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Section 1: 11-K (11-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 11-K
 

[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From _______________To ______________                     

Commission file number 001-11302
 
KeyCorp 401(k) Savings Plan
(Full title of the plan)

KeyCorp
127 Public Square
Cleveland, Ohio 44114
(Name of issuer of the securities held
pursuant to the plan and the address
of its principal executive office)

REQUIRED INFORMATION

Item 4. Financial Statements and Supplemental Schedule for the Plan.    

The KeyCorp 401(k) Savings Plan (“Plan”) is subject to the Employee Retirement Income Security Act of 1974 ("ERISA"). In lieu of the requirements of Items 1-3 of this form, the Plan is filing financial statements and supplemental schedule prepared in accordance with the financial reporting requirements of ERISA. The Plan financial statements and supplemental schedule for for the fiscal year ended December 31, 2017 are included as is Exhibit 99.1 to this report on Form 11-K and are incorporated herein by reference. The Plan financial statements and schedule have been audited by Meaden & Moore, Ltd. Independent Registered Public Accounting Firm, and their report is included therein.

EXHIBITS
23.1
Consent of Independent Registered Public Accounting Firm, Meaden & Moore, Ltd.
99
Financial statements and supplemental schedule of the KeyCorp 401(k) Savings Plan for the fiscal year ended December 31, 2017, prepared in accordance with the financial reporting requirements of ERISA.
          





SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
                        
Date:
June 22, 2018
By:
/s/ Douglas Schosser
 
 
 
Douglas Schosser, signing on behalf of
 
 
 
KeyCorp as sponsor of the KeyCorp 401(k) Savings Plan
 
 
 
Chief Accounting Officer


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Section 2: EX-23.1 (EXHIBIT 23.1)

Exhibit


Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


KeyCorp, as Plan Sponsor for the KeyCorp 401(k) Savings Plan

We consent to the incorporation by reference in a Registration Statement on Form S-8 (File No. 333-49609 and File No. 333-112225) with respect to the KeyCorp 401(k) Savings Plan (the "Plan") of our audit report dated June 22, 2018 with respect to the Plan's financial statements and supplemental schedule, included in Form 11-K for the Plan as of and for the years ended December 31, 2017 and 2016 and all references to our firm included in or made a part of the Registration Statement.


/s/ Meaden & Moore, Ltd.
Meaden & Moore, Ltd.

Cleveland, Ohio
June 22, 2018



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Section 3: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1











KEYCORP
401(k) SAVINGS PLAN


FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
WITH
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM


December 31, 2017






KeyCorp
401(k) Savings Plan
 
 
 
INDEX
 
 
Page
 
 
 
Report of Independent Registered Public Accounting Firm
1
 
 
 
Financial Statements:
 
 
Statement of Net Assets Available for Benefits
2
 
 
 
 
Statement of Changes in Net Assets Available for Benefits
3
 
 
 
 
 Notes to Financial Statements
4-11
 
 
 
Supplemental Schedule:
 
 
 
 
 
Schedule of Assets (Held at End of Year)
12-14













REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Plan Participants and KeyCorp, as Plan Sponsor for the KeyCorp 401(k) Savings Plan

Opinion on the Financial Statements

We have audited the accompanying Statement of Net Assets Available for Benefits of the KeyCorp 401(k) Savings Plan (the “Plan”) as of December 31, 2017 and 2016, and the Statements of Changes in Net Assets Available for Benefits for the years then ended, and the related notes and schedule (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2017 and 2016, and the changes in net assets available for benefits of the Plan for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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 are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Supplemental Information

The supplemental Schedule of Assets (Held at End of Year) as of December 31, 2017 has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental schedule is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental schedule reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedule. In forming our opinion on the supplemental schedule, we evaluated whether the supplemental schedule, including its form and content, is presented in conformity with Department of Labor’s (DOL) Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental schedule is fairly stated, in all material respects, in relation to the financial statements as a whole.

/s/ Meaden & Moore, Ltd.
Meaden & Moore, Ltd.

We have served as the Plan’s auditor since 2005.

