NOTES TO FINANCIAL STATEMENTS
The following description of the Exelon Corporation Employee Savings
Plan (the Plan) is provided for general information purposes only. The official text of the Plan, as amended, should be read for more complete information.
General
The Plan was established by
Commonwealth Edison Company, effective March 1, 1983, to provide a systematic savings program for eligible employees and to supplement such savings with employer matching contributions. On March 30, 2001, the Commonwealth Edison Employee
Savings and Investment Plan was combined with the PECO Energy Company Employee Savings Plan to become the Exelon Corporation Employee Savings Plan. On July 1, 2014, the Constellation Energy Group, Inc. Employee Savings Plan was merged into the
Plan. On July 1, 2015, the Employee Savings Plan for Constellation Energy Nuclear Group, LLC and Represented Employee Savings Plan for Nine Mile Point were merged into the Plan. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended (ERISA), and the Internal Revenue Code of 1986, as amended (the Code). The Exelon Corporation Stock Fund, which is an investment option under the Plan, is invested primarily in Exelon
Corporation common stock and is intended to be an Employee Stock Ownership Plan under Code Section 4975(e)(7).
Exelon Corporation
(Exelon) is the sponsor of the Plan and the administrator of the Plan (the Plan Administrator) acting through Exelons Director of Employee Benefit Plans and Programs. The Plan Administrator has the responsibility for
the day-to-day administration of the Plan. Exelon, acting through the Exelon Investment Office, is responsible for the selection and retention of the Plans investment options and any investment manager that may be appointed under the Exelon
Corporation Defined Contribution Retirement Plans Master Trust (the Master Trust). The Northern Trust Company is the Plan trustee (Trustee). Effective July 1, 2016, Northwest Plan Services, Inc. became the Plan
recordkeeper (for periods on or after July 1, 2016, the Recordkeeper). Prior to July 1, 2016, Aon Hewitt was the Plan recordkeeper (for periods before July 1, 2016, the Recordkeeper).
Generally, any regular employee whose employment is subject to a collective bargaining agreement that provides for participation in the Plan
and any regular non-represented employee of a subsidiary of Exelon that is designated by Exelon as participating in the Plan (such subsidiary referred to individually and collectively as the Company) is eligible to elect to participate
in the Plan. Participating employees include employees represented by: International Brotherhood of Electrical Workers (IBEW) Locals 15, 97 and 614; Utility Workers of America Local 369; Security, Police & Fire Professionals of
America Locals 228 and 238; Service Employees International Union Local 1; United Government Security Officers of America Locals 12, 17 and 18; and United Security Services Union Local 1. Newly hired employees who do not make a participation
election within 90 days after their date of hire will automatically be enrolled in the Plan as soon as administratively practicable after their 90th day of employment with a pre-tax deferral of 3% of eligible pay per pay period and 1% increase each
March 1
st
, generally beginning with the second calendar year that begins after automatic enrollment first applies to the participant, until a total maximum pre-tax deferral of 5% of eligible
pay is reached. Contributions to the Plan will be automatically invested in the custom target retirement fund that corresponds to the participants anticipated retirement date (based on the participants birth date). A participant who is
subject to automatic enrollment may elect within 90 days of the first automatic contribution, to withdraw all automatic contributions adjusted for any investment gains or losses. Such a withdrawal would be subject to federal income tax but not to
any early withdrawal penalty. Additionally, the participant will forfeit any employer matching contributions made with respect to such automatic contributions.
4
EXELON CORPORATION EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Participant Contributions
The Plan permits salaried, non-represented hourly and participating represented employees to contribute between 1% and 50% of eligible pay each
pay period on a pre-tax basis, an after-tax basis, a Roth basis or a combination of the three, subject to certain Internal Revenue Service (IRS) limitations.
