Notes to
Financial Statements
December 31, 2017 and 2016
(1)
|
Description of the Plan
|
The following description of the Genworth Financial, Inc.
Retirement and Savings Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plans provisions.
The Plan is a defined contribution plan. The Plan qualifies under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the Code), and is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Genworth Financial, Inc. (the Company)
is the Plan sponsor.
The trustee and recordkeeper for the Plan are The Bank of New York Mellon and Alight Solutions, respectively.
Eligible full-time employees (those scheduled to perform at least
1,000 hours of service within a plan year) may participate in the Plan upon their date of employment. Eligible part-time employees may join the Plan once scheduled to perform at least 1,000 hours of service within a plan year.
Subject to limitations imposed by law, participants may elect to
contribute up to 50% of their eligible pay on a
pre-tax
basis. Eligible pay includes salary, overtime, first year commissions and bonuses. The maximum allowable deferral under the Code was $18,000 per
individual for 2017. Beginning January 1, 2017, the Company made matching contributions equal to 100% of the first 4% of eligible pay deferred by an eligible participant and 50% of the next 2% of eligible pay deferred by an eligible participant
for such Plan year, provided that the Companys matching contribution for an eligible participant will not exceed 5% of a participants eligible pay. Prior to that date, the Company made matching contributions equal to 100% of the first 6%
of eligible pay deferred by an eligible participant.
The Company also makes annual supplemental contributions, based upon each
participants eligible pay. The annual supplemental contributions are based on a combination of age and service and range from 1% to 6% of eligible pay. Beginning January 1, 2016, newly hired employees received annual supplemental
contributions ranging from 1% to 3% of eligible pay. Starting January 1, 2017 for most employees, the annual supplemental contributions became a flat 3% of eligible pay. Certain participants eligible (as of December 31, 2015) for annual
supplemental contributions in the range of 4% to 6% of eligible pay will generally continue to receive that contribution rate through December 31, 2020 before converting to a flat 3% of eligible pay effective January 1, 2021. Supplemental
contributions are invested as directed by the Company (see note 4).
The Plan has automatic enrollment features with respect to newly
hired or
re-hired
employees. If the employee is eligible to participate, he or she will be automatically enrolled in the Plan with
pre-tax
contributions being made at
the rate of 3% of eligible pay the first year. As part of the automatic enrollment, participant contribution rates are automatically increased by 1% each year until they reach 6% of eligible pay. If a participant is automatically enrolled in
the Plan, they may decline participation in the Plan, change the contribution rate from 3% of eligible pay or modify the automatic rate escalation. These contributions are invested in the BlackRock LifePath Index fund associated with a
participants date of birth, until the participant directs investment of the automatic deferrals into another investment option offered by the Plan.
4
Genworth Financial, Inc. Retirement and Savings Plan
Notes to
Financial Statements
December 31, 2017 and 2016
Rollover contributions as shown in the accompanying statement of changes in net assets available for plan benefits represent account balances
rolled over into the Plan by participants from other qualified plans.
Each participants account is credited with his or her
contributions, the Companys matching and supplemental contributions and the earnings or losses of their individual fund elections. Each participant is entitled to the benefits that can be provided from his or her vested account.
Participants hired after December 31, 2010 must attain two years of
service to reach full vesting on Company matching contribution accounts. Company supplemental contributions are fully vested after three years of service. Participants hired before January 1, 2011 were immediately vested in their account
balances excluding their supplemental contribution accounts. Forfeitures are used to reduce future employer contributions to the Plan. Forfeitures available to reduce future employer contributions as of December 31, 2017 and 2016 were $462,372
and $521,319, respectively, and forfeitures used to reduce employer contributions were $723,319 and $388,840 in 2017 and 2016 respectively.
Participants are permitted to allocate their account balances
to one or more of 17 investment options currently available under the Plan. Participants may change future investment options as frequently as daily, and subject to time constraints by certain investment managers, may initiate transfers among
investments daily. Direct transfers from the T. Rowe Price Stable Value Common Trust Fund to the BlackRock Money Market Fund are not permitted. Instead, participants who wish to transfer from the T. Rowe Price Stable Value Common Trust Fund to the
BlackRock Money Market Fund must first transfer to one of the other Plan investment options and remain in that option for 90 days before transferring into the BlackRock Money Market Fund.