Cleveland, Ohio
June 22, 2018



1



STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
 
 
 
 
 
 
 
 
 
 
KeyCorp
401(k) Savings Plan
 
December 31,
 
 
 
 
 
 
 
2017
 
2016
ASSETS
 
 
 
 
 
Investments, at fair value:
 
 
 
 
KeyCorp common stock (cost $139,381,459 and $163,880,688 at
 
 
 
 
     2017 and 2016, respectively)
$
249,645,280

 
$
265,875,783

 
Other equity securities
203,698,065

 
155,821,418

 
Interest in mutual funds and collective trusts at fair value
2,264,553,409

 
1,922,678,212

 
 
 
 
Total investments at Fair Value
2,717,896,754

 
2,344,375,413

Receivables:
 
 
 
 
Receivable from Cain Brothers & Company, LLC Retirement Plan (Note 1)
52,633,744

 

 
Notes receivable from participants
50,994,663

 
46,626,869

 
Receivable - Employer contributions
45,502,040

 
31,455,888

 
Receivable - Employee contributions
2,883,187

 
2,686,933

 
Receivable - Interest and dividends
495,867

 
409,575

 
Securities sold, not settled

96,159

 

 
 
 
 
Total Receivables
152,605,660

 
81,179,265

 
 
 
 
 
 
 
 
 
 
Cash
1,213,337

 
1,256,065

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
2,871,715,751

 
2,426,810,743

 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
Payables - administrative and other expenses
347,059

 
457,369

Securities purchased, not settled
35,554

 
3,916

 
 
 
 
 
 
 
 
Total Liabilities
382,613

 
461,285

 
 
 
 
NET ASSETS AVAILABLE FOR BENEFITS
$
2,871,333,138

 
$
2,426,349,458


See accompanying notes to financial statements.

2



STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
 
KeyCorp
401(k) Savings Plan
 
 
 
 
 
 
 
Year Ended December 31,
 
 
 
 
 
 
 
2017
 
2016
Additions to Net Assets Attributed to:
 
 
 
 
Contributions:
 
 
 
 
     Employer
$
111,906,175

 
$
83,502,684

 
     Participants
109,191,649

 
84,739,295

 
     Rollovers
8,494,450

 
5,635,827

 
 
 
 
Total Contributions
229,592,274

 
173,877,806

 
 
 
 
 
 
 
 
 
 
 
Interest on participant notes receivable
1,974,284

 
1,605,816

 
 
 
 
 
 
Investment Income:
 
 
 
 
Dividends from KeyCorp common stock
5,062,966

 
4,657,339

 
Dividends from other equity securities
1,551,278

 
1,144,048

 
     Net investment income from mutual funds and collective trusts
27,716,649

 
19,713,837

 
     Net realized gain and unrealized appreciation
365,647,341

 
175,246,824

 
     Plan interest in KeyCorp 401(k) Savings Plan Cash Balance
 
 
 
 
          Pension Plan Master Trust investment income

 
1,766,362

 
     
 
 
Total Investment Income
399,978,234

 
202,528,410

 
 
 
 
 
 
 
 
 
 
Deductions from Net Assets Attributed to:
 
 
 
 
Participant withdrawals
234,883,173

 
164,699,591

 
Administrative and other expenses
4,311,683

 
3,185,289

 
 
 
 
Total Deductions
239,194,856

 
167,884,880

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Increase Before Transfers
392,349,936

 
210,127,152

 
 
 
 
 
 
 
 
 
 
 
Transfer from merged plans
52,633,744

 
313,278,295

 
 
 
 
 
 
 
 
 
 
 
 
Net Increase
444,983,680

 
523,405,447

 
 
 
 
 
 
 
 
 
 
Net Assets Available for Benefits:
 
 
 
 
Beginning of Year
2,426,349,458

 
1,902,944,011

 
 
 
 
 
 
End of Year
$
2,871,333,138

 
$
2,426,349,458


See accompanying notes to the financial statements.








3




NOTES TO FINANCIAL STATEMENTS
 
KeyCorp
401(k) Savings Plan

1
Description of Plan

The following description of the KeyCorp 401(k) Savings Plan (Plan) provides only general information. Participants should refer to the Summary Plan Description or Plan document for a more complete description of the Plan’s provisions.

General:

The Plan consists of a profit sharing plan with a cash or deferred arrangement, as authorized under Section 401(k) of the Internal Revenue Code of 1986, as amended (Code), and an employee stock ownership plan (ESOP), as authorized under the provisions of Section 4975(e)(7) of the Code. As of January 1, 2011, the Plan was amended and restated to close the KeyCorp Common Stock Fund to new investments effective January 1, 2012, with the exception of KeyCorp dividend reinvestments, and make other administrative modifications and changes as required by law or to facilitate the administration of the Plan.

Effective December 31, 2017, the Plan was amended to merge in the participants and the assets of the former Cain Brothers & Company, LLC Retirement Plan.  As of December 31, 2017, the Plan has recorded a receivable for the assets of the former Cain Brothers & Company, LLC Retirement Plan, which were transferred to the Plan on January 22, 2018. As of December 20, 2016, the Plan was amended to merge in the participants and the assets of the former 401(k) Savings Plan of First Niagara.

Effective January 1, 2017, the Plan was restated to reflect the amendments adopted since the January 1, 2011 amendment and restatement and to make administrative modifications and changes as required by law or to facilitate the administration of the Plan.

