Farm Credit Foundations Benefit Plans - Health & Welfare Benefits. Financial Statements December 31, 2016 and 2015

Transcription

1 Farm Credit Foundations Benefit Plans - Health & Welfare Benefits Financial Statements December 31, 2016 and 2015

2 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS' REPORT Participants and Farm Credit Foundations Trust Committee Farm Credit Foundations Benefit Plans - Health & Welfare Benefits St. Paul, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of Farm Credit Foundations Benefit Plans - Health & Welfare Benefits (the Plan), which comprise the statements of net assets available for benefits and benefit obligations as of December 31, 2016 and 2015, and the related statements of changes in net assets available for benefits and changes in benefit obligations for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors 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 of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from 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 auditors 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 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 basis for our audit opinion. 1

3 Participants and Farm Credit Foundations Trust Committee Farm Credit Foundations Benefit Plans - Health & Welfare Benefits Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial status of the Plan as of December 31, 2016 and 2015, and the changes in financial status for the years then ended, in accordance with accounting principles generally accepted in the United States of America. CliftonLarsonAllen LLP Minneapolis, Minnesota September 28,

4 Statements of Net Assets Available for Benefits Farm Credit Foundations Benefit Plans - Health & Welfare Benefits December 31, 2016 and 2015 December 31, 2016: Assets Life and Flexible Long-Term Total Medical Dental AD&D Spending Vision Disability Memorandum Plan Plan Plan Account Plan Plan Only Short-term investments (at fair value) $ 22,972,208 $ 995,356 $ - $ 492,954 $ - $ - $ 24,460,518 Interest receivable 6, ,448 Stop loss receivable 1,669, ,669,980 Liabilities Total assets 24,648, , , ,136,946 Administrative and other expenses payable 938,826 49,330-1, ,409 Total liabilities 938,826 49,330-1, ,409 Net assets available for benefits $ 23,709,453 $ 946,262 $ - $ 491,822 $ - $ - $ 25,147,537 December 31, 2015: Assets Short-term investments (at fair value) $ 21,057,681 $ 1,051,400 $ - $ 444,484 $ - $ - $ 22,553,565 Interest receivable Claims Receivable 202, ,187 Liabilities Total assets 21,260,042 1,051, , ,755,937 Administrative and other expenses payable 486,855 47, ,505 Total liabilities 486,855 47, ,505 Net assets available for benefits $ 20,773,187 $ 1,003,817 $ - $ 444,428 $ - $ - $ 22,221,432 See accompanying notes to the financial statements. 3

5 Statement of Changes in Net Assets Available for Benefits Farm Credit Foundations Benefit Plans - Health & Welfare Benefits Year Ended December 31, 2016 Life and Flexible Long-Term Total Medical Dental AD&D Spending Vision Disability Memorandum Plan Plan Plan Account Plan Plan Only Net assets available for benefits, beginning of year $ 20,773,187 $ 1,003,817 $ - $ 444,428 $ - $ - $ 22,221,432 Additions Employer contributions 90,462,360 3,404, , ,955,834 96,760,624 Employee contributions 30,825,375 3,494,775 3,492,627 4,343, ,015-43,138,480 Interest and dividends 29,507 1, ,923 Miscellaneous income , ,125 Deductions Total additions 121,317,469 6,900,312 4,430,547 4,345, ,015 1,955, ,932,152 Benefits to participants 90,000,172 6,665,212-4,213, ,878,490 Insurance premiums 1,472,004-4,430, ,015 1,955,834 8,840,400 Transfers to health savings accounts 20,654, ,654,616 Administrative and other expenses 6,254, ,655-85, ,632,541 Total deductions 118,381,203 6,957,867 4,430,547 4,298, ,015 1,955, ,006,047 Net increase (decrease) 2,936,266 (57,555) - 47, ,926,105 Net assets available for benefits, end of year $ 23,709,453 $ 946,262 $ - $ 491,822 $ - $ - $ 25,147,537 See accompanying notes to the financial statements. 4

