Notes to Financial Statements
December 31, 2016
1. Description of the Plan
General
The following
description of the Superior Tube Company, Inc. Union 401(k) Plan (the Plan) provides only summarized information. Participants should refer to the Plan document for a more complete description of the Plans provisions, copies of
which may be obtained from Superior Tube Company, Inc. (Superior, the Company or the Plan Sponsor).
The Plan is a tax-deferred 401(k) defined contribution savings plan which provides eligible union employees an opportunity to invest a portion of their compensation, as defined by the Plan, in one or a
combination of investment programs. See Note 3.
Trustee and Recordkeeper
Great-West Life & Annuity Insurance Company was the Plan Trustee and party-in-interest through September 30, 2016. Empower
Retirement was the Plans administrative recordkeeper through September 30, 2016. On September 30, 2016, the Plans assets were transferred from Great-West Life & Annuity Insurance Company to Vanguard Fiduciary Trust
Company. On September 30, 2016, the Vanguard Fiduciary Trust Company (Trustee) became the Plan Trustee and a party-in-interest to the Plan. The Vanguard Group is the Plans administrative recordkeeper.
Participant Eligibility
A Superior Tube Company union employee, who is not specifically an ineligible employee as defined by the Plan, shall become a participant
in the Plan as of the first day of employment.
Contributions
Each year, participants have an opportunity to invest up to 50% and no less than 2% of annual compensation, as defined in the Plan. Participants age 50 and over have an opportunity to invest catch-up
contributions up to Internal Revenue Service (IRS) annual limits. Participants may also contribute amounts representing rollovers from other qualified plans. Participants direct their elective contributions into various investment
options offered by the Plan and can change their investment options on a daily basis.
The Plan provides for Company matching
contributions based on a percentage of elective deferrals. Effective March 16, 2015, the Company contributed 50% of elective deferrals up to the first 6% of compensation deferred. For employees hired before March 18, 2013, the Plan
provided for a discretionary non-elective Company profit sharing contribution based on a percentage of compensation and years of service. Effective September 30, 2016 the profit sharing contribution became non-discretionary. Contributions are
subject to certain Internal Revenue Service (IRS) limitations.
Forfeited Company contributions are used to reduce
non-elective employer profit sharing contributions.
Participant Accounts
Each participants account is credited with the participants contributions, Company matching contributions, and allocations of
(a) the Companys profit sharing contributions and (b) Plan net earnings. Allocations are based on participant earnings and/or account balances, as defined. The benefit to which a participant is entitled is the balance in the
participants vested account.
5
Superior Tube Company, Inc. Union 401(k) Plan
Notes to Financial Statements
December 31, 2016
1. Description of the Plan (continued)
Vesting
Participants are fully vested at all times in participant contributions and any rollover contributions, plus actual earnings on these contributions. Vesting in the Companys contribution portion of
their accounts plus actual earnings thereon is based on years of credited service. This portion of participants accounts fully vests after three years of service or upon Normal Retirement Age, as defined. Upon the death or disability before
the participants retirement age or termination date, the participant will be fully vested.
Participant Loans
Participants may borrow a minimum of $1,000 or up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance.
Participants may have up to two loans outstanding at any time, although only one loan may be for a primary residence, the sum of which may not exceed the maximum allowable under the Plan. Loan origination fees are paid by participants and are
included in the gross loan distribution amount. Repayment terms of the loans are generally limited to no longer than 60 months from inception or for a reasonable period of time in excess of 60 months for the purchase of a principal residence, as
fixed by the Plan. The loans are secured by the balance in the participants account and bear interest at rates established by the Plan, which approximate rates charged by commercial lending institutions for comparable loans. Interest rates on
loans outstanding at December 31, 2016 ranged between 4.25% and 4.50%. Principal and interest is paid ratably through payroll deductions.
Master Trust
The AMETEK
Stock Fund of certain employee savings plans of AMETEK are combined under the AMETEK, Inc. Master Trust (Master Trust) agreement with the Trustee. Participating plans purchase units of participation in the AMETEK Stock Fund based on
their contributions to such fund along with income that the fund may earn, less distributions made to the plans participants. The AMETEK Stock Fund consists primarily of AMETEK common stock and a small portion may also be invested in
short-term securities to help accommodate daily transactions. The AMETEK Stock Fund is considered a level 1 investment within the fair value hierarchy. Effective September 30, 2016, the Plan became a participating plan in the Master Trust.
As of December 31, 2016, no participants have elected to defer compensation to purchase shares in the AMETEK Stock Fund, therefore, the Plan holds a zero interest in the Master Trust at December 31, 2016.
The Plan limits the amount a participant can invest in the AMETEK Stock Fund to encourage diversification of participants accounts.
Each payroll period, for other investment fund transfers and for other qualified plan rollover contributions, a participant can direct up to a maximum of 25% of their contributions in the AMETEK Stock Fund. The Plan has implemented a dividend pass
through election for its participants.