The portion of the Plan that is attributable to participant contributions invested in the Plan’s various investment funds (other than the Plan’s KeyCorp Common Stock Fund) constitutes a profit sharing plan. The portion of the Plan that is attributable to participant contributions, employer contributions, profit sharing contributions, after-tax contributions, and rollover contributions invested primarily in KeyCorp common shares constitutes an ESOP. The Plan is intended to be qualified under Section 401(a) of the Code and the provisions of Titles I, II, and III of the Employee Retirement Income Security Act of 1974, as amended (ERISA).

Dividends paid on those KeyCorp common shares maintained in the ESOP, at the participant’s election, may automatically be reinvested in the Plan’s Common Stock Fund or paid directly to the participant. In 2017 and 2016, dividends of $628,485 and $634,317, respectively, were paid directly to participants in connection with this election and are reflected in the Statement of Changes in Net Assets Available for Benefits as participant withdrawals.

Eligibility:

All regular full-time and part-time employees of KeyCorp and its participating subsidiaries (Employer or Key) are eligible to participate in the Plan as of their first day of employment with the Employer for purposes of making pre-tax contributions, Roth contributions, Plan transfer contributions, and rollover contributions. Employees are eligible to participate in receiving employer contributions and profit sharing contributions in accordance with the following eligibility requirements: for employees whose employment commencement date is July 1, 2006, or after, participants can receive these contributions after completing one year of service. Seasonal and on-call employees are required to complete 1,000 hours of service prior to becoming eligible to participate in the Plan.

Contributions:

Contributions are subject to limitations on annual additions and other limitations imposed by the Code as defined in the Plan agreement.


4




NOTES TO FINANCIAL STATEMENTS
 
KeyCorp
401(k) Savings Plan

1
Description of Plan, Continued

Employee 401(k) Deferral:

In years in which the safe harbor provisions of Section 401(k)(12) of the Code are not utilized, employees who have met the eligibility requirements and have elected to participate may contribute from 1% to 100% of their compensation on a pre-tax basis to the Plan, and highly compensated employees (as that term is defined in accordance with Section 414(n) of the Code) may contribute from 1% to 6% of their compensation to the Plan. For the 2017 and 2016 Plan years, the Plan utilized the safe harbor provisions of Section 401(k)(12) of the Code, which permits the Plan to automatically satisfy certain nondiscrimination requirements of the Code without undergoing the necessity of discrimination testing. In years in which the safe harbor provisions of Section 401(k)(12) of the Code are utilized (2017 and 2016), all eligible employees may contribute up to 100% of their compensation to the Plan. For Plan years commencing on or after January 1, 2014, the Plan provides a qualified Roth contribution program.

Commencing January 1, 2010, an automatic enrollment feature was added to the Plan for all new regular full-time and part-time employees of the Employer (Covered Employees). The initial default contribution percentage for Covered Employees is 2% and will increase by 1% at the beginning of each Plan year until the default percentage is 10% for Plan years on and after January 1, 2012. The Covered Employee may request a distribution of his or her default elective deferrals no later than 90 days after default elective deferrals are first withheld from a Covered Employee’s pay. As of January 1, 2016, the Plan was amended to implement an auto-enrollment back sweep feature for certain employees hired prior to December 31, 2009.

Employer Matching Contributions:

After satisfying the eligibility requirements, Key matches up to the first 6% of the participant’s contributions to the Plan. Default elective deferrals will be eligible for matching contributions after the Covered Employee satisfies the Eligibility Requirements for receiving a matching contribution. Commencing for Plan years on and after January 1, 2012, the KeyCorp Common Stock Fund was closed to new investments, and matching contributions became subject to the investment direction of the participant.

Effective for Plan years commencing on or after January 1, 2013, the Employer Matching Contribution for each participant is based on the participant’s eligible annual compensation. For the 2017 and 2016 Plan years, the Plan utilized the safe harbor provisions of Section 401(k)(12) of the Code, which permits the Plan to automatically satisfy certain nondiscrimination requirements of the Code without undergoing the necessity of discrimination testing.

Employer Discretionary Contributions:

Key may also make additional contributions as approved by the Board of Directors. Commencing January 1, 2010, and thereafter, profit sharing contributions may be made, allocated, and credited to the accounts of participants employed on the last business day of the Plan year as a flat percentage of eligible compensation for the participants entitled to receive an allocation, based on the further terms and conditions set forth in the Plan. For Plan years beginning on and after January 1, 2012, participants will share in profit sharing contributions for the applicable year if the participant experienced a Termination Under Limited Circumstances, as defined by the Plan, during the Plan year. Key contributed profit sharing allocations of 2.0% for 2017 and 2.5% for 2016 on eligible compensation for employees eligible on the last business day of the respective Plan years. In addition, in 2017 Key allocated a discretionary contribution of $1,000 per eligible full-time employee and $500 per eligible part-time employee, which approximated $15,100,000. Employees eligible for the additional contribution must have been employed as of December 31, 2017 and have a salary of $100,000 or less.

