Notes to Financial Statements
December 31, 2019
1. Description of the Plan
The following description of the CACI $MART Plan (the Plan), which is sponsored and administered by CACI International Inc (the Company or Plan Sponsor), provides only general information about various terms, conditions and features of the Plan. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.
General
The Plan was adopted on September 1, 1985, as a defined contribution plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Plan has both a 401(k) and a profit-sharing feature. Company matching 401(k) and any profit-sharing contributions are made at the discretion of the Plan Sponsor. All contributions to the Plan are maintained in a trust fund consisting of separate accounts identifiable by individual participant.
Eligibility
In general, employees of the Plan Sponsor and its participating subsidiaries who are U.S. citizens or residents, regardless of age, are eligible to participate.
Contributions
Participants can elect to contribute up to 75% of their annual compensation in any combination of before-tax and after-tax (Roth) contributions subject to the Internal Revenue Service (IRS) maximum. Participants who are age 50 and older by each Plan year-end date have the opportunity to defer an additional amount up to the annual catch-up contribution limits as outlined under the Economic Growth and Tax Relief Reconciliation Act of 2001.
Participants may also contribute amounts representing distributions or transfers from other qualified defined benefit plans or defined contribution plans.
Effective January 1, 2019, the Company makes matching contributions to eligible employees in an amount equal to 50% of the first 8% of pre‑tax compensation deferred by eligible participants, subject to federal limits. Certain employees are not eligible for matching contributions. Prior to January 1, 2019, the Company made matching contributions to eligible employees in an amount equal to 50% of the first 6% of pre-tax compensation deferred by eligible participants, subject to federal limits.
The Company also may elect to make annual discretionary profit-sharing contributions for all participants based on annual financial results. There were no discretionary profit-sharing contributions during the years ended December 31, 2019 and 2018.
Vesting
All participants vest immediately in their salary deferral contributions and the investment earnings thereon, and vest in the Company matching and discretionary profit-sharing contributions, and the investment earnings thereon, based on years of continuous service. Participants become 100% vested in Company matching and profit-sharing contributions after three years of continuous service.
Participant Accounts
The Plan establishes and maintains a separate account in the name of each individual participant. Participant accounts are credited with participant salary deferral contributions, Company matching contributions, and allocations of (1) any discretionary profit-sharing contributions and (2) Plan investment earnings. Participant accounts are reduced by an allocation of Plan administrative expenses. Allocation of profit-sharing contributions are based on participants’ annual compensation, and allocations of Plan investment earnings are based on participant account balances.
The benefit to which a participant is entitled is the amount that can be provided from the participant’s vested account.
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CACI $MART Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Investments
Participants direct the investment of their contributions, and Plan Sponsor contributions, into any of the investment options offered by the Plan, and may change their investment options daily.
Plan Administration
The Company is responsible for the overall administration of the Plan. T. Rowe Price Trust Company serves as trustee and custodian of the Plan, and T. Rowe Price Retirement Plan Services, Inc. provides investment management and recordkeeping services. As provided by the Plan document, administrative expenses of the Plan may be funded by the Plan or paid by the Plan Sponsor. Origination fees for loans made to participants are funded by individual account assets of the participant originating the loan.
During each of the years ended December 31, 2019 and 2018, the Plan funded administrative expenses of $1.0 million and $1.1 million, respectively. The Plan Sponsor paid all other administrative expenses.
Participant Loans
The Plan allows participants to borrow against their vested account balances. The minimum loan amount is $1,000, and the maximum is the lesser of 50% of the vested balance of the participant’s account or $50,000, reduced by the highest outstanding balance of any loan during the preceding 12 months. Participants are permitted to have only one loan outstanding at a time.
Loan terms may be up to five years unless the borrowings are made to finance the purchase of a primary residence, in which case the term of the loan may be over a reasonable period of time that may exceed five years. Payments of interest and outstanding principal are made primarily through automatic payroll deductions.
Interest is charged over the term of the loan at the prime rate plus 1%, based on the rate on the last business day of the month prior to the month in which the loan is made. Outstanding loan balances are secured by vested participant account balances.
If a participant terminates employment with the Company, they may repay their loan in full prior to initiating a distribution or they may continue to make loan payments via an Automated Clearing House (ACH) arrangement. If the loan is defaulted the participant’s distribution will be reduced by the amount of the outstanding loan.
Retirement and Disability Benefits or Termination of Employment
Upon a participant’s retirement, disability, or termination for other reasons, the normal forms of benefit for all participants, other than those whose pension account merged into the Plan in 1997, are lump sum or installment cash payments. For pension accounts that were merged into the Plan in 1997, the normal form of benefit is a joint and survivor annuity for a married participant or a single life annuity for a single participant. Alternative forms of distribution for this group include lump sum or installment cash payments or the purchase of a different form of annuity. Distributions to participants who have separated from service and have requested a distribution are made no later than 60 days after their date of termination. Outstanding loan balances that have been applied against these distributions are reported as benefits paid to participants in the accompanying financial statements.
