RETIREMENT PLAN FOR NJ TRANSIT BUS OPERATIONS, INC. AMALGAMATED TRANSIT UNION EMPLOYEES

Transcription

1 RETIREMENT PLAN FOR NJ TRANSIT BUS OPERATIONS, INC. AMALGAMATED TRANSIT UNION EMPLOYEES FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JUNE 30, 2014 AND 2013 SUPPLEMENTAL SCHEDULE AND REPORT OF INDEPENDENT AUDITORS

2 RETIREMENT PLAN FOR NJ TRANSIT BUS OPERATIONS, INC. AMALGAMATED TRANSIT UNION EMPLOYEES Financial Statements and Supplemental Schedule as of and for the Years Ended June 30, 2014 and 2013 TABLE OF CONTENTS PAGE REPORT OF INDEPENDENT AUDITORS 1-2 MANAGEMENT S DISCUSSION AND ANALYSIS 3-6 FINANCIAL STATEMENTS: Statements of Net Position 7 Statements of Changes in Net Position 8 Notes to Financial Statements 9-15 REQUIRED SUPPLEMENTARY INFORMATION.16-19

3 Ernst & Young LLP 99 Wood Avenue South Metropark P.O. Box 751 Iselin, NJ Tel: Fax: ey.com Report of Independent Auditors Retirement Plan Committee Retirement Plan for NJ Transit Bus Operations, Inc. Amalgamated Transit Union Employees We have audited the accompanying financial statements of the Retirement Plan for NJ Transit Bus Operations, Inc. Amalgamated Transit Union Employees (the Plan), which comprise the statements of net position as of June 30, 2014 and 2013, and the related statements of changes in net position for the years then ended and the related notes to the financial statements. Management s Responsibility for the Financial Statements The Plan s management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Plan s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management, as well as, evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our audit opinion. 1 A member firm of Ernst & Young Global Limited

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the net position of the Plan as of June 30, 2014 and 2013, and the changes in its net position for the years then ended, in conformity with U.S. generally accepted accounting principles. Adoption of New Accounting Pronouncement As discussed in Note 2 to the financial statements, the Plan changed its method of financial reporting of pensions as a result of the adoption of Government Accounting Standards Board Statement No. 67, Financial Reporting for Pension Plans an Amendment of GASB Statement No. 25, effective July 1, Our opinion is not modified with respect to this matter. Required Supplementary Information Accounting principles generally accepted in the United States require that management s discussion and analysis and required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. December 21, 2015 EY 2 A member firm of Ernst & Young Global Limited

5 RETIREMENT PLAN FOR NJ TRANSIT BUS OPERATIONS, INC. AMALGAMATED TRANSIT UNION EMPLOYEES MANAGEMENT S DISCUSSION AND ANALYSIS The following overview of the financial activity of the Retirement Plan for the New Jersey Transit Corporation s Amalgamated Transit Union Employees (the Plan) is intended to provide the reader with the analysis of the Plan s overall financial position for the fiscal years ended June 30, 2014 and This Management s Discussion and Analysis should be read in conjunction with the basic financial statements of the Plan, which follow. Financial Highlights The Plan s net position was $925,276,050 as of June 30, This amount reflected an increase of $123,838,279 from the prior fiscal year. This change was the result of fiscal year 2014 operations. Additions for the year were $185,819,457 and were comprised of investment income of $134,531,989, employer and employee contributions of $51,283,275 and other receipts of $4,193. Deductions for the year were $61,981,178 and were comprised of benefit payments of $58,854,409, actuarial and professional fees of $3,121,809 and other disbursements of $4, The Plan s net position was $801,437,771 as of June 30, This amount reflected an increase of $84,457,335 from the prior fiscal year. This change was the result of fiscal year 2013 operations. Additions for the year were $141,996,280 and were comprised of investment income of $94,079,415, employer and employee contributions of $47,879,411 and other receipts of $37,454. Deductions for the year were $57,538,945 and were comprised of benefit payments of $54,926,501, actuarial and professional fees of $2,603,764 and other disbursements of $8,680. Overview of the Financial Statements This annual report consists of two financial statements: The Statements of Net Position and The Statements of Changes in Net Position. The financial statements were prepared using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized in the period they are earned, and expenses are recorded in the year they are incurred, regardless of when cash is received or paid. The Statements of Net Position show the balances in all of the assets and liabilities of the Plan at the end of the fiscal year. The difference between assets and liabilities represents the Plan s net position. Over time, increases or decreases in the Plan s net position may serve as a useful indicator of the Plan s financial position. The Statements of Changes in Net Position show the results of the financial operations for the year. The statements provide an explanation for the change in the Plan s net position since the prior fiscal year. The Notes to the financial statements are an integral part of the financial statements and provide additional information that is essential to a full understanding of the data provided in the financial statements. The required supplementary information presents information regarding the funding status of the pension fund trust account and schedule of employer contributions. 3

