*Note: Other schedules required by Section 2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income and Security Act of 1974 have been omitted because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of the
Johnson Controls Federal Systems, Inc. Retirement Savings Plan:
Opinion on the Financial Statements
We have audited the accompanying statements of net assets available for benefits of Johnson Controls Federal Systems, Inc. Retirement Savings Plan (the “Plan”) as of December 31, 2021 and 2020, and the related statement of changes in net assets available for benefits for the year ended December 31, 2021, 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, 2021 and 2020, and the changes in net assets available for benefits for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s 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 standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion.
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 Schedule H, Line 4i – Schedule of Assets (Held at End of Year) as of December 31, 2021 has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information 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 information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.
/s/ Wipfli LLP
We have served as the Plan’s auditor since 2018.
Milwaukee, Wisconsin
June 24, 2022
1
JOHNSON CONTROLS FEDERAL SYSTEMS, INC.
RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
2021
2020
Assets
Investments
Investment in Master Trust at fair value
$
140,198,309
$
125,845,350
Receivables
Employer contributions
2,904,004
2,257,565
Notes receivable from participants
1,253,560
1,305,186
Total receivables
4,157,564
3,562,751
Net assets available for benefits
$
144,355,873
$
129,408,101
See the notes to the financial statements
2
JOHNSON CONTROLS FEDERAL SYSTEMS, INC.
RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended
December 31, 2021
Additions
Additions to net assets attributed to:
Net investment income from Master Trust
$
20,747,017
Interest on notes receivable from participants
52,601
20,799,618
Contributions:
Participants
6,006,247
Employer
2,904,004
8,910,251
Total additions
29,709,869
Deductions
Deductions from net assets attributed to:
Distributions and withdrawals
15,095,187
Administrative expenses
84,846
Total deductions
15,180,033
Transfers from other plans, net
417,936
Net increase in net assets available for benefits
14,947,772
Net assets available for benefits, beginning of year
129,408,101
Net assets available for benefits, end of year
$
144,355,873
See the notes to the financial statements
3
JOHNSON CONTROLS FEDERAL SYSTEMS, INC.
RETIREMENT SAVINGS PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
NOTE 1 - DESCRIPTION OF THE PLAN
The following description of the Johnson Controls Federal Systems, Inc. Retirement Savings Plan (the "Plan") provides only general information. Participants should refer to the Summary Plan Description provided to all participants for a more complete description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan adopted effective January 1, 2005 for participation by eligible employees of Johnson Controls Federal Systems, Inc. and related entities (the "Company"). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
The Plan is administered by the Johnson Controls Employee Benefits Policy Committee appointed by the Company.
CONTRIBUTIONS
Participants in certain union groups can designate either pre-tax (not to exceed 25%) or after-tax contributions (not to exceed 10%) of their eligible gross annual eligible compensation. All other participants can designate either pre-tax or after-tax contributions not to exceed 35% of their gross annual eligible compensation. The Company makes contributions to the Plan on behalf of the participants as determined by their benefit schedule. Participants may also contribute amounts representing rollover distributions from other employers’ qualified retirement plans.
Participant contributions are deposited in the investment funds of their choice. Participants may reallocate their account balances among the investment funds at any time in increments of one percent (1%).
For certain participant groups, if the participant does not make an election to participate in the Plan within 60 days of becoming eligible, the participant will be automatically enrolled to make pre-tax contributions depending on their employment classification. If automatically enrolled, the participant's contributions will be invested in a target date fund based on their birth date and the fund's target retirement date.
Participants are immediately vested in their contributions plus actual earnings (losses) thereon. A participant's interest in employer contributions plus actual earnings (losses) thereon vest at the rate of twenty percent (20%) per year for each year of employment with the Company or any affiliated company, fully vesting after five years of service. A participant becomes fully vested on termination of service due to death, disability or retirement.
If employment terminates other than by reason of retirement, death or total and permanent disability and the participant is not reemployed by the Company or its affiliates within 72 months of that date, the participant's interest in the non-vested portion of the employer contributions is forfeited. The Company may apply any forfeited amounts to reduce future employer contributions to the Plan and to pay plan expenses.
