NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2016 and 2015
1.
PLAN DESCRIPTION
The following description of the American Electric Power System Retirement Savings Plan (Plan) is provided for general information purposes only. Participants should refer to the Plan documents for a more complete description of the Plan’s information.
General
The Plan is a defined contribution plan that became effective and commenced operations on January 1, 1978. The Plan covers full-time and part-time employees of the participating subsidiaries of American Electric Power Company, Inc. (AEP or the Company) who are not excluded by the terms of the Plan, such as pursuant to a unionized collective bargaining agreement. American Electric Power Service Corporation (AEPSC) is the plan administrator (Plan Administrator) and plan sponsor (Plan Sponsor). AEPSC is a wholly-owned subsidiary of AEP. JP Morgan Chase Bank (JPMorgan) is the primary trustee for the Plan. Great West Financial Retirement Plan Services, LLC (Empower Retirement) is the plan record keeper. Effective May 23, 2016, American Electric Power Service Corporation (AEPSC) appointed Great-West Trust Company, LLC (GWTC) as a trustee/custodian for certain cash held on behalf of the Plan pending investment or disbursement.
Contributions
Newly eligible employees are automatically enrolled in the Plan with a 3% pretax deferral. Employees may opt out of the automatic enrollment or revise their elections after they are notified of their right not to have such pretax deferrals made on their behalf and how their account will be invested in the absence of their making an investment election. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Generally, eligible employees participating in the Plan may make contributions (pretax, after-tax or Roth 401(k) contributions) in 1% increments up to 50% of their eligible pay (within Internal Revenue Service (IRS) limits). Participants who are age 50 and older are eligible to contribute additional pretax or Roth 401(k) amounts as catch-up contributions. The catch-up contribution limit was $6,000 for 2016 and 2015.
An employee who is eligible to participate in the Plan also may roll eligible retirement benefits into the Plan.
The participating employers contribute to the Plan, on behalf of each participant, an amount equal to 100% of the participant’s non-rollover contributions up to 1% of the participant’s eligible compensation for each payroll period, plus 70% of the participant’s contributions for the next 5% of the participant’s eligible compensation for each payroll period, subject to certain limitations. All contributions that are withheld from a participant’s pay or are made by the participating employers are deposited in the American Electric Power System Retirement Savings Plan Trust after each pay period. The Plan, in a manner consistent with the requirements under section 401 of the Internal Revenue Code (IRC), restricts the amount that certain participants who are deemed highly compensated may contribute to the Plan, provided that it is AEPSC’s intent that the Plan include a “qualified automatic contribution arrangement” (as defined in Section 401(k)(13) of the IRC), such that only the after-tax contributions made by such highly compensated participants may be subject to such restrictions.
Dolet Hills Lignite Company, LLC (DHLC) is wholly -owned by Southwestern Electric Power Company, which is a wholly-owned Subsidiary of AEP. In January 2016, DHLC employees became eligible to participate in the Plan.
In connection with that transition, DHLC and the Plan Sponsor decided that DHLC’s 401(k) savings plan would be merged into the Plan and as a result, $20.4 million in assets were transferred to the Plan in January 2016.
In November 2015, AEP sold its commercial barge transportation subsidiary, AEP River Operations (AEPRO), to American Commercial Barge Lines (ACBL), a nonaffiliated party. ACBL acquired AEPRO by purchasing all the common stock of AEP Resources, Inc., the parent company of AEPRO. AEP agreed to cause the Plan account balances of the participants who became employees of ACBL or its affiliates to be transferred to the 401(k) retirement plan in which they had become participants following the sale. As a result, $67.6 million in assets were transferred out of the Plan and into ACBL’s 401(k) plan in February 2016, including $5.0 million in participant loans receivable.
Investments
The investment options offered by the Plan are a series of separately managed accounts, interests in commingled and collective trusts, Target Date Funds, the AEP Stock Fund and self-directed mutual fund brokerage accounts. Affiliates of JPMorgan and Empower Retirement provide custody, trustee, recordkeeping and other services with regard to investments.
