Notes to Financial Statements
December 31, 2015 and 2014
General
The Navient 401(k) Savings Plan (the Plan) is a defined contribution plan established for the benefit of certain eligible employees
of Navient Corporation (the Company) and its participating subsidiaries (the Participants). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The
following description of the Plan provides only general information. Participants should refer to the Plan documents for a more complete description of the Plans provisions.
The Plan covers substantially all employees of the Company and its participating subsidiaries. Eligible employees may participate in the Plan
after one month of service.
Fidelity Management Trust Company (Fidelity) is the Plan Trustee. An affiliate of Fidelity,
Fidelity Investments Institutional Operations Company, Inc. (FIIOC), serves as recordkeeper.
Contributions and vesting
Participants are eligible to contribute from 1 to 75 percent of their eligible compensation to the Plan, in increments of whole
percentages, up to the Internal Revenue Service (IRS) maximum. The Plan allows participants who will attain age 50 in the current Plan year to make catch-up contributions into the Plan up to the IRS maximum. Participants may also
contribute amounts into the Plan from other qualified employer plans in which they had previously participated. Participants direct the investment of their contributions into various investment options offered by the Plan.
The Company makes a safe harbor matching contribution on behalf of each Participant after the Participant has accrued six months of service.
This matching contribution is 100 percent on the first three percent of a Participants contributions and 50 percent on the next two percent of a Participants contributions. These matching contributions and related earnings vest
immediately. The Company also makes a contribution in an amount equal to one percent of eligible compensation to each eligible employee after one month of service, which vests after one year of service. Employees subject to the Service Contract Act
may be eligible to receive fully-vested employer contributions based on the service contract fringe benefit differential rate compared with the company cost of benefits they have elected. Participants also direct the investments of Company
contributions.
Participants forfeit their right to Company contributions that are unvested at the time of their termination of service.
During 2015, Company contributions were reduced by $103,000 from previously forfeited non-vested accounts. Unused forfeitures at December 31, 2015 and 2014 totaled $1,796 and $991, respectively, which will be used to offset future Company
contributions.
The Plan also allows the Company to make a discretionary profit sharing contribution, whereby the Company determines the
amount of net profits, if any, to contribute to the Plan. The Company did not make any profit sharing contributions for year ended December 31, 2015.
Notes receivable from Participants
Participants may generally borrow up to 50 percent of their vested benefit to a maximum of $50,000. Participants may have no more than two
loans outstanding at any time. The term of a loan will be three or five years, at the election of the Participant, except for a loan to purchase the Participants
4
Navient 401(k) Savings Plan
Notes to Financial Statements
December 31, 2015
and 2014
principal residence, which can be repaid over 20 years. Loans are secured by the Participants account balance, bear interest at the prime rate established monthly by the Federal Reserve,
and are repaid biweekly through automatic payroll deductions. In addition, Participants may repay all or a portion (in $500 increments) of such loans at any time. Loans allowable under the Plan Document, collateralized by Participant account
balances, are due in varying installments through 2035, with interest rates ranging from 3.25% to 9%.
Investment elections
The Plan offers a variety of investment options, including various registered investment companies and a unitized employer stock fund. In
addition, Participants have the option to make contributions to a self-directed brokerage account. Under the self-directed brokerage account, Participants may direct investments in any security other than Company stock or other investments offered
by Fidelity, regardless of whether they are included as investment options offered by the Plan. The one percent Company contribution will be made to the default investment, if a Participant does not make an investment election. The default fund is
the Fidelity Freedom Fund, based on the Participants date of birth and year in which the Participant attains age 65.
Participant
accounts
Each Participants account is credited with the Participants and the Companys contributions and their
portion of the Plans earnings (losses). Plan earnings (losses) are allocated based on the Participants designated investments of their account balances, as defined. The benefit to which a Participant is entitled is the benefit that can
be provided from the Participants vested account.
Payment of benefits
Participants may withdraw funds from their account upon retirement, disability, separation from employment, attainment of age 59-1/2, and
certain other times as specified in the Plan document. Distributions shall be made in a lump sum in cash, in the Companys common stock, or a combination thereof, reduced by the outstanding balance of any loans not repaid by the Participant.
