The Peterson Company Retirement Savings Plan

Transcription

1 The Peterson Company Retirement Savings Plan Financial Statements and Supplemental Schedule For the Years Ended December 31, 2015 and 2014 The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee.

2 Financial Statements and Supplemental Schedule For the Years Ended December 31, 2015 and 2014

3 Contents Independent Auditor s Report 3-4 Financial Statements Statements of Net Assets Available for Benefits as of December 31, 2015 and Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 2015 and Notes to Financial Statements 7-13 Supplemental Schedule Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, Note: Schedules other than that listed above have been omitted because they are not applicable or are not required by 29 CFR of the Department of Labor s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, as amended. 2

4 Tel: Fax: University Street, Suite 2528 One Union Square Seattle, WA Independent Auditor s Report To the Plan Administrator of The Peterson Company Retirement Savings Plan Auburn, Washington Report on the Financial Statements We were engaged to audit the accompanying financial statements of the Peterson Company Retirement Savings Plan (the Plan), which comprise the statements of net assets available for benefits as of December 31, 2015 and 2014, and the related statements of changes in net assets available for benefits 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on conducting the audits in accordance with auditing standards generally accepted in the United States of America. Because of the matter described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Basis for Disclaimer of Opinion As permitted by 29 CFR of the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, the plan administrator instructed us not to perform, and we did not perform, any auditing procedures with respect to the information summarized in Note 5, which was certified by Fidelity Management Trust Company, the trustee of the Plan, except for comparing such information with the related information included in the financial statements. We have been informed by the plan administrator that the trustee holds the Plan's investment assets and executes investment transactions. The plan administrator has obtained a certification from the trustee as of December 31, 2015 and 2014, and for the years then ended, that the information provided to the plan administrator by the trustee is complete and accurate. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 3

5 Disclaimer of Opinion Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on these financial statements. Other Matter The supplemental schedule Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2015 is required by the Department of Labor s (DOL) Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 and is presented for the purpose of additional analysis and is not a required part of the financial statements. Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we do not express an opinion on this supplemental schedule. Report on Form and Content in Compliance With DOL Rules and Regulations The form and content of the information included in the financial statements and supplemental schedule, other than that derived from the information certified by the trustee, have been audited by us in accordance with auditing standards generally accepted in the United States of America and, in our opinion, are presented in compliance with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of August 4, 2016 BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 4

6 Financial Statements

7 Statements of Net Assets Available for Benefits December 31, Assets Investments, at fair value: Shares of registered investment companies $ 6,803,212 $ 6,546,741 Money market fund 127, ,292 Total Investments, at fair value 6,930,772 6,740,033 Receivables Employer contributions receivable Net Assets Available for Benefits $ 6,931,759 $ 6,740,033 See notes to financial statements. 5

8 Statements of Changes in Net Assets Available for Benefits Year Ended December 31, Investment Income Dividend income $ 364,890 $ 427,086 Net depreciation in the fair value of investments (391,312) (108,564) Total investment income (loss) (26,422) 318,522 Contributions Participants 549, ,189 Employer 140, ,520 Rollovers - 32,222 Total contributions 689, ,931 Total Investment Income (Loss) and Contributions 662, ,453 Deductions from Net Assets Attributed to Benefits paid to participants and beneficiaries (467,309) (473,773) Administrative expenses (3,770) (5,221) Total Deductions from Net Assets (471,079) (478,994) Net Increase in Net Assets Available for Benefits 191, ,459 Net Assets Available for Benefits, beginning of year 6,740,033 6,295,574 Net Assets Available for Benefits, end of year $ 6,931,759 $ 6,740,033 See notes to financial statements. 6