6 Statement of Changes in Net Assets Available for Benefits Farm Credit Foundations Benefit Plans - Health & Welfare Benefits Year Ended December 31, 2015 Life and Flexible Long-Term Total Medical Dental AD&D Spending Vision Disability Memorandum Plan Plan Plan Account Plan Plan Only Net assets available for benefits, beginning of year $ 12,390,559 $ 1,001,256 $ - $ 474,223 $ - $ - $ 13,866,038 Additions Employer contributions 86,468,935 3,340,790 1,016, ,184,853 93,011,290 Employee contributions 28,991,083 3,441,289 3,594,239 4,295, ,536-41,255,932 Interest and dividends 1, ,931 Miscellaneous income 1, ,712 Deductions Total additions 115,463,543 6,782,173 4,610,951 4,295, ,536 2,184, ,270,865 Benefits to participants 79,777,696 6,490,939-4,233, ,501,929 Insurance premiums 1,907,674-4,610, ,536 2,184,853 9,637,014 Transfers to health savings accounts 19,076, ,076,209 Administrative and other expenses 6,319, ,673-92, ,700,319 Total deductions 107,080,915 6,779,612 4,610,951 4,325, ,536 2,184, ,915,471 Net increase (decrease) 8,382,628 2,561 - (29,795) - - 8,355,394 Net assets available for benefits, end of year $ 20,773,187 $ 1,003,817 $ - $ 444,428 $ - $ - $ 22,221,432 See accompanying notes to the financial statements. 5

7 Statement of Benefit Obligations Farm Credit Foundations Benefit Plans - Health & Welfare Benefits Years Ended December 31, 2016 and 2015 December 31, 2016 December 31, 2015 Flexible Total Flexible Total Medical Dental Spending Memorandum Medical Dental Spending Memorandum Plan Plan Account Only Plan Plan Account Only Amounts currently payable to or for participants - medical claims drafts outstanding and premiums due to insurers $ 2,050,160 $ - $ 5,404 $ 2,055,564 $ 3,610,141 $ - $ - $ 3,610,141 Other obligations for current benefit coverage - estimated liability for claims incurred but not reported 6,979, , ,901 8,162,741 4,528, , ,706 5,591,565 Total benefit obligations other than postretirement benefit obligations 9,030, , ,305 10,218,305 8,139, , ,706 9,201,706 Postretirement benefit obligations Current retirees 16,639, ,000-16,823,000 15,671, ,000-15,813,000 Other participants fully eligible for benefits 8,192, ,000-8,564,000 8,186, ,000-8,564,000 Other participants not yet fully eligible 12,066, ,000-12,508,000 12,550, ,000-13,056,000 Total postretirement benefit obligations 36,897, ,000-37,895,000 36,407,000 1,026,000-37,433,000 Total benefit obligations $ 45,927,000 $ 1,406,000 $ 780,305 $ 48,113,305 $ 44,546,000 $ 1,368,000 $ 720,706 $ 46,634,706 See accompanying notes to the financial statements. 6

8 Statement of Changes in Benefit Obligations Farm Credit Foundations Benefit Plans - Health & Welfare Benefits Year Ended December 31, 2016 Amounts currently payable to or for participants - medical claims drafts outstanding and premiums due to insurers Life and Flexible Long-Term Total Medical Dental AD&D Spending Vision Disability Memorandum Plan Plan Plan Account Plan Plan Only Balance at beginning of year $ 3,610,141 $ - $ - $ - $ - $ - $ 3,610,141 Claims reported and approved for payment 88,440,191 6,665,212-4,218, ,323,913 Premiums reported and approved for payment 1,472,004-4,430, ,015 1,955,834 8,840,400 Claims and premiums paid (91,472,176) (6,665,212) (4,430,547) (4,213,106) (982,015) (1,955,834) (109,718,890) Balance at end of year 2,050, , ,055,564 Other obligations for current benefit coverage - estimated liability for claims incurred but not reported Balance at beginning of year 4,528, , , ,591,565 Net change in estimated liability 2,450,981 66,000-54, ,571,176 Balance at end of year 6,979, , , ,162,741 Total benefit obligations other than postretirement benefit obligations 9,030, , , ,218,305 Postretirement benefit obligations Balance at beginning of year 36,407,000 1,026, ,433,000 Benefits earned 524,000 23, ,000 Interest 1,306,000 21, ,327,000 Benefits paid (1,751,000) (12,000) (1,763,000) Changes in actuarial assumptions and other gains and losses 411,000 (60,000) ,000 Balance at end of year 36,897, , ,895,000 Total benefit obligations at year end $ 45,927,000 $ 1,406,000 $ - $ 780,305 $ - $ - $ 48,113,305 See accompanying notes to the financial statements. 7

