4. ACCUMULATED OTHER COMPREHENSIVE INCOME The changes in AOCI for the years ended December 31, 2022, 2021 and 2020, for FirstEnergy are shown in the following table: Gains & Losses on Cash Flow Hedges (1) Defined Benefit Pension & OPEB Plans (2)(3) Total (In millions) AOCI Balance, January 1, 2020 $ (9) $ 29 $ 20 Amounts reclassified from AOCI 1 (34) (33) Other comprehensive income (loss) 1 (34) (33) Income tax (benefits) on other comprehensive income (loss) — (8) (8) Other comprehensive income (loss), net of tax 1 (26) (25) AOCI Balance, December 31, 2020 $ (8) $ 3 $ (5) Amounts reclassified from AOCI 1 (14) (13) Other comprehensive income (loss) 1 (14) (13) Income tax (benefits) on other comprehensive income (loss) — (3) (3) Other comprehensive income (loss), net of tax 1 (11) (10) AOCI Balance, December 31, 2021 $ (7) $ (8) $ (15) Amounts reclassified from AOCI 9 (9) — Other comprehensive income (loss) 9 (9) — Income tax (benefits) on other comprehensive income (loss) 2 (3) (1) Other comprehensive income (loss), net of tax 7 (6) 1 AOCI Balance, December 31, 2022 $ — $ (14) $ (14) (1) Relates to previous cash flow hedges used to hedge fixed rate long-term debt securities prior to their issuance. Amounts reclassified from AOCI affects Interest expense line item in Consolidated Statements of Income. (2) Prior-service costs are reported within Miscellaneous income, net within Other Income (Expense) on FirstEnergy’s Consolidated Statements of Income. Components are included in the computation of net periodic cost (credits), see Note 5, "Pension and Other Post-Employment Benefits," for additional details. (3) Income tax (benefits) on other comprehensive income (loss) affects Income taxes line item in Consolidated Statements of Income. 5. PENSION AND OTHER POST-EMPLOYMENT BENEFITS FirstEnergy provides noncontributory qualified defined benefit pension plans that cover substantially all of its employees and non-qualified pension plans that cover certain employees. The plans provide defined benefits based on years of service and compensation levels. Under the cash-balance portion of the pension plan (for employees hired on or after January 1, 2014), FirstEnergy makes contributions to eligible employee retirement accounts based on a pay credit and an interest credit. In addition, FirstEnergy provides a minimum amount of noncontributory life insurance to retired employees in addition to optional contributory insurance. Health care benefits, which include certain employee contributions, deductibles and co-payments, are also available upon retirement to certain employees, their dependents and, under certain circumstances, their survivors. FirstEnergy recognizes the expected cost of providing pension and OPEB to employees and their beneficiaries and covered dependents from the time employees are hired until they become eligible to receive those benefits. FirstEnergy also has obligations to former or inactive employees after employment, but before retirement, for disability-related benefits. FirstEnergy’s pension and OPEB funding policy is based on actuarial computations using the projected unit credit method. On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which, among other things, extended shortfall amortization periods and modification of the interest rate stabilization rules for single-employer plans thereby impacting funding requirements. As a result, FirstEnergy does not currently expect to have a required contribution to the pension plan until 2025, which, based on various assumptions, including annual expected rate of return on assets of 8.0% in 2023, is expected to be approximately $250 million. However, FirstEnergy may elect to contribute to the pension plan voluntarily. Pension and OPEB costs are affected by employee demographics (including age, compensation levels and employment periods), the level of contributions made to the plans and earnings on plan assets. Pension and OPEB costs may also be affected by changes in key assumptions, including anticipated rates of return on plan assets, the discount rates and health care trend rates used in determining the projected benefit obligations for pension and OPEB costs. FirstEnergy uses a December 31 measurement date for its pension and OPEB plans. The fair value of the plan assets represents the actual market value as of the measurement date. 91
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