* Other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 have been omitted because they are not applicable.
See accompanying notes to financial statements.
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 2021 and 2020
1. DESCRIPTION OF THE PLAN
The Berkshire Bank 401(k) Plan (the “Plan”) was established on April 1, 1993.
The following brief description of the Plan is provided for general information purposes only. Participants should refer to the Plan agreement for a more
complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan covering all eligible employees of Berkshire Bank and subsidiaries (the “Bank” or the “Plan Sponsor”). The Plan is
subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended. Vanguard Fiduciary Trust Company serves as the Trustee of the Plan. The Vanguard Group (“Vanguard” or the “Custodian”) is the financial advisor,
record keeper, and custodian of the Plan.
Contributions
Each year, participants may contribute a percent of pretax annual compensation, excluding certain types of restricted compensation, subject to certain
limitations as defined by the Plan and the Internal Revenue Code (“IRC”). The maximum participant deferral was $19,500 for the Plan years ended December 31, 2021 and 2020. In addition, all employees who are eligible to make salary reductions
under the Plan and who have attained age 50 before the close of the Plan year are eligible to make catch-up contributions, as defined by the Economic Growth and Tax Relief Reconciliation Act of 2001. Participants may also contribute rollover
amounts representing distributions from other qualified retirement plans and individual retirement accounts. Participants direct the investment of their contributions into various investment options offered by the Plan. Participants may change
their rate of contribution each pay period. Participants are eligible to contribute a flat dollar amount or a percentage of their pretax annual compensation. Berkshire Bank’s 401(k) Plan offers an after-tax
Roth option as an additional deferral selection.
The Bank matches a portion of eligible employee contributions. During 2021 and 2020, the Bank matched 100% of eligible employee contributions up to 4% of
the participant’s pretax annual compensation.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
DESCRIPTION OF THE PLAN (continued)
Plan Eligibility
Employees of the Bank are eligible to participate in the Plan after attaining eighteen years of age and completing ninety days of service.
A break in eligibility service occurs if an employee is not employed for a twelve consecutive month period. If the eligibility requirements had not yet been
satisfied and there is a break in eligibility service, periods before the break in service will not be taken into account and the employee will have to satisfy the eligibility requirements following the break in service.
Periods during which an employee has a break in eligibility service will not count against the employee if the employee was absent because the employee was
pregnant, had a child or adopted a child, was serving in the military, or provided service during a national emergency and re-employment is protected under federal or state law, and the employee returns to employment within the time required by
law. Service credit is given to employees of certain predecessor employers as described in the Plan document for participation and vesting purposes. Employees may join the Plan on the first of the month following the month in which eligibility
requirements are satisfied. Rehires may rejoin the Plan on the first day of the month following the month of rehire if they were previous participants of the Plan.
Participant Accounts
Each participant’s account is credited with the participant’s contribution and allocations of (a) the Bank’s contributions, (b) the Plan’s investment
earnings, (c) administrative expenses and (d) participant withdrawals. Allocations are based on participant earnings or account balances, as defined by the Plan. The benefit to which a participant is entitled is the benefit that can be provided
from the participant’s vested account.
Investments
Participants direct the investment of their contributions into investment options offered by the Plan which include selected mutual funds of Vanguard and
other financial advisors, and common shares of Berkshire Hills Bancorp, Inc., the parent company of the Bank. Participants electing the Vanguard Brokerage Option can transfer vested assets to their brokerage account and invest in additional
options beyond the Plan’s core lineup. Employer contributions are invested in each participant’s account according to the participant’s selected allocation. Participants may change or transfer their investment options at any time via an automated
telephone system or the Custodian’s website.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
DESCRIPTION OF THE PLAN (continued)
Vesting
Participants are 100% vested in all contributions plus actual earnings thereon.
Notes Receivable from Participants
Participants may borrow from their fund accounts a minimum of $1,000 per loan up to a maximum amount, which is equal to $50,000 or 50% of their vested
account balance, whichever is less. In addition, the $50,000 limit is reduced by the highest outstanding loan balance (of any previous loans made) in the previous twelve months. The loans are secured by the balance in the participant’s accounts
and bear interest at The Wall Street Journal prime rate plus one percentage point as of the loan application review date. Interest rates ranged from 4.25% to 6.50% as of December 31, 2021 and December 31, 2020. In general, principal and interest
are paid ratably over a period not to exceed five years through regular payroll deductions. Loans used to finance the participant’s principal residence are repaid over a period of time, up to 20 years.
