Change in Preparation of 2016 Schedule D - Part 1A - Sections 1 and 2

Submitted by Cynthia Braman on Wed, 04/19/2017 - 11:49am

By Russell Simpson, Booke Life Instructor

Man working at a computerDon’t miss this change in the preparation of 2016 Schedule D - Part 1A - Sections 1 and 2!

Former “Class 1” Money Market Mutual Funds, renamed All Other Money Market Mutual Funds on Schedule DA – Short-Term Investments (E17), will no longer be included in Schedule D - Part 1A - Sections 1 and 2 (SI05 – SI09).

This change stems from regulatory action taken by the Securities and Exchange Commission whereby institutional prime money market funds are now required to report a floating net asset value instead of a stable net asset value.  Part Six, Section 2 (b) (ii) of the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual) contains the NAIC’s Class 1 List, which identifies money market funds that can be reported as bonds by insurers in part because they are permitted to report stable NAV under SEC regulations.  Because of the regulations adopted by the SEC, the money market funds on the Class 1 List fit the SEC definition of institutional prime funds and therefore, such money market funds can no longer report stable NAV and accordingly will no longer be eligible for bond treatment under statutory accounting.

The Statutory Accounting Principles Working Group took action on June 9, 2016 to amend SSAPs 2, 26, 30 and 32 to clarify the reporting of money market mutual funds registered under the Investment Company Act of 1940 and regulated under rule 2a-7 of the Act.  These types of money market mutual funds are now accounted for as short-term investments regardless of whether they are accounted for under SSAP No. 26 or SSAP No. 30.  A new footnote 2 was also added to SSAP 2 to clarify how certain short-term investments should be carried in the financial statements – “As detailed in SSAP No. 26, money market mutual funds on the U.S. Direct Obligations / Full Faith and Credit Exempt List, as identified in Part Six, Section 2 of the Purposes and Procedures Manual of the NAIC Investment Analysis Office are accounted for under SSAP No. 26.  All other Money Market Mutual Funds shall be accounted for under SSAP No. 30.”

The 2016 Schedule D – Part 1A – Sections 1 and 2 will now include the book/adjusted carrying value of the following investments:

Investment Type Annual Statement Reference
Bonds Page 2, Line 1, Column 3
Short-Term Investments:  
     Subtotal Bonds E17, Line 8399999, Column 8
     Exempt Money Market Mutual Funds as Identified by the SVO E17, Line 8899999, Column 8
Cash Equivalents E27, Line 8399999, Column 6

Related cross check information related this review follows:

   
Electronic Filing - EF15.INV - General Interrogatories - Part 1 - Investments GI #30.1, Column 1
Page 15 - General Interrogatories - Part 1 - Common Interrogatories GI #30.1, Column 1
SI07 - Schedule D - Part 1A - Section 1 (Total Bonds Current Year) Section 10, Line 10.7, Column 7
SI08 - Schedule D - Part 1A - Section 2 (Total Bonds Current Year) Section 10, Line 10.6, Column 7

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