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HomeMy WebLinkAbout2014 Deferred Comp„ j”" NlIEW YORK STATE Of OPPORTUNITY. Civil S,eirvice ANDREW M. CUOMO Governor June 24, 2015 Mr. John Cushman, Town Comptroller Town of Southold Accounting & Finance Department 54375 Main Road, Town Hall Annex PO Box 1179 Southold, New York 11971-0959 Dear Mr. Cushman: Re: Recei t of Inde endent Auditors' Report and Financial Statements for the Town of Southold Deferred Compensation Plan — Model Plan # DC -2173 This acknowledges our receipt of your letter and copy of the "Independent Auditors' Report" and "Financial Statements" for the Town of Southold's Deferred Compensation Plan prepared by Albrecht, Viggiano, Zureck & Company, P.C. (Certified Public Accountants) for years ended December 31, 2014 and 2013. This report has been submitted to our office pursuant to Section 9005.1 of the Rules and Regulations of the NYS Deferred Compensation Board. Sincerely, David Boland Director Employee Benefits Division cc: Mr. David Fischer Deputy Executive Director New York State Deferred Compensation Board Empire State Plaza Station PO Box 2103 Albany, New York 12220-2103 Empire State Plaza, Agency Building 1, Albany; NY 122391518-457-2487 1 www.cs,ny.gov CERTIFIED PUBLIC ACCOUNTANTS June 8, 2015 Mr. John Cushman, Town Comptroller Town of Southold Deferred Compensation Plan Main Road Southold, New York 11971 RECEIVED J U N 1 7 2015 Southold Town Clerk We have conducted a DOL limited -scope audit of the financial statements of Town of Southold Deferred Compensation Plan as of and for the year ended December 31, 2014 and have issued our report thereon dated June 8, 2015. As permitted by 29 CFR 2520.103-8 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 Notes 3, 4 and 5 to those financial statements. Because of the significance of the information that we did not audit, we are unable to, and have not, expressed an opinion on those financial statements and supplemental schedules taken as a whole. We did, however, audit the form and content of the information included in the financial statements and supplemental schedules, other than that derived from the information certified by the trustee, in accordance with auditing standards generally accepted in the United States of America and found them to be presented in compliance with the DOL's Rules and Regulations for Reporting and Disclosure under ERISA. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated May 14, 2015. Professional standards also require that we communicate to you the following information related to our audit: Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Plan are described in Note 2 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2014. We noted no transactions entered into by the Plan during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. PERSONAL SERVICE. TRUSTED ADVICE. — 4 ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. 245 PARK AVENUE, 39TH FLOOR 25 SUFFOLK COURT NEW YORK, NY 10167 HAUPPAUGE, NY 11788-3715 T. 212.792.4075 T. 631.434.9500 F: 631.434.9518 www.avz.com INDEPENDENT MEMBER OF BKR INTERNATIONAL Mr. John Cushman, Town Comptroller Town of Southold Deferred Compensation Plan Page 2 of 2 Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. There were no such misstatements. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated June 8, 2015. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Plan's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Plan's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters This information is intended solely for the use of trustees and management of The Town of Southold Deferred Compensation Plan and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, Albrecht, Viggiano, Zureck & Company, P.C. TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN FINANCIAL STATEMENTS Years Ended December 31, 2014 and 2013 JUN 1 6 2015 Southold Town Clerk TABLE OF CONTENTS Page MANAGEMENT'S DISCUSSION AND ANALYSIS .................................................... 1-3 INDEPENDENT AUDITORS' REPORT..................................................................... 4-5 FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits .................................................... 6 Statements of Changes in Net Assets Available For Benefits ............................... 7 Notes to Financial Statements................................................................................ 8-15 -1 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN Management's Discussion. and Analysis The statements of net assets available for plan benefits and the statements of changes in net assets available for plan benefits provide information about the financial status of the Town of Southold Deferred Compensation Plan (the Plan). These statements include all assets and liabilities using the accrual basis of accounting. Under the accrual basis of accounting, revenue and expenses are recorded when earned or incurred regardless of when cash is received or paid. The following discussion and analysis is supplementary information required by the Governmental Accounting Standards Board (GASB) and is intended to provide background and summary information for the Plan. This discussion