6 Financial Analysis Summary of Net Position $Increase/ (Decrease) %Increase/ (Decrease) Assets: Investments $953,097,209 $830,744,101 $122,353, Receivables 2,048,527 1,994,253 54, _ Total Assets 955,145, ,738, ,407, Liabilities: Payables 29,869,686 31,300,583 (1,430,897) (4.6) Total Liabilities 29,869,686 31,300,583 (1,430,897) (4.6) Net Position $925,276,050 $801,437,771 $123,838, Assets of the Plan consist primarily of investments, contributions due from employer and employees, and accrued interest and dividends. Total assets were $955,145,736 as of June 30, 2014, an increase of $122,407,382, or 14.6 percent, from the prior fiscal year. This increase was primarily due to an increase in investments of $122,353,108, or 14.7 percent, as a result of appreciation of the fair value of investments. Receivables also increased as a result of the timing of deposits received in the trust account. Liabilities of the Plan are comprised of accrued professional expenses and a net payable for investments purchased. Between fiscal years 2013 and 2014, total liabilities decreased by $1,430,897, or 4.6 percent. This was primarily attributable to a decrease in the net payable as a result of the timing of payments for investments. Net position increased by $123,838,279, or 15.5 percent Summary of Net Position $Increase/ (Decrease) %Increase/ (Decrease) Assets: Investments $830,744,101 $730,650,587 $100,093, Receivables 1,994,253 1,942,692 51, Total Assets 832,738, ,593, ,145, Liabilities: Payables 31,300,583 15,612,843 15,687, Total Liabilities 31,300,583 15,612,843 15,687, Net Position $801,437,771 $716,980,436 $84,457, Assets of the Plan consist primarily of investments, contributions due from employer and employees, and accrued interest and dividends. Total assets were $832,738,354 as of June 30, 2013, an increase of $100,145,075, or 13.7 percent, from the prior fiscal year. This increase was primarily due to an increase in investments of $100,093,514, or 13.7 percent, as a result of appreciation of the fair value of investments. Receivables also decreased as a result of the timing of deposits received in the trust account. Liabilities of the Plan are comprised of accrued professional expenses and a net payable for investments purchased. Between fiscal years 2012 and 2013, total liabilities increased by $15,687,740, or

