NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND 2021, AND FOR THE YEAR ENDED DECEMBER 31, 2022
1. DESCRIPTION OF THE PLAN
The following brief description of the Idaho Power Company Employee Savings Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan document, as amended, for more complete information on the Plan's provisions.
General - The Plan is a defined contribution plan covering substantially all employees (full-time, part-time, and temporary) of IDACORP, Inc. (IDACORP) and its participating subsidiaries (collectively, the Company), including Idaho Power Company (the Plan Sponsor and the Plan Administrator), as allowed under Section 401(k) of the Internal Revenue Code of 1986, as amended (IRC), and is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Plan Sponsor's fiduciary committee controls and manages the operation and administration of the Plan. T. Rowe Price is the trustee of the Plan.
Eligibility - Employees who have attained 18 years of age are eligible to participate in the Plan and may enroll on their hire date; however, matching contributions are only vested upon completion of twelve months of employment.
Contributions - Eligible employees may participate in the Plan by contributing to the Savings Feature (after-tax) or the Deferred Feature (before-tax) of the Plan. Employees are also permitted to contribute after-tax dollars to a Roth 401(k) Feature. A participant may elect to contribute to any or all features up to 80 percent of eligible pay, as defined in the Plan, subject to certain IRC limitations. Eligible employees who do not make an affirmative election to participate (or to not participate) in the Plan are, subject to notice required by the IRC, deemed to have made an election to make a deferral contribution of 6 percent of the employee's compensation, which the employee can alter or revoke at any time.
The Company makes a matching contribution for the participant in an amount equal to 100 percent of the participant’s first 2 percent of eligible pay contributed to the Plan and 50 percent of the next 4 percent of eligible pay contributed to the Plan. Participant contributions in excess of 6 percent of eligible pay are not matched by the Company. Participants may also contribute certain rollover contributions from other plans.
Participant Accounts - Individual accounts are maintained for each Plan participant for each Plan feature, as applicable. Each participant’s account is credited, as applicable, with the participant’s contribution, the Company’s matching contribution, and an allocation of Plan earnings and is charged with withdrawals and an allocation of Plan losses, and as applicable, any administrative expenses. Gains and losses on investments are allocated to participants’ accounts based upon relative fund account balances at regular valuation dates specified by the trustee of the Plan. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Investments - Participants direct the investment of their contributions into various investment options offered by the Plan. The Plan offers 12 ready-mixed (target date) portfolios, 24 core mutual funds, one common collective trust money market deposit account and IDACORP common stock as investment options for participants. A self-directed brokerage account option is also available to allow participants to select investment options not specifically offered by the Plan. Upon enrollment in the Plan, a participant may direct deferrals and employer contributions in any of the investment options offered by the Plan. Participants may change their investment options daily.
Vesting - Participants are fully vested immediately in their own contributions, plus actual earnings thereon. Matching contributions are vested only for participants who have completed twelve cumulative months of service. Matching contributions that are forfeited may be used to reduce the Company’s matching contribution in the year following the year in which the forfeiture arose. Forfeitures in the amount of $49,852 were used to reduce matching contributions during the year ended December 31, 2022.
Notes Receivable from Participants - Under certain circumstances participants may borrow against their vested account balances. The maximum principal amount of any loan is the lesser of (i) 50 percent of the balance of a participant’s vested account balance, determined on the day of the loan, minus the balance of all other loans from all other qualified plans, outstanding on that date, or (ii) $50,000, minus the participant’s highest outstanding principal balance of loans from the Plan,
and from all other qualified plans, to the participant during the period of one year ending on the day preceding the origination of the loan being requested. Amounts held in a self-directed brokerage fund are included in the calculation of the maximum principal amount available for a loan but may not be used as a source for a loan. The interest rate on participant loans is set at the prime rate on the first business day of the month in which the loan is requested, plus one percent. The interest rate will remain fixed through the duration of the loan. All loans must be repaid within five years except for loans for the purchase of a primary residence, which have a maximum repayment period of ten years. The Plan permits only one outstanding loan per participant at a time. Principal and interest are paid through payroll deductions and credited to the participant's account. As of December 31, 2022, participant loans have maturities through 2032 at interest rates ranging from 4.25 percent to 8.50 percent.
