Notes to Financial Statements
NOTE 1 DESCRIPTION OF THE PLAN
The following is a
brief description of the Post Properties, Inc. 401(k) Plan (the Plan). Reference should be made to the Plan document for a more complete description of the Plans provisions.
General
: The Plan is a defined contribution plan covering all full-time employees and part-time employees who have completed 60 days of service. It is
subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
: Each year, participants may
contribute a percentage, up to 100%, of pretax annual compensation, as defined in the Plan not to exceed the amount allowed for income tax purposes. Participants 50 years of age or older may make catch-up contributions as allowed by the
Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans. Participants direct the
investment of their contributions into various investment options offered by the Plan. Post Properties, Inc.s (the Company and Plan Sponsor) matching contributions are discretionary and currently the Company matches 50%
of employee deferrals up to 6% of eligible compensation. The Company may make additional discretionary contributions, although to date it has not chosen to do so. Prior to 2015, Company contributions allocable to each participant were made in
Company common stock. Subsequent to the Company stock contributions, Plan participants had the option of transferring such investment to other investment funds offered by the Plan. Contributions are subject to certain Internal Revenue Code
(IRC) limitations.
Participant Accounts
: Each participants account is credited with the participants contributions
and the Companys matching contributions. Plan earnings (losses) are allocated based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the
participants vested account.
Investment Options
: Participants may direct their contributions and any related earnings into any investment
fund option offered by the Plan. Investment options consist of mutual funds, a common collective trust and a Company stock fund. See additional disclosures in Note 3 concerning the Company stock investments.
Voting Rights
: Each participant is entitled to exercise voting rights attributable to the common shares of the Company allocated to his or her
account. Participants are requested to instruct the Trustee as to how shares should be voted. If a participant does not provide the Trustee with instructions as to how shares should be voted, then such shares are voted proportionately in
accordance with instructions received from other participants in the Plan.
Vesting
: Participants are fully vested in their contributions and the
earnings (losses) thereon. Vesting in Company contributions and related earnings (losses) accrues using a graduated scale based on years of service. To earn a year of service, a participant must be credited with at least 1,000 hours of service
during any plan year. Participants are fully vested after five years.
Notes Receivable from Participants
: Participants may borrow from their
fund account a minimum of $1,000 and up to a maximum of the lesser of $50,000 or 50% of their vested account balance. Notes are secured by the balance in the participants account and currently bear interest at a rates of 4.25% to 4.5% and have
a definite repayment period, not to exceed five years except in the case of the purchase of a residence. Principal and interest is paid ratably through payroll deductions.
Payment of Benefits
: Upon termination of service for any reason, a participant may elect to receive either a lump-sum amount equal to the value of the
participants vested interest in his or her account or a portion of that vested interest.
- 4 -
POST PROPERTIES, INC. 401(k) PLAN
Notes to Financial Statements
Participants may withdraw up to 100% of their rollover account at any time. Participants may withdraw up to
100% of their employee deferrals and 100% of their vested matching and employer discretionary contributions at any time after attaining age 59
1
⁄
2
.
Account balances under $1,000 are automatically distributed upon termination of service.
In the event of a hardship as defined by the Plan, participants may withdraw an amount not to exceed the total of their vested account balance.
Investment and Administrative Expenses
: Net expenses associated with individual plan investments as well as those of Transamerica Retirement Solutions,
the Plans record keeper, are paid by Plan participants. Certain legal, professional fees and other usual and reasonable costs of administering the Plan are paid by the Company.
Excess Contributions Payable
: The Plan passed the Actual Deferral Percentage (ADP) discrimination test for 2015 and accordingly did not have to refund
excess contributions to highly compensated employees. The Plan failed the test in 2014 and the Company elected to have the highly compensated employees withdraw the excess contributions out of the Plan. These excess contributions totaled
$30,331 for 2014 and are included as a liability in the statements of net assets available for benefits as of December 31, 2014.
Forfeited
Accounts
: Forfeited accounts will be used to reduce future employer contributions. The employers contribution receivable at December 31, 2015 and 2014 of $771,658 and $652,015, respectively, is net of the 2015 and 2014 forfeitures of
$25,714 and $12,920, respectively. There were no additional forfeitures for future use at December 31, 2015 or 2014.
NOTE 2 ACCOUNTING POLICIES
Basis of Accounting
: The accompanying financial statements have been prepared on the accrual basis of accounting, in accordance with accounting
principles generally accepted in the United States of America.
