NOTES TO FINANCIAL STATEMENTS
Note 1. Plan Description
The following description of the Trustmark 401(k) 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 established for the associates of Trustmark Corporation (the "Company") and certain other associated companies. The Plan is subject to the provisions of the Employee Retirement
Income Security Act ("ERISA") of 1974, as amended.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which allowed the Plan to adopt several new provisions, including the following:
For coronavirus-related distributions made before December 31, 2020, to qualified individuals, as defined in the CARES Act, the maximum distribution was the lesser of the vested portion of the participant’s account
balance in the Plan or $100,000. Active associates are also allowed to repay coronavirus-related distributions at any time during the three-year period beginning on the day after the day on which the distribution was received.
Loan repayments during the period from March 27, 2020 through December 31, 2020 were permitted to be suspended for a 12-month period, for qualified individuals with outstanding loans. The term of the loan was extended
by one year to accommodate the suspension period and subsequent repayments were adjusted to include accrued interest during the delay period.
In addition, required minimum distributions were also suspended during 2020.
Eligibility
The Plan provides eligibility for participation in elective deferrals by associates on the first day of the month after one month of employment.
Plan Administration
Empower Retirement refers to the products and services offered in the retirement markets by Great-West Life & Annuity Insurance Company (“GWL&A”). Great-West Trust Company, LLC is a subsidiary of GWL&A and
is the custodian of the Plan’s assets. The Plan administrator and sponsor is Trustmark Corporation, parent company of Trustmark National Bank. All trustee functions related to the employer stock held by the Plan are handled by Newport Trust Company
and all trustee functions related to all other Plan investments are handled by Great-West Trust Company.
TRUSTMARK 401(k) PLAN
Years Ended December 31, 2021 and 2020
NOTES TO FINANCIAL STATEMENTS
Note 1. Plan Description (Continued)
Participant Contributions
The Plan allows participants to make voluntary before‑tax salary deferral contributions, through payroll deductions, to separately invested funds in accordance with Section 401(k) of the Internal Revenue Code ("IRC").
If certain requirements of IRC Section 401(k) are not met in Plan operation, the salary deferral agreements of participants may, on a nondiscriminatory and uniform basis, be amended or revoked to preserve the qualified status of the Plan.
All newly eligible participants are automatically enrolled in the Plan unless they affirmatively elect not to participate in the Plan. Automatically enrolled participants have their initial deferral rate set at 3% of
their eligible compensation. The deferral rate automatically increases by 1% annually up to a maximum deferral rate of 6%.
Participants may elect to contribute through the Roth 401(k) contribution option on an after-tax basis. The Roth 401(k) contributions qualify for matching contributions and are otherwise subject to the same combined
dollar limits applicable to pre-tax contributions.
Participants may elect to contribute up to 75 percent of eligible compensation each period, subject to regulatory limitations. Any excess contributions must be returned to the applicable participant by March 15 of the
calendar year following the year of excess contributions. The Plan allows for rollover contributions from individual retirement accounts, IRC Section 457(b) plans or other qualified plans.
Provisions of the Plan allow participants who were age 50 years or older by the end of the calendar year to make catch‑up contributions to the Plan. Catch‑up contributions represent associate compensation deferrals in
excess of certain Plan limits and statutory limits, including Internal Revenue Service ("IRS") annual deferral limits.
Employer Contributions
Full-time and part-time associates are eligible to receive the safe harbor matching contribution on the first day of the month following one month of service. Eligible participant contributions are matched by the
employer at a rate of 100 percent of the first 6 percent of covered compensation. The employer may also make discretionary contributions. No discretionary contributions were made for the years ended December 31, 2021 and 2020.
Participant Accounts
Each participant's account is credited with the participant's contributions and allocations of (a) the Company's contributions and (b) Plan earnings (losses) and charged with an allocation of administrative expenses.
Allocations are based on participant compensation deferrals or account balances, as defined.