7 percent. This was primarily attributable to timing of payments for investments. Net position increased by $84,457,335, or 11.8 percent Summary of Changes in Net Position $Increase/ (Decrease) %Increase/ (Decrease) Additions: Investment income $134,531,989 $94,079,415 $40,452, Contributions 51,283,275 47,879,411 3,403, Other receipts 4,193 37,454 (33,261) (88.8) Total Additions 185,819, ,996,280 43,823, Deductions: Benefits 58,854,409 54,926,501 3,927, Professional fees and other 3,126,769 2,612, , Total Deductions 61,981,178 57,538,945 4,442, Net Increase/(Decrease) $123,838,279 $84,457,335 $39,380, Additions consist of earnings from investment activities, employee and employer s contributions, and other receipts. Total additions increased by $43,823,177, or 30.9 percent. This was primarily a result of an increase in investment income of $40,452,574 or 43.0 percent from fiscal years 2013 to 2014, primarily due to unrealized gains based on market performance of investments of Janus Capital Management, ING (Voya) Investments Management, and Dresdner RCM Global Investment. Total contributions also increased by $3,403,864, or 7.1 percent. Deductions include benefit payments and actuarial and professional fees. Total benefit payments to retirees and beneficiaries increased by $4,442,233, or 7.7 percent, due to an increase in the number of retirees receiving retirement benefits Summary of Changes in Net Position $Increase/ (Decrease) %Increase/ (Decrease) Additions: Investment income $94,079,415 $9,082,830 $84,996, Contributions 47,879,411 49,352,639 (1,473,228) (3.0) Other receipts 37,454 25,676 11, Total Additions 141,996,280 58,461,145 83,535, Deductions: Benefits 54,926,501 51,364,991 3,561, Professional fees and other 2,612,444 2,469, , Total Deductions 57,538,945 53,834,572 3,704, Net Increase/(Decrease) $84,457,335 $4,626,573 $79,830,762 1,

8 Additions consist of earnings from investment activities, employee and employer s contributions, and other receipts. Total additions increased by $83,535,135, or percent. This was primarily a result of an increase in investment income of $84,996,585 or percent from fiscal years 2012 to 2013, primarily due to unrealized gains based on market performance of investments of LSV Asset Management, Aronson Johnson, and Dresdner RCM Global Investment. Total contributions decreased by $1,473,228, or 3.0 percent. Deductions include benefit payments and actuarial and professional fees. Total benefit payments to retirees and beneficiaries increased by $3,561,510, or 6.9 percent, due to an increase in the number of retirees receiving retirement benefits. Overall Financial Condition of the Plan In FY 2014, the Plan adopted GASB Statement No. 67, Financial Reporting for Pension Plans- an amendment of GASB Statement No. 25 (GASB No. 67). The financial statements for 2013 and prior years were restated as a result of GASB No. 67. Based on the actuarial valuation dated June 30, 2014, the ratios of plan fiduciary net position as a percentage of the total pension liability was 83.46%, and the net pension liability as a percentage of covered payroll was 68.30%. Contacting the Plan s Financial Management The financial report is designed to provide our members, beneficiaries and other interested parties with a general overview of the Plan s finances and to show the Plan s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact New Jersey Transit Corporation, Chief Financial Officer and Treasurer, One Penn Plaza East, Newark, New Jersey

9 RETIREMENT PLAN FOR NJ TRANSIT BUS OPERATIONS, INC. AMALGAMATED TRANSIT UNION EMPLOYEES STATEMENTS OF NET POSITION As of June 30, * ASSETS: Investments at Fair Value $953,097,209 $830,744,101 Receivables: Accrued Interest and Dividends 1,818,095 1,752,785 Employee Contributions 112, ,116 Medicare Reimbursements 118, ,352 2,048,527 1,994,253 Total Assets 955,145, ,738,354 LIABILITIES: Accounts Payable and Accrued Expenses 29,869,686 31,300,583 Total Liabilities 29,869,686 31,300,583 NET POSITION: Held in Trust for Pension Plan $925,276,050 $801,437,771 *Restated for GASB 67 implementation (see note 2b). See notes to financial statements. 7

10 RETIREMENT PLAN FOR NJ TRANSIT BUS OPERATIONS, INC. AMALGAMATED TRANSIT UNION EMPLOYEES STATEMENTS OF CHANGES IN NET POSITION Years Ended June 30, * Additions: Investment Income Net increase in Fair Value of Investments $ 115,188,624 $ 76,586,031 Dividend and Interest Income 19,343,365 17,493, ,531,989 94,079,415 Contributions: Employer 44,792,175 41,539,700 Employees 6,491,100 6,339,711 51,283,275 47,879,411 Other Receipts 4,193 37,454 Total Additions 185,819, ,996,280 Deductions: Benefits Paid to Participants 58,854,409 54,926,501 Actuarial and Professional Fees 3,121,809 2,603,764 Other Deductions 4,960 8,680 Total Deductions 61,981,178 57,538,945 Increase in Net Position 123,838,279 84,457,335 Net Position - Beginning of Year, as previously reported 835,436, ,391,946 Prior Period Adjustment - Cumulative effect of Accounting Change (33,999,085) (30,411,510) Net Position - Beginning of year, as adjusted for Accounting Change 801,437, ,980,436 Net Position - End of Year $ 925,276,050 $801,437,771 *Restated for GASB 67 implementation (see note 2b). See notes to financial statements. 8