Payments of Benefits and Withdrawals - Benefits are payable upon a participant’s disability, termination of employment, or death. In the event of disability or termination of employment, benefits are distributed when the participant elects to receive a distribution, which may be in the form of a lump sum distribution, installment distributions (monthly, quarterly, semi-annual, or annual), or when the participant is required to take a minimum distribution as defined by the IRC. If the participant dies on or after the date distributions begin, a beneficiary who is the participant's minor child, a chronically ill or disabled individual, or an individual not more than ten years younger than the participant, may take a lump sum distribution or elect installment distributions over their life expectancy or for a payment period of up to five years. When a child of a deceased participant reaches the age of majority, the Plan will distribute the child’s account in full no later than ten years after such date. A beneficiary who is a surviving spouse may take a lump sum distribution, elect an installment distributions, or remain in the Plan subject to the mandatory minimum distribution requirements of the IRC. A beneficiary that does not meet the proceeding criteria may take a lump sum distribution or installment distributions for a payment period of up to five years. The Plan conditionally offers certain additional benefits to survivors of participants who die while performing qualified military service, as defined in the IRC. Notwithstanding the above, in the event of death, disability, or termination of employment, for account balances of $5,000 or less, a lump sum payment will be made automatically. Persons otherwise entitled to a distribution under the Plan may elect to make partial withdrawals at least quarterly in accordance with procedures determined by the Plan Administrator.
The Plan permits in-service withdrawals from the Deferred and Rollover Features to be made (1) by participants who have incurred a hardship (as defined in the Plan) or (2) as frequently as once per calendar quarter by participants who have attained age 59 ½. In-service withdrawals also are permitted with respect to a participant’s after-tax contributions invested in the Savings Feature as frequently as once per calendar quarter. In-service withdrawals are permitted from the Roth 401(k) Feature if they are qualified distributions.
The Plan permits qualified reservist withdrawals of a participant's contributions from amounts attributable to elective deferrals in the Plan to be made by participants who are ordered or called to active military duty at specified times if certain conditions specified in the Plan are satisfied.
The Plan allows participants the option of obtaining distributions in the form of cash or common stock of IDACORP. The Plan allows the Plan Administrator to distribute the quarterly dividend on shares of IDACORP stock (the dividend pass-through feature) to electing participants in the Plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies followed by the Plan:
Basis of Accounting - The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires Plan management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ materially from those estimates.
Risks and Uncertainties - Participants in the Plan invest in various investment securities. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and market volatility risks. Market risks include, but are not limited to, global events which could impact the value of investment securities, such as a pandemic or global conflict. Based on the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants' accounts and the amounts reported in the financial statements.
Investment Valuation and Income Recognition - The Plan's investments are stated at fair value and quoted market prices are used to value investments. Shares of common stock and mutual funds are valued at quoted market prices, which represent the net asset value of shares held by the Plan at year end. The classification of investment earnings reported in the Statement of Changes in Net Assets Available for Benefits may differ from the classification of earnings on Form 5500 due to different reporting requirements on Form 5500.
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. Net depreciation includes the Plan's gains and losses on investments bought and sold as well as those held during the year.
Notes Receivable from Participants - Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are recorded as distributions based on the terms of the Plan document. No allowance for credit losses had been recorded as of December 31, 2022 and 2021.
Payment of Benefits - Benefits are recorded when paid. There were no participants who had elected to withdraw from the Plan but had not yet been paid at December 31, 2022 or 2021.
Administrative Expenses - Administrative expenses and certain fees relating to the Plan are shared by the Plan’s Sponsor and Plan participants, as provided for in the Plan document. Plan participants who have a brokerage account also pay a quarterly administrative fee.
Subsequent Events - The Plan Sponsor has evaluated subsequent events through June 22, 2023, the date which the financial statements were available to be issued.
3. FAIR VALUE MEASUREMENTS
The Plan has categorized its financial instruments into a three-level fair value hierarchy, based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. There were no changes in the methodologies used at December 31, 2022 and 2021, nor were there any transfers between levels for the years ended December 31, 2022 and 2021. The following is a description of the valuation methodologies used for assets measured at fair value.