TRUSTMARK 401(k) PLAN
Years Ended December 31, 2021 and 2020
NOTES TO FINANCIAL STATEMENTS
Note 1. Plan Description (Continued)
Investment Options
Participants may direct investments of their account balance among several investment options.
The Plan provides participants the opportunity to annually elect whether cash dividends paid on employer stock will be invested in shares of employer stock within the individual participant's account or be paid to the
participant in cash.
Vesting
Participants are immediately vested in their voluntary contributions, employer contributions made on their behalf and the investment earnings and losses thereon.
Payment of Benefits
On retirement, death, disability or termination of service, a participant may elect to receive a lump‑sum distribution equal to the total of his or her account balance or in installments. In addition, hardship
distributions are permitted if certain criteria are met.
Notes Receivable from Participants
Participants may borrow from their vested account balance a minimum of $1,000 up to a maximum of $50,000 or 50% of their account balance, whichever is less. The loans are secured by the balance in the participant’s
account and bear interest at commercially reasonable rates as determined under the Plan. On December 31, 2021, the interest rate on all outstanding participant loans was from 4.25% to 6.50% with maturity dates ranging from January 2022 to December
2036.
Principal and interest payments occur ratably through regular payroll deductions and over a period not to exceed five years unless the notes receivable were used to purchase a primary residence in which case the notes
receivable term may exceed five years.
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. However, no such
action may deprive any participant or beneficiary under the Plan of any vested benefit.
TRUSTMARK 401(k) PLAN
Years Ended December 31, 2021 and 2020
NOTES TO FINANCIAL STATEMENTS
Note 2. Significant Accounting Policies
Basis of Presentation
The Plan's financial statements are prepared using the accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America ("GAAP").
Use of Estimates
GAAP requires management to make estimates and assumptions that affect the reported amounts of net assets and changes therein. Actual results could differ from those estimates.
Investments
The Plan’s investments are stated 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.
The Plan’s shares of mutual funds are valued at quoted market prices which represent the net asset value (“NAV”) of shares held by the Plan at each year end. Investments in common stock, including the Company’s common
stock, are stated at fair value based on the last reported sales price on the last business day of the year in the active market in which the security is traded. The investment in the collective investment funds is valued at NAV per unit, as
determined by the trustee at year-end. The NAV is used as the practical expedient to estimate fair value. One of the Plan’s investment options includes a self-directed brokerage account which allows participants to establish a brokerage account and
select various investments consisting of mutual funds and Exchange Traded Funds, which approximates fair value.
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.
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 are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2021 and 2020. 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.
Net Appreciation in Fair Value of Investments
Net appreciation in fair value of investments, as recorded in the accompanying statements of changes in net assets available for benefits, includes changes in the fair value of investments acquired, sold, or held
during the year.
TRUSTMARK 401(k) PLAN
Years Ended December 31, 2021 and 2020
NOTES TO FINANCIAL STATEMENTS
Note 2. Significant Accounting Policies (Continued)
Administrative Fees
Certain administrative fees are paid by the Plan. All other fees, including professional fees, are paid by the Company. Expenses that relate solely to a participant are assessed against such participant as provided in
the Plan agreement.
Note 3. Risks and Uncertainties
The Plan's investments include funds which invest in various types of investment securities and in various companies within various markets. The Putnam Stable Value Fund, the Vanguard Equity-Income Admiral Fund, and
the Harbor Capital Appreciation Institutional Fund each represented approximately 7% to 12% of the total investments at both December 31, 2021 and 2020. Investment securities are exposed to several 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 statements of net assets available for benefits and the statements of changes in net assets available for benefits.
In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic. The COVID-19 pandemic is having, and will likely continue to have, significant impacts on global
markets, businesses, and communities. As of the date of issuance, the ultimate length and severity of this pandemic cannot be reasonably estimated. Management will continue to monitor the impact of COVID-19 on the Plan and will reflect the
consequences, as appropriate, in the Plan’s financial records.
Note 4. Tax Status
The IRS has determined and informed the Company by a letter dated December 12, 2016, that the Plan and related trust are designed in accordance with applicable sections of the IRC. The Plan has been amended since
receiving the determination letter. However, the Plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.
