screen actors guild-producers health plan · the plan was established in january 1961 to provide...
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Screen Actors Guild-Producers Health Plan
Financial Statements
For the Year Ended December 31, 2012
••BoNDBEEBE •• ACCOUNTANTS & ADVISORS
SCREEN ACTORS GUILD-PRODUCERS HEAL TH PLAN TABLE OF CONTENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
REPORT OF INDEPENDENT AUDITORS
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits
Statement of Changes in Net Assets Available for Benefits
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS ON SUPPLEMENTAL INFORMATION
SUPPLEMENTAL INFORMATION
Schedule of General and Administrative Expenses
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5 -20
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••BoNDBEEBE •• ACCOUNTANTS & ADVISORS
REPORT OF INDEPENDENT AUDITORS
Board of Trustees Screen Actors Guild-Producers Health Plan
Report on the Financial Statements
We have audited the accompanying financial statements of the Screen Actors Guild-Producers Health Plan, which comprise the statement of net assets available for benefits as of December 31, 2012 and the related statement of changes in net assets available for benefits for the year then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Plan management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of AmeriGa; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
A PROFESSIONAL CORPORATION WITH OFFICES JN BETHESDA, MD AND ALEXANDRIA, VA
REPORT OF INDEPENDENT AUDITORS
Opinion
In our opinion, the 2012 financial statements referred to above present fairly, in all material respects, the financial status of the Screen Actors Guild-Producers Health Plan as of December 31, 2012, and the changes therein for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
The financial statements of the Screen Actors Guild-Producers Health Plan as of December 31, 2011, were audited by other auditors whose opinion dated August 14, 2012, on those statements was unmodified. As discussed in Note 13, the Plan has restated its 2011 financial statements during the current year to accrue contributions and adjust deferred participant premiums in accordance with accounting principles generally accepted in the United States of America. The other auditors reported on the 2011 financial statements before the restatement.
As part of our audit of the 2012 financial statements, we also audited adjustments described in Note 13 that were applied to restate the 2011 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2011 financial statements of the Plan other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2011 financial statements as a whole.
A Professional Corporation Bethesda, MD October 14, 2013
2
SCREEN ACTORS GUILD-PRODUCERS HEAL TH PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2012 AND 2011
2012 ASSETS
Investments - at fair value $ 305,933,240
Receivables Employers' contributions 9,524,011 Accrued interest and dividends 1, 143,996 Receivable for sale of securities
10,668,007
Cash 11,926,237
Fixed assets - net of accumulated depreciation and amortization 19,745,882
Prepaid expenses 847,491
TOTAL ASSETS 349, 120,857
LIABILITIES
Accounts payable and accrued expenses 4,995,600 Deferred participant premiums 5,427,966 Payable for purchase of securities 954,779 Payable to SAG-Producers Pension Plan 9,029,621
TOTAL LIABILITIES 20,407,966
NET ASSETS AVAILABLE FOR BENEFITS $ 328,712,891
See Notes to Financial Statements
2011 {Restated}
$ 290,913,733
8,568,345 2,938,251 2,210,000
13,716,596
10,882,048
21,830,431
892, 121
338,234,929
3,797,436 4,987,334 2, 129,969 3,352,397
14,267,136
$ 323,967,793
3
SCREEN ACTORS GUILD-PRODUCERS HEAL TH PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2012
ADDITIONS
Investment income Net appreciation in fair value of investments Interest income Dividend income
Investment expenses
Contributions Employers' contributions Participants' contributions
Medicare subsidies
TOTAL ADDITIONS
DEDUCTIONS
Benefit payments General and administrative expenses
TOTAL DEDUCTIONS
NET INCREASE
NET ASSETS AVAILABLE FOR BENEFITS AT BEGINNING OF YEAR AS PREVIOUSLY PRESENTED
Adjustment of net assets available for benefits
NET ASSETS AVAILABLE FOR BENEFITS AT BEGINNING OF YEAR AS RESTATED
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR
See Notes to Financial Statements
$ 13,400,279 10,950,872
1,358, 139
25,709,290 {1, 710,663}
23,998,627
145,138,381 34,831,765
179, 970, 146
2,873,274
206,842,047
183,649,342 18,447,607
202,096,949
4,745,098
320, 195,670
3,772,123
323, 967' 793
$ 328,712,891
4
SCREEN ACTORS GUILD-PRODUCERS HEAL TH PLAN NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 1: PLAN DESCRIPTION AND FUNDING
The following brief description of the Screen Actors Guild-Producers Health Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan document for complete information.
General
The Plan was established in January 1961 to provide health and other benefits for actors who have performed services in television and theatrical motion pictures or in television commercials for an employer under a collective bargaining agreement with SAG-AFTRA. The Plan is primarily a self-insured multi-employer plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Board of Trustees of the Screen Actors Guild-Producers Health Plan is the Plan Administrator.
