UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK
PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
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| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the fiscal year ended December 31, 2009 |
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| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to |
Commission File #001-08506
A. |
| Full title of Plan and the address of the Plan, if different from that of the issuer named below: |
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
B. |
| Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office: |
UNIVERSAL AMERICAN CORP.
SIX INTERNATIONAL DRIVE, SUITE 190, RYE BROOK, NEW YORK 10573
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
December 31, 2009 and 2008 and for the Year Ended December 31, 2009
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F-1 | |
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Statements of Net Assets Available for Benefits as of December 31, 2009 and 2008 | F-2 |
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Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2009 | F-3 |
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F-4 | |
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Supplemental Schedules: |
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Schedule H, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2009 | F-14 |
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F-15 | |
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F-16 | |
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EXHIBITS |
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Exhibit 23.1 - Consent of Independent Registered Public Accounting Firm |
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Report of Independent Registered Public Accounting Firm
The Plan Sponsor of
Universal American Corp. 401(k) Savings Plan
We have audited the accompanying statements of net assets available for benefits of Universal American Corp. 401(k) Savings Plan as of December 31, 2009 and 2008, and the related statement of changes in net assets available for benefits for the year ended December 31, 2009. 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. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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 at December 31, 2009 and 2008, and the changes in its net assets available for benefits for the year ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets (held at end of year) as of December 31, 2009, and reportable transactions for the year then ended, are presented for purposes of additional analysis and are not a required part of the financial statements but are 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. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
New York, New York
June 25, 2010
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
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| December 31, |
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| 2009 |
| 2008 |
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ASSETS |
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Investments: |
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Registered investment companies |
| $ | 23,944,932 |
| $ | 15,959,732 |
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Employer securities - company stock fund |
| 9,412,752 |
| 5,432,847 |
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Group annuity contract |
| 4,048,324 |
| 3,453,960 |
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Participant loans |
| 921,288 |
| 768,136 |
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Interest bearing cash and equivalents |
| 126,945 |
| 324,906 |
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Total investments, at fair value |
| 38,454,241 |
| 25,939,581 |
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Net assets available for benefits |
| $ | 38,454,241 |
| $ | 25,939,581 |
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See accompanying notes to financial statements.
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2009
Additions |
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Investment income: |
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Net appreciation in fair value of investments: |
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Registered investment companies |
| $ | 5,343,855 |
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Employer securities - company stock fund |
| 2,222,243 |
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Subtotal |
| 7,566,098 |
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Interest income on group annuity contract |
| 121,105 |
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Interest income on participant loans |
| 51,974 |
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Other investment income |
| 81 |
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Total investment income |
| 7,739,258 |
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Contributions: |
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Employer contributions |
| 1,891,407 |
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Participant contributions |
| 5,204,423 |
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Participant rollovers |
| 84,980 |
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Total contributions |
| 7,180,810 |
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Total additions |
| 14,920,068 |
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Deductions |
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Benefits paid to participants |
| 2,379,158 |
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Administrative expenses |
| 26,250 |
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Total deductions |
| 2,405,408 |
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Net increase |
| 12,514,660 |
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Net assets available for benefits: |
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Beginning of year |
| 25,939,581 |
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End of year |
| $ | 38,454,241 |
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See accompanying notes to financial statements.
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
December 31, 2009
NOTE 1 - DESCRIPTION OF PLAN
Effective April 1, 1992, Universal American Corp. (hereafter called the “Company”) adopted the Universal American Corp. 401(k) Savings Plan (hereafter called the “Plan”), which is a voluntary defined contribution plan under which employees may elect to defer income from taxation under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Plan description below provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
Plan Administration
The Company is the Administrator for the Plan and has appointed State Street Bank and Trust as Plan Trustee. The Administrator is the named fiduciary that is responsible for execution of the Plan’s provisions, construction, required record keeping, directing and advising the Plan Trustee regarding investment and payment procedures. The Administrator is also responsible for claims management and exercising such authority and responsibility as they deem appropriate to comply with ERISA and government regulations. The Company has contracted with Diversified Investment Advisors for recordkeeping services for the Plan. State Street Bank and Trust is the custodian for the Plan’s assets.
Administrative Costs
Permitted administrative expenses are paid by the Plan. The Company pays all other costs of operating the Plan.