Each participant is entitled to exercise voting rights attributable to the shares
allocated to their account and is notified by the Company prior to the time that such rights may be exercised. The Trustee is not permitted to vote any allocated shares for which instructions have not been given by a participant. The Trustee votes
any unallocated shares in the same proportion as those shares that were allocated, unless the Savings and Investment Committee directs the Trustee otherwise. Participants have the same voting rights in the event of a tender or exchange offer.
The Plan held no interest in the assets of the Master Trust at December 2016. The value of the assets held by the Master
Trust was $70,665,274 at December 31, 2016.
A summary of the investment loss for the assets held by the Master Trust for
the year ended December 31, 2016 was as follows:
|
|
|
|
|
Net depreciation in fair value of investment
|
|
$
|
(8,046,644
|
)
|
Interest and dividend income on investment
|
|
|
509,528
|
|
|
|
|
|
|
Total investment loss
|
|
$
|
(7,537,116
|
)
|
|
|
|
|
|
6
Superior Tube Company, Inc. Union 401(k) Plan
Notes to Financial Statements
December 31, 2016
1
.
Description of the Plan (continued)
Payment of Benefits
Participants benefits under the Plan are payable to participants, their beneficiaries or their estates upon
termination of employment, normal retirement (the attainment of age 65), death, disability, hardship or upon the attainment of age
59
1
/
2
. Benefits are payable in the form of lump sum distributions or installments. Installments may be monthly, quarterly, semi-annual, annual or other payment terms over a fixed reasonable period of time, not
exceeding the Life Expectancy of the participant, or the joint life and last survivor expectancy of the Participant and his/her designated beneficiary. If a participants vested benefit derived from employer and employee contributions is less
than $5,000 but more than $1,000, and the participant does not make an affirmative election otherwise, the administrator will roll over the balance into an individual retirement account. If a participants vested balance is $1,000 or less, and
the participant does not make an affirmative election otherwise, they will receive a direct rollover in the form of a cash payment.
Also, in certain cases of financial hardship, a participant may elect to withdraw up to a specified portion of his or her elective account balance, regardless of age. Benefits are recorded when paid.
Administrative Expenses
Certain expenses of maintaining the Plan are paid directly by the Company and are excluded from these financial statements. Fees related to the administration of notes receivable from participants are
charged directly to the participants account and are included in administrative expenses. Certain investment-related expenses are allocated proportionately to plan participants based on their respective account balances and are included in net
investment appreciation.
Plan Termination
The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). While the Company has not expressed any intent to terminate the Plan, it is
free to do so at any time subject to the provisions of ERISA and applicable labor agreements. In the event of Plan termination, each participants account would become fully vested and each participant will receive the value of his or her
separate vested account.
2. Summary of Significant Accounting Policies
Basis of Financial Statements
The accompanying financial statements have
been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (GAAP).
Use
of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires Plan management to make
estimates and assumptions that affect amounts reported in the financial statements and accompanying notes, and supplemental schedule. Actual results could differ from those estimates and assumptions.
Notes Receivable from Participants
Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from
participants is recorded when it is earned. Related fees are paid from participants accounts. No allowance for credit losses has been recorded at December 31, 2016 and 2015. If a participant ceases to make loan repayments and the plan
administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.
7
Superior Tube Company, Inc. Union 401(k) Plan
Notes to Financial Statements
December 31, 2016
2. Summary of Significant Accounting Policies (continued)
Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market fluctuation 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 statements of assets available for benefits.
Investment Valuation and Income Recognition
Investments held by the Plan are stated at fair value less costs to sell, if significant, except for fully benefit-responsive investment
contract. At December 31, 2015, the fully benefit-responsive investment contract is reported at contract value, see Note 5. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. See Note 4.
Investments in shares of registered investment companies are valued at quoted market prices, which represent the net asset values of shares held by the Plan at year end. Money market and short-term
investments are carried at the fair value established by the issuer and/or the trustee.
At December 31, 2016, the Plan
invests in a Vanguard Retirement Savings Fund and Vanguard Target Retirement Date Funds through common/collective trusts. The fair values of the Vanguard Retirement Savings Trust IV and Vanguard Target Retirement Date Trusts II are the reported net
asset values of the participation units owned by the Plan at year end. There are currently no redemption restrictions on these investments.
Purchases and sales of investments are reflected on trade dates. Realized gains and losses on sales of investments are based on the average cost of such investments. Interest income is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned. Plan investments do not have significant costs to sell.
8
Superior Tube Company, Inc. Union 401(k) Plan
Notes to Financial Statements
December 31, 2016
3. Investment Programs
As of December 31, 2016, a participant could direct contributions (up to certain specified limits) in any of the following investment options:
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Vanguard Retirement Savings Trust IV
|
|
|
|
Vanguard Target Retirement Income Trust II
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|
|
|
Vanguard Target Retirement Date Trusts II
|
|
|
|
Registered investment companies:
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|
|
|
Vanguard Total Bond Market Index Fund
|
|
|
|
Vanguard LifeStrategy Funds
|
|
|
|
Vanguard Wellington Fund Admiral Shares
|
|
|
|
Vanguard Windsor II Fund
|
|
|
|
Vanguard Small-Cap Index Fund
|
|
|
|
Vanguard 500 Index Fund
|
|
|
|
Vanguard Developed Markets Index Fund
|
|
|
|
Vanguard Emerging Markets Stock Index Fund
|
|
|
|
Vanguard Prime Money Market Fund
|
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|
American Funds EuroPacific Growth Fund
|
|
|
|
BlackRock Inflation Protected Bond Fund
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|
|
|
RidgeWorth Small Cap Value Equity Fund
|
|
|
|
Wells Fargo Advantage Discovery Fund
|
Participants could change their investment options or transfer existing account balances to other investment options daily.