During any calendar year in which a participant attains age 50 or older, he or she may elect to make additional pre-tax contributions, called
catch-up contributions, to the Plan. In order to be eligible to make catch-up contributions, the participant must anticipate that his or her pre-tax contributions to the Plan will reach the applicable annual IRS limit on that type of
contribution or be contributing at the maximum base pay level. Catch-up contributions are not credited with the Companys fixed or profit-sharing matching contribution.
Company Contributions
Effective
January 1, 2010, with respect to non-represented employees, except non-exempt craft and clerical employees assigned to the Peach Bottom, Limerick, Outage Services East, Philadelphia Electric Company or Texas generating plant, Exelon provides
both a fixed and annual profit-sharing match. Under the fixed match, Exelon matches 60% of the first 5% of a participants eligible pay contributed per pay period, by the employee for a maximum annual fixed match percentage of 3% of the
participants eligible pay. Additionally, with respect to such employees, Exelon may make an annual profit-sharing match of up to 3% of eligible pay contributed per pay period, based on specified performance goals established by
the Compensation Committee of Exelons Board of Directors (the Committee). Combined, the total employer match (fixed and profit-sharing) is an annual maximum of up to 6% of a participants eligible pay. Any profit-sharing match
will be contributed to the Plan after the end of each calendar year. The 2016 profit-sharing match contributed in 2017 was $48,989,679. The 2015 profit-sharing match contributed in 2016 was $48,519,826. Generally, a participant must be
employed on the last day of a calendar year to receive the profit-sharing match for that year. In the event a participant terminates employment during the calendar year due to death, long-term disability or retirement (age 50 and completion of
10 years of service with the Company) or in the event a participant terminates employment with the Company and receives benefits under the severance plan, the participant will be eligible to receive a profit-sharing match.
With respect to non-represented, non-exempt craft and clerical employees assigned to the Peach Bottom, Limerick, Outage Services East,
Philadelphia Electric Company or Texas generating plant, Exelon provides a fixed match of 100% of the first 5% of a participants eligible pay contributed per pay period. Employer matching contributions for represented employees are based on
the applicable collective bargaining agreement.
Effective January 1, 2015, for employees within the Commercial Retail or Commercial
Wholesale business of Exelon Generation Company, LLC who are eligible to participate in the Constellation Short-Term Incentive Award Program, the Company provides an additional non-discretionary fixed contribution of 3% of eligible pay. Any
non-discretionary fixed contribution will be contributed to the Plan after the end of each calendar year based on eligible pay determined as of the last day of the applicable plan year.
Investment Options
The Plans
investments are held in the Master Trust, which was established in 2006, for the investments of the Plan and other savings plans sponsored by Exelon. The Plan investments are fully participant-directed, and the Plan is intended to satisfy
Section 404(c) of ERISA.
The investment options include a menu of funds that include custom Target Retirement Fund options, three
actively-managed custom funds, three passively-managed funds, the Northern Trust U.S. Government Short-Term Investment Fund and the Exelon Corporation Stock Fund. Below is a brief description of each of the investment options available as of
December 31, 2016 and 2015. These descriptions are not, and are not intended to be, complete descriptions of each investment options risk, objective and strategy.
5
EXELON CORPORATION EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
|
|
|
Target Date Funds
- Diversified funds managed by multiple investment managers that seek to provide investment return, shifting from an emphasis on capital appreciation to an emphasis on income and inflation
protection as the fund approaches and passes its target retirement age. Target allocations of the funds are designed using certain assumptions, including that most Exelon plan participants receive a 401(k) company matching contribution under the
Plan, earn pension benefits over their careers under a cash balance or other pension plan, and typically begin receiving retirement benefits around age 61. The funds reduce exposure to equity and real estate, and increase exposure to fixed income
and certain other investments, as the target retirement date approaches, and for ten years thereafter.
|
|
|
|
Actively-managed custom funds
- These funds use a multi-manager approach whereby the funds assets are allocated to several investment managers that act independently of each other and follow their own
distinct investment style in investing in securities. The portfolios are principally managed using an active approach with the objective of collectively exceeding the record of the fund benchmark.
|
|
|
|
Passively-managed funds
- These funds seek investment results that correspond generally to the price and yield performance, before fees and expenses, of a particular index.
|
|
|
|
Northern Trust U.S. Government Short-Term Investment Fund
- This fund is an investment vehicle for cash reserves that offers a rate of return based on a portfolio of obligations of the U.S. Government, its
agencies or instrumentalities, and related money market instruments. Principal preservation and liquidity management are the funds prime objectives.
|
|
|
|
Exelon Corporation Stock Fund
- This fund primarily invests in Exelon common stock with some short-term liquid investments. The Exelon Corporation Stock Fund does not represent direct ownership of Exelon common
stock. The funds unit value is determined by dividing the total current fair value of the investments in the fund by the total number of units owned. This fund is not diversified and is considered riskier than a diversified
portfolio.
|
Notes Receivable from Participants
A participant may, upon application, borrow from the Plan. Only one loan is permitted to a participant in any calendar year with a maximum of
five (as of April 6, 2009, three for the majority of non-represented employees and employees whose collective bargaining agreement limits loans to three) outstanding at any time, and the amount of any loan shall not be less than $1,000. The
aggregate amount of all outstanding loans may not exceed the lesser of (i) 50% of a participants vested balance in the Plan or (ii) $50,000 minus the excess of the highest outstanding balance of all loans from the Plan to the
participant during the previous 12-month period over the outstanding balance of all loans from the Plan to the participant on the day the loan is made. For loans other than home loans, the maximum term is five years. For a home loan, the maximum
term is fifteen years and the minimum is five years. The interest rate on all loans is the prime rate for commercial loans plus 1%. Principal and interest is paid ratably through monthly payroll deductions or direct payment, as applicable. No
lump-sum or installment distribution from the Plan will be made to a participant who has received a loan, or to a beneficiary of any such participant, until the loan, including interest, has been repaid out of the funds otherwise distributable. In
the event a participant defaults on the repayment of a loan, the loan will be considered a taxable distribution of the participants account and may be subject to an early withdrawal penalty.
Withdrawals by Participants While Employed
Generally, a participant may withdraw up to the entire balance of his or her after-tax contributions account once each calendar year. After
making such a withdrawal, the participant must wait six months before making a new election to resume after-tax contributions to the Plan if the distribution is received by the participant before attainment of age
59
1
⁄
2
. A participant may also withdraw up to an amount equal to the balance in his or her rollover account.
6
EXELON CORPORATION EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Generally, a participant may make withdrawals from his or her before-tax, catch-up, matching,
Roth, Roth catch-up and Roth rollover contributions accounts, but only if the participant has attained age 59
1
⁄
2
or, prior to that age, only in an amount
required to alleviate financial hardship as defined in the Code and regulations promulgated thereunder. Financial hardship withdrawals from a before-tax contributions account suspend the participants right to make contributions to the Plan for
six months.
While any loan to the participant remains outstanding, the maximum amount available for withdrawal shall be the balance in
such account less the balance of all outstanding loans.
Distributions upon Termination of Employment
Upon termination of employment, including the retirement, total disability or death of a participant, a participant is entitled to the
distribution of his or her entire account balance. Such distribution will be made, as elected by the participant, in the form of either a single lump-sum payment, an ad hoc partial distribution, or in substantially equal annual, quarterly or monthly
installments over any period of time specified by the participant, subject to meeting any restrictions required by applicable law, including but not limited to the minimum distribution requirements under the Internal Revenue Code. If a participant
elects installment payments, the participant can elect to change the amount, frequency and number of payments at any time. A participant may elect ad hoc partial withdrawals of any amount at any time. A participant may elect to defer distributions
until age 70
1
⁄
2
. If the value of a participants account is $1,000 or less, the participant will receive a lump sum distribution from the Plan upon
termination of employment. If the value of a participants account is greater than $1,000, the participant can leave his or her account in the Plan. Generally, distributions will be taxed as ordinary income in the year withdrawn and may also be
subject to an early withdrawal penalty if taken before age 59
1
⁄
2
, unless eligible rollover distributions are rolled over to another qualified plan or an
Individual Retirement Account (IRA). A 20% mandatory federal income tax withholding applies to withdrawals that are eligible for rollover, but which are not directly rolled over to another qualified plan or an IRA. If a participant does
not specify the form and timing of the participants distribution, the benefit generally will be paid in installments beginning no later than April 1 of the calendar year following the calendar year in which the participant attains age 70
1
⁄
2
.
Participant Accounts
Each participants account is credited with the participants contribution and allocations of (i) the Companys
corresponding contributions and (ii) Plan earnings, and charged with an allocation of Plan administrative costs. Allocations are based on participant elections or account balances, as applicable. The benefit to which a participant is entitled
is the benefit that can be provided from the participants vested account.
Vesting of Participants Accounts
Participants are fully vested in their accounts at all times.
Investment Income
Dividends and earnings
received on all funds, with the exception of the Exelon Corporation Stock Fund, are automatically reinvested in the fund to which those earnings apply.
Employee Stock Ownership Plan
If a
participant invests any portion of his or her account in the Exelon Corporation Stock Fund and is eligible to receive dividend distributions from the Plan, then the participant is deemed to have elected to have the dividends reinvested in the Exelon
Corporation Stock Fund. If the participant prefers to receive any such dividends in cash, he or she can so elect by contacting the Recordkeeper. Dividends distributed to the participant in cash from the Plan are subject to income tax as a dividend
and not subject to an early withdrawal penalty.
7
EXELON CORPORATION EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
2.
|
Summary of Significant Accounting Policies
|
General
The Plan follows the accrual method of accounting, in accordance with accounting principles generally accepted in the United States of America
(GAAP). Withdrawals and distributions are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Plan Administrator to make estimates and assumptions that affect
the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Accordingly, actual results may differ from those estimates.
Investment Valuation and Income Recognition
The Plans interest in the Master Trust is stated at 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. The Plan presents, in the Statement of Changes in Net Assets Available for Benefits, the Plan interest in investment income from the Master Trust. See
Note 3Fair Value of Interest in Master Trust for further information.
Plan Expenses
A participants account balance will be charged with certain fees and expenses. Asset-based fees (e.g., management fees and other fund
operating expenses) are used to cover the expenses related to running an investment fund, and are generally deducted directly from a participants investment returns. The asset-based fees relating to the target date and custom funds are
primarily presented within the investment and administrative fees of the Master Trust. See Note 3Fair Value of Interest in Master Trust for further information.
Plan administration fees cover the day-to-day expenses of administering the Plan and are covered by amounts deducted directly from participant
accounts. Transaction-based fees also may be charged with respect to optional features offered under the Plan (e.g., loans) and are charged directly against a participants account balance.
Notes Receivable from Participants
Notes
receivable from participants are valued at their unpaid principal balance plus accrued interest. No allowance for credit losses has been recorded as of December 31, 2016 or 2015.
Reclassifications
Certain prior year
amounts have been reclassified for comparative purposes. These reclassifications did not affect net assets available for benefits.
Recent Accounting
Pronouncements
Fair Value Measurements and Disclosures
In May 2015, the Financial Accounting Standards Board (FASB) issued authoritative guidance that removes the requirement to
categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value (NAV) per share practical expedient. Investments measured at NAV per share using the practical expedient will be
presented as a reconciling item between the fair value hierarchy disclosure and the investment line item on the statement of financial position. The guidance also removes the requirement to make certain disclosures for all investments that are
eligible to be measured at fair value using the NAV per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using the practical expedient. The new guidance is
effective for non-public entities for periods beginning after December 15, 2016 and is required to be applied retrospectively for all periods presented. Early adoption is permitted. The Company adopted this standard for plan reporting effective
December 31, 2016. As this guidance provides only disclosure requirements, the adoption of this standard did not impact the Plans financial results.