9 Notes to Financial Statements 1. Plan Description The following description of The Peterson Company Retirement Savings Plan (the Plan) provides only general information. Participants should refer to the Plan Agreement or Summary Plan Description for a more complete description of the Plan s provisions. General The Plan is a defined contribution plan under Section 401(k) of the Internal Revenue Code ( IRC ) and covers substantially all employees of Floyd Peterson Co., Inc. (the Employer or Company ), except leased employees and employees covered under a collective bargaining agreement. The Plan was established on July 1, 1985, and the amended and restated provisions of the Plan became effective on that date. The Plan is to provide benefits to eligible employees, as defined in the Plan Document. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ( ERISA ). The Plan trustee and recordkeeper is Fidelity Management Trust Company (the Trustee ). Eligibility Employees who are 21 years of age or older who have completed at least one year of service, excluding employees covered by a collective bargaining agreement, are eligible to participate in the Plan. Entry dates are the first day of the month subsequent to obtaining eligibility. Employees are automatically enrolled in the Plan to contribute 3% of their eligible compensation to the appropriate Fidelity Freedom Fund as determined by the participant s date of birth. The employee may elect to change their deferral at any future entry date. Contributions Participants may contribute a minimum of 1% up to a maximum of 90% of their annual compensation, subject to certain Internal Revenue Code (IRC) limitations. Employees who have been automatically enrolled and have not made affirmative elections otherwise will have annual automatic deferral increases of 1% of compensation until their deferral rate equals 10% of compensation as defined by the Plan. Each year, the Company contributes to the Plan a minimum of 35% of the employee s annual contributions, limited to a maximum of 6% of the employee s annual compensation. The total amount of a participant s regular deferral, voluntary, and catchup contributions is limited to $24,000 ($18,000 plus the allowable $6,000 catch-up contributions), the limit under IRC Section 401(k). Participants are allowed to invest in a variety of investment choices as more fully described in the Plan s literature. Participants Accounts Each participant s account is periodically credited for the participant s contributions, and an allocation of the Plan earnings, and the Company s contributions. The participants accounts are also charged for an allocated amount of the administrative expenses incurred. Allocations are based on participant earnings or account balances, as defined. The participants are entitled to the benefit that can be provided from their respective vested account. 7

10 Notes to Financial Statements Investments The Plan investment options currently include various mutual funds (registered investment company funds), including one money market portfolio. Vesting of Benefits Participants are immediately vested in their voluntary contributions including any realized earnings thereon. Vesting in the Company s contribution portion of their accounts, plus actual earnings thereon, is based on years of service as defined by the following schedule: Completed Years of Service Percentage Vested 1 but less than 2 0% 2 but less than 3 20% 3 but less than 4 40% 4 but less than 5 60% 5 but less than 6 80% 6 or more 100% The Plan has an early retirement provision that allows participants who reach the age of 55 to become fully vested in the Company s contribution portion of their accounts, regardless of their length of service. Notes Receivables Participant Loans Participant loans are not allowed under the Plan. Payment of Benefits Upon termination of service, normal retirement, death or disability, a participant may elect to receive a lump-sum amount equal to the value of the participant s vested interest in his or her account. An in-service withdrawal is permitted upon attainment of age 59½, and hardship withdrawals are permitted under certain circumstances, as defined by the Plan. Forfeitures Forfeited accounts include the non-vested portion of the Company s contributions, including any realized earnings thereon, previously allocated to former participants in the Plan. Forfeitures may be used to pay expenses of the Plan and then to reduce employer contributions. For the years ended December 31, 2015 and 2014, forfeited amounts totaled $4,708 and $3,167, respectively. Forfeitures used to pay Plan expenses were $2,975 and $4,308 in 2015 and 2014, respectively. Forfeitures used to reduce employer contributions were $0 in 2015 and Unallocated forfeitures available for future use were $1,908 and $175 at December 31, 2015 and 2014, respectively. 8

11 Notes to Financial Statements Administrative Expenses Certain administrative expenses of the Plan are paid by the Company. Expenses not paid by the Company are paid by the Plan. Administrative expenses recorded by the Plan during the years ended December 31, 2015 and 2014, totaled $3,770 and $5,221, respectively. These generally include maintenance fees, withdrawal fees, recordkeeping fees, and managed account fees charged directly to the participant's account. 2. Significant Accounting Policies Basis of Accounting The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Payment of Benefits Benefit payments to participants are recorded upon distribution. Investment Valuation and Income Recognition The investments of the Plan are reported at fair value in accordance with Financial Accounting Standards Board Accounting Standards Codification ( ASC ) 820, Fair Value Measurements. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). See Note 4 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 investment gain (loss) includes the Plan s gains and losses on investments bought and sold as well as held during the year. Risks and Uncertainties The Plan provides for various investment options in any combination of investment securities offered by the Plan. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the risk associated with certain investment securities, it is at least reasonably possible that changes in market values, interest rates or other factors in the near term would materially affect participants account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statements of Changes in Net Assets Available for Benefits. 9