The Plan includes all actors who have performed services in television and theatrical motion pictures or in television commercials for an employer under a collective bargaining agreement with SAG-AFTRA that specifically requires contributions to the Plan. The Plan is funded by contributions from producers at rates applied to the actors' compensation as specified under collective bargaining agreements.
Plan Benefits and Eligibility
The Plan provides benefits which include life insurance, accidental death and dismemberment, medical, hospital, vision, mental health and chemical dependency, dental and prescription drug coverage for participants and their eligible dependents. Participants must meet the minimum earnings or days of employment requirements during their base earnings period in order to qualify for health coverage.
The 2012 minimum earnings requirement was $15, 100; the 2012 minimum days of employment was 76. Participants who are at least 40 years of age could also qualify for coverage with $10,900 in covered earnings and at least 10 years of earned Health Plan eligibility. All participants must meet eligibility requirements annually.
In addition, members eligible for health benefits must pay a premium in order to retain eligibility in the Plan. During 2012, premiums followed a tiered structure based on the number of individuals covered. The chart below gives monthly rates for single, two-party and family options for each coverage level:
Single Two-Party Family Coverage level
Plan I $ 91.00 $ 105.00 $ 114.00 Plan II $ 108.00 $ 124.00 $ 135.00 Plan II Age & Service $ 138.00 $ 159.00 $ 173.00
Participants who were receiving a pension based on at least 20 Pension Credits, as defined under the Screen Actors Guild-Producers Pension Plan (the Pension Plan), were eligible to receive coverage under the Senior Performers Health Plan, with a premium payment of $25 per month. Pensioners who had at least 15, but less than 20 Pension Credits could obtain coverage by paying $145 per month (25% of the actual cost of the coverage). Certain exceptions applied for participants who had at least 1 O Pension Credits as of December 31, 2001 and were at least age 55 as of December 31, 2002.
Contributions
The Boards of Trustees of the Plan, Pension Plan, and Screen Actors Guild-Producers Industry Advancement and Cooperative Fund (the IACF) have authorized the allocation of contributions received from producers between the Plan, Pension Plan, and IACF pursuant to provisions of collective bargaining agreements with SAG-AFTRA. The Plan is funded by contributions from producers at rates applied to the actors' compensation as specified under the current collective bargaining agreements. The producers are required to submit contributions to the Plan within one month from the date that earnings are reported to SAG-AFTRA.
5
NOTES TO FINANCIAL STATEMENTS
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Plan's accounting policies reflect practices common to employee benefit plans and conform with accounting principles generally accepted in the United States of America. Significant accounting policies are summarized as follows:
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan's management to make estimates and assumptions which affect the reported amounts of assets, liabilities, postretirement benefit obligations, health claims incurred but not reported (IBNR), eligibility credits, claims payable and disclosure of contingencies, if any, at the date of the financial statements and additions to and deductions from net assets and the changes in benefit obligations during the reporting period. Actual results may differ from those estimates.
Investment Valuation and Income Recognition
Investments are presented at fair value in the accompanying statements of net assets available for benefits. 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.
Following is a description of the valuation methodologies used for assets measured at fair value.
• Mutual funds are valued at the closing price reported in the active market in which the individual securities are traded.
• Corporate bonds, asset backed securities and U.S. and other government securities are valued based on a quoted bid price at year end or valued by pricing services based on yields currently available on comparable issues with similar credit ratings and broker quotes from dealers who are market makers in these investments.
• Short-term investments are recorded at cost, which equals or approximates fair value.
• Private funds are carried at the net asset value, or its equivalent, of the shares held by the Plan at year end, which is based on the fair value of the underlying securities and bonds. Partnerships and other investments are carried at the fair value of the interest held by the Plan at year end, for which fair values of the underlying investments are provided by the investment manager.
• Real estate investment fund is carried at the net asset value, or its equivalent, of the interest held by the Plan, for which fair values of the underlying investments are subject to appraisal as directed by management of the funds. The underlying properties held in the funds are appraised utilizing the following approaches: the Cost Approach (current cost of reproducing the real estate less deterioration and functional and economic obsolescence), the Income Approach (the ability of the underlying properties to generate net operating income) and the Sales Comparison Approach (recent sales of comparable real estate in the market).
6
NOTES TO FINANCIAL STATEMENTS
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan's management 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.
In accordance with the policy of presenting investments at fair value, appreciation or depreciation (unrealized and realized gains and losses) in fair value is reported in the statement of changes in net assets available for benefits for the period in which it occurs.
Purchases and sales of securities are recorded on a trade date basis. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date.
Employers' Contributions Receivable
As of December 31, 2012 and 2011, the Plan reported as employers' contributions receivable any amounts received by the Plan during the 90-day period subsequent to the fiscal year-end date which related to performances on or before December 31 of the respective years. Accordingly, no provision for uncollectible accounts has been reported.