Plan Changes
During 2009, there were changes to the terms of the Plan relating to investment options as follows:
Investment options — The Transamerica Diversified Equity Fund, the Columbia Mid Cap Value Fund, the Goldman Sachs Growth Opportunities Fund, the Janus Forty Fund, the Royce Premier Financial Fund, and the Royce Value Fund were added. The American Century Vista Adv Fund, the Transamerica Premier Core Equity Fund, and the Transamerica Premier Equity Fund were removed as investment options.
Participation in the Plan
Any employee who has completed 250 hours within three months of service and has attained age 21 (attained age 18 for those participants added to the plan in 2007 related to the Plan’s merger with the Heritage Health Systems, Inc. (“Heritage”) 401 (k) Profit Sharing Plan, effective July 1, 2007) shall be eligible to participate in the Plan. Employees are eligible to participate on the first day of the Plan quarter following the date the employee has met the eligibility requirements. Non-resident employees who receive no earned income from Company sources within the United States are not eligible to participate in the Plan. An employee ceases to be a participant if they cease employment for any reason (including death or retirement), or if the Company ceases to exist. If a person no longer meets the requirements for participation while they are an employee, they
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
shall remain a participant but shall not be entitled to a share of any Company contributions, and may not make elective contributions until Plan requirements are met.
Contributions
Eligible employees may contribute to the Plan, through payroll deductions, up to 100% of their eligible compensation to a variety of funds, including the Company’s common stock fund. The maximum contribution allowed for 2009 was $16,500. Participants who are fifty years or older were also allowed to make an additional $5,500 catch-up contribution for a total of $22,000. Participants may also contribute distributions from any tax qualified plan under Code Section 401(a), or from any other plans from which distributions are eligible to be rolled over into this Plan pursuant to the Code.
The Company may match participants’ contributions with employer contributions to the Company’s common stock fund. Beginning on January 1, 2004, the matching contribution was revised to be equal to 100% of the first 1% of eligible salary contributed to the Plan by the participant and 50% of the next 2% of eligible salary contributed to the Plan by the participant (maximum match contributions will not exceed 2% of compensation). In addition, the Administrator approved a supplemental Company matching contribution, beginning in 2004 and continuing to 2009, equal to a maximum of 50% of each of the next 2% of eligible salary contributed to the Plan by the participant (contributions of greater than 3% up to 5%). The percentage for both the Company match and the supplemental Company match may be adjusted or discontinued as of a valuation date that is thirty (30) days after written notice of the change has been furnished to participants’. The Company matching contribution is summarized as follows:
Participant |
| Company |
| Maximum |
| Supplemental |
| Total |
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1.0% |
| 100 | % | 1.0 | % | — | % | 1.0 | % |
2.0% |
| 75 | % | 1.5 | % | — | % | 1.5 | % |
3.0% |
| 67 | % | 2.0 | % | — | % | 2.0 | % |
4.0% |
| N/A |
| 2.0 | % | 0.5 | % | 2.5 | % |
5.0% |
| N/A |
| 2.0 | % | 1.0 | % | 3.0 | % |
Over 5.0% |
| N/A |
| 2.0 | % | 1.0 | % | 3.0 | % |
* Expressed as a percentage of the participant’s eligible salary.
† Expressed as a percentage of the Participant’s contribution.
Participant and employer matching contributions are recorded in the period during which the related compensation is earned.
Participant Accounts
Each participant’s account is credited with the participant’s contribution and allocation of the Company’s contribution and Plan earnings, and is charged with Plan losses and an allocation of administrative expenses. Allocations are based on participant account balances, or earnings, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. The participants’ account balances that are reflected in the total asset value of the Plan are not the same as the total participants vested benefits, as all participants are not fully vested.
Vesting
The entire interest of a participant in their elective contribution account and qualified non-elective contribution accounts is 100% vested at all times. The interest of a participant in their discretionary and matching contributions accounts vest 25% after two years of service and 25% more per year thereafter, with 100% vesting after five years of service (Participants who joined the Plan as part of the January 1, 2008 merger of the MemberHealth, Inc. 401(k) / Roth Profit Sharing Plan vest over 5 years, graded, based on date of hire and Heritage merged participants vest over either 3 or 4 years, graded, based on date of hire). Additionally, the entire interest of a participant in their discretionary and matching contributions accounts shall become 100% vested upon the occurrence of any of the following events: the cessation of participation due to retirement, death, attainment of age 65, or termination of the Plan. Upon full or partial termination of the Plan, or trust, or the final dissolution and liquidation of the Company, to the extent terminated, the interest in the Plan of each affected participant shall become fully vested. If a person ceases to be a participant for any reason, and their entire interest in their discretionary and matching contribution accounts has not become fully vested, the non-vested portion of these accounts are forfeited.