Rollover Contributions:

Rollover contributions from other plans are also accepted, providing certain specified conditions are met.

5



NOTES TO FINANCIAL STATEMENTS
 
KeyCorp
401(k) Savings Plan

1
Description of Plan, Continued

Participant’s Accounts:

Each participant’s account is credited with the participant’s elective contributions, employer matching contributions, employer discretionary contributions, and earnings and losses thereon.

Vesting:

All participants are 100% vested in elective deferrals (pre-tax and Roth) and rollover contributions made to the Plan. In years in which the safe harbor provisions of Section 401(k)(12) of the Code are not utilized, participants are 100% vested in Key matching contributions after three years of service. Contributions subject to the safe harbor provisions of Section 401(k)(12) are 100% vested. Participants are 100% vested in Key discretionary contributions after three years of service.

Forfeitures:

Effective January 1, 2017, under the terms of the Plan, forfeited nonvested participant amounts may be used to offset Employer contributions to the Plan. At December 31, 2017, and December 31, 2016, the Plan’s investments included $12,599 and $1,849,311 of Plan forfeitures, respectively. During 2017, $1,451,150 in forfeitures were allocated to the accounts of certain participants who were employees of KeyCorp on December 31, 2016 and $997,068 in forfeitures were used to offset Employer contributions. Prior to January 1, 2017, forfeited nonvested participant accounts may have been used to pay Plan administrative expenses and to offset Employer contributions to the Plan. Plan forfeitures were not used to pay Plan administrative expenses or offset Employer contributions to the Plan in 2016.

Notes Receivable from Participants:

Loans are permitted under certain circumstances and are subject to limitations. Participants may borrow from their fund accounts up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loans are repaid over a period not to exceed five years with exceptions for the purchase of a primary residence.

The loans are secured by the balance in the participant’s account. The interest rate is currently established by the terms of the Loan Policy as Prime plus 1%.

Loans to Plan participants are valued at their unpaid principal balance plus accrued but unpaid interest, which approximates fair value.

Payment of Benefits:

Distribution of participant contributions and matching contributions are subject to the distribution limitations outlined in Section 401(k) of the Code (i.e., attainment of age 59 1/2, severance from employment, retirement, death, or disability, subject to special grandfathered distribution provisions). Upon termination, participants may receive a distribution of their vested account balance in cash or may elect to have their interest in the KeyCorp Common Stock Fund distributed to them in common shares of KeyCorp. Participants may leave their balance in the Plan if their balance is greater than $1,000. Upon retirement, participants may elect to receive their Plan distribution as a lump sum payment or as a monthly, quarterly, or annual installment payment.

As of January 1, 2016, the Plan was amended to facilitate the implementation of flexibility in the distribution of benefits to assist participants with retirement readiness and distribution planning.

Hardship Withdrawals:

Hardship withdrawals are permitted in accordance with Internal Revenue Service guidelines.

6





NOTES TO FINANCIAL STATEMENTS
 
KeyCorp
401(k) Savings Plan

1
Description of Plan, Continued

Investment Options:

Upon enrollment in the Plan, a participant may direct his or her employee contribution in any of the investment options offered by the Plan. As discussed above, the KeyCorp Common Stock Fund was closed to new investments effective January 1, 2012.    

2
Summary of Significant Accounting Policies

Basis of Accounting:

The Plan’s transactions are reported on the accrual basis of accounting. Certain prior year amounts have been reclassified to conform with the current year's presentation.

Investment Valuation:

Investments are stated at aggregate fair value, which is determined based on the closing price reported on the last business day of the Plan year as follows:

Equity Securities

Closing market price as quoted on the New York Stock Exchange as of December 31, 2017, and December 31, 2016. The closing market price of KeyCorp’s Common Stock at December 31, 2017, and December 31, 2016, was $20.17 and $18.27, respectively. The other common stocks, which are included in the Jennsion Large Cap Growth Separate Account, are valued at the closing price reported on the major stock exchange on which the individual securities are traded

Mutual Funds

Closing market price as quoted per a third-party valuation service as of December 31, 2017, and December 31, 2016.

Collective Trust Funds

Market values of units held in collective trust funds are determined daily by the trustee of the funds based on reported redemption values received from a third-party valuation service.