11 RETIREMENT PLAN FOR NJ TRANSIT BUS OPERATIONS, INC. AMALGAMATED TRANSIT UNION EMPLOYEES NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF PLAN The following brief description of the Retirement Plan for NJ TRANSIT Bus Operations, Inc. Amalgamated Transit Union Employees (the Plan) is provided for general information purposes only. More complete information concerning the Plan and its provisions is provided in the Plan document. General - The Plan is a contributory defined benefit retirement plan. Because NJ TRANSIT Bus Operations, Inc. is a government instrumentality, the Plan is exempt from many requirements of the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (ERISA). Generally, all permanent employees who are covered under collective bargaining agreements between New Jersey Transit Corporation (the Company) and divisions of the Amalgamated Transit Union Employees become participants of the Plan when they are first employed or re-employed after a break in service. The Plan is administered by the Retirement Committee, which consists of six persons three appointed by NJ TRANSIT and three appointed by the Amalgamated Transit Union. Contributions - The Company establishes contribution based on an actuarially determined rate recommended by an independent actuary. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by plan participants during the year, with an additional amount to finance any unfunded accrued liability. The Company is required to contribute the difference between the actuarially determined rate and the contribution rate of plan participants. Effective February 15, 2007, all full-time employees as of March 31, 2007 started contributing 2.00% of gross weekly wages to the Company to offset the cost of the Company s payments with respect to the Plan. In addition, effective March 31, 2007, any full-time employee hired after March 31, 2007, or any employee moving from part-time to full-time after March 31, 2007 (collectively referred to as new hires ) shall contribute 4.00% of gross weekly wages to the Company to offset the cost of the Company s payments with respect to the Plan. For the year ended June 30, 2014, the Company s average contribution rate was percent of annual payroll. Pension Benefits - The Plan provides retirement, death and disability benefits with full vesting of the accrued benefits to a participant who terminates employment with 10 or more years of vesting service. A participant is credited with one year of vesting service for each calendar year in which he completes 1,000 hours of service or more. The standard form of pension payment to a retiring participant is a 50% actuarially equivalent reduced surviving spouse annuity unless the participant elects to have the benefits paid in some other form. The retirement benefits rate is based on 2.125% for each year of service multiplied by the average of the highest three years earnings in the past ten years of service. In addition, benefits paid to retirees on the rolls as of March 31, 2007 increased 5%. Participants are always fully vested for their own contributions. Plan Participants - As of June 30, 2014, the most recent actuarial valuation date, the participants of Plan consisted of the following: Active participants 4,477 Inactive plan participants or beneficiaries currently receiving 2,871 benefits Inactive plan participants entitled to but not yet receiving benefits 319 Total 7,667 9