If a participant fails to make a loan repayment by its due date, the total outstanding amount of the loan including any interest that has accrued will be
defaulted and deemed a distribution to the participant on the date of default; however, the balance continues to be included in notes receivable from participants until the account balances of the defaulted borrower(s) are distributed from the
Plan. There were no deemed loans for the years ended December 31, 2021 and 2020. There were no loan defaults for terminated participants for the years ended December 31, 2021 and 2020.
Payment of Benefits
On termination of service due to death, disability, normal retirement, or attaining age 59½ a participant may elect to receive either a lump sum amount equal
to the value of the participant’s vested interest in their account, annual installments, or defer distribution until a later date. If the vested portion of a participant’s account balance is $1,000 or less, and the participant does not provide
alternative instructions to the Plan sponsor, this amount is paid as a lump sum distribution as soon as possible following termination, retirement, disability, or to the beneficiary following death.
Participants may request a benefit payment in the case of financial hardship, subject to certain limitations as defined by the Plan.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
DESCRIPTION OF THE PLAN (continued)
Plan Termination
Although it has not expressed any intent to do so, the Bank 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, the net assets of the Plan would be allocated as prescribed by ERISA and its related regulations.
Forfeited Accounts
At December 31, 2021 and December 31, 2020, forfeited non-vested accounts totaled $18,145 and $1,634, respectively. These accounts will be used to reduce future
employer contributions.
2. SUMMARY OF ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the preparation of the accompanying financial statements follows.
Basis of Accounting
The accompanying financial statements have been prepared using the accrual method of accounting.
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
SUMMARY OF ACCOUNTING POLICIES (continued)
Investment Valuation and Income Recognition
The Plan’s investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices which represent the net asset
value reported by the fund at year-end. Investments in Berkshire Hills Bancorp, Inc. common stock and other equities are valued at the closing market price as of the last trade date of the year.
Purchases and sales of investments are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. Capital gain distributions are included in dividend income. Net appreciation includes the Plan's gains and losses on investments bought and sold as well as held during the year.
The Plan groups assets and liabilities that are measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of
the assumptions used to determine fair value.
Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market
transactions involving identical assets or liabilities.
Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Level 3 assets and liabilities include financial instruments whose value is determined using unobservable techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
In certain cases, inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy
is based on the lowest level of input that is significant to the fair value measurement. The Plan’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific
to the investment.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
SUMMARY OF ACCOUNTING POLICIES (concluded)
Notes Receivable from Participants
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Interest income is recorded on an accrual basis. Related fees are recorded as administrative expenses and are expensed when they
are incurred. No allowance for credit losses have been recorded at December 31, 2021 and 2020.
Benefits Paid
Benefits are recorded upon distribution.
Administrative Expenses
The Plan’s administrative expenses are paid by either the Plan or the Plan Sponsor as provided by the Plan document. Administrative fees charged to the Plan
as shown on the Statements of Changes in Net Assets relate to fees charged to the participants for recordkeeping and information management or participant loan processing that are deducted from their asset balances. Investment related expenses are
included in net appreciation in fair value of investments on the Statements of Changes in Net Assets Available for Benefits.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
3. INVESTMENTS, AT FAIR VALUE
The following table summarizes the valuation of the Plan’s investments by the fair value hierarchy levels as of December 31, 2021 and 2020, respectively:
There were no assets measured at fair value on a non-recurring basis at December 31, 2021 or 2020. There were no transfers between categories during 2021 or
2020.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
4. TAX STATUS
The Bank adopted a prototype plan whose most recent opinion letter from the Internal Revenue Service, dated May 28, 2014, stated that the Plan was designed
in accordance with applicable sections of the IRC. The Plan has been amended from the original prototype document; however, the Plan Administrator believes the Plan is currently operated in compliance with the applicable requirements of the IRC.
The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan is no longer
subject to income tax examinations for years prior to 2018.
The United States Generally Accepted Accounting Principles requires plan management to evaluate tax positions taken by the Plan. The financial statement
effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the Internal Revenue Service. Plan management has analyzed the tax positions taken by the Plan
and has concluded that there are no uncertain positions taken or expected to be taken as of December 31, 2021. The Plan did not have any uncertain positions at December 31, 2020 which required disclosure or accrual. The Plan has recognized no
interest or penalties related to uncertain tax positions.
