International Executive Council
International Brotherhood of Electrical Workers
Opinion
We have audited the accompanying consolidated financial statements of the International Brotherhood of Electrical Workers and subsidiaries (collectively, the International Union or IBEW), which comprise the consolidated statements of financial position as of June 30, 2023 and 2022, and the related consolidated statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended, and the related notes to the consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the International Brotherhood of Electrical Workers and subsidiaries as of June 30, 2023 and 2022, and the consolidated changes in their net assets and their consolidated cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.
Responsibilities of Management for the
Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the International Union’s ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the International Union’s internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the International Union’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Bethesda, MD
December 15, 2023
| International Brotherhood of Electrical Workers and SubsidiariesConsolidated Statements of Financial PositionJUNE 30, 2023 AND 2022 | ||||
| 2023 | 2022 | |||
| Assets | ||||
| Cash and cash equivalents | $ 9,852,722 | $ 9,465,063 | ||
| Receivables | ||||
| Loans and advances to chartered bodies | 374,000 | 400,500 | ||
| Per capita tax receivable | 12,945,281 | 10,393,692 | ||
| Due from Trust for the IBEW Pension Benefit Fund (PBF) | – | 125,799 | ||
| Unbilled rent | 5,446,100 | 6,501,869 | ||
| Accrued interest and dividends | 820,699 | 571,568 | ||
| Security sales pending settlement | 61,228 | 584,804 | ||
| Other | 1,071,720 | 578,267 | ||
| Total receivables | 20,719,028 | 19,156,499 | ||
| Investments – at fair value | 533,667,678 | 515,185,087 | ||
| Property and equipment – at cost | ||||
| Land, building and improvements | 138,765,144 | 139,556,712 | ||
| Furniture and equipment | 53,764,784 | 57,717,247 | ||
| 192,529,928 | 197,273,959 | |||
| Accumulated depreciation | (95,690,798) | (94,186,431) | ||
| Net property and equipment | 96,839,130 | 103,087,528 | ||
| Other assets | ||||
| Cash held for reciprocity agreements pending settlement | 15,952,924 | 9,142,453 | ||
| Deferred leasing, organization and financing costs (net of amortization) | 1,991,265 | 2,148,137 | ||
| Prepaid expenses | 1,357,910 | 1,378,623 | ||
| Inventory of merchandise and office supplies, at cost | 2,177,270 | 1,867,853 | ||
| Excess of pension plan assets over projected benefit obligation | 55,136,675 | 4,090,687 | ||
| Right-of-use asset – finance leases | 516,385 | – | ||
| Other | 1,258,662 | 2,177,944 | ||
| Total other assets | 78,391,091 | 20,805,697 | ||
| Total assets | $ 739,469,649 | $ 667,699,874 | ||
| Liabilities and Net Assets | ||||
| Liabilities | ||||
| Accounts payable and accrued expenses | $ 7,900,875 | $ 12,817,173 | ||
| Due to Trust for the IBEW Pension Benefit Fund | 173,081 | – | ||
| Liability for postretirement benefits | 89,448,000 | 90,516,000 | ||
| Security purchases pending settlement | 7,009,909 | 7,219,890 | ||
| Deferred per capita tax revenue | 13,692,396 | 11,144,644 | ||
| Reciprocity agreement funds pending settlement | 15,950,416 | 9,140,769 | ||
| Lease liabilities – finance leases | 515,689 | – | ||
| Other | 1,715,570 | 4,224,689 | ||
| Total liabilities | 136,405,936 | 135,063,165 | ||
| Net assets without donor restrictions | ||||
| Appropriated for additional postretirement benefits | 267,747,000 | 252,518,000 | ||
| Unappropriated | 335,316,713 | 280,118,709 | ||
| Total net assets | 603,063,713 | 532,636,709 | ||
| Total liabilities and net assets | $ 739,469,649 | $667,699,874 | ||
| International Brotherhood of Electrical Workers and SubsidiariesConsolidated Statements of Activities and Changes in Net AssetsYEARS ENDED JUNE 30, 2023 AND 2022 | ||||
| 2023 | 2022 | |||
| Operating revenue | ||||
| Per capita tax | $ 164,127,782 | $ 154,849,713 | ||
| Initiation and reinstatement fees | 1,730,574 | 1,950,302 | ||
| Rental income, net | 10,492,375 | 11,036,351 | ||
| Sales of supplies | 1,333,760 | 1,419,987 | ||
| Other income | 6,258,461 | 3,574,196 | ||
| Total operating revenue | 183,942,952 | 172,830,549 | ||
| Operating expenses | ||||
| Program services expenses | ||||
| Field services and programs | 126,801,617 | 118,737,551 | ||
| Media relations | 10,791,238 | 9,752,830 | ||
| Industry trade programs | 15,859,616 | 13,604,854 | ||
| Per capita tax expense | 7,724,423 | 7,471,660 | ||
| Legal defense | 2,716,329 | 2,882,912 | ||
| Total program services | 163,893,223 | 152,449,807 | ||
| Supporting services expenses | ||||
| Governance and oversight | 8,223,272 | 7,539,017 | ||
| General administration | 9,143,537 | 10,241,607 | ||
| Total supporting services | 17,366,809 | 17,780,624 | ||
| Total operating expenses | 181,260,032 | 170,230,431 | ||
| Change in net assets from operations before investment and other income | 2,682,920 | 2,600,118 | ||
| Investment income (loss) | ||||
| Interest and dividends | 7,675,907 | 6,141,555 | ||
| Net appreciation (depreciation) in fair value of investments | 17,051,833 | (26,593,756) | ||
| Investment expenses | (445,973) | (770,295) | ||
| Net investment income (loss) | 24,281,767 | (21,222,496) | ||
| Other income (expense) | ||||
| Convention expense | (232,052) | (21,150,000) | ||
| Convention revenue | – | 2,440,150 | ||
| Gain (loss) on sale of property and equipment | 155,454 | 77,698 | ||
| Currency translation adjustment | (1,341,007) | (272,010) | ||
| Total other income (expense) | (1,417,605) | (18,904,162) | ||
| Change in net assets from operations after investment and other income | $ 25,547,082 | $ (37,526,540) | ||
| Other components of defined benefit pension and postretirement net periodic benefit cost | ||||
| Pension benefits | 13,582,827 | 22,156,874 | ||
| Postretirement health care benefits | (2,608,000) | (1,754,000) | ||
| Defined benefit pension and postretirement benefit changes other than net periodic benefit cost | ||||
| Pension benefits | 29,942,210 | (24,000,503) | ||
| Postretirement health care benefits | 3,962,885 | (1,283,738) | ||
| Appropriation of net assets to fund postretirement benefits not yet accrued | (15,229,000) | (75,667,000) | ||
| Change in net assets without donor restrictions, unappropriated | 55,198,004 | (118,074,907) | ||
| Net assets without donor restrictions, unappropriated | ||||
