PSA-L Public Storage





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549



FORM 11-K





[X]Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934



For the fiscal year ended December 31, 2019



OR



[   ]Transition Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934



For the transition period from  ____________  to  ____________.



Commission File Number:  001-33519





A. Full title of the plan and the address of the plan, if different from that of the issuer named below:





B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

















PS 401(k) PROFIT SHARING PLAN



FINANCIAL STATEMENTS

AND SUPPLEMENTAL SCHEDULE







TABLE OF CONTENTS











Supplemental Schedule

The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2019, has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The information in the supplemental schedule is the responsibility of the Plan’s management. Our audit procedures included determining whether the information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedule. In forming our opinion on the information, we evaluated whether such information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

/s/ Ernst & Young LLP

We have served as the Plan’s auditor since 2006.

Los Angeles, California

June 19, 2020

PS 401(k) PROFIT SHARING PLAN



STATEMENTS OF NET ASSETS AVAILABLE

FOR BENEFITS















PS 401(k) PROFIT SHARING PLAN



STATEMENT OF CHANGES IN NET ASSETS

AVAILABLE FOR BENEFITS



For the Year Ended December 31, 2019















General

The PS 401(k) Profit Sharing Plan (the “Plan”) encompasses Public Storage, PS Business Parks, Inc. and certain of their majority owned subsidiaries (collectively, the “Company”).  The following description of the Plan provides only general information.  Participants should refer to the Plan document for a more complete description of the Plan’s provisions. 

The Plan is a defined contribution plan available for the benefit of all permanent employees of the Company who have completed at least 30 days of service and are at least 21 years of age.  The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  Although it has not expressed the intention to do so, the Company has the right to terminate the Plan subject to ERISA provisions.  The Plan allows interim allocations of Company contributions and earnings or losses of trust fund assets among participants. 

The Company appoints a committee (the “Plan Administrator”) to administer the Plan.  At December 31, 2019, the Plan Administrator is comprised of six officers of the Company with Wells Fargo Bank acting as Trustee (the “Trustee”).  Wells Fargo Bank has custody of the Plan’s investments under a non-discretionary trust agreement with the Plan.

Other significant provisions of the Plan are as follows:

Contributions

Employee contributions to the Plan (voluntary contributions) are deferrals of the employee’s compensation made through a direct reduction of compensation in payroll  during the year.  Each eligible participant may elect a pretax contribution rate from 1% to 100% of their compensation, as defined in the Plan document, subject to the maximum annual elective deferral amount set by the Internal Revenue Code (the “Code”).  Participants may also contribute rollover amounts representing distributions from other qualified benefit or defined contribution plans.

The Company contributes one dollar ($1.00) for each dollar deferred by a participant up to three percent (3%) of compensation, as defined and subject to certain limitations as described in the Plan document.  The Company also contributes an additional fifty cents ($0.50) for each dollar that each participant defers in excess of three percent (3%) of compensation up to five percent (5%) of compensation.  The Company’s aggregate contributions are limited to four percent (4%) of compensation, as defined and subject to certain limitations as described in the Plan document.  Additional amounts, including profit sharing contributions, may be contributed at the discretion of the Company.  No such additional contributions were made in 2019.

Vesting

Employee deferrals and the Company’s safe harbor matching contribution are 100% vested and non-forfeitable.

Investment Options

Upon enrollment in the Plan, a participant may direct their contributions and holdings in various investment options.

Prior to December 19, 2005, participants had the option to direct contributions to the Company’s securities.  Effective December 19, 2005, participants no longer had that option.  Existing holdings of

the Company’s securities on December 19, 2005, were either held or transferred to other Plan investment alternatives at the option of each participant.  Participants with individually directed accounts remain able to acquire and dispose of the Company’s securities at their discretion.  See Note 5 for disclosure of the remaining holdings in the Company’s securities. 

The Plan’s investment options include the Wells Fargo Stable Return Fund N and the WF/BlackRock S&P 500 Index CIT N which are common/collective trust funds.  The Wells Fargo Stable Return Fund N seeks to provide a moderate level of stable income without principal volatility, while seeking to maintain adequate liquidity and returns superior to shorter maturity investments.  It invests in a variety of investment contracts and instruments issued by selected high-quality insurance companies and financial institutions.  Participant-directed redemptions have no restrictions; however, the Plan is required to provide a one-year redemption notice to liquidate its entire share in the fund.  The WF/BlackRock S&P 500 Index CIT N is an index fund that invests in the equity securities of companies that comprise the S&P 500 Index (the “Index”) and seeks to approximate as closely as practicable the total return, before deduction of fees and expenses, of the Index.  The WF/BlackRock S&P 500 Index CIT N has no redemption restrictions.  See “Investment Valuation and Income Recognition” in Note 2 below for further information regarding common collective trusts.

The Individually Directed Account is considered a self-directed brokerage account which allows participants access to a broader range of investment choices than that which is offered through the Plan’s menu.  Participants with Individually Directed Accounts remain able to acquire and dispose of the Company’s securities at their discretion.    At December 31, 2019, the Individually Directed Accounts were primarily invested in money market funds and common equity securities of publicly-traded companies, including those of the Company.

Distributions from the Plan

Distributions of each participant’s vested account balance upon severance or death are made in a single lump sum payment; however, upon severance if the participant’s vested account balance exceeds $5,000, payment may be deferred at the election of the participant until April 1st of the calendar year in which the participant reaches 70 ½ years of age.