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
Investment Options
Amounts credited to participants’ accounts under the Plan are invested by the employer-appointed investment committee. Upon enrollment in the Plan, a participant may direct employee contributions in any of the various investment options. These options consist of various equity investments (funds) and the Company’s common stock, a qualifying employer security.
The participant may elect, on not more frequently than any valuation date, to have all or any portion of his vested interest in any investment fund(s) transferred to any other investment fund(s).
Participant Loans
The Administrator may permit a participant to borrow from the Plan an amount equal to between $1,000 and generally 50% of the value of their vested interest, but they may not borrow, in the aggregate, an amount greater than $50,000, reduced by the highest outstanding balance on loans to the participant during the twelve month period preceding the date a new loan is to be made. The loan shall bear a reasonable rate of interest, be adequately secured and must be repaid within five years, unless the loan is used to acquire a dwelling unit. The participant must direct the Company to withhold from each payroll and pay to the Plan an amount sufficient to repay the loan over its term. If a loan is in default, the Administrator may treat the unpaid amount as a distribution to the participant from the Plan. A participant may not apply for a loan while they have another loan outstanding.
As of December 31, 2009 and 2008, participants had outstanding loan balances totaling $921,288 and $768,136, respectively. These loans have various maturity dates, with interest rates ranging from 4.3% to 9.3% as of December 31, 2009.
Payment of Benefits
Unless the participant otherwise elects, they normally shall start to receive benefits not later than the 60th day after the close of the Plan year in which the latest of the following occurs:
a.) participant’s attainment of age 65;
b.) participant’s attainment of their tenth year in the Plan;
c.) termination of participant’s employment.
Benefits are generally payable in a lump sum. Participants generally will have their entire balance distributed no later than April 1 following the calendar year in which they attain age 70 ½, or if later, in the year in which they retire. In cases of hardship, the participant may have a portion of their vested interest distributed to them. Upon attainment of age 59 ½, they may elect in writing to receive a single sum of their entire interest while continuing to stay in the Plan. If a participant dies, their beneficiary shall be paid a lump sum amount. If they elect to not receive a distribution of their vested interest as of the date they cease to be a participant, any amount of their Company contribution account in excess of their vested interest shall be forfeited. The participant may elect to have any portion of their benefits directly transferred to an eligible retirement plan.
Forfeited Accounts
Forfeited non-vested accounts totaled $122,904 at December 31, 2009 and $321,850 at December 31, 2008. These accounts will be used to reduce future employer contributions. During the year ended December 31, 2009, employer contributions were reduced by $173,654 from forfeitures.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting
The accompanying financial statements have been prepared using the accrual basis in accordance with U.S. generally accepted accounting principles and the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA.
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain amounts reported in the financial statements and accompanying notes. Accordingly, actual results could differ from those estimates.
Investment Valuation and Income Recognition
The Plan invests in various investment securities, including registered investment companies, company stock and investment contracts. 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 possible that changes in the values of investment securities may occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.
The Plan’s investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices determined on an active market which represent the net asset value of shares held by the Plan at year end. The Universal American Corp. Company Stock Fund is valued at net asset value which is based on the quoted market price of Universal American Corp. common stock determined on an active market. Participant loans are valued at their outstanding balance, which approximates fair value.
The Plan has entered into a traditional group annuity contract primarily with insurance carriers. This contract, which is included in the Transamerica Stable Value Fund (the Fund), is fully benefit-responsive and has no stated maturity date. A fully benefit-responsive contract provides for a stated return on principal invested over a specified period and permits withdrawals at contract value for benefit payments, loans, or transfers. Contract value represents contributions made under the contract, plus earnings, less Plan withdrawals and administrative expenses. As described in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946-210-45-11, investment contracts held by a defined contribution plan are required to be reported at fair value. Contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. Accordingly, the fully benefit-responsive group annuity contract is included in the financial statements at contract value, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Payment of Benefits
Benefit payments to participants are recorded upon distribution.
