NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
NOTE
1—PLAN DESCRIPTION
Viacom Inc. (“Viacom” or the “Company”) established the Viacom 401(k) Plan (the
“Plan”), effective on January 1, 2006.
The following is a brief description of the Plan and is provided for general
information only. Participants should refer to the Plan document and the Summary Plan Description made available to them for more complete information regarding the Plan. In the event of a conflict between the following description and the Plan
document, the Plan document will control.
The Plan, sponsored by the Company, is a defined contribution plan offered to substantially all
of the Company’s employees. The Plan is subject to the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Administration
of the Plan is overseen by the Viacom Retirement Committee (“Plan Administrator”), the members of which are appointed under the Plan document. Members may also be added to or removed from the Retirement Committee by the Company’s
Executive Vice President & Chief Administrative Officer.
JPMorgan Chase Bank, N.A., served as trustee and custodian of the Plan
pursuant to the amended and restated Master Trust Agreement dated January 1, 2012. Effective as of the close of business on October 31, 2016, JPMorgan Chase Bank, N.A., was removed as trustee and as of November 1, 2016, Great-West
Trust Company, LLC (“Great-West” or the “Trustee”) was appointed successor trustee of the Plan. Great-West serves as trustee pursuant to a Master Trust Agreement dated November 1, 2016 (“the Agreement”). Under the
Agreement, Great-West has the power to appoint suitable custodians in its sole discretion. JPMorgan Chase Bank, N.A., remained custodian of the Plan’s assets through the close of business on February 20, 2017. Great-West appointed Mellon
Bank, N.A., as custodian, and the Plan’s assets were transferred to Mellon Bank, N.A., as of February 21, 2017. Great-West Financial Retirement Plan Services, LLC (doing business as Empower Retirement (“Empower”)) is the
recordkeeper for the Plan.
Related Party Transactions
Certain investments for the Plan are invested in funds managed by affiliates of the Trustee, and are considered a “party-in-interest”
as such term is defined in ERISA. In addition, certain Plan investments are in shares of Class A and Class B common stock of the Company and qualify as a party-in-interest. The fair value of these investments was $42.2 million and $47.8 million
at December 31, 2016 and 2015, respectively. For the year ended December 31, 2016, these investments depreciated $6.9 million, which is equal to the net of realized and unrealized gains and losses, and earned dividends of $1.4 million,
which were reinvested into the Plan. During the year ended December 31, 2016, the Plan sold shares of Viacom Class A and Class B common stock for total proceeds of $7.5 million and purchased shares of Viacom Class B common stock
at a cost of $8.8 million.
Eligibility
Eligible full-time employees may become participants in the Plan following the attainment of age 21. Eligible part-time employees generally
participate in the Plan on the first of the month after attainment of age 21 and completion of one thousand hours of service within the consecutive twelve-month period beginning with their date of hire or within any plan year (January 1 through
December 31) thereafter.
Participant Accounts
Each participant’s account is credited with the participant’s contributions, applicable employer contributions, earnings or losses on
the participant’s account and allocations of Plan administrative expenses. Allocations are based on participant earnings or losses, account balances, or specific participant transactions, as defined. The benefit to which a participant is
entitled is the vested portion of the participant’s account.
Plan participants have the option of investing their contributions and
existing account balances among twenty investment options. All investments are participant directed. These investment options include separately managed investment portfolios, common/collective trust funds, registered investment companies (mutual
funds) and Viacom Class B common stock. Some plan participants are invested in Viacom Class A common stock, but that fund is closed to new investment. The securities held by these investment options are described in greater detail in Note 3.
Contributions
Participants are
permitted to contribute up to 50% of annual eligible compensation, on a before-tax basis, subject to applicable Code limitations discussed below. Participants may also contribute eligible rollover amounts into the Plan.
5
VIACOM 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Tabular dollars in thousands)
All eligible employees are deemed to have authorized the Company to make before-tax
contributions to the Plan in an amount equal to 6% of the employee’s eligible compensation upon his or her date of hire. Deemed authorization takes effect on the first available payroll following the 30
th
day after the employee is sent notification he or she is eligible to participate in the Plan, unless the employee elects not to participate in the Plan or to participate at a different contribution
rate. The Plan’s designated default investment is a target retirement date asset allocation fund.