Investment Transactions:

Purchases and sales of securities are reflected on a trade-date basis. Gains or losses on sales of equity securities are based on the specific cost of units sold. Gains or losses on sales of mutual funds and collective trust funds are based on the average cost per share or per unit at the time of the sale. In the case of KeyCorp Common Stock, brokerage commissions are added to the cost of shares purchased and subtracted from the proceeds of shares sold. No direct brokerage commissions are incurred by the Plan on purchases and sales of shares or units in mutual funds and collective trust funds.

Investment Income:

Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned on the accrual basis.


7



NOTES TO FINANCIAL STATEMENTS
 
KeyCorp
401(k) Savings Plan

2
Summary of Significant Accounting Policies, Continued

Fair Value Measurement:

Accounting guidance defines fair value as the price to sell an asset or transfer a liability in an orderly transaction between market participants in the principal market. In other words, fair value represents an exit price at the measurement date. Market participants are buyers and sellers who are independent, knowledgeable, and willing and able to transact in the principal (or most advantageous) market for the asset or liability being measured. Current market conditions, including imbalances between supply and demand, are considered in determining fair value.

The Plan’s assets are valued based on the principal market where each would be sold. The principal market is the forum with the greatest volume and level of activity. In the absence of a principal market, valuation is based on the most advantageous market (i.e., the market where the asset could be sold at a price that maximizes the amount to be received).

There are three acceptable techniques for measuring fair value: the market approach, the income approach, and the cost approach. The appropriate technique for valuing a particular asset depends on the exit market, the nature of the asset being valued, and how a market participant would value the same asset. Ultimately, selecting the appropriate valuation method requires significant judgment, and applying the valuation technique requires sufficient knowledge and expertise.

Valuation inputs refer to the assumptions market participants would use in pricing a given asset. Inputs can be observable or unobservable. Observable inputs are assumptions based on market data obtained from an independent source. Unobservable inputs are assumptions based on the Trustee’s own information or assessment of assumptions used by other market participants in pricing the asset. Unobservable inputs are based on the best and most current information available on the measurement date.

All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy that gives the highest ranking to quoted prices in active markets for identical assets (Level 1) and the lowest ranking to unobservable inputs (Level 3). Fair values for assets classified as Level 2 are based on one or a combination of the following factors: (a) quoted market prices for similar assets in active markets; (b) quoted prices for identical or similar assets in inactive markets; (c) observable inputs, such as interest rates or yield curves; or (d) inputs derived principally from or corroborated by observable market data. The level in the fair value hierarchy ascribed to a fair value measurement in its entirety is based on the lowest level input that is significant to the measurement. The Plan considers an input to be significant if it drives 10% or more of the total fair value of a particular asset. Assets may transfer between levels based on the observable 12and unobservable inputs used at the valuation date, as the inputs may be influenced by certain market conditions. Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period.

Typically, assets are considered to be fair valued on a recurring basis if fair value is measured regularly. Additional information regarding fair value measurements and disclosures is provided in Note 4 (“Fair Value Measurements”).

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Administrative Fees:

Substantially all administrative fees are paid by the Plan.


8



NOTES TO FINANCIAL STATEMENTS
 
KeyCorp
401(k) Savings Plan

2
Summary of Significant Accounting Policies, Continued

Plan Termination:

Although it has not expressed any intent to do so, Key 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% vested in their accounts.

Risks and Uncertainties:

The Plan invests in various investments, including KeyCorp common stock, other equity securities, and interests in mutual funds and collective trusts. These investments are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in values of investments will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statement of Net Assets Available for Benefits.

Subsequent Events:

In preparing these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users, or filed with the SEC. In compliance with applicable accounting standards, all material subsequent events have been either recognized in the financial statements or disclosed in the notes to the financial statements.

3
Tax Status

The Internal Revenue Service has determined and informed Key by letter dated September 22, 2013, that the Plan and related trust as of the January 1, 2011 Restatement are designed in accordance with applicable sections of the Internal Revenue Code.

The Plan has been amended since receiving the determination letter. However, the Plan Administrator and tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements.

Accounting principles generally accepted in the United States of America (U.S. GAAP) requires plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken uncertain tax positions that more-likely-than-not would not be sustained upon examination by applicable taxing authorities. The Plan administrator has analyzed tax positions taken by the Plan and has concluded that, as of December 31, 2017, there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability or that would require disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions. However, currently no audits for any tax periods are in progress. During 2017, the Plan was audited by the United States Department of Labor which resulted in an amendment to the Plan effective January 1, 2017 to provide for the use of forfeitures arising during the 2014 and 2015 Plan years.  As a result, in 2017, forfeitures were allocated to the accounts of certain participants who were employees of KeyCorp on December 31, 2016.

4
Fair Value Measurements

The following is a description of the valuation methodologies used to measure the fair value of assets held in the Plan:

Equity Securities. Investments in KeyCorp Common Stock are valued at their official closing price on the New York Stock Exchange and are classified as Level 1. Other equity securities are valued  at the closing price reported on the major stock exchange on which the individual securities are traded and are classified as Level 1.