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
Recently Adopted Accounting Standards
GAAP Codification: In June 2009, the FASB issued Statement of Financial Accounting Standard, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 (SFAS No. 168). This Statement modifies the GAAP hierarchy by establishing only two levels of GAAP, authoritative and nonauthoritative accounting literature. Effective July 2009, the FASB Accounting Standards Codification, or ASC, also known collectively as the “Codification,” is considered the single source of authoritative U.S. accounting and reporting standards, except for additional authoritative rules and interpretive releases issued by the SEC. Nonauthoritative guidance and literature would include, among other things, FASB Concepts Statements, American Institute of Certified Public Accountants Issue Papers and Technical Practice Aids and accounting textbooks. The Codification was developed to organize GAAP pronouncements by topic so that users can more easily access authoritative accounting guidance. It is organized by topic, subtopic, section, and paragraph, each of which is identified by a numerical designation. The Codification is effective for financial statements issued for reporting periods that end after September 15, 2009. Updates to the ASC are issued as Accounting Standards Updates, or ASU. Because the Codification did not change GAAP, the Codification had no impact on our financial statements and footnotes, other than the replacement of pre-codification references with ASC or ASU references herein.
Subsequent Events Disclosure: On June 30, 2009, the Company adopted ASC 855-10-50, Subsequent Events—Disclosure, which established general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. ASC 855-10-50 defines two types of subsequent events. The effects of events or transactions that provide additional evidence about conditions that existed at the balance sheet date, including the estimates inherent in the process of preparing financial statements, are recognized in the financial statements. The effects of events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date are not recognized in the financial statements. On February 24, 2010, the FASB issued an update to address certain implementation issues. Effective upon its issuance, the update exempts Securities and Exchange Commission registrants from disclosing the date through which subsequent events have been evaluated. ASC 820-10-50 affected disclosure only and had no impact on the financial statements of the Plan.
Fair Value Measurements: In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements, requiring separate disclosure of the amounts of significant transfers in and out of Level 1 and Level 2 and description of the reasons for the transfers. It also requires disclosure on a gross basis of purchases, sales, issuances and settlements within Level 3, and disclosures by class of assets and liabilities. The new disclosures and clarifications of existing disclosures are effective for financial statements issued for interim or annual financial reporting periods ending after December 15, 2009 with an exception for the reconciliation disclosures for Level 3, which are effective for interim or annual financial reporting periods ending after December 15, 2010. This guidance did not impact the Plan’s financial statements.
In September 2009, the FASB issued ASU 2009-12, Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), regarding the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent) and requires disclosure by major category of investment about the attributes of applicable investments. The guidance is effective for interim and annual reporting periods ending after December 15, 2009, with early adoption permitted. This guidance did not impact the Plan’s financial statements.
In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4). FSP 157-4 amends ASC 820, Fair Value Measurements and Disclosures, and, in addition to other requirements, provides guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased and also includes guidance on identifying circumstances that indicate a transaction is not orderly. The provisions of the guidance are applied prospectively and are effective for reporting periods ending after June 15, 2009. This guidance did not impact the Plan’s financial statements.
Future Adoption of Accounting Standards:
The Company has determined that all other recently issued accounting standards that are not yet effective will not have a material impact on the financial statements of the Plan, or do not apply to the Plan.
NOTE 3 - PLAN AMENDMENT AND TERMINATION
Although it has not expressed any intent to do so, the Company has the right to terminate or partially terminate the Plan, subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. The Company also has the right or obligation to amend the Plan; various amendments have been made subsequent to the original Plan filing date.
NOTE 4 - INCOME TAX STATUS
The Plan has received an advisory letter from the Internal Revenue Service dated March 31, 2008, stating that the written form of the volume submitter document is qualified under Section 401(a) of the Internal Revenue Code (the Code). Any employer adopting the volume submitter plan will be considered to have a plan qualified under Section 401(a) of the Code. Therefore, the related trust is tax-exempt. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualified status. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and therefore believes the Plan is qualified and the related trust is tax-exempt.
NOTE 5 - CONTRIBUTION INCOME
Participant contributions during 2009 totaled $5,289,403 and originated from the participants’ salary deferral contributions of $5,204,423 and from participants’ rollover contributions of $84,980.
Employer contributions during 2009 amounted to $1,891,407. All of the Employer contributions are deposited to the Universal American Corp. - Company stock fund. Participants cannot direct the investment alternatives for the Employer contributions until they are vested.