and analysis should be read in conjunction with the financial statements, including notes, which begin on page 4. Financial Highlights Net assets available for benefits amounted to $15,951,731 at December 31, 2014 compared to $14,602,181 at December 31, 2013. The increase of $1,349,550 (8%) during the year ended December 31, 2014 is primarily the result of appreciation in the fair value of invested assets and employee contributions. Contributions from participants excluding rollovers were $664,862 in 2014 and $728,458 in 2013. The 2014 contributions decreased 9% from the 2013 contributions. The Plan's loans to participants were $294,310 in 2014 and $243,610 in 2013. This increase of 17% is mainly due to an increase in participants borrowing from the Plan. Summarized Financial Statement Information December 31, 2014 2013 Net assets available for benefits $ 15,951 731 $ 14,602 181 Increase in net assets available for benefits $ 1,349 550 $ 3,002,335 -2 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN Management's Discussion and Analysis Employee contributions Rollovers Appreciation in fair value of investments Interest income on notes receivable from participants Total additions to net assets Distributions to participants and beneficiaries Administrative expenses Appreciation in fair value of investments Average plan assets Rate of return on average plan assets Plan Additions Percentage 2014 2013 Change $ 664,862 $ 728,458 (9%) -0- 20,251 664,862 748,709 889,946 2,473,437 9,676 10,095 899,622 $ 1,564,484 2,483,532 $ 3,232,241 Plan Deductions Percentage 2014 2013 Change $ 213,984 $ 228,968 (7%) 950 938 0% Average Rate of Return 2014 2013 $ 889,946 $ 2,473,437 15, 276, 956 12, 868,402 5.8% 19.2% -3 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN Management's Discussion and Analysis Decisions and Conditions Expected to Have Significant Impact on the Plan's Future Financial Position The annual maximum contributions during the year ended December 31, 2014 was $17,500 ($23,000 if the employee is age 50 or older). Due to the demographics of the Town of Southold's ("the Town") employee base, the amount categorized as "employee contributions" should continue to increase in the foreseeable future as long as participants believe the market will continue to rise and the cost of consumer goods does not significantly decrease the participant's disposable income. Participants understand that the earlier they retire, the longer they will live in retirement and that they will need to supplement their New York State pension. As long as they can afford it (and the closer they get to retirement) they will continue to defer a portion of their current salary into the Plan. The Plan's Third Party Administrator does offer investment advice or guidance to attract non- participants who have not enrolled because of their lack of expertise in investing, fear of investing in the wrong option, not familiar with asset allocation, etc. The Town is committed to explore options to reach out to non -participants or to educate participants on the importance of reaching their retirement goals. It is hoped that the fee structure as well as the Town's policy that allows retirees or terminated employees to stay in the Plan will encourage former employees to remain in the Plan rather than rollout their account balance to another financial institution. Request for Information This financial report is designed to provide a general overview of the Plan's finances for all those included in the Plan. Questions concerning any of the information provided in this report, or requests for additional financial information should be addressed to: Accounting and Finance Department Deferred Compensation Plan for Employees of the Town of Southold Town Hall Annex P.O. Box 1179 54375 Main Road Southold, NY 11971 -4 - CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT To the Board of Directors and Trustees Town of Southold Southold, New York Report on the Financial Statements We were engaged to audit the accompanying financial statements of Town of Southold Deferred Compensation Plan (the "Plan"), which comprise the statements of net assets available for benefits as of December 31, 2014 and 2013 and the related statements of changes in net assets available for benefits for the year ended December 31, 2014 and 2013, 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 conducting the audit 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 2520.103-8 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 Notes 3, 4 and 5, which was certified by Mass Mutual Retirement Services, 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, 2014 and 2013 and for the years ended December 31, 2014 and 2013, that the information provided to the Plan administrator by the Trustee is complete and accurate. PERSONAL SERVICE. TRUSTED ADVICE. �— ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. 