CLAYTON HOMES, INC. 401(K) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 1 - DESCRIPTION OF PLAN (Continued)
Fees related to the administration of notes
receivable from participants are charged directly to the
participant’s account and are included in administrative expenses.
Investment management fees are charged to the Plan as a reduction
of investment return and included in the investment income (loss)
reported by the Plan.
Notes Receivable from
Participants: Participants may borrow
from their accounts a minimum of $1,000 up to a maximum of $50,000
or 50% of their account balance, whichever is less. The notes are
secured by the balance in the participant’s account and bear
interest at fixed rates that are commensurate with local prevailing
rates as determined quarterly by the Plan Administrator. Principal
and interest are paid through payroll deductions.
Plan Changes Related to the CARES Act and SECURE
Act: The Plan has implemented certain
requirements by the Coronavirus Aid, Relief, and Economic Security
(the CARES Act) and the Setting Every Community Up for Retirement
Enhancement Act of 2019 (the SECURE Act), which laws change the
Plan to, among others, allow certain eligible individuals to
receive coronavirus-related relief for the repayment of notes
receivable from participants, suspend required minimum
distributions, and delay the commencement date for required minimum
distributions. Written amendments to the Plan to reflect these
operational changes were formally adopted during the 2020 plan year
in accordance with applicable law and IRS guidance.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting: The financial statements of
the Plan are prepared on the accrual basis of accounting in
conformity with accounting principles generally accepted in the
United States of America.
Use of Estimates: The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires the Plan Administrator to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly,
actual results may differ from those estimates.
Uncertainties: The Plan holds various
investment securities. Investment securities are exposed to various
risks such as interest rate, market, liquidity and credit risks.
Due to the level of risk associated with certain investment
securities and the sensitivity of certain fair value estimates to
changes in valuation assumptions, it is at least reasonably
possible that changes in the fair 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 statement of net assets available for benefits.
Investment Valuation and Income
Recognition: The Plan’s investments are
reported at fair value. Fair value is the price that would be
received by the Plan for an asset or paid by the Plan to transfer a
liability (an exit price) in an orderly transaction between market
participants on the measurement date in the Plan’s principal or
most advantageous market for the asset or liability.
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
(depreciation) includes the Plan’s gains and losses on investments
bought and sold as well as held during the year.
Fair value measurements are determined by
maximizing the use of observable inputs and minimizing the use of
unobservable inputs. The hierarchy places the highest priority on
unadjusted quoted market prices in active markets for identical
assets or liabilities (Level 1 measurements) and gives the lowest
priority to unobservable inputs (Level 3 measurements). The three
levels of inputs within the fair value hierarchy are defined as
Level 1: Quoted prices
(unadjusted) for identical assets or liabilities in active markets
that the Plan has the ability to access as of the measurement