Notes to Financial Statements
NOTE 1 DESCRIPTION OF PLAN
The
following description of the BNSF Railway Company Non-Salaried Employees 401(k) Retirement Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plans
provisions. BNSF Railway Company and its majority-owned subsidiaries, (collectively, BNSF Railway) is a wholly-owned subsidiary of Burlington Northern Santa Fe, LLC (BNSF).
General
The purpose of
the Plan, which is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), is to offer eligible non-salaried employees of BNSF Railway an opportunity to invest a portion of their income on a regular basis through
payroll deductions. These amounts, supplemented in some cases by BNSF Railways matching contributions, may be invested at the participants direction in various investment funds.
Effective January 1, 2011, based on a Memorandum of Agreement between the Brotherhood of Locomotive Engineers and Trainmen (BLET) and
BNSF Railway Company, on approximately March 1 of each year, BNSF Railway will contribute a single vested contribution on behalf of each eligible employee.
Administration
The Plan
is administered by BNSFs Vice President and Chief Human Resources Officer. Vanguard Fiduciary Trust Company (the Trustee) is responsible for the custody and management of the Plans assets, and an affiliate of the Trustee provides
recordkeeping services to the Plan. BNSF Railways Employee Benefits Committee is responsible for appointing and removing the Trustee, specifying the investment options available under the Plan (if not otherwise mandated by the Plan), and
reviewing benefit claims appeals.
Master Trust
The Plan participates in the BNSF 401(k) Plans Master Trust (the Master Trust) and, along with the Burlington Northern Santa Fe Investment and
Retirement Plan (the Salaried Plan), owns a percentage of the assets in the Master Trust.
Eligibility
Employees under the Plan include any person who establishes seniority under a collective bargaining agreement that provides for participation
in this Plan. An employee shall be eligible to participate in the Plan upon the earlier of completion of not less than one year of continuous service with BNSF Railway or a 12-month period, computed with reference to the date on which the
employees employment commenced, and anniversaries thereof, during which the employee has not less than 1,000 hours of service, or a shorter period of participation service that an applicable collective bargaining agreement may provide for an
eligible employee.
Eligible employees may become participants in the Plan by authorizing regular payroll deductions and designating an
allocation method for such deductions.
Employee eligibility for the BLET contribution is based on employees who received earnings in the
engineers craft and did not terminate employment with BNSF Railway for reasons other than death or retirement.
Contributions
Compensation, as generally defined under the Plan, is the total of salary and other amounts received for personal services rendered
as an eligible employee, excluding disciplinary or judicially ordered back pay awards, severance benefits, bonuses and certain other payments set forth in the Plan. The Plan provides that the annual compensation of each employee taken into account
under the Plan for any year may not exceed a limitation pursuant to requirements of the Internal Revenue Code (IRC). During 2016, the limitation was $265 thousand.
4
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN
Notes to Financial Statements (Continued)
The maximum limitation on combined total before-tax and after-tax employee contributions
(other than catch-up contributions) is 25% of compensation or such other maximum amount provided in an applicable collective bargaining agreement. All employee-elected contributions are made by means of regular payroll deductions.
BNSF Railway matches 25% of the first 4% of employee-elected before-tax contributions and/or Roth contributions for each pay period for
employees whose collective bargaining agreement provides for a BNSF Railway match. Matching contributions are made in cash, as soon as practicable after the end of each pay period, within ERISA regulated limits.
In addition, certain participants may elect to have BNSF Railway make Sick Leave Deposits into the Plan in lieu of compensation for unused
sick time in accordance with an agreement between BNSF Railway and the Transportation-Communications International Union.
The BLET
contribution provides a single vested contribution equal to 25% of 1% of the qualified earnings for each employee in the engineers craft during the preceding calendar year. Qualified earnings include gross earnings paid in the engineers
craft and any profit-sharing payment made to the eligible employee, including any deferrals made under this Plan, and excluding certain retroactive payments.