245 PARK AVENUE, 39TH FLOOR 25 SUFFOLK COURT NEW YORK, NY 10167 HAUPPAUGE, NY 11788-3715 T. 212.792.4075 T. 631.434.9500 F: 631.434.9518 www.avz.com INDEPENDENT MEMBER OF BKR INTERNATIONAL -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. Report on Form and Content in Compliance with DOL Rules and Regulations The form and content of the information included in the financial statements 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 1974. (lUotl ,V ,3 q C c. Hauppauge, New York June 8, 2015 U. TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS December 31, 2014 and 2013 2014 _ ASSETS Investments at fair value Notes receivable from participants 2013 $ 15,657,421 $ 14,358,571 294,310 243,610 Net Assets Available for Benefits $ 15,951,731 $ 14,602,181 See accompanying notes to the financial statements. -7 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS Years Ended December 31, 2014 and 2013 ADDITIONS: Investment income: Net appreciation in fair value of investments Interest income on notes receivable from participants Contributions: Participant Rollovers 2014 2013 $ 889,946 $ 2,473,437 9,676 10,095 899,622 2,483,532 664,862 728,458 -0- 20,251 664,862 748,709 Total Additions 1,564,484 3,232,241 DEDUCTIONS: Benefits paid to participants and beneficiaries 213,984 228,968 Administrative expenses 950 938 Total Deductions 214,934 229,906 Net Increase 1,349,550 3,002,335 Net Assets Available for Benefits: Beginning of Year 14,602,181 11,599,846 End of Year $ 15,951,731 $ 14,602,181 See accompanying notes to the financial statements. TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013 Note 1 — Description of Plan The following description of the Town of Southold Deferred Compensation Plan (the "Plan") provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan available to substantially all of the employees of the Town of Southold ("the Town") upon date of hire. The Plan was created in accordance with Internal Revenue Code Section 457 and permits the employees to defer a portion of their current salary until future years. The deferred compensation is not available to the employees until termination of employment, retirement, death or unforeseeable financial emergency. The Plan has entered into contract with the Mass Mutual Retirement Services ("the Administrator") to administer the Plan. The Administrator offers several investment options through various financial organizations, and maintains 'individual accounts for Plan participants. All amounts deferred under the Plan all property and rights purchased with such amounts and all income attributable to such amounts, property, or rights are held in trust for the exclusive benefit of the participants and their beneficiaries and alternate payees pursuant to the trust agreement. Contributions Each year, participants may contribute up to fifteen percent of their annual compensation, as defined by the Plan, not to exceed the maximum amount permitted under the Internal Revenue Code. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans. Participants direct the investment of their contributions into various investment options offered by the Plan. Participant Accounts Each participant's account is credited with the participant's contribution and allocations of the Plan earnings, and charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined by the Plan. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. Vesting Participants are immediately vested in their contributions plus actual earnings thereon. Notes Receivable from Participants Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. The notes are secured by the balance in the participant's account and bear interest at rates which are commensurate with local prevailing rates as determined quarterly by the Plan Administrator. Principal and interest is paid ratably through payroll deductions. W TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013 Note 1 — Description of Plan (continued) Investment Options Upon enrollment in the Plan, a participant may options in mutual funds offered by Mass Mutual their investment options throughout the Plan year Payment of Benefits direct contributions to a variety of investment Retirement Services. Participants may change On termination of service due to death, disability, or retirement, a participant may elect to receive either a lump -sum amount equal to the value of the participant's vested interest in his or her account, or monthly, quarterly, semi-annually or annual installments over a certain period, as defined by the Plan. Additionally, participants may request withdrawals for unforeseeable emergencies subject to certain federal rules and regulations. Note 2 — Summary of Significant Accounting Policies Basis of Accountinq The financial statements of the Plan are prepared under the accrual method of accounting and present the fiduciary net assets available for plan benefits and changes in fiduciary net assets for benefits. Investment contracts held by a defined -contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available. for benefits of a defined -contribution plan attributable to fully benefit -responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The statements of net assets available for benefits present the fair value of the investment contracts from fair value to contract value. The fair value of the benefit responsive investment contracts approximated contract value as of December 31, 2014 and 2013, respectively. 