Administrative expenses
Participants pay fees relating to such Participants loans and withdrawals. Additionally, Participants may pay for commissions associated
with common stock purchases and sales and short term transaction fees in certain funds when Participants trade in and out of the funds within the time restriction specified for such funds. Participant costs, including investment management fees
charged by the respective funds, are charged directly to the Participants account and are reflected in the statement of changes in net assets available for benefits. The Company bears the remaining cost of Plan administration.
Plan administration
The
Navient Corporation Employee Benefits Fiduciary Committee administers the Plan and is responsible for development of Plan investment policies and guidelines. Officers of the Company or its subsidiaries presently serve as Committee members. The Plan
did not pay the Company, its subsidiaries or the Committee members for their services.
5
Navient 401(k) Savings Plan
Notes to Financial Statements
December 31, 2015
and 2014
2.
|
Summary of Significant Accounting Policies
|
Basis of accounting
The financial statements of the Plan are prepared on the accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America.
Fair Value Measurements
Financial Accounting Standards Boards (FASB) Accounting Standards Codification Topic 820,
Fair Value Measurements and
Disclosures
(ASC 820) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 specifies a fair
value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Classification is based on the lowest level of input that is significant to the fair value of the instrument. The three levels
are as follows:
Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date. The types of financial instruments included in level 1 are highly liquid instruments with quoted prices.
Level 2 Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices
for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by correlation or
other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 Pricing inputs significant to the valuation are unobservable. Inputs are developed based on the best information available;
however, significant judgment is required by management in developing the inputs.
The related disclosures are in note 3.
Investment valuation and income recognition
Investments held by the Plan at December 31, 2015 consist of various registered investment companies, a unitized employer stock fund, and
a self-directed brokerage option. Common stock, securities and brokerage account investments traded on national securities exchanges are carried at market value based on the closing price on the last business day of the year. The fair value of
registered investment companies is determined based on quoted market prices, which represents the net asset value for shares held at year-end. The unit value of the Navient Stock Fund is based on the closing price of the Companys stock and the
value of the money market component on the last business day of the Plan year. The Companys stock is listed and traded on the NASDAQ Global Select Market. Investments traded in the over-the-counter market and listed securities for which no
sale was reported on that date are valued at the average of the last reported bid and asked prices.
Dividend income is recorded on the
ex-dividend date. Interest earned on investments is recorded on the accrual basis. Purchases and sales of securities are recorded on the trade date.
6
Navient 401(k) Savings Plan
Notes to Financial Statements
December 31, 2015
and 2014
Notes Receivable from Participants
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Interest income is
recorded on the accrual basis. No allowance for credit losses has been recorded as of December 31, 2015. If a Participant ceases to make loan repayments and the Plan administrator deems the participant loan to be in default, the participant
loan balance is reduced and a benefit payment is recorded.
Contributions
Contributions made by employees electing to participate in the Plan under salary reduction agreements and Company contributions are recorded
when payable into the Plan.
Use of estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Risks and uncertainties
The Plan provides for various investment options. Such investments are subject to various risks such as interest rate, market and credit risks.
Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the value of investment securities will occur in the near term, including a decrease in value, and that such changes could materially
affect Participants account balances and the amounts reported in the statements of net assets available for benefits.
Benefit
payments
Benefits are recorded when paid.
Adoption of accounting standard
In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-12,
Plan
Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965).
The ASU is effective for fiscal years beginning after December 15, 2015, with early
adoption permitted. Management has elected to adopt the relevant parts of the ASU for the year ended December 31, 2015. The ASU eliminates the requirements to disclose individual investments that represent 5 percent or more of net
assets available for benefits and the net appreciation or depreciation in fair value of investments by general type. The ASU also simplifies the level of disaggregation of investments that are measured using fair value by general type; however,
plans are no longer required to also disaggregate investments by nature, characteristics and risk. Further, the disclosure of information about fair value measurements shall be provided by general type of plan asset.
7
Navient 401(k) Savings Plan
Notes to Financial Statements
December 31, 2015
and 2014
3.
