See accompanying notes to the financial statements.
The following description of the Rhinebeck Bank 401(k) Plan (the "Plan") provides only general information. Participants should refer to the plan document for a more complete description of the
Plan’s provisions.
General
The Plan is a defined contribution plan covering substantially all employees of Rhinebeck Bank and its subsidiaries (collectively, the "Bank") who have completed 90 days of service and attained the
age of twenty-one, except leased employees and employees participating in a collective bargaining agreement. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
Contributions
Each year, participants may elect to contribute any amount of their eligible compensation, up to the maximum limits defined by the Internal Revenue Code ("IRC"). Participants who have attained the
age of 50 before the close of the plan year are eligible to make an additional catch-up contribution. Participants may also contribute amounts representing distributions from other qualified plans (rollovers).
Unless its Board of Directors determines otherwise, prior to the beginning of each year, the Bank will make the following contributions: (1) a safe harbor non-elective contribution equal to 3% of
each participant’s eligible compensation and (2) a matching contribution equal to 50% of the amount of the participant’s elective deferrals made during the payroll period that do not exceed 6% of the participant’s eligible compensation for the
payroll period. In addition, the Bank may make a discretionary contribution in such amount as determined by its Board of Directors. There was a 2% discretionary contribution made to all Rhinebeck Bank employees in the first, second and third
quarters of 2019. A participant must have one year of service to be eligible for the Bank’s matching contribution.
Participants direct the investment of all contributions into various investment options offered by the Plan, including the common stock of Rhinebeck Bancorp, Inc., the parent company of the Bank.
Contributions are subject to certain Internal Revenue Service ("IRS") limitations.
|
Rhinebeck Bank 401(k) Plan
|
|
Notes to Financial Statements
|
|
December 31, 2019 and 2018
|
Participant Accounts
Each participant’s account is credited with the participant’s contribution and the Bank’s contributions as well as allocations of the Plan’s earnings and charged with an allocation of
administrative expenses that are paid by the Plan. Allocations are based on participant earnings, account balances, or specific participant transactions, as defined. The benefit to which a participant is entitled is the benefit that can be provided
from the participant’s vested account.
Vesting
Participants are immediately vested in their contributions and the Bank’s safe harbor contributions and discretionary contributions plus actual earnings thereon. Vesting in the Bank’s matching
contribution is based on years of continuous service. Participants are 100% vested after five years of credited service (20% for each year of service).
Notes Receivable from Participants
Participants may borrow from their fund accounts a minimum of $1,000, up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. The notes are secured by the balance in
the participant's account and bear interest at rates that range from 4.25% to 9.25% at December 31, 2019. Interest rates are set at the prime rate plus 1%. Principal and interest is paid ratably through bi-weekly payroll deductions. Terms range
from one to five years or greater for the purchase of a primary residence. Only one loan outstanding is permitted at a time.
Payment of Benefits
On termination of service due to death, disability, retirement, or other reasons, a participant will receive a lump-sum payment equal to the value of the participant’s vested interest in their
account. The Plan also allows hardship withdrawals, if certain criteria are met.
Forfeited Accounts
At December 31, 2019 and 2018, there were $1,266 and $142, respectively, in forfeited accounts. These accounts are used to reduce future Bank contributions or pay administrative fees. In 2019, Bank
contributions were reduced by $10,116 from forfeited accounts.
Administration of Plan Assets
The Plan’s assets are administered under a contract with Principal, the custodian of the Plan. The custodian invests funds received from contributions, investment sales, interest, and dividend
income and makes distribution payments to participants.
|
Rhinebeck Bank 401(k) Plan
|
|
Notes to Financial Statements
|
|
December 31, 2019 and 2018
|
Basis of Accounting
The financial statements of the Plan are prepared on the accrual basis of accounting.
Investments held by a defined contribution plan are required to be reported at fair value, except for a fully benefit-responsive investment contract. 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.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and changes therein, and disclosures of contingent assets and liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
Investments are reported at fair value (except for the fully benefit-responsive guaranteed annuity contract, which is reported 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. See Note 3 for a discussion of fair value measurements.
Purchases and sales of securities are recorded on a trade date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation 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. Related fees are recorded as administrative expenses and are expensed when
they are incurred. Interest income is recorded on the accrual basis. If a participant ceases to make repayments and the plan administrator deems the participant note receivable to be in default, the note receivable balance is reduced and a benefit
payment is recorded. No allowance for credit losses has been recorded at December 31, 2019 and 2018.
|
Rhinebeck Bank 401(k) Plan
|
|
Notes to Financial Statements
|
|
December 31, 2019 and 2018
|
Expenses
Certain expenses of maintaining the Plan are paid by the Plan, unless otherwise paid by the Bank. Expenses paid by the Bank are excluded from these financial statements. Fees related to the
administration of notes receivable from participants are charged directly to the participant’s account and are included in administrative expenses. Fees incurred for investment related expenses are included in net appreciation in fair value of
investments.
