Washington, D.C. 20549
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
Notes to
Financial Statements
1.
Description
of the Plan
The following description of The Magna Group
of Companies Retirement Savings Plans (the Plan) provides only general information. Participants should refer to the restated Plan Agreement
or Summary Plan Description for a more complete description of the Plan’s provisions.
General
Certain employees of Magna International of America, Inc.
(the Primary Employer) and other participating subsidiaries and affiliates of the Primary Employer (collectively, the Employer) are eligible
to participate in the Plan.
The Plan was established by the Primary Employer
as the Magna International of America 401(k) Plan on August 1, 1992. The Primary Employer restated the Plan’s terms,
provisions and conditions effective January 1, 2016.
The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA). The Plan Agreement provides that the Plan may invest in common stock of Magna
International Inc. (Magna), the parent company of the Primary Employer.
The Plan is administered by the Primary Employer
and individuals appointed by the Board of Directors of the Primary Employer. Principal Trust Company (Principal) is the appointed Trustee
of the Plan.
401(k) Eligibility
An employee is eligible to participate on the
first day of employment, and shall be eligible for matching contributions on the first day of the month following six months of service
and attainment of 18 years of age.
Deferred Profit-Sharing Eligibility
An employee is eligible to receive profit-sharing
contributions if the employee is employed at a participating employer on the last day of the plan year and the employee received compensation
for 1,000 hours of service in the plan year.
Contributions and Automatic Enrollment
The 401(k) portion of the Plan is funded
by contributions from employees who may elect to contribute from 1% to 50% of wages, as defined, subject to the maximum amount permitted
under the Internal Revenue Code (the Code). The Employer may make a discretionary matching contribution. For the 2020 and 2019 plan years,
the employer matching contribution was 50% of the first 6% of base earnings contributed by a participant, unless a collective bargaining
agreement states differently. Employees may also defer 1% to 100% of their bonus for a given year, which is not eligible for a matching
contribution by the Employer. Participants in the Plan may also contribute amounts representing distributions from other qualified defined
benefit or defined contribution plans.
The Magna Group of Companies Retirement Savings
Plans
Notes to
Financial Statements
Employees are automatically enrolled after a
30-day opt-out period. The Employer withholds an amount equal to a percentage of eligible employee compensation (other than bonus pay),
until such time as the employee changes or stops the contribution.
New hires are automatically enrolled at 6% of
employee compensation (other than bonus pay), except for newly hired employees covered under certain collective bargaining agreements
who will be automatically enrolled at 3%.
The Plan has an automatic increase feature whereby
the contribution percentage is increased by 1% per year up to a maximum contribution percentage of 6% for participants making a contribution
of less than 6%, unless the employee changes or stops the contribution. The automatic increase does not apply to certain employees who
are covered by a collective bargaining agreement.
The deferred profit-sharing portion of the Plan
is a non-contributory, defined contribution plan funded by discretionary Employer contributions as determined under the provisions of
the Plan, which are generally based on years of service and consolidated profits as determined by the Employer.
Participant Accounts
Individual participant accounts are maintained
by Principal and are credited with employee contributions, Employer contributions, and Plan earnings in the case of the 401(k) portion
of the Plan, and allocations of Employer contributions, Plan earnings, and forfeitures of former participants’ non-vested amounts
in the case of the deferred profit-sharing portion of the Plan. Allocations of contributions and forfeitures in the deferred profit-sharing
portion of the Plan are based upon compensation and years of service, as defined, while allocations of earnings are recognized by changes
in the unit value. Such accounts are valued periodically in accordance with the provisions of the Plan.
Vesting
For the 401(k) portion of the Plan, participants
are 100% vested immediately in Employer and employee contributions and allocated earnings thereon.
Vesting for the deferred profit-sharing portion
of the Plan occurs on the following schedule:
|
Number of full years of service
|
|
Vested Percentage
|
|
|
Less than 1
|
|
|
0
|
%
|
|
1
|
|
|
30
|
|
|
2
|
|
|
40
|
|
|
3
|
|
|
60
|
|
|
4
|
|
|
80
|
|
|
5 and after
|
|
|
100
|
|
Notwithstanding the foregoing, all amounts allocated
or re-allocated to a participant shall vest irrevocably to that participant not later than five years after the end of the plan year
in which the amounts are allocated or re-allocated, unless the participant has ceased before that time to be an employee. Immediate full
vesting also occurs upon a participant’s death, total and permanent disability, permanent layoff, or attainment of normal retirement
age of 60.