Management of the Plan, in the normal course of business, contracts for the performance of audits of contributing employer compensation records to verify compliance with the employers' obligations to make required contributions to the Plan. Any additional employer contributions that are due to the Plan based on findings of the aforementioned engagements are recorded as income in the period in which such amounts are received.
Benefits
Benefits are recognized when paid.
Deferred Participant Premiums
Participants are required to pay premiums to retain their eligibility in the Plan. Premiums must be prepaid for some or all of the participant's current eligibility period. A participant's current eligibility period begins three months after the participant meets the annual earnings or days of employment requirement for the year. Deferred participant premiums reported on the statement of net assets available for benefits include prepaid participant premiums that relate to earned and eligible benefit periods subsequent to the year-end.
Fixed Assets, Depreciation and Amortization
Fixed assets are capitalized at cost. Costs of major additions, replacements and improvements are capitalized, and maintenance and repairs which do not improve or extend the useful lives of the respective assets are charged to expense as incurred.
Depreciation and amortization are generally provided on the straight-line method over the estimated useful lives of the related assets. The estimated useful lives are as follows:
Computer equipment and software
Office equipment and furniture
Computer licenses
Leasehold improvements
1-15 years
1-10 years
Term of licenses
10 years
7
NOTES TO FINANCIAL STATEMENTS
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Operating Expenses
Administrative and operating expenses of the Plan, Pension Plan, and IACF are paid first by the Pension Plan. A charge is apportioned to each plan or fund based on the kind of expense and the kind of service or activity attributable to that entity. Salary and related benefits for personnel who work exclusively for one plan or fund are charged to that entity. Certain shared costs are allocated in a ratable and consistent method to ensure a fair charge among the plans and fund. The basis of allocation to each plan or fund is approved by the Boards of Trustees.
Subsequent Events
In preparing these financial statements, management of the Plan has evaluated events and transactions that occurred after December 31, 2012 for potential recognition or disclosure in the financial statements. These events and transactions were evaluated through October 14, 2013, the date that the financial statements were available to be issued.
NOTE 3: INVESTMENTS
Investments held at December 31, 2012 and 2011 are summarized below:
2012 2011
Corporate bonds $ 15,566,332 $ 12,011,777 Government securities 33,355,615 30,210,976 Short-term investments 39,260,722 32, 113,240 Mutual funds 91,889,841 80,470, 146 Private funds 122,448,067 132,278,212 Real estate fund 3,412,663 3,829,382
$ 305,933,240 $ 290,913,733
During the year ended December 31, 2012, the Plan had net appreciation (depreciation) (including gains and losses on investments bought and sold, as well as held during the years) in fair value of investments as follows:
Fair value determined by quoted market price
Mutual funds Short-term investments
Estimated fair value
Corporate bonds Government securities Private funds Real estate fund
$ 7,912,421 207,880
8, 120,301
(96,069) (2,687,364) 8,410,609 (347,198)
5,279,978
$ 13,400,279
8
NOTES TO FINANCIAL STATEMENTS
NOTE 3: INVESTMENTS - continued
The fair value of investments that represent 5% or more of the Plan's net assets available for benefits at December 31, 2012 and 2011 are as follows:
CF Brandywine Global Opportunistic Fund MFO GMO Benchmark- Free Alloc. Fund CL Ill MFO PIMCO All Asset All Authority Fund MFO PIMCO US Govt. Sector Portfolio MFO PIMCO Paps Mortgage Portfolio lnstl CL
NOTE 4: FAIR VALUE MEASUREMENTS
2012 2011
$ 25,212,921 $ 27,007,354 $ 43,609,010 $ 39,437,583 $ 48,280,831 $ 41,032,563 $ N/A $ 16,939,926 $ 19,610,472 $ 22,907, 191
Accounting principles generally accepted in the United States of America define fair value 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, and they also establish a fair value reporting hierarchy and define three broad levels of inputs (the assumptions that market participants would use in pricing the asset or liability) as noted below:
Level1
Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level2
Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level3
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. See Note 2 for more specific detail on valuation methodology. There have been no changes in the methodology used at December 31, 2012.
The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the end of the reporting period. For the year ended December 31, 2012, there were no transfers in or out of levels 1, 2 or 3.
9
NOTES TO FINANCIAL STATEMENTS
NOTE 4: FAIR VALUE MEASUREMENTS - continued
As of December 31, 2012 and 2011, assets measured at fair value on a recurring basis are summarized by level within the fair value hierarchy as follows:
2012 Level 1 Level2 Level3 Total Fair Value
Corporate bonds Domestic corporate bonds $ $ 1,585,233 $ $ 1,585,233
Asset backed securities Commercial mortgage backed 6,759,551 6,759,551 Asset backed securities 5,718,335 5,718,335 Non-government backed C.M.O.s 1,503,213 1,503,213
U.S. and other government securities Government mortgage backed
securities 33,355,615 33,355,615 Mutual funds
Global strategy mutual funds 43,609,010 43,609,010 Balanced mutual funds 48,280,831 48,280,831
Private funds Balanced funds 6,526,186 10,543,620 17,069,806 Domestic currency fund 4,281,109 4,281,109 Domestic fixed income funds 43,518,878 43,518,878 International fixed income funds 28,636,489 28,636,489 Municipal fund 827,837 827,837 U.S. government funds 28, 113,948 28, 113,948
Real estate fund International 3,412,663 3,412,663
Short-term investments 14,693,623 24,567,099 39,260,722
$ 106,583,464 $ 185,393,493 $ 13,956,283 $ 305,933,240
10
NOTES TO FINANCIAL STATEMENTS
NOTE 4: FAIR VALUE MEASUREMENTS - continued
2011 Level 1 Level2 Level3 Total Fair Value
Corporate bonds Domestic corporate bonds $ $ 623,408 $ $ 623,408
Asset backed securities Commercial mortgage backed 5,850,496 5,850,496 Asset backed securities 4,554,678 4,554,678 Non-government backed C.M.O.s 983, 195 983,195
U.S. and other government securities Government mortgage backed
securities 25,081,467 180,298 25,261,765 Government issued commercial
mortgage backed 4,949,211 4,949,211 Mutual funds
Global strategy mutual funds 39,437,583 39,437,583 Balanced mutual funds 41,032,563 41,032,563
Private funds Balanced funds 7,494, 196 9,849,605 17,343,801 Domestic currency fund 6,963,925 6,963,925 Domestic fixed income funds 46,387,246 46,387,246 International fixed income funds 31,208,886 31,208,886 Municipal fund 905,701 905,701 U.S. government funds 29,468,653 29,468,653
Real estate fund International 3,829,382 3,829,382
Short-term investments 14,446,462 17,666,778 32, 113,240
$ 94,916,608 $ 182,137,840 $ 13,859,285 $ 290,913,733
The tables below represent reconciliations for the years ended December 31, 2012 and 2011 of assets measured at fair value on a recurring basis using Level 3 inputs.
2012 Balance at Unrealized gains Realized gains Transfers in or out Balance at
December 31, 2011 (lossesl (lossesl Purchases Sales of Level 3 December 31, 2012
U.S. and government securities $ 180,298 $ $ $ $ (180,298) $ $
Private funds 9,849,605 555,787 138,228 10,543,620 Real estate fund 3,829,382 (416,719l 3,412,663
$ 13,859,285 $ 139,068 $ $ 138,228 $ (180,298l $ $ 13,956,283
2011 Balance at Unrealized gains Realized gains Transfers in or out Balance at
December 31, 201 O Qossesl Qossesl Purchases Sales of Level 3 December 31, 2011
U.S. and government securities $ $ $ (36,929) $ 225,957 $ (8,730) $ $ 180,298
Private funds 9,054,391 795,214 9,849,605 Real estate fund 4,760,330 (374,124l 114,956 (671,780l 3,829,382
$ 13,814,721 $ (374,124l $ 873,241 $ 225,957 $ (680,510l $ $ 13,859,285
11
NOTES TO FINANCIAL STATEMENTS
NOTE 4: FAIR VALUE MEASUREMENTS - continued
The Plan uses the Net Asset Value (NAV) to determine the fair value of all the underlying investments which (a) do not have a readily determinable fair value and (b) prepare their financial statements consistent with the measurement principles of an investment company or have the attributes of an investment company. The following table lists investments in other investment companies (in partnership format) by major category:
$Amount of Timing to Draw Redemption
Restrictions in Number of Remaining Unfunded Down Redemption Redemption Place at Year
Strategy NAV in Funds Funds Life Commitments Commitments Terms Restrictions End
Private funds
Equities, fixed income and alternative investments
Real estate fund Real estate
122,448, 067
3,412,663
$ 125,860,730
13 N/A N/A
NIA N/A
14 $
Daily to Monthly Liquidity N/A
Semi-annually Liquidity; notice must be given 45 to 90 days Pending prior to availability of redemption cash
The following private fund investments are measured at fair value, without adjustment by the Plan, based on NAV or NAV equivalent as of December 31, 2012 and 2011, respectively: GMO Multi-Strategy Fund Offshore, L.P., PIMCO International Portfolio, PIMCO Short-Term Floating NAV Portfolio II, PIMCO Asset-Backed Securities Portfolio, PIMCO Investment Grade Corporate Portfolio, PIMCO Mortgage Portfolio, PIMCO Emerging Markets Portfolio, PIMCO Municipal Sector Portfolio, PIMCO Real Return Portfolio, PIMCO U.S. Government Sector Portfolio, PIMCO High Yield Portfolio, Oaktree High Yield Fund, L.P., and Brandywine Global Opportunistic Fixed Income Fund.
The JP Morgan European Property Fund real estate investment fund is measured at fair value, without adjustment by the Plan, based on NAV or NAV equivalent as of December 31, 2012 and 2011, respectively.