Notes Receivable from Participants
Participants may borrow from their savings plan accounts a minimum of $1,000 but no more than the lesser of $50,000 or 50% of their account balance. Loan terms range from 12 months to 60 months (or up to 180 months for certain residential loans), or any monthly increment in-between. Interest rates, fixed for the life of the loan, are calculated by adding 1% to the prime rate, as reported in the Wall Street Journal as of the first business day of the calendar month in which the loan is taken. Active employees repay principal and interest payments through payroll deductions.
Participant loans and the accrued interest are collateralized by the account balance, and upon default, the outstanding balance is subject to income taxes and possible tax penalty.
Participant Accounts
Individual accounts are maintained for each Plan participant. Each participant’s account is credited with the participant’s contributions, the Company’s matching contributions and investment earnings and losses and charged with benefit payments and allocations of Plan expenses. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.
Participants may transfer the value of their cumulative contributions, in any whole percentage or dollar amount, among investments, and change their investment elections on a daily basis. Participants may change their payroll contribution elections coinciding with the Company’s payroll periods.
Vesting and Distribution
Participants are immediately vested in their pretax, after-tax, Roth 401(k) and the Company matching contributions, including earnings thereon. Excluding participants’ pretax and Roth 401(k) contributions, and post-2008 Company matching contributions, all participants may make an unlimited number of withdrawals of their interest in the Plan,
including their pre-2009 Company matching contributions. Pretax and Roth 401(k) contributions are eligible for withdrawal by participants only after age 59-1/2, or earlier upon hardship (as defined by the Plan) or following termination of employment. Post-2008 Company matching contributions are eligible for withdrawal by participants only after age 59-1/2, or earlier following earlier termination of employment, but not upon hardship.
The AEP Stock Fund, a Plan investment option, is an employee stock ownership plan or fund. As a result, participants can elect to have dividends generated from their AEP Stock Fund holdings paid out in cash, rather than automatically reinvested in the fund. The dividend payouts are made periodically (at least annually) and are treated as ordinary income to the participants for tax purposes.
2.
ACCOUNTING POLICIES
Basis of Accounting
The accompanying financial statements are prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America (GAAP).
Investment Valuation and Income Recognition
Participants direct the investment of their contributions into various investment options offered by the Plan. Investments in securities are reported at fair value while fully benefit responsive investment contracts are reported at contract value. Fair value of a financial instrument is 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.
Purchases and sales of securities have been recorded on a trade-date basis. Net appreciation includes the Plan’s gains or losses on investments bought or sold as well as held throughout the year. Interest income is recorded on an accrual basis. Dividends are recorded on the ex-dividend date. These amounts are reinvested by the Trustee in the funds that generated such income with the exception of the AEP Stock Fund, which pays or reinvests dividends at the direction of each participant.
Notes Receivable from Participants
Notes Receivable from Participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are not recorded as distributions until actually distributed based on the terms of the Plan document.
Administrative and Management Fees
Administrative and Management Fees incurred relating to JPMorgan and Empower Retirement during 2016 and 2015 totaled $2,566,217 and $2,532,903, respectively. The Plan directly pays for administrative, recordkeeping and management fees.
Distributions to Participants
Distributions to participants are recorded when paid. There were no material amounts of distributions due to participants who requested distributions from the Plan as of December 31, 2016 and 2015.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein and disclosure of contingent assets. Actual results could differ from the estimates.
Fair Value Measurements of Assets
The accounting guidance for “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). AEPSC’s staff independently monitors valuation policies and procedures and provides members of the Benefits Finance Committee (BFC) and its Investment Subcommittee (IC) various monthly and quarterly reports, regarding compliance with policies and procedures. The BFC consists of AEPSC’s Chief Financial Officer, Treasurer, Chief Administrative Officer, Chief Risk Officer, Executive Vice President General Counsel in addition to the Executive Vice President - Energy Supply of AEP and the President of AEP Ohio. The IC consists of AEPSC’s Treasurer, Chief Risk Officer (until May 22, 2017), Director of Trusts and Investments and two Managing Directors of Corporate Finance (one that was appointed August 22, 2016 and the other May 22, 2017).