During the 2016 Plan year, in accordance with the provisions of the IRC, no participant could elect more than $24 thousand in before-tax
and/or Roth after-tax contributions, which included a $6 thousand limit for catch-up contributions for participants age 50 or older before the close of the Plan year. This limitation does not include BNSF Railways matching contributions. In
addition, the Plan provides that annual contributions for highly-compensated employees (as defined by the IRC) may be limited based on the average rate of contributions for lower-compensated employees. In no event may the total of employee-elected
pre-tax contributions, employee after-tax contributions, and BNSF Railways matching contributions exceed the lesser of $53 thousand ($59 thousand including catch-up contributions) or 100% of a participants compensation, as defined in IRC
Section 415(c)(3), for any participant in a calendar year, subject to certain cost-of-living adjustments. Contributions with respect to any participant may be further reduced to the extent necessary to prevent disqualification of the Plan under
Section 415 of the IRC, which imposes additional limitations on contributions and benefits with regard to employees who participate in other qualified plans.
Participant Accounts
Each participants account is credited with the participants elective contributions, BNSF Railways matching contributions,
interest, dividends and gains and losses attributable to such contributions. The benefit to which a participant is entitled is limited to the participants vested account balance.
Participants may direct the investment of their account balances into investment options offered by the Plan. The Plan offers a company stock
fund (the Company Stock Fund) which consists of Berkshire Hathaway Inc. (Berkshire) Class B common stock (BNSF is a wholly-owned, indirect subsidiary of Berkshire), nine mutual funds, thirteen common / collective trusts and a stable value fund as
investment options for participants, all of which are held by the Master Trust.
Participants may allocate both elective and employer
contributions to any or all of the investment options in multiples of 1%. Participants may reallocate amounts from one investment option to another on a daily basis within certain guidelines as described in the Plan document and the relevant
investment prospectus.
No investment election or interfund transfer may result in the investment of more than 20% of the value of a
participants account in the Company Stock Fund. Investment election funds that exceed the 20% limit are invested in a target retirement trust designed for investors planning to retire on a date closest to the participants 65th birthday.
5
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN
Notes to Financial Statements (Continued)
Vesting
Participants are immediately vested in their elective contributions plus any income or loss thereon. BNSF Railways matching
contributions become fully vested in accordance with the following schedule:
|
|
|
|
|
Number of Years of Vesting Service*
|
|
Vested Percentage
|
|
|
|
Less than 1 year
|
|
|
0%
|
|
1 year but less than 2 years
|
|
|
20%
|
|
2 years but less than 3 years
|
|
|
40%
|
|
3 years but less than 4 years
|
|
|
60%
|
|
4 years but less than 5 years
|
|
|
80%
|
|
5 years or more
|
|
|
100%
|
|
* The term Vesting Service is defined as the number of plan years in which the participant is
compensated for at least 1,000 hours of work by BNSF Railway, in any capacity.
Participants are immediately vested in any BLET
contributions.
Notes Receivable from Participants
Participants may borrow from their accounts a minimum of $1 thousand up to a maximum equal to the lesser of $50 thousand or 50% of their
vested account balance. Participants may have up to two loans outstanding at any time. Loan transactions are treated as a transfer to (from) the investment fund from (to) the participant loan account. Loan terms can be up to five years, or fifteen
years for the purchase of a primary residence. The loans are collateralized by the balance in the participants account and bear interest at the prime rate plus 1%. Interest rates on loans outstanding as of December 31, 2016, range from
4.25% to 10.50%. Principal and interest are paid ratably through payroll deductions for active employees.
Benefit Payments to
Participants
Subject to certain Plan and IRC restrictions, a participant may, at any time, elect to withdraw all or a specified
portion of the value of the participants account in the Plan, including vested BNSF Railways matching contributions. Both the Plan and the IRC allow a participant who has not attained age
59
1
⁄
2
to withdraw the participants pre-tax and Roth after-tax contributions only in the event of hardship (as defined in the Plan). Earnings on pre-tax
contributions credited after December 31, 1988, are not available for withdrawal for hardship.
No distribution from the Plan, unless
in the event of hardship or attainment of age 59
1
⁄
2
, will be made until a participant retires, dies (in which case, payment shall be made to his or her
beneficiary), becomes disabled or otherwise terminates employment with BNSF Railway.
By law, a distribution of benefits must occur or
commence no later than April 1 of the calendar year following the later of the year when a participant attains age 70
1
⁄
2
or retires. In the event of the
death of a participant, the participants account is distributed to his beneficiary. Immediate lump-sum distributions are required in the case of accounts valued at up to $5 thousand. Mandatory lump-sum distributions which are greater than $1
thousand will be transferred to an individual retirement account for the benefit of the participant unless the participant elects to receive the distribution directly or roll-over the distribution into another eligible retirement plan.