NOTE 5: FIXED ASSETS
At December 31, 2012 and 2011, fixed assets comprise the following:
2012
Pension Plan Health Plan IACF Total
Furniture and fixtures $ 996,430 $ 1,437, 159 $ 41,951 $ 2,475,540 Equipment 218, 122 382,667 10, 158 610,947 Computer hardware and software 25,853,273 32,034,332 316,474 58,204,079 Leasehold improvements 1,065,435 1, 195,660 38,915 2,300,010 Projects in progress 3,363,599 3,252,523 6,616, 122
31,496,859 38,302,341 407,498 70,206,698 Accumulated depreciation and
amortization {13,234,778} {18,556,459} {279,489} {32,070, 726}
$ 18,262,081 $ 19,745,882 $ 128,009 $ 38,135,972
N/A
Yes
12
NOTES TO FINANCIAL STATEMENTS
NOTE 5: FIXED ASSETS - continued
2011
Pension Plan Health Plan IACF Total
Furniture and fixtures $ 969,702 $ 1,419,575 $ 41, 151 $ 2,430,428 Equipment 250,983 382,593 10, 142 643,718 Computer hardware and software 25,942,098 35,709,672 320,510 61,972,280 Leasehold improvements 952, 111 1, 195,660 38,915 2,186,686 Projects in progress 2,268,626 1,911,755 4, 180,381
30,383,520 40,619,255 410,718 71,413,493 Accumulated depreciation and
amortization {9,271,377} {18,788,824} {258,452} {28,318,653}
$ 21,112,143 $ 21,830,431 $ 152,266 $ 43,094,840
As discussed in Note 13 of the financial statements, the Plan's fixed assets - net of accumulated depreciation and amortization were reclassified from previously reported amounts. See Note 13 for further information on the reclassification.
Total depreciation and amortization expense (for the Pension Plan, Health Plan, and IACF) was $5,481, 137 for the year ended December 31, 2012. Of the total depreciation and amortization expense, $3,310,526 was allocated to the Plan as administrative expense for the year ended December 31, 2012.
NOTE 6: BENEFIT OBLIGATIONS
Estimated Health Claims Incurred, but not Reported
The amount of health claims incurred but not reported is estimated by the Plan's Actuary, based on applying a combination of lag factors developed from the Plan's actual experience and standardized industry lag factors to actual claims paid information.
Estimated Obligation for Accumulated Eligibility Credits
The reported obligation for accumulated eligibility credits is calculated by the Plan's Actuary and represents the present value of the Plan's obligation for health benefits to be provided in future periods arising from prior participant service for which employer contributions have been received and participant contributions have been received or are expected to be received based on estimates and assumptions made by the Actuary. The net change in the obligation includes the effect of changes in per capita costs, the number of enrolled participants, and participant and dependent contributions.
Accumulated Postretirement Benefit Obligation
The amount reported as the postretirement benefit obligation represents the actuarial present value of those estimated future benefits that are attributed by the terms of the Plan to participants' service rendered to the date of the financial statements reduced by the actuarial present value of premiums expected to be received in the future from current plan participants attributable to receipt of such future benefits. Postretirement benefits include future benefits expected to be paid to or for (1) currently retired or terminated participants and their dependents and (2) active participants and their dependents after retirement from service with participating employers. The total postretirement benefit obligation is the amount that is to be funded by contributions from the Plan's participating employers, participants' premiums and from Plan assets. There is no liability for the Trustees to provide payment over and beyond the amounts collected by the Plan and held for such purpose. The Trustees have the right to change or discontinue the types and amounts of benefits under the Plan and the eligibility rules including the rules for extended or accumulated eligibility, even if such extended eligibility has already been accumulated.
13
NOTES TO FINANCIAL STATEMENTS
NOTE 6: BENEFIT OBLIGATIONS - continued
Prior to an active participant's full eligibility date, the postretirement benefit obligation is the portion of the expected postretirement benefit obligation that is attributed to that participant's service rendered to the valuation date.
The actuarial present value of the expected postretirement benefit obligation is calculated by the Plan's Actuary and is the amount that results from applying actuarial assumptions to historical claims cost data to estimate future annual incurred claims costs per participant and to adjust such estimates for the time value of money (through discounts for interest) and the probability of payment (by means of decrements such as those for death, disability, withdrawal, etc.) between the valuation date and the expected date of payment.
The Plan made net benefit payments, including prescription drug benefits, of $183,649,342 for the year ended December 31, 2012. The Plan received $2,873,274 of Medicare subsidies and $3,207,529 of prescription drug rebates for the year ended December 31, 2012. Prescription drug rebates are netted with benefits paid and Medicare subsidies are reported separately on the statement of changes in net assets available for benefits.
