PG&E CORPORATION
RETIREMENT SAVINGS PLAN
FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
TOGETHER WITH REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
YEARS ENDED DECEMBER 31, 2013 AND 2012
PG&E CORPORATION
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS | |
Page | |
Report of Independent Registered Public Accounting Firm | 2 |
Financial Statements: | |
Statements of Net Assets Available for Benefits | 3 |
Statements of Changes in Net Assets Available for Benefits | 4 |
Notes to the Financial Statements | 5-13 |
Supplemental Schedule: | |
Schedule H, Part IV, Line 4i – Schedule of Assets Held | 14 |
All other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Employee Benefit Committee of
PG&E Corporation and Participants of
PG&E Corporation Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits of PG&E Corporation Retirement Savings Plan (the Plan) as of December 31, 2013 and 2012, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2013 and 2012, and the changes in net assets available for benefits for the years then ended in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedule of assets held as of December 31, 2013 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Morris Davis Chan & Tan LLP
Oakland, California
June 20, 2014
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PG&E CORPORATION
RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(in thousands)
As of December 31, | ||||||||
2013 | 2012 | |||||||
ASSETS | ||||||||
Plan interest in Master Trust investments, at fair value | $ | 2,599,452 | $ | 2,274,524 | ||||
Receivables: | ||||||||
Notes receivable from participants (2,105 and 1,931 loans outstanding in 2013 and 2012, respectively, and interest rates ranging from 4.25% to 10.50% in 2013 and 2012) | 33,672 | 31,224 | ||||||
Total assets | 2,633,124 | 2,305,748 | ||||||
LIABILITIES | ||||||||
Administrative expenses payable | 42 | 25 | ||||||
NET ASSETS AVAILABLE FOR BENEFITS | $ | 2,633,082 | $ | 2,305,723 |
See Accompanying Notes to the Financial Statements.
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PG&E CORPORATION
RETIREMENT SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(in thousands)
Year ended December 31, | ||||||||
2013 | 2012 | |||||||
ADDITIONS TO NET ASSETS ATTRIBUTABLE TO: | ||||||||
Investment income: | ||||||||
Plan interest in Master Trust investment income | $ | 353,064 | $ | 205,460 | ||||
Contributions: | ||||||||
Employer | 37,383 | 32,939 | ||||||
Participant | 98,586 | 88,645 | ||||||
Rollover | 8,602 | 8,035 | ||||||
Total contributions | 144,571 | 129,619 | ||||||
Interest from notes receivable from participants | 1,388 | 1,358 | ||||||
Total additions | 499,023 | 336,437 | ||||||
DEDUCTIONS FROM NET ASSETS ATTRIBUTABLE TO: | ||||||||
Benefit distributions to participants | 194,476 | 195,219 | ||||||
Administrative expenses | 1,740 | 1,383 | ||||||
Total deductions | 196,216 | 196,602 | ||||||
NET INCREASE BEFORE ASSET TRANSFERS | 302,807 | 139,835 | ||||||
Asset transfers in, net | 24,552 | 37,064 | ||||||
NET INCREASE | 327,359 | 176,899 | ||||||
NET ASSETS AVAILABLE FOR BENEFITS: | ||||||||
Beginning of year | 2,305,723 | 2,128,824 | ||||||
End of year | $ | 2,633,082 | $ | 2,305,723 |
See Accompanying Notes to the Financial Statements.
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PG&E CORPORATION
RETIREMENT SAVINGS PLAN
NOTES TO THE FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following is an overview of the PG&E Corporation Retirement Savings Plan (“Plan” or “RSP”). The Plan document provides a more complete description of the Plan’s provisions.
General – The Plan is a defined contribution plan covering all non-represented employees, of PG&E Corporation and all companies owned by PG&E Corporation (collectively “PG&E Corporation Group”), as designated by the Employee Benefit Committee (“EBC”). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended.
The Board of Directors of PG&E Corporation established the EBC to have oversight over the administration and financial management of affiliated company employee benefit plans, including this Plan. The EBC retains Fidelity Management Trust Company as the Trustee of the Plan (“Trustee”).
The PG&E Corporation Retirement Savings Plan Master Trust (“Master Trust”) holds the investment assets of both the Plan and the PG&E Corporation Retirement Savings Plan for Union-Represented Employees (“Union RSP”). The accompanying financial statements present the assets and liabilities of the Plan only.
Eligibility – All eligible employees of the PG&E Corporation Group hired or rehired on or after January 1, 2013 are automatically enrolled in the Plan. All eligible employees hired or rehired before January 1, 2013 and who elected to participate in the Cash Balance Pension feature of the Pacific Gas and Electric Company Retirement Plan (“the Retirement Plan”) during a one-time election period in 2013 are also automatically enrolled in the Plan. All other employees who continue to participate in the Final Average Pay Pension under the Retirement Plan are eligible to participate in the Plan but are not covered by automatic enrollment and must elect to make Plan contributions.
Contributions – Participating employees may elect to contribute, through payroll deductions, from 1 to 50 percent of their eligible compensation. Participating employees’ eligible compensation for purposes of the Plan is limited by the Internal Revenue Code (“Code”) to $255,000 for the 2013 plan year and $250,000 for 2012 plan year. These elective contributions can be made on a pre-tax basis, on an after-tax basis, or on a combination of both pre-tax and after-tax basis.
Participants may also contribute amounts representing distributions from other qualified plans into the Plan. Such “rollover” contributions are not subject to federal or state income taxes until withdrawn or distributed from the Plan.
As provided by the Code, participant pre-tax contributions may not exceed $17,500 for the 2013 plan year and $17,000 for the 2012 plan year. All Plan contributions, including pre-tax and after-tax participant contributions and all employer contributions, may not exceed the lesser of 100 percent of the participant’s eligible compensation or $51,000 for the 2013 plan year and $50,000 for 2012 plan year. In addition, as provided by the Code, participants age 50 and older are permitted to make an additional pre-tax contribution up to a maximum of $5,500 for each of the 2013 and 2012 plan years.