6
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN
Notes to Financial Statements (Continued)
Forfeited Accounts
The Plan provides for the forfeiture of nonvested BNSF Railway matching contributions related to terminated employees. Forfeitures shall be
used in the following order (as described by the Plan document):
-
|
|
First, to restore previously forfeited amounts of other participants who have resumed employment with BNSF
Railway;
|
-
|
|
Second, to offset future BNSF Railway matching contributions; and
|
-
|
|
Finally, to pay administrative expenses of the Plan.
|
Forfeitures used were $17 thousand in 2016. At December 31, 2016 and 2015, unused forfeited balances totaled less than $2 thousand.
Plan Amendment and Termination
The Plan may be amended at any time. No such amendment, however, may adversely affect the rights of participants in the Plan with respect to
contributions made prior to the date of the amendment. BNSF Railway matching contributions may be discontinued and participation by BNSF Railway in the Plan may be terminated at any time at the election of BNSF Railway. In the event the Plan is
terminated, each participant shall receive the full amount of Plan assets in their respective accounts.
The Plan is subject to the
provisions of ERISA applicable to defined contribution plans. The Plan provides for an individual account for each participating employee. Plan benefits are based solely on the amount contributed to the participating employees account plus any
income, expenses, gains and losses attributed to such account. Consequently, Plan benefits are not insured by the Pension Benefit Guaranty Corporation pursuant to Title IV of ERISA.
Voting Rights
Each
participant is entitled to exercise voting rights attributable to the shares of Berkshires Class B common stock allocated to the participants account.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies, which conform with accounting principles generally accepted in the United States of America and with the
requirements of ERISA, have been used consistently in the preparation of the Plans financial statements:
Basis of Accounting
The financial statements of the Plan have been prepared under the accrual method of accounting.
Authoritative accounting guidance requires investment contracts held by a defined contribution plan to be reported at fair value. However,
contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount
participants would receive if they were to initiate a permitted withdrawal transaction under the terms of the Plan. The Plan invests in investment contracts through the Master Trust. The Statements of Net Assets Available for Benefits present the
fair value of the investment in the Master Trust as well as the contract value relating to investment contracts. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.
7
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN
Notes to Financial Statements (Continued)
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions during the reporting period. Actual results could differ from these estimates.
Income Recognition
Purchases and sales of investments are recorded on a trade-date basis. Interest income is recorded when earned. Dividend income is recorded on
the ex-dividend date. Capital gain distributions are included in dividend income. Net appreciation or depreciation in the fair value of investments consists of realized and unrealized gains and losses on investments.
Risks and Uncertainties
The Plan provides for various investment options in a variety of stocks, mutual funds, common / collective trusts and other investment
securities. Investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes could materially affect participants account balances and the amounts reported in the Plans financial statements.
Benefit Payments to Participants
Benefits are recorded when paid.
Recent Accounting Pronouncements
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): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement
Date Practical Expedient. Part I designates contract value as the only required measure for fully benefit-responsive investment contracts. Part II simplifies the level of disaggregation of investments that are measured using fair value, to
disaggregation by type, but no longer by nature, characteristics and risk. Part II also eliminates the requirement to disclose the net appreciation or depreciation in fair value of investments by general type, as well as the requirements to disclose
individual investments that represent 5% or more of net assets available for benefits. Part III of this ASU is not applicable to the Plan. ASU 2015-12 is effective for reporting periods beginning after December 15, 2015.
Part I and Part II of ASU 2015-12 have been applied retrospectively, resulting in the reclassification of $4,810 thousand of adjustment from
fair value to contract value in the Plans Statement of Net Assets Available for Benefits as of December 31, 2015, related to the Master Trusts investment in a stable-value fund that holds fully benefit-responsive investment
contracts. The historical disclosures have been eliminated for individual investments which comprise 5% or more of total net assets available for benefits, and for net appreciation or depreciation of fair values by type. The adoption of ASU 2015-12
did not have an impact on the reported net assets or changes in net assets.
NOTE 3 VALUATION
Various inputs are used to determine the fair value of the Plans investments. These inputs are summarized in the three broad levels
listed below:
Level 1 Quoted prices for identical assets or liabilities in active markets that BNSF Railway has
the ability to access at the measurement date.
8
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN
Notes to Financial Statements (Continued)
Level 2 Quoted prices for similar assets or liabilities in active
markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.