9 Statement of Changes in Benefit Obligations Farm Credit Foundations Benefit Plans - Health & Welfare Benefits Year Ended December 31, 2015 Amounts currently payable to or for participants - medical claims drafts outstanding and premiums due to insurers Life and Flexible Long-Term Total Medical Dental AD&D Spending Vision Disability Memorandum Plan Plan Plan Account Plan Plan Only Balance at beginning of year $ 1,168,533 $ - $ - $ 842 $ - $ - $ 1,169,375 Claims reported and approved for payment 82,219,303 6,490,939-4,232, ,942,694 Premiums reported and approved for payment 1,907,674-4,610, ,536 2,184,853 9,637,014 Claims and premiums paid (81,685,369) (6,490,939) (4,610,951) (4,233,294) (933,536) (2,184,853) (100,138,942) Balance at end of year 3,610, ,610,141 Other obligations for current benefit coverage - estimated liability for claims incurred but not reported Balance at beginning of year 6,404, , , ,404,399 Net change in estimated liability (1,875,608) 44,000-18, (1,812,834) Balance at end of year 4,528, , , ,591,565 Total benefit obligations other than postretirement benefit obligations 8,139, , , ,201,706 Postretirement benefit obligations Balance at beginning of year 42,990,000 1,266, ,256,000 Benefits earned 655,000 31, ,000 Interest 1,731,000 26, ,757,000 Benefits paid (1,779,000) (10,000) (1,789,000) Changes in actuarial assumptions and other gains and losses (7,190,000) (287,000) (7,477,000) Balance at end of year 36,407,000 1,026, ,433,000 Total benefit obligations at year end $ 44,546,000 $ 1,368,000 $ - $ 720,706 $ - $ - $ 46,634,706 See accompanying notes to the financial statements. 8

10 Notes to Financial Statements Farm Credit Foundations Benefit Plans - Health & Welfare Benefits December 31, 2016 and 2015 NOTE 1: DESCRIPTION OF THE PLANS The Medical Plan, the Dental Plan, the Life and AD&D Plan, the Flexible Spending Account, the Vision Plan, and the Long-Term Disability Plan (the Plans) represent the six Plans comprising the Farm Credit Foundations Benefit Plans Health & Welfare Benefits. The Plans provide health and welfare benefits to eligible member employers. The following description provides general information regarding the Plans. Refer to the respective Plans documents for a complete description of Plan provisions. Plan Provisions The member employers of the Plans include AgriBank, FCB (AgriBank) and its affiliated Associations, Northwest Farm Credit Services, ACA (Northwest FCS), and former Ninth and Eleventh District Employers (collectively, the Employers). Except as discussed below, all full-time and part-time employees of the Employers working an average of 20 hours or more per week are eligible to participate in the Plans. Plan Governance The Farm Credit Foundations Plan Sponsor Committee (Plan Sponsor Committee) and Farm Credit Foundations Trust Committee (Trust Committee) provide consideration and oversight of the benefit plans offered by participating employers as defined by the Farm Credit Foundations Administrative Agreement. As of December 31, 2016 there were 41 participating employers across 29 states with over 8,600 active employees, which Farm Credit Foundations served. The governance committees are either elected or appointed representatives (senior leadership and/or Board of Director members) from the participating organizations. The Plan Sponsor Committee is responsible for decisions regarding benefits at the direction of the participating employers. The Trust Committee is responsible for fiduciary and Plan administrative functions. Medical Plan The Medical Plan provides self-insured hospital and health care benefits to all eligible active and retired employees. The cost of medical coverage for active employees and retirees is shared by the Employers and Plan participants. Employees and retirees may make contributions to obtain coverage for themselves and/or dependents. The Employers have purchased specific excess loss insurance on the self-insured PPO features through Blue Cross Blue Shield of Illinois (BCBS IL). Under the terms of the policy, the insurer will reimburse 100 percent of eligible expenses in excess of $650,000 per covered person. The Medical Plan is administered by BCBS IL and CVS Caremark for pharmacy benefit management. Fully insured medical Plans are offered for employees in the State of Hawaii through Hawaii Medical Service Allocation (HMSA) and the State of Utah through SelectHealth. Dental Plan The Dental Plan is self-insured which provides employees with the option of basic or comprehensive dental coverage. The Basic Plan covers routine annual expenses such as examinations, x-rays, fillings, and cleanings. The Comprehensive Plan covers all expenses provided for by the Basic Plan as well as major and orthodontia treatment. The Employers and employees share the cost of the Plan. The Dental Plan is administered by Delta Dental of Kansas. Life and AD&D Plan The Employers provide basic life insurance and accidental death and dismemberment (AD&D) coverage to eligible employees equal to one times the employees total compensation. The cost of the Plan is borne by the Employers, who make premium payments to the insurance company in return for coverage for the employees. Employees also have the option to purchase additional life insurance, additional AD&D insurance, dependent life insurance, or group universal life insurance. The cost of these optional policies is borne by the participating employees and remitted to the insurance company as premium payments. All insurance coverage is provided by Minnesota Life Insurance Company. Flexible Spending Account The Flexible Spending Accounts allow employees to set aside pre-tax dollars for out-of-pocket health care and dependent care expenses. This Plan is funded entirely by the employees. Forfeited contributions are used to pay Plan administrative and other expenses. Contributions to the health spending and dependent care accounts are employee contributions withheld from payroll, which are deposited into each participant's account. Vision Plan The Vision Plan provides comprehensive services that focus solely on eye care. The cost of the Plan is borne by the employees. Employee contributions are remitted to the insurance company, Vision Service Plan Insurance Company, as premium payments. The Plan provides coverage for the employee and eligible family members for eye exams, lenses, frames, and contact lenses. 9