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Beginning January 1, 2013, all participants hired or rehired on or after January 1, 2013, are eligible for a matching employer contribution of 75 percent of their elective employee contributions up to 8 percent of eligible compensation.
All other participating employees hired before January 1, 2013 who elected to contribute to the Plan are eligible for a matching employer contribution of 75 percent of their elective employee contributions up to 6 percent of eligible compensation. In December 2013, these participants were given a one-time opportunity to continue participating in the Final Average Pay Pension under the Retirement Plan or elect, beginning in 2014, to participate in the Cash Balance Pension feature of the Retirement Plan. Participants who elected to participate in the Cash Balance Pension will receive a matching employer contribution of 75 percent of their elective employee contributions up to 8 percent of eligible compensation beginning January 1, 2014.
Participant Accounts – Individual accounts are maintained for each participant in the Plan and each account is credited with the participant’s elective contributions, employer contributions, and an allocation of the net investment income (losses) and certain investment management fees of the Master Trust. Allocations of net investment income (losses) and fees are based on participant account balances as defined in the Plan Document.
Vesting – Employer and participant elective contributions and their related accumulated earnings and losses are 100 percent vested at all times.
Investment Options – The EBC is responsible for the selection of the Plan’s investment fund managers and the selection of the range of investment options. Neither the EBC nor any of the companies within the PG&E Corporation Group is involved in the investment funds’ day-to-day investment operations. Individual participants designate the way in which their contributions are invested and may generally change their investment designation at any time. Employer matching contributions are initially invested in the PG&E Corporation Stock Fund, but participants may reallocate the employer contributions to other investment options once it has been credited to their account.
The Plan also contains an Employee Stock Ownership Plan. This enables the Plan to pay any dividends directly to participants when declared on the PG&E Corporation common stock held in the PG&E Corporation Stock Fund. Participants may elect to receive their dividends earned from this fund in cash, reinvest their dividends earned from this fund back into the fund, or a combination of both.
Notes Receivable from Participants – Notes receivable from participants totaled $34 million and $31 million as of December 31, 2013 and 2012, respectively. Participants may borrow from their account a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of the market value of the participant’s account balance. Loans for general purposes have terms ranging up to 5 years and loans for the purchase of a primary residence have terms ranging up to 15 years. The loans are secured by the balance in the participant’s account and bear interest at a rate equal to the prime rate plus 1 percent, as determined by the Trustee, for the month in which the loan is requested. The rate is set when participants apply for a loan and remains fixed throughout the duration of the loan term. Principal and interest are paid primarily through payroll deductions and are returned to the participant’s account. Participants pay a one-time origination fee and quarterly maintenance fees for each loan. Participants may have up to 3 outstanding loans at any time.
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Payment of Benefits – Upon termination of service from all employers within the PG&E Corporation Group, a participant may elect to receive an amount equal to the full value of the participant’s account balance. Generally, participants may elect to leave the account in the RSP, take a full or partial distribution or receive periodic installment payments. Participants with account balances less than $5,000 must take a full distribution of their account balance. If the account balance is $1,000 or less and the participant does not make an active election to take a lump-sum cash distribution or rollover distribution of their account balance to another qualified plan or Individual Retirement Account (IRA), their account will be automatically distributed in cash subject to applicable taxes and penalties. If the account balance is greater than $1,000 but less than $5,000 and the participant does not make an active election to take a lump-sum cash distribution or rollover distribution of their account balance to another qualified plan or IRA, their accounts will be automatically rolled over to a Fidelity IRA and invested in the Fidelity Cash Reserve Fund. In the event of a participant’s death, the participant’s beneficiaries will receive the value of the participant’s account balance in a lump-sum payment. Participants must begin taking minimum distributions from the Plan by April 1 of the calendar year following the year in which they reach the age 70-1/2.
Withdrawals – Hardship withdrawals and certain in-service withdrawals are permitted subject to Plan provisions.
Administrative Expenses – Certain costs of administering the Plan, including recordkeeping fees and certain expenses of the Trustee, are shared by the participating companies of the PG&E Corporation Group. Investment management fees, used to cover the expenses related to running an investment fund, are paid by participants and are deducted directly from investment returns. Expenses associated with the individual participant brokerage accounts and professional financial advisory services are paid by the participants enrolled in these services. Loan origination and maintenance fees are also paid by participants.
Voting Rights – Each participant is entitled to exercise voting rights based on the equivalent number of PG&E Corporation Stock Fund shares allocated to the participant’s account. Each participant is notified by the Trustee prior to the time that such rights are to be exercised. The Trustee is not permitted to exercise voting rights for any share without instructions from the participant. However, the Trustee is required to vote any unallocated shares on behalf of the collective best interest of the Plan participants and beneficiaries.
Plan Termination – The Board of Directors of PG&E Corporation reserves the right to amend or terminate the Plan at any time subject to the provisions of ERISA. In the event the Plan is terminated, participants will receive full payment of the balance in their accounts. No plan assets may revert to PG&E Corporation or any company within the PG&E Corporation Group.
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting – The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”).
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Use of Estimates – The preparation of financial statements, in conformity with GAAP, requires Plan management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and changes therein, and the disclosure of contingencies. Actual results could differ from these estimates.
Fair Value Measurements – The Plan’s management determines the fair value of certain assets and liabilities based on assumptions that market participants would use in pricing the assets or liabilities. 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, or the “exit price.” The Plan’s management utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and give precedence to observable inputs in determining fair value. An instrument’s level within the hierarchy is based on the lowest level of any significant input to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.
Investment Valuation and Income Recognition – A participant’s interest in the investment funds is represented by participation units allocated on the basis of contributions and assigned a unit value on the basis of the total value of each fund.