The Genworth Common Stock Fund invests primarily in common stock of the Company. A small portion of the fund is held in cash or other
short-term investments to provide liquidity. Within the financial statements and supplemental schedule of assets (held at end of year), the assets of the fund are presented separately as common stock and short-term investments.
On October 21, 2016, the Company entered into an agreement and plan of merger (the Merger Agreement) with Asia Pacific Global
Capital Co., Ltd. (the Parent), a limited liability company incorporated in the Peoples Republic of China, and Asia Pacific Global Capital USA Corporation (Merger Sub), a Delaware corporation and an indirect,
wholly-owned subsidiary of the Parent. Subject to the terms and conditions of the Merger Agreement, including the satisfaction or waiver of certain conditions, Merger Sub would merge with and into the Company with the Company surviving the merger as
an indirect, wholly-owned subsidiary of the Parent. The Parent is a subsidiary of China Oceanwide Holdings Group Co., Ltd. (together with its affiliates, China Oceanwide). China Oceanwide has agreed to acquire all the Companys
outstanding common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. At a special meeting held on March 7, 2017, the Companys stockholders voted on and approved a proposal to adopt the
Merger Agreement. The transaction remains subject to other closing conditions, including the receipt of required regulatory approvals in the U.S., China, and other international jurisdictions. Both parties are engaging with the relevant regulators
regarding the applications and the pending transaction.
5
Genworth Financial, Inc. Retirement and Savings Plan
Notes to
Financial Statements
December 31, 2017 and 2016
|
(g)
|
Notes Receivable from Participants
|
Participants may borrow from their account a
minimum of $500 up to a maximum equal to the lesser of $50,000 or 50% of their account balance (excluding their supplemental contribution account). There is a charge for each loan that is reflected as a reduction from the appropriate
participants account. Loan transactions are treated as transfers between the respective investment funds and the loan fund.
The
period of repayment of any loan is determined by mutual agreement between the Plan administrator and the borrower, but such period may not exceed five years from the effective date of the loan. Loans are secured by the balance in the
participants account and bear interest at an effective annual percentage rate that is 2% above the Prime interest rate in effect as of the second business day of each calendar quarter before the loan was requested. Principal and interest are
paid ratably through payroll deductions. Delinquent participant loans are recorded as distributions based on the terms of the Plan document.
Withdrawals for financial hardship are permitted (excluding
supplemental contribution account) provided they are for a severe and immediate financial need and the distribution is necessary to satisfy that need. For the 2017 Plan year, participants were required to fully use the Plan loan program, described
above, before requesting a hardship withdrawal.
In-service
withdrawals are permitted, allowing participants who have reached age 59 1/2 or older to obtain withdrawals of
pre-tax
and rollover accounts.
Upon termination of service for any reason, a participant
(or a designated beneficiary) may elect to receive the vested interest in his or her account in a
lump-sum
amount or via partial
lump-sum
distributions. Upon
termination, participants with assets in the group variable annuity investment option may elect to annuitize that portion of their account and begin receiving their guaranteed minimum income if they are age 55 or older. Alternatively, upon
termination, participants with assets in the group variable annuity investment option may elect to receive the vested interest in his or her group variable annuity account in a
lump-sum
amount and forfeit the
lifetime retirement income guarantee. In the event of annuitizations for participants ages 55 to 64, the guaranteed amount will be less than the amount that would be received at age 65 because payments will be made over a longer period of time.
(2)
|
Summary of Significant Accounting Policies
|
The accompanying financial statements of the Plan have been
prepared on the accrual basis of accounting.
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles (U.S. GAAP) requires management of the Plan to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes in net assets available for plan benefits and
disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
|
(c)
|
Investment Valuation and Income Recognition
|
Investments are stated at fair
value. The shares of registered investment companies (mutual funds) are valued at quoted market prices, which represent the net asset values (NAV) of shares held by the Plan at year end. Investments in common/collective trust funds are valued at the
net asset value as determined using the estimated fair value of the assets and liabilities in the respective funds on the last day of the Plan year. The common stock of the Company is traded on the New York Stock Exchange (NYSE) and is valued at the
quoted market price on the last business day of the Plan year. Investment in the separately managed fund is valued based on the fair value of the underlying investments, which is based upon the closing price reported in the active market in which
the individual securities are traded.
