Constellation Energy Corp

14. Retirement Benefits

Defined Benefit Pension and OPEB

The majority of current employees participate in the defined benefit pension and OPEB plans that we sponsor. As the plan sponsor, our Consolidated Balance Sheets reflect underfunded pension and OPEB liabilities equal to an excess of either the PBO or APBO over the fair value of the plan assets, consistent with a single employer benefit plan. Newly hired employees are generally not eligible for either pension or OPEB benefits; instead, these employees are eligible to receive an enhanced non-discretionary fixed employer contribution under our sponsored defined contribution savings plan.

Benefit Obligations, Plan Assets, and Funded Status

As of February 1, 2022, we assumed from Exelon the PBO, APBO, and plan assets for our plan participants in connection with the separation. The defined benefit pension and OPEB plans were remeasured to determine the obligations and related plan assets to be transferred to us as of that date. The pension assets allocated to us were based on the rules prescribed by ERISA for transfers of assets in connection with a pension plan separation. A portion of the Exelon OPEB plan assets, which are held in VEBA trusts, were also allocated to us separately for each funding vehicle based on the ratio of the APBO assumed by us to the total APBO attributed to each funding vehicle. As a result of the remeasurement completed at separation we recognized $2,006 million (after-tax) in Accumulated other comprehensive income (loss) for actuarial losses and prior service costs that had accrued over the lives of the plans prior to separation, primarily based on our proportionate share of the total projected pension and OPEB obligations at Exelon prior to separation.

We use a December 31 measurement date for our pension and OPEB obligations and the related plan assets. The actuarial losses experienced upon remeasurement as of December 31, 2024 were offset against AOCI, net of deferred taxes. See the table below for changes associated with the pension valuation.

The following tables provide a rollforward of the changes in the benefit obligations and plan assets for the years ended December 31, 2024 and 2023 for all plans combined:

(a)Pension and OPEB adjustments related to held for sale impacts of the settlement agreement entered into in 2024 and acquisition of STP in 2023, respectively. See Note 2 — Mergers, Acquisitions, and Dispositions for additional information.

(a)Pension and OPEB adjustments related to held for sale impacts of the settlement agreement in 2024 and the acquisition of STP in 2023, respectively. See Note 2 — Mergers, Acquisitions, and Dispositions for additional information.

We present our benefit obligations net of plan assets on our Consolidated Balance Sheets within the following line items:

The following table provides the ABO and fair value of plan assets for all pension plans with an ABO in excess of plan assets.

Components of Net Periodic Benefit (Credit) Cost

See Note 1 — Basis of Presentation for additional information on where we report the service cost and other non-service cost (credit) components for all plans.

The following table presents the components of our net periodic benefit (credits) costs, prior to capitalization and co-owner allocations, for the years ended December 31, 2024, 2023 and 2022:

(a)Reflected above and in the Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2024, 2023, and 2022, are pension benefit and OPEB service costs of $99 million, $94 million, and $131 million, respectively, and non-service costs (credits) of $8 million, ($54) million, and ($116) million, respectively.

(b)Our portion of the total net periodic benefit (credits) costs allocated to us from Exelon in January 2022 prior to separation was not material and remains in total Operating and maintenance expense.

Components of AOCI

We recognize the overfunded or underfunded status of defined benefit pension and OPEB plans as an asset or liability on our balance sheet, with offsetting entries to AOCI. The following tables provide the pre-tax components of AOCI for the years ended December 31, 2024 and 2023, for all plans combined:

The following table provides the components of gross accumulated other comprehensive income (loss) that have not been recognized as components of periodic benefit cost as of December 31, 2024 and 2023, for all plans combined:

Average Remaining Service Period

For pension benefits, we amortize the unrecognized prior service (credits) costs and certain actuarial gains and losses reflected in AOCI, as applicable, based on participants’ average remaining service periods.

For OPEB, we amortize the unrecognized prior service (credits) costs reflected in AOCI over participants’ average remaining service period to benefit eligibility age, and amortize certain actuarial gains and losses reflected in AOCI over participants’ average remaining service period to expected retirement.