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
NOTE 6 - INVESTMENTS
The following schedule of Plan assets presents investments at December 31, 2009 and 2008:
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| December 31, 2009 |
| December 31, 2008 |
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Description |
| Units |
| Per Unit |
| Value |
| Value |
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Registered investment companies |
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American Century Vista Adv Fund |
| — |
| $ | — |
| $ | — |
| $ | 415 |
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American Funds Fundamental Invs R3 |
| 13,655.294 |
| 32.670 |
| 446 |
| 216 |
| |||
American Funds Small Cap Fund |
| 63,584.090 |
| 30.910 |
| 1,965 | * | 1,171 |
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American Funds-Growth Fund of America |
| 55,594.166 |
| 26.930 |
| 1,497 |
| 1,002 |
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Black Rock Equity Fund |
| 90,766.371 |
| 15.900 |
| 1,443 |
| 1,003 |
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BlackRock Global Financial Svcs Inv A |
| 6,332.566 |
| 7.380 |
| 47 |
| 26 |
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Columbia Mid Cap Value Fund |
| 1,288.040 |
| 11.070 |
| 14 |
| — |
| |||
Diversified Stock Index Fund |
| 154,737.063 |
| 8.660 |
| 1,340 |
| 1,087 |
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Fidelity Advisor Mid Cap Fund |
| 48,929.062 |
| 16.340 |
| 800 |
| 481 |
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Fidelity Small Cap Fund |
| 25,208.703 |
| 21.400 |
| 539 |
| 350 |
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First American Real Estate Fund |
| 24,571.063 |
| 14.310 |
| 352 |
| 228 |
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Franklin Micro Cap Value Fund |
| 51,287.323 |
| 27.040 |
| 1,387 |
| 1,027 |
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Goldman Sachs Growth Opportunities Fund |
| 27,635.596 |
| 19.540 |
| 540 |
| — |
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Janus Adviser Balanced S |
| 39,794.008 |
| 24.550 |
| 977 |
| 821 |
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Janus Forty Fund |
| 45,967.232 |
| 31.520 |
| 1,449 |
| — |
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Jennison Natural Resources A |
| 7,468.794 |
| 45.150 |
| 337 |
| 96 |
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Loomis Sayles Bond Fund |
| 59,852.718 |
| 13.260 |
| 794 |
| 530 |
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Loomis Sayles Investment Grade Bond Fund |
| 94,174.060 |
| 11.680 |
| 1,100 |
| 848 |
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Royce Premier Financial Fund |
| 1,310.959 |
| 16.120 |
| 21 |
| — |
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Royce Value Fund |
| 2,963.201 |
| 10.130 |
| 30 |
| — |
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TA IDEX Asset Allocation — Conservative Portfolio |
| 26,078.568 |
| 10.480 |
| 273 |
| 69 |
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TA IDEX Asset Allocation — Growth Portfolio |
| 86,127.980 |
| 10.540 |
| 908 |
| 520 |
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TA IDEX Asset Allocation — Moderate Growth Portfolio |
| 49,762.860 |
| 10.690 |
| 532 |
| 248 |
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TA IDEX Asset Allocation — Moderate Portfolio |
| 207,301.858 |
| 10.690 |
| 2,216 | * | 1,111 |
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Thornburg Core Growth Fund |
| 35,873.572 |
| 14.190 |
| 509 |
| 349 |
| |||
Transamerica Diversified Equity Fund |
| 66,707.973 |
| 13.140 |
| 877 |
| — |
| |||
Transamerica Premier Core Equity Fund |
| — |
| — |
| — |
| 615 |
| |||
Transamerica Premier Equity Fund |
| — |
| — |
| — |
| 1,144 |
| |||
Vanguard International Value Fund |
| 58,131.354 |
| 30.610 |
| 1,779 |
| 1,133 |
| |||
Wells Fargo Advantage Government Securities Fund |
| 111,872.950 |
| 10.670 |
| 1,194 |
| 1,153 |
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Wells Fargo Advantage Small Cap Value Fund |
| 21,440.388 |
| 27.010 |
| 579 |
| 317 |
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Employer securities |
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|
|
| |||
Universal American Corp. - company stock fund |
| 798,523.224 |
| 11.788 |
| 9,413 | * | 5,433 | * | |||
|
|
|
|
|
|
|
|
|
| |||
Group annuity contract |
|
|
|
|
|
|
|
|
| |||
Transamerica Stable Value Fund |
| 233,998.692 |
| 17.301 |
| 4,048 | * | 3,454 | * | |||
|
|
|
|
|
|
|
|
|
| |||
Participant loans |
|
|
|
|
| 921 |
| 768 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Cash and equivalents |
|
|
|
|
|
|
|
|
| |||
Interest bearing cash |
|
|
|
|
| 127 |
| 325 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Total Investments |
|
|
|
|
| $ | 38,454 |
| $ | 25,940 |
| |
* | Investment in fund represents 5% or more of the net assets of the Plan. |
| All investments are participant directed except for the non-vested matching employer contribution to the Universal American Corp. - company stock fund, which is non-participant-directed. |
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
NOTE 7 — Fair Value Measurements
Accounting Standards Codification (ASC) 820, Fair Value Measuremensts and Disclosure, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1 — Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
Level 2 — Inputs to the valuation methodology include:
· Quoted prices for similar assets or liabilities in active markets;
· Quoted prices for identical or similar assets or liabilities in inactive markets;
· Inputs other than quoted prices that are observable for the asset or liability;
· Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for assets measured at fair value.