|
Fair Value Measurements
|
The fair value of Plan investments at December 31, 2015 is
shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on
|
|
|
|
Fair Value at
December 31,
2015
|
|
|
Quoted prices in
active markets
(Level 1)
|
|
|
Other
observable
inputs
(Level 2)
|
|
|
Unobservable
inputs
(Level 3)
|
|
Registered investment companies
|
|
$
|
434,441,186
|
|
|
$
|
434,441,186
|
|
|
$
|
|
|
|
$
|
|
|
Navient Stock Fund
|
|
|
9,758,258
|
|
|
|
|
|
|
|
9,758,258
|
|
|
|
|
|
Self-directed brokerage account
|
|
|
11,672,724
|
|
|
|
11,672,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
455,872,168
|
|
|
$
|
446,113,910
|
|
|
$
|
9,758,258
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on
|
|
|
|
Fair Value at
December 31,
2014
|
|
|
Quoted prices in
active markets
(Level 1)
|
|
|
Other
observable
inputs
(Level 2)
|
|
|
Unobservable
inputs
(Level 3)
|
|
Registered investment companies
|
|
$
|
430,243,249
|
|
|
$
|
430,243,249
|
|
|
$
|
|
|
|
$
|
|
|
Navient Stock Fund
|
|
|
18,173,414
|
|
|
|
|
|
|
|
18,173,414
|
|
|
|
|
|
Self-directed brokerage account
|
|
|
10,716,111
|
|
|
|
10,716,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
459,132,774
|
|
|
$
|
440,959,360
|
|
|
$
|
18,173,414
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
Navient 401(k) Savings Plan
Notes to Financial Statements
December 31, 2015
and 2014
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA and the Internal Revenue Code (the IRC). In the event of Plan termination, Participants would become 100
percent vested in their Company contributions.
5.
|
Related-Party Transactions and Party-In-Interest Transactions
|
Certain Plan investments
are shares of registered investment companies, the self-directed brokerage account or amounts of the Navient Stock Fund managed by Fidelity. Fidelity is the trustee as defined by the Plan and therefore these transactions qualify as party-in-interest
transactions. Fees paid by the Plan for administrative services were $139,468 for the year ended December 31, 2015. Fees incurred by the Plan for the investment management services are included in net depreciation in fair value of the
investments, as they are paid through revenue sharing, rather than a direct payment.
Additionally, the Plan has investments in the
Navient Stock Fund comprised principally of Navient Corporation common stock. At December 31, 2015 and 2014, the Plan held 1,104,015 and 1,099,643 units, respectively, valued at $9,758,258 and $18,173,414, respectively. During 2015, 310,109
units in the amount of $3,788,264 were purchased and 305,737 units in the amount of $3,968,325 were sold related to the Navient Stock Fund. Such transactions qualify as party-in-interest transactions, as Navient Corporation is the Plans
sponsor. During 2015, the Plan recorded dividend income in the amount of $526,347 from Participants investments in the Navient Stock Fund.
The Plan Sponsor timely requested a determination by the IRS that the
Plan is designed in accordance with applicable sections of the IRC defined above. Although the IRS has not yet issued a determination as to the Plans tax-qualified status, the Plan administrator believes that the Plan and related trust are
operating in accordance with the IRC and are qualified under Section 401(a) of the IRC. Accordingly, no provision for income taxes has been made.
Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan
and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan is subject to routine audits by taxing jurisdictions for years since inception; however,
there are currently no audits for any tax periods in progress.
7.
|
Nonexempt Transactions
|
As reported on the supplemental schedule of delinquent
participant contributions (Schedule H, Line 4a), certain Plan contributions were not remitted to the trust within the time frame specified by the Department of Labors Regulation 29 (CFR 2510.3-102), thus constituting nonexempt transactions
between the Plan and the Company for the period April 30, 2014 (date of inception) through December 31, 2014. The contributions were corrected outside of the Voluntary Fiduciary Correction Program (VFCP) in January 2015.
9
Navient 401(k) Savings Plan
Schedule H, Line 4a Schedule of Delinquent Participant Contributions
EIN: 46-4054283 Plan: 001
Year
Ended December 31, 2015
Total that Constitute
Nonexempt Prohibited Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Participant
Contributions
Transferred Late to
the Plan
|
|
|
Check Here
if Late
Participant
Loan
Repayments
are Included
|
|
Contributions
Not Corrected
|
|
Contributions
Corrected
Outside VFCP
|
|
|
Contributions
Pending
Correction
Outside
VFCP
|
|
Contributions
Pending
Correction in
VFCP
|
|
Total Fully Corrected
Under Voluntary
Fiduciary Correction
Program (VFCP) and
Prohibited Transaction
Exemption 2002-51
|
|
$753
|
|
|
|
|
|
|
$
|
753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Report of Independent Registered Public Accounting Firm.