5. ADMINISTRATION OF PLAN ASSETS
The Plan assets are held by The Vanguard Group, the Custodian of the Plan.
Bank contributions, participant elective deferrals, and participant accounts are held and administered by Vanguard Fiduciary Trust Company, who invests cash
received, interest, and dividend income in accordance with participants’ instructions and makes distributions to participants. The Trustee also administers the payment of interest and principal on participants’ loans.
Certain administrative functions are performed by officers or employees of the Bank. No such officers or employees receive compensation for such functions from the Plan.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
6. RISKS AND UNCERTAINTIES
The Plan invests in a variety of investment vehicles. Investment securities are exposed to various risks, such as interest rate, market, liquidity, and
credit. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the 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 statements of net assets available for benefits.
In December 2019, a novel strain of coronavirus (“COVID-19”) was reported to have surfaced in China and has since spread to a number of other countries, including the United
States. On March 11, 2020, the World Health Organization classified COVID-19 a global pandemic, which has adversely impacted the global economy by disrupting supply chains, lowering equity market valuations, creating significant volatility and
disruption in financial markets, and increasing unemployment levels. While the length and severity of this pandemic cannot be reasonably estimated, it has negatively impacted the market price of Berkshire Hills Bancorp common stock and Plan
assets.
On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which included several relief provisions available to tax qualified
retirement plans and their participants. The provisions of the CARES Act may be effective and operationalized immediately, prior to amending the Plan document. The Plan has adopted certain measures included in the CARES Act which allow qualified
participants to receive coronavirus-related distributions without penalty and delay repayments of any new or outstanding loans for up to one year. Additionally, required minimum distributions beginning in 2020 will be delayed by one year, but may
still be received at the request of a participant.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
7. RELATED PARTY AND PARTIES IN INTEREST TRANSACTIONS
The Plan's record keeper, Trustee, and Custodian, as well as the Company and Plan participants, and Crowe LLP, the auditor of the Plan’s financial
statements, are each a “party-in-interest" to the Plan as defined by ERISA. Certain administrative functions are performed by employees and officers of the Bank for which no compensation was paid from the Plan. For the year ended December 31, 2021,
the Bank contributed $2,919,122 to the Plan, of which none was owed to the Plan at December 31, 2021. For the year ended December 31, 2020, the Bank contributed $3,468,991 to the Plan, of which none was owed to the Plan at December 31, 2020. In
addition, the Bank paid expenses in connection with the administration of the Plan, totaling $29,109 and $27,309 for the years ended December 31, 2021 and 2020, respectively. Expenses paid by the Plan to the Plan’s record keeper, trustee, and
custodian represent party-in-interest transactions.
The Plan has investments in common stock of Berkshire Hills Bancorp, Inc., the parent company of the Bank. At December 31, 2021 and 2020, the Plan held 239,684 shares and 262,037
shares, respectively. At December 31, 2021 and 2020, the stock value was $6,814,215 and $4,486,079, respectively. For the years ended December 31, 2021 and 2020, the purchases of stocks amounted to $726,340 and $863,050 respectively and sales
amounted to $1,330,292 and $933,028, respectively. For the years ended December 31, 2021 and 2020, dividends earned were $117,745 and $172,757, respectively. For the years ended December 31, 2021 and 2020, realized losses were $29,160 and $530,211,
respectively. In addition, certain of the investment options are managed by Vanguard. Transactions in such investments qualify as party-in-interest transactions. Notes receivable from participants also qualify as parties-in-interest transactions.
8. ROLLOVER CONTRIBUTIONS
For the year ended December 31, 2021 and 2020, the rollover contributions are made up of contributions from current employees rolling their assets over into the Plan. Current
employees have the option to transfer their funds from a previous employer’s retirement plan into the Plan.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Concluded)
December 31, 2021 and 2020
9. SUBSEQUENT
EVENTS
Plan management has evaluated subsequent events for recognition and disclosure through June 29, 2022 and has concluded that there are no events that require recognition or
disclosure in the financial statements.
10.
RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2021 and 2020 to Form 5500:
The following is a reconciliation of the net increase / decrease in net assets available for benefits as presented in the statements of changes in net assets available for
benefits to Form 5500 for the years ended December 31, 2021 and 2020: