Notes
to Financial Statements
December 31, 2022
and 2021
Note 1 - Description
of the Plan
The following description of the Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees (the “Plan”) provides only general information. Participants
should refer to the provisions of the Plan, which are governed in all respects by the detailed terms and conditions contained in the
Plan document. The Plan was established effective January 1, 1985.
Type and Purpose of the Plan
- The Plan is a defined contribution plan established to encourage and facilitate systematic retirement savings and investment by eligible
hourly employees of Ford Motor Company (the “Company”) and to provide them with an opportunity to become stockholders of
the Company. The Plan includes provisions for voting shares of Company stock. It is subject to certain provisions of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), applicable to defined contribution pension plans.
Eligibility – Regular full
time hourly employees are eligible to participate in the Plan immediately after their original date of hire. Certain other part-time
and temporary employees may also be eligible to participate in the Plan. Participation in the Plan is voluntary. Newly hired eligible
employees are automatically enrolled in the Plan at an initial contribution rate of 3 percent of their base wages, though they may elect
to cancel or change their automatic enrollment rate.
Contributions and Vesting - Participants
can contribute a percentage of their base pay and overtime pay to the Plan on a pre-tax, Roth, and/or after-tax basis, subject to federal
tax law and Plan limits. Participants may also elect to contribute all, or a portion, of their distributions under the Company’s
Profit Sharing Plan and certain other bonuses to the Plan on a pre-tax or Roth basis. Pre-tax contributions are excluded from the participant’s
federal and most state and local taxable income. Employees are immediately 100 percent vested in their contributions to the Plan.
Subject to provisions of the Plan, participants
may elect to roll over amounts from other eligible retirement plans in accordance with the Internal Revenue Code of 1986, as amended
(the "Code"). For the year ended December 31, 2022, rollovers from other eligible retirement plans totaled $3.4 million,
which are included in employee contributions in the statement of changes in net assets available for benefits.
Certain (as defined) employees hired
or rehired beginning November 19, 2007 may be immediately eligible to receive Supplemental Contributions and/or Retirement Contributions
(collectively, “Company Contributions”). Eligible employees receive Supplemental Contributions of $1.00 for every eligible
compensated hour up to 40 hours per week. Eligible employees receive Retirement Contributions of 6.4 percent of eligible wages up to
40 hours per week. Employees become 100 percent vested in their Company Contributions three years from their original hire date.
Per the 2019 Collective Bargaining
Agreement between the Company and the UAW, employees not eligible for Retirement Contributions (eligible for a pension plan instead)
were given a one-time $1,000 Company contribution into their TESPHE account on January 31, 2020.
Distributions - Pre-tax or Roth
assets may not be withdrawn by participants until the termination of their employment or until they reach 59-1/2 years of age, except
in the case of personal financial hardship. Supplemental Contributions may not be withdrawn by participants until termination of employment
or until they reach 59-1/2 years of age. Retirement Contributions may not be withdrawn by participants until termination of employment.
Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 2022
and 2021
Note 1 - Description of the Plan (Continued)
After-tax assets can be withdrawn at
any time without restriction.
Distribution options include lump-sum,
partial, or installment payments. Eligible rollover distributions can be rolled over to an IRA or another employer's eligible retirement
plan.
Activity for participants in the Ford
Stock Fund who have elected to receive dividends paid in the form of cash instead of purchasing additional shares is reported in the
statement of changes in net assets available for benefits.
Participant Accounts - A participant’s
account balance is comprised of employee contributions, Company Contributions, if any, and investment income earned from the individual
investment options selected by the participant less withdrawals, loans, distributions, and fees. In the absence of participant investment
directions, contributions are invested in a target-date fund, a qualified default investment alternative (“QDIA”) prescribed
by final regulations issued by the Department of Labor. Allocations are based on participant earnings, account balances, or specific
participant transactions, as defined. The benefit to which a participant is entitled is determined from the participant’s vested
account balance.