6
Genworth Financial, Inc. Retirement and Savings Plan
Notes
to Financial Statements
December 31, 2017 and 2016
The ClearCourse
SM
group variable annuity is valued daily by Genworth Life and Annuity
Insurance Company (GLAIC) (see note 6), an indirect, wholly-owned subsidiary of the Plan sponsor, using the quoted market price of the underlying mutual fund (Vanguard Balanced Institutional Index Fund) less the applicable ClearCourse
SM
asset charge.
The change in the difference between the fair value and the cost of the
investments held at the beginning and end of each year, adjusted for realized gains and losses on investments sold during the year, is reflected in the statement of changes in net assets available for plan benefits as net appreciation or
depreciation in the fair value of investments.
The cost of investments sold is determined on the basis of average cost. Purchases and
sales of investments are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend
date.
|
(d)
|
Notes Receivable from Participants
|
Notes receivable from participants equal the
outstanding principal balance plus accrued interest.
Benefit payments to participants are recorded when paid.
Substantially all expenses related to the administration of the Plan
are paid by the Company, with the exception of the Plans loan and qualified domestic relations order fees, which are paid from participants accounts. Participants paid $ 32,650 and $ 28,950 in 2017 and 2016 respectively for loan
fees and qualified domestic relations order fees.
(3)
|
Investments, at Fair Value
|
|
(a)
|
Fair Value Measurements
|
Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.
Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. The Plan utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
All assets carried at fair value are classified and disclosed in one of the following three categories:
|
|
|
Level 1Quoted prices for identical instruments in actively traded markets.
|
|
|
|
Level 2Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose
significant value drivers are observable.
|
|
|
|
Level 3Instruments whose significant value drivers are unobservable.
|
Level 1
primarily consists of financial instruments whose value is based on quoted market prices such as actively traded equity securities and actively traded mutual fund investments. Financial instruments in this category include short-term investments,
mutual funds, Genworth common stock, equity securities and the ClearCourse
SM
group variable annuity.
Level 2 includes those financial instruments that are valued using industry-standard pricing methodologies, models or other valuation
methodologies. These models are primarily industry-standard models that consider various inputs, such as interest rate, credit spread and foreign exchange rates for the underlying financial instruments. All significant inputs are observable, or
derived from observable, information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category include common/collective trust funds.
7
Genworth Financial, Inc. Retirement and Savings Plan
Notes t
o Financial Statements
December 31, 2017 and 2016
Level 3 is comprised of financial instruments whose fair value is estimated based on industry-standard pricing methodologies and
internally developed models utilizing significant inputs not based on, nor corroborated by, readily available market information. In limited instances, this category may also utilize
non-binding
broker quotes.
The Plan had no Level 3 assets as of December 31, 2017 or 2016.
The assessment of the significance of a particular input to the
fair value measurement in its entirety requires judgment, and considers factors specific to the asset, such as the relative impact on the fair value as a result of including a particular input. The Plan reviews the fair value hierarchy
classifications each reporting period. Changes in valuation techniques used to measure fair value are monitored at least annually by the Plan to determine if a change results in a measurement that is equally or more representative of fair value.
Changes in valuation techniques or their application are accounted for as changes in accounting estimates. Furthermore, changes in the observability of the valuation attributes may result in a reclassification of certain financial assets. Such
reclassifications are reported as transfers in and out of each level at the beginning fair value for the reporting period in which the changes occur. There were no transfers between levels during the years ended December 31, 2017 or 2016. See
note 2(c) for additional information related to fair value measurements.
|
(b)
|
Valuation Methodologies
|
The following is a description of the valuation
techniques and inputs used to determine fair value by class of instrument.
Short-term investments: Short-term investments are valued at
quoted prices for the identical instrument.
Common stock: Common stock is valued at the closing price reported in the active market in
which the individual securities are traded.
Registered investment companies: Mutual funds are valued at NAV and trade on a market
exchange. Each funds NAV is calculated as of the close of business of the NYSE and National Association of Securities Dealers Automated Quotations.
Common/collective trust funds: The funds are valued at the NAV as determined by using estimated fair value of the underlying assets held in the
funds. Standard models are used to estimate the fair value of the underlying assets using observable market inputs.
Separately managed
fund: This fund is valued based on the fair value of the underlying investments. The underlying investments consist of interest-bearing cash and marketable securities and were valued based upon the closing price reported in the active market in
which the individual securities are traded.
Group variable annuity: The ClearCourse
SM
group variable annuity is valued daily by GLAIC (see note 6) using the quoted market price of the underlying mutual fund (Vanguard Balanced Institutional Index Fund) less the applicable
ClearCourse
SM
asset charge.