The Magna Group of Companies Retirement Savings
Plans
Notes to
Financial Statements
Forfeitures
For the deferred profit-sharing portion of the
Plan, the non-vested portion of a terminated participant’s account balance is allocated to other Plan participants after the former
participant has five consecutive one-year service breaks. During 2020 and 2019, allocated forfeitures were $1,586 thousand and $1,981
thousand, respectively. As of December 31, 2020 and 2019, forfeited nonvested accounts totaled $2,560 and $2,225 thousand, respectively.
Plan Benefits
For the deferred profit-sharing portion of the
Plan, participants are eligible to receive vested benefits based upon the most recent valuation of their account upon termination of service
with the Employer. Under certain provisions of the Plan, a percentage of vested benefits may also be distributed after 10 continuous years
of service and/or upon reaching age 55. Distributions of Plan benefits are made to eligible participants in one lump-sum payment. Only
vested balances of a participant’s profit-sharing contribution account as of December 31, 2007 are eligible for in-service
withdrawals.
For the 401(k) portion of the Plan, upon
retirement, death, disability or termination of service, benefits will be paid in the form of a lump-sum distribution. Certain other withdrawals
are permitted in the event of financial hardship, as defined in the Plan Agreement.
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, excluding
amounts related to the participant’s deferred profit-sharing account. Participant note terms range from one to five years, or
up to 10 years for the purchase of a primary residence. The notes are secured by the balance in the participant’s account and
bear interest at the then current Prime plus 2% as determined by the Plan Administrator. Principal and interest is paid ratably
through payroll deductions, not less frequently than quarterly. As of December 31, 2020, outstanding notes receivable had
interest rates ranging from 4.25% to 10.00%. Fees related to the administration of notes receivable from participants are charged directly to the participant’s
account and are included in administrative expenses.
Plan Termination
Although it has not expressed any intent to do
so, the Employer has the right to terminate the Plan in whole or in part at any time subject to the provisions of ERISA. In the event
the Plan is terminated, all participant accounts will become 100% vested and non-forfeitable.
Participant and Non-Participant Directed
Investments
Participants may invest in Magna International
Inc. Common Stock (Employer Securities). For the deferred profit-sharing portion of the Plan, 4/7th of the annual profit-sharing
contribution, as defined, is invested in Employer Securities, referred to as the non-participant directed portion of the Plan. The remaining
portion of the annual profit-sharing contribution is directed by the employee and may include investments in Employer Securities. Participants
may diversify up to 100% of Magna stock held in their account at any time. Voting rights are all retained by the trustee per the direction
of the Employer.
The Magna Group of Companies Retirement Savings
Plans
Notes to
Financial Statements
Administrative Expenses
The Employer administers the Plan. The Employer
pays certain administrative expenses of the Plan, and the Employer also provides certain administrative services which have not been charged
to the Plan. The amount of such expenses and cost of such services have not been determined. Certain administrative expenses not paid
directly by the Employer may be paid from the Plan in accordance with ERISA provisions.
CARES Act Implementation
On March 27, 2020, the Coronavirus Aid, Relief,
and Economic Security (CARES) Act was signed into law. The CARES Act, among other things, includes several relief provisions available
to tax-qualified retirement plans and their participants. Plan management has evaluated the relief provisions available to plan participants
under the CARES Act and the Plan allowed for the suspension of 401(k) loan payments in 2020.
2. Significant
Accounting Policies
Basis of Financial Statements
The accompanying financial statements have been
prepared under the accrual basis of accounting.
Use of Estimates
The preparation of the financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
The Plan invests in various investment securities.
Investment securities are exposed to various risks, such as interest rate, market and credit risks. 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.
On January 30, 2020, the World Health Organization
(WHO) announced a global health emergency because of a new strain of coronavirus (the COVID-19 outbreak) and the risks to the international
community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a
pandemic, based on the rapid increase in exposure globally.
The full impact of the COVID-19 outbreak continues
to evolve. This pandemic has adversely affected global economic activity and contributed to volatility in financial markets. Since the
values of the Plan’s individual investments have and will fluctuate in response to changing market conditions, the amount of losses
that will be recognized in subsequent periods, if any, and related impact on the Plan’s liquidity cannot be determined at this time.
