dynegyinc401k.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
________________
FORM
11-K
_________________
ANNUAL
REPORT PURSUANT TO SECTION 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2008
Commission
file number: 001-33443
_________________
Dynegy
Inc. 401(k) Savings Plan
(Full
title of the plan)
_________________
Dynegy
Inc.
1000
Louisiana
Suite
5800
Houston,
Texas 77002
(Name of
issuer of the securities held
pursuant
to the plan and the address
of its
principal executive office)
TABLE
OF CONTENTS
Page No.
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL
STATEMENTS
Statements
of Net Assets Available for
Benefits
2
Statement
of Changes in Net Assets Available for
Benefits 3
NOTES TO
FINANCIAL
STATEMENTS
4
SUPPLEMENTAL
SCHEDULE
Schedule
H, Line 4(i): – Schedule of Assets (Held at End of
Year)
18
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Note:
Other schedules required by 29 CFR 2520.103-10 of the
Department
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of
Labor’s Rules and Regulations for reporting and disclosure
under
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ERISA
have been omitted because they are not
applicable.
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EXHIBIT
23.1 CONSENT OF INDEPENDENT
REGISTERED
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Participants and Administrator of
the
Dynegy Inc. 401(k) Savings Plan
We have
audited the accompanying statements of net assets available for benefits of the
Dynegy Inc. 401(k) Savings Plan (the “Plan”) as of December 31, 2008 and 2007,
and the related statement of changes in net assets available for benefits for
the year ended December 31, 2008. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the net assets available for benefits of the Plan as of
December 31, 2008 and 2007, and the changes in net assets available for benefits
for the year ended December 31, 2008 in conformity with accounting principles
generally accepted in the United States of America.
Our
audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
table of contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplementary information is the responsibility of the Plan's
management. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/
McConnell & Jones LLP
Houston,
Texas
June 18,
2009
DYNEGY
INC. 401(k) SAVINGS PLAN
STATEMENTS
OF NET ASSETS AVAILABLE FOR BENEFITS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
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2008
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2007
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ASSETS
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Investments at fair
value:
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Plan interest in Dynegy Inc.
Master Trust
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$ |
102,466,761 |
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$ |
163,280,147 |
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Participant loans
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1,931,590 |
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1,885,653 |
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Total investments
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104,398,351 |
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165,165,800 |
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Receivables:
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Employer
contributions
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160,575 |
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142,579 |
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TOTAL ASSETS
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104,558,926 |
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165,308,379 |
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NET
ASSETS AVAILABLE FOR BENEFITS
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$ |
104,558,926 |
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$ |
165,308,379 |
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The
accompanying notes are an integral part of these financial
statements.
DYNEGY
INC. 401(k) SAVINGS PLAN
STATEMENT
OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR
THE YEAR ENDED DECEMBER 31, 2008
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INVESTMENT
INCOME (LOSS), NET:
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Plan interest in net loss of
Dynegy Inc. Master Trust
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$ |
(60,380,483 |
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Interest on participant
loans
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140,843 |
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Total investment
loss
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(60,239,640 |
) |
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CONTRIBUTIONS:
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Employee
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9,217,204 |
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Employer
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4,029,974 |
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Total
contributions
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13,247,178 |
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EXPENSES:
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Benefit payments
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13,887,604 |
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Administrative
expenses
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77,210 |
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Total expenses
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13,964,814 |
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NET
DECREASE BEFORE TRANSFERS
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(60,957,276 |
) |
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PLAN-TO-PLAN
TRANSFERS
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207,823 |
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NET
DECREASE
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(60,749,453 |
) |
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NET
ASSETS AVAILABLE FOR BENEFITS
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Beginning of year
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165,308,379 |
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End of year
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$ |
104,558,926 |
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The
accompanying notes are an integral part of these financial
statements.
DYNEGY
INC. 401(k) SAVINGS PLAN
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Explanatory
Note
On April
2, 2007, Dynegy Illinois Inc. (formerly Dynegy Inc.), an Illinois corporation
(“Dynegy Illinois”), consummated a transaction (the “Merger”) in which it became
a wholly owned subsidiary of a newly created entity, Dynegy Inc., a Delaware
corporation (“Dynegy”).
Following
the Merger, Dynegy replaced Dynegy Illinois as the sponsor of the Dynegy Inc.
401(k) Savings Plan (the “Plan”). In addition, all shares of Dynegy
Illinois common stock in the Dynegy Stock Fund were converted into shares of the
Class A common stock of Dynegy, par value $.01 per share (“Dynegy Class A common
stock”), based on a formula established in connection with the
Merger. As a result, future investments in the Dynegy Stock Fund will
be represented by units of Dynegy Class A common stock, rather than units of
Dynegy Illinois common stock. The Plan was amended on April 2, 2007
to reflect such changes.