Interest income, dividends, investment management fees where appropriate, and the net appreciation or depreciation in the fair value of the investments held by the Plan are allocated to the participant’s account each day based upon the account’s proportional share of the fund balance.
Interest income is recognized as it is earned. Dividends are recorded on the ex-dividend date, the date before which a participant must hold the underlying investment in order to be entitled to dividends. Net appreciation or depreciation in the fair value of the Plan’s investments consists of: (1) the net change in unrealized appreciation or depreciation on investments held during the year, and (2) the realized gain or loss recognized on the sale of investments during the year.
Purchases and sales of securities are recorded on a trade date basis. Realized gains and losses from security transactions are reported on the average cost basis.
Notes Receivable from Participants – Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent notes receivable from participants are reclassified as distributions upon default.
Derivative Investments – Subject to certain guidelines, the EBC allows the plan investment managers to use derivative instruments to achieve investment objectives. During the years ended December 31, 2013 and 2012, the Master Trust held no direct investments in derivative instruments.
Payment of Benefits – Benefit payments to participants are recorded upon distribution.
Reclassification – Certain amounts in the prior year financial statements and notes have been reclassified to conform to the current year’s presentation.
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3. | MASTER TRUST INVESTMENTS |
The Plan’s investment funds are managed by the Trustee or an investment manager, who has discretionary investment authority over the funds. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statement of Net Assets Available for Benefits.
As of December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
Brokerage Link Account | $ | 607,535 | $ | 498,658 | ||||
PG&E Corporation Stock Fund | 816,954 | 888,052 | ||||||
Target Date Funds | 908,522 | 762,015 | ||||||
Equity Funds | 1,995,379 | 1,555,708 | ||||||
Fixed Income Funds | 537,647 | 531,472 | ||||||
Money Market Fund | 520,753 | 565,303 | ||||||
Total Master Trust investments | $ | 5,386,790 | $ | 4,801,208 | ||||
Total Master Trust investments by plan: | ||||||||
RSP | $ | 2,599,452 | $ | 2,274,524 | ||||
Union RSP | 2,787,338 | 2,526,684 | ||||||
Total all plans | $ | 5,386,790 | $ | 4,801,208 |
The following investments represent 5 percent or more of the Master Trust’s net assets at December 31, 2013 and 2012:
As of December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
PG&E Corporation Stock Fund | $ | 816,954 | $ | 888,052 | ||||
RSP Large Company Stock Index Fund | 1,030,967 | 846,786 | ||||||
RSP Small Company Stock Index Fund | 422,532 | 291,742 | ||||||
RSP International Stock Index Fund | 395,005 | 323,371 | ||||||
RSP Bond Index Fund | 394,452 | 430,770 | ||||||
RSP Money Market Fund | 520,753 | 565,303 |
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The net investment income of the Master Trust by major category and the Plan’s total share of this net investment income based on participant account balances are as follows:
Year ended December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
Net appreciation (depreciation) in fair value of investments: | ||||||||
Brokerage Link Account | $ | 59,133 | $ | 34,576 | ||||
PG&E Corporation Stock Fund | 13,408 | (20,806 | ) | |||||
Target Date Funds | 108,749 | 92,504 | ||||||
Equity Funds | 467,532 | 226,256 | ||||||
Fixed Income Funds | (11,847 | ) | 16,785 | |||||
Money Market Fund | 48 | 177 | ||||||
Net appreciation in fair value of investments | 637,023 | 349,492 | ||||||
Dividends and interest | 58,459 | 51,830 | ||||||
Total Master Trust investment income | $ | 695,482 | $ | 401,322 | ||||
Total Master Trust investment income by plan: | ||||||||
RSP | $ | 353,064 | $ | 205,460 | ||||
Union RSP | 342,418 | 195,862 | ||||||
Total all plans | $ | 695,482 | $ | 401,322 | ||||
The following investments held by the Plan through the Master Trust represent 5 percent or more of the Plan’s net assets at December 31, 2013 and 2012:
As of December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
PG&E Corporation Stock Fund | $ | 315,596 | $ | 324,440 | ||||
RSP Large Company Stock Index Fund | 544,744 | 443,750 | ||||||
RSP Small Company Stock Index Fund | 206,061 | 142,366 | ||||||
RSP International Stock Index Fund | 202,185 | 166,308 | ||||||
RSP Bond Index Fund | 196,973 | 219,476 | ||||||
RSP Money Market Fund | 204,857 | 221,448 |
4. FAIR VALUE MEASUREMENTS
The Plan measures certain assets at fair value. A three-tier fair value hierarchy is established as a basis for considering fair value assumptions and for inputs used in the valuation methodologies in measuring fair value:
Level 1 : “Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.”
Level 2 : “Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.”
Level 3 : “Unobservable inputs for the asset or liability.” These are inputs for which there is no market data available, or observable inputs that are adjusted using Level 3 assumptions.
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The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Investments measured at fair value on a recurring basis for the Plan are summarized below.