12 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) Basis of Accounting The accompanying financial statements of the Plan have been prepared in accordance with the U.S. generally accepted accounting principles and adhere to the reporting requirements established by the Government Accounting Standards Board (GASB). The accrual basis of accounting is used for measuring financial position and changes in net position of the Plan. Under this method, contributions are recorded in the accounting period in which they are legally due from the employer or plan member, and deductions are recorded at the time the liabilities are due and payable in accordance with the terms of the Plan. b) Adoption of Accounting Pronouncements - In FY 2014, the Plan adopted GASB Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25 (GASB No. 67). The objective of this Statement is to improve financial reporting by state and local governmental pension plans. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency. This Statement replaces the requirements of Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 50, Pension Disclosures, as they relate to pension plans that are administered through trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria. The requirements of Statements 25 and 50 remain applicable to pension plans that are not administered through trusts covered by the scope of this Statement and to defined contribution plans that provide postemployment benefit other than pension. In connection with the implementation of GASB Statement No. 67, the Plan changed its accounting for certain contributions receivable from NJ TRANSIT. Previously, the Plan recognized contributions receivable from NJ TRANSIT that were considered due pursuant to formal commitments. GASB Statement No. 67 changed the criteria for recognizing receivables to limit recognition only to amounts that are due pursuance to legal requirements. This change in accounting resulted in the following adjustments: As Previously Reported Adjustment As Restated As of June 30, 2012 Net position $747,391,946 $(30,411,510) $716,980,436 As of June 30, 2013 Receivables: Employer Contributions 33,999,085 (33,999,085) - Net position 835,436,856 (33,999,085) 801,437,771 For the year ended June 30, 2013 Contributions: Employer 45,127,275 (3,587,575) 41,539,700 Increase in net position 88,044,910 (3,587,575) 84,457,335 c) Receivables - Receivables consist primarily of member and employer contributions and other amounts that are legally required to be due to the Plan. d) Valuation of Investments All ATU Plan investment funds are stated at fair value based on quoted market prices. Stocks, bonds and notes are priced based on closing prices on the last business day of the fiscal year. Investments are recorded on a trade date basis. Real Estate Investments consist of three types: units of participation in a Closed-End Real Estate Account, Open-End Real Estate Account and Limited Partnership Agreements. e) Transfers Between Plans - NJ TRANSIT Bus Operations, Inc. maintains more than one funded pension plan for its employees. When employees are transferred from a position in a group covered by one Plan to a position in a group covered by another Plan, all contributions paid by the Company on behalf of the employees and related accumulated benefits are transferred to the other Plan. 10

13 f) Income Taxes - The Plan is exempt from federal income taxes under the Internal Revenue Code, Section 115 and, accordingly, no provision is made for state and federal income taxes. g) Administrative Expenses - Substantially all administrative expenses related to the Plan are paid by NJ TRANSIT, exclusive of actuarial, trustee and investment manager s fees, which are paid by the Plan. 3. INVESTMENTS The pension funds investments as of June 30, 2014 and 2013 were as follows: Short-term Investment $37,296,930 $28,077,309 Domestic Equities 640,727, ,436,257 Corporate Obligations 91,612,407 86,994,345 Federal Agency Obligations 6,165,972 10,666,516 United States Treasury Notes 48,734,745 32,190,031 United States Treasury Bonds 31,466,824 27,999,079 Assets and Mortgage Backed 82,559,732 89,234,493 Foreign Government Obligations 1,412, ,301 Mutual Funds and Other 13,120,767 11,416,770 Total $953,097,209 $830,744,101 Investment Policy: The Plan s policy in regard to the allocation of invested assets is established and may be amended to pursue an investment strategy that reduces risk through the diversification of the portfolio across a broad selection of asset classes. The following was the Plan s adopted asset allocation policy as of June 30, 2014: Asset Class Target Allocation Domestic large cap equity 41.0% Domestic small cap equity 9.0% Foreign equity 10.0% Fixed income 38.5% Cash 1.5% Total 100.0% Rate of return - For the year ended June 30, 2014, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was percent. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Deposit and Investment Risk Disclosures - The trust invests in various equity and fixed income securities, GASB Statement No. 40, Deposit and Investment Risk Disclosures, addresses common deposit and investment risks related to custodial credit risk, interest rate risk, credit risk, concentration of credit risk, and foreign currency risk. Custodial Credit Risk For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the plan will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. As of June 30, 2014 and 2013, the investment securities are not exposed to custodial credit risk as they are held in segregated trust accounts in the name of the plan with the custodians. 11