The
following description of the Plan provides only general
information. Participants should refer to the Plan document, which is
the governing document, for a more complete description of the Plan’s
provisions.
General
Effective
May 1, 1989, Natural Gas Clearinghouse, the predecessor company to Dynegy Inc.
(collectively, the “Company”), established this Plan which qualifies under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”).
The Plan is a trusteed, defined contribution plan subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”). The Plan and related trust are established and maintained
for the exclusive benefit of participating employees of certain affiliates of
the Company that participate in the Plan (the participating affiliates in the
Plan are each referred to herein as the “Employer”). Vanguard
Fiduciary Trust Company (“Vanguard” or the “Trustee”) is the trustee for the
Plan. The Dynegy Inc. Benefit Plans Committee serves as the “Plan
Administrator” for the Plan.
As of
December 31, 2008, the following entities were participating in the
Plan: Dynegy Operating Company, Dynegy Energy Services Inc., Dynegy
Marketing and Trade, Sithe Energies, Inc., Sithe Energies Power Services, Inc.,
Dynegy Power Company and Dynegy Northeast Generation, Inc.—but solely for
purposes of providing benefits under the Plan to eligible employees hired on or
after April 3, 2008 and who were covered by that certain Memorandum of Agreement
between Dynegy Northeast Generation, Inc. and Local Union 320 of the
International Brotherhood of Electrical Workers, dated March 26, 2008, as
ratified on April 3, 2008 (collectively, the “Employer”). Note that
Calcasieu Power, LLC was a participating employer under the Plan but was sold in
April of 2008 and ceased to be a participating employer as a result of the
sale.
Participant
Accounts
Each
participant’s accounts are credited with the participant’s contributions and
allocations of the Employer’s contributions and Plan earnings. For participants
with loans, a loan administrative fee is charged to their respective account
each year.
Forfeitures
At
December 31, 2008 and 2007, forfeited nonvested accounts totaled $387,579 and
$110,122, respectively. Any forfeitures under the Plan are applied to reduce
Employer contributions and/or to pay Plan administrative expenses. In 2008,
Employer matching contributions were reduced by $118,493 and administrative
expenses were reduced by $29,014 from forfeitures from nonvested
accounts.
Investment of
Funds
Each
participant has the right upon enrollment to select the fund(s) into which the
participant’s before-tax, after-tax and rollover contributions (and the earnings
allocable thereto) will be invested. A participant may change the allocation of
such participant contributions made to the selected funds or transfer amounts
among investment funds during the Plan year in accordance with the procedures
established by the Plan Administrator. Employer matching
contributions and Employer discretionary contributions, if any, are made to the
Dynegy Stock Fund (the “Stock Fund”) which are allocated to participants as
units in the Stock Fund. A participant may transfer such Employer
contributions (and the earnings allocable thereto) among investment funds
anytime after they are initially credited to his or her account, subject to the
limitations contained in the Company's insider trading policy.
Eligibility and
Contributions
All
employees of the Employer are eligible to participate in the Plan other than (a)
employees covered by a collective bargaining agreement (unless such agreement
provides for coverage under the Plan), (b) certain nonresident aliens, (c) any
individual designated, compensated, or otherwise classified or treated by the
Employer as a leased employee, an independent contractor or other non-common law
employee, (d) employees who have waived participation in the Plan, (e)
individuals who are deemed to be employees under certain Treasury regulations,
and (f) an employee of an entity that has been designated to participate in the
Plan to the extent that such entity’s designation specifically excepts such
employee’s participation. Participation in the Plan commences
immediately upon employment as an eligible employee after such employee follows
the Plan’s enrollment procedure. A participant’s election to make before-tax
and/or after-tax contributions to the Plan is
voluntary. Notwithstanding the foregoing, participation in the Plan
is voluntary for an eligible employee who is also entitled to accrue a benefit
or service credit under the Dynegy Midstream Services Retirement Plan (formerly
the Trident NGL, Inc. Retirement Plan) (the “Dynegy Midstream Plan”), and such
an employee will not be eligible to receive an allocation of Employer
discretionary contributions under the Plan.
Participants
may make before-tax contributions including “catch-up” contributions (if age 50
or older before the close of the particular Plan year) by payroll deduction up
to the legal dollar limit. Additionally, as of January 1, 2008,
participants may elect to have some or all of their before-tax contributions
(including any catch-up contributions) contributed to the Plan as an after-tax
Roth contribution up to the legal dollar limit. Participants may also
make after-tax contributions in cash or by payroll deduction. Note
that, unlike regular after-tax contributions, distributions of Roth
contributions and earnings generally are not taxable to a participant after a
five-year period beginning with the first Roth contributions made to the Plan by
a participant, provided that the distribution is: (1) made on or
after the date the participant attains age 59 1/2; (2) made to a beneficiary
after the participant’s death; or (3) made as a result of the participant being
disabled. Total contributions are limited to the extent required by
law. A participant may “roll-over” into the Plan amounts distributed
from another eligible retirement plan.
