|MEDTRONIC PLC filed this Form 11-K on 10/26/2017|
Notes Receivable from Participants
Effective January 1, 2016, participants may have two outstanding notes at a time and are able to borrow up to 50% of their vested account balance in the participant’s 401(k) Component/ESOP accounts not to exceed the maximum note amount of $50. However, the notes may only be distributed from the participant’s 401(k) Component/ESOP balance. The minimum note amount is $1. Participants are limited to one general purpose note and one primary residence note outstanding at a time. Notes are repaid through payroll deductions in equal amounts, typically over one to five years for a general purpose note, with a maximum term of 30 years if the note was transferred into the Plan as part of an acquisition, or 15 years for a primary residence note. The notes are collateralized by the balance in the participant’s account. The interest rate on new loans is calculated as one percentage point above the prime rate as received by Aon Hewitt from The Wall Street Journal in effect on the 15th date of the month prior to the first day of the month to which it is to apply. The interest rate for notes originating prior to January 1, 2016 is the prime rate as received by Vanguard Trust from Reuters at the beginning of the month in which the proceeds of the note were paid to the borrower and remains fixed for the duration of the note.
At April 30, 2017, notes receivable from participants were due at various dates through May 2032, with interest rates ranging from 3.25% to 9.50%.
The Plan provides that the Board of Directors of the Company is able to terminate the Plan. 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 the Plan is terminated and there is not a successor plan, participants would become fully vested in their accounts. Benefits would be distributed at that time in accordance with the Plan provisions.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Investments held by a defined contribution plan are required to be reported at fair value, except for fully benefit-responsive investment contracts. Contract value is the relevant measure for the portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts, as contract value is the amount participants normally would receive if they were to initiate permitted transactions under the terms of the Plan.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Plan Administrator to make estimates and assumptions that affect the reported amounts of net assets available for benefits and the changes therein, and disclosures of contingent assets and liabilities. Actual results could differ from those estimates.
New Accounting Pronouncements
In February 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-06, "Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (A Consensus of the Emerging Issues Task Force)." The standard requires the Plan to report its interest in a master trust and changes in the value of that interest as separate line items on the Plan's financial statements. The Plan must also disclose the Master Trust's investments by general type, as well as other assets and liabilities, and disclose the dollar amount of the Plan's interest in each category disclosed. The standard is effective for the Plan beginning in fiscal year 2020, with early adoption permitted, and will be applied retrospectively. The Plan is currently evaluating the standard and does not believe it will have a material impact on the Plan's financial statements.