14 Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of the trust s fixed income securities. Generally, the value of the debt securities increases if interest rates fall and decreases if interest rates rise. The fixed income securities are limited to a term of 30 years, while the total portfolio s weighted average duration can generally not exceed 125% of the Barclays US Aggregate Bond Index (formerly the Lehman Aggregate Corp. Bond Index). The table below summarizes the Plan s exposure to interest rate risk by remaining term to maturity at June 30, 2014: Maturity in Years Fixed Income Investment Type Fair Value Less Than More Than 10 Short-term Investment $37,296,930 $96,395 $--- $--- $37,200,535 Corporate Obligations 91,612,407 6,067,917 43,145,064 33,644,806 8,754,620 Federal Agency Obligations 6,165, ,610 4,066,015 1,081, ,864 US Treasury Notes 48,734,745 3,541,371 41,729,828 3,463, US Treasury Bonds 31,466, , ,510 29,992,231 Assets and Mortgage Backed 82,559,732 2,460,597 4,708,060 6,446,889 68,944,186 Foreign Government Obligations 1,412, , ,472 TOTAL $299,249,358 $12,770,890 $95,098,326 $45,138,234 $146,241,908 Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The credit risk of debt instruments is evaluated by nationally recognized rating agencies such as Moody s, Standard & Poor s, and Fitch. There are no restrictions in the amount that can be invested in United States treasury securities. The Plans regulations require the total amount of the fixed income obligations that can be invested in bonds rated below BBB cannot exceed 25% of total value of bonds and 5% of total value of plan assets. The portfolio s weighted average credit quality should equal or exceed A. For securities exposed to credit risk in the fixed income portfolio, the following table discloses the aggregate fair value, by credit rating category at June 30, 2014: Fixed Income Investment Type Standard & Poor s Ratings Fair Value AAA AA A BBB BB B CCC CC Short-term Investment $37,296,930 $--- $--- $--- $--- $--- $--- $--- $--- $37,296,930 Corporate Obligations 91,612,407 6,384,368 6,181,960 33,184,184 29,480,115 11,213,781 1,575, , ,650 2,733,004 Federal Agency Obligations 6,165, ,208 5,728, US Treasury Notes 48,734,745 35,691,621 13,043, US Treasury Bonds 31,466,824 3,511,477 27,090, , Assets and Mortgage Backed 82,559,732 21,506,185 48,199,822 2,430,743 2,571,276 1,259,336 2,238,589 3,196, ,065 1,029,322 Foreign Government Obligations 1,412, , , , TOTAL $299,249,358 $67,530,859 $100,720,284 $36,479,936 $32,742,495 $12,473,117 $3,814,553 $4,192,143 $236,715 $41,059,256 Not Rated 12

15 Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the Plan s investment in a single issuer. As of June 30, 2014 and 2013, no exposure of the concentration of credit risk existed since the Plan did not hold any investments in any one issuer that would represent five percent or more of total investments. Investments issued or explicitly guaranteed by the U.S. government and pooled investments are excluded from this regulation. Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rate will adversely affect the fair value of an investment or a deposit. As of June 30, 2014 and 2013 the Plan did not invest in global markets and there were no investments in international equities, securities or foreign-issued bonds. As of June 30, 2014 and 2013, the Plan held no forward contract receivables or payables. As a result, the Plan investments had no foreign currency risk exposure as of June 30, 2014 and For the years ended June 30, 2014 and 2013, the Plan's investments (including investments bought, sold, as well as held during the year) appreciated in fair value by $115,188,624 and $76,586,031, respectively, and are summarized as follows: Net Appreciation (Depreciation) in Fair Value During Year Fair Value at End of Year Year ended June 30, 2014 ATU Cash Account $21,210 $2,128,263 Western Asset Management 1,704, ,822,875 Denver Investments Advisers 571,270 86,567,773 Metropolitan West 1,224,099 99,409,500 Montag & Caldwell 15,015,160 88,285,878 Real Estate Investments 1,472,634 11,922,094 Dredsner RCM 21,747,265 91,746,204 Aronson Johnson 30,239, ,925,963 Lsv Asset Management 12,814,172 62,325,097 Janus Capital Management 8,308,460 62,202,864 CS McKee 2,628,041 15,692,729 1st Eagle Overseas 4,101,107 36,090,999 Brandywine Asset Mgmt Fund 10,483, ,705,343 ING Investment Management LLC 4,858,156 38,271,627 Total $115,188,624 $953,097,209 Year ended June 30, 2013 ATU Cash Account $13,490 $1,995,338 Western Asset Management (1,153,500) 95,603,587 Denver Investments Advisers (2,473,127) 76,827,768 Metropolitan West 682,865 95,527,416 Montag & Caldwell 10,541,682 84,152,514 Real Estate Investments 939,084 10,584,626 Dredsner RCM 11,175,851 74,194,198 Aronson Johnson 29,669, ,423,393 Lsv Asset Management 11,659,541 49,243,137 Janus Capital Management 3,066,588 50,248,359 CS McKee 3,580,953 16,005,486 1st Eagle Overseas 1,801,684 24,389,490 Brandywine Asset Mgmt Fund 7,256,608 87,721,670 ING Investment Management LLC (174,833) 24,827,119 Total $76,586,031 $830,744,101 13