The Plan utilizes its Trustee’s external pricing service to estimate the fair value of the underlying investments held in the Plan. The Plan’s investment managers review and validate the prices utilized by the Trustee to determine fair value. The Plan Administrator performs its own valuation testing to verify the fair values of the securities, in part by reviewing audit reports of the Trustee’s operating controls and valuation processes.
Assets in the Plan are classified using the following methods. Equities are classified as Level 1 holdings if they are actively traded on exchanges. Items classified as Level 1 are investments in money market funds, fixed income and equity mutual funds and domestic equity securities. They are valued based on observable inputs primarily unadjusted quoted prices in active markets for identical assets. Items classified as Level 2 are primarily investments in individual fixed income securities and cash equivalents funds. Fixed income securities do not trade on an exchange and do not have an official closing price but their valuation inputs are based on observable market data.
The Trustee uses multiple pricing vendors for the assets held in trust. The Trustee’s pricing vendors calculate bond valuations using financial models and matrices. The models use observable inputs including yields on benchmark securities, quotes by securities brokers, rating agency actions, discounts or premiums on securities compared to par prices, changes in yields for U.S. Treasury securities, corporate actions by bond issuers, prepayment schedules and histories, economic events and, for certain securities, adjustments to yields to reflect changes in the rate of inflation. Cash equivalent funds are held to provide liquidity and meet short term cash needs. The underlying holdings in the cash funds consist of commercial paper, certificates of deposit, treasury bills, and other short-term debt securities. Short-term debt securities are valued based on observable market data by the trust banks pricing vendor. Other securities with model-derived valuation inputs that are observable are also classified as Level 2 investments. Investments with unobservable valuation inputs are classified as Level 3 investments.
Common Collective Trusts are valued at the net asset value per share (NAV) and the Managed Income Fund is valued at contract value. The basis of the reported NAV is the total fair value of all underlying holdings less expenses and liabilities. The value of each unit is determined by dividing the net asset value of the fund by the number of applicable units outstanding on the valuation date. The following funds are underlying investments of the Managed Income Fund.
JPMorgan US Treasury Plus and US Government Money Market Funds
The objective of these funds is to provide liquidity and meet short-term cash needs while preserving principal. The underlying holdings in the JPMorgan US Treasury Plus fund include U.S. Treasury obligations, including Treasury bills, bonds and notes and other obligations issued or guaranteed by the U.S. Treasury, and repurchase agreements fully collateralized by U.S. Treasury securities. The underlying holdings in the JPMorgan US Government fund include debt securities issued or guaranteed by the U.S. government, or by U.S. government agencies or instrumentalities or Government-Sponsored Enterprises (“GSEs”), and repurchase agreements fully collateralized by U.S. Treasury and U.S. government securities.
Metlife Separate Account No. 690
The objective of the fund is to exceed the performance of the Barclays Capital 1-3 year Government/Credit Index. The fund seeks to preserve principal and an above average level of income with the goal of minimizing overall portfolio risk. Fixed income securities do not trade on an exchange and do not have an official closing price.
3.
PLAN TERMINATION
Although it has not expressed any intent to do so, AEPSC has the right to take such actions as will allow contributions to the Plan to be discontinued at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants remain 100 percent vested in their accounts.
4.