8
EXELON CORPORATION EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Master Trust Presentation and Disclosures
In February 2017, the FASB issued authoritative guidance that requires a plans interest in a master trust and any change in interest in
the master trust to be presented as a single line item in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits. It also requires that plans with a divided interest disclose the
master trusts investments by general type and other assets and liabilities balances, as well as the dollar amount of the plans interest in each of those balances. The new guidance is effective for periods beginning after
December 15, 2018 and is required to be applied retrospectively. Early adoption is permitted. The Company is currently assessing the effects this guidance may have on the Plans financial statement disclosures.
3. Fair Value of Interest in Master Trust
The Plan established a Master Trust Agreement with the Trustee for the purpose of investing assets of the Plan and other savings plans
sponsored by Exelon. The investment options for the three savings plans that participate in the Master Trust are the same, with the exception of the Exelon Corporation Stock Fund which through December 31, 2015, was only offered in the Plan.
Effective January 1, 2016, the Exelon Corporation Stock Fund was offered in all three savings plans that participate in the Master Trust. The Master Trust is comprised of two master trust investment accounts (MTIA)one of which
contains primarily real estate investments (MTIA B) and another for the remaining other investments (MTIA A). The real estate account within the Master Trust is comprised primarily of real estate assets that do not have an
observable value (either directly or indirectly) on an established market, and therefore, is being reported separately for Form 5500 purposes. Interest and dividends along with net depreciation or appreciation in the fair value of investments are
allocated to the Plan on a daily basis based upon the Plans equitable share of the various investment funds and portfolios that comprise the Master Trust. The Plans Statements of Net Assets Available for Benefits include its share of
investments maintained in the Master Trust measured at fair value on a recurring basis.
At December 31, 2016 and 2015, the
Plans interest in the net assets of the Master Trust was approximately 98.06% and 98.01% respectively.
9
EXELON CORPORATION EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
The net assets of the Master Trust as of December 31, 2016 and 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
MTIA A
|
|
|
MTIA B
|
|
|
Total
|
|
|
MTIA A
|
|
|
MTIA B
|
|
|
Total
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing cash
|
|
$
|
472,636,125
|
|
|
$
|
1,912,643
|
|
|
$
|
474,548,768
|
|
|
$
|
453,418,073
|
|
|
$
|
|
|
|
$
|
453,418,073
|
|
U.S. government securities
|
|
|
612,245,321
|
|
|
|
|
|
|
|
612,245,321
|
|
|
|
602,296,873
|
|
|
|
|
|
|
|
602,296,873
|
|
Corporate debt instruments - preferred
|
|
|
20,410,627
|
|
|
|
|
|
|
|
20,410,627
|
|
|
|
11,688,048
|
|
|
|
|
|
|
|
11,688,048
|
|
Corporate debt instruments - other
|
|
|
541,704,264
