NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
1. PLAN DESCRIPTION
The following description of the AEP Retirement Savings 401(k) 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. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
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. JPMorgan Chase Bank (JPMorgan) was the primary trustee for the Plan (the Trustee) until the transition to The Bank of New York Mellon (BNYM) as primary trustee commenced effective January 29, 2021. Great-West Financial Retirement Plan Services, LLC (Empower Retirement) is the plan record keeper. AEPSC appointed Great-West Trust Company, LLC (GWTC) as the 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. Such deferrals automatically increase each year by 1% to a maximum of 6%. 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. 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), although pretax and Roth 401(k) amounts are limited to $19,500 for 2021 and 2020. 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 $6,500 for 2021 and 2020. 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 AEP Retirement Savings 401(k) 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.
Notes Receivable from Participants
Participants generally 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. During March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law. Pursuant to the CARES Act, the Company changed the Plan to temporarily allow certain qualified participants to obtain COVID-19 related plan loans for the lesser of: (1) $100,000 (increased from $50,000), or (2) 100% (increased from 50%) of the participant’s vested account balance. This was only available for plan loans made during the period from March 27, 2020 to September 22, 2020. The CARES Act also provided relief to participants with outstanding plan loans (on or after March 27, 2020) by
allowing for a suspension of the loan payments (due from March 27, 2020 through December 31, 2020). During the suspension period, interest continued to accrue. The term of the loan may extend for a period of up to one year without violating the original term period. 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. No allowance for credit losses has been recorded at December 31, 2021 or 2020.
Participant Accounts
Individual accounts are maintained for each Plan participant. Each participant’s account is credited with the participant’s contributions, the Company’s 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.
Participants may make investments in 1% increments among various unitized funds established by the Plan including index funds, bond funds, growth funds, value funds, target date funds, and a stable value fund. The assets of each of the funds are held in the custody of the Trustee, and record-kept at the participant level by Empower Retirement. As the Plan owns the underlying assets of each of these funds, the financial statements present the underlying investments of these unitized funds. In the absence of a participant-directed investment, contributions are invested in a target date fund based on the participant's date of birth and estimated retirement date.
The AEP Stock Fund is an investment option in the Plan. Participants can elect to have dividends generated from their unitized holdings in the AEP Stock Fund 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.
In addition to the above, the Plan offers a self-directed brokerage account (SDB) option that allows participants to invest in retail mutual funds and money market funds.
Vesting and Distribution
Participants are immediately vested in their pretax, after-tax, Roth 401(k) and the Company contributions, including earnings thereon; provided that certain matching contributions made to participants of the AEP Energy, Inc. 401(k) Retirement Plan may be only partially vested in accordance with existing vesting positions of this plan. Excluding participants’ pretax and Roth 401(k) contributions, profit sharing contributions, and post-2008 Company matching contributions, all participants may make an unlimited number of withdrawals of their interest in the Plan at any time, including their pre-2009 Company matching contributions. Pretax, Roth 401(k) and profit sharing 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. Pursuant to the CARES Act, the Company has changed the Plan to allow certain qualified participants impacted by COVID-19 to take withdrawals up to $100,000 between January 1, 2020 and December 30, 2020. These COVID-19 related distributions were not subject to the early withdrawal penalty, or to 20% federal tax withholding; but they were subject to a 10% federal tax withholding requirement, and participants have the option to spread the applicable income tax resulting from the COVID-19 related distribution over a 3 year period.
Participant who obtained a COVID-19 related distribution may repay the distribution to an eligible retirement plan within the three-year period following the distribution to defer otherwise applicable taxation.
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 plan accounts among 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, Empower Retirement and BNYM during 2021 and 2020 totaled $2,539,267 and $2,314,433, respectively. The Plan directly pays for administrative, record keeping and management fees. Fees related to the administration of Notes Receivable from Participants are charged directly to the participant's account and are included in the administrative expenses. Investment related expenses are included in Net Appreciation in Investments.
Distributions to Participants
Distributions to participants are recorded when paid.
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. The estimates and assumptions used are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements. 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. As of December 31, 2021, the BFC consisted of AEPSC’s Chief Financial Officer, Treasurer, Senior Vice President - Chief Human Resources Officer, Senior Vice President - Strategy and Transformation, Executive Vice President - General
Counsel, and the Executive Vice President - Portfolio Optimization. The IC consists of AEPSC’s Treasurer, Director of Trusts and Investments and two Managing Directors of Corporate Finance.
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 equity securities and registered investment companies. 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. Fixed income securities generally do not trade on exchanges 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 may 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. Investments classified as “Other” are valued using Net Asset Value (NAV) as a practical expedient. Items classified as Other are primarily cash equivalent funds and common collective trusts. These investments do not have a readily determinable fair value or they contain redemption restrictions which may include the right to suspend redemptions under certain circumstances. Redemption restrictions on common collective trusts may also prevent certain investments from being redeemed at the reporting date for the underlying value. There are no unfunded commitments for investments in common collective trusts.
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, affected participants would be made 100 percent vested in their accounts.
4. INVESTMENT CONTRACTS
The Plan's Managed Income Fund provides a stable value investment option that includes fully benefit-responsive synthetic investment wrap contracts which assure the book value of investments in that fund 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, 2021 and 2020. The fund’s underlying investment or investments, usually a portfolio owned by the Plan, consist primarily of high quality, intermediate term fixed income securities and guaranteed investment contracts. 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 a 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, 2021 or the date these financial statements are issued.
5. RELATED PARTY AND PARTY-IN-INTEREST TRANSACTIONS
Certain transactions involving the Plan and its assets during 2020 and 2021 involved parties in interest with respect to the Plan, but 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 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, (2) BNYM has acted as trustee and custodian under the Plan, while Mellon, an affiliate has acted as an investment manager in connection with the index funds held under the Plan's investment options and (3) GWTC has been acting as a trustee and custodian under the Plan, 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. Notes receivable from participants held by the Plan are also considered party-in-interest transactions. Certain investments within the Self Directed Brokerage account are considered party-in-interest transactions.
As of December 31, 2021 and 2020, the Plan held 3,583,960 and 3,879,879 shares, respectively, of common stock of American Electric Power Company, Inc., the parent company of the Plan Sponsor, with a cost basis of $192,820,317 and $203,562,898, respectively. During the year ended December 31, 2021, the Plan acquired 146,976 shares of that common stock with a fair value of $12,298,450 and disposed of 442,895 shares with a fair value of $16,511,053. During the year ended December 31, 2020, the Plan acquired 485,324 shares of that common stock with a fair value of $40,685,494 and disposed of 635,323 shares with a fair value of $56,206,458. During the years ended December 31, 2021 and 2020, the Plan recorded dividend income of $11,413,199 and $11,123,089, respectively, related to its investment in that common stock.
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.