10
Navient 401(k) Savings Plan
Schedule H, Line 4a Schedule of Delinquent Participant Contributions
EIN: 46-4054283 Plan: 001
Year
Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
Identity of issuer, borrower or similar entity
|
|
Description of Investment
|
|
Current value
|
|
|
|
Spartan 500 Index Inst
|
|
Registered Investment Company
|
|
$
|
57,228,506
|
|
*
|
|
Fidelity Contrafund K
|
|
Registered Investment Company
|
|
|
49,838,844
|
|
*
|
|
Fidelity OTC K
|
|
Registered Investment Company
|
|
|
30,421,640
|
|
*
|
|
Fidelity Retirement Govt MM
|
|
Registered Investment Company
|
|
|
29,609,939
|
|
*
|
|
Fidelity Balanced K
|
|
Registered Investment Company
|
|
|
25,943,751
|
|
*
|
|
Fidelity Freedom K 2030
|
|
Registered Investment Company
|
|
|
24,645,479
|
|
|
|
Pimco Total Return Inst
|
|
Registered Investment Company
|
|
|
23,123,014
|
|
|
|
Victory Estb Value 1
|
|
Registered Investment Company
|
|
|
21,910,623
|
|
|
|
Loomis SM CP Grth IS
|
|
Registered Investment Company
|
|
|
21,054,245
|
|
*
|
|
Fidelity Freedom K 2020
|
|
Registered Investment Company
|
|
|
19,884,616
|
|
|
|
AllianzGI NFJ International Value Inst
|
|
Registered Investment Company
|
|
|
19,319,628
|
|
*
|
|
Fidelity Freedom K 2040
|
|
Registered Investment Company
|
|
|
18,763,742
|
|
|
|
Spartan US Bond Index Is
|
|
Registered Investment Company
|
|
|
14,938,872
|
|
|
|
Invs Comstock R5
|
|
Registered Investment Company
|
|
|
13,991,975
|
|
|
|
Janus Enterprise N
|
|
Registered Investment Company
|
|
|
12,563,757
|
|
|
|
Brokeragelink
|
|
Self-directed brokerage account
|
|
|
11,672,724
|
|
*
|
|
Navient Stock Fund
|
|
Common Stock Fund
|
|
|
9,758,258
|
|
|
|
GS Small Cap Value Inst
|
|
Registered Investment Company
|
|
|
8,259,541
|
|
*
|
|
Fidelity Freedom K 2055
|
|
Registered Investment Company
|
|
|
6,893,243
|
|
*
|
|
Fidelity Freedom K 2025
|
|
Registered Investment Company
|
|
|
6,083,628
|
|
*
|
|
Fidelity Freedom K 2035
|
|
Registered Investment Company
|
|
|
5,830,028
|
|
*
|
|
Fidelity Freedom K 2050
|
|
Registered Investment Company
|
|
|
5,027,307
|
|
*
|
|
Fidelity Freedom K 2045
|
|
Registered Investment Company
|
|
|
4,487,613
|
|
|
|
Spartan Intl Index Adv
|
|
Registered Investment Company
|
|
|
4,384,872
|
|
*
|
|
Fidelity Freedom K 2010
|
|
Registered Investment Company
|
|
|
4,068,176
|
|
|
|
Spartan Mid Cap Index Adv
|
|
Registered Investment Company
|
|
|
1,564,073
|
|
*
|
|
Fidelity Freedom K Income
|
|
Registered Investment Company
|
|
|
1,555,355
|
|
|
|
Spartan Sm Cap Index Adv
|
|
Registered Investment Company
|
|
|
1,228,494
|
|
*
|
|
Fidelity Freedom K 2015
|
|
Registered Investment Company
|
|
|
943,377
|
|
*
|
|
Fidelity Freedom K 2055
|
|
Registered Investment Company
|
|
|
793,639
|
|
*
|
|
Fidelity Freedom K 2005
|
|
Registered Investment Company
|
|
|
83,210
|
|
|
|
|
|
*
|
|
Participant Loans:
Plan Participants
|
|
Loans allowable under the plan instrument, collateralized by Participant account balances, are due in varying installments through 2035,
with interest rates ranging from 3.25% to 9%
|
|
|
11,669,058
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
467,541,227
|
|
|
|
|
|
|
|
|
|
|
|
|
* Denotes a party-in-interest
|
|
|
|
|
|
|
|
|
Note: Cost information is not required for participant-directed investments and therefore is not included.
|
|
|
|
|
11