|
|
|
|
2,635,867
|
|
|
|
544,340,131
|
|
|
|
530,776,394
|
|
|
|
2,513,873
|
|
|
|
533,290,267
|
|
Corporate stock - preferred
|
|
|
1,577,481
|
|
|
|
6,592,717
|
|
|
|
8,170,198
|
|
|
|
1,332,252
|
|
|
|
6,823,875
|
|
|
|
8,156,127
|
|
Corporate stock - common
|
|
|
1,250,488,363
|
|
|
|
|
|
|
|
1,250,488,363
|
|
|
|
1,717,448,199
|
|
|
|
1,623,294
|
|
|
|
1,719,071,493
|
|
Corporate stock - Exelon
Corporation
(1)
|
|
|
338,056,375
|
|
|
|
|
|
|
|
338,056,375
|
|
|
|
283,346,974
|
|
|
|
|
|
|
|
283,346,974
|
|
Real estate
|
|
|
|
|
|
|
168,245,150
|
|
|
|
168,245,150
|
|
|
|
|
|
|
|
169,662,729
|
|
|
|
169,662,729
|
|
Common/collective trust funds
|
|
|
3,321,251,085
|
|
|
|
1,548,234
|
|
|
|
3,322,799,319
|
|
|
|
2,512,571,383
|
|
|
|
1,425,230
|
|
|
|
2,513,996,613
|
|
Registered investment company securities
|
|
|
73,823,407
|
|
|
|
6,664,710
|
|
|
|
80,488,117
|
|
|
|
52,799,046
|
|
|
|
|
|
|
|
52,799,046
|
|
Other investments
|
|
|
215,100,671
|
|
|
|
18,602,383
|
|
|
|
233,703,054
|
|
|
|
229,393,127
|
|
|
|
17,861,649
|
|
|
|
247,254,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Master Trust investments
|
|
|
6,847,293,719
|
|
|
|
206,201,704
|
|
|
|
7,053,495,423
|
|
|
|
6,395,070,369
|
|
|
|
199,910,650
|
|
|
|
6,594,981,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
2,002,677
|
|
|
|
|
|
|
|
2,002,677
|
|
|
|
768,619
|
|
|
|
|
|
|
|
768,619
|
|
Accrued dividend and interest
|
|
|
13,531,952
|
|
|
|
|
|
|
|
13,531,952
|
|
|
|
14,795,991
|
|
|
|
|
|
|
|
14,795,991
|
|
Due from brokers for securities sold
|
|
|
75,428,772
|
|
|
|
|
|
|
|
75,428,772
|
|
|
|
127,608,249
|
|
|
|
|
|
|
|
127,608,249
|
|
Other
|
|
|
4,842,016
|
|
|
|
|
|
|
|
4,842,016
|
|
|
|
341,582
|
|
|
|
|
|
|
|
341,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
95,805,417
|
|
|
|
|
|
|
|
95,805,417
|
|
|
|
143,514,441
|
|
|
|
|
|
|
|
143,514,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Master Trust assets
|
|
|
6,943,099,136
|
|
|
|
206,201,704
|
|
|
|
7,149,300,840
|
|
|
|
6,538,584,810
|
|
|
|
199,910,650
|
|
|
|
6,738,495,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment and administrative expenses
|
|
|
6,339,386
|
|
|
|
840,600
|
|
|
|
7,179,986
|
|
|
|
5,745,654
|
|
|
|
431,240
|
|
|
|
6,176,894
|
|
Due to broker for securities purchased
|
|
|
155,118,057
|
|
|
|
|
|
|
|
155,118,057
|
|
|
|
222,908,114
|
|
|
|
|
|
|
|
222,908,114
|
|
Other liabilities
|
|
|
1,211,153
|
|
|
|
|
|
|
|
1,211,153
|
|
|
|
1,399,324
|
|
|
|
|
|
|
|
1,399,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Master Trust liabilities
|
|
|
162,668,596
|
|
|
|
840,600
|
|
|
|
163,509,196
|
|
|
|
230,053,092
|
|
|
|
431,240
|
|
|
|
230,484,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Master Trust net assets
|
|
$
|
6,780,430,540
|
|
|
$
|
205,361,104
|
|
|
$
|
6,985,791,644
|
|
|
$
|
6,308,531,718
|
|
|
$
|
199,479,410
|
|
|
$
|
6,508,011,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Exelon Corporation Stock Fund held $337.9 million and $282.7 million of this investment as of December 31, 2016 and 2015, respectively. The custom funds held $0.1 million and $0.7 million of this investment as
of December 31, 2016 and 2015, respectively.