The
Employer contributes a match each pay period to the Plan equal to 100% of the
participant’s before-tax contributions (including any catch-up contributions and
Roth contributions) that are not in excess of 5% of the participant’s
“Compensation” (as defined by the Plan) for such pay period. In
addition, each calendar year the Employer makes a “true-up” matching
contribution, if necessary, on behalf of each participant who was an eligible
employee on the last day of the year that takes into account the participant’s
before-tax contributions (including any catch-up contributions and Roth
contributions) and Compensation for the year. Employer matching
contributions are made to the Stock Fund in the Master Trust (as defined below)
and allocated to participants as units in the Stock Fund. Dividends
on stock held in the Stock Fund are also invested in the Stock Fund. See Notes 4
and 9 for more information.
In
addition, the Employer may make a discretionary contribution for a calendar year
that is allocated based on Compensation to (a) participants who are eligible
employees on the last day of the year and who are not accruing benefits or
service credit under the Dynegy Midstream Plan and (b) participants who
terminated employment during the year on or after attaining age 65 or by reason
of death or total and permanent disability and who, immediately prior to such
termination, were not accruing benefits or service credit under the Dynegy
Midstream Plan. The discretionary contribution, if any, is made to
the Stock Fund and allocated to participants as units in the Stock Fund. No
contributions were made under this arrangement during plan years 2008 and
2007. Further, the Employer may make contributions in order to meet
nondiscrimination requirements as prescribed in the Plan document.
Vesting
Generally,
participants vest in Employer matching and discretionary contributions as
follows:
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Years of Service
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Vesting Percentage
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1
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25%
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2
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50%
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3
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75%
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4
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100%
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Participants
also become 100% vested in such contributions upon (a) attaining normal
retirement age (age 65) while employed by the Employer, (b) termination of
employment with the Employer by reason of total and permanent disability or
death or (c) if the participant is affected by a termination or a partial
termination of the Plan.
Employee
before-tax (including any catch-up and Roth contributions), after-tax and
rollover contributions are 100% vested and non-forfeitable at all
times.
Distributions
Distributions
as provided for in the Plan are made to plan participants or their beneficiaries
upon the participant’s termination of employment, total and permanent disability
or death. Prior to May 1, 2002, participants could elect to receive
their distributions in a lump sum, in periodic installment payments or in
various annuity forms. From and after May 1, 2002, only lump sum
distributions are available under the Plan. All distributions are
made in cash, except that a participant may elect to have the portion of his or
her account that is invested in the Stock Fund distributed in shares of Dynegy
Inc. common stock.
Generally,
a participant can defer the receipt of his or her distribution until April 1 of
the calendar year following the later of the calendar year in which he or she
reaches age 70-1/2 or the calendar year in which he or she terminates
employment. However, an automatic lump sum distribution may be made
upon termination of employment if the participant’s aggregate account balance is
not in excess of $1,000.
The Plan
permits a variety of in-service withdrawals. Any participant may
withdraw amounts credited to his or her after-tax account, rollover account and
ERISA and Securities Class Action Settlement accounts, as
applicable. See Note 9 for more information regarding these two Class
Action Settlement accounts. A participant who has attained age 59-½
may withdraw amounts from his or her before-tax account, “catch-up” account, as
applicable, and the vested interest in his or her Employer contribution
account. A hardship withdrawal is also permitted under the
Plan. In addition, certain special in-service withdrawal rights apply
to certain amounts that have been transferred to the Plan from other retirement
plans.
Loans to
Participants
The Plan
allows participants to borrow from their Plan accounts an amount not to exceed
the lesser of $50,000 (reduced by the excess of the highest outstanding balance
of loans during the one-year period before the date the loan is made over the
outstanding balance of loans on the date the loan is made) or 50% of the vested
account balance (other than the portion of such account balance that is invested
under the directed brokerage investment fund option). Interest is charged on
these loans at a rate commensurate with interest rates charged by persons in the
business of lending money for similar type loans. A loan may not be
made in an amount less than $500. Additionally, no participant may
have more than three outstanding loans at any given time, and only one of those
loans may be used to acquire any house that within a reasonable period of time
is to be used as a primary residence.