Master Trust Investment Options and
Participation – Employee contributions and Company Contributions are invested in accordance with the participant’s election
in one or more investments, which are held in the Ford Defined Contribution Plans Master Trust (the “Master Trust”) (see
Note 3).
Transfers of Assets - The Plan
permits the transfer of assets among investment options held by the Master Trust, subject to certain trading restrictions imposed on
some of the investment options.
Notes Receivable from Participants-
The Plan permits participants to borrow from their pre-tax, Roth, after-tax, and rollover accounts. Monthly notes receivable interest
rates related to these borrowings are based on the prime rate published in The Wall Street Journal. Participant notes receivable are
collateralized by the participant’s vested account balance.
A participant is eligible to take out
one note receivable per calendar year, and to have up to four notes receivable outstanding at any one time. General notes receivable
may be for a minimum of one year, but not exceeding five years. Notes receivable related to the purchase of a primary residence may be
for a maximum of ten years.
Forfeitures and Plan Administration
Expenses- The Plan permits the Company to use assets forfeited by participants to pay plan administrative expenses and, to the extent
not used to pay such expenses, to reduce the Company's future contributions to the Plan. The Company may pay certain plan administrative
expenses directly.
Party in Interest Transactions
- Certain Master Trust investment options are investment products managed by State Street Global Advisors (“SSgA”), which
is the investment management division of State Street Bank and Trust Company, a wholly owned subsidiary of State Street Corporation.
State Street Bank and Trust Company is the trustee, as defined by the Plan, and the disbursement agent.
Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 2022
and 2021
Note 2 - Summary of Significant
Accounting Policies
Basis of Accounting – The
financial statements of the Plan are prepared on the accrual basis of accounting.
Investment Valuation and Income Recognition
- The fair value of the Plan's interest in the Master Trust is based on the beginning of the year value of the Plan's interest in
the trust, plus actual contributions and allocated investment income, less actual distributions and allocated administrative expense
(see Note 3).
Investments held by the Master Trust
are stated at fair value, except for the synthetic guaranteed investment contracts (“synthetic GICs”) which are held through
the Master Trust’s investment in the Interest Income Fund and valued at contract value. Since synthetic GICs are fully benefit-responsive,
contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the synthetic
GICs. Contract value 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.
Fair value is defined as 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 further discussion of fair value measurements.
Purchases and sales of securities are
recorded on a trade-date basis. Interest income is recorded as earned. Dividends are recorded on the ex-dividend date.
Notes Receivable from Participants-
Notes receivable from participants are recorded at their unpaid principal balance plus any accrued interest. Interest income is recorded
on the accrual basis. Related fees are recorded as administrative expenses and are expensed when incurred. Participant notes receivable
are written off when deemed uncollectible. No allowances for credit losses has been recorded as of December 31, 2022 and 2021.
Investment Contracts - A synthetic
GIC is a wrap contract paired with underlying investments, usually a portfolio of high-quality, short to intermediate term fixed-income
securities and a short-term interest fund.
A synthetic GIC credits a stated interest
rate. Investment gains and losses are amortized over the expected duration of the covered investments through the calculation of the
interest rate on a prospective basis. Synthetic GICs provide for a variable crediting rate, which resets on a periodic basis. The crediting
rate set by the wrap contracts resets quarterly. The quarterly crediting rate does not include the short-term investments (e.g., short-term
interest fund) used for benefit-responsive events. While the issuer of the wrap contract provides assurance that future adjustments to
the crediting rate cannot result in a crediting rate less than zero, the actual quarterly interest rate is impacted by the current yield
of the short-term investments.
Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 2022
and 2021
Note 2 - Summary of Significant Accounting Policies (Continued)
The crediting rate is primarily based
on the current yield-to-maturity of the covered investments, plus or minus amortization of the difference between the market value and
contract value of the covered investments over the duration of the covered investments at the time of computation.
The crediting rate is most impacted
by the change in the annual effective yield to maturity of the underlying securities, but is also affected by the differential between
the contract value and the market value of the covered investments. This difference is amortized over the duration of the covered investments.
