TRP 401(k) and Savings Local 1-2 Plan 12.31.13


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 11-K
 
 
þ
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2013.
 
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________
 
 
Commission File No. 1-31690
 
A.
Full title of the plan and the address of the plan, if different from that of the issuer named below:
 
TransCanada 401(k) and Savings Local 1-2 Plan
TransCanada USA Services Inc., 717 Texas Street, Suite 2400
Houston, Texas 77002
 
 
B.  
Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
 
TransCanada Corporation
450 – 1 Street S.W., Calgary, Alberta, T2P 5H1, Canada


 






TRANSCANADA 401(k) AND SAVINGS
LOCAL 1-2 PLAN

TABLE OF CONTENTS



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
FINANCIAL STATEMENTS
 
 
 
Statements of Net Assets Available for Benefits as of December 31, 2013 and 2012
 
 
Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 2013 and 2012
 
 
Notes to Financial Statements December 31, 2013 and 2012
 
 
SUPPLEMENTAL SCHEDULE
 
 
 
Schedule H, Part IV, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2013
 
 
SIGNATURE
 
 
EXHIBIT INDEX
 
 
Exhibit 23.1 Consent of Independent Registered Public Accounting Firm
 

 All other schedules required by 29 CFR 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable.





Report of Independent Registered Public Accounting Firm
 
 
The Plan Administrator
TransCanada 401(k) and Savings Local 1-2 Plan:
 
We have audited the accompanying statements of net assets available for benefits of the TransCanada 401(k) and Savings Local 1-2 Plan (the Plan) as of December 31, 2013 and 2012, and the related statements of changes in net assets available for benefits for the years then ended. 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 audit 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, 2013 and 2012, and the changes in net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.
 
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule H, part IV, line 4i – schedule of assets (held at end of year) as of December 31, 2013 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. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits 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/ KPMG LLP
 
Houston, Texas
June 26, 2014


1





TRANSCANADA 401(k) AND SAVINGS LOCAL 1-2 PLAN
 
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
 
 
December 31 (thousands of dollars)
 
2013

 
2012

Assets
 
 
 
 
Investments at fair value (Note 3)
 
$
23,499

 
19,938

Notes receivable from participants
 
1,251

 
1,188

Net Assets Available for Benefits
 
$
24,750

 
21,126


The accompanying notes to the financial statements are an integral part of these statements.


2





TRANSCANADA 401(k) AND SAVINGS LOCAL 1-2 PLAN
 
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
  

Year ended December 31 (thousands of dollars)
 
2013

 
2012

Additions
 
 
 
 
Contributions
 
 
 
 
Employee contributions
 
$
1,570

 
1,429

Employer contributions
 
212

 
212

Employee rollover
 
11

 

 
 
1,793

 
1,641

Investment Income
 
 

 
 

Net appreciation in fair value of investments (Note 3)
 
2,262

 
1,125

Interest and dividend income
 
548

 
599

 
 
2,810

 
1,724

Interest on notes receivable from participants
 
51

 
54

Total Additions
 
4,654

 
3,419

 
 
 
 
 
Deductions
 
 

 
 

Benefits paid to participants
 
1,030

 
840

Total Deductions
 
1,030

 
840

Increase in Net Assets Available for Benefits
 
3,624

 
2,579

Net Assets Available for Benefits
 
 

 
 

Beginning of Year
 
21,126

 
18,547

End of Year
 
$
24,750

 
21,126


The accompanying notes to the financial statements are an integral part of these statements.


3





TRANSCANADA 401(k) AND SAVINGS LOCAL 1-2 PLAN
 
NOTES TO FINANCIAL STATEMENTS
December 31, 2013 and 2012
 

NOTE 1:    DESCRIPTION OF PLAN

The TransCanada 401(k) and Savings Local 1-2 Plan (the Plan) is a defined contribution plan that provides retirement benefits for employees of TransCanada USA Services Inc. (TCUSA or the Company) or its subsidiaries who are covered under a collective bargaining agreement with the Utility Workers Union of America (UWUA) Local 1-2 Ravenswood.  The Plan excludes employees hired under the Company’s student program.  Employees are eligible for employer-matching contributions when they have completed 11 months of service by the end of a 12 month period with the Company.  The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
 
The Board of Directors of TCUSA has appointed Fidelity Management Trust Company (Fidelity or the Trustee) as custodian and trustee of the Plan’s assets. Fidelity Investments Institutional Operations Company serves as the recordkeeper for the Plan.