All loans
made will mature and be payable in full no later than five years from the date
of the loan. An exception exists when the loan is used by the participant to
acquire his or her principal residence. In this case, the loan will mature and
be payable in full no later than ten years from the date of the loan. Loan
repayments are made by payroll deductions authorized by the participant while
the participant remains employed by the Employer or an
affiliate. After termination of employment and before receiving a
distribution from the Plan, a participant may continue to make loan payments
directly to the Trustee. Principal and interest paid on the loan is credited to
the participant's account. The Trustee maintains a loan fund to hold the
balances of participants' loans.
Termination of the
Plan
Subject
to certain limitations, the right to amend, modify or terminate the Plan is
reserved by the Company.
In the
event the Plan is terminated, the assets of the trust fund will be liquidated
and each participant will be entitled to receive the entire amount of his or her
account.
Plan Changes and
Amendments
Effective at various dates in 2006 and
2007, the Plan was amended
to incorporate various amendments permitted and required by the final Section Code 401(k)/(m) regulations and other Internal Revenue Service
guidance, including the
following: incorporate the new definition of Severance from
Employment and related requirements under the new regulations; clarify timing of compensation for
elective deferrals under Code Section 401(k) and Code Section 415 regulations; reflect ACP/ADP testing requirements,
minimum required corrective contributions and recharacterizing of catch-up
contributions for testing purposes under new regulations; incorporate the safe harbor method for calculating gap
period income; add good faith compliance language for
final Code Section
401(k)/(m) regulations;
add burial expenses and residential
casualty losses as new hardship events; add special hurricane relief
distribution and loan provisions; and incorporate new Plan termination
requirements.
Effective January 1, 2007, the Plan was
amended to reflect the deposit of the Securities Class Action Settlement
proceeds into the Plan for the benefit of specified participants, and to add
related administrative provisions.
Effective April 2, 2007, as of the
completion of the merger between Dynegy Illinois Inc. (formerly "Dynegy Inc."),
an Illinois corporation, and certain LS Power entities, the Plan was amended to
provide that Dynegy Inc., a Delaware corporation, became the Plan’s sponsor and
that all shares of common stock in the Stock Fund became the common stock of
Dynegy Inc., a Delaware corporation. In addition, certain employees
of specified LS Power entities who became employed by an Employer, within a
specified period of time, were credited with certain prior
service. See Note 9 for information regarding the Dynegy Illinois
Inc. merger. Further, amendments to the Plan were also made regarding
certain administrative provisions regarding the Plan
Administrator.
Effective
January 1, 2008, the Plan was amended in several respects, as
follows: (1) to allow participants to make after-tax Roth
contributions to the Plan that are eligible for Employer matching contributions
in the same manner and amount as before-tax contributions (the combined total
before-tax contributions and after-tax Roth contributions may not exceed the IRS
elective deferral limit ($15,500 for 2008)); (2) to accept eligible Roth 401(k)
distributions as rollover contributions to the Plan; (3) to allow (in addition
to a participant and a participant’s spouse or eligible former spouse) a
non-spouse beneficiary to elect a direct rollover distribution of all or a
portion of his or her Plan benefit to an eligible retirement plan; and (4) to
add a Roth IRA account as an eligible retirement plan for direct rollover
distribution purposes.
Effective
March 17, 2008, the Plan was amended to provide service crediting for purposes
of vesting under the Plan to certain individuals employed by Accenture
LLP.
Effective April 1, 2008 (“Merger Date”), the Extant, Inc. 401(k) Plan (the
“Extant Plan”) was merged into the Plan. The benefits structure
and related provisions under the Extant Plan continue as a separate benefits structure under
the
Plan. Participants in the Extant Plan on the Merger Date are treated as Plan participants (an
“Extant Member”) as a result of the merger with respect
to their transferred account balances. The Extant Plan account
balances of Extant Members amounting to $207,823 were transferred to the Plan and
credited on the Merger Date to the appropriate accounts established for Extant
Members under the Plan (“Transferred Accounts”). Extant Members are fully
vested in their Transferred Accounts.
Effective
April 3, 2008, the Plan was amended to provide that employees who are hired by
Dynegy Northeast Generation, Inc. on or after April 3, 2008 and who are covered
by the Memorandum of Agreement between Dynegy Northeast Generation, Inc. and
Local Union 320 of the International Brotherhood of Electrical Workers, dated
March 26, 2008 as ratified on April 3, 2008 are eligible to participate in the
Plan (provided such individuals otherwise meet the Plan’s eligibility
requirements).
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2.
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SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
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Basis of
Accounting
The
accompanying Plan financial statements are prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Investments
Participant
loans included in the loan fund are valued at cost, which approximates fair
value. Purchases and sales of securities are recorded on a
trade-date-basis.