•Common stocks: Valued at the closing price reported on the active market on which the individual securities are traded.
•Mutual funds: Valued at quoted market prices, which represents the net asset values of securities held in such funds.
•Brokerage securities: comprised of cash, common stocks, and mutual funds, which are valued at the closing price reported on the active market on which the securities are traded or quoted market prices.
•Common Collective Trust Funds: Common collective trust funds are composed primarily of fully benefit-responsive investment contracts that are valued at the net asset value of units of the common collective trust. The net asset value is readily available and used to estimate fair value. Participant transactions (purchases and sales) may occur immediately. If the plan initiates a full redemption of the collective trust, no notice to the issuer is required.
The table below presents by level within the fair value hierarchy a summary of the Plan's investments measured at fair value on a recurring basis at December 31, 2022 and 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| 2022: | | | | | | | | |
| IDACORP Common Stock | | $ | 81,541,416 | | | $ | — | | | $ | — | | | $ | 81,541,416 | |
| Mutual Funds | | 537,215,996 | | | — | | | — | | | 537,215,996 | |
| Brokerage Securities | | 16,385,266 | | | — | | | — | | | 16,385,266 | |
| Common Collective Trust, Money Market | | — | | | 52,557,831 | | | — | | | 52,557,831 | |
| Total | | $ | 635,142,678 | | | $ | 52,557,831 | | | $ | — | | | $ | 687,700,509 | |
| | | | | | | | |
| 2021: | | | | | | | | |
| IDACORP Common Stock | | $ | 88,021,070 | | | $ | — | | | $ | — | | | $ | 88,021,070 | |
| Mutual Funds | | 664,122,282 | | | — | | | — | | | 664,122,282 | |
| Brokerage Securities | | 19,587,415 | | | — | | | — | | | 19,587,415 | |
| Common Collective Trust, Money Market | | — | | | 45,400,321 | | | — | | | 45,400,321 | |
| Total | | $ | 771,730,767 | | | $ | 45,400,321 | | | $ | — | | | $ | 817,131,088 | |
4. PLAN TERMINATION
Although it has not expressed the 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 set forth in ERISA and the IRC. The Plan document includes provisions for the distribution of vested contributions in the event of the termination of the Plan.
5. FEDERAL INCOME TAX STATUS
The Company received a determination letter, dated February 28, 2017, from the Internal Revenue Service stating that the Plan, as amended, is qualified under Sections 401 and 501 of the IRC. The Company and the Plan Administrator believe that the Plan, including amendments subsequent to the date of the determination letter, is currently designed and operated in compliance with the applicable requirements of the IRC and that the Plan and related trust continue to be tax-exempt. Participants in a qualified plan are not subject to income taxes on Company contributions or dividend income allocated to their accounts until a distribution is made from the Plan. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
U.S. GAAP requires Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain tax position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
6. RELATED PARTY AND PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are managed by T. Rowe Price. T. Rowe Price is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan for investment management services were included as a reduction of the return earned on each fund.
The Plan offers IDACORP common stock as an investment option for participants. IDACORP is the parent company of the sponsoring employer; therefore, these transactions qualify as party-in-interest transactions. At December 31, 2022 and 2021, the Plan held 756,063 and 776,816 shares, respectively, of common stock of IDACORP, with a cost basis of $44,460,785 and $42,546,371, respectively.
During the year ended December 31, 2022, the Plan recorded dividend income from IDACORP of $2,051,118.
7. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following table reconciles net assets available for benefits per the Plan’s financial statements to the Form 5500:
| | | | | | | | | | | | | | |
| | | December 31, |
| | | 2022 | | 2021 |
| Net assets available for benefits per the financial statements | | $ | 693,941,071 | | | $ | 823,206,564 | |
| Total deemed distributions to participants | | (241,566) | | | (233,850) | |
| Total net assets per the Form 5500 | | $ | 693,699,505 | | | $ | 822,972,714 | |
The following table reconciles the decrease in net assets per the financial statements to the Form 5500:
| | | | | | | | |
| | | Year ended December 31, 2022 |
| Decrease in net assets per the financial statements | | $ | (129,265,493) | |
| Add: Decrease in deemed distributions to participants | | 1,545 | |
| Less: Interest on deemed distributions | | (9,261) | |
| Net loss per the Form 5500 | | $ | (129,273,209) | |
IDAHO POWER COMPANY EMPLOYEE SAVINGS PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4i, SCHEDULE OF ASSETS (HELD AT END OF YEAR) | | | | | | | | | | | | | | |
| December 31, 2022 |
| | | | | |
| | (b) | (c) | (d) | (e) |
| (a) | Identity of Issue, Borrower, Lessor, or Similar Party | Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value | Cost** | Current Value |
| * | IDACORP, Inc. | Common Stock | | $ | 81,541,416 | |
| Vanguard | Vanguard Institutional Index Fund | | 66,376,167 | |
| * | T. Rowe Price | US Treasury Money Market Retail Common Collective Trust | | 52,557,831 | |
| Harbor Funds | Harbor Capital Appreciation Fund | | 37,285,788 | |
| American Funds | American Funds Target 2025 | | 31,400,282 | |
| American Funds | American Funds Target 2030 | | 31,206,553 | |
| American Funds | American Funds Target 2040 | | 29,550,409 | |
| Dodge & Cox Funds | Dodge & Cox Income Fund | | 29,364,727 | |
| American Funds | American Funds Target 2045 | | 27,914,616 | |
| American Funds | American Funds Target 2035 | | 27,096,057 | |
| * | T. Rowe Price | T. Rowe Price Equity Income Fund | | 24,925,044 | |
| Vanguard | Vanguard Mid Cap Index Fund | | 23,444,076 | |
| Vanguard | Vanguard Balanced Index Fund | | 21,732,294 | |
| American Funds | American Funds Target 2050 | | 19,595,458 | |
| MFS | International Growth | | 17,977,343 | |
| Brokerage Account | Brokerage Securities | | 16,385,266 | |
| Invesco Investments | Invesco Small Cap Growth Fund | | 16,204,179 | |
| Transamerica | Transamerica Small Cap Value I | | 15,520,188 | |
| American Funds | American Funds Target 2020 | | 13,529,215 | |
| Putnam Investments | Putnam Large Cap Value Fund | | 12,724,927 | |
| Vanguard | Vanguard Small Cap Index Fund Institutional Class | | 12,286,542 | |
| Vanguard | Vanguard Total Bond Market Index Fund | | 11,828,303 | |
| American Funds | American Funds Target 2055 | | 9,921,514 | |
| Dimensional Fund Advisors | DFA International Small Company Fund | | 5,700,701 | |
| Vanguard | Vanguard Selected Value | | 5,362,699 | |
| Vanguard | Vanguard Total International Stock Index Institutional | | 5,195,243 | |
| Putnam Investments | Putnam High Yield Advantage | | 4,968,934 | |
| Causeway Funds | Causeway International Value Fund Institutional | | 4,919,680 | |
| Baird Funds | Baird Mid Cap Fund Institutional | | 4,432,766 | |
| Payden Funds | Payden Low Duration Fund | | 4,296,759 | |
| American Funds | American Funds Target 2060 | | 4,057,168 | |
| Dimensional Fund Advisors | DFA International Small Company Portfolio | | 3,937,343 | |
| American Funds | American Funds Target 2015 | | 3,039,237 | |
| Credit Suisse | Credit Suisse Commodity Return Strategy Fund Class I | | 2,916,540 | |
| Harding Loevner Funds | Harding Loevner Emerging Markets Portfolio | | 2,690,937 | |
| American Funds | American Funds Target 2010 | | 2,196,502 | |
| Putnam Investments | Putnam Global Income Trust | | 2,085,293 | |
| American Funds | American Funds Target 2065 | | 1,118,343 | |
| Wasatch Funds | Wasatch Frontier Emerging Small Countries Fund | | 414,169 | |
| * *** | Notes Receivable From Participants | Maturing 2023 - 2032 at interest rates of 4.25% - 8.50% | $ | — | | 5,188,884 | |
| | | | | |
| | | | | $ | 692,889,393 | |
| | | | |
| * Denotes a permitted party-in-interest with respect to the Plan. |
| ** Cost information is not required for participant-directed investments and, therefore, is not included. |
| *** Net of $241,566 in deemed loan distributions. |