Registered investment companies: Valued at quoted market prices determined on an active market which represent the net asset value of shares held by the Plan at year end.
Employer securities — company stock fund: Valued at net asset value which is based on the quoted market price of Universal American Corp. common stock determined on an active market.
Group annuity contract: Valued at contract value, which approximates fair value.
Participant loans: Valued at their outstanding balance, which approximates fair value.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following table sets forth the Plan’s investments carried at fair value by ASC 820 hierarchy level as of December 31, 2009 and 2008 (in thousands):
2009 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| ||||
Registered investment companies: |
|
|
|
|
|
|
|
|
| ||||
Long term bond funds |
| $ | 3,087 |
| $ | 3,087 |
| $ | — |
| $ | — |
|
Large Cap funds |
| 7,052 |
| 7,052 |
| — |
| — |
| ||||
Small/Mid Cap funds |
| 4,771 |
| 4,771 |
| — |
| — |
| ||||
International funds |
| 3,745 |
| 3,775 |
| — |
| — |
| ||||
Other funds |
| 5,290 |
| 5,290 |
| — |
| — |
| ||||
Total registered investment companies |
| 23,945 |
| 23,945 |
| — |
| — |
| ||||
Employer securities — company stock fund |
| 9,413 |
| 9,413 |
| — |
| — |
| ||||
Group annuity contract |
| 4,048 |
| — |
| — |
| 4,048 |
| ||||
Participant loans |
| 921 |
| — |
| — |
| 921 |
| ||||
Interest bearing cash and equivalents |
| 127 |
| 127 |
| — |
| — |
| ||||
Total investments at fair value |
| $ | 38,454 |
| $ | 33,485 |
| $ | — |
| $ | 4,969 |
|
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
2008 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| ||||
Registered investment companies |
| $ | 15,960 |
| $ | 15,960 |
| $ | — |
| $ | — |
|
Employer securities — company stock fund |
| 5,433 |
| 5,433 |
| — |
| — |
| ||||
Group annuity contract |
| 3,454 |
| — |
| — |
| 3,454 |
| ||||
Participant loans |
| 768 |
| — |
| — |
| 768 |
| ||||
Interest bearing cash and equivalents |
| 325 |
| 325 |
| — |
| — |
| ||||
Total investments at fair value |
| $ | 25,940 |
| $ | 21,718 |
| $ | — |
| $ | 4,222 |
|
Level 3 Gains and Losses
The table below sets forth a summary of changes in the fair value of the Plan’s level 3 assets for the year ended December 31, 2009 (in thousands):
|
| Group |
| Participant |
| ||
Balance, beginning of year |
| $ | 3,454 |
| $ | 768 |
|
Net purchases, sales, and additions |
| 473 |
| 153 |
| ||
Net investment income |
| 121 |
| — |
| ||
Balance, end of year |
| $ | 4,048 |
| $ | 921 |
|
NOTE 8 - INVESTMENTS IN GROUP ANNUITY CONTRACT
The estimated contract value of the group annuity contract (the Contract), approximating the fair market value, was $4,048,324 as of December 31, 2009 and $3,453,960 as of December 31, 2008. There are no reserves against contract value for credit risk of the contract issuer.
The average yield on the Contract was 3.2% and 3.5% for the years ended December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, the crediting interest rate on this contract was 2.75% and 3.50%, respectively. Crediting interest rates are generally reset monthly with the reset based on formulas which may use market value, book value, duration and yield.
The Contract does not specify any events which would limit the ability of the Plan to transact at contract value with the issuer or any events which would allow the issuer to terminate the contract and settle for an amount different from contract value. The Contract provides payment options of the contract value for surrendering the Contract; however, the Plan Sponsor does not intend to surrender the Contract.