Depending on the change in duration from reset period to reset period, the magnitude of the impact to the crediting rate of the contract
to market difference is heightened or lessened. The crediting rate can be adjusted periodically, but in no event is the crediting rate
less than zero percent.
Certain events limit the ability of
the Master Trust to transact at contract value with the insurance company and the financial institution issuer. Such events include the
following: (i) material amendments to the Plan documents (including complete or partial plan termination or merger with another plan);
(ii) changes to the Plan’s prohibition on competing investment options or deletion of equity wash provisions; (iii) bankruptcy
of the plan sponsor or other plan sponsor events (e.g., divestitures or spin-offs of a subsidiary) which cause a significant withdrawal
from the Plan; (iv) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction
exemption under ERISA; (v) any change in law, regulation, ruling, administrative or judicial position, or accounting requirement, applicable
to the Interest Income Fund or the Plan; or (vi) the delivery of any communication to Plan participants designed to influence a participant
not to invest in the Interest Income Fund. The plan administrator does not believe that the occurrence of any such event, which would
limit the Master Trust’s ability to transact at contract value, is probable.
The synthetic investment contracts generally
impose conditions on both the Master Trust and the issuer. If an event of default occurs and is not cured, the non-defaulting party may
terminate the contract. The following may cause the Master Trust to be in default: a breach of material obligation under the contract;
a material misrepresentation; or a material amendment to the Plan agreement. The issuer may be in default if it breaches a material obligation
under the investment contract; makes a material misrepresentation; has a decline in its long-term credit rating below a threshold set
forth in the contract; is acquired or reorganized and the successor issuer does not satisfy the investment or credit guidelines applicable
to issuers. If, in the event of default of an issuer, the Master Trust were unable to obtain a replacement investment contract, withdrawing
plans may experience losses if the value of the Master Trust’s assets no longer covered by the contract is below contract value.
The Master Trust may seek to add additional issuers over time to diversify the Master Trust’s exposure to such risk, but there
is no assurance the Master Trust may be able to do so. The combination of the default of an issuer and an inability to obtain a replacement
agreement could render the Master Trust unable to achieve its objective of maintaining a stable contract value. The terms of an investment
contract generally provide for settlement of payments only upon termination of the contract or total liquidation of the covered investments.
Generally, payments will be made pro-rata, based on the percentage of investments covered by each issuer. Contract termination occurs
whenever the contract value or market value of the covered investments reaches zero or upon certain events of default.
Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 2022
and 2021
Note 2 - Summary of Significant Accounting Policies (Continued)
If the contract terminates due to issuer
default (other than a default occurring because of a decline in its rating), the issuer will generally be required to pay to the Master
Trust the excess, if any, of contract value over market value on the date of termination. If a synthetic GIC terminates due to a decline
in the ratings of the issuer, the issuer may be required to pay to the Master Trust the cost of acquiring a replacement contract (i.e.,
replacement cost) within the meaning of the contract. If the contract terminates when the market value equals zero, the issuer will pay
the excess of contract value over market value to the Master Trust to the extent necessary for the Master Trust to satisfy outstanding
contract value withdrawal requests. Contract termination also may occur by either party upon election and notice.
Contributions - Contributions
to the Plan from participants, and when applicable, from the Company and participating subsidiaries (as defined in the Plan), are recorded
in the period that payroll deductions are made from Plan participants.
Payment of Benefits - Benefits
are recorded when paid.
Use of Estimates - The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America requires Plan management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of additions and deductions during the reporting period.
Actual results could differ from those estimates.
Risks and Uncertainties - Investment
securities are exposed to various risks, such as interest rate, market, and credit. Due to the level of risk 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 risks in the near term would materially affect participants’ account balances and the amounts reported
in the financial statements.
New Accounting Pronouncements
– There have been no new accounting pronouncements reflected in the 2022 financial statements.
