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.