|
10
EXELON CORPORATION EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
The net investment income and appreciation of the Master Trust for the year ended
December 31, 2016 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
MTIA A
|
|
|
MTIA B
|
|
|
Total
|
|
Corporate stock dividends
|
|
$
|
43,209,028
|
|
|
$
|
439,751
|
|
|
$
|
43,648,779
|
|
Other interest and dividends
|
|
|
49,226,074
|
|
|
|
383,155
|
|
|
|
49,609,229
|
|
Net appreciation in the fair value of investments
|
|
|
488,760,287
|
|
|
|
13,225,222
|
|
|
|
501,985,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net investment income and appreciation
|
|
|
581,195,389
|
|
|
|
14,048,128
|
|
|
|
595,243,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and administrative expenses not directly allocated to the plans
|
|
|
(14,923,611
|
)
|
|
|
(1,662,374
|
)
|
|
|
(16,585,985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Master Trust net investment income and appreciation
|
|
$
|
566,271,778
|
|
|
$
|
12,385,754
|
|
|
$
|
578,657,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2016, the Plans interest in the net investment income of the Master
Trust is 98.27%.
Recurring Fair Value Measurements
To increase consistency and comparability in fair value measurements, the FASB established a fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value into three levels as follows:
|
|
|
Level 1 - unadjusted quoted prices in active markets for identical assets for which the Plan has the ability to access as of the reporting date.
|
|
|
|
Level 2 - inputs other than quoted prices included within Level 1 that are directly observable for the asset or indirectly observable through corroboration with observable market data.
|
|
|
|
Level 3 - unobservable inputs, such as internally-developed pricing models for the asset.
|
The
valuation methods for each investment category are described below.
Interest bearing cash
. Interest bearing cash is valued daily
based on observable market prices and is categorized as Level 1.
U.S. government securities.
U.S. government securities
are valued daily based on quoted prices in active markets. Investments in U.S. Treasury securities have been categorized in Level 1 because they trade in highly liquid and transparent markets. Investments in U.S. government affiliates are based on
evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for observable differences and are categorized as Level 2.
Preferred and other corporate debt instruments.
Corporate debt instruments are based on evaluated prices that reflect observable market
information, such as actual trade information of similar securities, adjusted for observable differences and are categorized as Level 2.
Preferred and common corporate stock.
The Master Trusts stock investments are primarily traded on exchanges that contain only
actively traded securities, due to the volume trading requirements imposed by these exchanges. Preferred and common corporate stocks, including rights and warrants, are valued daily based on quoted prices in active markets and are categorized as
Level 1. Certain securities have been categorized as Level 2 because they are based on evaluated prices that reflect observable market information, such as actual trade information of similar securities.
11
EXELON CORPORATION EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Real estate.
Income producing real estate funds are valued by the fund managers on a
daily basis. Fund values are based on valuation of the underlying investments which may include inputs such as operating results, discounted future cash flows and market-based comparable data. The valuation inputs are unobservable. Certain real
estate investments are redeemable from the investment vehicle quarterly. The fair value is determined using NAV or its equivalent as a practical expedient and are not classified within the fair value hierarchy.
Common/collective trust funds.
Common/collective trust funds are maintained by investment companies and hold investments in accordance
with a stated set of fund objectives. For common/collective trust funds which are not publicly quoted, the funds are valued using the NAV per fund share as a practical expedient, which is primarily derived from the quoted prices in active markets of
the underlying securities, and are not classified within the fair value hierarchy. Common/collective trust funds can be redeemed daily.
Registered investment company securities.
Registered investment company securities are investment funds maintained by investment
companies that hold investments in accordance with a stated set of fund objectives. For funds with values that are publicly quoted on a daily basis in active markets, the funds have been categorized as Level 1. For funds with values which are not
publicly quoted, the funds are valued using the NAV per fund share as a practical expedient, which is primarily derived from the quoted prices in active markets of the underlying securities, and are not classified within the fair value hierarchy.
The registered investment company securities can be redeemed daily.
Other investments.
Other investments include futures
contracts, swap contracts, holdings in real estate investment trusts, and state, municipal and foreign government fixed income securities. Futures contracts are valued daily based on quoted prices in active markets and trade in open markets, and
have been categorized as Level 1. Real estate investment trusts are valued daily based on quoted prices in active markets and have been categorized as Level 1. State, municipal and foreign government fixed income securities are valued daily using
evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for observable differences and are categorized as Level 2. Derivative instruments other than futures contracts are valued
based on external price data of comparable securities and have been categorized as Level 2.