INVESTMENT CONTRACTS
The Managed Income Fund provides a stable value investment option that includes fully benefit-responsive wrap contracts which assure the book value of investments for plan participants. The fund’s underlying assets, which are held in a trust, utilize wrap contracts issued by four financial institutions as of December 31, 2016 and 2015. The contracts provide that participants execute plan transactions at contract value. Contract value represents contributions made to the fund, plus credited interest, less participant withdrawals, without regard to changes in the fair value of the investments and securities underlying the fund. The rates for crediting interest are reset periodically based on market rates of other similar investments, the current yield of the underlying investments and the spread between the market value and contract value. The interest crediting rate cannot be less than 0%. Certain events initiated by the Plan Sponsor, such as plan termination or a plan merger, would limit the ability of the Plan to administer participant-level transactions at contract value or may allow for the termination of the wrap contract at market value, rather than contract value.
The Plan Sponsor does not believe that any events that may limit the ability of the plan to transact at contract value are probable as of December 31, 2016 or the date these financial statements are issued.
5.
PARTY-IN-INTEREST TRANSACTIONS
Certain transactions involving the Plan and its assets involved parties in interest with respect to the Plan, but most of those transactions were not prohibited transactions under ERISA because of the applicability of one or more exemptions. The exempt party-in-interest transactions involving the Plan included the following: JPMorgan Chase Bank, N.A. has acted as trustee and custodian under the Plan, while its affiliates have acted as (a) investment managers for a number of the Plan’s investment options; and (2) Great West Trust Company, LLC, has been acting as a trustee and custodian under the Plan since May 23, 2016, while its affiliates have acted as (a) the Plan’s record keeper and (b) investment advisor or investment manager for a number of plan participants with respect to the amounts held in their Plan accounts.
As of December 31, 2016 and 2015, the Plan held 5,229,663
and 5,503,327 shares, respectively, of common stock of American Electric Power Company, Inc., the parent company of the Plan Sponsor, with a cost basis of
$220,285,746
and $219,608,258, respectively. During the years ended December 31, 2016 and 2015, the Plan recorded dividend income of $11,775,399 and $12,146,882, respectively, related to its investment in that common stock.
The Plan entered into a non-exempt prohibited transaction when it made a series of overpayments to the Trustee between October 2006 and July 2014. ERISA Section 406(a)(1)(D) prohibits the use of plan assets by, or transfer of plan assets to, a party in interest (such as a fiduciary investment manager or Trustee). Although an exemption under ERISA 408(b)(2) generally is applicable to contracts with parties (such as Trustees) for services necessary for the operation of a plan where no more than reasonable compensation is paid therefor, the described payments represent the amount invoiced and paid by the Plan in excess of the amount required by the applicable contract.
The Trustee had agreed to apply different fee rates to different plan accounts, depending on the classification of the activity transacted in those accounts, and had agreed to waive normal fees with regard to other accounts. However, upon a review of the invoices generated by the Trustee, it was discovered that (a) for the period between July 2006 and July 2014, the Trustee had mistakenly applied incorrect fee rates applicable to certain accounts, and (b) between July 2009 and July 2014, it had mistakenly applied fees that it had agreed to waive. These resulted in an effective overcharge for their services. Following confirmation of the overpayments in 2014, the Plan secured repayment of the excess charges and the Trustee and Plan Sponsor have confirmed that the transactions were fully remediated in 2016.
The Plan Administrator reviewed whether certain legal fees paid by the Plan in September 2012 entailed a non-exempt prohibited transaction. It concluded that those fees did in fact relate to services for the operation of the Plan and therefore are not a prohibited transaction under ERISA.
The Plan also entered into a non-exempt prohibited transaction in March 2016 when Galliard Capital Management, Inc. (Galliard), a fiduciary investment manager engaged by the Plan, used its discretion to cause the Plan to purchase corporate bonds that had been issued by Berkshire Hathaway, Inc., which by then had become a 10% or more shareholder of Wells Fargo, Inc., which is the parent corporation of Galliard. ERISA Section 3(14)(H) defines the term “party in interest” to include a 10 percent or more shareholder directly or indirectly of a plan fiduciary. Therefore, when Galliard caused the Plan to purchase the bonds issued by Berkshire Hathaway, the resulting relationship between the Plan and Berkshire Hathaway may be considered an indirect use of Plan assets by a party in interest. When Galliard caused the Plan to sell the bonds approximately 6 months later at a gain of $25,359, that put the Plan in a financial position that was no worse than it would have been had the transaction not occurred,
which “corrected” the transaction
per applicable tax regulations. (See Temporary Treasury Regulation Section 141.4975-13 and Treasury Regulation Section 53.4941(e)-1(c)(1).)