The Magna Group of Companies Retirement Savings
Plans
Notes to
Financial Statements
Investment Valuation and Income Recognition
All Plan investments are stated at fair value.
Fair value is the price that would be received to sell an asset (an exit price) in the principal or most advantageous market for the asset
in an orderly transaction between market participants on the measurement date. The Plan’s management determines the Plan’s
valuation policies utilizing information provided by the investment advisors, Plan trustee and custodian. See Note 3 for 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
(depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.
Notes Receivable From Participants
Participant loans are classified as notes receivable
from participants, and are measured at the unpaid principal balance plus unpaid accrued interest. Defaulted loans, if any, are reclassified
as distributions based upon the terms of the Plan Document.
Concentration of Investments
Included in investments at December 31, 2020
and 2019 are shares of the Employer’s securities amounting to $482 million and $378 million, respectively. This investment represents
21% and 20% of total investments at December 31, 2020 and 2019, respectively. A significant decline in the market value of the Employer’s
securities would significantly affect the net assets available for benefits.
Payment of Benefits
Benefits are recorded when paid.
3. Investments
In accordance with ASC 820, Fair Value Measurements
and Disclosures, the Plan utilizes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in
active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to
the fair value measurement. The three levels of the fair value hierarchy are described as follows:
Level 1 - Inputs to the valuation methodology
are unadjusted quoted prices for identical assets in active markets.
Level 2 - Inputs to the valuation methodology
include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets, other inputs
that are observable or can be corroborated by observable market data.
The Magna Group of Companies Retirement Savings
Plans
Notes to
Financial Statements
Level 3 - Inputs to the valuation methodology
are both significant to the fair value measurement and unobservable.
The following valuation methodologies were used
to measure the fair value of the Plan’s investments. There have been no changes in the methodologies used at December 31, 2020
or 2019.
The Principal Stable Value Fund: Daily
valued by the trustee, Union Bond & Trust Company, based on the underlying investments which consist primarily of a diversified
portfolio of stable value investment contracts issued by life insurance companies, banks and other financial institutions, the performance
of which may be predicated on underlying fixed income investments. The Fund provides for daily redemptions at the reported net asset value
(NAV). Participants are permitted to redeem units at NAV on the valuation date.
Pooled Separate Accounts (PSAs): Valued
based on the underlying investments (i.e., common stock, mutual funds, short-term securities). While the majority of the underlying assets
values are based on quoted prices, the NAV of the pooled separate account is not publicly quoted. The NAV is reported by the fund managers
as of the financial statement date based on recent transaction prices. The PSAs held by the Plan provide for daily redemptions by the
Plan at reported NAV with no advance notice requirement. The Plan is permitted to redeem investment units at NAV on the measurement date.
Principal may place transfer or liquidation restrictions on the U.S. Property Separate Account. As of March 4, 2020, a withdraw limitation
was enacted and a partial plan payments were made during 2020 for participants requesting withdraws from the U.S. Property Separate Account.
No such restrictions were in place during 2019.
Generally, the PSA investments in any class can
be transferred once every 30 days at the current NAV per share based on the fair value of the underlying assets. Participants are not
allowed to transfer back into that originating class until the 30-day period has expired.
Common/Collective Trusts (CCTs): Valued
at the NAV of the units held by the Plan which are based on the quoted market prices of the underlying securities of the funds. The unit
price is based on the value of the underlying investment assets owned by the fund, minus its liabilities, and then divided by the number
of shares outstanding. The CCTs provide for daily redemptions by the Plan at reported NAV, with no advance notice requirements.
Employer securities: Valued at the closing
price quoted on a recognized securities exchange.
Mutual funds: Valued at quoted market prices
of shares held by the Plan.
Deferred income annuities: The Principal
Pension Builder is an investment option which allows participants to purchase deferred income annuities issued by Principal Life Insurance
Company. These assets can be transferred in the future to other investment options within the Plan or surrendered. Transactions that occur
prior to the commencement of guaranteed income payments are realized at the lower of contract value (or return of premium) or an adjusted
contract value that takes into account the current rates of interest available in the marketplace as well as mortality factors. The fair
market value of the annuities is the value paid when funds are withdrawn prior to the income start date. The annuities are reported at
fair value which approximates contract value.