The resulting average remaining service periods for pension and OPEB as of December 31, 2024 and 2023 were as follows:

Assumptions

The measurement of the plan obligations and costs of providing benefits under our defined benefit pension and OPEB plans involves various factors, including the development of valuation assumptions and inputs and accounting policy elections. The measurement of benefit obligations and costs is impacted by several assumptions and inputs, as shown below, among other factors. When developing the required assumptions, we consider historical information as well as future expectations.

Discount Rate. The discount rates are determined by developing a spot rate curve based on the yield to maturity of a universe of high-quality non-callable (or callable with make whole provisions) bonds with similar maturities to the related pension and OPEB obligations. The spot rates are used to discount the estimated future benefit distribution amounts under the pension and OPEB plans. The discount rate is the single level rate that produces the same result as the spot rate curve. We utilize an analytical tool developed by our actuaries to determine the discount rates.

Expected Rate of Return. To determine the EROA, we use third-party expectations for future long-term capital market performance, weighted by our target asset class allocations.

Mortality. The mortality assumption is composed of a base table that represents the current expectation of life expectancy of the population adjusted by an improvement scale that attempts to anticipate future improvements in life expectancy. Upon remeasurement as of December 31, 2024 and December 31, 2023, we utilized the mortality tables and projection scales released by the SOA.

The following assumptions were used to determine the benefit obligations for the plans as of December 31, 2024 and December 31, 2023. Assumptions used to determine year-end benefit obligations are the assumptions used to estimate the subsequent year’s net periodic benefit costs.

(a)The discount rates above represent the blended rates used to calculate the majority of Constellation's pension and OPEB costs.

(b)The investment crediting rate above represents a weighted average rate.

(c)Includes 4.25% average for the four-year period (2025-2028) and 3.75% average thereafter.

The following assumptions were used to determine the net periodic benefit cost for the plans for the years ended December 31, 2024 and 2023.

(a)The discount rates above represent the blended rates used to calculate the majority of Constellation's pension and OPEB costs.

(b)The investment crediting rate above represents a weighted average rate.

(c)Applicable to our pension and OPEB plans with plan assets, with the OPEB rate representing a weighted average.

(d)Includes 4.25% average for the five-year period (2025-2028) and 3.75% average thereafter.

Contributions

We consider various factors when making qualified pension funding decisions, including actuarially determined minimum contribution requirements under ERISA, contributions required to avoid benefit restrictions and at-risk status as defined by the Pension Protection Act, and management of the pension obligation. The Pension Protection Act requires the attainment of certain funding levels to avoid benefit restrictions (such as an inability to pay lump sums or to accrue benefits prospectively), and at-risk status (which triggers higher minimum contribution requirements and participant notification). The projected contributions below reflect a funding strategy to make levelized annual contributions to offset some of the growth of the liability (e.g., from service cost). Based on this funding strategy and current market conditions, which are both subject to change, we made our annual qualified pension contribution in February 2025.

Our non-qualified pension plans are not funded, given that they are not subject to statutory minimum contribution requirements. OPEB plans are also not subject to statutory minimum contribution requirements, though we have funded some of our plans. Annually, we evaluate whether additional funding for those plans is needed, and the OPEB values below reflect both plan contributions (if applicable) and benefit payments for unfunded plans.

The following table provides our contributions paid to our qualified pension plans, non-qualified pension plans, and OPEB plans for the years ended December 31, 2024, 2023, and 2022:

(a)In 2024 and 2023, our annual qualified pension contributions were $161 million and $21 million, respectively. The benefit payments to the non-qualified pension plans in 2024 and 2023 were not material.