Employee and Employer Contributions
 
Each year, participants may elect to defer a percentage of their eligible compensation into the Plan subject to an annual limit of the lesser of 50 per cent of their eligible compensation or $17,500 (2012 - $17,000), subject to certain limitations under the Internal Revenue Code of 1986, as amended (the Code). Participants age 50 or older who are making deferral contributions may also make catch-up contributions of up to $5,500.  The Company may make discretionary matching contributions, if any, to be determined annually, as well as required matching contributions under a collective bargaining agreement.  Effective June 25, 2013 the required matching contribution equals five ninths of the first sixty-eight dollars contributed by the participant each pay period. Prior to June 25, 2013, the required matching contribution equaled five ninths of the first sixty-three dollars contributed by the participant each pay period. Participants may contribute amounts transferred to the Plan from another qualified plan at the participant’s request (rollover).
 
Participant Accounts
 
Each participant’s account is credited with the participant’s and Company’s contributions and an allocation of Plan earnings.  Earnings are allocated from a particular fund based on the ratio of a participant’s account invested in the fund to all participants’ investments in that fund.
 
Participants are responsible for investment decisions relating to the investment of assets in their account.  The Trustee carries out all investing transactions on behalf of the participant. In the event investment instructions are not received from the participant, contributions are allocated to the Plan's qualified default option, the Fidelity Freedom K target date funds, based upon the participant's expected date of retirement.
 
Investment in TransCanada Corporation
 
Stock of TransCanada Corporation (TransCanada), indirect parent company of TCUSA, is available to participants in the Plan. Participants may elect to invest up to 10 per cent of contributions in TransCanada stock. Participants may elect to exchange up to 10 per cent of their existing account balance into TransCanada stock, subject to a 10 per cent maximum account value. Additionally, no more than 10 per cent of any rollover contribution can be invested in TransCanada stock.
 

4





Vesting
 
Participants are immediately vested in their contributions, including rollovers, and any earnings thereon. Employer-matching contributions and earnings are vested on the participant’s three year anniversary.
 
Notes Receivable from Participants
 
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 reduced by the highest outstanding note balance in their account during the prior 12 month period or 50 per cent of their vested account balance. Note terms range from one to five years for general notes or up to 15 years for the purchase of a primary residence. The notes are secured by the balance in the participant’s account and bear interest at a reasonable interest rate, as determined by the Plan Administrator, based on prevailing market interest rates at the time. Interest rates remain fixed throughout the duration of the term. Interest rates on notes outstanding at December 31, 2013 ranged from 4.25 per cent to 7.5 per cent (2012 - 4.25 per cent to 8.25 per cent). Principal and interest are paid through payroll deductions.
 
A note receivable from a participant shall be considered in default if any scheduled repayment remains unpaid as of the last business day of the calendar quarter following the calendar quarter in which the note is initially considered past due.  In the event of a default or termination of employment the entire outstanding note and accrued interest is considered to be a deemed distribution to the participant.
 
Payment of Benefits
 
Participants are eligible to request a distribution of their vested amounts upon retirement, death, total and permanent disability, severance of employment with the Company or, in very limited circumstances, in the event of financial hardship.  Distributions are made in the form of a lump-sum payment, installment payments or a rollover to another qualified account.
 
A participant’s normal retirement age is 65, however, participants may elect to withdraw all or a portion of their contributions after the age of 59½, subject to certain conditions.  Participants may receive benefits commencing on or after age 55 provided they have terminated their employment with the Company.
 
In certain circumstances, participants may elect to withdraw all or a portion of their vested matching contributions that have been in their account for a minimum of 36 months, subject to certain conditions.
 
Forfeitures
 
As participants are immediately 100 per cent vested in employee contributions and related plan earnings, there are no forfeitures of these amounts.  Employer contributions that are not vested are forfeited if the participant’s employment is terminated for reasons other than death or retirement, and are used first to pay administrative expenses and next to reduce future employer contributions.
 
Administrative Expenses
 
The Plan Administrator is responsible for filing all required reports on behalf of the Plan.  The Company provides or pays for certain accounting, legal and management services on behalf of the Plan.  The Company has not charged the Plan for these expenses or services. Loans and other transaction specific fees are charged to the accounts of participants electing such transaction.  Certain investment related expenses are presented as a reduction of investment income.
 

5





Plan Termination
 
Although it has not expressed any intent to do so, with approval from its Board of Directors, the Company has the right under the Plan to discontinue contributions at any time and to terminate the Plan, subject to the provisions of ERISA.  In the event of Plan termination, participants would become 100 per cent vested in their accounts.

NOTE 2:    SUMMARY OF ACCOUNTING POLICIES
 
Basis of Accounting
 
The financial statements of the Plan are prepared on an accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
 
Use of Estimates
 
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and changes therein, and disclosure of contingent assets and liabilities.  Actual results could differ from these estimates.
 