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. Investment Valuation and Income Recognition The Plan's investments are recorded at fair value. Fair value is the price 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. 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 appreciation or depreciation includes the Plan's gains and losses on investments bought and sold as well as held during the year. -10 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013 Note 2 — Summary of Significant Accounting Policies (continued) Notes Receivable from Participants Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Interest Income is recorded on -the accrual basis. Related fees are recorded as administrative expenses and expensed when incurred. No allowance for credit losses has been recorded as of December 31, 2014 and 2013. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be in default, the participant loan balance is reduced and a benefit payment is recorded. Payment of Benefits Benefits are recorded when paid. Administrative Expenses Each participant account is credited with earnings on the underlying investments and charged for administrative expenses to arrive at the net yield on an investment. The Town pays all other administrative expenses. Subsequent Events Plan management has evaluated subsequent events through the date of the report, which is the date the financial statements were available to be issued. Note 3 — Investments The following present investments that represent five percent or more of the Plan's net assets at December 31: Mass Mutual Guaranteed Interest Account Hartford Capital Appreciation Prudential Jenn 20/20 Fund Fidelity Contra Fund American Funds Growth Fund Janus Balanced Fund ❖ SSGA S&P 500 Index SEC Lender Investments representing less than 5% of the Plan's net assets 2014 2013 $ 3,577,590 $ 3,636,466 2,180,843 1,927,744 -0- 766,347 2,611,367 1,468,292 942,309 838,788 841,166 866,375 719,234 576,596 10, 872, 509 10, 080, 608 4,784,912 4,277,963 $ 15,657,421 $14,358,571 ❖ The 2013 amount doesn't represent 5% or more of the Plan's net assets but is included for comparative purposes only. During 2014 and 2013, the Plan's investments (including interest, dividends and gains and losses on investments bought and sold, and held during the year) appreciated in value by approximately $890,000 and 2,473,000, respectively, which consists of mutual funds. -11 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013 Note 4 — Fair Value Measurements FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, provides the framework for 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 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the ASC 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. The asset or liability'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. 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, 2014 and 2013. Mutual funds: Valued at the daily closing price as reported by the fund. Mutual funds held by the Plan are open-ended mutual funds that are registered with the SEC. The funds are required to publish their daily net asset value (NAV) and transcript at that price. The mutual funds held by the Plan are deemed to be actively traded. Investment contract. Valued at fair -value by discounting the related cash flows based on current yields of similar instruments with comparable durations considering the credit- worthiness of the issuer. -12 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013 Note 4 — Fair Value Measurements (continued) The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table sets forth by level, within the fair value hierarchy, the Plan's investments at fair value: Investments at Fair Value as of December 31, 2014 Level Level Total Mutual funds: Index funds $ 987,576 $ -0- $ 987,576 Balanced funds 3,549,296 -0- 3,549,296 Growth funds 4,449,589 -0- 4,449,589 Value funds 1,352,524 -0- 1,352,524 Fixed income funds 258,570 -0- 258,570 International funds 1,104,889 -0- 1,104,889 Allocation funds 377,387 -0- 377,387 Total mutual funds 12,079,831 -0- 12,079,831 Investment contract -0- 3,577,590 3,577,590 Total investments at fair value $ 12,079,831 $ 3,577,590 $ 15,657,421 Investments at Fair Value as of December 31, 2013 Level1 Leve13 Total Mutual funds: Index funds $ 822,752 $ -0- $ 822,752 Balanced funds 2,424,625 -0- 2,424,625 Growth funds 3,992,941 -0- 3,992,941 Value funds 1,128,965 -0- 1,128,965 Fixed income funds 189,364 -0- 189,364 International funds 1,075,338 -0- 1,075,338 Allocation funds 1,088,120 -0- 1,088,120 Total mutual funds 10,722,105 -0- 10,722,105 Investment contract -0- 3,636,466 3,636,466 Total investments at fair value $ 10,722,105 $ 3,636,466 $ 14,358,571 -13 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013 Note 4 - Fair Value Measurements (continued) Level 3 Gains and Losses The following table sets forth a summary of changes in the fair value of the Plan's level 3 assets for the year ended December 31, 2014: Balance, beginning of year Realized gains/ (losses) Purchases Sales Balance, end of year Unrealized gains/(losses) from the guaranteed investment contract are statement of changes in net assets available for benefits as the contract is value for purposes of the net assets available for benefits. $ 3,636,466 103,506 131,189 (293,571) $ 3,577,590 