The following table provides our planned contributions to our qualified pension plans, non-qualified pension plans, and OPEB plans in 2025 (including our benefit payments related to unfunded plans):

Estimated Future Benefit Payments

Estimated future benefit payments to participants over the next ten years in all pension and OPEB plans as of December 31, 2024 are as follows:

Plan Assets

On a regular basis, we evaluate our investment strategy to ensure that plan assets will be sufficient to pay plan benefits when due. We have developed and implemented a liability hedging investment strategy for the majority of our qualified pension plans which has reduced the volatility of these pension assets relative to the associated pension obligations. We are likely to continue to gradually increase the liability hedging portfolios as the funded statuses of the plans improve. The overall objective is to achieve attractive risk-adjusted returns that will satisfy the liquidity requirements of the plans’ liabilities while striving to minimize the risk of significant losses. Trust assets for our OPEB plans are managed in a diversified investment strategy that prioritizes maximizing liquidity and returns while minimizing asset volatility.

Actual asset returns have an impact on the costs reported for the pension and OPEB plans. The actual asset returns across our pension and OPEB plans for the year ended December 31, 2024 were 0.70% and 6.80%, respectively, compared to an expected long-term return assumption of 6.50% and 6.50%, respectively. We used an EROA of 6.50% and 6.00% to estimate our 2025 pension and OPEB costs.

Our pension and OPEB plan target asset allocations as of December 31, 2024 and 2023 were as follows:

(a)Alternative investments include private equity, hedge funds, real assets, and private credit.

We evaluated our pension and OPEB plans’ asset portfolios for the existence of significant concentrations of credit risk as of December 31, 2024. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country, and individual fund. As of December 31, 2024, our pension and OPEB plans held no credit risk concentrations surpassing 10% of plan assets.

Fair Value Measurements

The following table presents pension and OPEB plan assets measured and recorded at fair value as a net component of Pension and non-pension postretirement benefit obligations in our Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of December 31, 2024 and 2023:

(a)See Note 17 — Fair Value of Financial Assets and Liabilities for a description of levels within the fair value hierarchy.

(b)Includes total derivative assets and liabilities that are not material, which have total notional amounts of $2,635 million and $2,001 million as of December 31, 2024 and 2023, respectively. The notional principal amounts for these instruments provide one measure of the transaction volume outstanding as of the fiscal years ended and do not represent the amount of the company’s exposure to credit or market loss.

(c)Excludes net liabilities of $229 million and $263 million as of December 31, 2024 and 2023, respectively. These items are required to reconcile to the fair value of net plan assets and consist primarily of receivables or payables related to pending securities sales and purchases, and interest and dividends receivable.

There were no assets or liabilities valued at level 3 for the year ended December 31, 2024. The following table presents the reconciliation of Level 3 assets and liabilities measured at fair value for pension and OPEB plans for the year ended December 31, 2023:

(a)Represents cash settlements only.

Valuation Techniques Used to Determine Fair Value

The techniques used to determine the fair value of the pension and OPEB assets invested in cash equivalents, equities, fixed income, derivatives, private equity, real assets, and private credit investments are the same as the valuation techniques for these types of investments in the NDT funds. See Cash Equivalents and NDT Fund Investments in Note 17 — Fair Value of Financial Assets and Liabilities for further information.

Pension and OPEB assets also include investments in hedge funds. Hedge fund investments include those that employ a broad range of strategies to enhance returns and provide additional diversification. The fair value of hedge funds is determined using NAV or its equivalent as a practical expedient, and therefore, hedge funds are not classified within the fair value hierarchy. We have the ability to redeem these investments at NAV or its equivalent subject to certain restrictions, which may include a lock-up period or a gate.

Defined Contribution Savings Plan

We sponsor the Constellation Employee Savings Plan, a 401(k) defined contribution savings plan. The plan allows employees to contribute a portion of their pre-tax and/or after-tax income in accordance with specified guidelines. We match a percentage of the employee contributions up to certain limits. In addition, certain employees are eligible for a fixed non-discretionary employer contribution in lieu of a pension benefit. The employer contributions to the savings plan were $117 million, $106 million, and $90 million for the years ended December 31, 2024, 2023, and 2022, respectively.