Use of Estimates
: The preparation of the financial statements in conformity with
the accrual basis of accounting requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported additions
and deductions during the reporting period. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
:
Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See note 3 for a discussion of
fair value measurements.
- 5 -
POST PROPERTIES, INC. 401(k) PLAN
Notes to Financial Statements
Purchases and sales of securities are recorded on a trade date basis. Dividends are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis. Net depreciation includes the Plans realized gains and losses on investments bought and sold as well as unrealized gains and losses on investments held during the year.
Investment securities, in general, are exposed to various risks, including credit, interest, and overall market volatility risks. Due to the level of
risk associated with certain investment securities, it is possible that changes in values of investment securities will occur and that such changes could materially affect the amount reported in the Statements of Net Assets Available for Benefits.
Notes Receivable from Participants
: Notes receivable from participants are measured at their unpaid principal balance plus accrued but unpaid
interest. Delinquent participant loans are reclassified as distributions based upon terms of the Plan document.
Payments of Benefits
: Benefits are
recorded when paid.
Recently Issued Accounting Pronouncements
: In May 2015, Accounting Standards Update No. 2015-07 (ASU 2015-07),
Fair Value Measurement (Topic 820): Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent), was issued. This guidance exempts investments measured using net asset value from
categorization within the fair value hierarchy (see note 3). Effective for the year ended December 31, 2015, the Plan retrospectively adopted ASU-2015-07. Accordingly, the presentation of the Plans investment in the fair value hierarchy as of
December 31, 2015 and 2014 in note 3 was amended to conform to this new guidance.
In July 2015, Accounting Standards Update No. 2015-12 (ASU
2015-12), Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965), was issued. ASU 2015-12 clarified certain accounting and disclosure
requirements for pension and welfare benefit plans. Effective for the year ended December 31, 2015, the Plan retrospectively adopted ASU-2015-12. Accordingly, the Plan reported its investment in the Common Collective Trust at fair value, using the
net asset value practical expedient. Previously, the investment in the Common Collective Trust was valued at fair market value. As such, the Plan eliminated the adjustment from fair market value to net asset value in its statements of net assets
available for benefits. At December 31, 2014, the aggregate fair market value of this investment was $44,293 higher than the fair value measured using the net asset value practical expedient. Additionally, the adoption of ASU 2015-12 eliminated
certain previously required disclosures related to Plan investments representing more than five percent or more of net plan assets available for benefits as well as the net appreciation/depreciation of plan investments by general investment type.
Accordingly, the Plan eliminated these disclosures in the accompanying notes to the financial statements.
NOTE 3 FAIR VALUE MEASUREMENTS
Financial Accounting Standards Board (FASB)
Accounting Standards Codification
(ASC) 820,
Fair Value Measurements and Disclosures
,
provides the 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 FASB ASC 820 are described as follows:
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Level 1 Quoted prices in active markets for identical investments.
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Level 2 Inputs other than quoted prices that are observable for the investments, either directly or indirectly.
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Level 3 Unobservable inputs for the investments.
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- 6 -
POST PROPERTIES, INC. 401(k) PLAN
Notes to Financial Statements
The asset or liabilitys 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. The following is a description of the valuation methodologies used for assets measured at fair value. Other than the change in the valuation methodology for the Common
Collective Trust (see note 2), there have been no changes in the methodologies used at December 31, 2015 and 2014.
Mutual funds:
Valued at the
daily closing price reported by the mutual funds for shares held by the plan at year end. The mutual funds held by the Plan are deemed to be actively traded.
Employer Securities
: The Plans investment option related to Company common stock consists of the ownership of a common stock fund administered by
Transamerica Retirement Solutions, the Plans record keeper. The Company common stock fund consists of investments in Company common stock, cash and dividends receivable. The common stock component of the fund is made up of whole shares of
common stock and the cash is invested in an interest-bearing account. The interest on the cash investment plus any dividends paid on the Company common stock is reinvested into the fund. The cash component generally represents approximately 2% to 4%
of the total fund and provides the fund liquidity for participant redemptions. The shares of Company common stock held by the fund are valued at the quoted market price of the stock at year end.