The preceding methods described may produce fair
value calculations that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of
different methodologies and assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
8
Genworth Financial, Inc. Retirement and Savings Plan
Notes
to Financial Statements
December 31, 2017 and 2016
Classification within the fair value hierarchy table is based upon the lowest level of any input that is significant to the fair value measurement. The
following tables set forth by level, within the fair value hierarchy, the Plans assets at fair value as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$
|
243,778
|
|
|
$
|
243,778
|
|
|
$
|
|
|
|
$
|
|
|
Mutual funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
10,963,404
|
|
|
|
10,963,404
|
|
|
|
|
|
|
|
|
|
Bond funds
|
|
|
20,873,361
|
|
|
|
20,873,361
|
|
|
|
|
|
|
|
|
|
Balanced funds
|
|
|
28,306,602
|
|
|
|
28,306,602
|
|
|
|
|
|
|
|
|
|
Growth funds
|
|
|
65,935,252
|
|
|
|
65,935,252
|
|
|
|
|
|
|
|
|
|
Value funds
|
|
|
21,732,534
|
|
|
|
21,732,534
|
|
|
|
|
|
|
|
|
|
Foreign blend funds
|
|
|
33,327,383
|
|
|
|
33,327,383
|
|
|
|
|
|
|
|
|
|
Common/collective trust funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stable value funds
|
|
|
21,108,618
|
|
|
|
|
|
|
|
21,108,618
|
|
|
|
|
|
Target maturity funds
|
|
|
332,411,034
|
|
|
|
|
|
|
|
332,411,034
|
|
|
|
|
|
Blend funds
|
|
|
44,035,148
|
|
|
|
|
|
|
|
44,035,148
|
|
|
|
|
|
Separately managed fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing cash
|
|
|
68,038
|
|
|
|
68,038
|
|
|
|
|
|
|
|
|
|
Small-cap
equity securities
|
|
|
21,375,898
|
|
|
|
21,375,898
|
|
|
|
|
|
|
|
|
|
Group variable annuity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balanced fund
|
|
|
21,964,011
|
|
|
|
21,964,011
|
|
|
|
|
|
|
|
|
|
Common stock of Genworth Financial, Inc.
|
|
|
7,785,070
|
|
|
|
7,785,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
630,130,131
|
|
|
$
|
232,575,331
|
|
|
$
|
397,554,800
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$
|
1,240,193
|
|
|
$
|
1,240,193
|
|
|
$
|
|
|
|
$
|
|
|
Mutual funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
10,483,250
|
|
|
|
10,483,250
|
|
|
|
|
|
|
|
|
|
Bond funds
|
|
|
22,046,544
|
|
|
|
22,046,544
|
|
|
|
|
|
|
|
|
|
Balanced funds
|
|
|
24,786,604
|
|
|
|
24,786,604
|
|
|
|
|
|
|
|
|
|
Growth funds
|
|
|
47,848,952
|
|
|
|
47,848,952
|
|
|
|
|
|
|
|
|
|
Value funds
|
|
|
20,846,556
|
|
|
|
20,846,556
|
|
|
|
|
|
|
|
|
|
Foreign blend funds
|
|
|
28,309,589
|
|
|
|
28,309,589
|
|
|
|
|
|
|
|
|
|
Common/collective trust funds
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stable value funds
|
|
|
24,832,039
|
|
|
|
|
|
|
|
24,832,039
|
|
|
|
|
|
Target maturity funds
|
|
|
298,783,069
|
|
|
|
|
|
|
|
298,783,069
|
|
|
|
|
|
Blend funds
|
|
|
38,280,292
|
|
|
|
|
|
|
|
38,280,292
|
|
|
|
|
|
Separately managed fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing cash
|
|
|
1,404,774
|
|
|
|
1,404,774
|
|
|
|
|
|
|
|
|
|
Small-cap
equity securities
|
|
|
23,351,872
|
|
|
|
23,351,872
|
|
|
|
|
|
|
|
|
|
Group variable annuity
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balanced fund
|
|
|
21,567,475
|
|
|
|
21,567,475
|
|
|
|
|
|
|
|
|
|
Common stock of Genworth Financial, Inc.