11 The Vision Plan also covers laser vision correction surgery at a discounted fee when network providers are used. For participating providers, services are paid in full after an initial employee copayment. Employees are given allowances for services provided by nonparticipating providers. Long-Term Disability Plan The Long-Term Disability Plan provides payment of 66 2/3 percent of an employee s eligible monthly earnings. Benefits begin on the 181st day after disability, subject to the approval of the insurance provider, Hartford Life and Accident Insurance Company (Hartford). The cost of the Plan is borne by the Employers, with contributions remitted to Hartford as premium payments. Funding Policy Employers and employees contribute to the various Plans in amounts necessary to fund the benefits provided. In addition, the Medical Plan is not subject to the Consolidated Omnibus Budget Reconciliation Act of 1985 ( COBRA ), although it voluntarily offers continuation coverage similar to that found in COBRA, as set forth in this Medical Plan. If a participant and the participant s dependents lose coverage as a result of a qualifying event, they do have the opportunity to continue coverage by returning a continuation of coverage election form and by paying the applicable premium. Postretirement costs of the Medical Plans are shared by the participating employers and retirees. In addition to deductibles and copayments, contributions are subsidized by the Employers as follows: Retiree Participants Retiree Contribution (1) Former Seventh District Retirees (retired prior to December 31, 1992) Employer subsidy is 50 percent of total premium Employer subsidy is 50 percent of total premium (2) Former Sixth District Retirees (retired prior to December 31, 1992) Employer subsidy is 75 percent of total premium Employer subsidy is 75 percent of total premium (3) Former Fourth District Retirees (retired or eligible to retire on December 31, 1992) Employer subsidy is 33 percent of total premium Employer subsidy is 10 percent of total premium (4)* Current AgriBank District Retirees (hired prior to January 1, 2002, and retired after January 1, 1993) Employer subsidy is based on a formula of $50 x number of years of service (10 year minimum/30 year maximum) Employer subsidy is based on a formula of $30 x number of years of service (10 year minimum/30 year maximum) (5) Current Eleventh District Retirees (hired prior to January 1, 2002) Employer subsidy is 25 percent of total premium Employer subsidy is $50 a month for each retiree (6) Current Northwest Farm Credit Services Retirees (hired prior to January 1, 2002) No employer subsidy No employer subsidy 10

12 Retiree Participants Retiree Contribution (7) Former Farm Credit Services of America Retirees (hired prior to January 1, 2002 and retired on or before December 31, 2011) Employer subsidy is fixed at 2011 employer subsidy levels; ongoing retiree bears full increase in premium No employer subsidy (8) Current Farm Credit Services of America Retirees (hired prior to January 1, 2002 and retired after January 1, 2012 and later) Employer subsidy is based on a formula of $50 x number of years of service (10 year minimum/30 year maximum) No employer subsidy * Note: Employees retiring from Farm Credit Mid-America, an employer in the AgriBank District, Northwest FCS, and former Ninth District employers are not eligible for subsidy; they are charged the total premium. Any employee hired after January 1, 2002, has access to retiree medical coverage provided they retire at age 55 or later with ten or more years of service; however, there will be no employer subsidy. Regulatory Compliance The Department of Labor has determined the Plans to be governmental plans; therefore, the Plans are not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Plan Administration The Plans provide that an employee of a participating employer who has satisfied the Plan s eligibility requirements, will have rights to benefits under the Plans. Farm Credit Foundations serves as a Plan Administrator. The Farm Credit Foundations Trust Committee has primary responsibility for administration and interpretation of the Plans and investment of the assets of the Plans. Wells Fargo Bank, N.A. (Wells Fargo) is the primary custodian for the invested assets of the Plans and is the investment manager for the Plans. As the investment manager, Wells Fargo supervises and administers all investments and related activities including such functions as purchases, sales, reinvestment, collection of interest and other forms of income, and voting. Plan Termination Although it has not expressed any intention to do so, the Plan Sponsor Committee has the right under the Plans to modify the benefits provided, to discontinue its contributions at any time, and to terminate the Plans. Upon such termination, assets will be used to pay benefits under the terms of the Plans and coverage for all covered persons would end. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP). Accordingly, income is recorded in the year earned and expenses are recorded in the year incurred. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, disclosure of contingent assets and liabilities, and the actuarial present value of benefit obligations at the date of the financial statements. Actual results could differ from those estimates. Fair Value of Financial Instruments The accounting guidance describes three levels of inputs that may be used to measure fair value. Level 1: Unadjusted quoted prices in active markets for identical assets that the Plan has the ability to access at the measurement date. 11