Death Benefits
Upon death, a participant’s designated beneficiary will receive a benefit distribution during the same period over which the participant would have received his or her benefit.
In-Service and Hardship Withdrawals
In-service withdrawals are available in certain limited circumstances, as defined by the Plan. Hardship withdrawals are allowed for participants experiencing a severe financial hardship, as defined by the Plan, subject to restrictions and limitations imposed by the Plan. Hardship withdrawals are strictly regulated by the IRS.
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CACI $MART Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan have been prepared using the accrual method of accounting in accordance with U.S. generally accepted accounting principles (GAAP).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Plan Sponsor to make estimates and assumptions that affect the amounts reported in the financial statements, accompanying notes, and supplemental schedules. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
Investments held by the Plan are stated at fair value. 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 (an exit price). See Note 3 for further discussion and disclosures related to fair value measurements.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded as earned. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.
Participant Benefits
Benefit payments made to participants or transferred to another qualified plan at the direction of participants are recorded when paid.
Contributions
Participant contributions are allocated to participant accounts when the Company remits payroll deductions from eligible Plan participants. Employer contributions are recognized in the period in which they become obligations of the Company. As of December 31, 2019 and 2018, there were no unallocated employer contributions.
Forfeitures
Forfeitures of non-vested Company matching and profit-sharing contributions are used to offset respective Company contributions generally for the Plan year in which such forfeitures occur. Company matching contributions were reduced by $3.7 million and $3.0 million during the years ended December 31, 2019 and 2018, respectively, by the offset of available forfeited balances. At December 31, 2019 and 2018, forfeited non-vested account balances available to offset future Company contributions totaled $4.9 million and $2.2 million, respectively. As of December 31, 2019 and 2018, receivable amounts were entirely offset by available forfeitures.
Notes Receivable from Participants
Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2019 or 2018. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.
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CACI $MART Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Risk and Uncertainties
The Plan provides for a number of investment options, primarily in stock, mutual funds and common trust funds with varying investment objectives and underlying security instruments including fixed income and equity securities. These investment securities are exposed to various risks including interest rate, market and credit risk. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in risks could materially affect participants, account balances and the amounts reported in the accompanying financial statements.
3. Fair Value Measurements
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Plan considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The Plan follows a fair value hierarchy to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1 – quoted prices in active markets for identical assets or liabilities.
Level 2 – inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Investments measured at fair value on a recurring basis consisted of the following types of instruments (in thousands):
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Fair Value at December 31,
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2019
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2018
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Mutual funds:
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Bond funds
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Level 1
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$
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31,059
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$
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22,367
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Stock funds
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Level 1
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540,565
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354,736
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Total mutual funds
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571,624
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377,103
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Participant-directed brokerage accounts
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Level 1
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5,231
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3,281
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Company stock
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Level 1
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96,851
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55,076
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Common trust funds
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Level 2
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1,405,927
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-
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Common trust funds measured at NAV
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-
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1,131,368
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Total investments measured at fair value
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$
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2,079,633
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$
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1,566,828
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The Plan did not have any transfers between levels during the years ended December 31, 2019 and 2018.
The Plan adopted ASU 2018-09, Codification Improvements, for the year ended December 31, 2019. In connection with the adoption, the Plan has prospectively included certain common trust funds in the fair value hierarchy disclosure that were previously excluded from such disclosure because those investments previously used the net asset value per share practical expedient. While this ASU modified the Plan’s fair value disclosures, there was no impact to the financial statements themselves.
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CACI $MART Plan
Notes to Financial Statements (continued)
3. Fair Value Measurements (continued)
Mutual funds – Mutual fund investments are valued using quoted market prices listed on nationally recognized securities exchanges.
Company stock – The value of the Plan’s investment in CACI International Inc common stock is based on the closing market price of the Company’s common stock on the last business day of the Plan year.
Participant-directed brokerage accounts – Participant-directed brokerage accounts are valued using quoted market prices listed on nationally recognized securities exchanges. The participant-directed brokerage accounts allow Plan participants to invest in a wide range of investments that are not available through the Plan’s core investment options, including various publicly-traded securities and exchange-listed closed-end funds, as well as certain open-end mutual funds. These additional investments offer a spectrum of strategies and objectives beyond those available in the core investments of the Plan. Participant-directed brokerage accounts are administered by Charles Schwab & Co., Inc., a subservice organization to T. Rowe Price Retirement Plan Services, Inc.