The following table presents the components of the Plan's benefit obligations as of December 31, 2012 and 2011:
Amounts currently payable
Claims payable and claims incurred but not reported
Postemployment benefit obligations, net of amounts currently payable
Accumulated eligibility credits
Postretirement benefit obligations, net of amounts currently payable
Current retirees, beneficiaries and dependents Other participants fully eligible for benefits Other participants not yet fully eligible for benefits
Total benefit obligations
2012 2011
$ 25,655,000 $ 26,629,000
168,700,000
966,767,944 827,791,484 655,302,229
164, 100,000
873,365,000 721,261,000 563, 157,000
2,449,861,657 2, 157, 783,000
$ 2,644,216,657 $ 2,348,512,000
Postretirement benefit obligations, net of amounts currently payable, are shown net of expected retiree contributions of $385,254,953 and $297,005,666, for the years ended December 31, 2012 and 2011, respectively.
14
NOTES TO FINANCIAL STATEMENTS
NOTE 6: BENEFIT OBLIGATIONS - continued
The following table represents the changes in the Plan's benefit obligations for the year ended December 31, 2012:
Amounts currently payable
Balance at beginning of year Benefits incurred Benefits paid to participants
Balance at end of year
Accumulated eligibility credits, net of amounts currently payable
Balance at beginning of year Net increase in estimated obligation for the fiscal year
Balance at end of year
Postretirement benefit obligations, net of amounts currently payable
Balance at beginning of year Benefits earned net of benefits paid
Interest cost Service cost Expected benefits paid net of retiree contributions
Actuarial experience loss Changes in actuarial assumptions Plan amendments
Balance at end of year
Total benefit obligations
$ 26,629,000 182,675,342
(183,649,342)
$ 25,655,000
$ 164, 100,000 4,600,000
$ 168,700,000
$ 2,157,783,342
101,227,765 50,662,261
(53,345,006) 58,080,044
170,711, 192 (35,257,941)
2,449,861,657
$ 2,644,216,657
For measurement purposes, the following health care cost trend rates were assumed in the valuations as of December 31, 2012 and 2011:
Medical Retirees, spouses and
surviving spouses age 65 and over
Drug Dental Medicare Part D subsidy
2012
8.5% graded to 5.0% over 8 years 8.5% graded to 5.0% over 8 years 5.0% 7.0% graded to 5.0% over 8 years
2011
9.0% graded to 5.0% over 9 years 9.0% graded to 5.0% over 9 years 5.0% 7.5% graded to 5.0% over 5 years
The effect of a 1 % increase in the assumed health care cost trend rates would cause the postretirement benefit obligations at December 31, 2012 to increase by $581,576,521 to $3,031,438,178, and at December 31, 2011 by $475, 101,251 and $2,632,844,593, respectively.
15
NOTES TO FINANCIAL STATEMENTS
NOTE 6: BENEFIT OBLIGATIONS - continued
The following are other significant assumptions used in the valuations as of December 31, 2012:
Discount rate:
Administrative expense increase rate:
Postretirement mortality rates:
Healthy
Disabled
Retiree contribution increase rate
Actives' retirement rates 2012 and 2011:
55-61 62 63 64 65 66- 70 71
4.25% - 2012; 4. 75% - 2011
5.0% - 2012 and 2011
RP 2000 Combined Healthy Mortality Table, projected to 2020 using scale AA - 2012; RP-2000 Combined Healthy Mortality Table - 2011
1965 RRB Totally Disabled Ultimate rates, set back 5 years for females - 2012 and 2011
None - 2012 and 2011
2012
5% 15 % 10% 25 % 40 % 25 %
100 %
2011
5% 15 % 10% 25 % 40 % 25 %
100 %
lnactives' retirement rates: 100% of inactives were assumed to retire upon attainment of age 60 for 2012 and 2011.
The foregoing assumptions are based on the presumption that the Plan will continue. Were the Plan to terminate, different actuarial assumptions and other factors might be applicable in determining the actuarial present value of the postretirement benefit obligation.
The Plan deficiency of net assets over benefit obligations at December 31, 2012 relates primarily to the postretirement benefit obligation, the funding of which is not covered by the contribution rate provided by the current collective bargaining agreement. It is expected that the deficiency will be funded through future increases in the collectively bargained contribution rates and changes to benefit and eligibility levels.
Medicare Part D
On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act (the Act) was signed into law. The Act introduces a prescription drug benefit for Medicare-eligible retirees starting in 2006. Beginning with the year ended December 31, 2004, the Plan has determined the benefits provided by the Plan are actuarially equivalent to Medicare Part D under the Act and has incorporated the net effect of the Act in the calculation of postretirement benefit obligations.
Benefit costs starting in 2006 were lower as a result of receiving the Medicare prescription drug subsidy from the new Medicare provisions. The approach used to measure this impact as reported on the statement of changes in benefit obligations as recognition of Medicare Part D is based on guidance published by the Centers for Medicare and Medicaid Services and relevant guidance from Accounting Standards Codification Topic 715 (ASC 715) (formerly Financial Accounting Standards Board Staff Position 106-2).