As of December 31, 2015, a participant could direct contributions (up to certain specified limits) in any of the following investment options:
|
|
|
American Funds Target Date Funds
|
|
|
|
Key Guaranteed Portfolio Fund
|
|
|
|
Registered investment companies:
|
|
|
|
American Funds American Balanced R4
|
|
|
|
BlackRock Equity Dividend A
|
|
|
|
BlackRock Global Allocation Inv A
|
|
|
|
BlackRock S&P 500 Stock Institutional
|
|
|
|
Columbia Mid Cap Index R5
|
|
|
|
JPMorgan Government Bond Select
|
|
|
|
JPMorgan Large Cap Growth Select
|
|
|
|
Loomis Sayles Investment Grade Bond Y
|
|
|
|
Oppenheimer International Growth Y
|
9
Superior Tube Company, Inc. Union 401(k) Plan
Notes to Financial Statements
December 31, 2016
4. Fair Value Measurements
The Plan utilizes a valuation hierarchy for disclosure of the inputs to the valuations used to measure fair value. This hierarchy
prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active
markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the
Plans own assumptions used to measure assets and liabilities at fair value. A financial asset or liabilitys classification within the hierarchy is determined based on the lowest level input that is significant to the fair value
measurement.
The following tables sets forth by level, within the fair value hierarchy, the Plans assets at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Registered investment companies
|
|
$
|
1,352,731
|
|
|
$
|
1,352,731
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common/collective trusts measured at net asset value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vanguard Retirement Savings Trust IV
|
|
|
144,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vanguard Target Retirement Date Trusts II
|
|
|
926,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments, at Fair Value
|
|
$
|
2,423,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Registered investment companies
|
|
$
|
1,673,872
|
|
|
$
|
1,673,872
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Fully Benefit-Responsive Investment Contract
The Plan invested in a fully benefit-responsive investment contract through September 30, 2016 with Great-West Life & Annuity
Insurance Company in the form of a guaranteed investment contract that invested in traditional investment contracts. The guaranteed investment contract was carried at contract value, see Note 2. Great-West Life & Annuity Insurance Company
maintained the contributions in a general account. The account was credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. Great-West Life & Annuity Insurance Company was
contractually obligated to repay the principal and a specified interest rate that was guaranteed to the Plan. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.
Certain events limited the Plans ability to transact at contract value with Great-West Life & Annuity Insurance Company
including plan termination and other events as specified in the guaranteed investment contract. In September 2016, the guaranteed investment contract was terminated prior to maturity date for which the plan sponsor paid a market value adjustment fee
to enable the participants to receive contract value at liquidation.
10
Superior Tube Company, Inc. Union 401(k) Plan
Notes to Financial Statements
December 31, 2016
6. Income Tax Status
Prior to September 30, 2016, the underlying standardized prototype plan has received an opinion letter from the Internal Revenue Service (IRS) dated March 31, 2014, stating that the written form
of the underlying prototype document is qualified under Section 401 of the Internal Revenue Code (the Code). Any employer adopting this form of the plan will be considered to have a plan qualified under Section 401 of the Code, and,
therefore, the related trust is tax-exempt. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualified status.
Effective September 30, 2016, the Plan became a volume submitter plan. The underlying volume submitter plan has received an advisory letter from the IRS dated March 31, 2014, stating that the
form of the plan is qualified under Section 401 of the Code and, therefore, the related trust is tax-exempt. In accordance with Revenue Procedures 2016-6 and 2015-36, the plan administrator has determined that it is eligible to, and has chosen
to, rely on the current IRS volume submitter advisory letter. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualified status. However, the plan administrator believes that the Plan has been designed to
comply with the requirements of the Code and has indicated that it will take the necessary steps, if any, to bring the Plans operations into compliance with the Code.
U.S. GAAP requires 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 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. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
7. Recent Accounting Pronouncements
In February 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
No. 2017-06,
Plan
Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting
(ASU 2017-06).
ASU 2017-06
requires a plans interest in a master trust and change in the value of that interest to be presented in separate
line items in the statement of assets available for benefits and in the statement of changes in assets available for benefits. The new guidance removes the requirement to disclose the percentage interest in the master trust for those plans with
divided interests and instead requires disclosure of the dollar amount of interest in each investment type.
ASU 2017-06
is effective for interim and annual reporting periods beginning after
December 15, 2018. The new guidance will be applied on a retrospective basis and early adoption is permitted. The Plan is currently evaluating the impact of adopting
ASU 2017-06
on the Plans
financial statements.
11