Fair Value Measurements at December 31, 2013 | ||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Master Trust Investments: | ||||||||||||||||
Brokerage Link Account | $ | 607,535 | $ | - | $ | - | $ | 607,535 | ||||||||
PG&E Corporation Stock Fund | - | 816,954 | - | 816,954 | ||||||||||||
Target Date Funds | - | 908,522 | - | 908,522 | ||||||||||||
Equity Funds | - | 1,995,379 | - | 1,995,379 | ||||||||||||
Fixed Income Funds | - | 537,647 | - | 537,647 | ||||||||||||
Money Market Fund | 520,753 | - | - | 520,753 | ||||||||||||
Total Master Trust Investments, at Fair Value | $ | 1,128,288 | $ | 4,258,502 | $ | - | $ | 5,386,790 | ||||||||
Fair Value Measurements at December 31, 2012 | ||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Master Trust Investments: | ||||||||||||||||
Brokerage Link Account | $ | 498,658 | $ | - | $ | - | 498,658 | |||||||||
PG&E Corporation Stock Fund | - | 888,052 | - | 888,052 | ||||||||||||
Target Date Funds | - | 762,014 | - | 762,014 | ||||||||||||
Equity Funds | - | 1,555,709 | - | 1,555,709 | ||||||||||||
Fixed Income Funds | - | 531,472 | - | 531,472 | ||||||||||||
Money Market Fund | 565,303 | - | - | 565,303 | ||||||||||||
Total Master Trust Investments, at Fair Value | $ | 1,063,961 | $ | 3,737,247 | $ | - | $ | 4,801,208 |
The fair value measurements incorporate various factors, such as the credit standing of the counterparties involved, the applicable exit market, and specific risks inherent in the financial instrument. As of December 31, 2013 and 2012, the following is a description of the valuation methodologies used for the financial instruments at fair value:
· | Mutual funds offered to participants either through the Brokerage link account or as direct investment options are valued based on unadjusted prices in active markets for identical transactions. These investments are actively traded on a public exchange and are therefore considered Level 1 assets. |
· | The PG&E Corporation stock fund, target date funds, equity funds, and fixed income funds are stated at estimated fair value as determined by the issuer based on the unit values of the funds. Unit values are determined by dividing the fund’s net assets, which represent the unadjusted prices in active markets of the underlying investments, by the number of units outstanding at the valuation date. Target date funds, equity funds, and fixed income funds are maintained by investment companies for large institutional investors and are not publicly traded. They are comprised primarily of underlying securities represented by a variety of asset classes that are publicly traded on exchanges or over-the-counter, and price quotes for the assets held by these funds are readily observable and available. As of December 31, 2013 and 2012, the PG&E Corporation stock fund, target date funds, equity funds, and fixed income funds are categorized as Level 2. |
· |
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The PG&E Corporation stock fund, target date funds, equity funds, and fixed income funds are reported using net asset value as an estimate of fair value. The PG&E Corporation stock fund invests in PG&E stock. The target date funds invest in US and international common stock, marketable fixed income securities, and other publicly traded securities with an asset allocation that is suitable for a participant with a retirement date in the fund's specified target year. The equity funds invest in common stock and securities convertible into common stock from companies of various sizes and geography, with each fund seeking to match the performance of a specified index. The fixed income funds invest in diversified portfolios of bonds, with each fund seeking to match the performance of a specified index. Each of these funds were able to be purchased or redeemed daily based on the unit value determined on the respective transaction date. The funds had no unfunded commitments, required notice period for redemption, or other redemption restriction.
Transfers Between Levels
The Plan recognizes any transfers between levels in the fair value hierarchy as of the end of the reporting period. There were no significant transfers between levels for the year ended December 31, 2013 and 2012.
Level 3 Rollfoward
There were no assets classified as Level 3 in the fair value hierarchy for the years ended December 31, 2013 and 2012.
5. | RELATED-PARTY TRANSACTIONS |
Certain Plan investments, including investments held in the Master Trust, are shares of funds managed by the Trustee. The Plan also invests in PG&E Corporation common stock. These transactions qualify as party-in-interest transactions under ERISA.
The party-in-interest transactions for the Plan comprised the following investments:
As of December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
PG&E Corporation Stock Fund | $ | 315,596 | $ | 324,440 | ||||
Fidelity managed funds | 151,117 | 125,196 | ||||||
Total party-in-interest investments | $ | 466,713 | $ | 449,636 |
6. | FEDERAL INCOME TAX STATUS |
The Plan has received a determination letter from the IRS dated March 3, 2003, stating that the Plan is qualified under Section 401(a) and Section 401(k) of the Code, and therefore the related trust is exempt from taxation. Accordingly, PG&E Corporation believes that the Plan is designed and continues to operate in accordance with the applicable requirements of the Code and no provision for federal income taxes has been recorded in the Plan’s financial statements. Furthermore, participating employees are not liable for federal income tax on amounts allocated to their accounts attributable to: (1) pre-tax participant contributions, (2) reinvested dividends, earnings, and interest income on both pre-tax and after-tax contributions, or (3) employer contributions, until the time that they withdraw such amounts from the Plan.
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On December 30, 2009, PG&E Corporation filed an application for a new favorable tax determination letter from the IRS. However, as of the date hereof, the IRS has not ruled on that application.
Plan management has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2013, there are no uncertain tax positions taken or expected to be taken that more likely than not would not be sustained upon examination by the IRS and would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan management believes it is no longer subject to income tax examinations for years prior to 2010.
7. | SUBSEQUENT EVENTS |
In preparing the financial statements, subsequent transactions and events were evaluated for potential recognition. Plan management determined that there are no subsequent transactions and events that require disclosure to or adjustment in the financial statements.
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PG&E CORPORATION
RETIREMENT SAVINGS PLAN
EIN #: 94-3234914
PLAN #: 001
FORM 5500, SCHEDULE H, PART IV, LINE 4i –
SCHEDULE OF ASSETS HELD
AS OF DECEMBER 31, 2013
(in thousands) | ||||
(a) | (b) | (c) | (d) | (e) |
Identity of Issue, Borrower, Lessor, or Similar Party | Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par, or Maturity Value | Cost | Current Value | |
* | Participant loans | 4.25% - 10.50% | $ - | $ 33,672 |
(*) Represents party-in-interest, as defined under ERISA. |
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PG&E CORPORATION
RETIREMENT SAVINGS PLAN FOR
UNION-REPRESENTED EMPLOYEES
FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
TOGETHER WITH REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
YEARS ENDED DECEMBER 31, 2013 AND 2012
PG&E CORPORATION
RETIREMENT SAVINGS PLAN FOR UNION-REPRESENTED EMPLOYEES
TABLE OF CONTENTS | |
Page | |
Report of Independent Registered Public Accounting Firm | 2 |
Financial Statements: | |
Statements of Net Assets Available for Benefits | 3 |
Statements of Changes in Net Assets Available for Benefits | 4 |
Notes to the Financial Statements | 5-13 |
Supplemental Schedule: | |
Schedule H, Part IV, Line 4i – Schedule of Assets Held | 14 |
All other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable.