Life insurance policies: Valued at the
cash surrender value of the individual policies.
The Magna Group of Companies Retirement Savings
Plans
Notes to
Financial Statements
The Plan’s valuation methods may result
in a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Although Plan management
believes the valuation methods are appropriate and consistent with the market participants, the use of different methodologies or assumptions
to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following tables set forth by level within
the fair value hierarchy the Plan’s investments (in thousands):
|
December 31, 2020
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Mutual funds
|
|
$
|
48,244
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
48,244
|
|
|
Employer securities
|
|
|
482,161
|
|
|
|
-
|
|
|
|
|
|
|
|
482,161
|
|
|
Deferred income annuities
|
|
|
-
|
|
|
|
-
|
|
|
|
2,047
|
|
|
|
2,047
|
|
|
Life insurance policies
|
|
|
-
|
|
|
|
-
|
|
|
|
33
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments at net asset value*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,713,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments at Fair Value
|
|
$
|
530,405
|
|
|
$
|
-
|
|
|
$
|
2,080
|
|
|
$
|
2,246,057
|
|
|
December 31, 2019
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Mutual funds
|
|
$
|
32,291
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
32,291
|
|
|
Employer securities
|
|
|
377,849
|
|
|
|
-
|
|
|
|
-
|
|
|
|
377,849
|
|
|
Deferred income annuities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,756
|
|
|
|
1,756
|
|
|
Life insurance policies
|
|
|
-
|
|
|
|
-
|
|
|
|
31
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments at net asset value*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,502,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments at Fair Value
|
|
$
|
410,140
|
|
|
$
|
-
|
|
|
$
|
1,787
|
|
|
$
|
1,914,105
|
|
|
|
*
|
The stable value funds, the pooled separate accounts and the common/collective trusts are measured
at fair value using the NAV per share (or its equivalent) as a practical expedient and have not been categorized in the fair value hierarchy.
The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented
in the statements of net assets available for benefits.
|
The remainder of this page intentionally
left blank.
The Magna Group of Companies Retirement Savings
Plans
Notes to
Financial Statements
Investments classified within Level 3 consist
of life insurance policies and deferred income annuities. The tables below set forth a summary of changes in the fair values of the Plan’s
Level 3 investments for the years ended December 31, 2020 and 2019 (in thousands):
|
Year ended December 31, 2020
|
|
Deferred Income
Annuities
|
|
|
Life Insurance
Policies
|
|
|
Balance, beginning of year
|
|
$
|
1,756
|
|
|
$
|
31
|
|
|
Unrealized gains (losses) relating to instruments still held at the reporting date
|
|
|
-
|
|
|
|
-
|
|
|
Interest credited
|
|
|
-
|
|
|
|
-
|
|
|
Purchases
|
|
|
932
|
|
|
|
2
|
|
|
Sales
|
|
|
(641
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
2,047
|
|
|
$
|
33
|
|
|
Year ended December 31, 2019
|
|
Deferred Income
Annuities
|
|
|
Life Insurance
Policies
|
|
|
Balance, beginning of year
|
|
$
|
1,217
|
|
|
$
|
30
|
|
|
Unrealized gains (losses) relating to instruments still held at the reporting date
|
|
|
-
|
|
|
|
-
|
|
|
Interest credited
|
|
|
-
|
|
|
|
-
|
|
|
Purchases
|
|
|
607
|
|
|
|
1
|
|
|
Sales
|
|
|
(68
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
1,756
|
|
|
$
|
31
|
|
The remainder of this page intentionally
left blank.
The Magna Group of Companies Retirement Savings
Plans
Notes to
Financial Statements
4. Non-Participant-Directed
Investments
The Magna International Inc. Common Stock includes
both participant and non-participant-directed investments, which are co-mingled. Substantially all contributions and associated appreciation
(depreciation), income and dividends are non-participant-directed until amounts are available for transfer as described in the Plan agreement.