The Code limited the amount of
annual participant contributions that can be made on a before-tax basis to $18,000 for 2016. Compensation considered under the Plan based on Code limits could not exceed $265,000 for 2016. The Code also limited annual aggregate participant and
employer contributions to the lesser of $53,000 or 100% of compensation in 2016. In 2016, the Plan utilized a safe harbor design for compliance with the nondiscrimination requirements applicable to deferrals and matching contributions in accordance
with the provisions of the Code.
Each participant who has attained age 50 before the close of the calendar year is eligible to make
catch-up contributions if the participant made the maximum contribution permitted under the Plan for a plan year. The limit for catch-up contributions was $6,000 in 2016.
The employer matching contribution is equal to 100% of the first 1% and 80% of the next 5% of eligible compensation contributed and employer
matching contributions are invested according to the participant’s investment elections. Catch-up contributions are not treated as matchable contributions except when required by law. A match true-up contribution may be made at the end of the
plan year to ensure participants receive the full Company match.
In 2016, the Company’s discretionary annual employer profit sharing
contribution equaled 0.75% of eligible compensation. In future years the Company may make a lower or higher contribution (not anticipated to be in excess of 3% of eligible compensation) or no contribution at all depending on circumstances. Company
profit-sharing contributions are discretionary, meaning they are not guaranteed and may not be made in any given year. Participants were required to be employed on the last day of the Company’s fiscal year 2016 and meet all other eligibility
requirements in order to receive the profit-sharing contribution.
Vesting
Participants in the Plan are immediately vested in their own contributions and earnings thereon. Employer matching and profit sharing
contributions (“employer contributions”) vest at 100% after two years of service. Transition rules apply to participants of plans that were merged into the Plan.
Forfeitures
If participants terminate
employment prior to being vested in their employer contributions, upon distribution of the vested portion of their accounts, or, if earlier, a five-year break in service, the non-vested portion of their account is forfeited. Forfeitures may be used
for future employer contributions and/or to pay administrative expenses. As of December 31, 2016, the Company had forfeitures, including interest earned on such amounts, of approximately $1.4 million. As of December 31, 2015, the Company
had forfeitures of approximately $0.8 million. In 2016, employer contributions of approximately $1.0 million were forfeited, and the Company utilized forfeitures of approximately $0.4 million to pay administrative expenses.
Notes receivable from participants
Participants may request a loan of up to the lesser of 50% of the participant’s vested account balance or $50,000, reduced by the highest
outstanding balance of any Plan loan made to the participant during the twelve-month period ending on the day before the loan is made. The minimum loan available to a participant is $500. The interest rate on participant loans is currently one
percentage point above the annual prime commercial rate (as published in The Wall Street Journal) on the first day of the calendar month in which the loan is approved, with principal and interest payable not less than quarterly through payroll
deductions. Only one loan may be outstanding at any time. Participants may elect repayment periods from 12 to 60 months commencing as soon as administratively possible following the issuance of the loan. The Plan allows participants to elect a
repayment period of up to 300 months for loans used for the acquisition of a principal residence. Repayments of loan principal and interest are allocated in accordance with the participant’s then current investment elections. 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.
6
VIACOM 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Tabular dollars in thousands)
Included in the Statements of Net Assets Available for Benefits are
Notes receivable from
participants
of $12.1 million and $12.2 million as of December 31, 2016 and 2015, respectively, which carried interest rates ranging from 3.25% to 9.5%.
Payment of Benefits and Hardship Withdrawals
Earnings on both employee and employer contributions are not subject to income tax until they are distributed or withdrawn from the Plan.
Participants in the Plan, or their beneficiaries, may receive their vested account balances in a lump sum or in installments in the event of
termination of employment, long-term disability or death. A participant must commence receiving required minimum distributions no later than the April 1
st
after the year in which the
participant attains age 70
1
/
2
unless he/she is still employed. Installment payments to beneficiaries are available only if the
participant was receiving installment payments at the time of death.