16
NOTES TO FINANCIAL STATEMENTS
NOTE 6: BENEFIT OBLIGATIONS - continued
For the year ended December 31, 2011, a benefit for $151,823,000 was reported as the estimated effect of Medicare Part Din the determination of post-retirement benefit obligations. For the year ended December 31, 2012, a benefit for $172,025,000 is included in the accumulated post-retirement benefit obligation as described below.
The following table summarizes the effect of the Act with respect to the calculation of postretirement benefit obligations as reported on the statement of changes in plan benefit obligations:
Accumulated Postretirement Benefit Obligation (APBO)
December 31, 2012 December 31, 2011
Net effect of subsidy on changes in APBO
Expected benefit payments Actual benefit payments Expected subsidy receipts Received subsidy receipts
NOTE 7: RISKS AND UNCERTAINTIES
Before After Effect of Medicare Part D Medicare Part D Medicare Part D
$ 2,621,887,000 $ 2,449,862,000 $ (172,025,000) $ 2,309,606,000 $ 2,157,783,000 (151,823,000)
$ {20,202,000}
2012 2011
$ 53,345,000 $ 48,994,000 $ 54,344,000 $ 52,477,000 $ 3,591,000 $ 3,433,275 $ 2,873,000 $ 3,061,000
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Fair values of investments may decline for a number of reasons, including changes in prevailing market and interest rates, increases in defaults and credit rating downgrades. 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 change could materially affect the financial status of the Plan.
The actuarial present value of benefit obligations is reported based on certain assumptions pertaining to interest rates, health care inflation rates and employee demographics, all of which are subject to change. Due to uncertainties inherent in the estimations and assumptions process, it is at least reasonably possible that changes in these estimates and assumptions in the near term would be material to the financial statement.
NOTE 8: CONTRIBUTIONS
Contribution income and participant premiums for the year ended December 31, 2012 consisted of the follows:
Contributions from
Employers Employees Participant premiums
$ 145, 138,381 13,487,600 21,344,165
$ 179,970,146
17
NOTES TO FINANCIAL STATEMENTS
NOTE 8: CONTRIBUTIONS - continued
Contributions from employees represent payments made by Plan participants who were no longer eligible to receive benefits but have elected to continue coverage. Participant premiums represent payments from participants for eligible benefit periods during the current year. Additionally, deferred participant premiums are reported on the statement of net assets available for benefits for eligible benefit periods subsequent to year end in the amount of $5,427,966 and $4,987,334 for the years ended December 31, 2012 and 2011, respectively.
NOTE 9: TAX STATUS
The Plan is exempt from Federal income taxes under Section 501 (c)(9) of the Internal Revenue Code (the IRC). The Plan obtained an exemption letter dated February 26, 1997, in which the Internal Revenue Service (the IRS) stated that the Plan, as then designed, was in compliance with the applicable requirements of the IRC. The Trustees believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, they believe that the trust is tax-exempt as of the financial statement date.
Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the organization and recognize an income tax liability if the organization has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. Management has evaluated the tax positions taken by the Plan and concluded that as of December 31, 2012 there are no uncertain 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 taxing jurisdictions; however, there are currently no audits in progress for any tax periods. Management believes the Plan is no longer subject to income tax examinations for years prior to 2009.
NOTE 10: RELATED PARTY TRANSACTIONS
The Pension Plan provides administrative services to the Plan.
Under the terms of the funding arrangement with the Pension Plan, repayment for current month expenses is due by the end of the month following such funding. In addition, a liability (related party payable) will exist on the Plan's statement of net assets available for benefits until the balance due is paid. As of December 31, 2012 and 2011, the Plan's payable balance due to the Pension Plan was $9,029,621 and $3,352,397, respectively.
Administrative expenses funded by the Pension Plan were charged to related parties as described in Note 2. These expenses include certain transactions with related parties to the Plan as follows: salaries and benefits paid to employees of the Pension Plan, rent expense paid month to month to Business Arts Plaza Inc., the building owned by the Pension Plan, depreciation expense attributed to assets of the Pension Plan, which is allocated to the Plan, and investment fees paid to investment advisors and investment managers.
The following summarizes these charges for the year ended December 31, 2012, and the allocation to the Pension Plan, Health Plan, and IACF in accordance with the terms of the allocation agreement as approved by the Board of Trustees.
2012
Pension Plan Health Plan IACF Total
Salaries and benefits $ 6,740,065 $ 8,001,699 $ 313,555 $ 15,055,319 Rent expense paid to BAPI 1, 143,814 933,419 26,718 2, 103,951 Depreciation and amortization 2, 138,421 3,310,526 32,190 5,481,137 Investment fees 26,606,548 1,710,663 74,680 28,391,891 Other administrative expenses 7,358,296 6,201,963 260,037 13,820,296
Total $ 43,987,144 $ 20, 158,270 $ 707, 180 $ 64,852,594
18
NOTES TO FINANCIAL STATEMENTS
NOTE 10: RELATED PARTY TRANSACTIONS - continued
Plan investments include shares in a short term investment fund managed by the Northern Trust Corporation. Northern Trust Corporation is a Custodian as defined by the Plan. Other investment managers have formal arrangements with the Plan, and these assets are held in trust by Northern Trust Corporation. Transactions with these parties qualify as party-in-interest transactions for which a statutory exemption exists.