Information about the net assets available for benefits and the significant components of the changes in net assets available for benefits
for non-participant-directed investments is as follows:
|
December 31,
|
|
2020
|
|
|
2019
|
|
|
Magna International Inc. common stock
|
|
$
|
482,161
|
|
|
$
|
377,849
|
|
|
Year ended December 31,
|
|
2020
|
|
|
2019
|
|
|
Changes in net assets available for benefits
|
|
|
|
|
|
|
|
|
|
Dividend income
|
|
$
|
11,444
|
|
|
$
|
10,508
|
|
|
Net appreciation in fair value of investments
|
|
|
125,482
|
|
|
|
66,257
|
|
|
Employer contributions
|
|
|
22,431
|
|
|
|
26,238
|
|
|
Participant contributions
|
|
|
3,229
|
|
|
|
3,599
|
|
|
Net inter-fund transfers
|
|
|
(34,212
|
)
|
|
|
(26,330
|
)
|
|
Distributions to terminated employees
|
|
|
(15,070
|
)
|
|
|
(18,489
|
)
|
|
Distributions to participating employees
|
|
|
(8,991
|
)
|
|
|
(9,490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Increase in Net Assets Available for Benefits
|
|
$
|
104,313
|
|
|
$
|
52,293
|
|
5. Related
Party Transactions
Certain Plan investments are stable value funds,
common/collective trusts, pooled separate accounts and mutual funds managed by Principal. Principal is the trustee as defined by the Plan
and qualifies as a party-in-interest. The Plan also invests in the common stock of the Employer.
6. Income
Tax Status
The Plan has received a determination letter from
the Internal Revenue Service dated March 15, 2018 stating that the Plan is qualified under Section 401(a) of the Code and,
therefore, the related trust is exempt from taxation. The Plan is required to operate in conformity with the Code to maintain its qualification.
The Plan Document has been amended since receiving the determination letter. However, the Plan Administrator believes the Plan is being
operated in compliance with the applicable requirements of the Code and, therefore, believes the Plan, as amended, is qualified and the
related trust is tax exempt.
Accounting principles generally accepted in the
United States of America require 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 Internal Revenue
Service. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in
progress.
The Magna Group of Companies Retirement Savings
Plans
Notes to
Financial Statements
7. Delinquent
Participant Contributions
The Employer failed to remit certain employee
deferrals and loan repayments to the Plan in a timely manner according to DOL regulations during 2020 and 2019 aggregating $1,963 thousand
and $2,469 thousand, respectively. The Employer has calculated lost earnings and deposited the lost earnings into the Plan for 2020 and
2019.
8. Commitments and Contingencies
On April 30, 2020, a putative class action
lawsuit was filed in the United States District Court, Eastern District of Michigan against Magna International of America, Inc.
and its Board of Directors, the Magna International of America, Inc. Investment Committee, the United States Pension and Retirement
Savings Committee, and several unnamed individuals (the Defendants). The Complaint alleges claims under the Employee Retirement Income
Security Act of 1974 (ERISA) for breach of fiduciary duty and failure to monitor other fiduciaries with respect to the fees and expenses
associated with investment options in the Magna Group of Companies Retirement Savings Plans. The plaintiffs seek various forms of relief,
including damages and declaratory and injunctive relief. The Defendants believe the suit is without merit and therefore intend to vigorously
defend the case. Given the early stages of the legal proceedings, it is not possible to predict the outcome of the claim.
9. Reconciliation
of Financial Statements to Form 5500
The following is a reconciliation of net assets
available for plan benefits per the financial statements to the Form 5500 (in thousands):
|
December 31,
|
|
2020
|
|
|
2019
|
|
|
Net assets available for benefits per the financial statements
|
|
$
|
2,325,298
|
|
|
$
|
2,010,862
|
|
|
Benefits payable to participants
|
|
|
(4,067
|
)
|
|
|
(365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets Available for Benefits per the Form 5500
|
|
$
|
2,321,231
|
|
|
$
|
2,010,497
|
|
The following is a reconciliation of the net increase
in net assets per the financial statements to total income per the Form 5500 (in thousands):
|
Year ended December 31,
|
|
2020
|
|
|
2019
|
|
|
Net increase per the financial statements
|
|
$
|
314,436
|
|
|
$
|
348,090
|
|
|
Benefits payable to participants - end of year
|
|
|
(4,067
|
)
|
|
|
(365
|
)
|
|
Benefits payable to participants - prior year
|
|
|
365
|
|
|
|
661
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income per the Form 5500
|
|
$
|
310,734
|
|
|
$
|
348,386
|
|
The Magna Group of Companies Retirement Savings
Plans
Schedule
H, Line 4i - Schedule of Assets (Held at End of Year)
EIN: 98-0095901
Plan Number: 002
December 31, 2020