9



NOTES TO FINANCIAL STATEMENTS
 
KeyCorp
401(k) Savings Plan
    
4
Fair Value Measurements, continued

Mutual Funds, Collective Trust Funds, and Money Market Funds. Investments in mutual funds, collective trust funds, and money market funds are valued at their closing net asset value. Exchange-traded mutual funds are valued using quoted prices and, therefore, are classified as Level 1. Because net asset values for the collective trust funds and money market funds are based primarily on observable inputs, most notably quoted prices for the underlying assets, these investments are classified as Level 2. The Plan's investment in the KeyBank EB Magic Fund was measured at net asset value ("NAV") as a practical expedient to estimate fair value and accordingly, has not been classified in the fair value hierarchy. This practical expedient would not be used if it is determined to be probable that the funds will sell the investment for an amount different from the reported NAV. Participant transactions (purchases and sales) may occur daily. If the Plan initiates a full redemption of this fund, the issuer reserves the right to require 12 months’ notification in order to ensure that securities liquidations will be carried out in an orderly business manner. 

The investment strategies for the collective trust funds are varied, and they may invest directly and indirectly in a broad range of equities, debt, and derivative instruments with the objective of mirroring or exceeding the total return of certain market indices.  Strategies may vary based on global macroeconomic views, expected directional movements in the financial markets, market capitalization, and other strategies.  Participant transactions (purchases and sales) occur daily. However, in high volume liquidation demand periods, the Trustee may, at their discretion, delay liquidation requests so that it is in the best interest of all participants in the fund.

The following tables present the Plan’s assets that are measured at fair value on a recurring basis in accordance with U.S. GAAP at December 31, 2017, and December 31, 2016.

December 31, 2017
Level 1
 
Level 2
 
Level 3
 
Total
Equity Securities
 
 
 
 
 
 
 
KeyCorp Common Stock
$
249,645,280

 
$

 
$

 
$
249,645,280

Other Equity Securities
203,698,065

 
 
 
 
 
203,698,065

Mutual Funds
1,287,786,877

 

 

 
1,287,786,877

Collective Trust Funds

 
735,707,645

 

 
735,707,645

Money Market Funds

 
87,059,083

 

 
87,059,083

Other investments measured at net asset value (a)

 

 

 
153,999,804

 
$
1,741,130,222

 
$
822,766,728

 
$

 
$
2,717,896,754

December 31, 2016
Level 1
 
Level 2
 
Level 3
 
Total
Equity Securities
 
 
 
 
 
 

KeyCorp common stock
$
265,875,782

 
$

 
$

 
$
265,875,782

Other equity securities
155,821,418

 
 
 
 
 
155,821,418

Mutual Funds
1,055,278,508

 

 

 
1,055,278,508

Collective Trust Funds

 
621,515,304

 

 
621,515,304

Money Market Funds

 
87,890,101

 

 
87,890,101

Other investments measured at net asset value (a)

 

 

 
157,994,300

 
$
1,476,975,708

 
$
709,405,405

 
$

 
$
2,344,375,413


(a) In accordance with Topic 820, the Plan’s investment in the KeyBank EB Magic Fund was measured at NAV per share (or its equivalent) and accordingly, has not been classified in the fair value hierarchy. The fair value amounts in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of net assets available for benefits.

10



NOTES TO FINANCIAL STATEMENTS
 
KeyCorp
401(k) Savings Plan

5
Interest in Master Trust

Prior to September 30, 2016, a portion of the Plan’s investments were in the KeyCorp 401(k) Savings Plan Cash Balance Pension Plan Master Trust (the "Master Trust"), which was established in 2012 for the investment of assets of the Plan and the KeyCorp Cash Balance Pension Plan. Each participating retirement plan had an undivided interest in the Master Trust. The assets of the Master Trust were held by The Bank of New York Mellon (Trustee). Effective September 30, 2016, the Master Trust was terminated and the funds were transferred to the PIMCO Diversified Real Asset Collective Trust.

Appreciation in fair value of the Master Trust for the period January 1, 2016 to September 30, 2016, when the Master Trust was terminated, amounted to $12,289,600, of which the Plan's interest was approximately 14%.

6
Party-in-Interest Transactions

During 2017 and 2016, the Plan received $5,062,966 and $4,657,339 respectively, in KeyCorp common stock dividends.

During the year ended December 31, 2017, the Plan did not purchase KeyCorp common stock, and 1,861,415 shares of common stock of KeyCorp were sold by the Plan for $34,466,060. During the year ended December 31, 2016, the Plan did not purchase KeyCorp common stock, and 2,148,917 shares of common stock of KeyCorp were sold by the Plan for $29,215,281. The sales of KeyCorp common stock were completed in the open market.