1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Employee Benefit Committee of
PG&E Corporation and Participants of
PG&E Corporation Retirement Savings Plan for Union-Represented Employees
We have audited the accompanying statements of net assets available for benefits of PG&E Corporation Retirement Savings Plan for Union-Represented Employees (the Plan) as of December 31, 2013 and 2012, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2013 and 2012, and the changes in net assets available for benefits for the years then ended in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedule of assets held as of December 31, 2013 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Morris Davis Chan & Tan LLP
Oakland, California
Oakland, California
June 20, 2014
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PG&E CORPORATION
RETIREMENT SAVINGS PLAN
FOR UNION-REPRESENTED EMPLOYEES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(in thousands)
As of December 31, | ||||||||
2013 | 2012 | |||||||
ASSETS | ||||||||
Plan interest in Master Trust investments, at fair value | $ | 2,787,338 | $ | 2,526,684 | ||||
Receivables: | ||||||||
Notes receivable from participants (5,250 and 5,028 loans outstanding in 2013 and 2012, respectively, and interest rates ranging from 4.25% to 10.5% in 2013 and 2012) | 76,779 | 71,919 | ||||||
Total assets | 2,864,117 | 2,598,603 | ||||||
LIABILITIES | ||||||||
Administrative expenses payable | 103 | 95 | ||||||
NET ASSETS AVAILABLE FOR BENEFITS | $ | 2,864,014 | $ | 2,598,508 |
See Accompanying Notes to the Financial Statements.
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PG&E CORPORATION
RETIREMENT SAVINGS PLAN
FOR UNION-REPRESENTED EMPLOYEES
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(in thousands)
Year ended December 31, | ||||||||
2013 | 2012 | |||||||
ADDITIONS TO NET ASSETS ATTRIBUTABLE TO: | ||||||||
Investment income: | ||||||||
Plan interest in Master Trust investment income | $ | 342,418 | $ | 195,862 | ||||
Contributions: | ||||||||
Employer | 32,548 | 31,716 | ||||||
Participant | 127,915 | 120,152 | ||||||
Rollover | 4,339 | 3,134 | ||||||
Total contributions | 164,802 | 155,002 | ||||||
Interest from notes receivable from participants | 3,092 | 3,117 | ||||||
Total additions | 510,312 | 353,981 | ||||||
DEDUCTIONS FROM NET ASSETS ATTRIBUTABLE TO: | ||||||||
Benefit distributions to participants | 217,966 | 188,713 | ||||||
Administrative expenses | 2,288 | 1,831 | ||||||
Total deductions | 220,254 | 190,544 | ||||||
NET INCREASE BEFORE ASSET TRANSFERS | 290,058 | 163,437 | ||||||
Asset transfers out, net | (24,552 | ) | (37,064 | ) | ||||
NET INCREASE | 265,506 | 126,373 | ||||||
NET ASSETS AVAILABLE FOR BENEFITS: | ||||||||
Beginning of year | 2,598,508 | 2,472,135 | ||||||
End of year | $ | 2,864,014 | $ | 2,598,508 |
See Accompanying Notes to the Financial Statements.
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PG&E CORPORATION
RETIREMENT SAVINGS PLAN
FOR UNION-REPRESENTED EMPLOYEES
NOTES TO THE FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN
The following is an overview of the PG&E Corporation Retirement Savings Plan for Union-Represented Employees (“Plan” or Union RSP). The Plan document provides a more complete description of the Plan’s provisions.
General – The Plan is a defined contribution plan covering union-represented employees of PG&E Corporation and all companies owned by PG&E Corporation (collectively, “PG&E Corporation Group”), as designated by the Employee Benefit Committee (“EBC”). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, (“ERISA”), as amended.
The Board of Directors of PG&E Corporation established the EBC to have oversight over the administration and financial management of affiliated company employee benefit plans, including this Plan. The EBC retains Fidelity Management Trust Company as the Trustee of the Plan (“Trustee”).
The PG&E Corporation Retirement Savings Plan Master Trust (“Master Trust”) holds the investment assets of both the Plan and the PG&E Corporation Retirement Savings Plan (“RSP”). The accompanying financial statements present the assets and liabilities of the Plan only.
Eligibility – All eligible employees of the PG&E Corporation Group hired or rehired on or after January 1, 2013 are automatically enrolled in the Plan. All eligible employees hired or rehired before January 1, 2013 and who elected to participate in the Cash Balance Pension feature of the Pacific Gas and Electric Company Retirement Plan (“the Retirement Plan”) during a one-time election period in 2013 are also automatically enrolled in the Plan. All other represented employees who continue to participate in the Final Average Pay Pension under the Retirement Plan are eligible to participate in the Plan but are not covered by automatic enrollment and must elect to make Plan contributions.
Contributions – Participating employees may elect to contribute, through payroll deductions, from 1 to 20 percent of their eligible compensation. Participating employees’ eligible compensation for purposes of the Plan is limited by the Internal Revenue Code (“Code”), to $255,000 for the 2013 plan year and $250,000 for the 2012 plan year. These elective contributions can be made on a pre-tax basis, on an after-tax basis, or on a combination of both pre-tax and after-tax basis.
Participants may also contribute amounts representing distributions from other qualified plans into the Plan. Such “rollover” contributions are not subject to federal or state income taxes until withdrawn or distributed from the Plan.
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As provided by the Code, participant pre-tax contributions may not exceed $17,500 for the 2013 plan year and $17,000 for the 2012 plan year. All Plan contributions, including pre-tax and after-tax participant contributions and all employer contributions, may not exceed the lesser of 100 percent of the participant’s eligible compensation or $51,000 for the 2013 plan year and $50,000 for the 2012 plan year. In addition, as provided by the Code, participants age 50 and older are permitted to make an additional pre-tax contribution up to a maximum of $5,500 for each of the 2013 and 2012 plan years.