Participants in the Plan may withdraw certain eligible contributions
at any time. Upon attainment of age 59
1
/
2
, participants may withdraw all or part of their vested account. The Plan limits participants
to a maximum of two non-hardship withdrawals in each plan year.
The Plan also provides for financial hardship withdrawals, in accordance
with applicable sections of the Code. A participant may obtain a financial hardship withdrawal of the employee’s before-tax contributions provided that the requirements for financial hardship are met and only to the extent required to relieve
such hardship. Additionally, the vested portion of employer matching contributions through December 31, 2009, any vested profit-sharing contributions and certain predecessor plan contributions may be used toward a financial hardship withdrawal.
There is no restriction on the number of hardship withdrawals permitted. Participants who take a hardship withdrawal are suspended from making employee contributions to the Plan for 6 months.
When a participant terminates employment with the Company, the full value of the employee contributions and earnings thereon plus the value of
all vested employer contributions and earnings thereon can be rolled over to a tax qualified retirement plan or an Individual Retirement Account or remain in the Plan rather than being distributed. If the vested account balance is $1,000 or less and
the participant does not make an election to roll over the vested balance, it will be automatically paid in a single lump sum cash payment and taxes will be withheld from the distribution.
Plan Expenses
The Plan document permits
Plan expenses to be paid from Plan forfeitures, from participant accounts or by the Company. The fees for investment of Plan assets are charged to the Plan’s investment funds, as reflected in the net asset value of the fund. Certain
administrative expenses, such as legal, accounting, recordkeeping, trustee and custodian fees, may be paid by the Plan using forfeitures as described above or may be paid by the Company. Recordkeeping, trustee and custodian fees may also be paid
from participant accounts. For 2016, $0.5 million was paid to Empower for plan administration services, which included recordkeeping, trustee and custodian fees.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial
statements are prepared on the accrual basis of accounting.
Recent Accounting Pronouncements
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2015-12,
Plan
Accounting: Defined Benefit Pension Plans
(Topic 960),
Defined Contribution Pension Plans
(Topic 962),
and 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
. This three part standard simplifies employee benefit plan reporting with respect to fully benefit-responsive investment contracts and plan disclosures, and provides for a
measurement-date practical expedient. Parts I and II are effective retrospectively for the Plan year ended December 31, 2016. Part III does not apply to the Plan. The Plan’s financial statements and disclosures contained herein incorporate
the new guidance.
7
VIACOM 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Tabular dollars in thousands)
In May 2015, the FASB issued ASU No. 2015-07,
Fair Value Measurement
(Topic 820):
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)
, which removes the requirement to include investments in the fair value hierarchy for which fair value is measured using the net
asset value per share practical expedient under ASC 820. This ASU is effective for the Plan retrospectively for the year ended December 31, 2016. The Plan’s financial statements and disclosures contained herein incorporate the new
guidance.
Investment Valuation and Income Recognition
Investments are reported at fair value except for fully benefit-responsive investment contracts, which are recorded at contract value. Fair
value 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. The Plan’s valuation policies utilize information provided by the
investment advisors, custodian, and insurance companies. See Note 3 for discussion of fair value measurements. Contract value is the relevant measure for the 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 normally would receive if they were to initiate permitted transactions under the terms of the Plan. See Note 8 for discussion of the
fully benefit-responsive investment contracts.
Purchases and sales of securities are recorded on the trade date. The average cost basis
is used to determine gains or losses on dispositions of securities.
Interest income is accrued as earned and dividend income is recorded
on the ex-dividend date.
Included in the Statement of Changes in Net Assets Available for Benefits is the net appreciation/(depreciation)
in the fair value of the Plan’s investments, which includes the gains and losses on investments bought and sold, as well as held, during the year.
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. Related fees are recorded as administrative expenses and are expensed when they are
incurred. No allowance for credit losses has been recorded as of December 31, 2016 or 2015.
Payment of Benefits
Benefits are recorded when paid.
Use of
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires the Plan’s management to make estimates, judgments and assumptions, such as those regarding the fair value of investments, 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 changes in net assets available for benefits during the reporting period. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual
results could differ from those estimates.