Additionally, the Plan provides for hardship distributions (as defined).

Basis of Accounting

The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting and are in conformity with U.S. generally accepted accounting principles.

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 the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.



Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service (“IRS”) dated February 9,  2016, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation.  Subsequent to the issuance of the determination letter, the Plan has been amended.  Once qualified, the Plan is required to operate in conformity with the Code

to maintain its qualification.  The Plan Administrator has indicated that it will take the necessary steps, if any, to bring the Plan’s operations into compliance with the Code. 

U.S. generally accepted accounting principles require Plan management to evaluate uncertain tax positions taken by the Plan.  The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS.  The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2019, there are no uncertain positions taken or expected to be taken.  The Plan is subject to routine audits by taxing jurisdictions.  There are currently no audits for any tax periods in progress.    

Investment Valuation and Income Recognition

Plan participants’ investments in Company equity securities,  mutual funds, and the self-directed brokerage account investments are recorded at fair value as determined by the quoted market price on the last business day of the plan year.  Common collective trusts are recorded at fair value based on the net asset value of the investment reported by the Trustee. 

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 payment date.

Recent Accounting Pronouncements and Guidance

In July 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)  No. 2018-09, Codification Improvements, which, among other things, amends an illustrative example of a fair value hierarchy disclosure to indicate that a certain type of investment should not always be considered to be eligible to use the net asset value per share practical expedient.  Also, it further clarifies that an entity should evaluate whether a readily determinable fair value exists or whether its investments qualify for the net asset value per share practical expedient in accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurement.  We adopted this ASU effective January 1, 2019.  We have concluded that two common/collective trust funds (Wells Fargo Stable Return Fund N and the WF/BlackRock S&P 500 Index CIT N) do not have readily determinable fair values and continue to be measured at fair value using the net asset value per share. 

In August 2018, the FASB issued ASU No. 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.  The ASU modifies the disclosure requirements of fair value measurements in ASC 820.  The ASU is effective for all reporting periods beginning after December 15, 2019, with early adoption permitted.  An entity may elect to early adopt any removed or modified disclosures upon issuance of this Update and delay the adoption of the additional disclosures until the effective date.  The Plan Administrator is evaluating the impact of the adoption of this ASU on the Plan’s financial statements.





ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  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 (i.e. an exit price).  ASC 820 includes 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 and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  The three levels of the fair value hierarchy are described below:

Level 1 – Valuation is based on quoted prices in active markets for identical securities.

Level 2 – Valuation is based upon other significant observable inputs.

Level 3 – Valuation is based upon significant unobservable inputs (i.e., supported by little or no market activity).  Level 3 inputs include the Company’s own assumption about the assumptions that market participants would use in pricing the securities (including assumptions about risk).

The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measure in its entirety.

The following table sets forth, within the fair value hierarchy, the Plan’s investments carried at fair value as of December 31, 2019 and 2018:











For the year ended December 31, 2019, the Plan paid to the Trustee a  portion of the annual participant fee per eligible participant and certain transaction related expenses incurred for the administration of the Plan, totaling $67,852.  The Company directly paid for all other Trustee fees and all other expenses related to the Plan, totaling $224,915 for the year ended December 31, 2019.

The Company is the Plan sponsor as defined by the Plan document.  As described more fully under “Investment Options” in Note 1, while participants no longer have the option of directing contributions to the Company’s securities, participants can continue to hold such investments and participants with Individually Directed Accounts remain able to acquire and dispose of the Company’s securities at their discretion.  Plan participants held the following shares in the Company’s securities:

At December 31, 2019 and 2018, Plan participants held $14,081,212 and $12,596,343,  respectively, in the Wells Fargo Stable Return Fund N,  offered by the Plan’s Trustee.  At December 31, 2019 and 2018, Plan participants held $645,609 and $441,152, respectively, in the Wells Fargo Short Term Investment Fund S, offered by the Plan’s Trustee.  At December 31, 2019 and 2018, Plan participants held $15,951,750 and  $12,255,555, respectively, in the WF/BlackRock S&P 500 Index CIT N, offered by the Plan’s Trustee. 

6.Risks and Uncertainties

The Plan provides for investment 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 or long term and that such changes could materially affect participants’ account balances and the amounts reported in the financial statements.

7.Concentrations

Investments in the Company’s securities comprised approximately 10% and 12% of the Plan’s total investments as of December 31, 2019 and 2018, respectively.

8.Subsequent Events

Subsequent to December 31, 2019, the COVID-19 pandemic (the “COVID Pandemic”) has resulted in substantial volatility in the global financial markets.  As a result, the value of the Plan’s investments are likely to be negatively impacted by the COVID Pandemic.  The extent of the negative impact of the COVID Pandemic on the value of the Plan’s investments cannot be estimated at this time.



SUPPLEMENTAL INFORMATION



SCHEDULE I



PS 401(k) PROFIT SHARING PLAN

Schedule H, Line 4i –

Schedule of Assets (held at end of year)

December 31, 2019



Employer Identification Number: 95-3551121

Plan Number: 001













*Indicates a party-in-interest of the Plan.

Note: As all Plan investments are participant directed, column (d) providing certain participant-directed transaction cost information is not applicable and has been omitted.