Plan Assets within the Fair Value Hierarchy as of December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Other | | Total |
| Equities | | | | | | | | | | |
| Corporate Stocks | | $ | 704,278,150 | | | $ | — | | | $ | — | | | $ | — | | | $ | 704,278,150 | |
| AEP Stock | | 318,864,921 | | | — | | | — | | | — | | | 318,864,921 | |
| Subtotal Equities | | 1,023,143,071 | | | — | | | — | | | — | | | 1,023,143,071 | |
| | | | | | | | | | |
| Common/Collective Trusts | | | | | | | | | | |
| Mellon Capital Small Cap Stock Index Fund (a) | | — | | | — | | | — | | | 222,099,319 | | | 222,099,319 | |
| Mellon Capital Mid Cap Stock Index Fund (a) | | — | | | — | | | — | | | 467,698,045 | | | 467,698,045 | |
| Mellon Capital Stock Index Fund (a) | | — | | | — | | | — | | | 1,308,710,375 | | | 1,308,710,375 | |
| Mellon Capital International Stock Index Fund (a) | | — | | | — | | | — | | | 717,537,755 | | | 717,537,755 | |
| Mellon Capital Aggregate Bond Index Fund (a) | | — | | | — | | | — | | | 608,665,464 | | | 608,665,464 | |
Mellon Capital Treasury Inflation-Protected Securities Fund (a) | | — | | | — | | | — | | | 27,585,802 | | | 27,585,802 | |
| JPMorgan Strategic Property Fund (a) | | — | | | — | | | — | | | 86,941,287 | | | 86,941,287 | |
Mellon Capital Emerging Markets Stock Index Fund (a) | | — | | | — | | | — | | | 58,080,968 | | | 58,080,968 | |
Columbia Trust Focused Large Cap Growth Fund (a) | | — | | | — | | | — | | | 247,064,658 | | | 247,064,658 | |
| Sands International CIT (a) | | — | | | — | | | — | | | 29,734,845 | | | 29,734,845 | |
| TCW Core Plus Bond Fund (a) | | — | | | — | | | — | | | 74,892,930 | | | 74,892,930 | |
| Subtotal Common/Collective Trusts | | — | | | — | | | — | | | 3,849,011,448 | | | 3,849,011,448 | |
| | | | | | | | | | |
| Self-Directed Brokerage Account (a) | | 88,582,672 | | | — | | | — | | | 11,727,551 | | | 100,310,223 | |
| Registered Investment Companies | | 31,650,980 | | | — | | | — | | | — | | | 31,650,980 | |
| Cash Equivalents (a) | | — | | | — | | | — | | | 46,133,899 | | | 46,133,899 | |
| Accrued Items and Unsettled Trades (a) | | 356,825 | | | — | | | — | | | (4,690,901) | | | (4,334,076) | |
| | | | | | | | | | |
| Total Assets Reflecting Investments at Fair Value | | $ | 1,143,733,548 | | | $ | — | | | $ | — | | | $ | 3,902,181,997 | | | $ | 5,045,915,545 | |
(a)Amounts in “Other” column represent investments for which fair value is measured using net asset value per share as practical expedient.
Plan Assets within the Fair Value Hierarchy as of December 31, 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Other | | Total |
| Equities | | | | | | | | | | |
| Corporate Stocks | | $ | 682,098,487 | | | $ | — | | | $ | — | | | $ | — | | | $ | 682,098,487 | |
| AEP Stock | | 323,077,524 | | | — | | | — | | | — | | | 323,077,524 | |
| Subtotal Equities | | 1,005,176,011 | | | — | | | — | | | — | | | 1,005,176,011 | |
| | | | | | | | | | |
| Common/Collective Trusts | | | | | | | | | | |
| JPMorgan Liquidity Fund (a) | | — | | | — | | | — | | | 21,682,463 | | | 21,682,463 | |
| Mellon Capital Small Cap Stock Index Fund (a) | | — | | | — | | | — | | | 210,808,132 | | | 210,808,132 | |
| Mellon Capital Mid Cap Stock Index Fund (a) | | — | | | — | | | — | | | 401,692,712 | | | 401,692,712 | |
| Mellon Capital Stock Index Fund (a) | | — | | | — | | | — | | | 1,109,531,125 | | | 1,109,531,125 | |
| Mellon Capital International Stock Index Fund (a) | | — | | | — | | | — | | | 660,031,838 | | | 660,031,838 | |
| Mellon Capital Aggregate Bond Index Fund (a) | | — | | | — | | | — | | | 575,341,739 | | | 575,341,739 | |
Mellon Capital Treasury Inflation-Protected Securities Fund (a) | | — | | | — | | | — | | | 26,571,999 | | | 26,571,999 | |
| JPMorgan Strategic Property Fund (a) | | — | | | — | | | — | | | 65,129,429 | | | 65,129,429 | |
Mellon Capital Emerging Markets Stock Index Fund (a) | | — | | | — | | | — | | | 50,660,881 | | | 50,660,881 | |