Subsequent Events – The
Plan has evaluated subsequent events through June 26, 2023, the date the financial statement
were available to be issued, and there were no subsequent events requiring adjustments to or disclosure in the financial statements.
Note 3 - The Master Trust
The Company established the Master Trust
pursuant to a trust agreement between the Company and State Street Bank and Trust Company, as trustee, in order to permit the commingling
of trust assets of several employee benefit plans for investment and administrative purposes. The assets of the Master Trust are held
by State Street Bank and Trust Company.
Employee benefit plans participating
in the Master Trust as of December 31, 2022 and 2021 include the following defined contribution plans:
·
Ford Motor Company Savings and Stock Investment Plan for Salaried Employees
Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 2022
and 2021
Note 3 - The Master Trust (Continued)
·
Ford Motor Company Tax-Efficient Savings Plan for Hourly Employees
All transfers to, withdrawals from,
or other transactions regarding the Master Trust shall be conducted in such a way that the proportionate interest in the Master Trust
of each plan and the fair market value of that interest may be determined at any time.
The interest of each such plan shall
be debited or credited (as the case may be) (i) for the entire amount of every contribution received on behalf of such plan (including
participant contributions), every distribution, or other expense attributable solely to such plan, and every other transaction relating
only to such plan; and (ii) for its proportionate share of every item of collected or accrued income, gain or loss, and general expense,
and of any other transactions attributable to the Master Trust or that investment option as a whole.
A summary of the net assets of the Master
Trust and the Plan’s interest in the Master Trust as of December 31, 2022 and 2021 is as follows (in thousands):
Summary
of Net Assets - Note 3 Master Trust |
| |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| |
| |
2022 | | |
2021 | |
| |
Master
Trust
Balances | | |
Plan's
Interest in
Master Trust | | |
Master
Trust
Balances | | |
Plan's
Interest in
Master Trust | |
Investments
- Fair value: | |
| | | |
| | | |
| | | |
| | |
Separate
Account - Common Stock (1) | |
$ | 489,534 | | |
$ | 105,990 | | |
$ | 650,253 | | |
$ | 141,263 | |
Ford
Stock Fund | |
| 1,737,702 | | |
| 803,954 | | |
| 3,109,173 | | |
| 1,411,707 | |
Common
and commingled institutional pools | |
| 14,878,387 | | |
| 4,358,074 | | |
| 18,935,665 | | |
| 5,395,350 | |
| |
| | | |
| | | |
| | | |
| | |
Total
Investments at Fair Value | |
| 17,105,623 | | |
| 5,268,018 | | |
| 22,695,091 | | |
| 6,948,320 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Investments
at Contract value - Interest Income Fund | |
| 3,126,739 | | |
| 1,090,003 | | |
| 2,995,599 | | |
| 1,049,495 | |
| |
| | | |
| | | |
| | | |
| | |
Total
Investments | |
| 20,232,362 | | |
| 6,358,021 | | |
| 25,690,690 | | |
| 7,997,815 | |
| |
| | | |
| | | |
| | | |
| | |
Other
Assets/(Liabilities) - Net (2) | |
| (3,324 | ) | |
| - | | |
| (1,950 | ) | |
| - | |
Total
Net Assets | |
$ | 20,229,038 | | |
$ | 6,358,021 | | |
$ | 25,688,740 | | |
$ | 7,997,815 | |
| |
| | | |
| | | |
| | | |
| | |
(1)
The fund is primarily made up of common stock that is owned 100% by the Master Trust.
(2)
Includes accrued but unpaid fees, unsettled trades, and other receivables. In the Plan's Interest in Master Trust, these amounts
are reported within total investments and are not material to the amounts presented.
Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 2022
and 2021
Note 3 - The Master Trust (Continued)
During the year ended December 31,
2022, the Master Trust investment loss was comprised of the following (in thousands):
Net
realized and unrealized losses | |
$ | (5,160,961 | ) |
| |
| | |
Dividend
and other income | |
| 79,880 | |
| |
| | |
Total
Master Trust investment losses | |
$ | (5,081,081 | ) |
Note 4 - Fair Value Disclosures
Accounting standards require certain
assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value.