12 Notes to Financial Statements Recent Accounting Pronouncements In May 2015, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) No , Fair Value Measurement (Topic 820) - Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent). The amendments in this ASU remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. This guidance also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. The amendments in this ASU are effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Plan should apply the amendments retrospectively to all periods presented. Earlier application is permitted. Plan management is currently evaluating the impact of adopting this guidance on the financial statements. In July 2015, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) , Plan Accounting: Defined Benefits Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962) and Health and Welfare Benefit Plans (Topic 965): I. Fully Benefit-Responsive Investment Contracts; II. Plan Investment Disclosures; and III. Measurement Date Practical Expedient. This three-part ASU simplifies current benefit plan accounting and requires (i) fully benefit-responsive investment contracts to be measured, presented, and disclosed only at contract value and accordingly removes the requirement to reconcile their contract value to fair value; (ii) benefit plans to disaggregate their investments measured using fair value by general type, either on the face of the financial statements or in the notes to the financial statements; (iii) the net appreciation or depreciation in investments for the period to be presented in the aggregate rather than by general type, and removes certain disclosure requirements relevant to individual investments that represent five percent or more of net assets available for benefits. Further, the amendments in this ASU eliminate the requirement to disclose the investment strategy for certain investments that are measured using Net Asset Value ( NAV ) per share using the practical expedient in the FASB ASC Topic 820. Part III of the ASU provides a practical expedient to permit employee benefit plans to measure investments and investment related accounts as of the month-end that is closest to the plan s fiscal year-end, when the fiscal period does not coincide with a month-end, while requiring certain additional disclosures. Plan management has adopted the provisions of Part III of this ASU and is currently evaluating the impact of adopting Part II. 3. Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan, subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their accounts. 10

13 Notes to Financial Statements 4. Fair Value Measurements ASC 820 provides the framework of measuring fair value; that framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described as follows: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access. Level 2: Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. 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. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2015 and Shares of Investment Companies: investment companies represent investments with various investment managers. The fair value of these investments are determined by reference to the investment companies underlying assets, which are principally marketable equities and fixed income securities. Shares held in registered investment companies traded on national securities exchanges are valued at the net asset value as of December 31, 2015 and Money Market Fund: Interest in the money market fund is valued based on the short-term cash component as of the measurement date and classified within Level 1 of the valuation hierarchy. 11

14 Notes to Financial Statements The tables below set forth the Plan s investments by level within the fair value hierarchy. Fair Value Measurements December 31, 2015 Level 1 Level 2 Level 3 Total investment companies: Target date funds $ 5,472,606 $ - $ - $ 5,472,606 Blended funds 584, ,233 Growth funds 230, ,254 Bond funds 182, ,556 Value funds 166, ,688 Balanced funds 141, ,807 Other funds 25, ,068 Money market fund 127, ,560 Investments, at fair value $ 6,930,772 $ - $ - $ 6,930,772 Fair Value Measurements December 31, 2014 Level 1 Level 2 Level 3 Total investment companies: Target date funds $ 5,214,033 $ - $ - $ 5,214,033 Blended funds 727, ,642 Value funds 175, ,339 Bond funds 168, ,309 Growth funds 121, ,577 Balanced funds 117, ,687 Other funds 22, ,154 Money market fund 193, ,292 Investments, at fair value $ 6,740,033 $ - $ - $ 6,740, Information Prepared and Certified by Trustee of the Plan The plan administrator has elected the alternative method of annual reporting compliance permitted by 29 CFR of the Department of Labor s Rules and Regulations for Reporting and Disclosure under ERISA. Accordingly, the Trustee of the Plan has certified that the following data included in the accompanying financial statements and supplemental schedule is complete and accurate. - Amounts included as investments in the statements of assets available for benefits at December 31, 2015 and Net investment income included in the statements of changes in assets available for benefits for the years ended December 31, 2015 and

