City of Ripon | California
Money Purchase Thrift Pension Plan
Financial Statements
For the Years Ended June 30, 2023 and 2022
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Financial Statements
TABLE OF CONTENTS
PAGE
Independent Auditor’s Report ............................................................................................................................................ 1 Financial Statements:
Pension Trust Fund:
Statements of Fiduciary Net Position ........................................................................................................................... 4 Statements of Changes in Fiduciary Net Position ........................................................................................................ 5 Notes to the Financial Statements. .................................................................................................................................... .6 City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 1 INDEPENDENT AUDITOR’S REPORT
RESERVED FOR INDEPDENDENT AUDITOR’S REPORT
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 2 RESERVED FOR INDEPDENDENT AUDITOR’S REPORT
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 3 FINANCIAL STATEMENTS
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | JUNE 30, 2023 AND 2022 Pension Trust Fund
Statements of Fiduciary Net Position
The notes to the financial statements are an integral part of this statement. 4 2023 2022
ASSETS
Cash and cash equivalents 2,108,368 $ 2,061,769 $
U.S. government securities 1,262,370 981,712
Corporate obligations - 654,246
Mutual funds 10,027,486 8,413,775
Common and preferred stock 1,120,371 1,108,640
Real estate investment trust 274,917 72,494
Total cash and investments 14,591,089 13,495,059
Receivables:
Participant notes receivable 129,141 94,664
Contributions receivable 33,750 38,675
Total assets 13,623,473 14,758,905
LIABILITIES - -
NET POSITION
Restricted for pensions $ 13,623,473 14,758,905 $
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Pension Trust Fund
Statements of Changes in Fiduciary Net Position
The notes to the financial statements are an integral part of this statement. 5 2023 2022
Additions to net position attributed to:
Investment income:
Net appreciation (depreciation) in the fair
value of investments $ 259,461 $ (1,830,169)
Interest 11,517 6,515
Dividends 371,512 252,799
Contributions:
Employer 521,373 489,720
Employee 426,786 406,315
Other income - 7,438
Total additions (674,820) 1,598,087
Deductions from net position attributed to:
Benefits paid to participants 432,810 497,625
Administration 33,264 29,845
Total deductions 462,655 530,889
Changes in net position 1,135,432 (1,205,709)
Total net position - beginning of year 14,829,182 13,623,473 Total net position - ending of year $ 13,623,473 14,758,905 $ City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 6 NOTES TO THE FINANCIAL STATEMENTS
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Notes to the Financial Statements
7 NOTE 1 – PLAN DESCRIPTION
The financial statements of the City of Ripon Money Purchase Thrift Pension Plan (the Plan), a single-employer defined contribution plan, have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to fiduciary activities, and in accordance with the Plan agreement.
The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions. The Plan is sponsored by the City of Ripon, California (the City).
General
The Plan covers all permanent, full-time employees, excluding public safety employees, of the City who have completed six consecutive months of employment. As of June 30, 2023 and 2022, the plan members totaled 76 and 67 respectively.
Plan provisions and contribution requirements are established and may be amended by the City Council of the City of Ripon. The Plan is subject to the provisions of Government Code Section 7504. The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) as ERISA does not apply to government sponsored plans.
Under the Internal Revenue Code, the Plan meets the requirements of Section 401(a) and is exempt from federal income tax under Section 510(a).
The City has the right under the Plan provisions to terminate the Plan by delivering to the trustee and administrator written notice of such termination. In the event of plan termination, participants will become 100% vested in their accounts.
Employee Contributions
Eligible employees can elect to defer 5% of their compensation to the Plan. The Plan allows additional employee elective contributions up to 6.6% of annual compensation.
Employer Contributions
The City makes contributions to the Plan equal to 10% of the total compensation, excluding overtime, of all participants in the Plan under the mandatory provision and up to 3.3% of the qualified employee’s annual compensation under the voluntary provision.
The City entered into a Memorandum of Understanding with the Union representing its employees which requires the City to “pick up” the 5% employee contribution referenced above. All such contributions are designated as employee contributions and are fully vested.
Participant Accounts
In accordance with the trust agreement, each member directs the investments held in his/her individual account. The participants’ accounts are held by a corporation-administered trust fund.
Vesting
Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the City contributions under the mandatory provision and earnings thereon is based on years of continuous service. A member is 100% vested after six years of credited service. Participants are fully vested in the City contributions under the voluntary provision and earnings thereon.
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Notes to the Financial Statements
8 NOTE 1 – PLAN DESCRIPTION (Continued)
Payment of Benefits
Upon termination of service or attainment of earliest retirement age of 55, a participant may elect to receive the value of the account under one of the methods as described in the Plan.
The City contribution for, and interest forfeited by, employees who leave employment before six years of service are redistributed to all participants based on salary and vesting levels.
Participant Notes Receivable
The Plan provides for loans to participants which are secured by their vested account balances and can be no greater than the lesser of 50% of the participant’s vested account balance or $50,000. The loans are secured by the balance in the participant’s account and bear interest at rates which are commensurate with local prevailing rates as determined by the Plan administrator. Principal and interest are paid ratably through payroll deductions.
Expenses
Plan administrator charges are paid by the City of Ripon. Investment related expenses are paid from the Plan assets.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Plan are prepared on the accrual basis of accounting.
