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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12: EMPLOYEE BENEFIT PLANS (Continued)
fixed income also includes insurance contracts for deferred annuities. These investments are valued using a net asset
value per share using pricing models and valuation inputs that are unobservable and are considered Level 3 assets.
Other fixed-income primarily includes pass-through and asset-backed securities. Pass-through securities are
valued based on benchmark yields created using observable market inputs and are Level 2 assets. Asset-backed
securities are primarily valued based on broker quotes and are considered Level 2 assets. Other fixed-income also
includes municipal bonds and index futures. Collateral posted related to the index futures consist of money market
investments that are considered Level 1 assets. Municipal bonds are valued based on a compilation of primarily
observable information or broker quotes in non-active markets and are considered Level 2 assets. Futures are valued
based on unadjusted prices in active markets and are Level 1 assets.
Transfers Between Levels
PG&E Corporation and the Utility recognize any transfers between levels in the fair value hierarchy as of the
end of the reporting period. As shown in the table below, transfers out of Level 3 represent assets that were
previously classified as Level 3 for which the lowest significant input became observable during the period. No
significant transfers between Levels 1 and 2 occurred in the years ended December 31, 2012 and 2011.
Level 3 Reconciliation
The following table is a reconciliation of changes in the fair value of instruments for pension and other benefit
plans that have been classified as Level 3 for the years ended December 31, 2012 and 2011:
Pension Benefits
Absolute Corporate Other
Return Fixed-Income Fixed-Income Real Assets Total
(in millions)
Balance as of January 1, 2011 ............ $ 494 $ 549 $ 120 $ —$ 1,163
Actual return on plan assets:
Relating to assets still held at the reporting
date ........................... 5 57 (2) —60
Relating to assets sold during the period . . . 2 — 1 — 3
Purchases, issuances, sales, and settlements
Purchases ......................... — 14 2 65 81
Settlements ....................... (14) (35) (58) —(107)
Transfers out of Level 3 ................ ——(63) —(63)
Balance as of December 31, 2011 .......... $ 487 $ 585 $ — $ 65 $ 1,137
Actual return on plan assets:
Relating to assets still held at the reporting
date ........................... 26 28 — 12 66
Relating to assets sold during the period . . . — (1) ——(1)
Purchases, issuances, sales, and settlements
Purchases ......................... — 12 — 208 220
Settlements ....................... —(13) ——(13)
Balance as of December 31, 2012 .......... $ 513 $ 611 $ — $ 285 $ 1,409
103