The FirstBank 401(k) Retirement Plan for Residents of Puerto Rico
Notes to the Financial Statements
December 31, 2022 and 2021
4. |
Party-In-Interest
Transactions |
Parties-in-interest are defined under the
provisions of ERISA as any fiduciary of the Plan, any party rendering service to the Plan, any employer (or any affiliate), any employee of such employer covered by the Plan, and certain others. Certain Plan investments consist of investment in a
money market deposit account at Charles Schwab, or affiliates which is the provider of custodial services as defined by the Plan since April 1, 2005. In addition, as of December 31, 2022 and 2021, the First BanCorp. Unitized Stock Fund
held 377,274 and 379,419 shares, respectively, with a quoted market value of $4,798,931 and $5,228,388, respectively, of First BanCorp. common stock, the parent company of the Plan Sponsor. The First BanCorp. Unitized Stock Fund also has an
investment in a money market fund managed by State Street. State Street provides Charles Schwab with, among other things, custody services for the First BanCorp. Unitized Stock Fund. For the year ended December 31, 2022, the Plan received
dividend income of $180,272 related to the investment in First BanCorp. Unitized Stock Fund and recognized net loss of $203,476, including unrealized loss of $301,063 related to the net depreciation in the fair value of such investment. Plan assets
include notes receivable from participants of $3,409,574 and $3,284,291 as of December 31, 2022 and 2021, respectively. For the year ended December 31, 2022, interest income related to participant loans receivable amounted to $184,756.
These transactions qualify as party-in-interest transactions permitted under the provisions of ERISA.
The Plan obtained its latest determination letter on March 17, 2023, in which the Puerto Rico Treasury Department
determined and informed the Bank that the Plan is designed in accordance with the applicable sections of the PR Code and, therefore, exempt from income taxes. Therefore, no provision for income taxes has been included in the Plans financial
statements.
The Plan Administrator and the Plans tax counsel believe that the Plan is designed, and is currently
being operated, in compliance with the applicable requirements of the PR Code and, therefore, believe that the Plan is qualified and is tax exempt.
Accounting principles generally accepted in the United States of America require 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 federal, state and/ or local taxing authorities. The plan administrator
has analyzed the tax positions by the Plan, and has concluded that as of December 31, 2022 and 2021, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the
financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years
prior to 2018.
Although it has not expressed any intent to do so, the Bank has the right under the Plan to discontinue its contributions at
any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts and such termination shall not reduce the interest of any participating
employee or their beneficiaries accrued under the Plan up to the date of such termination.
Forfeited nonvested accounts amounted to $50,846 as of December 31, 2022 ($41,725 as of December 31, 2021). Forfeited
accounts, if any, are transferred by the Plan administrator to an unallocated account to be used to cover administrative expenses of the Plan or reduce the Banks future contributions. No forfeitures were used to cover administrative expense
during 2022.
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