The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure
fair value.
In determining fair value, various valuation
techniques are utilized and observable inputs are prioritized. The availability of observable inputs varies from instrument to instrument
and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics
particular to the transaction. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology
used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial
instruments, pricing inputs are less observable in the marketplace and may require management judgment.
The inputs used to measure fair value
are assessed using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market.
Level 1 inputs include quoted prices in active markets for identical instruments and are the most observable. Level 2 inputs include
quoted prices for similar assets and inputs such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs are not observable in the market and include management's judgments about the assumptions market participants would use
in pricing the asset. In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy,
fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Plan’s
assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific
to each asset.
The following valuation methodologies
have been used to value the underlying investments in the Master Trust:
Separate Accounts – Common
Stocks – These investments, except a small portion of the separate account invested in a short-term interest fund to provide
liquidity for daily activity, are valued on the basis of quoted year-end market prices.
Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 2022
and 2021
Note 4 - Fair Value Disclosures
(Continued)
The short-term interest fund is valued
at the net asset value per share, which is based on the fair value of the underlying net assets
Ford Stock Fund – The Ford
Stock Fund is a unitized account that is comprised primarily of Ford Motor Company common stock, except a small portion of the fund is
invested in a short-term interest fund to provide liquidity for daily activity. The Ford Stock Fund consists of assets from the following
sources: employee contributions (including certain rollovers), employee loan repayments, exchanges into the fund from other investment
options, Company contributions (vested and unvested), earnings and dividends. Ford Motor Company common stock is valued on the basis
of quoted year-end market prices and the short-term interest fund is valued at the net asset value per share, which is based on the fair
value of the underlying net assets. Transactions within this fund are considered related party transactions to the Plan.
Common and Commingled Institutional
Pools - The common and commingled institutional pool investments are valued at the net asset value
per share of the individual collective pools included in each respective fund, which are based on the fair value of the underlying net
assets. There were no significant unfunded commitments or redemption restrictions on these investments.
Interest Income Fund - The Interest
Income Fund, which invests in fully-benefit responsive synthetic investment contracts, is stated at contract value. Contract value is
the amount participants normally receive if they were to initiate permitted transactions under the terms of the Plan. Contract value
represents deposits made to the contract, plus earnings at guaranteed crediting rates, less withdrawals and applicable fees.
Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 2022
and 2021
Note 4 - Fair Value Disclosures
(Continued)
Disclosures concerning assets measured
at fair value on a recurring basis are as follows (in thousands):
Assets
Measured at Fair Value at December 31, 2022 |
| |
| | |
| | |
| | |
| |
| |
Balance | | |
Quoted
Prices in
Active Markets for
Identical Assets
(Level 1) | | |
Significant
Observable Inputs
(Level 2) | | |
Significant
Unobservable
Inputs
(Level 3) | |
Assets
- Master Trust investments: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Investments
at Fair Value: | |
| | | |
| | | |
| | | |
| | |
Separate
Account - Common Stock (1) | |
$ | 482,726 | | |
$ | 482,726 | | |
| - | | |
| - | |
Ford
stock fund - Ford common stock | |
| 1,715,965 | | |
| 1,715,965 | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Total
Investments at Fair Value | |
$ | 2,198,691 | | |
$ | 2,198,691 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Investments
Measured at Net Asset Value: | |
| | | |
| | | |
| | | |
| | |
Common
and commingled Institutional pools | |
| 14,878,387 | | |
| | | |
| | | |
| | |
Separate
Account - Common Stock (2) | |
| 6,808 | | |
| | | |