| Beginning of year | 280,118,709 | 398,193,616 | ||
| End of year | $ 335,316,713 | $ 280,118,709 | ||
| Net assets without donor restrictions, appropriated | ||||
| Beginning of year | $ 252,518,000 | $ 176,851,000 | ||
| Appropriation of net assets to fund postretirement benefits not yet accrued | 15,229,000 | 75,667,000 | ||
| End of year | $ 267,747,000 | $ 252,518,000 | ||
| International Brotherhood of Electrical Workers and SubsidiariesConsolidated Statements of Functional ExpensesYEARS ENDED JUNE 30, 2023 AND 2022 | |||||||||||||||
| 2023 | |||||||||||||||
| Program Services | Supporting Services | ||||||||||||||
| Field Services and Programs | Media Relations | Industry Trade | Per Capita Tax | Legal Defense | Governance and Oversight | General Administration | Total | ||||||||
| Salaries | $ 52,276,994 | $ 2,197,671 | $ 6,300,403 | $ – | $ – | $ 3,528,173 | $ 5,204,032 | $ 69,507,273 | |||||||
| Payroll taxes and employee benefits | 41,515,659 | 1,766,430 | 5,001,206 | – | – | 2,845,439 | 4,156,352 | 55,285,086 | |||||||
| Per capita taxes | – | – | – | 7,724,423 | – | – | – | 7,724,423 | |||||||
| Professional fees | 1,403,649 | 102,901 | 535,812 | – | 2,716,329 | 54,569 | 509,885 | 5,323,145 | |||||||
| Travel and related expenses | 6,859,408 | 48,797 | 300,010 | – | – | 320,696 | 46,681 | 7,575,592 | |||||||
| Electrical Worker printing and mailing expenses | – | 5,835,750 | – | – | – | – | – | 5,835,750 | |||||||
| Other expenses | 16,189,136 | 599,133 | 3,200,368 | – | – | 943,005 | 959,007 | 21,890,649 | |||||||
| Administrative reimbursement from PBF | – | – | – | – | – | – | (2,700,000) | (2,700,000) | |||||||
| Building operations | 8,898,228 | 254,911 | 562,969 | – | – | 554,435 | 1,001,571 | 11,272,114 | |||||||
| Total operating expense | 127,143,074 | 10,805,593 | 15,900,768 | 7,724,423 | 2,716,329 | 8,246,317 | 9,177,528 | 181,714,032 | |||||||
| Less: software development costs capitalized | (341,457) | (14,355) | (41,152) | – | – | (23,045) | (33,991) | (454,000) | |||||||
| Net operating expense | 126,801,617 | 10,791,238 | 15,859,616 | 7,724,423 | 2,716,329 | 8,223,272 | 9,143,537 | 181,260,032 | |||||||
| Other components of defined benefit pension and postretirement net periodic benefit cost | (8,254,258) | (347,001) | (994,800) | – | – | (557,080) | (821,688) | (10,974,827) | |||||||
| Total | $ 118,547,359 | $ 10,444,237 | $ 14,864,816 | $ 7,724,423 | $ 2,716,329 | $ 7,666,192 | $ 8,321,849 | $ 170,285,205 | |||||||
| 2022 | |||||||||||||||
| Program Services | Supporting Services | ||||||||||||||
| Field Services and Programs | Media Relations | Industry Trade | Per Capita Tax | Legal Defense | Governance and Oversight | General Administration | Total | ||||||||
| Salaries | $ 49,434,532 | $ 2,231,034 | $ 5,277,766 | $ – | $ – | $ 3,184,057 | $ 5,939,070 | $ 66,066,459 | |||||||
| Payroll taxes and employee benefits | 44,350,202 | 2,066,096 | 4,649,461 | – | 2,944,148 | 5,265,173 | 59,275,080 | ||||||||
| Per capita taxes | – | – | – | 7,471,660 | – | – | – | 7,471,660 | |||||||
| Professional fees | 929,012 | 55,825 | 468,799 | – | 2,882,912 | 51,821 | 427,208 | 4,815,577 | |||||||
| Travel and related expenses | 4,245,210 | 31,452 | 205,047 | – | – | 295,044 | 24,597 | 4,801,350 | |||||||
| Electrical Worker printing and mailing expenses | – | 4,824,118 | – | – | – | – | – | 4,824,118 | |||||||
| Other expenses | 12,322,710 | 300,257 | 2,482,475 | – | – | 552,461 | 793,062 | 16,450,965 | |||||||
| Administrative reimbursement from PBF | – | – | – | – | – | – | (2,900,000) | (2,900,000) | |||||||
| Building operations | 8,727,918 | 301,456 | 657,112 | – | – | 593,417 | 845,319 | 11,125,222 | |||||||
| Total operating expense | 120,009,584 | 9,810,238 | 13,740,660 | 7,471,660 | 2,882,912 | 7,620,948 | 10,394,429 | 171,930,431 | |||||||
| Less: software development costs capitalized | (1,272,033) | (57,408) | (135,806) | – | – | (81,931) | (152,822) | (1,700,000) | |||||||
| Net operating expense | 118,737,551 | 9,752,830 | 13,604,854 | 7,471,660 | 2,882,912 | 7,539,017 | 10,241,607 | 170,230,431 | |||||||
| Other components of defined benefit pension and postretirement net periodic benefit cost | (15,266,544) | (688,996) | (1,629,898) | – | – | (983,312) | (1,834,124) | (20,402,874) | |||||||
| Total | $ 103,471,007 | $ 9,063,834 | $ 11,974,956 | $ 7,471,660 | $ 2,882,912 | $ 6,555,705 | $ 8,407,483 | $ 149,827,557 | |||||||
International Brotherhood of Electrical Workers and Subsidiaries
Consolidated Statements of Cash Flows
YEARS ENDED JUNE 30, 2023 AND 2022
| 2023 | 2022 | ||
|---|---|---|---|
| Cash flows from operating activities | |||
| Cash flows from | |||
| Affiliated chartered bodies | $ 167,188,279 | $ 157,220,969 | |
| Interest and dividends | 7,426,776 | 6,161,996 | |
| Rental income | 11,456,812 | 10,895,506 | |
| Participant contributions collected on behalf of PBF | 102,579,896 | 92,998,169 | |
| Reimbursement of administrative expenses from PBF | 2,700,000 | 2,900,000 | |
| Other | 5,765,008 | 6,019,888 | |
| Cash provided by operations | 297,116,771 | 276,196,528 | |
| Cash paid for | |||
| Salaries, payroll taxes, and employee benefits | (121,123,359) | (120,189,539) | |
| Service providers, vendors and others | (58,811,918) | (55,090,695) | |
| Participant contributions remitted to PBF | (102,281,016) | (92,966,693) | |
| Per capita tax | (7,724,423) | (7,471,660) | |
| Interest | (64,597) | (70,981) | |
| Cash used for operations | (290,005,313) | (275,789,568) | |
| Net cash provided by operating activities | 7,111,458 | 406,960 | |
| Cash flows from investing activities | |||
| Repayments on loans and advances made to chartered bodies | 26,500 | 5,500 | |
| Purchases of property and equipment | (1,899,001) | (4,299,078) | |
| Purchases of investments | (165,050,399) | (162,698,444) | |
| Proceeds from sales of property and equipment | 300,224 | 101,835 | |
| Proceeds from sales of investments | 179,713,872 | 163,279,637 | |
| Net short-term cash investment transactions | (15,780,636) | 1,969,399 | |
| Net cash provided by (used for) investing activities | (2,689,440) | (1,641,151) | |
| Cash flows from financing activities | |||
| Principal repayments under capital lease obligations | (2,693,352) | (1,352,608) | |
| Net cash used for financing activities | (2,693,352) | (1,352,608) | |
| Effect of exchange rate changes on cash and cash equivalents | (1,341,007) | (272,010) | |
| Net change in cash and cash equivalents | 387,659 | (2,858,809) | |
| Cash and cash equivalents | |||