NOTE 9 - NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of changes in net assets related to this primarily nonparticipant-directed investment is as follows:
|
| December 31, |
| ||||
|
| 2009 |
| 2008 |
| ||
Investments, at fair value: |
|
|
|
|
| ||
Universal American Corp. - company stock fund |
| $ | 9,412,752 |
| $ | 5,432,847 |
|
|
| Year ended |
| |
Change in net assets: |
|
|
| |
Net appreciation in fair value |
| $ | 2,222,243 |
|
Contributions, net of forfeitures |
| 2,320,670 |
| |
Benefits paid to participants |
| (368,896 | ) | |
Administrative expenses |
| (104 | ) | |
Net transfers |
| (194,008 | ) | |
|
| $ | 3,979,905 |
|
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
NOTE 10 - PARTIES-IN-INTEREST
Certain Plan investments are shares of registered investment companies managed by Diversified Investment Advisors, a subsidiary of Aegon. Diversified Investment Advisors is also the recordkeeper for the Plan. Certain other Plan investments are shares of registered investment companies managed by Transamerica Securities and Sales Corporation. The group annuity contract was issued to the Plan by Transamerica Life Insurance and Annuity Company. Transamerica Securities and Sales Corporation and Transamerica Life Insurance and Annuity Company are also subsidiaries of Aegon. In addition, Plan investments include shares of Universal American Corp.’s common stock.
NOTE 11 — SUBSEQUENT EVENTS
Effective as of January 1, 2010, the following amendments have been made to the Plan:
· The minimum attained age required to participate in the plan reduced from age 21 to age 18.
· The minimum service period required to participate in the Plan reduced from 250 hours within three months of service to 30 days
· The Plan entrance date changed from the first day of the Plan quarter following achievement of eligibility requirements to the first day of the month following achievement of eligibility requirements.
· The automatic enrollment percentage has increased from 2% to 3%.
Effective as of June 1, 2010, the following amendments have been made to the Plan related to the Company’s sale of its CHCS, Inc. subsidiary:
· For any employee of CHCS, Inc. who is a Participant of the Plan as of the closing of the sale transaction, their account balances will immediately become 100% vested.
· Former employees of CHCS, Inc. are permitted to continue making loan payments into the Plan until their benefits have been spun-off from the Plan.
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
PLAN NUMBER 002 EIN 11-2580136
SCHEDULE H, LINE 4i — SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2009
|
| Identity of Issue, Borrower, Lessor or Similar Party |
| Description of Investment, Including |
| Cost |
| Current Value |
| ||
(A) |
| (B) |
| (C) |
| (D) |
| (E) |
| ||
|
|
|
|
|
| (In thousands) |
| ||||
|
| Registered investment companies |
|
|
|
|
|
|
| ||
|
| American Funds Fundamental Invs R3 |
| 13,655.294 shares, mutual fund |
|
| ** | $ | 446 |
| |
|
| American Funds Small Cap Fund |
| 63,584.090 shares, mutual fund |
|
| ** | 1,965 |
| ||
|
| American Funds-Growth Fund of America |
| 55,594.166 shares, mutual fund |
|
| ** | 1,497 |
| ||
|
| Black Rock Equity Fund |
| 90,766.371 shares, mutual fund |
|
| ** | 1,443 |
| ||
|
| BlackRock Global Financial Svcs Inv A |
| 6,332.566 shares, mutual fund |
|
| ** | 47 |
| ||
|
| Columbia Mid Cap Value Fund |
| 1,288.040 shares, mutual fund |
|
| ** | 14 |
| ||
* |
| Diversified Stock Index Fund |
| 154,737.063 shares, mutual fund |
|
| ** | 1,340 |
| ||
|
| Fidelity Advisor Mid Cap Fund |
| 48,929.062 shares, mutual fund |
|
| ** | 800 |
| ||
|
| Fidelity Small Cap Fund |
| 25,208.703 shares, mutual fund |
|
| ** | 539 |
| ||
|
| First American Real Estate Fund |
| 24,571.063 shares, mutual fund |
|
| ** | 352 |
| ||
|
| Franklin Micro Cap Value Fund |
| 51,287.323 shares, mutual fund |
|
| ** | 1,387 |
| ||
|