The
investments held in the Dynegy Inc. Master Trust ("Master Trust") are stated at
fair value based on the latest quoted market values of the underlying
securities. Securities for which no quoted market value is available are
evaluated and valued by Plan management with reference to the underlying
investments, assumptions and methodologies used in arriving at fair value in
accordance with Financial
Accounting Standards Board Statement No. 157, Fair Value
Measurements (FASB
Statement No. 157) (Note 7). Plan interest in the net assets of the
Master Trust is based on the assets held by each plan in the Master Trust on an
actual basis. At December 31, 2008 and 2007, the Plan's interest in the Master
Trust was approximately 43% and 45%, respectively.
Investment
securities are exposed to various risks, such as interest rate, market, and
credit. Due to the level of risk associated with certain investment securities
and the level of uncertainty related to changes in the value of investment
securities, it is at least reasonably possible that changes in risks in the near
term could materially affect the amounts reported in the Statement of Net Assets
Available for Benefits.
The FASB
issued FSP AAG INV-1 and SOP 94-4-1 Reporting of Fully
Benefit-Responsive Investment Contracts Held by Certain Investment Companies
Subject to the AICPA Investment Company Guide and Defined-Contribution Health
and Welfare and Pension Plans (the FSP) which requires benefit-responsive
investment contracts held by a defined-contribution plan to be reported at fair
value. However, contract value is the relevant measurement attribute for that
portion of the net assets available for benefits of a defined-contribution plan
attributable to fully benefit-responsive investment contracts because contract
value is the amount participants would receive if they were to initiate
permitted transactions under the terms of the plan. The FSP, requires the
Statement of Net Assets Available for Benefits to present the fair value of the
investment contracts as well as the adjustment of the fully benefit-responsive
investment contracts from fair value to contract value, if material (Note 5).
The Statement of Changes in Net Assets Available for Benefits is prepared on a
contract value basis.
Income
Net
appreciation (depreciation) of investments is comprised of realized and
unrealized gains and losses. Realized gains or losses represent the difference
between proceeds received upon sale and the average cost of the investment.
Unrealized gain or loss is the difference between market value and cost of
investments retained in the Plan (at financial statement date). For the purpose
of allocation to participants, the Stock Fund is valued by the Plan at its unit
price (comprised of market price plus uninvested cash position) on the date of
allocation and current unit price is used at the time of distribution to
participants resulting in a realized gain or loss and is reflected in the income
from the Plan’s investment in the Master Trust.
Investment
income from the Plan’s investment in the Master Trust consists of the Plan’s
proportionate share of the Master Trust’s interest and dividend income and
investment income from net appreciation (depreciation) in fair value of
investments.
The
Trustee records dividend income as of the ex-dividend date and accrues interest
income as earned. Realized gains and losses on security sales are
computed on an average cost basis.
Expenses
Certain
expenses incurred in the administration of the Plan and the related trusts are
paid by the Employer. These expenses include fees and expenses of the
consultants, auditors, and legal personnel.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
materially from these estimates.
Distribution of
Benefits
Distributions
of benefits are recorded when paid.
Risk and
Uncertainties
Investment
securities are exposed to various risks, such as interest rate, market, and
credit. Due to the level of risk associated with certain investment securities
and the level of uncertainty related to changes in the value of investment
securities, it is at least reasonably possible that changes in risks in the near
term could materially affect the amounts reported in the Statement of Net Assets
Available for Benefits.
The
Internal Revenue Service has determined and informed the Company by a letter
dated June 16, 2004, that the Plan and related trust are designed in accordance
with the applicable sections of the Code. The Plan has been amended by
subsequent amendments not covered by the determination letter. However, the Plan
Administrator believes that the Plan is designed and is currently being operated
in compliance with the applicable requirements of the Code. Therefore, no
provision for income taxes has been included in the Plan’s financial
statements.
Plan
investments are received, invested and held by the
Trustee. Individual investments that represent 5% or more of the
Plan’s net assets available for benefits include:
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December
31
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Investments
at fair value as determined by quoted market price
|
|
2008
|
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|
2007
|
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|
|
|
|
|
| Plan
interest in Dynegy Inc. Master Trust * |
|
$ |
102,466,761 |
|
|
$ |
163,280,147 |
|
*
Includes both participant-directed and nonparticipant-directed
investments. See Note 9.
The
Plan’s interest in the Master Trust (including gains and losses on investments
bought and sold, as well as held during the year) depreciated in value by
$60,813,386 during 2008.
|
5.
|
FULLY
BENEFIT-RESPONSIVE INVESTMENT
CONTRACTS
|
The
Master Trust has an interest in a common collective trust that invests primarily
in a pool of investment contracts issued by insurance companies and commercial
banks and in contracts that are backed by high quality bonds, bond trusts and
bond mutual funds that are selected by the Trustee.