|
|
|
8,848,290
|
|
|
|
8,848,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
572,629,499
|
|
|
$
|
210,734,099
|
|
|
$
|
361,895,400
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
During 2017, the Plan changed the presentation of certain investments in the fair value hierarchy chart above, related to investments that the Plan has now determined to have a readily determinable fair value. As a
result, the Plan reclassified the entire balance of the common/collective trust funds and the ClearCourse
SM
group variable annuity from the NAV column to the Level 2 and Level 1 columns
respectively, as of December 31, 2016.
|
9
Genworth Financial, Inc. Retirement and Savings Plan
Notes to
Financial Statements
December 31, 2017 and 2016
(4)
|
Nonparticipant-Directed Investment
|
Information about the net assets available for plan
benefits and changes in net assets available for plan benefits relating to the nonparticipant-directed investment was as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Net assets available for plan benefits:
|
|
|
|
|
|
|
|
|
Common/collective trust funds
|
|
$
|
161,869,224
|
|
|
$
|
149,793,911
|
|
Employer supplemental contributions receivable
|
|
|
10,658,098
|
|
|
|
9,838,953
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
172,527,322
|
|
|
$
|
159,632,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
2017
|
|
Changes in net assets available for plan benefits:
|
|
|
|
|
Net appreciation in fair value of common/collective trust funds
|
|
$
|
21,954,077
|
|
Employer contributions
|
|
|
10,658,098
|
|
Benefits paid to participants
|
|
|
(19,717,717
|
)
|
|
|
|
|
|
Net increase
|
|
$
|
12,894,458
|
|
|
|
|
|
|
(5)
|
Risks and Uncertainties
|
The Plan investment options include various investment
securities, which in general, are exposed to various risks, such as interest rate, credit and overall market volatility risk. It is reasonable to expect that changes in the values of investment securities will occur in the near term and that such
changes could materially affect participants account balances.
The Plans exposure to a concentration of credit risk is limited
by the diversification of investments across the participant-directed fund elections. Additionally, the investments within each participant-directed fund election are further diversified into varied financial instruments, with the exception of the
Genworth Common Stock Fund, which generally invests in a single security. Investment decisions are made, and the resulting risks are borne, exclusively by the Plan participants who make such decisions.
The value, liquidity and related income of the securities in which the Plan invests are sensitive to changes in economic conditions, including
real estate value, delinquencies or defaults, or both, and may be adversely affected by shifts in the markets perception of the issuers and changes in interest rates.
(6)
|
Party-in-Interest
Transactions
|
One investment option available to participants is the ClearCourse
SM
group variable
annuity provided under the Plan. Each contribution into ClearCourse
SM
provides a guaranteed amount of retirement income to the participant. GLAIC offers the guaranteed amount of retirement income
provided by this ClearCourse
SM
group variable annuity product. Fees paid by the Plan to GLAIC for the Plan years ended December 31, 2017 and 2016 were approximately $210,000 and $207,000,
respectively.
Another investment in the Plan is an investment fund comprised primarily of shares of common stock issued by the Company.
The Plan owned 2,503,238 and 2,322,386 shares of common stock of the Company as of December 31, 2017 and 2016,
10
Genworth Financial, Inc. Retirement and Savings Plan
Not
es to Financial Statements
December 31, 2017 and 2016
respectively. As of December 31, 2017 and 2016, the shares had a cost basis of $12,494,839 and $11,926,355, respectively, and a fair
value of $7,785,070 and $8,848,291, respectively. During the year ended December 31, 2017, 268,165 shares of common stock of the Company were purchased at a total cost of $1,006,174, and 63,489 shares were sold at a total cost of $317,519.
Certain Plan investments are held by The Bank of New York Mellon. The Bank of New York Mellon is the Trustee as defined by the Plan and,
therefore, is a
party-in-interest.
Participant loans are considered exempt
party-in-interest
transactions.
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in the Companys contributions.
(8)
|
Federal Income Tax Status
|
The Internal Revenue Service (IRS) has determined and
informed the Company by a letter dated March 1, 2012 that the Plan and related trust are designed in accordance with applicable sections of the Code. This letter expired on January 31, 2017. The Company applied to the IRS for a new letter
in January 2017 and is awaiting their updated determination.
U.S. GAAP requires Plan management to evaluate tax positions taken by the
Plan and recognize a tax liability (or asset) 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, 2017, there were no uncertain 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 of the Plan for any tax periods in progress. The Plan administrator believes it is no longer subject to federal or state tax examinations of the Plan for years prior to 2014.
11