| Goldman Sachs Growth Opportunities Fund |
| 27,635.596 shares, mutual fund |
|
| ** | 540 |
| ||
|
| Janus Adviser Balanced S |
| 39,794.008 shares, mutual fund |
|
| ** | 977 |
| ||
|
| Janus Forty Fund |
| 45,967.232 shares, mutual fund |
|
| ** | 1,449 |
| ||
|
| Jennison Natural Resources A |
| 7,468.794 shares, mutual fund |
|
| ** | 337 |
| ||
|
| Loomis Sayles Bond Fund |
| 59,852.718 shares, mutual fund |
|
| ** | 794 |
| ||
|
| Loomis Sayles Investment Grade Bond Fund |
| 94,174.060 shares, mutual fund |
|
| ** | 1,100 |
| ||
|
| Royce Premier Financial Fund |
| 1,310.959 shares, mutual fund |
|
| ** | 21 |
| ||
|
| Royce Value Fund |
| 2,963.201 shares, mutual fund |
|
| ** | 30 |
| ||
* |
| TA IDEX Asset Allocation — Conservative Portfolio |
| 26,078.568 shares, mutual fund |
|
| ** | 273 |
| ||
* |
| TA IDEX Asset Allocation — Growth Portfolio |
| 86,127.980 shares, mutual fund |
|
| ** | 908 |
| ||
* |
| TA IDEX Asset Allocation — Moderate Growth Portfolio |
| 49,762.860 shares, mutual fund |
|
| ** | 532 |
| ||
* |
| TA IDEX Asset Allocation — Moderate Portfolio |
| 207,301.858 shares, mutual fund |
|
| ** | 2,216 |
| ||
|
| Thornburg Core Growth Fund |
| 35,873.572 shares, mutual fund |
|
| ** | 509 |
| ||
* |
| Transamerica Diversified Equity Fund |
| 66,707.973 shares, mutual fund |
|
| ** | 877 |
| ||
|
| Vanguard International Value Fund |
| 58,131.354 shares, mutual fund |
|
| ** | 1,779 |
| ||
|
| Wells Fargo Advantage Government Securities Fund |
| 111,872.950 shares, mutual fund |
|
| ** | 1,194 |
| ||
|
| Wells Fargo Advantage Small Cap Value Fund |
| 21,440.388 shares, mutual fund |
|
| ** | 579 |
| ||
|
|
|
|
|
|
|
|
|
| ||
|
| Employer securities |
|
|
|
|
|
|
| ||
* |
| Universal American Corp. - company stock fund |
| 798,523.224 shares of Company common stock |
| $ | 9,267 |
| 9,413 |
| |
|
|
|
|
|
|
|
|
|
| ||
|
| Group annuity contract |
|
|
|
|
|
|
| ||
* |
| Transamerica Stable Value Fund |
| Group Annuity Contract |
|
| ** | 4,048 |
| ||
|
|
|
|
|
|
|
|
|
| ||
* |
| Participant loans |
| Loans receivable from participants, maturing at various dates bearing interest at rates from 4.3% to 9.3% |
| N/A |
| 921 |
| ||
|
|
|
|
|
|
|
|
|
| ||
|
| Cash equivalents |
|
|
|
|
|
|
| ||
* |
| Interest bearing cash |
| Unallocated accounts, including employer advances and forfeitures |
| N/A |
| 127 |
| ||
|
|
|
| Total |
|
|
| $ | 38,454 |
| |
* | Indicates party-in-interest. |
** | Cost information not required for participant directed investments. |
UNIVERSAL AMERICAN CORP. 401(k) SAVINGS PLAN
PLAN NUMBER 002 EIN 11-2580136
SCHEDULE H, LINE 4j — SCHEDULE OF REPORTABLE TRANSACTIONS
IN EXCESS OF 5% OF PLAN ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2009
(a) |
| (b) |
| (c) |
| (d) |
| (g) |
| (h) |
| (i) |
| |||||
Identity of Party |
| Description of |
| Total Cost of |
| Total |
| Transaction Expenses |
| Cost of Asset |
| Gain (Loss) as |
| |||||
|
|
|
|
|
|
|
| (In thousands) |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Category (iii) — A series of transactions in a security issue aggregating 5% of Plan assets |
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diversified Investment Advisors |
| Universal American Corp. - company stock fund |
| $ | 2,734 |
| $ | 976 |
| $ | — |
| $ | 1,250 |
| $ | (274 | ) |
|
|
|
| (287 Buys) |
| (468 Sells) |
|
|
|
|
|
|
| |||||
Note: | Columns (e) and (f) have not been presented as this information is not applicable. |
| There were no category (i), (ii), or (iv) reportable transactions for the year ended December 31, 2009. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Investment Committee of the Universal American Corp. 401(k) Savings Plan has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.
| UNIVERSAL AMERICAN CORP. | |
| 401(k) SAVINGS PLAN | |
|
|
|
| By: | /s/ Robert A. Waegelein |
|
| Robert A. Waegelein, Trustee |
|
|
|
Date: June 25, 2010 |
|
|