PAYMENT OF BENEFITS
On termination of service due to death, disability or retirement, a participant may elect to receive a lump-sum amount equal to the value of the participant's interest in his or her account. For termination of service for other reasons, a participant may receive the value of the vested interest in his or her account as a lump-sum distribution. In addition, participants may be able to take voluntary, in-service withdrawals, which include hardship withdrawals. Benefit payments are recorded when paid.
PARTICIPANT ACCOUNTS
Participant recordkeeping is performed by Fidelity Investments Institutional Retirement Services Company ("Fidelity").
As of December 31, 2021 and 2020, Plan assets of $36.3 million and $22.7 million, respectively, have been allocated to the accounts of persons who are no longer active participants of the Plan, but who have not yet received distributions as of that date. Requested but unpaid distributions at December 31, 2021 were deemed to be immaterial.
4
JOHNSON CONTROLS FEDERAL SYSTEMS, INC.
RETIREMENT SAVINGS PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
NOTES RECEIVABLE FROM PARTICIPANTS
Participants may borrow from their fund accounts a minimum of $1,000 and up to a maximum of $50,000 or fifty percent (50%) of their account balance, whichever is less. Loans are subject to certain limitations based on the Plan document. Only two loans per participant may be outstanding at any time. Each loan may be for a term up to five years. Regular payroll deductions are required to repay a loan. Each loan's interest rate is fixed at the prime rate at the beginning of the calendar quarter in which it is issued. Interest rates range between 3.25% and 5.50% as of December 31, 2021. At termination, participants may continue to make monthly loan payments until the balances of any loans are paid off.
The notes receivable from participants are measured at their unpaid principal balances plus accrued but unpaid interest. At the time of borrowing, the assets of the participant are sold proportionally to finance the loan. The loan is collateralized by the participant's assets in the Plan.
Should a participant fail to make a loan payment when due (including retirement or termination), the participant is given a grace period to cure the delinquency through the end of the calendar quarter following the calendar quarter in which the default arose. If the participant fails to cure the delinquency, a deemed distribution occurs in accordance with the provisions of the Plan document. The Plan has not made a provision for uncollectible loans as there are none.
Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), participants could elect to defer loan repayments for up to one year from the period beginning March 27, 2020 to December 31, 2020. Additionally, participants did not default on loans during this same period due to the adoption of the CARES Act.
ADMINISTRATIVE EXPENSES
Administrative expenses are paid by the Plan, as allowed by Plan provisions, with all remaining expenses paid by the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Plan are prepared on the accrual basis of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
FAIR VALUE MEASUREMENTS
ASC 820, "Fair Value Measurement," defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:
Level 1:
Observable inputs such as quoted prices in active markets;
Level 2:
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:
Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.
ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
5
JOHNSON CONTROLS FEDERAL SYSTEMS, INC.
RETIREMENT SAVINGS PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
SAVINGS AND INVESTMENT MASTER TRUST
All investments of the Plan are included under a master trust arrangement, the Master Trust, which is trusteed by Fidelity. All investments of the Master Trust are stated at fair market value.
Investment income or loss of the Master Trust is allocated among the participating plans daily based on the plans' relative equity interests in each of the Master Trust's investment programs as of the beginning of the applicable day. Interest income and share price appreciation or depreciation are recorded daily by each of the applicable investment programs. Dividend income is recorded either quarterly or semi-annually, depending on the investment program.
The net assets held in the Master Trust as of December 31, 2021 and 2020 and the changes in net assets held in the Master Trust for the year ended December 31, 2021 for the Master Trust are presented in Note 7.
At December 31, 2021 and 2020, unallocated participant forfeitures of non-vested employer contributions of $251,494 and $135,383, respectively, related to the Plan, were in the Master Trust.
DATE OF MANAGEMENT'S REVIEW
Management has evaluated subsequent events through June 24, 2022, the date which the financial statements were available to be issued.
NOTE 3 - TAX STATUS
The Internal Revenue Service (IRS) has determined and informed the Company by a letter dated September 7, 2017, that the Plan is designed in accordance with applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC.