16 4. NET PENSION LIABILITY The components of the net pension liability at June 30, 2014 were as follows: Total Pension Liability $1,108,637,759 Plan fiduciary net position 925,276,050 Net pension Liability $183,361,709 Plan fiduciary net position as a percentage of the total pension liability 83.46% Actuarial assumptions: The total pension liability was determined by an actuarial valuation as of July 1, 2014, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.00% plus age and service based merit increases Investment rate of return 8.00%, Net of pension plan investment expense, including inflation Mortality rates were based on the RP-2014 Blue Collar Mortality Tables for annuitants and non-annuitants. These tables are adjusted to future years using generational projection under one-half Scale MP-2014 to anticipate future mortality improvement. The total pension liability was determined using the level percent of salary Entry Age Normal Cost funding method. The actuarial assumptions are the same as the assumptions used in the July 1, 2014 funding actuarial valuation. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan s target asset allocation as of June 30, 2014 are summarized in the following table: Long-Term Expected Real Asset Class Rate of Return Domestic large cap equity 6.6% Domestic small cap equity 6.6% Foreign equity 7.1% Fixed income 2.2% Cash 0% Discount rate: The discount rate used to measure the total pension liability was 8.00%. The projection of cash flows used to determine the discount rate assumed that contributions will be made at the actuarially determined amount. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 14

17 Sensitivity of the net pension liability to changes in the discount rate: The following presents the net pension liability, calculated using the discount rate of 8.00%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (7.00%) or 1-percentagepoint higher (9.00%) than the current rate: 1% Decrease (7.00%) Current Discount (8.00%) 1% Increase (9.00%) Net Pension Liability $304,511,580 $183,361,709 $80,365, CONTRACT WITH AETNA LIFE INSURANCE COMPANY In 1981, NJ TRANSIT entered into a contract with Aetna Life Insurance Company (Aetna) to fund the entire past service cost of the Amalgamated Transit Union Employees accrued prior to June 30, Through this contract, Aetna is obligated to pay the related pension benefits. Both the pension benefits and the valuation of this contract have been excluded from the financial statements. During the years ended June 30, 2014 and 2013, Aetna paid pension benefits in the amount of $2,443,945 and $2,566,170 respectively. 6. PLAN TERMINATION In the event the Plan terminates, net assets of the Plan are to be allocated to (a) all participants currently or formerly employed by the Company or on pension as of the date of termination to the extent of contributions, less any payments made to them, (b) all participants who, prior to the three-year period ending on the date of termination were receiving a pension or who would have been entitled to immediate pensions had their employment terminated prior to the beginning of this three-year period, (c) all participants who have met the Plan s requirements for retirement or vested pension as of the date of termination and (d) all participants who were not receiving a pension and were not eligible under the Plan s requirements for retirement as of the date of termination and were still employed by the Company. Funds shall be allocated toward a category only if there are assets of the Trust Fund in excess of the total required to meet the obligations to each of the preceding categories. If there are assets allocated toward a category that are insufficient to fulfill the entire obligation of that category, each individual within the category shall be allocated assets in the same proportion that his or her obligation within the category bears to the total obligation for the category. The assets, if any, remaining after provision for all liabilities hereunder shall be returned to the Company. 7. RETIREMENT PLAN COMMITTEE, TRUSTEE AND INVESTMENT MANAGERS In accordance with the provisions of the Plan, the Plan is administered by the Retirement Plan Committee of the Company. The Retirement Plan Committee has entered into a Trust agreement with The Bank of New York (Trustee) that provides for the Trustee to receive contributions and to make payments and distributions to participating members and their beneficiaries based upon notification from the Retirement Plan Committee. In addition, the Trustee maintains custody of all Plan assets. Certain Plan assets are managed through investment managers. 15