Level 3 Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
The Plans investment in the Master Trust for other than fully benefit-responsive investment contracts is stated at fair value. The fair
value of the Plans interest in the Master Trust is based on the specific interest that each plan has in the underlying participant-directed investment options. The investments held by the Master Trust are valued as follows:
(1) Investments in registered investment companies are valued at the quoted net asset value of the respective investment company. Net asset value is considered a Level 1 input if redemptions at this value are available to all shareholders
without restriction. (2) The Company Stock Fund is valued using a quoted active market price which is considered a Level 1 input. (3) Common / collective trusts are valued at the calculated net asset value of the respective investment
entity. Although these trusts are not publicly traded and are considered a Level 2 input, the underlying assets are publicly traded on exchanges and price quotes for the assets held by these trusts are readily available.
The following table summarizes the Plans investments at fair value as of December 31, 2016, based on the valuation inputs (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Level 1
Inputs
|
|
|
|
|
Level 2
Inputs
|
|
Registered investment companies
|
|
$
|
|
|
1,103,373
|
|
|
$
|
|
|
1,103,373
|
|
|
$
|
|
|
|
|
Common / Collective Trusts
|
|
|
|
|
765,814
|
|
|
|
|
|
|
|
|
|
|
|
765,814
|
|
Company Stock Fund
|
|
|
|
|
274,605
|
|
|
|
|
|
274,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at fair value
|
|
$
|
|
|
2,143,792
|
|
|
$
|
|
|
1,377,978
|
|
|
$
|
|
|
765,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments of the Plan as of December 31, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
Total
|
Investments at fair value
|
|
$
|
|
2,143,792
|
Investments at contract value
|
|
|
|
413,283
|
|
|
|
|
|
Total
|
|
$
|
|
2,557,075
|
|
|
|
|
|
The following table summarizes the Plans investments at fair value as of December 31, 2015, based
on the valuation inputs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Level 1
Inputs
|
|
|
|
|
Level 2
Inputs
|
|
Registered investment companies
|
|
$
|
|
|
1,031,719
|
|
|
$
|
|
|
1,031,719
|
|
|
$
|
|
|
|
|
Common / Collective Trusts
|
|
|
|
|
705,981
|
|
|
|
|
|
|
|
|
|
|
|
705,981
|
|
Company Stock Fund
|
|
|
|
|
239,436
|
|
|
|
|
|
239,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at fair value
|
|
$
|
|
|
1,977,136
|
|
|
$
|
|
|
1,271,155
|
|
|
$
|
|
|
705,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments of the Plan as of December 31, 2015 (in thousands):
|
|
|
|
|
|
|
|
|
Total
|
Investments at fair value
|
|
$
|
|
1,977,136
|
Investments at contract value
|
|
|
|
391,374
|
|
|
|
|
|
Total
|
|
$
|
|
2,368,510
|
|
|
|
|
|
9
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN
Notes to Financial Statements (Continued)
NOTE 4 INVESTMENT IN MASTER TRUST
All of the Plans investments are in a Master Trust, which was established for the investment of assets of the Plan and of the Salaried
Plan of BNSF. Each participating retirement plan has an undivided interest in the Master Trust. The assets of the Master Trust are held by the Trustee. For the Plan years ended December 31, 2016 and 2015, the Plans interest in the net
assets of the Master Trust was approximately 63%.
The following table presents the total of investments in the Master Trust (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Investments:
|
|
|
|
|
|
|
|
|
Registered investment
companies
|
|
$
|
1,745,070
|
|
|
$
|
1,637,507
|
|
Common / Collective
Trusts
|
|
|
1,161,234
|
|
|
|
1,085,917
|
|
Company Stock Fund
|
|
|
436,172
|
|
|
|
385,952
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at fair value
|
|
|
3,342,476
|
|
|
|
3,109,376
|
|
Alternative GICs
|
|
|
641,166
|
|
|
|
606,681
|
|
Cash and cash
equivalents
|
|
|
39,503
|
|
|
|
30,438
|
|
Traditional GICs
|
|
|
22,024
|
|
|
|
24,991
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at contract value
|
|
|
702,693
|
|
|
|
662,110
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,045,169
|
|
|
$
|
3,771,486
|
|
|
|
|
|
|
|
|
|
|
Investment income for the Master Trust was as follows (in thousands):
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2016
|
Investment income:
|
|
|
|
|
|
|
|
Net investment appreciation
|
|
$
|
|
264,248
|
|
|
|
Interest and dividend income
|
|
|
|
79,797
|
|
|
|
|
|
Total
|
|
$
|
|
344,045
|
|
|
|
|
|
The Master Trusts investment at contract value is a stable-value fund, which invests in traditional and
alternative guaranteed investment contracts (GICs). GICs are contracts between an issuer and the Plan that provide for a fixed return on principal amounts invested over a fixed period of time. GICs are valued at contract value and, as required by
authoritative accounting guidance, the Statement of Net Assets Available for Benefits presents the contract value of the GIC.