8
VIACOM 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Tabular dollars in thousands)
NOTE 3—FAIR VALUE MEASUREMENTS AND INCOME RECOGNITION
Fair Value Measurements and Income Recognition
The FASB provides the framework for measuring fair value. That framework provides 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 or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3
measurement). The three levels of the fair value hierarchy under the FASB guidance are described as follows:
|
|
•
|
|
Level 1— Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
|
|
|
•
|
|
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— Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is
significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The following is a description of the valuation methodology used for assets measured at fair value including the general classification of
such instruments pursuant to the valuation hierarchy. There have been no changes in the methodologies used at December 31, 2016 and 2015.
Common Stocks:
Common stocks are reported at fair value based on quoted market prices on national securities exchanges. All
common stocks are classified within level 1 of the valuation hierarchy.
Registered Investment Companies (Mutual Funds):
Investments in registered investment companies are stated at the respective fund’s NAV, which is determined based on market values at the closing price on the last business day of the year. The NAV is a quoted price in an active market
and classified within level 1 of the valuation hierarchy.
U.S. Government Securities:
Short-term money market obligations
are valued at $1.00 per share and are classified within level 2 of the valuation hierarchy.
9
VIACOM 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Tabular dollars in thousands)
The following tables set forth, by level within the fair value hierarchy, the Plan’s investments at fair
value as of December 31, 2016 and 2015, respectively. There were no transfers between Level 1 and Level 2 investments in 2016. The Plan has no investments classified within level 3 of the valuation hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at Fair Value as of December 31, 2016
|
|
|
|
|
Quoted Prices In
Active Markets for
Identical Assets
Level 1
|
|
|
Significant Other
Observable
Inputs
Level 2
|
|
|
Total
|
|
|
Common Stock
|
|
$
|
211,190
|
|
|
$
|
—
|
|
|
$
|
211,190
|
|
|
Registered Investment Companies
|
|
|
20,667
|
|
|
|
—
|
|
|
|
20,667
|
|
|
U.S. Government Securities
|
|
|
—
|
|
|
|
8,512
|
|
|
|
8,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in the fair value hierarchy
|
|
$
|
231,857
|
|
|
$
|
8,512
|
|
|
$
|
240,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments measured at net asset value:
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common / Collective Trust Funds
|
|
|
|
|
|
|
|
|
|
|
792,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value
|
|
|
|
|
|
|
|
|
|
$
|
1,033,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at Fair Value as of December 31, 2015
|
|
|
|
|
Quoted Prices In
Active Markets for
Identical Assets
Level 1
|
|
|
Significant Other
Observable
Inputs
Level 2
|
|
|
Total
|
|
|
Common Stocks
|
|
$
|
221,388
|
|
|
$
|
—
|
|
|
$
|
221,388
|
|
|
Registered Investment Companies
|
|
|
17,193
|
|
|
|
—
|
|
|
|
17,193
|
|
|
U.S. Government Securities
|
|
|
—
|
|
|
|
8,990
|
|
|
|
8,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in the fair value hierarchy
|
|
$
|
238,581
|
|
|
$
|
8,990
|
|
|
$
|
247,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments measured at net asset value:
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common / Collective Trust Funds
|
|
|
|
|
|
|
|
|
|
|
707,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value
|
|
|
|
|
|
|
|
|
|
$
|
955,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
In accordance with Subtopic 820-10, certain investments that were measured at net asset value per share have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended
to permit reconciliation of the fair value hierarchy to the line items presented in the statement of net assets available for benefits.
|
10
VIACOM 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Tabular dollars in thousands)
Investments Measured Using the Net Asset Value per Share Practical Expedient
The following table summarizes investments for which fair value is measured using the net asset value per share practical expedient as of
December 31, 2016 and 2015, respectively. There are no restrictions on participant redemptions for these investments; the redemption notice period is applicable only to the Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Fair Value
|
|
|
Unfunded
Commitments
|
|
|
Redemption
Frequency
|
|
|
Redemption
Notice Period
|
|
|
JPM Target Date Funds
|
|
$
|
303,279
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
2 months
|
|
|
Blackrock Equity Index Fund
|
|
|
204,062
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
1 month
|
|
|
Blackrock Russell 2500 Index Fund
|
|
|
91,498
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
1 month
|
|
|
Blackrock US Debt Index Fund
|
|
|
79,030
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
1 month
|
|
|
Blackrock MSCI ACWI
|
|
|
50,346
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
1 month
|
|
|
The Collective Pzena Fund
|
|
|
34,557
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
15 days
|
|
|
Mawer International Fund
|
|
|
29,966
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
10 days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common/Collective Trust Funds
|
|
$
|
792,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Fair Value
|
|
|
Unfunded
Commitments
|
|
|
Redemption
Frequency
|
|
|
Redemption
Notice Period
|
|
|
JPM Target Date Funds
|
|
$
|
262,944
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
2 months
|
|
|
Blackrock Equity Index Fund
|
|
|
184,508
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
1 month
|
|
|
Blackrock Russell 2500 Index Fund
|
|
|
80,117
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
1 month
|
|
|
Blackrock US Debt Index Fund
|
|
|
73,185
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
1 month
|
|
|
Vontobel International Fund
|
|
|
68,933
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
1 month
|
|
|
Blackrock MSCI ACWI
|
|
|
38,009
|
|
|
|
n/a
|
|
|
|
Daily
|
|
|
|
1 month
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common/Collective Trust Funds
|
|
$
|
707,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 4—RISKS AND UNCERTAINTIES
The Plan provides for various investment options that, along with the underlying securities, are exposed to various risks such as market,
interest rate, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of such securities, it is at least reasonably possible that changes in risks in the
near term could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits.
NOTE 5—TAX STATUS
On May 14,
2014, the Plan received a determination from the Internal Revenue Service (“IRS”) that the Plan satisfies the requirements of Section 401(a) of the Code and that the trust thereunder is exempt from federal income taxes under the
provisions of Section 501(a) of the Code. Certain amendments have been made to the Plan since receiving the determination letter. However, the Plan Administrator and the Plan’s tax counsel believe that the Plan is designed and is currently
being operated in compliance with the applicable provisions of the Code.
As of December 31, 2016, there were no uncertain tax
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 year in progress.
11
VIACOM 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Tabular dollars in thousands)
NOTE 6—PLAN TERMINATION
Although the Company anticipates that the Plan will continue indefinitely, it reserves the right by action of the Viacom Board of Directors or
Retirement Committee to amend or terminate the Plan provided that such action does not retroactively reduce earned participant benefits. In the event of Plan termination, participants would become fully vested. Upon termination, the Plan provides
that the net assets of the Plan would be distributed to participants based on their respective account balances.
NOTE 7—INVESTMENT IN FULLY
BENEFIT-RESPONSIVE INVESTMENT CONTRACTS
The Plan holds a portfolio of synthetic guaranteed investment contracts (“GICs”).
These contracts meet the fully benefit-responsive investment contract criteria and therefore are reported at contract value. Contract value is the relevant measure of fully benefit-responsive investment contracts because this is the amount received
by participants if they were to initiate permitted transactions under the terms of the Plan. Contract value represents contributions made under each contract, plus earnings, less participant’s withdrawals and administrative expenses. The GICs
had a contract value of $103.3 million and $99.1 million at December 31, 2016 and 2015, respectively.
The Plan invests in investment
contracts through the INVESCO Fund (the “Fund”). The Fund invests primarily in fully benefit-responsive investment contracts in a wrapper contract structure (also known as synthetic GICs). In a wrapper contract structure, the underlying
investments are owned by the Fund and held in trust for plan participants and are of high quality fixed income securities or investment funds. The Fund purchases a wrapper contract from an insurance company or bank. The wrapper contract amortizes
the realized and unrealized gains and losses on the underlying fixed income investments; typically over the expected duration of the investment through adjustments to the future interest crediting rate (which is the rate earned by participants in
the fund for the underlying investments which resets on a monthly basis). The issuer of the wrapper contract provides assurance that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than
zero. An interest crediting rate less than zero would result in a loss of principal or accrued interest.
The key factors that influence
future interest crediting rates for a wrapper contract include: the level of market interest rates, the amount and timing of participant activity into/out of the wrapper contract, the investment returns generated by the fixed income investments that
back the wrapper contract, and the duration of the underlying investments backing the wrapper contract.
