PSB PS Business Parks Inc





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549



FORM 11-K





[X] Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934



For the fiscal year ended December 31, 20 1 6



OR



[   ] Transition Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934



For the transition period from  ____________  to  ____________.



Commission File Number:  1-10709





A. Full title of the plan and the address of the plan, if different from that of the issuer named below:





B. Name of issuer of the securities held pursuant to the plan and the address of   its principal executive office:

















PS 401(k) PROFIT SHARING PLAN



FINANCIAL STATEMENTS

AND SUPPLEMENTAL SCHEDULE







TABLE OF CONTENTS











PS 401(k) PROFIT SHARING PLAN



STATEMENTS OF NET ASSETS AVAILABLE

FOR BENEFITS













PS 401(k) PROFIT SHARING PLAN



STATEMENT OF CHANGES IN NET ASSETS

AVAILABLE FOR BENEFITS



For the Year Ended December 31, 201 6













General

The PS 401(k) Profit Sharing Plan (the “Plan”) encompasses Public Storage , PS Business Parks, Inc. and certain of their majority owned subsidiaries ( collectively, the “Company”).  The following description of the Plan provides only general information.  Participants should refer to the Plan document for a more complete description of the Plan’s provisions. 

The Plan is a defined contribution plan available for the benefit of all permanent employees of the Company who have completed at least 30 days of service and are at least 21 years of age.  The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  Although it has not expressed the intention to do so, the Company has the right to terminate the Plan subject to ERISA provisions.  The Plan allows interim allocations of Company contributions and earnings or losses of trust fund assets among participants. 

The Company appoints a committee (the “Plan Administrator”) to administer the Plan.  At December 31, 20 1 6 , the Plan Administra tor is comprised of seven   officers of the Company with Wells Fargo   Bank acting as Trustee (the “Trustee”).   Wells Fargo Bank has custody of the Plan’s investments under a non-discretionary trust agreement with the Plan.

Other significant provisions of the Plan are as follows:

Contributions

Employee contributions to the Plan (voluntary contributions) are deferrals of the employee’s compensation made through a direct reduction of compensation in payrol l   during the year .  During 201 6 , each eligible participant could elect a pretax contribution rate from 1% to 100% of their compensation, as defined in the Plan document, subject to the maximum annual elective deferral amount set by the Internal Revenue Code (the “Code”) .  Participants may also contribute rollover amounts representing distributions from other qualified benefit or defined contribution plans.

The Company contributes one dollar ($1.00) for each dollar deferred by a participant up to three percent (3%) of compensation, as defined and subject to certain limitations as described in the Plan document.  The Company also contributes an additional fifty cents ($ 0 .50) for each dollar that each participant defers in excess of three percent (3%) of compensation up to five percent (5%) of compensation .  The Company’s aggregate contributions are limited to four percent (4%) of compensation, as defined and subject to certain limitations as described in the Plan document.  Additional amounts , including profit sharing contributions, may be contributed at the discretion of the Company.  No such additional contributions were made in 201 6 .

Vesting

Since January 1, 2005 , employee deferrals and the Company’s safe harbor matching contribution are 100% vested and non-forfeitable .

Investment Options

Upon enrollment in the Plan, a participant may direct their contributions and holdings in various investment options.

Prior to December 19, 2005, participants had the option to direct contributions to the Company’s securities.  Effective December 19, 2005, participants no longer had that option.  Existing holdings of

the Company’s securities on December 19, 2005, were either held or transferred to other Plan investmen t alternatives at the option of each participant .  Participants with individually directed accounts remain able to acquire and dispose of the Company’s securities at their discretion.  S ee Note  5   for disclosure of the remaining holdi ngs in the Company’s securities . 

The Plan ’s   investment options include   the We lls Fargo Stable Return Fund N and the W F/BlackRock S&P 500 Index CIT N   which are common/collective trust funds.  The We lls Fargo Stable Return Fund N seeks to provide a moderate level of stable income without principal volatility, while seeking to maintain adequate liquidity and returns superior to shorter maturity investments.  It invests in a variety of investment contracts and instruments issued by selected high-quality insurance companies and financial institutions.  Participant-directed redemptions have no restrictions; however, the Plan is required to provide a one-year redemption notice to liquidate its entire share in the fund.  The W F/BlackRock S&P 500 Index CIT N is an index fund that invests in the equity securities of companies that comprise the S&P 500 Index (the “Index”) and seeks to approximate as closely as practicable the total return, before deduction of fees and expenses, of the Index.  The W F/BlackRock S&P 500 Index CIT N has no redemption restrictions.  See “Investment Valuation and Income Recognition” in Note 2 below for further information regarding common collective trusts.

The Individually Directed Account is considered a self-directed brokerage account which allows participants access to a broader range of investment choices than that which is offered through the Plan’s menu.  Participants with Individually Directed Accounts remain able to acquire and dispose of the Company’s securities at their discretion.     At December 31, 201 6 , the Individually Directed Accounts were primarily invested in money market funds and common equity securities of publicly-traded companies, including those of the Company.

Distributions from the Plan

Distributions of each participant ’ s vested account balance upon severance or death are made in a single lump sum payment; however, upon severance if the participant’s vested account balance exceeds   $5,000, payment may be deferred at the election of the participant until April 1 st of the calendar year in which the participant reaches 70 ½ years of age.