NOTE 11: PRIORITIES UPON TERMINATION
The Plan's net assets are to be used solely to provide Plan benefits. In the event of Plan termination, the assets then remaining are to be used solely for the purpose of providing benefits for those eligible members of the Plan and payment of administrative costs. In no event shall any of the assets of the Plan revert to or be recoverable by an employer association, any contributing employer or SAG-AFTRA.
NOTE 12: RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500 as of December 31, 2012:
Net assets available for benefits per the financial statements
Estimated health claims incurred but not reported
Net assets available for benefits per Form 5500
$ 328,712,891
(25,655,000)
$ 303,057,891
The following is a reconciliation of benefits paid per the financial statements to the Form 5500 for the year ended December 31, 2012:
Benefits paid per the financial statements Estimated health claims incurred but not reported as
of December 31, 2012 Estimated health claims incurred but not reported as
of December 31, 2011
Benefits paid per Form 5500
NOTE 13: RESTATEMENT OF 2011 FINANCIAL STATEMENTS
$ 183,649,342
25,655,000
(26,629,000)
$ 182,675,342
During the year ended December 31, 2012, management determined that there were errors in the computations and changes in the estimates of employers' contributions receivable, fixed assets - net of accumulated depreciation and amortization and deferred participant premiums at December 31, 2011.
Employers' contributions receivable was determined to be understated by $2,656,000 at December 31, 2011 due to changes in estimates of collectability and errors made in the calculation. The employers' contributions receivable amount was reflected as $5,912,345 at December 31, 2011 in previously issued financial statements and has been restated to $8,568,345.
Deferred participant premiums was overstated at December 31, 2011 by $1, 116, 123 due to errors made in calculating the amounts. Deferred participant premiums, previously reflected at $6, 103,457, has been restated as $4,987,334.
19
NOTES TO FINANCIAL STATEMENTS
NOTE 13: RESTATEMENT OF 2011 FINANCIAL STATEMENTS - continued
As a result of the restatements above, net assets available for benefits has been increased by $3,772,123 frompreviously issued financial statements. In addition, certain reclassifications of balances that had no effect on theamount of net assets available for benefits were made, as follows.
Due to a miscalculation of depreciation in prior years, fixed assets – net of accumulated depreciation andamortization was understated and payable to the Pension Plan was understated by $2,002,590 at December 31,2011. This amount has been reclassified. Fixed assets – net of accumulated depreciation and amortization,previously reflected at $19,827,841, has been increased to $21,830,431 as a result of the reclassification.
Due to a change in classification, $242,740 of the balance of accounts payable has been reclassified from payableto the Pension Plan at December 31, 2011 and therefore increases accounts payable and accrued expenses from$3,554,696 to $3,797,436.
Payable to SAG-Producers Pension Plan, previously reflected at $1,592,547, has been increased to $3,352,397 asa result of the reclassification of depreciation and accounts payable.
20
••BoNDBEEBE •• ACCOUNTANTS & ADVISORS
REPORT OF INDEPENDENT AUDITORS ON SUPPLEMENTAL INFORMATION
Board of Trustees Screen Actors Guild-Producers Health Plan
We have audited the financial statements of Screen Actors Guild-Producers Health Plan as of and for the year ended December 31, 2012, and our report thereon dated October 14, 2013 which expressed an unqualified opinion on those financial statements, appears on page 1. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of general and administrative expenses is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
A Professional Corporation Bethesda, MD October 14, 2013
A PROFESSIONAL CORPORATION WITH OFFICES IN BETHESDA, MD AND ALEXANDRIA, VA
~21 21
SCREEN ACTORS GUILD-PRODUCERS HEAL TH PLAN SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2012
ADMINISTRATIVE EXPENSES
Data processing Delivery Depreciation and asset retirements Dues and subscriptions Equipment lease General consulting Hardware/equipment maintenance Insurance Meetings Moving and storage Postage and mailing Rent Salaries and wages
Payroll taxes P&H contributions
Software maintenance/licenses Stationery and office supplies Subpoena fees Taxes Technical consulting Telephone Temporary office workers Training and activities Travel
PROFESSIONAL FEES
Actuarial Audit Banking Compliance audit Legal
See Notes to Financial Statements
$ 56,509 21,423
3,310,526 15,955 94,618
179,052 531,505 301,678
54,335 (10,355) 418,467
1,219,441 6,753,219
554,190 1, 104,407 1, 176,958
508,264 (3,045) 25, 153 26,877
152,918 144,073
16,375 167,801
16,820,344
147,500 56,427 51,768
576,340 795,228
1,627,263
$ 18,447,607
22