GAAP requires plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by
the IRS. The Plan administrator has analyzed the tax positions taken by the Plan and has concluded that as of December 31, 2021, there are no uncertain tax positions taken or expected to be taken that would require recognition of a liability or
disclosure in the financial statements. The Plan is subject to routine audits by tax jurisdictions; however, there are currently no audits for any tax periods in progress.
TRUSTMARK 401(k) PLAN
Years Ended December 31, 2021 and 2020
NOTES TO FINANCIAL STATEMENTS
Note 5. Party-In-Interest Transactions
Certain Plan investments are invested in the common stock of the Company. Investment transactions in employer securities qualify as exempt party-in-interest transactions. For the years ended December 31, 2021 and
2020, dividends of $650,652 and $725,353, respectively, were received by the Plan from the Company. The Plan held 671,140 and 762,549 shares valued at $21,785,205 and $20,825,196 on December 31, 2021 and 2020, respectively.
GWL&A performs services, sells products, and maintains certain investments of the Plan for which fees are charged to the Plan. Newport Trust Company serves as an independent fiduciary and investment manager for
the Employer Stock Fund. Party-in-interest transactions also include notes receivable from participants. Such transactions, while considered party-in-interest transactions under ERISA, are permitted under the provisions of the Plan and are
specifically exempt from the prohibition of party-in-interest transactions.
Note 6. Fair Value Measurements
FASB ASC Topic 820, Fair Value Measurement ("ASC Topic 820"), establishes a 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 ASC Topic 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.
|
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.
TRUSTMARK 401(k) PLAN
Years Ended December 31, 2021 and 2020
NOTES TO FINANCIAL STATEMENTS
Note 6. Fair Value Measurements (Continued)
Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis. There have been no changes in the methodologies used on December 31, 2021 and 2020.
Common stock of Trustmark Corporation (Level 1): Valued at the closing price reported on the active market on which the individual securities are traded.
Money market fund, mutual funds, and self-directed brokerage accounts (Level 1): Valued at the NAV of shares held by the Plan at year-end. Mutual funds held by the Plan are
open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily NAV and to transact at that price. The mutual funds held by the Plan are deemed to be actively traded.
Self-directed brokerage accounts primarily consist of mutual funds and common stocks that are valued on the basis of readily determinable market prices.
Collective investment funds: Valued at NAV per unit, as determined by the trustee at year-end. The NAV is used as the practical expedient to estimate fair value.
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.
TRUSTMARK 401(k) PLAN
Years Ended December 31, 2021 and 2020
NOTES TO FINANCIAL STATEMENTS
Note 6. Fair Value Measurements (Continued)
The following tables set forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2021 and 2020:
|
|
Assets at Fair Values as of December 31, 2021
|
|
|
|
Level 1
|
|
|
Total
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
185,299,795
|
|
|
$
|
185,299,795
|
|
Common stock of Trustmark Corporation
|
|
|
21,785,205
|
|
|
|
21,785,205
|
|
Self-directed brokerage accounts
|
|
|
13,721,263
|
|
|
|
13,721,263
|
|
|
|
|
|
|
|
|
|
|
Total investments at fair value
|
|
|
220,806,263
|
|
|
|
220,806,263
|
|
|
|
|
|
|
|
|
|
|
Collective investment funds measured at NAV*
|
|
|
-
|
|
|
|
193,010,946
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
220,806,263
|
|
|
$
|
413,817,209
|
|
|
|
Assets at Fair Values as of December 31, 2020
|
|
|
|
Level 1
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
161,734,586
|
|
|
$
|
161,734,586
|
|
Common stock of Trustmark Corporation
|
|
|
20,825,196
|
|
|
|
20,825,196
|
|
Self-directed brokerage accounts
|
|
|
11,809,388
|
|
|
|
11,809,388
|
|
|
|
|
|
|
|
|
|
|
Total investments at fair value
|
|
|
194,369,170
|
|
|
|
194,369,170
|
|
|
|
|
|
|
|
|
|
|
Collective investment funds measured at NAV*
|
|
|
-
|
|
|
|
170,702,975
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
194,369,170
|
|
|
$
|
365,072,145
|
|
There were no investments measured using Level 2 or Level 3 during the years ending December 31, 2021 and 2020.
* Certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this
table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statements of Net Assets Available for Benefits.
TRUSTMARK 401(k) PLAN
Years Ended December 31, 2021 and 2020
NOTES TO FINANCIAL STATEMENTS
Note 6. Fair Value Measurements (Continued)
The fair value of investments, other than Level 1, in certain entities that calculate net asset value per share (or its equivalent), are as follows:
|
|
Fair Value at
|
|
|
Unfunded
|
|
Redemption
|
|
Redemption
|
Investment
|
|
December 31, 2021
|
|
|
Commitments
|
|
Frequency
|
|
Notice Period
|
|
|
|
|
|
|
|
|
|
|
Collective investment funds
|
|
$
|
193,010,946
|
|
|
|
N/A
|
|
Daily
|
|
Daily
|
|
|
Fair Value at
|
|
|
Unfunded
|
|
Redemption
|
|
Redemption
|
Investment
|
|
December 31, 2020
|
|
|
Commitments
|
|
Frequency
|
|
Notice Period
|
|
|
|
|
|
|
|
|
|
|
|
|
Collective investment fund
|
|
$
|
170,702,975
|
|
|
|
N/A
|
|
Daily
|
|
Daily
|
The collective investment funds participate in a stable value fund that invests primarily in benefit-responsive investment contracts issued by insurance companies and other financial institutions (“Contracts”), fixed
income securities, and money market funds. Under the terms of the Contracts, the assets of the fund are invested in fixed income securities (which may include, but are not limited to, US treasury and agency bonds, corporate bonds, mortgage-backed
securities, commercial mortgage-backed securities, asset-backed securities, and collective investment vehicles and shares of investment companies that invest primarily in fixed income securities) and shares of money market funds. The fund may also
invest in futures contracts, option contracts, and swap agreements.
The collective investment funds also participate in retirement trusts that invest primarily in a diversified portfolio of underlying trusts that represent various asset classes and sectors. The allocation to
equity-based underlying trusts is expected to become increasingly conservative over time, with substantial exposure to equity-based underlying trusts remaining at the end of its target year and the most conservative allocation projected to occur
within 30 years after the target date is reached.
TRUSTMARK 401(k) PLAN
Years Ended December 31, 2021 and 2020
NOTES TO FINANCIAL STATEMENTS
Note 7. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the corresponding amounts shown in the Plan's Form 5500 as of December 31, 2021 and 2020:
|
|
2021
|
|
|
2020
|
|
Net assets available for benefits per the financial statements
|
|
$
|
418,586,034
|
|
|
$
|
369,257,674
|
|
Adjustment from fair value to current value on collective investment funds
|
|
|
375,782
|
|
|
|
1,633,955
|
|
Net assets available for plan benefits per the Form 5500
|
|
$
|
418,961,816
|
|
|
$
|
370,891,629
|
|
The following is a reconciliation of investment income per the financial statements for the years ended December 31, 2021 and 2020, to the corresponding amounts shown on the Plan's Form 5500:
|
|
2021
|
|
|
2020
|
|
Total investment income per the financial statements
|
|
$
|
52,956,025
|
|
|
$
|
41,412,761
|
|
Adjustment from fair value to current value on collective investment funds
|
|
|
(1,258,173
|
)
|
|
|
809,165
|
|
Total investment income per Form 5500
|
|
$
|
51,697,852
|
|
|
$
|
42,221,926
|
|
Note 8. Subsequent Events
The Plan has evaluated, for consideration of recognition or disclosure, subsequent events that have occurred through the date of issuance, June 10, 2022, and has determined that no significant events occurred after
December 31, 2021, but prior to the issuance of these financial statements, that would have a material impact on its financial statements.
SUPPLEMENTAL SCHEDULE