Columbia Trust Focused Large Cap Growth Fund (a) | | — | | | — | | | — | | | 246,556,207 | | | 246,556,207 | |
| MetWest Total Return Bond Fund (a) | | — | | | — | | | — | | | 67,993,031 | | | 67,993,031 | |
| Subtotal Common/Collective Trusts | | — | | | — | | | — | | | 3,435,999,556 | | | 3,435,999,556 | |
| | | | | | | | | | |
| Self-Directed Brokerage Account (a) | | 81,368,294 | | | — | | | — | | | 13,720,131 | | | 95,088,425 | |
| Registered Investment Companies | | 74,665,499 | | | — | | | — | | | — | | | 74,665,499 | |
| Cash Equivalents (a) | | — | | | — | | | — | | | 4,659,795 | | | 4,659,795 | |
| Accrued Items and Unsettled Trades (a) | | (337,453) | | | — | | | — | | | 3,546,114 | | | 3,208,661 | |
| | | | | | | | | | |
| Total Assets Reflecting Investments at Fair Value | | $ | 1,160,872,351 | | | $ | — | | | $ | — | | | $ | 3,457,925,596 | | | $ | 4,618,797,947 | |
(a)Amounts in “Other” column represent investments for which fair value is measured using net asset value per share.
The following tables set forth a summary of the Plan's investments with a reported Net Asset Value as a practical expedient as of December 31, 2021 and 2020:
Fair Value Estimated Using Net Asset Value per Share as of December 31, 2021
| | | | | | | | | | | | | | | | | | | | |
| Common/Collective Trusts | | Fair Value | | Redemption
Frequency
(If currently
eligible) | | Redemption
Notice Period |
| Mellon Capital Small Cap Stock Index Fund | | $ | 222,099,319 | | | Daily | | Trade Date + 1 |
| Mellon Capital Mid Cap Stock Index Fund | | 467,698,045 | | | Daily | | Trade Date + 1 |
| Mellon Capital Stock Index Fund | | 1,308,710,375 | | | Daily | | Trade Date + 1 |
| Mellon Capital International Stock Index Fund | | 717,537,755 | | | Daily | | Trade Date + 1 |
| Mellon Capital Aggregate Bond Index Fund | | 608,665,464 | | | Daily | | Trade Date + 1 |
Mellon Capital Treasury Inflation-Protected Securities Fund | | 27,585,802 | | | Daily | | Trade Date + 1 |
| JPMorgan Strategic Property Fund | | 86,941,287 | | | Quarterly | | 30 Days |
Mellon Capital Emerging Markets Stock Index Fund | | 58,080,968 | | | Daily | | Trade Date + 1 |
| Columbia Trust Focused Large Cap Growth Fund | | 247,064,658 | | | Daily | | Trade Date + 1 |
| Sands International CIT | | 29,734,845 | | | Daily | | Trade Date + 1 |
| TCW Core Plus Bond Fund | | 74,892,930 | | | Daily | | Trade Date + 1 |
| Self-Directed Brokerage Account | | 11,727,551 | | | Daily | | Trade Date + 1 |
| Total Assets | | $ | 3,860,738,999 | | | | | |
Fair Value Estimated Using Net Asset Value per Share as of December 31, 2020
| | | | | | | | | | | | | | | | | | | | |
| Common/Collective Trusts | | Fair Value | | Redemption
Frequency
(If currently
eligible) | | Redemption
Notice Period |
| JPMorgan Liquidity Fund | | $ | 21,682,463 | | | Daily | | 1 Day |
| Mellon Capital Small Cap Stock Index Fund | | 210,808,132 | | | Daily | | Trade Date + 1 |
| Mellon Capital Mid Cap Stock Index Fund | | 401,692,712 | | | Daily | | Trade Date + 1 |
| Mellon Capital Stock Index Fund | | 1,109,531,125 | | | Daily | | Trade Date + 1 |
| Mellon Capital International Stock Index Fund | | 660,031,838 | | | Daily | | Trade Date + 1 |
| Mellon Capital Aggregate Bond Index Fund | | 575,341,739 | | | Daily | | Trade Date + 1 |
Mellon Capital Treasury Inflation-Protected Securities Fund | | 26,571,999 | | | Daily | | Trade Date + 1 |
| JPMorgan Strategic Property Fund | | 65,129,429 | | | Quarterly | | 30 Days |
Mellon Capital Emerging Markets Stock Index Fund | | 50,660,881 | | | Daily | | Trade Date + 1 |
| Columbia Trust Focused Large Cap Growth Fund | | 246,556,207 | | | Daily | | Trade Date + 1 |
| MetWest Total Return Bond Fund | | 67,993,031 | | | Daily | | Trade Date + 1 |
| Self-Directed Brokerage Account | | 13,720,131 | | | Daily | | Trade Date + 1 |
| Total Assets | | $ | 3,449,719,687 | | | | | |
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, 2021 and 2020.