Changes in market interest rates
affect the yield to maturity and the market value of the underlying investments; therefore, they can have a material impact on the wrapper contract’s interest crediting rate. In addition, participant withdrawals and transfers from the Fund are
paid at contract value but funded through the market value liquidation of the underlying investments, which also impacts the interest credit rating. All wrapper contracts provide for a minimum interest crediting rate of zero percent. In the event
that the interest crediting rate should fall to zero and the requirements of the wrapper contract are satisfied, the wrapper issuers will pay to the Plan the shortfall needed to maintain the interest crediting rate at zero. This ensures that
participants’ principal and accrued interest are protected.
Certain events might limit the ability of the Plan to transact at
contract value with the contract issuer. These events may be different under each contract. Examples of such events include (1) the Plan’s failure to qualify under Section 401(a) of the Code or the failure of the trust to be
tax-exempt under Section 501(a) of the Code, (2) premature termination of the contracts, (3) Plan termination or merger, (4) changes to the Plan prohibition on competing investment options, and (5) bankruptcy of the plan
sponsor or other plan sponsor events. No events are probable of occurring that might limit the ability of the Plan to transact at contract value with the contract issuers and that also would limit the ability of the Plan to transact at contract
value with the participants.
In addition, certain events allow the issuer to terminate the contracts with the Plan and settle at an
amount different from the contract value. Those events may be different under each contract. Examples of such events include (1) an uncured violation of the Plan investment guidelines, (2) a breach of material obligation under the
contract, (3) a material misrepresentation, and (4) a material amendment to the agreements without the consent of the issuer.
12
VIACOM 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Tabular dollars in thousands)
NOTE 8—RECONCILIATION OF FINANCIAL STATEMENTS TO IRS FORM 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Net assets available for benefits per the financial statements
|
|
$
|
1,151,297
|
|
|
$
|
1,069,522
|
|
|
Adjustment from fair value to contract value for fully benefit responsive investment contracts
(prior year only)
|
|
|
|
|
|
|
1,765
|
|
|
Amounts allocated to withdrawing participants
|
|
|
(665
|
)
|
|
|
(111
|
)
|
|
Deemed distribution of participant loans
|
|
|
(355
|
)
|
|
|
(294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits per the Form 5500
|
|
$
|
1,150,277
|
|
|
$
|
1,070,882
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of benefits paid to participants as reflected in the financial statements to
the Form 5500:
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2016
|
|
|
Benefits paid to participants per the financial statements
|
|
$
|
94,934
|
|
|
Add: Amounts allocated to withdrawing participants at December 31, 2016
|
|
|
665
|
|
|
Less: Amounts allocated to withdrawing participants at December 31, 2015
|
|
|
(111
|
)
|
|
Deemed loan offsets
|
|
|
18
|
|
|
|
|
|
|
|
|
Benefits paid to participants per the Form 5500
|
|
$
|
95,506
|
|
|
|
|
|
|
|
Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that were
processed and approved for payment before year-end, but were not yet paid as of that date.
The following is a reconciliation of net
increase/(decrease) in net assets available for benefits per the financial statements to the Form 5500:
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2016
|
|
|
Net increase in net assets available for benefits per the financial statements
|
|
$
|
81,775
|
|
|
Amounts allocated to withdrawing participants at December 31, 2016
|
|
|
(665
|
)
|
|
Amounts allocated to withdrawing participants at December 31, 2015
|
|
|
111
|
|
|
Deemed loan offsets
|
|
|
(18
|
)
|
|
Deemed distribution of participant loans
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
Net income per the Form 5500
|
|
$
|
81,160
|
|
|
|
|
|
|
|
NOTE 9—SUBSEQUENT EVENTS
Subsequent events and transactions have been evaluated through the date the financial statements were available to be issued, and are
incorporated herein as applicable.
13
VIACOM 401(k) PLAN
SCHEDULE H, LINE 4i –SCHEDULE OF ASSETS (HELD AT END OF YEAR)
PN: 002 / EIN: 20-3515052
DECEMBER 31, 2016
(In
thousands)