| Beginning of year | 9,465,063 | 12,323,872 | |
| End of year | $ 9,852,722 | $ 9,465,063 | |
| Supplemental disclosure | |||
| Property and equipment acquired under capital lease obligations | $ 1,442,000 | $ 1,854,700 |
International Brotherhood of Electrical Workers and Subsidiaries
Notes to Consolidated Financial Statements
YEARS ENDED JUNE 30, 2023 AND 2022
Note 1. Summary of Significant Accounting Policies
Nature of Operations — The International Brotherhood of Electrical Workers (International Union or IBEW) is an international labor union established to organize all workers for the moral, economic and social advancement of their condition and status. The significant portion of the International Union’s revenue comes from per capita taxes of members paid by the local unions.
Basis of Presentation — The consolidated financial statements include the accounts of the International Brotherhood of Electrical Workers, the IBEW Headquarters Building LLC, of which the International Brotherhood of Electrical Workers owns 99%, and the IBEW Relocation Holdings LLC, of which the International Brotherhood of Electrical Workers is the sole member. The IBEW Headquarters Building LLC holds title to an office building that serves as the headquarters for the International Brotherhood of Electrical Workers. The IBEW Relocation Holdings LLC’s purpose is to acquire, hold, own, maintain, hold for investment, operate, lease, convey interests in, mortgage or otherwise encumber, sell, exchange or dispose of, and otherwise invest in and deal with real estate property and any personal or intangible property associated with the real estate. All inter-organization accounts and transactions have been eliminated in consolidation. The International Union appropriates a portion of unrestricted net assets representing the estimated liability for additional postretirement benefits not yet accrued.
Method of Accounting — The financial statements have been prepared using the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. Under this basis, revenue is recognized when earned and expenses are recognized when incurred.
Financial Statement Presentation — Financial statement presentation follows the recommendations of U.S. generally accepted accounting principles in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic Not-for-Profit Entities — Presentation of Financial Statements. Under those principles, the International Union is required to report information regarding its financial position and activities according to two classes of net assets — net assets without donor restrictions and net assets with donor restrictions.
Net assets without donor restrictions — These net assets are available to finance the general operations of the International Union. The only limits on the use of net assets without donor restrictions are the broad limits resulting from the nature of the International Union, the environment in which it operates, and the purposes specified in its organizing documents.
Net assets with donor restrictions — These net assets result from contributions and other inflows of assets, the use of which by the International Union is limited by donor-imposed time or purpose restrictions that are either temporary or perpetual.
As of June 30, 2023 and 2022, the International Union did not have any net assets with donor restrictions.
Investments — Generally, investments are carried at fair value. Changes in fair value of investments are recognized as unrealized gains and losses. For the purpose of recording realized gains or losses, the average cost method is used. Purchases and sales are recorded on a trade-date basis. The purchases and sales pending settlement are reported as either assets or liabilities in the consolidated statements of financial position. Pending sales represent amounts due from brokers while pending purchases represent amounts due to brokers for trades not settled. All pending transactions at June 30, 2023 and 2022 were settled in July 2023 and 2022, respectively.
Accounts Receivable — Trade accounts receivable are reported net of an allowance for expected losses. Based on management’s evaluation of receivables, the allowance account has a zero balance at June 30, 2023 and 2022.
Property and Equipment — Building, improvements, furniture and equipment are carried at cost. Major additions are capitalized. Replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which are as follows:
Building and improvements 10-40 years
Tenant improvements and capital leases Life of respective lease
Furniture and equipment 2-10 years
Inventory — The International Union maintains an inventory of supplies for use and for resale to local unions and individual members. Inventory is stated at average inventory cost which approximates the net realizable value of items held.
Revenue Recognition — Revenue is derived from both exchange transactions and contribution transactions. Revenue from exchange transactions is recognized when control of promised goods or services is transferred to our members and customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Except for goods and services provided in connection with per capita tax, which are transferred over the period of membership, all goods and services are transferred at a point in time. Unconditional contributions are recognized upon receipt of cash or other assets, or when a donor promises to transfer cash or other assets in the future. Conditional promises to give, that is, those with a measurable performance or other barrier and a right of return or release, are not recognized until the conditions on which they depend have been substantially met.
Per capita taxes — Per capita taxes entitle members to a bundle of goods and services that are considered a single performance obligation and provided ratably over the membership period. Per capita tax payments are generally required in advance and amounts not yet recognized as revenue are deferred to the applicable membership period.
Initiation and reinstatement fees — Initiation and reinstatement fees are assessments levied and recognized at the time of initiation or reinstatement.
Sales of merchandise and supplies — Sales of merchandise and supplies entitle members and customers to IBEW branded goods for which revenue is recognized when goods are shipped to the member/customer.
Revenue from other exchange transactions — Event registrations are recognized as revenue when the event is held, and royalties are recognized as revenue as underlying sales are made.