As of December 20, 2016, the Plan was amended to merge in the participants and the assets of the former 401(k) Savings Plan of First Niagara. As a result of the merger, the 401(k) Savings Plan of First Niagara transferred 1,675,013 shares of KeyCorp common stock to the Plan.



11



SCHEDULE OF ASSETS (HELD AT YEAR END)
Form 5500, Schedule H, Part IV, Line 4i
 
KeyCorp
401(k) Savings Plan
 
EIN 34-6542451
Plan Number 002
 
December 31, 2017
 
 
 
 
 
 
 
 
(a)
(b)
 
(c)
 
(d)
 
 (e)
 
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
 
 
 
 
 
 
 
 
 
Equity Securities:
 
 
 
 
 
 *
KeyCorp Common Stock
 
Common Stock
 
 
 
$
249,645,280

 
Abbott Laboratories
 
 Common Stock
 
 
 
2,803,278

 
Abbvie Inc
 
 Common Stock
 
 
 
2,580,996

 
Activision Blizzard Inc
 
 Common Stock
 
 
 
2,158,136

 
Adidas AG
 
 Common Stock
 
 
 
476,294

 
Adobe Systems Inc
 
 Common Stock
 
 
 
5,189,382

 
Albemarle Corp
 
 Common Stock
 
 
 
2,505,365

 
Alexion Pharmaceuticals Inc
 
 Common Stock
 
 
 
1,957,449

 
Alibaba Group Holding Ltd
 
 Common Stock
 
 
 
6,544,581

 
Allergan Plc
 
 Common Stock
 
 
 
2,616,953

 
Alphabet Inc-Cl A
 
 Common Stock
 
 
 
5,192,209

 
Alphabet Inc-Cl C
 
 Common Stock
 
 
 
6,119,347

 
Amazon.com Inc
 
 Common Stock
 
 
 
9,203,729

 
Apple Inc
 
 Common Stock
 
 
 
8,032,840

 
Biomarin Pharmaceutical Inc
 
 Common Stock
 
 
 
2,431,755

 
Bristol-Myers Squibb Co
 
 Common Stock
 
 
 
3,922,349

 
Broadcom Ltd
 
 Common Stock
 
 
 
1,876,655

 
Celgene Corp
 
 Common Stock
 
 
 
2,955,475

 
Charter Communications Inc
 
 Common Stock
 
 
 
2,297,630

 
Concho Resources Inc
 
 Common Stock
 
 
 
2,358,304

 
Constellation Brands Inc
 
 Common Stock
 
 
 
1,897,131

 
Corning Inc
 
 Common Stock
 
 
 
570,862

 
Costco Wholesale Corp
 
 Common Stock
 
 
 
3,434,286

 
Crown Castle International Cor
 
 Common Stock
 
 
 
1,057,703

 
Eog Resources Inc
 
 Common Stock
 
 
 
2,372,401

 
Facebook Inc
 
 Common Stock
 
 
 
8,819,824

 
Fleetcor Technologies Inc
 
 Common Stock
 
 
 
2,702,294

 
Halliburton Co
 
 Common Stock
 
 
 
3,339,238

 
Illumina Inc
 
 Common Stock
 
 
 
2,087,453

 
JPMorgan Chase & Co
 
 Common Stock
 
 
 
1,883,962

 
Kering SA
 
 Common Stock
 
 
 
2,526,630

 
Marriott International Inc/Md
 
 Common Stock
 
 
 
4,732,905

 
Mastercard Inc
 
 Common Stock
 
 
 
6,906,254

 
Microsoft Corp
 
 Common Stock
 
 
 
6,891,102

 
Mondelez International Inc
 
 Common Stock
 
 
 
2,043,743


12



 
Monster Beverage Corp
 
 Common Stock
 
 
 
3,078,869

 
Netflix Inc
 
 Common Stock
 
 
 
6,790,585

 
Nike Inc
 
 Common Stock
 
 
 
4,008,329

 
Nvidia Corp
 
 Common Stock
 
 
 
3,468,681

 
Parker-Hannifin Corp
 
 Common Stock
 
 
 
4,263,029

 
Paypal Holdings Inc
 
 Common Stock
 
 
 
2,008,722

 
Qualcomm Inc
 
 Common Stock
 
 
 
1,971,944

 
Red Hat Inc
 
 Common Stock
 
 
 
3,254,950

 
S&P Global Inc
 
 Common Stock
 
 
 
2,186,446

 
Salesforce.Com Inc
 
 Common Stock
 
 
 
5,175,087

 
Splunk Inc
 
 Common Stock
 
 
 
1,861,498

 
Tencent Holdings Ltd
 
 Common Stock
 
 
 
5,392,576

 
Tesla Inc
 
 Common Stock
 
 
 
1,634,276

 
The Boeing Co
 
 Common Stock
 
 
 
5,453,181

 
The Estee Lauder Cos Inc
 
 Common Stock
 
 
 
3,051,597

 
The Goldman Sachs Group Inc
 
 Common Stock
 
 
 
3,720,770

 
The Home Depot Inc
 
 Common Stock
 
 
 
4,548,720

 
The Priceline Group Inc.
 