As
described in Note 2 above, because these contracts are fully benefit-responsive,
contract value is the relevant measurement attribute for that portion of the net
assets available for benefits attributable to the common collective trust.
Contract value represents contributions made under the contract, plus earnings,
less participant withdrawals and administrative expenses. Participants may
ordinarily direct the withdrawal or transfer of all or a portion of their
investment at contract value.
The
average yield earned by the contract for the year ended December 31, 2008 was
3.67% and the average yield earned to reflect the actual interest rate credited
to participants for the year ended December 31, 2008 was 3.38%.
There are
no reserves against contract value for credit risk of the contract issuer or
otherwise. The crediting interest rate is based on a formula agreed upon with
the issuer, but it may not be less than zero percent. As of December
31, 2008 and 2007 the contract value of the interest in the common collective
trust approximates fair value and therefore no adjustment has been recorded in
the Statements of Net Assets Available for Benefits.
|
6.
|
PARTICIPATION
IN MASTER TRUST
|
Effective
January 1, 2002, the assets of the Plan were held in the Master Trust, with
other assets of qualified retirement plans sponsored by the Company, including
the Dynegy Midwest Generation, Inc. 401(k) Savings Plan, Dynegy Midwest
Generation, Inc. 401(k) Savings Plan for Employees Covered Under A Collective
Bargaining Agreement, Dynegy Northeast Generation, Inc. Savings Incentive Plan,
and Extant, Inc. 401(k) Plan. Note that effective April 1, 2008, the
Extant, Inc. 401(k) Plan was merged into the Plan.
The
following information is presented for the Master Trust:
|
|
|
December
31,
|
|
|
|
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
Cash and temporary cash
investments
|
|
$ |
384,898 |
|
|
$ |
358,733 |
|
|
Investments, at fair
value:
|
|
|
|
|
|
|
|
|
|
|
Registered investment
companies
|
|
|
170,310,004 |
|
|
|
265,245,858 |
|
|
Common collective
trust
|
|
|
48,859,568 |
|
|
|
43,019,776 |
|
|
Common stock
|
|
|
1,687,219 |
|
|
|
3,080,980 |
|
|
Employer
securities
|
|
|
17,154,023 |
|
|
|
53,891,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
238,395,712 |
|
|
|
365,597,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables:
|
|
|
|
|
|
|
|
|
|
|
Employer
contributions
|
|
|
195,328 |
|
|
|
172,993 |
|
|
Due from broker for securities
sold
|
|
|
109,250 |
|
|
|
158,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total receivables
|
|
|
304,578 |
|
|
|
331,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
238,700,290 |
|
|
|
365,928,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to broker for securities
purchased
|
|
|
7,446 |
|
|
|
158,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
ASSETS AVAILABLE FOR BENEFITS
|
|
$ |
238,692,844 |
|
|
$ |
365,769,589 |
|
Investment
income/(loss) for the Master Trust is as follows:
|
|
|
Year
ended December 31, 2008
|
|
|
Investment
income:
|
|
|
|
|
Net appreciation in fair value of
investments
|
|
$ |
(139,929,240 |
) |
|
Dividends and
interest
|
|
|
10,059,104 |
|
|
|
|
|
|
|
|
|
|
$ |
(129,870,136 |
) |
The
Master Trust invests a significant portion of its assets in the Company’s common
stock. This investment in the Company’s common stock approximates 7% and 15% of
the Master Trust’s net assets available for benefits as of December 31, 2008 and
2007, respectively. As a result of this concentration, any
significant fluctuation in the market value of this stock could affect
individual Participant accounts and the net assets of the Plan.
|
7.
|
FAIR VALUE
MEASUREMENTS
|
FASB Statement No. 157, establishes a framework for
measuring fair value. That framework 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 or liabilities
(level 1 measurements) and the lowest priority to
unobservable inputs (level 3 measurements). The three levels of the fair value
hierarchy under FASB Statement No. 157 are described
below:
Level 1 - Inputs to the valuation methodology are
unadjusted quoted prices for identical assets or liabilities in active
markets that the Plan has the ability to access.
|
|
Level 2 - Inputs to the valuation
methodology include:
|
|
•
|
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;
|
|
•
|
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 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 used need to maximize the use of
observable inputs and minimize the use of unobservable
inputs.
The following is a description of the
valuation methodologies used for assets measured at fair value. There have been no changes in the
methodologies used at December 31, 2008 and 2007.
Common stocks, corporate bonds
and U.S. government securities: Valued at the closing price
reported on the active market on which the individual securities are
traded.
Mutual
funds: Valued at the
net asset value (‘NAV”) of shares held by the plan at year
end.