6.
FAIR VALUE MEASUREMENTS
For a discussion of fair value accounting and the classification of assets within the fair value hierarchy, see the “Fair Value Measurements of Assets” section of Note 2.
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|
|
|
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|
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|
Plan Assets within the Fair Value Hierarchy as of December 31, 2016
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|
|
|
|
|
|
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Level 1
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|
Level 2
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|
Level 3
|
|
Other
|
|
Total
|
|
Equities
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Stocks
|
|
$
|
635,410,822
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
635,410,822
|
|
|
AEP Stock
|
|
329,259,557
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
329,259,557
|
|
|
Subtotal Equities
|
|
964,670,379
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|
|
—
|
|
|
—
|
|
|
—
|
|
|
964,670,379
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income
|
|
|
|
|
|
|
|
|
|
|
|
Government Bonds
|
|
—
|
|
|
20,789,868
|
|
|
—
|
|
|
—
|
|
|
20,789,868
|
|
|
Corporate Debt Securities
|
|
—
|
|
|
10,937,074
|
|
|
—
|
|
|
—
|
|
|
10,937,074
|
|
|
Mortgage Backed Securities
|
|
—
|
|
|
10,794,803
|
|
|
—
|
|
|
—
|
|
|
10,794,803
|
|
|
Subtotal Fixed Income
|
|
—
|
|
|
42,521,745
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|
|
—
|
|
|
—
|
|
|
42,521,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common/Collective Trusts
|
|
|
|
|
|
|
|
|
|
|
|
JPMorgan Liquidity Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,947,585
|
|
|
12,947,585
|
|
|
Mellon Capital Small Cap Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
181,257,716
|
|
|
181,257,716
|
|
|
Mellon Capital Mid Cap Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
239,275,406
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|
|
239,275,406
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|
|
Mellon Capital
Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
744,575,161
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|
|
744,575,161
|
|
|
Mellon Capital International Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
463,841,234
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|
|
463,841,234
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|
|
Mellon Capital REIT Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,607,567
|
|
|
27,607,567
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|
|
Mellon Capital Aggregate Bond Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
451,234,688
|
|
|
451,234,688
|
|
|
Mellon Capital Treasury Inflation-Protected Securities Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,303,861
|
|
|
19,303,861
|
|
|
JPMorgan Strategic Property Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,720,839
|
|
|
43,720,839
|
|
|
Mellon Capital Emerging Markets Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,607,569
|
|
|
26,607,569
|
|
|
Subtotal Common/Collective Trusts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,210,371,626
|
|
|
2,210,371,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment Companies (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
146,398,474
|
|
|
146,398,474
|
|
|
Cash Equivalents (a)
|
|
—
|
|
|
38,478
|
|
|
—
|
|
|
21,981,151
|
|
|
22,019,629
|
|
|
Accrued Items and Unsettled Trades (a)
|
|
(956,071
|
)
|
|
(5,486,311
|
)
|
|
—
|
|
|
(2,091,521
|
)
|
|
(8,533,903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Reflecting Investments at Fair Value
|
|
$
|
963,714,308
|
|
|
$
|
37,073,912
|
|
|
$
|
—
|
|
|
$
|
2,376,659,730
|
|
|
$
|
3,377,447,950
|
|
|
|
|
|
(a)
|
Amounts in “Other” column represent investments for which fair value is measured using net asset value per share in accordance with ASU 2015-07, Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which was retrospectively applied to prior periods.