| | | |
| | |
Ford
stock fund - Short-term Interest Fund (2) | |
| 21,737 | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Total
Investments at NAV | |
| 14,906,932 | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Total
Master Trust Investments at Fair Value | |
$ | 17,105,623 | | |
| | | |
| | | |
| | |
Assets
Measured at Fair Value at December 31, 2021 |
| |
| | |
| | |
| | |
| |
| |
Balance | | |
Quoted
Prices in
Active Markets for
Identical Assets
(Level 1) | | |
Significant
Observable Inputs
(Level 2) | | |
Significant
Unobservable
Inputs
(Level 3) | |
Assets
- Master Trust investments: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Investments
at Fair Value: | |
| | | |
| | | |
| | | |
| | |
Separate
Account - Common Stock (1) | |
$ | 643,728 | | |
$ | 643,728 | | |
| - | | |
| - | |
Ford
stock fund - Ford common stock | |
| 3,079,548 | | |
| 3,079,548 | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Total
Investments at Fair Value | |
$ | 3,723,276 | | |
$ | 3,723,276 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Investments
Measured at Net Asset Value: | |
| | | |
| | | |
| | | |
| | |
Common
and commingled Institutional pools | |
| 18,935,665 | | |
| | | |
| | | |
| | |
Separate
Account - Common Stock (2) | |
| 6,525 | | |
| | | |
| | | |
| | |
Ford
stock fund - Short-term Interest Fund (2) | |
| 29,625 | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Total
Investments at NAV | |
| 18,971,815 | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Total
Master Trust Investments at Fair Value | |
$ | 22,695,091 | | |
| | | |
| | | |
| | |
(1)
The fund is primarily made up of common stock that is owned 100% by the Master Trust.
(2)
Includes short-term interest funds that invest primarily in fixed-income securities, including but not limited to, bonds, notes or other
investments such as government securities, commercial paper, certificates of deposit, master notes or variable amount notes, with the
objective of providing current income consistent with the preservation of capital and the maintenance of liquidity.
Ford
Motor Company Tax-Efficient Savings Plan for Hourly Employees
Notes to Financial Statements
December 31, 2022
and 2021
Note 4 - Fair Value Disclosures (Continued)
The
Plan’s policy to recognize transfers between levels of the fair value hierarchy is as of the actual date of the event of change
in circumstances that caused the transfer. There were no significant transfers between levels of the fair value hierarchy during 2021
or 2022.
Note 5 - Tax Status
The Internal Revenue Service (“IRS”)
has determined and informed the Company by letter dated May 9, 2017, that the Plan is designed in accordance with applicable sections
of the Code. The Plan has since been amended and restated through December 31, 2022. The Company believes that the Plan is currently
designed and being operated in compliance with the Code. Therefore, no provision for income taxes has been included in the Plan’s
financial statements.
The plan administrator believes it is no longer subject to
tax examinations for years prior to 2017.
Note 6 - Administration of Plan Assets
The Master Trust assets are held by
the trustee of the Plan, State Street Bank and Trust Company. The assets of the Interest Income Fund (the “Fund”) are held
by the Fund’s custodian, The Northern Trust Company.
Certain administrative functions are
performed by officers or employees of the Company or its subsidiaries. No such officer or employee receives compensation from the Plan,
nor does the Company allocate any costs to the Plan.
Note 7 - Plan Termination
The Company, by action of the board
of directors, may terminate the Plan at any time. Termination of the Plan would not affect the rights of a participant as to the
continuance of investment, distribution or withdrawal of their account balance. Upon termination of the Plan, participants would
become fully vested. In the event of termination, all participant notes receivable would become due immediately upon such termination.
There are currently no plans to terminate the Plan.
Note 8 - Reconciliation to Form
5500
The net assets on the financial statements
differ from the net assets on the Form 5500 due to the synthetic GICs held in the Master Trust being recorded at contract value on the
financial statements and at fair value on Form 5500. The net assets on the financial statements compared to those on Form 5500 at December
31, 2022 and 2021 were $73.0 million higher and $9.5 million lower, respectively. Additionally, the decrease in net assets on Form 5500
for the year ended December 31, 2022 is higher than the financial statements by $82.4 million.