13 Level 2: Observable inputs other than quoted prices included within Level 1 that are observable for the asset either directly or indirectly. Level 2 inputs include: Quoted prices for similar assets in active markets Quoted prices for identical or similar assets in markets that are not active so that they are traded less frequently than exchange-traded instruments, quoted prices are not current, or principal market information is not released publicly Inputs other than quoted prices that are observable for the asset Inputs derived principally from or corroborated by observable market data by correlation or other means Level 3: Unobservable inputs are supported by little or no market activity and are significant to the fair value of the assets. These unobservable inputs reflect the Plan s own judgements about assumptions that market participants would use in pricing the asset. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. The asset 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 used need to maximize the use of observable inputs and minimize the use of unobservable inputs. There have been no changes in the valuation methodologies used at December 31, 2016 and Investment Valuation and Income Recognition The Plan s investments are reported at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The short-term investments are valued at cost which approximates fair market value. Purchases and sales of investments are recorded on a trade date basis. Interest income is accrued based on the terms of the underlying instrument. Insurance Contracts Insurance carriers provide coverage under the Medical Plan, Life and AD&D Plan, Vision Plan, and Long-Term Disability Plan. Under the terms of the contracts with each respective carrier, the insurer has received premium payments and has a legal obligation to make all benefit payments. As such, these insurance contracts are excluded from Plan assets. Benefits and Expenses All benefits under the Life and AD&D Plan, Vision Plan, and Long-Term Disability Plan as well as certain benefits under the Medical Plan are paid by the insurance companies to which the Employers and/or employees pay premiums. All other benefit payments are paid from Plan assets and are recorded upon distribution. Administrative and other expenses of the Plans are generally paid from Plan assets. The Employers, however, may pay directly certain administrative expenses of the Plans. Costs paid directly by the Employers are not recorded in the Statements of Changes in Net Assets Available for Benefits. Recently Issued or Adopted Accounting Pronouncements We have assessed the potential impact of accounting standards that have been issued, but are not yet effective, and have determined that no such standards are expected to have a material impact to our consolidated financial statements. NOTE 3: INCOME TAX STATUS A trust was established under the Plans to hold the Plans assets. The Plans have not obtained a determination letter from the Internal Revenue Service, but management is of the opinion that the Plans and related trust are operating in compliance with applicable sections of the Internal Revenue Code and are exempt from Federal income taxes. GAAP requires the Trust Committee to evaluate tax positions taken by the Plans and recognize a tax liability if the Plans have taken an uncertain tax position that it estimates would not be fully sustained upon examination by the IRS. The Plans are subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plans administrator believes it is no longer subject to income tax examinations for years prior to