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|
|
|
|
|
|
|
|
|
|
Plan Assets within the Fair Value Hierarchy as of December 31, 2015
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Other
|
|
Total
|
|
Equities
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Stocks
|
|
$
|
651,023,438
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
651,023,438
|
|
|
AEP Stock
|
|
320,678,864
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
320,678,864
|
|
|
Subtotal Equities
|
|
971,702,302
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
971,702,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income
|
|
|
|
|
|
|
|
|
|
|
|
Government Bonds
|
|
—
|
|
|
22,185,387
|
|
|
—
|
|
|
—
|
|
|
22,185,387
|
|
|
Corporate Debt Securities
|
|
—
|
|
|
12,881,747
|
|
|
—
|
|
|
—
|
|
|
12,881,747
|
|
|
Mortgage Backed Securities
|
|
—
|
|
|
13,834,151
|
|
|
—
|
|
|
—
|
|
|
13,834,151
|
|
|
Subtotal Fixed Income
|
|
—
|
|
|
48,901,285
|
|
|
—
|
|
|
—
|
|
|
48,901,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common/Collective Trusts
|
|
|
|
|
|
|
|
|
|
|
|
JPMorgan Liquidity Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,470,523
|
|
|
12,470,523
|
|
|
Mellon Capital Small Cap Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
168,768,573
|
|
|
168,768,573
|
|
|
Mellon Capital Mid Cap Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65,664,948
|
|
|
65,664,948
|
|
|
Mellon Capital
Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
679,723,905
|
|
|
679,723,905
|
|
|
Mellon Capital International Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
390,982,224
|
|
|
390,982,224
|
|
|
Mellon Capital REIT Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,129,855
|
|
|
26,129,855
|
|
|
Mellon Capital Aggregate Bond Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
565,276,859
|
|
|
565,276,859
|
|
|
Mellon Capital Treasury Inflation-Protected Securities Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,154,304
|
|
|
18,154,304
|
|
|
JPMorgan Strategic Property Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,781,444
|
|
|
46,781,444
|
|
|
Mellon Capital Emerging Markets Stock Index Fund (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,600,662
|
|
|
24,600,662
|
|
|
Subtotal Common/Collective Trusts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,998,553,297
|
|
|
1,998,553,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment Companies (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
159,986,702
|
|
|
159,986,702
|
|
|
Cash Equivalents (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,495,014
|
|
|
13,495,014
|
|
|
Accrued Items and Unsettled Trades (a)
|
|
(2,427,977
|
)
|
|
1,742,397
|
|
|
—
|
|
|
135,589
|
|
|
(549,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Reflecting Investments at Fair Value
|
|
$
|
969,274,325
|
|
|
$
|
50,643,682
|
|
|
$
|
—
|
|
|
$
|
2,172,170,602
|
|
|
$
|
3,192,088,609
|
|
|
|
|
|
(a)
|
Amounts in “Other” column represent investments for which fair value is measured using net asset value per share in accordance with ASU 2015-07, Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which was retrospectively applied to prior periods.