Investment Valuation and Income Recognition
The Plan’s investments are reported at fair value. Securities traded on national exchanges are valued at the last reported sales price. The Plan’s investments are held in trust by Bank of Stockton.
Purchases and sales of securities are recorded on a trade-date basis. Interest and dividend income are recorded on the accrual basis.
Fair Market Value of Financial Instruments
Unless otherwise noted, the carrying value of financial instruments, including investments, receivables and liabilities, approximate fair value due to the short-term maturities of these instruments.
Notes Receivable from Participants
Loans to participants are reported at their unpaid balances plus any accrued but unpaid interest.
Payments of Benefits
Benefits are recorded when paid.
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Notes to the Financial Statements
9 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from the estimates.
Budgetary Accounting
The Plan does not utilize formal budget procedures and is not required to adopt such procedures by law. Accordingly, budgetary comparison information is not required or presented.
Reporting Entity
The Plan, governed by the Retirement Board, is considered an independent entity. Plan management considered all potential component units for inclusion in the reporting entity by applying the criteria set forth in accounting principles generally accepted in the United States of America. The Plan concluded that there were no potential component units which should be included in the reporting entity.
Cash and Cash Equivalents
The Plan’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.
NOTE 3 – FAIR VALUE MEASUREMENTS
The Plan’s investments are reported at fair value in the accompanying statements of fiduciary net position – pension trust fund. The methods used to measure fair value may produce an amount that may not be indicative of net realizable value or reflective future fair values. Furthermore, although 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 fair value measurement accounting literature establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority; Level 2 inputs are from other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable and have the lowest priority. The Plan uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments. When available, the Plan measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs were used only when Level 1 or Level 2 inputs were not available.
Following is a description of the valuation methodologies used for Level 2 assets measured at fair value. There have been no changes in the methodologies used at June 30, 2023.
Corporate obligations and government securities are valued at fair value. The market approach is used to value these assets which uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets and liabilities, such as a business.
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Notes to the Financial Statements
10 NOTE 3 – FAIR VALUE MEASUREMENTS (Continued)
Mutual funds and Real Estate Investment Trusts (REITs) are valued at the daily closing prices as reported by the fund.
These funds are required to publish their daily net asset value (NAV) and to transact at the price. NAV is calculated by dividing the value of the net assets of the fund by the total number of outstanding shares of the fund. The mutual funds and REITs held by the Plan are deemed to be actively traded.
The following table set forth, by level within the fair value hierarchy, the Plan’s investments at fair value as of June 30, 2023:
Level 1 Level 2 Level 3 Total
U.S. government securities $ 1,262,370 - $ $ 1,262,370 - $ Mutual funds 10,027,486 - 10,027,486 -
Common and preferred stock 1,120,371 - 1,120,371 -
Real estate investment trust - 72,494 - 72,494
Total $ 12,410,227 72,494 $ - $ 12,482,721 $
Assets held at Fair Value
The following table set forth, by level within the fair value hierarchy, the Plan’s investments at fair value as of June 30, 2022:
Level 1 Level 2 Level 3 Total
U.S. government securities $ 981,712 - $ $ 981,712 - $
Corporate obligations 654,246 - 654,246 -
Mutual funds 8,413,775 - 8,413,775 -
Common and preferred stock 1,108,640 - 1,108,640 -
Real estate investment trust - 274,917 - 274,917
Total $ 11,158,373 274,917 $ - $ 11,433,290 $
Assets held at Fair Value
NOTE 4 – INVESTMENTS
The following investments held by the plan were in excess of 5% of the Plan’s net position during the year ended June 30, 2023.
Issuer Investment Type
Reported
Amount
DODGE & COX INCOME FUND Mutual Funds $ 845,036
iShares: S&P 500 INDEX Mutual Funds $ 2,093,945
JP MORGAN BETABUILDERS INTERNATIONAL EQUITY Mutual Funds $ 978,030 City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023 CITY OF RIPON MONEY PURCHASE THRIFT PENSION PLAN | FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Notes to the Financial Statements
11 NOTE 4 – INVESTMENTS (Continued)
The following investments held by the plan were in excess of 5% of the Plan’s net position during the year ended June 30, 2022.
Issuer Investment Type
Reported
Amount
iShares: S&P 500 INDEX Mutual Funds $ 2,135,373
iShares Floating Rate Bond ETF Mutual Funds $ 1,090,253 Vanguard Short-Term Inflation-Protected
Securities Index Fund U.S. Government Security $ 979,495 Investment income results from each participant’s self-directed account. Investment income by major asset category is provided in the trustee reports.
NOTE 5 – RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of fiduciary net position – pension trust fund.
NOTE 6 – RELATED PARTY AND PARTY-IN-INTEREST TRANSACTIONS The Third-Party Administrator of the Plan and the Trust holding plan assets provide various services to the Plan and receive compensation and other fees for these services and, therefore, qualify as parties-in-interest. Total fees and commissions paid to these parties-in-interest totaled $103,899 and $111,615 for the years ended June 30, 2023 and 2022, respectively.
City of Ripon - Money Purchase Thrift Pension Plan - Draft Financial Statement - 2023