Beginning January 1, 2013, all participants hired or rehired on or after January 1, 2013 are eligible for a matching employer contribution of 75 percent of their elective employee contributions up to 8 percent of eligible compensation upon completing one year of service.
All other participating employees hired before January 1, 2013 are eligible for a matching employer contribution according to the following years of service:
Length of Service | Matching Employer Contribution |
Less than 1 year of service | None |
1 to 3 years of service | 60 percent of the participant’s pre-tax and/or after-tax contributions that do not exceed 3 percent of the employee’s eligible compensation |
3 years of service or more | 60 percent of the participant’s pre-tax and/or after-tax contributions that do not exceed 6 percent of the employee’s eligible compensation |
In 2013, these participants were given a one-time opportunity to continue participating in the Final Average Pay Pension under the Retirement Plan or elect, beginning in 2014, to participate in the Cash Balance Pension feature of the Retirement Plan. Participants who elected to participate in the Cash Balance Pension will receive a matching employer contribution of 75 percent of their elective employee contributions up to 8 percent of eligible compensation beginning January 1, 2014.
Participant Accounts – Individual accounts are maintained for each participant in the Plan and each account is credited with the participant’s employee elective contributions, employer contributions, and an allocation of the net investment income (losses) and certain investment management fees of the Master Trust. Allocations of net investment income (losses) and fees are based on participant account balances, as defined in the Plan Document.
Vesting – Employer and participant elective contributions and their related accumulated earnings and losses are 100 percent vested at all times.
Investment Options – The EBC is responsible for the selection of the Plan’s investment fund managers and the selection of the range of investment options. Neither the EBC nor any of the companies within the PG&E Corporation Group is involved in the investment funds’ day-to-day investment operations. Individual participants designate the way in which their contributions are invested and may generally change their investment designation at any time. Employer matching contributions are initially invested in the PG&E Corporation Stock Fund, but participants may reallocate the employer match to the other investment options once it has been credited to their account.
The Plan also contains an Employee Stock Ownership Plan. This enables the Plan to pay any dividends directly to participants when declared on the PG&E Corporation common stock held in the PG&E Corporation Stock Fund. Participants may elect to receive their dividends earned from this fund in cash, reinvest their dividends earned from this fund back into the fund, or a combination of both.
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Notes Receivable from Participants – Notes receivable from participants totaled $77 million and $72 million as of December 31, 2013 and 2012, respectively. Participants may borrow from their account a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of the market value of the participant’s account balance. Loans for general purposes have terms ranging up to 5 years and loans for the purchase of a primary residence have terms ranging up to 15 years. The loans are secured by the balance in the participant’s account and bear interest at a rate equal to the prime rate plus 1 percent, as determined by the Trustee, for the month in which the loan is requested. The rate is set when participants apply for a loan and remains fixed throughout the duration of the loan term. Principal and interest are paid primarily through payroll deductions and are returned to the participant’s account. Participants pay a one-time origination fee and quarterly maintenance fees for each loan. Participants may have up to 3 outstanding loans at any time.
Payment of Benefits – Upon termination of service from all employers within the PG&E Corporation Group, a participant may elect to receive an amount equal to the full value of the participant’s account balance. Generally, participants may elect to leave the account in the RSP, take a full or partial distribution or receive periodic installment payments. Participants with account balances less than $5,000 must take a full distribution of their account balance. If the account balance is $1,000 or less and the participant does not make an active election to take a lump-sum cash distribution or rollover distribution of their account balance to another qualified plan or Individual Retirement Account (IRA), their account will be automatically distributed in cash subject to applicable taxes and penalties. If the account balance is greater than $1,000 but less than $5,000 and the participant does not make an active election to take a lump-sum cash distribution or rollover distribution of their account balance to another qualified plan or IRA, their account will be automatically rolled over to a Fidelity IRA and invested in the Fidelity Cash Reserve Fund. In the event of a participant’s death, the participant’s beneficiaries will receive the value of the participant’s account balance in a lump-sum payment. Participants must begin taking minimum distributions from the Plan by April 1 of the calendar year following the year in which they reach the age 70-1/2.
Withdrawals – Hardship withdrawals and certain in-service withdrawals are permitted subject to Plan provisions.
Administrative Expenses – Certain costs of administering the Plan, including recordkeeping fees and certain expenses of the Trustee, are shared by the participating companies of the PG&E Corporation Group. Investment management fees, used to cover the expenses related to running an investment fund, are paid by participants and are deducted directly from investment returns. Expenses associated with the individual participant brokerage accounts and professional financial advisory services are paid by the participants enrolled in these services. Loan origination and maintenance fees are also paid by participants.
Voting Rights – Each participant is entitled to exercise voting rights based on the equivalent number of PG&E Corporation Stock Fund shares allocated to the participant’s account. Each participant is notified by the Trustee prior to the time that such rights are to be exercised. The Trustee is not permitted to vote any share for which a participant has not given instructions. However, the Trustee is required to vote any unallocated shares on behalf of the collective best interest of the Plan participants and beneficiaries.
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Plan Termination – The Board of Directors of PG&E Corporation reserves the right to amend or terminate the Plan at any time subject to the provisions of ERISA. In the event the Plan is terminated, participants will receive full payment of the balance in their accounts. No plan assets may revert to PG&E Corporation or any company within the PG&E Corporation Group.
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting – The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”).
Use of Estimates – The preparation of financial statements, in conformity with GAAP, requires Plan management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and changes therein, and the disclosure of contingencies. Actual results could differ from these estimates.
Fair Value Measurements – The Plan’s management determines the fair value of certain assets and liabilities based on assumptions that market participants would use in pricing the assets or liabilities. 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, or the “exit price.” The Plan’s management utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and give precedence to observable inputs in determining fair value. An instrument’s level within the hierarchy is based on the lowest level of any significant input to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.