Contributions — Contributions received are reported as increases in net assets without donor restrictions unless received with donor stipulations that require the assets be used for specific purposes or in specific time periods. All donor-restricted contributions are reported as an increase in net assets with donor restrictions. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the consolidated statements of activities as net assets released from restrictions.
Canadian Exchange — The International Union maintains assets and liabilities in Canada as well as the United States. It is the intent of the International Union to receive and expend Canadian dollars in Canada and not, on a regular basis, convert them to U.S. dollars. For financial statement purposes, all assets and liabilities are expressed in U.S. dollar equivalents.
Canadian dollars included in the consolidated statements of financial position are translated at the appropriate year-end exchange rates. Canadian dollars included in the consolidated statements of activities and changes in net assets are translated at the average exchange rates for the year. Unrealized increases and decreases due to fluctuations in exchange rates are included in “Currency translation adjustment” in the consolidated statements of activities and changes in net assets.
Leases — In its consolidated statements of financial position, the International Union records a right-of-use asset and lease liability, initially measured at the present value of total lease payments using a risk-free rate that approximates the remaining term of the lease. The International Union considers the likelihood of exercising renewal or termination clauses (if any) in measuring its right-of-use assets and lease liabilities. A single lease cost calculated so that the cost of the lease is allocated over the lease term on straight-line basis. Short- term leases (those with an initial term of twelve months or less and no purchase option) are expensed over their terms, with no corresponding right-of-use asset or lease liability recorded. The International Union does not separate non-lease components (if any) from lease components in determining the lease payments for leases of office equipment.
Statements of Cash Flows — For purposes of the consolidated statements of cash flows, cash is considered to be amounts on hand and in demand deposit bank accounts subject to immediate withdrawal.
Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.
Functional Allocation of Expenses — The costs of providing the various programs and supporting activities of the International Union have been summarized on a functional basis in the consolidated statements of activities and changes in net assets and functional expenses. Costs that can be specifically identified with a final cost objective are charged directly to that activity. Other costs are allocated among the program and supporting services benefited based on management’s best estimates. Salaries and related fringe benefits are allocated based on employee time and effort. Other common costs such as occupancy, depreciation and related infrastructure costs are allocated based on salary allocations.
New Accounting Pronouncement Adopted — During the year ended June 30, 2023, the International Union adopted the provisions of Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). This guidance is intended to increase transparency and comparability among lessees by recognizing lease assets and lease liabilities on the statement of financial position/net assets available for benefits and disclosing key information about leasing arrangements. ASU 2016-02 requires lessees to report a right-of-use asset along with a lease liability.
Additionally, in July 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-11, Leases (Topic 842) — Targeted Improvements, which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of net assets in the period of adoption. The International Union adopted ASU 2016-02 and its related amendments as of July 1, 2022, which resulted in the recognition of operating and finance right-of-use assets totaling $11,098,076 and $1,766,039, respectively, as well as operating and finance lease liabilities totaling $12,315,326 and $1,766,968, respectively. The International Union elected to adopt the transition relief provisions from ASU 2018-11 and recorded the impact of adoption as of July 1, 2022, without restating any prior-year amounts or disclosures. The additional lease disclosures can be found in Notes 12 and 13. There was no cumulative effect adjustment to the opening balance of net assets required.
The International Union elected to apply all practical expedients available under the ASU, allowing it to 1) not reassess whether any expired or existing contracts previously assessed as not containing leases are, or contain, leases; 2) not reassess the lease classification for any expired or existing leases; 3) not reassess initial direct costs for any existing leases; and 4) risk-free interest rate. The International Union also elected to apply the practical expedient to use hindsight in determining the lease term which in the year of implementation the International Union has determined to be the remaining lease term.
Note 2. Tax Status
The International Union is generally exempt from federal income and District of Columbia franchise taxes as an organization described in Section 501(c)(5) of the Internal Revenue Code (IRC). The International Union is, however, subject to tax on net profits generated by activities defined as unrelated business activities under applicable tax law (there were no unrelated activities during the years ended June 30, 2023 and 2022). IBEW Headquarters Building, LLC and IBEW Relocation Holdings, LLC are not taxpaying entities for federal income tax purposes.
Income of these companies is taxed to the members in their respective returns. The International Union’s Form 990, Return of Organization Exempt from Income Tax, and Form 990-T, Exempt Organization Unrelated Business Income Tax Return, for the years ended June 30, 2020 through 2022 are subject to examination by the Internal Revenue Service (IRS), generally for three years after they were filed.
Note 3. Liquidity and Availability of Financial Resources
As part of the International Union’s liquidity management, it has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due. In addition, the International Union invests cash in excess of its current requirements in a portfolio of investments designed to maximize long-term earnings with acceptable risk to investment principal. The International Union’s Board appropriated $267,747,000 as of June 30, 2023 and $252,518,000 as of June 30, 2022 for postretirement health care as disclosed in Note 7. However, in the event of unanticipated liquidity needs, the International Union’s Board could make available all or a portion of the amount currently appropriated.
The following table represents the International Union’s financial assets available to meet cash needs for general expenditures within one year of June 30, 2023 and 2022.