U.S. GAAP requires Plan management to evaluate tax positions taken by the Plan and recognize a liability if the organization has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS or Department of Labor. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded as of December 31, 2021 and 2020, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
NOTE 4 - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company 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.
NOTE 5 - RELATED PARTY AND PARTY-IN-INTEREST TRANSACTIONS
An Adient Stock Fund was established in the Plan in order to hold distributed shares as a result of the 2016 spin-off of the Johnson Controls International plc Automotive Experience business. The Adient Stock Fund is a closed investment in the Plan, which means balances can be taken out of the Adient Stock Fund but no new contributions or exchanges can be made into this Fund.
Purchases into the Adient Stock Fund are not allowed for participants in the Plan. For 2021, the Plan sold units in the Adient Stock Fund of less than $0.1 million and had an investment gain of approximately $0.1 million. The total value of the Plan’s investment in the Adient Stock Fund was approximately $0.4 million and $0.3 million at December 31, 2021 and 2020, respectively.
6
JOHNSON CONTROLS FEDERAL SYSTEMS, INC.
RETIREMENT SAVINGS PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
For 2021, the Plan purchased units in the JCI plc Stock Fund of approximately $0.4 million. Also, for 2021, the Plan sold units of approximately $0.9 million and had an investment gain of approximately $4.3 million. The total value of the Plan’s investment in the JCI Plc Stock Fund was approximately $9.6 million and $5.8 million at December 31, 2021 and 2020, respectively.
The unit values of the JCI plc Stock Fund and Adient Stock Fund are recorded and maintained by Fidelity and the Plan. Plan participants may direct up to 25% of their employee and employer contributions to the JCI plc Stock Fund. In addition, participants may exchange a portion of their account balance into the JCI plc Stock Fund, provided the transaction does not cause the portion of their account balance invested in the JCI plc Stock Fund to exceed 25%.
Certain of the assets of the Master Trust are invested in registered investment companies managed by Fidelity Investments, for which Fidelity Management & Research Company (“FMR Co.”) provides investment advisory services. FMR Co. is an affiliate of both Fidelity, and Fidelity Workplace Services, LLC, record keeper of the Plan. Expenses paid to FMR Co. and/or its affiliates by the Plan during the year ended December 31, 2021 was $21,276. These transactions and investments, as well as participant loans, qualify as exempt “party-in-interest” transactions, as “party-in-interest” is defined under Department of Labor regulations as any fiduciary of the Plan, any party rendering services to the Plan, the Company and certain others.
NOTE 6 - RISKS AND UNCERTAINTIES
The Plan's investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the values of investments, it is at least reasonably possible that changes in risks in the near term would materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits and the statement of changes in net assets available for benefits.
NOTE 7 - JOHNSON CONTROLS, INC. SAVINGS AND INVESTMENT MASTER TRUST
The following table presents net assets held in the Master Trust and the Plan's interest in the Master Trust, including fair value of investments held in the Master Trust, as of December 31, 2021 and 2020:
December 31,
2021
2020
Plan's Interest in Master Trust Balances
Master Trust Balances
Plan's Interest in Master Trust Balances
Master Trust Balances
Assets
Investments at fair value as determined by quoted market price (direct):
Common Stock Funds
$
9,988,771
$
518,754,241
$
6,149,565
$
337,312,225
Investments at fair value as determined by quoted market price (indirect):
Other Separate Accounts
130,209,538
6,953,106,677
119,695,785
6,378,549,299
Investments at fair value
140,198,309
7,471,860,918
125,845,350
6,715,861,524
Total investments in Master Trust
$
140,198,309
$
7,471,860,918
$
125,845,350
$
6,715,861,524
7
JOHNSON CONTROLS FEDERAL SYSTEMS, INC.
