BURLINGTON NORTHERN SANTA FE
INVESTMENT AND RETIREMENT PLAN
Notes to Financial Statements (continued)
Investment contracts generally impose conditions on the Plan. If an event of default occurs
and is not cured, the issuer may terminate the contract. These events may include: (i) a breach of material obligation under the contract; (ii) a material misrepresentation; or (iii) a material amendment to the Plan agreement that is
not approved and accepted by the issuer. The Plan may terminate wrap contracts at any time with notice, subject to certain conditions. Other than for reasons of Plan default, wrap contract issuers may generally only terminate contracts upon the
completion of certain contract requirements, such as completion of a specified period of time.
If, in the event of default of an issuer,
the Plan was unable to obtain a replacement investment contract, the Plan may experience losses if the value of the Plans assets no longer covered by the contract is below contract value. The Plan may seek to add additional issuers over time
to diversify the Plans exposure to such risk, but there is no assurance that the Plan may be able to do so. The combination of the default of an issuer and an inability to obtain a replacement agreement could render the Plan unable to achieve
its objective of maintaining a stable contract value. Contract termination occurs whenever the contract value or market value of the covered investments reaches zero or upon certain events of default. If the contract terminates due to issuer
default, the issuer will generally be required to pay to the Plan the excess, if any, of contract value over market value on the date of termination. If the contract terminates when the market value equals zero, the issuer will pay the excess of
contract value over market value to the Plan to the extent necessary for the Plan to satisfy outstanding contract value withdrawal requests.
As described in Note 2, because the investment contracts are fully benefit-responsive, contract value is the relevant measurement attribute
for that portion of the net assets available for benefits attributable to the investment contracts. Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses.
Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.
Net assets and
net investment income/loss are allocated to participating plans based on number of units owned.
NOTE 5 - RELATED PARTY AND PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments
held in the Master Trust are shares of mutual funds managed by the Trustee. The Plan also invests in the Class B common stock of Berkshire, a related party, through the Company Stock Fund, which is also held in the Master Trust. The Master
Trust recorded purchases of $32 million and sales of $65 million of Berkshire Class B common stock during the year ended December 31, 2019. Transactions in such investments qualify as party-in-interest transactions, which are exempt from the prohibited transaction rules.
Notes
receivable from participants are also considered party-in-interest transactions.
Administrative expenses of the Plan, except for certain participant loan fees and Qualified Domestic Relations Order fees, are paid by BNSF.
For the year ended December 31, 2019, BNSF paid $368 thousand in administrative expenses on behalf of the Plan.
NOTE 6 - INCOME TAX STATUS
The Internal Revenue Service determined and informed BNSF by letter dated May 21, 2018 that the Plan was qualified under IRC
Section 401(a). The Plan has subsequently been amended and restated since receiving the determination letter; however, the Plan Administrator and tax counsel believe the Plan is designed and is currently operating in compliance with the
applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plans financial statements.
In accordance with IRC Section 401(k), amounts deducted from participants salaries as
before-tax contributions are not income taxable to the participants until withdrawn or distributed. Non-Roth after-tax
contributions are not subject to taxation upon withdrawal or distribution. Roth after-tax contributions and earnings are not subject to taxation upon withdrawal or distribution.
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