| 2023 | 2022 | ||
| Total assets | $ 739,469,649 | $ 667,699,874 | |
| Less nonfinancial assets | |||
| Net property and equipment | (96,839,130) | (103,087,528) | |
| Net deferred leasing, organization, and financing costs | (1,991,265) | (2,148,137) | |
| Prepaid expenses | (1,357,910) | (1,378,623) | |
| Inventory | (2,177,270) | (1,867,853) | |
| Excess of pension plan assets over PBO | (55,136,675) | (4,090,687) | |
| Right-of-use assets | (516,385) | – | |
| Other nonfinancial assets | (1,258,662) | (2,177,944) | |
| Total financial assets | 580,192,352 | 552,949,102 | |
| Less amounts unavailable within one year | |||
| Appropriated for additional postretirement benefits | (267,747,000) | (252,518,000) | |
| Reciprocity Agreement funds pending settlement | (15,950,416) | (9,140,769) | |
| Loans and advances to chartered bodies not expected to be collected within one year | (360,500) | (379,500) | |
| Unbilled rent receivable due in more than one year | (4,883,689) | (6,366,947) | |
| Total financial assets available for general expenditures within one year | $ 291,250,747 | $ 284,543,886 |
Note 4. Investments
The cost and fair value of investments held as of June 30, 2023 were as follows:
| Cost | Fair Value | ||
| Short-term cash investments | $ 41,372,662 | $ 41,372,662 | |
| Government and government agency obligations | 37,468,254 | 34,274,719 | |
| Corporate bonds and notes | 62,181,024 | 58,361,378 | |
| Preferred stock | 190,800 | 182,580 | |
| Common stock | 97,567,476 | 168,676,572 | |
| Mutual funds | 44,846,708 | 50,660,922 | |
| 103-12 entities | 28,943,651 | 46,949,003 | |
| Other alternative investments | 1,500,000 | – | |
| INDURE REIT LLC | 46,627,454 | 105,985,748 | |
| AFL-CIO Housing Investment Trust | 32,318,176 | 27,204,094 | |
| $ 393,016,205 | $ 533,667,678 |
The cost and fair value of investments held as of June 30, 2022 were as follows:
| Cost | Fair Value | ||
| Short-term cash investments | $ 25,423,398 | $ 25,423,398 | |
| Government and government agency obligations | 37,489,639 | 33,580,474 | |
| Corporate bonds and notes | 72,893,800 | 68,262,689 | |
| Preferred stock | 190,800 | 188,848 | |
| Common stock | 95,692,932 | 151,218,720 | |
| Mutual funds | 49,080,474 | 49,505,339 | |
| 103-12 entities | 29,037,897 | 45,399,238 | |
| Other alternative investments | 1,500,000 | – | |
| INDURE REIT LLC | 46,627,454 | 113,781,842 | |
| AFL-CIO Housing Investment Trust | 31,490,943 | 27,824,539 | |
| $ 389,427,337 | $ 515,185,087 |
Fair Value Measurement
Accounting standards provide the framework for measuring fair value which 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 (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described as follows:
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the International Union has the ability to access.
Level 2 Inputs to the valuation methodology include other significant observable inputs including:
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in inactive markets;
Inputs other than quoted prices that are observable for the asset or liability; and
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset’s or liability’s 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. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
The following table sets forth, by level within the fair value hierarchy, the International Union’s investment assets at fair value as of June 30, 2023 and 2022:
| June 30, 2023 | ||||||||
| Description | Total Investments | Quoted Market Prices for Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||
| Short-term cash investments | $ 41,372,662 | $ – | $ 41,372,662 | $ – | ||||
| Government and government agency obligations | 34,274,719 | 6,553,786 | 27,720,933 | – | ||||
| Corporate bonds and notes | 58,361,378 | – | 58,361,378 | – | ||||
| Preferred stock | 182,580 | – | 182,580 | – | ||||
| Common stock | 168,676,572 | 142,048,321 | – | 26,628,251 | ||||
| Mutual funds | 50,660,922 | 50,660,922 | – | – | ||||
| Total | 353,528,833 | $ 199,263,029 | $ 127,637,553 | $ 26,628,251 | ||||
| Investments measured at NAV* | 180,138,845 | |||||||
| Investments at fair value | $ 533,667,678 | |||||||
| June 30, 2022 | ||||||||
| Description | Total Investments | Quoted Market Prices for Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||
| Short-term cash investments | $ 25,423,398 | $ – | $ 25,423,398 | $ – | ||||
| Government and government agency obligations | 33,580,474 | 6,208,396 | 27,372,078 | – | ||||
| Corporate bonds and notes | 68,262,689 | – | 68,262,689 | – | ||||
| Preferred stock | 188,848 | – | 188,848 | – | ||||
| Common stock | 151,218,720 | 124,590,469 | – | 26,628,251 | ||||
| Mutual funds | 49,505,339 | 49,505,339 | – | – | ||||
| Total | 328,179,468 | $ 180,304,204 | $ 121,247,013 | $ 26,628,251 | ||||
| Investments measured at NAV* | 187,005,619 | |||||||
| Investments at fair value | $ 515,185,087 | |||||||
*Investments that were measured at NAV per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the consolidated statements of financial position.
Following are the descriptions of the valuation methodologies used for assets measured at fair value. There have been no changes in methodologies used at June 30, 2023 and 2022.
Level 1
Equity securities (except the ULLICO Stock), U.S. Treasury bonds and notes, and mutual funds are traded in active markets on national and international securities exchanges and are valued at closing prices on the last business day of each period.
Level 2
Most Government and government agency obligations, municipal bonds, corporate bonds and notes, preferred stock and mortgage loans are generally valued by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities. To the extent that quoted prices are not available, fair value is determined based on a valuation model that includes inputs such as interest rate yield curves and credit spreads. Securities traded in markets that are not considered active are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Short-term cash investments are valued at cost which approximates fair value.
Level 3
Common stock represents stock holdings of ULLICO Inc. and fair value is determined by management based on valuations performed by an independent third party. The stock is not actively traded and there are no directly comparable inputs. There were no changes in valuation techniques used during the years ended June 30, 2023 and 2022.
Note 5. Investments in Investment Entities
Authoritative guidance on fair value measurements permits the International Union to measure the fair value of an investment in an investment entity that does not have a readily determinable fair value based upon the NAV of the investment. This guidance does not apply if it is probable that the investment will be sold at a value different than NAV. The net asset value per share is the amount of the investee’s net assets attributable to each unit share of ownership interest.
The International Union’s investment in investment entities is subject to the terms of the respective private placement memoranda and governing agreements. Income or loss from investments in these investment entities is net of the International Union’s proportionate share of fees and expenses incurred or charged by these investment entities.
The International Union’s risk of loss in these entities is limited to its investment. The International Union may increase or decrease its level of investment in these entities at its discretion. The International Union typically has the ability to redeem its investment from these entities on a daily or quarterly basis, but longer lock-up periods can apply to certain investments.
The following table summarizes the International Union’s investments in certain entities that calculate NAV per share as fair value measurement as of June 30, 2023 and 2022 by investment strategy. There were no unfunded commitments at either June 30, 2023 or June 30, 2022.
| Description | Fair Value (in millions) | Redemption frequency | Redemption notice period | |||||
| 2023 | 2022 | |||||||
| a.103-12 investment entities | $ 46.9 | $ 45.4 | Daily, Monthly | One day, 30 days | ||||
| b. AFL-CIO HIT | 27.2 | 27.8 | Monthly | 15 days | ||||
| c. INDURE REIT LLC | 106.0 | 113.8 | Maximum20% redemptions allowed for 24 months following initial investment, daily redemptions after | One day | ||||
The following summarizes the investment strategy for each of the Plan’s investments in the table presented above:
a. 103-12 investment entities represent investments with two entities: one in the Western Asset U.S. Core Plus LLC for $34.6 million at June 30, 2023 and $35.0 million at June 30, 2022, and another in the ULLICO Diversified International Equity Fund for $12.3 million at June 30, 2023 and $10.4 million at June 30, 2022. The Western Asset U.S. Core Plus LLC is a “master fund” in a “master/feeder” structure which primarily invests in investment grade debt and fixed income securities. Redemption is permitted daily with one-day notice.