RETIREMENT SAVINGS PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
The following table presents changes in net assets held in the Master Trust for the year ended December 31, 2021:
Year Ended December 31, 2021
Master Trust Balances
Additions
Additions to net assets attributed to:
Net appreciation in fair value of investments:
Other Separate Accounts
$
944,692,617
Common Stock Funds
226,470,562
1,171,163,179
Contributions:
Participants
251,309,178
Employer
59,480,037
Participant loan repayments
40,950,058
351,739,273
Interest and dividends
6,716,686
Total additions
1,529,619,138
Deductions
Deductions from net assets attributed to:
Participant withdrawals
742,340,545
Participant loan withdrawals
35,157,718
Administrative expenses
4,846,559
Total deductions
782,344,822
Transfers from other plans, net
8,725,078
Net increase in net assets available for benefits
755,999,394
Net assets available for benefits, beginning of year
6,715,861,524
Net assets available for benefits, end of year
$
7,471,860,918
8
JOHNSON CONTROLS FEDERAL SYSTEMS, INC.
RETIREMENT SAVINGS PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
The following table sets forth by level, within the fair value hierarchy, the Master Trust investment assets at fair value as of December 31, 2021 and 2020:
Investments at Fair Value as of
December 31, 2021
Level 1
Level 2
Level 3
Total
Common Stock Funds
$
518,754,241
$
—
$
—
$
518,754,241
Other Separate Accounts
—
6,953,106,677
—
6,953,106,677
Total investments at fair value
$
518,754,241
$
6,953,106,677
$
—
$
7,471,860,918
Investments at Fair Value as of
December 31, 2020
Level 1
Level 2
Level 3
Total
Common Stock Funds
$
337,312,225
$
—
$
—
$
337,312,225
Other Separate Accounts
—
6,378,549,299
—
6,378,549,299
Total investments at fair value
$
337,312,225
$
6,378,549,299
$
—
$
6,715,861,524
Following is a description of the valuation methodologies used for assets measured at fair value:
Common Stock Funds: The fair value for the Johnson Controls International plc Stock Fund ("JCI plc Stock Fund") and the Adient Stock Fund is determined by indirect quoted market prices. The value of the funds are not published, but the investment manager reports daily the underlying holdings. The underlying holdings are direct quoted market prices on liquid and regulated financial exchanges. The fair value of the investments in the JCI plc Stock Fund and Adient Stock Fund reflect a unit value computed daily based on the share price and the value of the fund's short-term investments. At December 31, 2021 and 2020, the Plan held 560,255 and 588,175 units of the JCI plc Stock Fund at a unit value of $17.10 and $9.89, respectively. At December 31, 2021 and 2020, the Plan held 37,257 and 41,563 units of the Adient Stock Fund at a unit value of $10.83 and $7.97, respectively.
Other Separate Accounts: The fair value for Other Separate Accounts is determined by indirect quoted market prices. These investments are generally held in a commingled trust. The value of the trust is not published, but the investment manager reports daily the underlying holdings. The underlying holdings are direct quoted market prices on liquid and regulated financial exchanges. The Plan has implemented a white-label fund structure for its defined contribution investment options, aside from the JCI plc and Adient Stock Funds. This structure places the individual fund offerings into unitized collective trusts for each asset class, which are valued at the NAV, published by Fidelity, based on the fair values of the underlying investments.
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.
9
JOHNSON CONTROLS FEDERAL SYSTEMS, INC. RETIREMENT SAVINGS PLAN
SCHEDULE H, Line 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
PLAN #001, EIN: 20-1279541
December 31, 2021
(a)
(b)
(c)
(d)
(e)
Identity of Issue, Borrower, Lessor or Similar Party
Description of Investment Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value
Cost
Current Value
*
Notes receivable from participants
3.25% - 5.50%
$0
$
1,253,560
*
Represents a party-in-interest
10
JOHNSON CONTROLS FEDERAL SYSTEMS, INC.
RETIREMENT SAVINGS PLAN
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Johnson Controls International plc Employee Benefit Policy Committee have duly caused this annual report to be signed by the undersigned thereunto duly authorized.
JOHNSON CONTROLS FEDERAL SYSTEMS, INC. RETIREMENT SAVINGS PLAN
By:
/s/ Olivier Leonetti
Olivier Leonetti
Executive Vice President and Chief Financial Officer