Transfer policy
The Companys policy is to recognize transfers into and out of levels as of the end of the reporting period.
12
EXELON CORPORATION EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
The Plans Statements of Net Assets Available for Benefits include its share of
investments maintained in the Master Trust measured at fair value on a recurring basis. The following tables present the fair value of assets in the Master Trust and their level within the fair value hierarchy as of December 31, 2016 and 2015:
There were no significant transfers between Level 1 and Level 2 during the years ended December 31, 2016
and 2015.
The Plan provides for various investment options in several
investment securities and instruments. Investment securities are exposed to various risks, such as interest, market and credit risk. Due to the level of risks associated with certain investment securities and the level of uncertainty related to
changes in the value of investment securities, it is at least reasonably possible that changes in values in the near term could materially affect participants account balances and the amounts reported in the Statements of Net Assets Available
for Benefits and the Statement of Changes in Net Assets Available for Benefits.
From time to time, investment managers may use derivative
financial instruments including futures, forward foreign exchange, and swap contracts. Derivative instruments may be used to mitigate exposure to foreign exchange rate and interest rate fluctuations as well as manage the investment mix in the
portfolio. The Plans exposure is limited to the fund(s) utilizing such derivative investments. Risks of entering into derivatives include the risk of an illiquid market, inability of a counterparty to perform, or unfavorable movement in
foreign currency exchange rates, interest rates, or the underlying securities.
Some investment managers may engage in securities lending
programs in which the funds lend securities to borrowers, with the objective of generating additional income. The borrowers of fund securities deliver collateral to secure each loan in the form of cash, securities, or letters of credit, and are
required to maintain the collateral at a level no less than 100% of the market value of the loaned securities. Cash collateral is invested in common/collective trust funds or collateral pools. Participation in securities lending programs involves
exposure to the risk that the borrower may default and there may be insufficient collateral to buy back the security. Lenders of securities also face the risk that invested cash collateral may become impaired or that the interest paid on loans may
exceed the amount earned on the invested collateral. The Plans exposure is limited to the funds that lend securities.
The Plan obtained its latest determination letter on
May 25, 2017 in which the IRS stated that the Plan, as then designed, was in compliance with the applicable requirements of the Code. The Plan is qualified under Section 401(a) and 401(k) of the Code.
The Plan may be amended, modified or terminated by Exelon at any time.
The Plan may also be terminated if the IRS disqualifies the Plan. Termination of the Plan with respect to a participating employer may occur if there is no successor employer in the event of dissolution, merger, consolidation or reorganization of
such employer company. In the event of full or partial termination of the Plan, assets of affected participants of the terminating employer or employers shall remain 100% vested and distributable at fair market value in the form of cash, securities
or annuity contracts, in accordance with the provisions of the Plan.
Investment options in the Plan include common/collective
trust funds managed by the Trustee or its affiliates. The Master Trust also holds shares of Exelon common stock. These transactions qualify as exempt party-in-interest transactions, in accordance with ERISA. There have been no known prohibited
transactions with a party-in-interest.
In 2016, there were transfers totaling $1,781,038 to the Plan
($1,044,764 from the Exelon Employee Savings Plan for Represented Employees at TMI and Oyster Creek and $736,274 from the Exelon Employee Savings Plan for Represented Employees at Clinton). In 2016, there were transfers totaling $24,410 from the ESP
($23,714 to the Exelon Employee Savings Plan for Represented Employees at TMI and Oyster Creek and $696 to the Exelon Employee Savings Plan for Represented Employees at Clinton). The Plan also received $97,040 in conversions of participant loans
from ConEd.
Effective July 1, 2017, sixteen additional passively-managed
funds (Expanded Choice funds) will be offered under the Plan.