15 Notes to Financial Statements - Investments as reflected in Form 5500, Schedule H, Part IV, Line 4i Schedule of Assets (Held at End of Year) as of December 31, The Plan s independent accountants did not perform auditing procedures with respect to this information, except for comparing such information to the related information included in the financial statements and supplemental schedule. 6. Exempt Party-in-Interest Transactions The Plan may invest in mutual funds sponsored by affiliates of the Trustee of Plan assets, which would be identified as a transaction with a party-in-interest in the supplemental schedule. 7. Income Tax Status The Plan adopted a prototype Plan document sponsored by a third party. The prototype plan received an updated opinion letter from the Internal Revenue Service (IRS) dated March 31, 2014 which states that the prototype document satisfies the applicable provisions of the IRC. The Plan itself has not received a determination letter from the IRS. The Plan Agreement has been amended since receiving the opinion letter. However, the Plan Administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirement of the IRC, and qualifies the Plan and related trust funds for tax-exempt status. Therefore, no provision for income taxes is recorded in the accompanying financial statements. 8. Plan Amendments There were no plan amendments during 2015 or Operational Plan Errors During the Plan year ended December 31, 2015, Plan management identified an operational error in which certain employee elected deferral rates were not updated timely in the payroll system. The Plan operational error resulted in contributions that were improperly calculated or excluded from Plan Years ending 2015 through Employee withholdings and employer matching contributions in the amount of $987 were not remitted by the Company to the Plan within the appropriate time period that would satisfy ERISA requirements for Plan year With the assistance of the DOL, the Company determined such late contributions do not constitute a prohibited transaction because funds were not withheld from employee pay. The Company has taken the appropriate steps to correct the situation through the Voluntary Fiduciary Correction Program, and has further revised its quarterly review procedure to ensure the accuracy of deferral rates. The Company is responsible for paying 25% of the missed employee contributions and 100% of the missed employer match. This total amount of $987 related to plan year 2015 was remitted on June 8, Subsequent Events Subsequent events were evaluated through August 4, 2016 the date the financial statements were available to be issued. 13

16 Supplemental Schedule

17 Form 5500, Schedule H, Line 4i Schedule of Assets (Held at End of Year) EIN: December 31, 2015 Plan Number: 001 (a) (b) Identity of Issuer, Borrower, Lessor, or Similar Party (c) Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value (d) Cost (e) Current Value Equity Funds Allianz NFJ Dividend Value Fund A Allianz NFJ Small Cap Value Fund A Glenmede Small Cap Equity Advantage Fidelity Fund Fidelity Capital & Income Fund Fidelity Freedom 2010 Fidelity Freedom 2015 Fidelity Freedom 2020 Fidelity Freedom 2025 Fidelity Freedom 2030 Fidelity Freedom 2035 Fidelity Freedom 2040 Fidelity Freedom 2045 Fidelity Freedom 2050 Fidelity Freedom 2055 Fidelity Freedom 2060 Fidelity Freedom Income Fidelity Government Income Fund Fidelity Growth Discovery Fund Fidelity International Discovery Fund Fidelity Large Cap Value Fund Fidelity Leveraged Company Stock Fund Fidelity Small Cap Growth Fund Fidelity Balanced Fund 2,209 Shares $ 34,152 6,417 Shares 128, Shares 7, Shares 4,741 9,667 Shares 88,457 8,293 Shares 120,909 50,919 Shares 606, ,202 Shares 1,557,651 69,051 Shares 858,999 16,676 Shares 253,641 41,219 Shares 515,651 50,083 Shares 440,232 41,491 Shares 412,005 59,802 Shares 596,225 9,133 Shares 101, Shares 4, Shares 3,816 2,434 Shares 25,068 1,658 Shares 41,888 2,341 Shares 92, Shares 4,436 1 Shares 24 3,133 Shares 58,585 6,683 Shares 141,807 14

18 Form 5500, Schedule H, Line 4i Schedule of Assets (Held at End of Year) Fidelity Independence Fund M&N Pro-Blend Moderate Fund MSIF Mid-Cap Growth Fund PIMCO Total Return Admin Fund Spartan Extended Market Index Advantage Fund Spartan International Index Advantage Fund Spartan 500 Index Advantage Fund 454Shares 16, Shares 1, Shares 16,437 9,344 Shares 94,098 3,351 Shares 168,220 2,835 Shares 101,870 4,244 Shares 304,720 Total Equity Funds 6,803,212 Cash Equivalents Fidelity Retirement Money Market Fund Money Market Fund $ 127,560 Total $ 6,930,772 A party-in-interest as defined as ERISA The cost of participant-directed investments is not required to be disclosed 15