|
The following tables set forth a summary of the Plan's investments with a reported Net Asset Value as of December 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Estimated Using Net Asset Value per Share as of December 31, 2016
|
|
|
|
|
|
|
|
|
|
Common/Collective Trusts
|
|
Fair Value
|
|
Redemption
Frequency
(If currently
eligible)
|
|
Redemption
Notice Period
|
|
JPMorgan Liquidity Fund
|
|
$
|
12,947,585
|
|
|
Daily
|
|
1 Day
|
|
Mellon Capital Small Cap Stock Index Fund
|
|
181,257,716
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital Mid Cap Stock Index Fund
|
|
239,275,406
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital Stock Index Fund
|
|
744,575,161
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital International Stock Index Fund
|
|
463,841,234
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital REIT Index Fund
|
|
27,607,567
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital Aggregate Bond Index Fund
|
|
451,234,688
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital Treasury Inflation-Protected Securities Fund
|
|
19,303,861
|
|
|
Daily
|
|
Trade Date + 1
|
|
JPMorgan Strategic Property Fund
|
|
43,720,839
|
|
|
Quarterly
|
|
45 Days
|
|
Mellon Capital Emerging Markets Stock Index Fund
|
|
26,607,569
|
|
|
Daily
|
|
Trade Date + 1
|
|
Total Assets
|
|
$
|
2,210,371,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Estimated Using Net Asset Value per Share as of December 31, 2015
|
|
|
|
|
|
|
|
|
|
Common/Collective Trusts
|
|
Fair Value
|
|
Redemption
Frequency
(If currently
eligible)
|
|
Redemption
Notice Period
|
|
JPMorgan Liquidity Fund
|
|
$
|
12,470,523
|
|
|
Daily
|
|
1 Day
|
|
Mellon Capital Small Cap Stock Index Fund
|
|
168,768,573
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital Mid Cap Stock Index Fund
|
|
65,664,948
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital Stock Index Fund
|
|
679,723,905
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital International Stock Index Fund
|
|
390,982,224
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital REIT Index Fund
|
|
26,129,855
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital Aggregate Bond Index Fund
|
|
565,276,859
|
|
|
Daily
|
|
Trade Date + 1
|
|
Mellon Capital Treasury Inflation-Protected
Securities Fund
|
|
18,154,304
|
|
|
Daily
|
|
Trade Date + 1
|
|
JPMorgan Strategic Property Fund
|
|
46,781,444
|
|
|
Quarterly
|
|
45 Days
|
|
Mellon Capital Emerging Markets Stock Index Fund
|
|
24,600,662
|
|
|
Daily
|
|
Trade Date + 1
|
|
Total Assets
|
|
$
|
1,998,553,297
|
|
|
|
|
|
It is the Plan’s policy to record transfers in and transfers out of each level at the end of each reporting period. There have been no transfers between Level 1, Level 2, and Level 3 during the years ended December 31, 2016 and 2015.
7.
RISK AND UNCERTAINTIES
The Plan utilizes various investment instruments, including common stock, bonds, commingled funds and investment contracts. Investment securities are exposed to various risks, such as interest rate, credit and market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the amounts reported in the financial statements.
8.
FEDERAL INCOME TAX
The IRS has issued a favorable determination letter dated September 24, 2013 with respect to the Plan. A favorable determination letter indicates that, in the opinion of the IRS, the terms of the Plan meets the requirements of Section 401(a) of the IRC, and thereby recognizes the exempt status of the Plan’s trust pursuant to Section 501(a) of the IRC.
The Plan has been amended subsequent to the issuance of that
IRS determination letter. On January 30, 2017, the Plan Sponsor filed with the IRS an application for an updated determination letter that would address the amendments made to the Plan not covered by the 2013 determination letter. Plan management believes that the Plan is currently designed and operated in compliance with the applicable requirements of the IRC and that the Plan’s trust continues to be tax-exempt. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
GAAP requires Plan management to evaluate tax positions taken by the Plan and to 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 Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2016 and 2015, there are no uncertain positions taken or expected to be taken that would require recognition of a liability 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. The Plan Administrator believes it is no longer subject to income tax examinations for years prior to 2013.
9.
RECONCILIATION OF FINANCIAL STATEMENTS TO THE FORM 5500
The following tables are reconciliations of participant loans and net assets available for benefits per the financial statements to Form 5500.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
|
|
Participant Loans - Schedule H, Part I, Line 1c(8), Column (a)
|
|
2016
|
|
2015
|
|
Beginning Balance per Financial Statements
|
|
$
|
87,524,769
|
|
|
$
|
85,735,539
|
|
|
Less: Loans Deemed Distributed with No Post-Default Payments
|
|
(2,532,695
|
)
|
|
(2,386,756
|
)
|
|
Balance Reported on Form 5500
|
|
$
|
84,992,074
|
|
|
$
|
83,348,783
|
|