Payment of Benefits
Benefits are recorded when paid.
Recent Accounting Standard
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements
for Fair Value Measurement. ASU No. 2018-13 modifies the disclosure requirements for fair value measurements in Topic 820, Fair Value Measurement. The amendments are based on the concepts in the FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, which the Board finalized on August 28, 2018. ASU No. 2018-13 is effective for fiscal years beginning after December 15,
2019. The Plan adopted ASU 2018-13 on January 1, 2020, which did not have a material impact on the Plan’s consolidated financial statements.
Reclassifications
Reclassification adjustments are made to the prior year financial statements when necessary to conform to the current year’s presentation.
Subsequent Events
On March 11, 2020, the World Health Organization declared the outbreak of the coronavirus (COVID-19) a pandemic. The Coronavirus Aid, Relief, and Economic Security Act ("CARES
Act") was signed into law on March 27, 2020. Effective April 17, 2020, the Plan adopted the applicable provisions of the CARES Act. As a result of the CARES Act, qualifying participants may take a loan up to $100,000 or 100% of the participant’s
vested balance, whichever is less, until September 22, 2020. Further, repayment on existing loans due through the end of 2020 may be delayed one year. The CARES Act also permits participants to take a distribution of $100,000 or 100% of their
vested balance, whichever is less, until December 31, 2020. Eligible participants who receive a distribution under the CARES Act will not be subject to the standard early withdrawal penalty that generally applies to participants under the age of
59½. The full impact of the CARES Act is unknown at this time.
While the disruption due to the pandemic is currently expected to be temporary, there is considerable uncertainty about its possible duration. As a result, significant economic uncertainties have arisen which are
likely to negatively impact plan assets as a result of the disruption to the financial markets. Other negative financial impacts could occur although such potential impact is unknown and cannot be reasonably estimated at this time.
|
Rhinebeck Bank 401(k) Plan
|
|
Notes to Financial Statements
|
|
December 31, 2019 and 2018
|
|
3.
|
Fair Value Measurements
|
The framework for measuring fair value 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) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under authoritative 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 other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as:
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 maximize the use of relevant observables and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for assets measured at fair value.
Mutual funds are valued at the daily closing price as reported by the fund. Mutual funds held by the Plan are open-end mutual funds that are registered with the U.S. Securities and Exchange
Commission. These funds are required to publish their daily net asset value (“NAV”) and to transact at that price. The mutual funds held by the Plan are deemed to be actively traded.
Pooled separate accounts are valued based upon the unit values of such pooled accounts held by the Plan at year end. The pooled separate accounts are priced daily and participants transact at that
price. Unit values are based on the fair value of the underlying assets of the fund derived from inputs principally from or corroborated by observable market data by correlation or other means, although are not based upon quoted market prices in an
active market. The underlying investments of the pooled separate accounts consist of mutual funds, each of which follows a separate investment strategy. Due to the nature of these pooled accounts, there are no unfunded commitments or redemption
restrictions.
|
Rhinebeck Bank 401(k) Plan
|
|
Notes to Financial Statements
|
|
December 31, 2019 and 2018
|
Principal LifeTime Hybrid CITs invest in a collective trust fund as well as a variety of separate accounts and mutual funds that seek total return consisting of long-term growth of capital and
current income, consistent with the investment strategy of an investor with a specific target retirement date. The CIT funds are valued at net asset value per unit held by the Plan at year-end as reported by Principal, which is based on the fair
value of the underlying investments held by the fund less its liabilities. The Principal LifeTime Hybrid CITs publish their NAV daily and participants transact at that price. Were the Plan to initiate a full redemption of the collective trust, the
investment advisor reserves the right to temporarily delay withdrawal from the trust in order to ensure the securities liquidations will be carried out in an orderly business manner.
The employer security, common stock, of Rhinebeck Bancorp, Inc. has been listed on The NASDAQ Global Select Market under the symbol “RBKB” since January 17, 2019 and is valued at the closing price
reported on the active market on which the individual security is traded.
The following table sets forth the Plan’s assets at fair value which are all considered Level 1 within the fair value hierarchy: