. DTE Energy contributed $20 million to these trusts, through contributions from DTE Gas, for the defined benefit other postretirement medical and life insurance benefit plans during 2016. DTE Energy does not anticipate making any contributions to the trusts in 2017.

DTE Energy and DTE Electric offer a defined contribution VEBA for eligible represented and non-represented employees, in lieu of defined benefit post-employment health care benefits. The Registrants allocate a fixed amount per year to an account in a defined contribution VEBA for each employee. These accounts are managed either by the Registrant (for non-represented and certain represented groups) or by the Utility Workers of America for Local 223 employees. DTE Energy contributions to the VEBA for these accounts were $6 million in 2016, $5 million in 2015, and $4 million in 2014, including DTE Electric contributions of $3 million in 2016 and 2015, and $2 million in 2014.

The Registrants also contribute a fixed amount to a Retiree Reimbursement Account, for both current and future Medicare eligible non-represented and future represented retirees, spouses, surviving spouses, or same sex domestic partners when the youngest of the retiree's covered household turns age 65. The amount of the annual allocation to each participant is determined by the employee's retirement date, and increases each year for each eligible participant at the lower of the rate of medical inflation or 2%.

Net other postretirement credit for DTE Energy includes the following components:



	2016			2015			2014
	(In millions)
Service cost	$	27		$	34		$	34
Interest cost	80			81			89
Expected return on plan assets	(129		)	(131		)	(122		)
Amortization of:
Net actuarial loss	30			43			20
Prior service credit	(118		)	(126		)	(144		)
Other	(1		)	—			—
Net other postretirement credit	$	(111	)	$	(99	)	$	(123	)



	2016			2015
	(In millions)
Other changes in plan assets and accumulated postretirement benefit obligation recognized in Regulatory assets and Other comprehensive income (loss)
Net actuarial gain	$	(68	)	$	(68	)
Amortization of net actuarial loss	(30		)	(43		)
Amortization of prior service credit	119			126
Total recognized in Regulatory assets and Other comprehensive income (loss)	$	21		$	15
Total recognized in net periodic benefit cost, Regulatory assets, and Other comprehensive income (loss)	$	(90	)	$	(84	)
Estimated amounts to be amortized from Regulatory assets and Accumulated other comprehensive income (loss) into net periodic benefit cost during next fiscal year
Net actuarial loss	$	16		$	32
Prior service credit	$	(14	)	$	(118	)

Net other postretirement credit for DTE Electric includes the following components:



	2016			2015			2014
	(In millions)
Service cost	$	20		$	25		$	26
Interest cost	61			62			68
Expected return on plan assets	(90		)	(90		)	(85		)
Amortization of:
Net actuarial loss	21			31			14
Prior service credit	(89		)	(95		)	(109		)
Net other postretirement credit	$	(77	)	$	(67	)	$	(86	)



	2016			2015
	(In millions)
Other changes in plan assets and accumulated postretirement benefit obligation recognized in Regulatory assets
Net actuarial gain	$	(59	)	$	(57	)
Amortization of net actuarial loss	(21		)	(31		)
Amortization of prior service credit	89			95
Total recognized in Regulatory assets	$	9		$	7
Total recognized in net periodic benefit cost and Regulatory assets	$	(68	)	$	(60	)
Estimated amounts to be amortized from Regulatory assets into net periodic benefit cost during next fiscal year
Net actuarial loss	$	10		$	22
Prior service credit	$	(10	)	$	(89	)

The following table reconciles the obligations, assets, and funded status of the plans including amounts recorded as Accrued postretirement liability in the Registrants' Consolidated Statements of Financial Position at December 31:



	DTE Energy						DTE Electric
	2016			2015			2016			2015
	(In millions)
Change in accumulated postretirement benefit obligation
Accumulated postretirement benefit obligation, beginning of year	$	1,846		$	2,044		$	1,414		$	1,558
Service cost	27			34			20			25
Interest cost	80			81			61			62
Actuarial gain	(75		)	(224		)	(62		)	(166		)
Benefits paid	(83		)	(89		)	(60		)	(65		)
Accumulated postretirement benefit obligation, end of year	$	1,795		$	1,846		$	1,373		$	1,414
Change in plan assets
Plan assets at fair value, beginning of year	$	1,617		$	1,528		$	1,131		$	1,038
Actual return on plan assets	122			(25		)	87			(19		)
Company contributions	20			199			—			175
Benefits paid	(1		)	(85		)	—			(63		)
Plan assets at fair value, end of year	$	1,758		$	1,617		$	1,218		$	1,131
Funded status, end of year	$	(37	)	$	(229	)	$	(155	)	$	(283	)
Amount recorded as:
Noncurrent assets	$	—		$	—		$	114		$	24
Current liabilities	(1		)	(1		)	—			—
Noncurrent liabilities	(36		)	(228		)	(269		)	(307		)
	$	(37	)	$	(229	)	$	(155	)	$	(283	)
Amounts recognized in Accumulated other comprehensive income (loss), pre-tax
Net actuarial loss	$	12		$	24		$	—		$	—
Prior service credit	—			(2		)	—			—
	$	12		$	22		$	—		$	—
Amounts recognized in Regulatory assets^(a)
Net actuarial loss	$	300		$	387		$	217		$	297
Prior service credit	(14		)	(131		)	(10		)	(99		)
	$	286		$	256		$	207		$	198

______________________________________

(a)See Note 9 to the Consolidated Financial Statements, "Regulatory Matters."

At December 31, 2016, the benefits expected to be paid, including prescription drug benefits, in each of the next five years and in the aggregate for the five fiscal years thereafter for the Registrants are as follows:



	DTE Energy		DTE Electric
	(In millions)
2017	$	96	$	74
2018	101		79
2019	106		82
2020	110		85
2021	114		88
2022-2026	595		457
Total	$	1,122	$	865

Assumptions used in determining the accumulated postretirement benefit obligation and net other postretirement benefit costs of the Registrants are:



	2016	2015	2014
Accumulated postretirement benefit obligation
Discount rate	4.25%	4.50%	4.10%
Health care trend rate pre- and post- 65	6.50 / 6.75%	6.25 / 6.75%	7.50 / 6.50%
Ultimate health care trend rate	4.50%	4.50%	4.50%
Year in which ultimate reached pre- and post- 65	2028	2027	2025 / 2024
Other postretirement benefit costs
Discount rate	4.50%	4.10%	4.95%
Expected long-term rate of return on plan assets	8.00%	8.00%	8.00%
Health care trend rate pre- and post- 65	6.25 / 6.75%	7.50 / 6.50%	7.50 / 6.50%
Ultimate health care trend rate	4.50%	4.50%	4.50%
Year in which ultimate reached pre- and post- 65	2027	2025 / 2024	2025 / 2024

A one percentage point increase in health care cost trend rates would have increased the total service cost and interest cost components of benefit costs for DTE Energy by $5 million, including $4 million for DTE Electric, in 2016 and would have increased the accumulated benefit obligation for DTE Energy by $88 million, including $65 million for DTE Electric, at December 31, 2016. A one percentage point decrease in the health care cost trend rates would have decreased the total service and interest cost components of benefit costs for DTE Energy by $5 million, including $3 million for DTE Electric, in 2016 and would have decreased the accumulated benefit obligation for DTE Energy by $77 million, including $57 million for DTE Electric, at December 31, 2016.

The process used in determining the long-term rate of return for assets and the investment approach for the other postretirement benefit plans is similar to those previously described for the pension plans.

Target allocations for the Registrants' other postretirement benefit plan assets as of December 31, 2016 are listed below:



U.S. Large Cap Equity Securities	17	%
U.S. Small Cap and Mid Cap Equity Securities	4
Non-U.S. Equity Securities	20
Fixed Income Securities	25
Hedge Funds and Similar Investments	20
Private Equity and Other	14
	100	%

The following tables provide the fair value measurement amounts for the Registrants' other postretirement benefit plan assets at December 31, 2016 and 2015^(a)(b):



	December 31, 2016											December 31, 2015
	Level 1			Level 2			Other^(c)		Total			Level 1			Level 2			Other^(c)		Total
DTE Energy asset category:	(In millions)
Short-term Investments^(d)	$	39		$	1		$	—	$	40		$	7		$	—		$	—	$	7
Equity Securities
U.S. Large Cap^(e)	284			—			—		284			264			—			—		264
U.S. Small Cap and Mid Cap^(f)	156			—			—		156			138			—			—		138
Non-U.S.^(g)	262			1			61		324			262			—			55		317
Fixed Income Securities^(h)	15			299			125		439			23			275			115		413
Hedge Funds and Similar Investments⁽ⁱ⁾	114			—			224		338			109			—			216		325
Private Equity and Other^(j)	—			—			177		177			—			—			153		153
Securities Lending^(k)	(28		)	(3		)	—		(31		)	(122		)	(6		)	—		(128		)
Securities Lending Collateral^(k)	28			3			—		31			122			6			—		128
DTE Energy Total	$	870		$	301		$	587	$	1,758		$	803		$	275		$	539	$	1,617