Participant loans: Valued at amortized cost, which
approximates fair value.
Guaranteed investment contract: Valued at fair value by discounting
the related cash flows based on current yields of similar instruments with
comparable durations considering the credit‐worthiness of the issuer (See Note
5).
The methods described above may
produce a fair value calculation that may not be indicative of net realizable
value or reflective of future fair values.
Furthermore, while the Plan believes its valuation methods are appropriate
and consistent with other market participants, the use of different
methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at
the reporting date.
The following table sets forth by level,
within the fair value hierarchy, the Master Trust’s assets at fair value as of December 31,
2008 and 2007:
|
|
|
Assets
at Fair Value as of December 31, 2008
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
Cash
|
|
$ |
384,898 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
384,898 |
|
|
Employer
securities
|
|
|
17,154,023 |
|
|
|
- |
|
|
|
- |
|
|
|
17,154,023 |
|
|
Common
collective trust
|
|
|
- |
|
|
|
48,859,568 |
|
|
|
- |
|
|
|
48,859,568 |
|
|
Common
stock
|
|
|
1,687,219 |
|
|
|
- |
|
|
|
- |
|
|
|
1,687,219 |
|
|
Registered
investment companies
|
|
|
170,310,004 |
|
|
|
- |
|
|
|
- |
|
|
|
170,310,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
189,536,144 |
|
|
$ |
48,859,568 |
|
|
$ |
- |
|
|
$ |
238,395,712 |
|
|
|
|
Assets
at Fair Value as of December 31, 2007
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
Cash
|
|
$ |
358,733 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
358,733 |
|
|
Employer
securities
|
|
|
53,891,874 |
|
|
|
- |
|
|
|
- |
|
|
|
53,891,874 |
|
|
Common
collective trust
|
|
|
- |
|
|
|
43,019,776 |
|
|
|
- |
|
|
|
43,019,776 |
|
|
Common
stock
|
|
|
3,080,980 |
|
|
|
- |
|
|
|
- |
|
|
|
3,080,980 |
|
|
Registered
investment companies
|
|
|
265,245,858 |
|
|
|
- |
|
|
|
- |
|
|
|
265,245,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
322,577,445 |
|
|
$ |
43,019,776 |
|
|
$ |
- |
|
|
$ |
365,597,221 |
|
In
addition to the Plan’s interest in the Master Trust, it has participant loans
which are level 3 assets.
|
|
|
Participant
Loans
Year
Ended
December
31, 2008
|
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
$ |
1,885,653 |
|
|
Net
change
|
|
|
45,937 |
|
|
Balance,
end of year
|
|
$ |
1,931,590 |
|
|
8.
|
TRANSACTIONS
WITH PARTIES-IN-INTEREST
|
Certain
Plan investments are shares of mutual funds managed by Vanguard Fiduciary Trust
Company. Vanguard Fiduciary Trust Company is the trustee as defined by the Plan
and, therefore, these qualify as parties-in-interest
transactions. Additionally, the Plan maintains investments in the
Company’s common stock and participant loans. Fees paid during the
year for legal, accounting, and other professional services rendered by
parties-in-interest were based on customary and reasonable rates for such
services.
|
9.
|
NONPARTICIPANT-DIRECTED
INVESTMENTS
|
All funds
in the Plan are participant directed, with the exception that Employer matching
and discretionary contributions are initially invested in the Stock
Fund. Participants may diversify the investment of Employer matching
and any discretionary contributions after such amounts are initially credited to
their accounts, subject to the limits contained in the Company's insider trading
policy.
Information
about the net assets available for benefits and the significant components of
the changes in net assets available for benefits relating to the Stock Fund is
as follows:
|
|
|
December
31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Net
Assets:
|
|
|
|
|
|
|
|
Investments, at fair market
value:
|
|
|
|
|
|
|
|
Employer
securities
|
|
$ |
9,913,279 |
|
|
$ |
30,807,103 |
|
|
|
|
|
|
|
|
|
|
|
|
Employer
contributions receivable
|
|
|
160,575 |
|
|
|
142,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,073,854 |
|
|
$ |
30,949,682 |
|
|
|
|
Year
ended December 31, 2008
|
|
|
Changes
in Net Assets:
|
|
|
|
|
Employer
contributions
|
|
$ |
4,029,974 |
|
|
Employee
contributions
|
|
|
652,659 |
|
|
Net
depreciation in fair value of investments
|
|
|
(21,747,357 |
) |
|
Loan
repayments
|
|
|
196,403 |
|
|
Benefit
payments
|
|
|
(1,890,860 |
) |
|
Loan
withdrawals
|
|
|
(141,729 |
) |
|
Administrative
expenses
|
|
|
(1,875 |
) |
|
Transfers
from participant directed investments, net
|
|
|
(1,973,043 |
) |
|
|
|
|
|
|
|
|
|
$ |
(20,875,828 |
) |
|
10.