7. RISK AND UNCERTAINTIES
The Plan invests in various investment instruments, and 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 December 8, 2017 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. 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.
The Plan Administrator is required 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 than 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, 2021, there are 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 currently no audits for any tax periods in progress.
9. SUBSEQUENT EVENTS
The Plan evaluated subsequent events from December 31, 2021 through June 29, 2022, the date these financial statements were available to be issued. The Plan is not aware of any subsequent events that would require recognition or disclosure in the financial statements.
10. 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 the Form 5500.
| | | | | | | | | | | | | | |
| | January 1, |
| Participant Loans - Schedule H, Part I, Line 1c(8), Column (a) | | 2021 | | 2020 |
| Beginning Balance per Financial Statements | | $ | 63,362,301 | | | $ | 76,418,775 | |
| Less: Loans Deemed Distributed with No Post-Default Payments | | (5,579,961) | | | (5,492,568) | |
| Balance Reported on Form 5500 | | $ | 57,782,340 | | | $ | 70,926,207 | |
| | | | | | | | | | | | | | |
| | December 31, |
| Participant Loans - Schedule H, Part I, Line 1c(8), Column (b) | | 2021 | | 2020 |
| Ending Balance per Financial Statements | | $ | 55,361,807 | | | $ | 63,362,301 | |
Less: Assets and Activity Related to Loans Deemed Distributed with No Post-Default Payments | | (5,728,244) | | | (5,579,961) | |
| Balance Reported on Form 5500 | | $ | 49,633,563 | | | $ | 57,782,340 | |
| | | | | | | | | | | | | | |
| | January 1, |
| Net Assets - Schedule H, Part I, Line 1l, Column (a) | | 2021 | | 2020 |
| Beginning Balance per Financial Statements | | $ | 5,363,949,211 | | | $ | 4,969,478,191 | |
| Less: Loans Deemed Distributed with No Post-Default Payments | | (5,579,961) | | | (5,492,568) | |
| Beginning Balance Reported on Form 5500 | | $ | 5,358,369,250 | | | $ | 4,963,985,623 | |
| | | | | | | | | | | | | | |
| | December 31, |
| Net Assets - Schedule H, Part I, Line 1l, Column (b) | | 2021 | | 2020 |
| Ending Balance per Financial Statements | | $ | 5,730,527,651 | | | $ | 5,363,949,211 | |
Less: Assets and Activity Related to Loans Deemed Distributed with No Post-Default Payments | | (5,728,244) | | | (5,579,961) | |
| Balance Reported on Form 5500 | | $ | 5,724,799,407 | | | $ | 5,358,369,250 | |
| | | | | | | | | | | | | | | |
| | December 31, | |
| Increase (Decrease) in Net Assets - Schedule H, Part II, Line 2k | | 2021 | | 2020 | |
| Per Financial Statements | | $ | 366,578,440 | | | $ | 394,471,020 | | |
| Less: Loans Deemed Distributed | | (148,283) | | | (87,393) | | |
| Reported on Form 5500 | | $ | 366,430,157 | | | $ | 394,383,627 | | |