DTE Electric asset category:
Short-term Investments^(d)	$	28		$	1		$	—	$	29		$	5		$	—		$	—	$	5
Equity Securities
U.S. Large Cap^(e)	195			—			—		195			183			—			—		183
U.S. Small Cap and Mid Cap^(f)	109			—			—		109			97			—			—		97
Non-U.S.^(g)	182			1			41		224			184			—			37		221
Fixed Income Securities^(h)	10			203			90		303			17			189			83		289
Hedge Funds and Similar Investments⁽ⁱ⁾	80			—			154		234			76			—			151		227
Private Equity and Other^(j)	—			—			124		124			—			—			109		109
Securities Lending^(k)	(20		)	(1		)	—		(21		)	(87		)	(4		)	—		(91		)
Securities Lending Collateral^(k)	20			1			—		21			87			4			—		91
DTE Electric Total	$	604		$	205		$	409	$	1,218		$	562		$	189		$	380	$	1,131

_______________________________________


(a)	For a description of levels within the fair value hierarchy see Note 12 to the Consolidated Financial Statements, "Fair Value."

(b)


(c)	Amounts represent assets valued at NAV as a practical expedient for fair value.


(d)	This category predominantly represents certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets or valuations from brokers or pricing services.


(e)	This category represents portfolios of large capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained.


(f)	This category represents portfolios of small and medium capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained.


(g)	This category primarily consists of portfolios of non-U.S. developed and emerging market equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as NAV assets.


(h)	This category includes corporate bonds from diversified industries, U.S. Treasuries, bank loans, and mortgage backed securities. Pricing for investments in this category is obtained from quoted prices in actively traded markets and quotations from broker or pricing services. Non-exchange traded securities and exchange-traded securities held in commingled funds are classified as NAV assets.


(i)	This category utilizes a diversified group of strategies that attempt to capture financial market inefficiencies and includes publicly traded mutual funds, commingled funds and limited partnership funds. Pricing for mutual funds in this category is obtained from quoted prices in actively traded markets. Commingled funds and limited partnership funds are classified as NAV assets.


(j)	This category includes a diversified group of funds and strategies that primarily invests in private equity partnerships. This category also includes investments in timber and private mezzanine debt. All investments in this category are classified as NAV assets.


(k)	The Registrants have a securities lending program with a third-party agent. The program allows the agent to lend certain securities from the Registrants' VEBA trust to selected entities against receipt of collateral (in the form of cash) as provided for and determined in accordance with their securities lending agency agreements.

The DTE Energy Company Master VEBA Trust holds debt and equity securities directly and indirectly through commingled funds and institutional mutual funds. Exchange-traded debt and equity securities held directly are valued using quoted market prices in actively traded markets. The commingled funds and institutional mutual funds hold exchange-traded equity or debt securities and are valued based on NAVs. Non-exchange traded fixed income securities are valued by the trustee based upon quotations available from brokers or pricing services. A primary price source is identified by asset type, class, or issue for each security. The trustee monitors prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustee challenges an assigned price and determines that another price source is considered to be preferable. The Registrants have obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, the Registrants selectively corroborate the fair values of securities by comparison of market-based price sources.

There were no significant transfers between Level 2 and Level 1 in the years ended December 31, 2016 and 2015 for either of the Registrants.

Grantor Trust

DTE Gas maintains a Grantor Trust that invests in life insurance contracts and income securities to fund other postretirement benefit obligations. Employees and retirees have no right, title, or interest in the assets of the Grantor Trust, and DTE Gas can revoke the trust subject to providing the MPSC with prior notification. DTE Gas accounts for its investment at fair value, which approximated $20 million and $18 million at December 31, 2016 and 2015, respectively, with unrealized gains and losses recorded to earnings. The Grantor Trust investment is included in Other investments on DTE Energy's Consolidated Statements of Financial Position.

Defined Contribution Plans

The Registrants also sponsor defined contribution retirement savings plans. Participation in one of these plans is available to substantially all represented and non-represented employees. For substantially all employees, the Registrants match employee contributions up to certain predefined limits based upon eligible compensation and the employee’s contribution rate. Additionally, for eligible represented and non-represented employees who do not participate in the Pension Plans, the Registrants annually contribute an amount equivalent to 4% (8% for certain DTE Gas represented employees) of an employee's eligible pay to the employee's defined contribution retirement savings plan. For DTE Energy, the cost of these plans was $51 million, $49 million, and $48 million for the years ended December 31, 2016, 2015, and 2014, respectively. For DTE Electric, the cost of these plans was $23 million for the years ended December 31, 2016 and 2015, respectively, and $24 million for the year ended December 31, 2014.

Plan Changes

In 2015, certain executive retirement benefit plans were amended to transfer the obligation for benefits as attributed to the LLC. The related plan liabilities were transferred from DTE Electric and DTE Gas to the LLC and DTE Energy. The related Rabbi Trust assets were also transferred to DTE Energy from DTE Electric.