not included in the recorded at contract Quantitative Information about Significant Unobservable Inputs Used in Level 3 Fair Value Measurements The following table represents the Plan's level 3 financial instruments, the valuation techniques used to measure the fair value of those financial instruments, and the significant unobservable inputs and the ranges of values for those inputs. Instrument Fair Value Principal Valuation Technique Unobservable Inputs Guaranteed Investment $ 3,577,590 Discounted Composite Contract Cash Flow Credit Rate Range of Significant Input Value Elm Weighted Average N/A -14 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013 Note 5 — Investment Contract With Insurance Company The Plan has a fully benefit responsive investment contract with the Mass Mutual Retirement Services ("Mass Mutual") as of December 31, 2014 and 2013. The Plan invests in a variety of investment contracts such as guaranteed investment contracts issued by insurance companies and other financial institutions and other investment products (synthetic guaranteed investment contracts and collective investment trusts) with similar characteristics. Mass Mutual maintains the contributions in a general account. The accounts are credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The investment contract issuer is contractually obligated to repay the principal and a specified interest rate that is guaranteed to the Plan. Because the investment contract is fully benefit -responsive, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the investment contract. The investment contract is presented on the face of the Statements of Net Assets Available for Benefits at contract value which approximates fair value in arriving at net assets available for benefits. Contract value, as reported to the Plan by Mass Mutual, represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. There are no reserves against contract value for credit risk of the contract issuer or otherwise. The fair value of these investment contracts at December 31, 2014 and 2013 were approximately $3,577,000 and $3,636,000, respectively. The crediting interest rate is based on a formula agreed upon with the issuer, but may not be less than 0%. Such interest rates are reviewed on a semi-annual basis for resetting. Certain events limit the ability of the Plan to transact at contract value with the issuer. Such events include the following: (a) amendments to the Plan documents (including complete or partial Plan termination or merger with another plan), (b) changes to the Plan's prohibition on competing investment options or deletion of equity wash provisions, (c) bankruptcy of the Plan sponsor or other Plan sponsor events (for example, divestitures or spin-offs of a subsidiary) that cause a significant withdrawal from the Plan, or (d) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under the ERISA. The Plan Administrator does not believe that any events that would limit the Plan's ability to transact at contract value with Plan participants are probable of occurring. Both fully benefit responsive investment contracts invest in a variety of investment contracts including guaranteed investment contracts. Guaranteed investment contracts generally do not permit the issuer to terminate the agreement prior to the scheduled maturity date. Average yields based on annual earnings and interest rates credited to participants was approximately 4% as of December 31, 2014 and 2013, respectively. -15 - TOWN OF SOUTHOLD DEFERRED COMPENSATION PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013 Note 6 — Plan Termination Although it has not expressed any intent to do so, the Board has the right under the Plan to amend, suspend or terminate the Plan and any deferrals there under, -the Trust Agreement and any Investment Fund, in whole or in part and for any reason and without consent of any employee, participant, beneficiary, or other person. In the event of Plan termination, all amounts deferred would be payable in accordance with plan provisions. Note 7 — Related Party Transactions Certain Plan investments are managed by Mass Mutual. Mass Mutual is the Trustee and record keeper for the Plan and, therefore, these transactions qualify as party in interest transactions Note 8 — Tax Status The Internal Revenue Service has determined and informed the New York State Deferred Compensation Board by a letter dated September 15, 2011, that the Model Plan implemented by Mass Mutual is designed in accordance with applicable sections of the Internal Revenue Code. Note 9 — Certification The Plan administrator has elected the method of compliance permitted by 29 CFR 2520.103-8 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under ERISA. Accordingly, Mass Mutual Retirement Services certified to the completeness and accuracy of all investments reflected in the accompanying statement of assets available for benefits as of December 31, 2014 and 2013 the related investment activity reflected in the statement of changes in assets available for benefits for the years ended December 31, 2014 and 2013. Note 10 — Risks and Uncertainties The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statement of net assets available for benefits.