Investment Valuation and Income Recognition – A participant’s interest in the investment funds is represented by participation units allocated on the basis of contributions and assigned a unit value on the basis of the total value of each fund.
Interest income, dividends, investment management fees where appropriate, and the net appreciation or depreciation in the fair value of the investments held by the Plan are allocated to the participant’s account each day based upon the account’s proportional share of the fund balance.
Interest income is recognized as it is earned. Dividends are recorded on the ex-dividend date, the date before which a participant must hold the underlying investment in order to be entitled to dividends. Net appreciation or depreciation in the fair value of the Plan’s investments consists of: (1) the net change in unrealized appreciation or depreciation on investments held
during the year, and (2) the realized gain or loss recognized on the sale of investments during the year.
Purchases and sales of securities are recorded on a trade date basis. Realized gains and losses from security transactions are reported on the average cost basis.
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Notes Receivable from Participants –– Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent notes receivable from participants are reclassified as distributions upon default.
Derivative Investments – Subject to certain guidelines, the EBC allows the plan investment managers to use derivative instruments to achieve investment objectives. During the years ended December 31, 2013 and 2012, the Plan and the Master Trust held no direct investments in derivative instruments.
Payment of Benefits – Benefit payments to participants are recorded upon distribution.
Reclassification – Certain amounts in the prior year financial statements and notes have been reclassified to conform to the current year’s presentation.
3. MASTER TRUST INVESTMENTS
The Plan’s investment funds are managed by the Trustee or an investment manager, who has discretionary investment authority over the funds. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statement of Net Assets Available for Benefits.
The total Master Trust investments by major category and the Plan’s total share of these investments based on participant account balances are as follows:
As of December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
Brokerage Link Account | $ | 607,535 | $ | 498,658 | ||||
PG&E Corporation Stock Fund | 816,954 | 888,052 | ||||||
Target Date Funds | 908,522 | 762,015 | ||||||
Equity Funds | 1,995,379 | 1,555,708 | ||||||
Fixed Income Funds | 537,647 | 531,472 | ||||||
Money Market Fund | 520,753 | 565,303 | ||||||
Total Master Trust investment | $ | 5,386,790 | $ | 4,801,208 | ||||
Total Master Trust investment by plan: | ||||||||
Union RSP | $ | 2,787,338 | $ | 2,526,684 | ||||
RSP | 2,599,452 | 2,274,524 | ||||||
Total all plans | $ | 5,386,790 | $ | 4,801,208 |
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The following investments represent 5 percent or more of the Master Trust’s net assets at December 31, 2013 and 2012:
As of December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
PG&E Corporation Stock Fund | $ | 816,954 | $ | 888,052 | ||||
RSP Large Company Stock Index Fund | 1,030,967 | 846,786 | ||||||
RSP Small Company Stock Index Fund | 422,532 | 291,742 | ||||||
RSP International Stock Index Fund | 395,005 | 323,371 | ||||||
RSP Bond Index Fund | 394,452 | 430,770 | ||||||
RSP Money Market Fund | 520,753 | 565,303 |
The net investment income of the Master Trust by major category and the Plan’s total share of this net investment income based on participant account balances are as follows:
Year ended December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
Net appreciation (depreciation) in fair value of investments: | ||||||||
Brokerage Link Account | $ | 59,133 | $ | 34,576 | ||||
PG&E Corporation Stock Fund | 13,408 | (20,806 | ) | |||||
Target Date Funds | 108,749 | 92,504 | ||||||
Equity Funds | 467,532 | 226,256 | ||||||
Fixed Income Funds | (11,847 | ) | 16,785 | |||||
Money Market Fund | 48 | 177 | ||||||
Net appreciation in fair value of investments | 637,023 | 349,492 | ||||||
Dividends and interest | 58,459 | 51,830 | ||||||
Total Master Trust investment income | $ | 695,482 | $ | 401,322 | ||||
Total Master Trust investment income by plan: | ||||||||
Union RSP | $ | 342,418 | $ | 195,862 | ||||
RSP | 353,064 | 205,460 | ||||||
Total all plans | $ | 695,482 | $ | 401,322 | ||||
The following investments held by the Plan through the Master Trust represent 5 percent or more of the Plan’s net assets at December 31, 2013 and 2012:
As of December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
PG&E Corporation Stock Fund | $ | 501,358 | $ | 563,612 | ||||
RSP Large Company Stock Index Fund | 486,223 | 403,036 | ||||||
RSP Small Company Stock Index Fund | 216,471 | 149,376 | ||||||
RSP International Stock Index Fund | 192,820 | 157,063 | ||||||
RSP Bond Index Fund | 197,479 | 211,294 | ||||||
RSP Money Market Fund | 315,896 | 343,855 |
4. | FAIR VALUE MEASUREMENTS |
The Plan measures certain assets at fair value. A three-tier fair value hierarchy is established as a basis for considering fair value assumptions and for inputs used in the valuation methodologies in measuring fair value:
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Level 1 : “Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.”
Level 2 : “Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.”
Level 3 : “Unobservable inputs for the asset or liability.” These are inputs for which there is no market data available, or observable inputs that are adjusted using Level 3 assumptions.
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Investments measured at fair value on a recurring basis for the Plan are summarized below.