Alternative
GICs (a form of wrap contract) are typically paired with an underlying single or multiple high-quality fixed income investment, fixed income mutual funds, or with units of a collective trust bond portfolio. The wrap contract is owned by the Plan
while the underlying investments may or may not be owned by the Plan, depending on the contract. Wrap contracts are issued by insurance or financial services institutions. Investment gains and losses are amortized over the expected duration of the
underlying investments of that contract through the calculation of an interest rate applicable to the contract on a prospective basis. The wrap contracts provide for a variable crediting rate, which typically resets quarterly, and the issuer of the
wrap contract provides assurance that future adjustments to the crediting rate cannot result in a crediting rate less than zero.
10
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN
Notes to Financial Statements (Continued)
The wrap contract crediting rate is typically based on the current yield-to-maturity of the
covered investments, plus or minus an amortization of the difference between the market value and contract value of the covered investments over the duration of the covered investments at the time of computation. The crediting rate is affected by
the change in the annual effective yield-to-maturity of the underlying securities, and is also affected by the differential between the contract value and the market value of the covered investments. In addition, changes in duration from reset
period to reset period can affect the crediting rate.
Certain events can limit the ability of the Plan to transact at contract value.
Such events can include, but are not limited to, the following: (i) complete or partial Plan termination or merger with another plan; (ii) changes to the Plans prohibition on competing investment options or deletion of equity wash
provisions; (iii) bankruptcy of BNSF Railway or other BNSF Railway events (e.g., divestitures or spin-off of a subsidiary) which cause a significant withdrawal from the Plan; or (iv) the failure of the Plan or Master Trust to qualify for
exemption from federal income taxes or any required prohibited transaction exemption under ERISA. The Plan Administrator does not believe that the occurrence of any such event, which would limit the Plans ability to transact at contract value
with participants, is probable.
Investment contracts generally impose conditions on the Plan. If an event of default occurs and is not
cured, the issuer may terminate the contract. These events may include: (i) a breach of material obligation under the contract; (ii) a material misrepresentation; or (iii) a material amendment to the Plan agreement that is not
approved and accepted by the issuer. The Plan may terminate wrap contracts at any time with notice, subject to certain conditions. Other than for reasons of Plan default, wrap contract issuers may generally only terminate contracts upon the
completion of certain contract requirements, such as completion of a specified period of time.
If, in the event of default of an issuer,
the Plan was unable to obtain a replacement investment contract, the Plan may experience losses if the value of the Plans assets no longer covered by the contract is below contract value. The Plan may seek to add additional issuers over time
to diversify the Plans exposure to such risk, but there is no assurance that the Plan may be able to do so. The combination of the default of an issuer and an inability to obtain a replacement agreement could render the Plan unable to achieve
its objective of maintaining a stable contract value. Contract termination occurs whenever the contract value or market value of the covered investments reaches zero or upon certain events of default. If the contract terminates due to issuer
default, the issuer will generally be required to pay to the Plan the excess, if any, of contract value over market value on the date of termination. If the contract terminates when the market value equals zero, the issuer will pay the excess of
contract value over market value to the Plan to the extent necessary for the Plan to satisfy outstanding contract value withdrawal requests.
As described in Note 2, because the investment contracts are fully benefit-responsive, contract value is the relevant measurement attribute
for that portion of the net assets available for benefits attributable to the investment contracts. Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses.
Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.
Net assets, net
investment income and gains and losses are allocated to participating plans based on number of units owned.
NOTE 5 RELATED PARTY TRANSACTIONS
Certain Plan investments held in the Master Trust are shares of mutual funds managed by the Trustee. The Plan also invests in the
Class B common stock of Berkshire through the Company Stock Fund, which is also held in the Master Trust. The Master Trust recorded purchases of $34 million and sales of $68 million of Berkshire Class B common stock during the year ended
December 31, 2016. Transactions in such investments qualify as party-in-interest transactions, which are exempt from the prohibited transaction rules.