Additionally, the Plan provides for hardship distributions (as defined).

Forfeited Accounts

Forfeitures of profit sharing contributions may be used (i) as a non-elective allocation to all eligible Plan participants, (ii) to reduce the Company’s safe harbor matching contribution or (iii) to reduce Plan expenses in the current Plan year or within one year following the end of the current Plan year.  During 201 6 , a total of $ 2 ,000 in non-vested amounts was forfeited from prior Plan year s , all of which were applied to Plan administrative expenses for eligible Plan participants in 201 6 .  As of December 31, 201 6 , there were no remaining non-vested forfeited amounts in the Plan.

Basis of Accounting

The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting and are in conformity with U.S. generally accepted accounting principles.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.



Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service (“IRS”) dated April 3, 2012 , stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation.  Subsequent to the issuance of the determination letter, the Plan has been amended and restated.  The Plan has received a new determination letter dated February 9, 2016 stating the Plan has retained its tax exempt status.  Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification.  The P lan A dministrator has indicated that it will take the necessary steps, if any, to bring the Plan’s operations into compliance with the Code .  

U.S. generally accepted accounting principles require Plan management to evaluate uncertain tax positions taken by the Plan.  The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS.  The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 201 6 , there are no uncertain positions taken or expected to be taken.  The Plan has recognized no interest or penalties related to uncertain tax positions.  The Plan is subject to routine audits by taxing jurisdictions .   During 2016, the IRS conduct ed an audit of the Plan for the plan year 2014 .  On November 23, 2016, the IRS audit of the Plan for the plan year 2014 was closed out with no issues noted.  There are currently no audits for any tax periods in progress. 

Investment Valuation and Income Recognition

Plan participants’ investments in Company equity securities ,   mutual funds , and the self-directed brokerage account investments   are recorded at fair value as determined by the quoted market price on the last business day of the plan year.  Common collective trusts are recorded at fair value based on the net asset value of the investment reported by the Trustee . 

Purchases and sales of securities are recorded on a trade-date basis.  Interest income is recorded on the accrual basis.  Dividends are recorded on the payment date.





“Accounting Standards Codification 820, Fair Value Measurement (“ ASC 820 ”)” defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  Fair value is defined 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 (i.e. an exit price).  ASC 820 includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  The three levels of the fair value hierarchy are described below :

Level 1 – Valuation is based on quoted prices in active markets for identical securities.

Level 2 – Valuation is based upon other significant observable inputs .

Level 3 – Valuation is based upon significant u nobservable inputs (i.e., supported by little or

no market activity).   Level 3 inputs include the Company ’s own assumption about the assumptions that market participants would use in pricing the securities (including assumptions about risk).

The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measure in its entirety.

The following table s set forth by level, within the fair value hierarchy, the Plan’s investments   carried at fair value as of December 31, 20 1 6   and 201 5 :







For the year ended December 31, 201 6 , the Plan paid to the Trustee a   portion of the annual participant fee of $ 90.00 per eligible participant and certain transaction related expenses incurred for the administration of the Plan , totaling $ 82,320 .  The Company directly paid for all other   T rustee fees and all other expenses related to the Plan.

The Company is the Plan sponsor as defined by the Plan document.  As described more fully under “Investment Options” in Note 1, while participants no longer have the option of directing contributions to the Company’s securities, participants can continue to hold such investments and participants with individually directed accounts remain able to acquire and dispose of the Company’s securities at their discretion.  Plan participants held the following shares in the Company’s securities :





At December 31, 201 6   and 201 5 , Plan participants held $ 12,687,122   and $ 11,811,914, respectively, in the Wells Fargo Stable Return Fund N , a common / collective trust fund that invests in fully   benefit-responsive investment contracts   and is offered by the Plan’s Trustee .  At December 31, 201 6   and 201 5 , Plan participants held $ 452,847 and $ 603,722 , respectively, in the Wells Fargo Short Term Investment Fund S , a money market fund offered by the Plan’s Trustee .  The WF/BlackRock S&P 500 Index  CIT N   is an index fund offered by the Plan’s Trustee that invests in equity securities of companies that comprise the S&P 500 Index.  At December 31, 201 6   and 201 5 , Plan participants held $ 10,492,576   and  $ 9,148,293 , respectively, in this investment selection. 

6 . Risks and Uncertainties

The Plan provides for invest ment in various investment securities .  Investment securities are exposed to various risks, such as interest rate, market, and credit risks .  Due to the level of risk associated wit h certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near or long   term and that such changes could materially affect participants’ account balances and the amounts reported in the financial statements.

7 . Concentrations

Investments in the Company’s securities comprised approximately of 1 6 % and 1 8 % of the Plan’s total investments as of December 31, 201 6   and 201 5 , respectively.

SUPPLEMENTAL INFORMATION



SCHEDULE I



PS 401(k) PROFIT SHARING PLAN

Schedule H, Line 4 i –

Schedule of Assets (held at end of year)

December 3 1, 201 6



Employer Identification Number: 95-3551121

Plan Number: 001









* Indicates a party-in-interest of the Plan.

Note: As all Plan   investments are participant directed, column (d) providing certain participant - directed transaction cost information is not applicable and has been omitted.