The unit value of the Company stock fund changes as the market value of the underlying common stock goes up or down. The unit value of the Company common
stock fund is calculated on a daily basis. At December 31, 2015, the fund held 287,882 units at a unit value of approximately $18.80. The fund balance of $5,413,559 is comprised of 88,845 shares of Company common stock valued at $5,256,850, cash
investments of $118,012, and dividends, interest and other receivables of $38,697. At December 31, 2014, the fund held 325,914 units at a unit value of approximately $18.16. The fund balance of $5,917,450 is comprised of 97,995 shares of
Company common stock valued at $5,758,056, cash investments of $120,374, and dividends, interest and other receivables of $39,020.
Common Collective
Trust
: The Plans investment in the Common Collective Trust-Diversified Stable Pooled Fund (the Trust) is valued at the fair value, using the net asset value practical expedient, of the units of the Trust. The Trusts
investments are composed of investments in an underlying stable value fund that primarily invests in fully benefit-responsive investment contracts. Fair value, using the net asset value practical expedient under the applicable accounting standards,
is the prescribed method for measuring investments in fully benefit-responsive investment contracts.
- 7 -
POST PROPERTIES, INC. 401(k) PLAN
Notes to Financial Statements
The following table presents the Plans investments reported at fair value and the related level in the
fair value hierarchy as defined by FASB ASC 820 used to measure those investments at December 31:
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Fair value measurements as of December 31, 2015
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Investments
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Total
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Level 1
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Level 2
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Level 3
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Mutual funds
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$
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31,444,910
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$
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31,444,910
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$
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$
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Employer securities
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5,413,559
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5,413,559
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Total assets in the fair market value hierarchy
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36,858,469
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Common collective trust (1)
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3,298,855
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Investments at fair value
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$
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40,157,324
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Fair value measurements as of December 31, 2014
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Investments
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Total
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Level 1
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Level 2
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Level 3
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Mutual funds
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$
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32,426,113
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$
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32,426,113
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$
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$
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Employer securities
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5,917,450
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|
5,917,450
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Total assets in the fair market value hierarchy
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38,343,563
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Common collective trust (1)
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3,276,106
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Investments at fair value
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$
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41,619,669
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(1)
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In accordance with Accounting Standards Subtopic 820-10, investments in the Common Collective Trust that are measured at fair value using the net asset value practical expedient have not been classified in the fair
value hierarchy and are listed above to permit a reconciliation of the fair value hierarchy to the amounts presented in the statement of net assets available for plan benefits.
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NOTE 4 TAX STATUS
The Internal Revenue Service
has determined and informed the Company by a letter dated March 10, 2011 that the Plan, as designed, is qualified and that the trust established under the Plan is tax-exempt under the appropriate sections of the IRC. Therefore, no provision for
income taxes has been included in the Plans financial statements.
NOTE 5 PARTY-IN-INTEREST TRANSACTIONS
As discussed above, the Plan held 287,882 units in the Company common stock fund at December 31, 2015 with a fair value of $5,413,559. At December 31,
2014, the Plan held 325,914 units in the Company common stock fund with a fair value of $5,917,450.
Certain Plan investments are shares of a Common
Collective Trust sponsored by Massachusetts Fidelity Trust Company, an affiliate of Transamerica Retirement Solutions, the Plans record keeper. As a result, these transactions qualified as party-in-interest transactions. In addition, the
Plans record keeper utilizes the services of State Street Bank & Trust Company as custodian and trustee for the remaining investments in the Plan.
NOTE 6 PLAN TERMINATION
Although it has not
expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested
in their accounts.
- 8 -
POST PROPERTIES, INC. 401(k) PLAN
Notes to Financial Statements
NOTE 7 RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the financial statements to Form 5500 at December 31:
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2015
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2014
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Net assets available for benefits per the financial statements
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$
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41,737,654
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$
|
43,008,484
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Excess contributions payable to Plan participants
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30,331
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Net assets available for benefits per the Form 5500
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$
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41,737,654
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$
|
43,038,815
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The following is a reconciliation of the decrease in net assets available for benefits per the financial statements to Form
5500 for the year ended December 31, 2015:
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Decrease in net assets available for benefits per the financial statements
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$
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(1,270,830
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)
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Less: 2014 Excess contributions payable to Plan participants
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(30,331
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Add: 2015 Excess contributions payable to Plan participants
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Decrease in net assets available for benefits per the Form 5500
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$
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(1,301,161
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)
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- 9 -
SUPPLEMENTAL INFORMATION
- 10 -
** - All investments in Post Properties, Inc. common stock, a party-in-interest, are Participant directed.