Administrative expenses of the Plan, except for certain participant loan fees and Qualified Domestic Relations Order fees, are paid by BNSF
Railway. For the year ended December 31, 2016, BNSF Railway paid $1.3 million in administrative expenses on behalf of the Plan.
11
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN
Notes to Financial Statements (Continued)
NOTE 6 INCOME TAX STATUS
The Internal Revenue Service determined and informed BNSF Railway by letter dated September 26, 2013, that the Plan was qualified under
IRC Section 401(a). The Plan has subsequently been amended and restated since receiving the determination letter; however, the Plan Administrator and tax counsel believe the Plan is designed and is currently operating in compliance with the
applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plans financial statements.
In accordance with IRC Section 401(k), amounts deducted from participants salaries as before-tax contributions are not income
taxable to the participants until withdrawn or distributed. Non-Roth after-tax contributions are not subject to taxation upon withdrawal or distribution. Roth after-tax contributions and earnings are not subject to taxation upon withdrawal or
distribution.
Generally accepted accounting principles require management to evaluate tax positions taken by the Plan and recognize a tax
liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Plan sponsor has analyzed the tax positions taken by the Plan and has concluded
that as of December 31, 2016, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing
jurisdictions; however, there are currently no audits for any tax periods in progress.
NOTE 7 RECONCILIATION OF FINANCIAL STATEMENTS TO FORM
5500
The financial statements of the Plan include distributions to participants as deductions when paid. The Department of Labor
requires participant loans that violate the IRC to be recorded as deemed distributions on the Form 5500, although the Plan still holds the participant loans as an asset.
The following is a reconciliation of net assets available for benefits from the financial statements to the Form 5500 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
|
2015
|
Net assets available for benefits from the financial statements
|
|
$
|
|
2,690,528
|
|
$
|
|
2,497,674
|
Participant loans reduced by current year deemed distributions
|
|
|
|
(1,495)
|
|
|
|
(1,139)
|
Participant loans reduced by deemed distributions in prior years and currently
outstanding
|
|
|
|
(11,914)
|
|
|
|
(12,669)
|
Difference in reporting of benefit-responsive investment at contract value per the financial
statements and fair value per the Form 5500
|
|
|
|
|
|
|
|
4,810
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits from the Form 5500
|
|
$
|
|
2,677,119
|
|
$
|
|
2,488,676
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of the change in net assets available for benefits from the financial
statements to the Form 5500 (in thousands):
|
|
|
|
|
|
|
|
|
Year
Ended
December 31,
2016
|
Net increase in net assets available for benefits per the financial statements
|
|
$
|
|
192,854
|
Deemed distributions of participant loans for the current year
|
|
|
|
(1,495)
|
Deemed distributions of participant loans for prior year
|
|
|
|
1,894
|
Prior year difference in reporting of benefit-responsive investment at contract value per the
financial statements and fair value per the Form 5500
|
|
|
|
(4,810)
|
|
|
|
|
|
|
|
|
Net increase in net assets available for benefits per the Form 5500
|
|
$
|
|
188,443
|
|
|
|
|
|
12
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN
SCHEDULE H, Line 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2016
(Dollars in thousands)
|
|
|
|
|
|
|
EIN 41-6034000
|
|
|
Attachment to Form 5500, Schedule H, Line 4i:
|
|
Plan # 006
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
(e)
|
|
|
|
|
|
|
|
Identity of Issue, Borrower or Similar
Party
|
|
Description of Investment, including
Maturity Date, Rate of Interest, Collateral,
Par or Maturity Value
|
|
|
|
Current Value
|
|
|
|
|
|
|
|
|
*
|
|
BNSF 401(k) Plans Master Trust
|
|
Investment in Master Trust
|
|
$
|
|
2,557,075
|
|
|
|
|
|
*
|
|
Notes receivable from participants
|
|
Interest rates of 4.25% - 10.50% with maturities from less than one year to fifteen years
|
|
|
|
120,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets held for investment purposes
|
|
|
|
$
|
|
2,677,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Represents a party-in-interest, as defined by ERISA.
Column (d) is excluded from the presentation, as all
investing activity is participant-directed; therefore, no disclosure of cost information is required.
|
|
|
13
BNSF RAILWAY COMPANY NON-SALARIED
EMPLOYEES 401(k) RETIREMENT PLAN