The ULLICO Diversified International Equity Fund invests primarily in equity securities traded in equity markets of, or issued by, companies located in countries represented in the Morgan Stanley Capital International Europe, Australasia, and Far East Index (the Index) with the goal of exceeding the investment returns of the Index. Redemptions are permitted monthly with a 30-day notice period which can be waived at the discretion of the General Partner.
b. The American Federation of Labor and Congress of Industrial Organizations (AFL- CIO) Housing Investment Trust (HIT) invests in a portfolio composed primarily of mortgage securities, with higher yield, higher credit quality and similar interest rate risks as the Barclays Capital Aggregate Bond Index. Redemptions are permitted monthly with a 15-day notice period.
c. The INDURE REIT LLC invests solely in the INDURE Build to Core Fund, LLC, which is a fund that is valued based on NAV. During the first two years following initial investment, redemption was limited to a maximum of 20% of investment balance. Following the two-year period, redemptions are permitted daily with a one-day notice period.
Note 6. Pension Plans
The International Union maintains two defined benefit pension plans to cover all of its employees. Employer contributions to the plans are based on actuarial costs as calculated by an outside actuary. The actuarial valuations are based on the unit credit cost method as required under the Pension Protection Act of 2006. The annual measurement date is June 30.
The net periodic pension cost for the plans for the years ended June 30, 2023 and 2022 is summarized as follows:
| 2023 | 2022 | ||
| Reported as part of compensation expense | |||
| Service cost | $ 20,048,867 | $ 25,241,068 | |
| Reported as other changes in net assets | |||
| Interest cost | 26,291,760 | 22,981,217 | |
| Expected return on plan assets | (43,387,624) | (46,349,877) | |
| Net amortization of loss | 3,513,037 | 1,211,786 | |
| (13,582,827) | (22,156,874) | ||
| Net periodic pension cost | $ 6,466,040 | $ 3,084,194 |
Total amounts recognized as changes in unrestricted net assets separate from expenses reported in the consolidated statements of activities and changes in net assets as pension-related changes other than net periodic pension cost for the years ended June 30, 2023 and 2022 are as follows:
| 2023 | 2022 | ||
| Net actuarial loss | $ (29,948,121) | $ 24,000,503 |
Amounts that have not yet been recognized as components of net periodic pension cost as of June 30, 2023 consist of the following:
| Net actuarial loss | $ 68,015,642 |
The net periodic pension cost is based on the following weighted-average assumptions at the beginning of the year:
| 2023 | 2022 | ||
| Discount rate | 4.50% | 3.50% | |
| Average rate of compensation increase | 4.00% | 4.00% | |
| Expected long-term rate of return on plan assets | 7.00% | 7.00% |
The plans’ obligations and funded status as of June 30, 2023 and 2022 are summarized as follows:
| 2023 | 2022 | ||
| Fair value of plan assets | $ 658,564,915 | $ 622,756,784 | |
| Projected benefit obligation | 603,428,240 | 618,666,097 | |
| Excess of plan assets over projected benefit obligation | $ 55,136,675 | $ 4,090,687 |
Benefit obligations are based on the following weighted average assumptions at the end of the year:
| 2023 | 2022 | ||
| Discount rate | 4.90% | 4.50% | |
| Average rate of compensation increase | 4.00% | 4.00% |
Employer contributions, employee contributions and benefit payments for the years ended June 30, 2023 and 2022 were as follows:
| 2023 | 2022 | ||
| Employer contributions | $ 27,543,999 | $ 25,517,556 | |
| Employee contributions | 2,142,440 | 1,941,812 | |
| Benefit payments | 32,966,690 | 31,389,955 |
Total expected employer contributions for the year ending June 30, 2024 are $28.8 million. Total expected benefit payments for the next 10 fiscal years are as follows:
| Year ending June 30, 2024 | $ 34,141,921 | |
| 2025 | 34,708,384 | |
| 2026 | 35,542,065 | |
| 2027 | 36,333,766 | |
| 2028 | 37,408,197 | |
| Years 2029 – 2033 | 199,851,942 | |
The expected long-term rate of return on plan assets of 7% reflects the average rate of earnings expected on plan assets invested or to be invested to provide for the benefits included in the benefit obligations. The assumption has been determined by reflecting expectations regarding future rates of return for plan investments, with consideration given to the distribution of investments by asset class and historical rates of return for each individual asset class.
Total pension plan weighted-average asset allocations at June 30, 2023 and 2022, by asset category, are as follows:
| 2023 | 2022 | ||
| Asset category | |||
| Cash and cash equivalents | 5% | 5% | |
| Equity securities | 59% | 54% | |
| Debt securities | 19% | 21% | |
| Real estate and other | 17% | 20% | |
| 100% | 100% |
The plans’ investment strategies are based on an expectation that equity securities will outperform debt securities over the long term, and that the plans should maximize investment return while minimizing investment risk through appropriate portfolio diversification. All investments are actively managed by a diversified group of professional investment managers, whose performance is routinely evaluated by a professional investment consultant. Target allocation percentages are 50% for equities, 30% for fixed income securities, 13% for real estate, and 7% for other investments (principally limited partnerships).