 Common Stock
 
 
 
3,178,326

 
Time Warner Inc
 
 Common Stock
 
 
 
1,767,383

 
Unitedhealth Group Inc
 
 Common Stock
 
 
 
3,077,622

 
Vertex Pharmaceuticals Inc
 
 Common Stock
 
 
 
2,538,029

 
Visa Inc
 
 Common Stock
 
 
 
6,721,137

 
Workday Inc
 
 Common Stock
 
 
 
2,057,793

 
 
 
 
 
 
 
453,343,345

 
Mutual Funds:
 
 
 
 
 
 
 
Dodge & Cox International Stock Fund
 
International Fund
 
 
 
120,628,126

 
Lord Abbett Developing Growth Fund
 
Small Cap Stock Fund
 
 
 
58,700,417

 
PIMCO Total Return Fund
 
Fixed Income Fund
 
 
 
96,286,175

 
Vanguard Total Bond Market Index Fund
 
Fixed Income Fund
 
 
 
87,209,609

 
Vanguard Extended Market Institutional Index Plus Fund
 
Mid U.S Equity Fund
 
 
 
212,060,608

 
Vanguard Institutional Index Plus Fund
 
Large U.S. Equity Fund
 
 
 
438,970,094

 
Vanguard Total International Stock Index Fund Inst'l Plus Shares
 
International Fund
 
 
 
191,827,355

 
Victory Small Company Opportunity Fund
 
Small U.S. Equity Fund
 
 
 
82,104,493

 
 
 
 
 
 
 
1,287,786,877

 
Collective Trust Funds:
 
 
 
 
 
 
 
BlackRock LifePath Index 2020 NL CIT Fund
 
Target Maturity Fund
 
 
 
70,081,190

 
BlackRock LifePath Index 2025 NL CIT Fund
 
Target Maturity Fund
 
 
 
96,338,620

 
BlackRock LifePath Index 2030 NL CIT Fund
 
Target Maturity Fund
 
 
 
85,744,861

 
BlackRock LifePath Index 2035 NL CIT Fund
 
Target Maturity Fund
 
 
 
77,899,255

 
BlackRock LifePath Index 2040 NL CIT Fund
 
Target Maturity Fund
 
 
 
65,264,180

 
BlackRock LifePath Index 2045 NL CIT Fund
 
Target Maturity Fund
 
 
 
55,453,850

 
BlackRock LifePath Index 2050 NL CIT Fund
 
Target Maturity Fund
 
 
 
37,166,829

 
BlackRock LifePath Index 2055 NL CIT Fund
 
Target Maturity Fund
 
 
 
25,586,430

 
BlackRock LifePath Index 2060 NL CIT Fund
 
Target Maturity Fund
 
 
 
7,211,757

 
BlackRock LifePath Index Retirement NL CIT Fund
 
Target Maturity Fund
 
 
 
39,728,162

 
Boston Partners Large Cap Value Equity Fund
 
Large U.S. Equity Fund
 
 
 
130,438,558

 
Harding Loevner International Equity Collective Fund
 
International Fund
 
 
 
26,613,178

 *
KeyBank EB MaGIC Fund
 
Stable Value Fund
 
 
 
153,999,804

 
PIMCO Diversified Real Asset CIT
 
Real Asset Fund
 
 
 
18,180,775

 
 
 
 
 
 
 
889,707,449


13



 
Money Market Funds:
 
 
 
 
 
 
 
Federated Government Obligations Fund
 
Money Market Fund
 
 
 
77,509,767

 
Collective U.S. Government STIF
 
Money Market Fund
 
 
 
9,549,316

 
 
 
 
 
 
 
87,059,083

 
 
 
 
 
 
 
 
 
Total assets held for investment purposes
 
 
 
 
 
2,717,896,754

 
 
 
 
 
 
 
 
*
Loans to participants (interest rates from 4.25% to 10.50% with various maturities)
 
 
 
50,994,663

 
 
 
 
 
 
 
 
 
 Total assets held for investment purposes
 
 
 
 
 
$
2,768,891,417

 
 
 
 
 
 
 
*
Party-in-interest to the Plan.
 
 
 
 
 
 
 
 
 
 
 
 
 
 

14
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