|
COMMITMENTS
AND CONTINGENCIES
|
ERISA Class Action
Settlement
In 2002,
a class action complaint was filed in federal district court on behalf of
participants holding common stock of the Company in the Plan during the period
from April 1999 to January 2003. In general, the complaint alleged
violations of ERISA in connection with the Plan, including claims that the
Company's Board and certain of its former officers, past members of its Benefit
Plans Committee, former employees who served on a predecessor committee to its
Benefit Plans Committee, and Vanguard Fiduciary Trust Company and CG Trust
Company (trustees of the trust that held Plan assets for portions of the
putative class period) breached their fiduciary duties to the Plan’s
participants and beneficiaries in connection with the Plan’s investment in
common stock. In 2004, the parties reached a settlement under which
the defendants agreed to pay $30.75 million to the plaintiffs for a full and
final release of all claims. In December 2004, the Court granted
final approval of the agreement and the settlement was fully funded by insurance
proceeds. The settlement funds were allocated to the Plan accounts of
the class members on April 1, 2005.
Securities Class Action
Settlement
Members of the “Settlement Class” in the
lawsuit identified as In re Dynegy Inc.
Securities Litigation,
Master File No. H-02-1571, have a Securities Class Action Settlement Account in
the Plan for receipt of settlement proceeds that was established in January
2007. In general, with certain exceptions, the
Settlement Class consists of participants in the Plan at any time from June 21,
2001, through July 22, 2002, who held Dynegy Illinois common stock in their Plan
Account during that period and who were not defendants in the
litigation.
Internal Revenue Service VCP
Submission
Due to an
administrative error by the Plan’s third-party recordkeeper, a terminated
participant was allowed to receive a Plan loan in contradiction of Plan
provisions. As a result, on January 10, 2008, the Company filed a
Voluntary Correction Program (“VCP”) submission with the Internal Revenue
Service (“IRS”) requesting formal approval of the Company’s correction
procedure. The IRS approved the Company’s proposed correction set
forth in the VCP submission in a compliance statement dated August 2,
2008.
Internal Revenue Service
Plan Audit
In March
2008, the Internal Revenue Service notified the Company of its intent to audit
the Plan, and is currently in the process of auditing the Plan.
Auto-Enrollment
Effective
January 1, 2009, the Plan was amended to provide that, for eligible employees
hired on or after January 1, 2009, enrollment in the Plan is automatic after a
60-day opt-out period. If such an employee does not opt-out of
participation and does not make investment elections, the eligible employee will
be enrolled in the Vanguard Target Retirement Fund closest to his or her
expected retirement year (assuming a retirement age of 65) at a contribution
rate of 5% of eligible earnings per pay period effective the first
administratively feasible pay period after the 60-day opt-out
period. These contributions are made on a pre-tax basis; that is
before federal (and state, if applicable) income taxes are deducted from the
individual’s pay.
Accelerated
Vesting
Effective
January 1, 2009, the Plan was amended to provide for accelerated vesting for
certain participants. Specifically, for all participants other than those that are
members of IBEW Local 1245, 320, or 769, their years of service with the
Employer (and certain affiliated companies) determine their vested interest in
Employer contributions as follows:
|
Years
of Service
|
Vested
Percentage
|
|
Less
than 1 year
|
0%
|
|
1
year
|
50%
|
|
2
years or more
|
100%
|
SUPPLEMENTAL
SCHEDULE
DYNEGY
INC. 401(k) SAVINGS PLAN
EIN:
74-2928353 PN:
001
Schedule
H, Line 4(i): Schedule of Assets (Held at End of Year)
As of
December 31, 2008
|
[a]
|
[b]
|
[c]
|
[d]
|
[e]
|
|
|
|
|
|
|
|
Party-in-interest
|
Identity
of Issuer, Borrower, Lessor or Similar Party
|
Description
of Investment including Maturity Date, Rate of Interest, Collateral, Par
or Maturity Value
|
Cost
|
Current
Value
|
|
|
|
|
|
|
|
*
|
Participant
Loans
|
Various
maturities and interest rates ranging from 5% - 9.5%
|
-
|
1,931,590
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
1,931,590
|
* A
party-in-interest to the Plan
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the trustee (or
other persons who administer the employee benefit plan) have duly caused this
annual report to be signed on its behalf of the undersigned hereunto duly
authorized.
Dynegy
Inc. 401(k) Savings Plan
Date: June
22,
2009 By: /s/ JULIUS
COX
Julius
Cox
Designated
Member – Dynegy Inc.
Benefit
Plans Committee