The following table sets forth, by level within the fair value hierarchy, the pension plans’ investment assets at fair value as of June 30, 2023:
| June 30, 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Description | Total Investments | Quoted Market Prices for Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||
| Unitized Pool Investments | ||||||||
| Common stock | $ 108,854,491 | $ 108,854,491 | $ – | $ – | ||||
| Preferred stock | 182,580 | – | 182,580 | – | ||||
| Corporate bonds | 27,166,600 | – | 27,166,600 | – | ||||
| U.S. Government and government agency obligations | 18,680,615 | 9,518,082 | 9,162,533 | – | ||||
| Municipal bonds | 8,895,585 | – | 8,895,585 | – | ||||
| Registered investment companies | 90,138,856 | 90,138,856 | – | – | ||||
| Common/collective trusts | 9,425,078 | – | – | 9,425,078 | ||||
| 263,343,805 | $ 208,511,429 | $ 45,407,298 | $ 9,425,078 | |||||
| Investments measured at net asset value* | 355,007,794 | |||||||
| Total | 618,351,599 | |||||||
| Non-Pool Investments | ||||||||
| Cash and cash equivalents | 723,345 | $ 723,345 | $ – | $ – | ||||
| Common/collective trusts | 23,926,475 | – | – | 23,926,475 | ||||
| Canadian Government obligations | 7,331,342 | 2,404,437 | 4,926,905 | – | ||||
| Corporate obligations | 6,127,930 | – | 6,127,930 | – | ||||
| Common stocks | 31,597,623 | 31,597,623 | – | – | ||||
| 69,706,715 | $ 34,725,405 | $ 11,054,835 | $ 23,926,475 | |||||
| Investments measured at net asset value* | 2,194,988 | |||||||
| Total | 71,901,703 | |||||||
| Other Assets and Liabilities | ||||||||
| Cash | 4,723 | |||||||
| Contributions receivable | 433,699 | |||||||
| Accrued investment income receivable | 1,018,370 | |||||||
| Accounts payable and accrued expenses | (280,853) | |||||||
| Net transactions pending settlement | (7,398,763) | |||||||
| Total | (6,222,824) | |||||||
| Net assets, total | 684,030,478 | |||||||
| Less: share to other employers | (25,465,563) | |||||||
| Fair value of plan assets | $ 658,564,915 | |||||||
The following table sets forth, by level within the fair value hierarchy, the pension plans’ investment assets at fair value as of June 30, 2022:
| June 30, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Description | Total Investments | Quoted Market Prices for Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||
| Unitized Pool Investments | ||||||||
| Common stock | $ 100,596,689 | $ 100,596,689 | $ – | $ – | ||||
| Preferred stock | 188,848 | – | 188,848 | – | ||||
| Corporate bonds | 29,056,770 | – | 29,056,770 | – | ||||
| U.S. Government and government agency obligations | 19,061,449 | 8,354,413 | 10,707,036 | – | ||||
| Municipal bonds | 6,942,980 | – | 6,942,980 | – | ||||
| Registered investment companies | 78,403,184 | 78,403,184 | – | – | ||||
| Common/collective trusts | 10,757,561 | – | – | 10,757,561 | ||||
| 245,007,481 | $ 187,354,286 | $ 46,895,634 | $ 10,757,561 | |||||
| Investments measured at net asset value* | 345,270,118 | |||||||
| Total | 590,277,599 | |||||||
| Non-Pool Investments | ||||||||
| Cash and cash equivalents | $ 1,609,325 | $ 1,609,325 | $ – | $ – | ||||
| Common/collective trusts | 19,756,018 | – | – | 19,756,018 | ||||
| Canadian Government obligations | 7,276,290 | 1,098,430 | 6,177,860 | – | ||||
| Corporate obligations | 5,758,597 | – | 5,758,597 | – | ||||
| Common stocks | 26,893,561 | 26,893,561 | – | – | ||||
| 61,293,791 | $ 29,601,316 | $ 11,936,457 | $ 19,756,018 | |||||
| Investments measured at net asset value* | 2,041,717 | |||||||
| Total | 63,335,508 | |||||||
| Other Assets and Liabilities | ||||||||
| Cash | 501,562 | |||||||
| Contributions receivable | 150,500 | |||||||
| Accrued investment income receivable | 653,469 | |||||||
| Accounts payable and accrued expenses | (285,030) | |||||||
| Net transactions pending settlement | (9,278,436) | |||||||
| Total | (8,257,935) | |||||||
| Net assets, total | 645,355,172 | |||||||
| Less: share to other employers | (22,598,388) | |||||||
| Fair value of plan assets | $ 622,756,784 | |||||||
*Investments that were measured at NAV per share (or its equivalent) have not been classified in the fair value hierarchy.
Investments valued based on Level 3 inputs consist of amounts held in a common/collective trust which is not publicly traded and for which the fair value is based on $1 per unit of investment held. There were no changes in valuation techniques used during the years ended June 30, 2023 and 2022.
The following is a summary of the changes in Level 3 investments for the years ended June 30, 2023 and 2022:
| Common/Collective Trusts | ||||
| Changes in Level 3 Category | 2023 | 2022 | ||
| Beginning balance– 7/1/ | $ 30,513,579 | $ 34,203,966 | ||
| Net gains(realized/unrealized) | – | – | ||
| Purchases | 76,029,776 | 55,460,111 | ||
| Sales | (73,191,802) | (59,150,498) | ||
| Ending balance– 6/30/ | $ 33,351,553 | $ 30,513,579 | ||
The International Union maintains a Supplemental Plan under IRC Section 457 to pay pension benefits required under its Constitution that cannot be paid from its qualified defined benefit plans. The liability for amounts due under the Supplemental Plan have been actuarially determined and total $800,116 and $1,494,647 as of June 30, 2023 and 2022, respectively. The International Union also contributes to a multiemployer defined benefit pension plan on behalf of its employees. Contributions to this plan were $1,313,961 and $1,235,385 for the years ended June 30, 2023 and 2022, respectively.
Note 7. Postretirement Benefits
The International Union provides medical and prescription insurance coverage for both active and retired employees through the NECA/IBEW Family Medical Care Plan, a multiemployer defined benefit health and welfare plan. In accordance with U.S. generally accepted accounting principles, the International Union does not report a liability for the excess of the related postretirement benefit obligation over plan assets in connection with the provision of these benefits. However, the International Union does appropriate net assets in an amount sufficient to fund the liability that would be accrued for the medical and prescription insurance coverage were those benefits not funded through a multiemployer plan. The International Union also provides certain health care, life insurance and legal benefits for substantially all employees who reach normal retirement age while working for the International Union. A liability is reported for the excess of the postretirement benefit obligation over plan assets in connection with the provision of these additional benefits.
Related benefit costs for the years ended June 30, 2023 and 2022:
| 2023 | 2022 | ||
| Reported as part of compensation expense | |||
| Service cost | $ 3,215,000 | $ 3,452,000 | |
| Reported as other changes in net assets | |||
| Interest cost | 3,924,000 | 3,111,000 | |
| Amortization of prior service cost | (1,316,000) | (1,357,000) | |
| 2,608,000 | 1,754,000 | ||
| Total postretirement benefit cost | $ 5,823,000 | $ 5,206,000 |
The accumulated postretirement benefit obligation and funded status at June 30, 2023 and 2022 are as follows:
| 2023 | 2022 | ||
| Postretirement benefit obligation | $ 89,448,000 | $ 90,516,000 | |
| Fair value of plan assets | – | – | |
| Excess of postretirement benefit obligation over plan assets | $ 89,448,000 | $ 90,516,000 |
The above postretirement benefit cost does not represent the actual amounts paid (net of estimated Medicare Part D subsidies) of $3,355,000 and $2,968,000 for the years ended June 30, 2023 and 2022, respectively. Amounts of as June 30, 2023 that have been recognized in net assets but not yet amortized into net periodic postretirement benefit cost are:
| Net loss | $ 2,112,000 |
During the years ended June 30, 2023 and 2022, the International Union paid the NECA/IBEW Family Medical Care Plan approximately $16,500,000 and $16,000,000, respectively, for medical and prescription coverage for both active and retired employees.