14 NOTE 4: BENEFIT OBLIGATIONS Postretirement Benefit Obligations-Medical Plan, Dental Plan, and Life and AD&D Plan The amount reported as the postretirement benefit obligation represents the actuarial present value of those estimated future benefits that are attributed by the terms of the Plans to employees service rendered to the date of the financial statements, reduced by the actuarial present value of contributions expected to be received in the future from current Plan participants. Postretirement benefits include future benefits expected to be paid to or for currently retired or terminated employees and their beneficiaries and dependents and active employees and their beneficiaries and dependents after retirement from service with participating employers. The postretirement benefit obligation represents the amount that is to be funded by contributions from the Plans participating employers and from existing Plan assets. Prior to an active employee s full eligibility date, the postretirement benefit obligation is the portion of the expected postretirement benefit obligation that is attributed to that employee s service rendered to the valuation date. The actuarial present value of accumulated Plan benefits is determined by the Plans actuaries by applying actuarial assumptions to adjust the accumulated Plan benefits to reflect the time value of money and the probability of payment between the valuation date and the expected date of payment. The significant assumptions used in the valuations as of December 31, 2016 and 2015, are detailed in the following table: Average retirement age Graduated rate beginning at age 55 with the 100% retirement at age 70 for 2016 and 2015 Mortality RP-2014 Aggregate Table projected back to 2006 using Scale MP-2014 and projected forward using Scale MP-2016 with generational projection for 2016 RP-2014 Aggregate Table projected back to 2006 using Scale MP-2014 and projected forward using Scale MP-2015 with generational projection for 2015 Interest rate: AgriBank District participants 4.24% per annum for 2016 FCS of America participants 2.99% per annum for 2016 Eleventh District participants 4.28% per annum for 2016 Ninth District participants 3.70% per annum for 2016 AgriBank District participants 4.49% per annum for 2015 FCS of America participants 3.07% per annum for 2015 Eleventh District participants 4.60% per annum for 2015 Ninth District participants 3.92% per annum for 2015 The foregoing assumptions are based on the presumption that the Plans will continue. Were the Plans to terminate, different actuarial assumptions and other factors might be applicable in determining the actuarial present value of the postretirement benefit obligation. For measurement purposes with regard to the Medical Plans, the annual rates of increase in the per capita cost of covered health care benefits for all Districts assumed for 2016 was 7.75% grading to 5.0% by 2023 and for 2015 was 8.0% grading to 5.0% by The weighted average health care cost trend rate assumption has a significant effect on the amounts reported in the accompanying financial statements. If the assumed rates increased by one percentage point in each year, it would increase the obligation by $765,000 and $716,000 as of December 31, 2016 and 2015, respectively. Liability for Claims Incurred But Not Reported The estimated liabilities for claims incurred but not reported for the Medical Plan and Dental Plan at December 31, 2016 and 2015, were estimated by the Plans actuary in accordance with accepted actuarial principles based on actual claims reported through March of the following year and prior year experience. The estimated liability for claims incurred but not reported is estimated based on actual claims reported through March of the following year. NOTE 5: RISKS AND UNCERTAINTIES The Plans provide for investments in investment funds. In general, investments are exposed to various risks, such as interest rate, credit, and overall market volatility risk. Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in the values of the investments will occur in the near term and that such changes could materially affect account balances and the amounts reported in the Statements of Net Assets Available for Benefits. 13

15 Plan contributions are made and the estimated liabilities for claims incurred but not reported and postretirement benefit obligations are reported based on certain assumptions pertaining to interest rates, inflation rates, and employee demographics, all of which are subject to change. Due to uncertainties inherent in the estimations and assumptions process, it is at least reasonably possible that changes in these estimates and assumptions in the near term would be material to the financial statements. NOTE 6: RELATED PARTY Farm Credit Foundations paid certain expenses on behalf of the Plans and was reimbursed by the participating employers for those expenses. NOTE 7: FAIR VALUE The following table presents the fair value hierarchy for the balances of assets of the plans measured at fair value on a recurring basis as of December 31: 2016 Medical Plan Level 1 Level 2 Level 3 Total Short-term investments $ 22,972,208 $ - $ - $ 22,972,208 Dental Plan Short-term investments 995, ,356 Flex Spending Account Short-term investments 492, ,954 Total investments at fair value $ 24,460,518 $ - $ - $ 24,460, Medical Plan Short-term investments $ 21,057,681 $ - $ - $ 21,057,681 Dental Plan Short-term investments 1,051, ,051,400 Flex Spending Account Short-term investments 444, ,484 Total investments at fair value $ 22,553,565 $ - $ - $ 22,553,565 There were no transfers into or out of Level 1, Level 2, or Level 3 during the Plans years ended December 31, 2016 or All assets in the Medical Plan, Dental Plan, and Flexible Spending Account are invested in the Wells Fargo Cash Investment Fund and no other investments were held as of December 31, 2016 and NOTE 8: SUBSEQUENT EVENTS The Plans have evaluated subsequent events through September 28, 2017, which is the date the financial statements were available to be issued. There have been no material subsequent events that would require recognition in these financial statements or disclosure in the Notes to Financial Statements. 14