Fair Value Measurements at December 31, 2013 | |||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Master Trust Investments: | |||||||||||||||||
Brokerage Link Account | $ | 607,535 | $ | - | $ | - | $ | 607,535 | |||||||||
PG&E Corporation Stock Fund | - | 816,954 | - | 816,954 | |||||||||||||
Target Date Funds | - | 908,522 | - | 908,522 | |||||||||||||
Equity Funds | - | 1,995,379 | - | 1,995,379 | |||||||||||||
Fixed Income Funds | - | 537,647 | - | 537,647 | |||||||||||||
Money Market Fund | 520,753 | - | - | 520,753 | |||||||||||||
Total Master Trust Investments, at Fair Value | $ | 1,128,288 | $ | 4,258,502 | $ | - | $ | 5,386,790 | |||||||||
Fair Value Measurements at December 31, 2012 | |||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Master Trust Investments: | |||||||||||||||||
Brokerage Link Account | $ | 498,658 | $ | - | $ | - | $ | 498,658 | |||||||||
PG&E Corporation Stock Fund | - | 888,052 | - | 888,052 | |||||||||||||
Target Date Funds | - | 762,014 | - | 762,014 | |||||||||||||
Equity Funds | - | 1,555,709 | - | 1,555,709 | |||||||||||||
Fixed Income Funds | - | 531,472 | - | 531,472 | |||||||||||||
Money Market Fund | 565,303 | - | - | 565,303 | |||||||||||||
Total Master Trust Investments, at Fair Value | $ | 1,063,961 | $ | 3,737,247 | $ | - | $ | 4,801,208 |
The fair value measurements incorporate various factors, such as the credit standing of the counterparties involved, the applicable exit market, and specific risks inherent in the financial instrument. As of December 31, 2013 and 2012, the following is a description of the valuation methodologies used for the financial instruments at fair value:
· | Mutual funds offered to participants either through the Brokerage link account or as direct investment options are valued based on unadjusted prices in active markets for identical transactions. These investments are actively traded on a public exchange and are therefore considered Level 1 assets. |
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· | The PG&E Corporation stock fund, target date funds, equity funds, and fixed income funds are stated at estimated fair value as determined by the issuer based on the unit values of the funds. Unit values are determined by dividing the fund’s net assets, which represent the unadjusted prices in active markets of the underlying investments, by the number of units outstanding at the valuation date. Target date funds, equity funds, and fixed income funds are maintained by investment companies for large institutional investors and are not publicly traded. They are comprised primarily of underlying securities represented by a variety of asset classes that are publicly traded on exchanges or over-the-counter, and price quotes for the assets held by these funds are readily observable and available. As of December 31, 2013 and 2012, the PG&E Corporation stock fund, target date funds, equity funds, and fixed income funds are categorized as Level 2. |
· | The money market fund is valued using unadjusted prices in an active market for identical assets and is thus classified as a Level 1 asset. |
The PG&E Corporation stock fund, target date funds, equity funds, and fixed income funds are reported using net asset value as an estimate of fair value. The PG&E Corporation stock fund invests in PG&E stock. The target date funds invest in US and international common stock, marketable fixed income securities, and other publicly traded securities with an asset allocation that is suitable for a participant with a retirement date in the fund's specified target year. The equity funds invest in common stock and securities convertible into common stock from companies of various sizes and geography, with each fund seeking to match the performance of a specified index. The fixed income funds invest in diversified portfolios of bonds, with each fund seeking to match the performance of a specified index. Each of these funds were able to be purchased or redeemed daily based on the unit value determined on the respective transaction date. The funds had no unfunded commitments, required notice period for redemption, or other redemption restriction.
Transfers Between Levels
The Plan recognizes any transfers between levels in the fair value hierarchy as of the end of the reporting period. There were no significant transfers between levels for the year ended December 31, 2013 and 2012.
Level 3 Rollfoward
There were no assets classified as Level 3 in the fair value hierarchy for the years ended December 31, 2013 and 2012.
5. | RELATED PARTY TRANSACTIONS |
Certain Plan investments, including investments held in the Master Trust, are shares of funds managed by the Trustee. The Plan also invests in PG&E Corporation common stock. These transactions qualify as party-in-interest transactions under ERISA.
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The party-in-interest transactions for the Plan comprised the following investments:
As of December 31, | ||||||||
(in thousands) | 2013 | 2012 | ||||||
PG&E Corporation Stock Fund | $ | 501,358 | $ | 563,612 | ||||
Fidelity managed funds | 112,208 | 102,869 | ||||||
Total party-in-interest investments | $ | 613,566 | $ | 666,481 |
6. | FEDERAL INCOME TAX STATUS |
The Plan has received a determination letter from the IRS dated March 17, 2004, stating that the Plan is qualified under Section 401(a) and Section 401(k) of the Code, and therefore the related trust is exempt from taxation. Accordingly, PG&E Corporation believes that the Plan is designed and continues to operate in accordance with the applicable requirements of the Code and no provision for federal income taxes has been recorded in the Plan’s financial statements. Furthermore, participating employees are not liable for federal income tax on amounts allocated to their accounts attributable to: (1) pre-tax participant contributions, (2) reinvested dividends, earnings, and interest income on both pre-tax and after-tax contributions, or (3) employer contributions, until the time that they withdraw such amounts from the Plan.
On December 30, 2009, PG&E Corporation filed an application for a new favorable tax determination letter from the IRS. However, as of the date hereof, the IRS has not ruled on that application.
Plan management has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2013, there are no uncertain tax positions taken or expected to be taken that more likely than not would not be sustained upon examination by the IRS and would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan management believes it is no longer subject to income tax examinations for years prior to 2010.
7. | SUBSEQUENT EVENTS |
In preparing the financial statements, subsequent transactions and events were evaluated for potential recognition. Plan management determined that there are no subsequent transactions and events that require disclosure to or adjustment in the financial statements.
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PG&E CORPORATION |
RETIREMENT SAVINGS PLAN FOR UNION-REPRESENTED EMPLOYEES |
EIN #: 94-3234914
PLAN #: 002
FORM 5500, SCHEDULE H, PART IV, LINE 4i –
SCHEDULE OF ASSETS HELD
AS OF DECEMBER 31, 2013 |
(in thousands) | ||||
(a) | (b) | (c) | (d) | (e) |
Identity of Issue, Borrower, Lessor, or Similar Party | Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par, or Maturity Value | Cost | Current Value | |
* | Participant loans | 4.25% - 10.50% | $ - | $76,779 |
(*) Represents party-in-interest, as defined under ERISA. |
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