18 Required Supplementary Information 16

19 Retirement Plan for NJ Transit Corporation Amalgamated Transit Union Required Supplementary Information Schedule of Changes in Net Pension Liability - Last Ten Fiscal Years Schedule Total pension liability Service cost $23,401,417 Interest 80,197,011 Change of benefit terms - Differences between expected and actual experience - Changes of assumptions 32,003,898 Benefit payments, including refunds of employee contributions (58,854,408) Net change in total pension liability 76,747,918 Total pension liability beginning 1,031,889,841 Total pension liability ending (a) $1,108,637,759 Plan fiduciary net position Contributions employer $44,792,175 Contributions employee 6,491,100 Net investment income 134,532,092 Benefit payments, including refunds of employee contributions (58,854,408) Administrative expense (3,117,573) Other (5,107) Net change in plan fiduciary net position 123,838,279 Plan fiduciary net position beginning 801,437,771 Plan fiduciary net position ending (b) $925,276,050 Net pension liability ending (a) (b) $183,361,709 Plan fiduciary net position as a percentage of the total pension liability 83.46% Covered employee payroll $268,449,679 Net pension liability as percentage of covered employee payroll 68.30% 17

20 Retirement Plan for NJ Transit Corporation Amalgamated Transit Union Required Supplementary Information Schedule of Contributions Last Ten Fiscal Years Schedule 2 Year Ended June 30, Actuarially Determined Contributions Contributions in Relation to the Actuarially Determined Contributions Contribution Deficiency (Excess) Covered- Employee Payroll Contribution as a Percentage of Covered Employee Payroll 2014 $44,043,917 $44,792,175 ($748,258) $268,449, % ,792,175 44,792, ,227, % ,539,700 41,539, ,936, % ,420,753 43,420, ,925, % ,822,769 42,590, , ,633, % ,531,645 34,859,211 (327,566) 245,611, % ,228,242 37,886,352 (1,658,110) 240,115, % ,832,948 31,832, ,063, % ,893,904 30,893, ,204, % ,925,803 41,925, ,623, % Notes to Schedule Methods and assumptions used to determine the actuarially determined employer contributions are as follows: Valuation Date July 1, 2014 Actuarial Cost Method Amortization Method Projected Unit Credit Cost Method Level percentage of payroll, closed Remaining Amortization Period 15 Years as of July 1, 2014 Asset Valuation Method Investment Rate of Return 5-year smoothed market 8.0%, Net of pension plan investment expense, including inflation Inflation 3.00% Salary Increases Mortality 3.00% plus age and service based merit increases RP-2014 Blue Collar Mortality Tables for annuitants and non-annuitants. These tables are adjusted to future years using generational projection under one-half Scale MP-2014 to anticipate future mortality improvement. 18

21 Retirement Plan for NJ Transit Corporation Amalgamated Transit Union Required Supplementary Information Schedule of Investment Returns Last Ten Fiscal Years Schedule Annual money-weighted rate of return, net of investment expense 12.42% 19