Common trust funds – Common trust funds are valued based on the net asset value reported by the trust manager as of the financial statement dates, which may reflect recent transaction prices, evaluations based on pricing services or other observable input. The common trust funds are issued by T. Rowe Price and Prudential and hold investments in accordance with stated objectives. These common trust funds include:
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•
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T. Rowe Price Retirement Active Trusts, which seek to emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation with the need for income as retirement approaches, and focus more on income and principal stability during retirement;
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•
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T. Rowe Price Blue Chip Growth Trust, which focuses on "blue chip" companies with leading market positions, seasoned management teams, strong financial conditions, and above-average growth and profitability;
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•
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T. Rowe Price International Growth Equity Trust D, which seeks long-term growth of capital through common stock of established, non-U.S. companies;
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•
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T. Rowe Price US Small-Cap Core Equity Trust D, which seeks long-term capital growth by investing primarily in the stocks of small companies;
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•
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T. Rowe Price US Value Equity Trust D, which seeks long-term capital appreciation and, secondarily, income by investing primarily in common stocks believed to be undervalued;
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•
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T. Rowe Price Stable Value Fund (Stable Value Fund), which seeks maximum current income while maintaining stability of principal and invests in FBRICs. This fund is primarily invested in guaranteed investment contracts (GICs), bank investment contracts (BICs), synthetic investment contracts (SICs), and separate account contracts (SACs). GICs, BICs, SICs, and SACs are types of investment contracts that are designed to provide principal stability and a competitive yield. Participant-directed redemptions have no restrictions. The Stable Value Fund requires a reasonable amount of time to liquidate the Plan’s share in the fund.
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•
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Prudential Core Plus Bond Fund, which seeks to outperform the Barclay’s U.S. Aggregate Bond Index over a full market cycle, through investments in U.S. Treasury, agency, corporate, mortgage-backed, and asset-backed securities.
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Under the trusts’ governing documents, the trustee may require 90 days’ prior written notice before redemption or withdrawal can occur.
4. Plan Termination
Although it has not expressed any intent to do so, the Plan Sponsor has the right to terminate the Plan subject to the provisions of ERISA. Upon Plan termination, as directed by the Plan Sponsor, participants would become 100% vested in all Plan Sponsor contributions made or due upon the date of termination, and the Trustee would either distribute benefits to participants or deliver the Plan assets to the trustee of another qualified plan.
8
CACI $MART Plan
Notes to Financial Statements (continued)
5. Tax Status
The Plan has received a determination letter from the Internal Revenue Service (IRS) dated May 30, 2014, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualified status. The Plan Sponsor believes the Plan is being operated in compliance with the applicable requirements of the Code and therefore believes the Plan, as amended, is qualified and the related trust is tax-exempt.
Accounting principles generally accepted in the U.S. 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 Sponsor has analyzed the tax positions taken by the Plan, and has concluded that there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
6. Parties-in-Interest Transactions
Certain Plan investments are managed by, and certain administrative and record-keeping services are provided by, T. Rowe Price Retirement Plan Services, Inc. Also, T. Rowe Price Trust Company serves as trustee of the Plan. Mercer Investment Consulting, Inc. & Mercer (US) Inc. provide investment and monitoring services for the Plan. These affiliated companies qualify as parties-in-interest to the Plan in regard to transactions involving Plan assets, and therefore the management and other fees earned by these companies are done so through transactions to which statutory exemptions apply. The Plan also invests in the common stock of the Company. In addition, notes receivable from participants are considered to be party-in-interest transactions for which a statutory exemption from the prohibited transaction regulation exists.
7. Subsequent Events
The Plan has evaluated subsequent events and determined that no significant subsequent events have occurred requiring adjustments to the financial statements or disclosures.
In January 2020, the World Health Organization declared the coronavirus outbreak (COVID-19) a global health emergency. In March 2020 it was characterized as a pandemic. The COVID-19 outbreak has negatively affected economies and global financial markets. Volatility in financial markets has affected and may continue to affect the values of the Plan’s individual investments. The extent of the impact of the COVID-19 outbreak on the Plan’s investments and the amounts reported in the 2019 statement of net assets cannot be predicted at this time.
The Coronavirus Aid Relief, and Economic Security Act (CARES Act) was passed by Congress on March 27, 2020. The Plan was operationally amended to implement certain changes permitted by the CARES Act, which allows eligible individuals to receive coronavirus-related distributions, increases available loan amounts, extends the period for loan repayments, suspends required minimum distributions, and delays the commencement date for required minimum distributions. Written amendments to the Plan to reflect these operational changes will be adopted at a later date.
9