Weighted-average assumptions used to determine net postretirement benefit cost at beginning of year:
| 2023 | 2022 | ||
| Discount rate | 4.50% | 3.50% |
Weighted-average assumptions used to determine benefit obligations at end of year:
| 2023 | 2022 | ||
| Discount rate | 4.50% | 4.50% |
The assumed health care cost trend rates used to measure the expected cost of benefits for the year ended June 30, 2023, were assumed to increase by 8.0% for medical, 5.5% for green shield, 5.0% for dental/vision, 5.0% for Medicare Part B premiums, and 3.94% for legal costs. Thereafter, rates for increases in medical were assumed to gradually decrease until they reach 3.94% over 20 years. If the assumed rates increased by one percentage point it would increase the benefit obligation and net periodic benefit cost as of June 30, 2023 by $11,427,000 and $1,228,000, respectively. However, if the assumed rates decreased by one percentage point it would decrease the benefit obligation and net periodic benefit cost as of June 30, 2023 by $9,085,000 and $937,000, respectively.
Total expected benefit payments, net of Medicare Part D subsidies, for the next 10 fiscal years are as follows:
| Year ending June30, | 2023 | $ 3,528,000 |
| 2024 | 3,724,000 | |
| 2025 | 3,923,000 | |
| 2026 | 4,134,000 | |
| 2027 | 4,330,000 | |
| Years 2028–2032 | 24,205,000 |
The International Union appropriated investments of $267,747,000 at June 30, 2023 and $252,518,000 at June 30, 2022 to pay for future postretirement benefit costs.
Note 8. Contract Balances
The timing of billings, cash collections, and revenue recognition result in contract assets and contract liabilities associated with revenue from exchange transactions. All of IBEW’s contract assets are considered accounts receivable and are included within the accounts receivables balance in the consolidated statements of financial position. All of IBEW’s contract liabilities are included with deferred revenues in the consolidated statements of financial position. Balances in these accounts as of the beginning and end of the years ended June 30, 2023 and 2022 are as follows.
| 2023 | 2022 | 2021 | |||
| Receivables | |||||
| Per capita tax | $ 12,945,281 | $ 10,393,692 | $ 9,971,939 | ||
| Merchandise sales | 776,503 | 212,791 | 226,381 | ||
| $ 13,721,784 | $ 10,606,483 | $ 10,198,320 | |||
| Deferred revenue | |||||
| Per capita tax | $ 13,692,396 | $ 11,144,644 | $ 11,721,924 | ||
| Convention income | 6,000 | – | 2,023,486 | ||
| $ 13,698,396 | $ 11,144,644 | $ 13,745,410 |
Note 9. Royalty Income
The International Union has entered into a multi-year License Agreement and a List Use Agreement with the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) under which the AFL-CIO has obtained rights to use certain intangible property belonging to the International Union, including the rights to use the name, logo, trademarks and membership lists of the International Union, in exchange for specified royalty payments to be paid to the International Union by the AFL-CIO. In turn, the AFL-CIO has sub-licensed the rights to use the International Union intangible property to Capital One Bank, for use by the bank in connection with its marketing of credit card and certain other financial products to members of the International Union. These agreements commenced on March 1, 1997. In 2018, these agreements were extended to December 2025. For the years ended June 30, 2023 and 2022, the International Union recognized as revenue $621,020 and $549,416, respectively.
Note 10. Litigation
The International Union is a party to a number of routine lawsuits, some involving substantial amounts. In all of the cases, the complaint is filed for damages against the International Union and one or more of its affiliated local unions. General Counsel is of the opinion that these cases should be resolved without a material adverse effect on the financial condition of the International Union.
Note 11. Related Party Transactions
The IBEW provides certain administrative services to the International Brotherhood of Electrical Workers’ Pension Benefit Fund (Fund), for which the International Union is reimbursed. These services include salaries and benefits, facilities, computer systems, and other administrative services. The amount reimbursed totaled $2,700,000 and $2,900,000, for the years ended June 30, 2023 and 2022, respectively.
In addition, the International Union collects and remits contributions received on behalf of the Fund from members.
The International Union also pays administrative services on behalf of the Pension Plan for the International Officers, Representatives and Assistants of the International Brotherhood of Electrical Workers, and the Pension Plan for Office Employees of the International Brotherhood of Electrical Workers. The administrative services include auditing, legal and actuarial services. The costs of the administrative services are not readily determinable.
Note 12. Operating Leases
The International Union, through the IBEW Headquarters Building LLC, has entered into agreements to lease space in its building. In addition, the International Union subleases a portion of its office space. These leases, which expire at various dates through 2031, contain renewal options. Future minimum rental payments due under these agreements, excluding the lease payments due from the International Union, are as follows:
| Year ending June30, | 2024 | $ 8,810,246 |
| 2025 | 7,987,888 | |
| 2026 | 7,055,719 | |
| 2027 | 7,100,087 | |
| 2028 | 7,205,711 | |
| Thereafter | 11,566,862 |
Note 13. Finance Leases
The International Union has entered into a master lease agreement for automobiles that qualifies as a capital lease arrangement. As such, the leased automobiles are capitalized and depreciated over their respective lease terms, and a liability is reported for the net present value of the future lease payments due. Remaining lease payments as of June 30, 2023 are due as follows:
| Year ending June 30, | 2024 | $ 533,738 |
| Less: discount to present value (with a rate of 3.5%) | (18,049) | |
| Total lease liability | $ 515,689 | |
Total finance lease costs for the years ended June 30, 2023 and 2022 is as follows:
| 2023 | 2022 | ||
| Amortization of right-of-use assets | $ 2,691,727 | $ 1,238,084 | |
| Interest expense | 64,597 | 70,981 | |
| $ 2,756,324 | $ 1,309,065 |
Note 14. Risks and Uncertainties
The International Union 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 the amounts reported in the consolidated statements of financial position.
Note 15. Subsequent Events Review
Subsequent events have been evaluated through December 15, 2023, which is the date the consolidated financial statements were available to be issued. This review and evaluation revealed no material event or transaction which would require an adjustment to or disclosure in the accompanying consolidated financial statements.