Investment Valuation and Income Recognition
 
The Plan’s investments are stated at fair value. Fair value is 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. See Note 3 for discussion of fair value measurements.
 
Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date.
 
Net Appreciation in Fair Value of Investments consists of: (1) the unrealized gains or losses on investments held during the year and (2) the realized gains or losses recognized on the sale of investments during the year. Realized gains and losses from security transactions are reported on the average cost basis.
 
Purchases and sales of securities are recorded on a trade-date basis.
 
Notes Receivable from Participants
 
Notes Receivable from Participants includes the unpaid principal balance plus any accrued interest. Defaulted notes receivable from participants are recorded as a distribution based upon the terms of the plan document.
 
Payment of Benefits
 
Benefits are recorded when paid.

NOTE 3:    INVESTMENTS
 
Participants direct the investment of their account balances into a broad range of investment securities offered by the Plan, including common stock and mutual funds. Investment securities are exposed to various risks, such as counterparty credit risk, liquidity risk and market risk. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in value of these investments, it is reasonably possible that changes in the values of investment securities may occur in the near term and that such changes could materially affect participant account balances and the amounts reported in the financial statements.
 

6





The Plan’s exposure to credit loss in the event of nonperformance of investments is limited to the carrying value of such instruments. The Plan’s concentrations of credit risk, interest rate risk and market risk are dictated by the Plan’s provisions as well as those of ERISA and the participants’ investment preference.
 
Fair Value Hierarchy
 
The Plan’s financial assets and liabilities recorded at fair value have been categorized into three levels based on a fair value hierarchy. In Level I, the fair value of assets and liabilities is determined by reference to quoted prices in active markets for identical assets and liabilities. In Level II, determination of the fair value of assets and liabilities includes valuations using inputs, other than quoted prices, for which all significant inputs are observable, directly or indirectly. This category includes fair value determined using valuation techniques, such as option pricing models and extrapolation using observable inputs. In Level III, determination of the fair value of assets and liabilities is based on inputs that are not readily observable and are significant to the overall fair value measurement. There were no Level II or Level III investments or transfers between levels in 2013 or 2012.
 
Common Stock: Valued at the closing price reported on the New York Stock Exchange.
 
Mutual funds: Valued at the daily closing price reported by the fund. Mutual funds held by the Plan are open end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value and transact at that price. The mutual funds held by the Plan are deemed to be actively traded.
 
Financial assets measured at fair value on a recurring basis are classified in the Level I fair value category as follows.
 
 
Quoted Prices in Active Markets (Level I)
December 31 (thousands of dollars)
 
2013

 
2012

Mutual funds
 
 
 
 
Mid/Large Cap Stock
 
$
18,174

 
14,314

Money Market
 
2,264

 
1,946

Fixed Income
 
2,168

 
2,903

International
 
303

 
201

Small Cap Stock
 

 
30

 
 
22,909

 
19,394

Common stock and other
 
590

 
544

Investments at Fair Value
 
$
23,499

 
19,938

 

Significant Investments
 
The following is a summary of investments which represented five per cent or more of the Plan’s Net Assets Available for Benefits:
December 31 (thousands of dollars)
 
2013

 
2012

Fidelity Freedom K® 2020 Fund
 
$
3,344

 
2,774

Fidelity Freedom K® 2015 Fund
 
2,822

 
2,495

Fidelity Freedom K® 2025 Fund
 
2,740

 
2,033

Fidelity® Retirement Money Market Portfolio
 
2,264

 
1,946

Fidelity Freedom K® 2030 Fund
 
1,786

 
1,282

Fidelity Freedom K® 2035 Fund
 
1,762

 
1,378

Spartan® U.S. Bond Index Fund
 
*

 
1,634

 * Investment is less than five percent of net assets available for benefits in indicated year.
 

7





Net Appreciation in Fair Value of Investments
 
Net Appreciation/(Depreciation) in Fair Value of Investments by major category (including investments purchased, sold and held during the year) was as follows:
Year ended December 31 (thousands of dollars)
 
2013

 
2012

Mutual funds
 
$
2,282

 
1,084

Common stock
 
(20
)
 
41

Net Appreciation in Fair Value of Investments
 
$
2,262

 
1,125


NOTE 4:    INCOME TAXES
 
Effective December 15, 2009, the Plan was restated to a volume submitter plan. The Plan obtained its latest determination letter on October 4, 2011 in which the Internal Revenue Service stated that the Plan, as then designed was in compliance with the applicable requirements of the Code. The Plan Administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Code. The Plan is exempt from federal income taxes. Accordingly, no provision for federal income taxes has been made in the accompanying financial statements.
 
The Plan Administrator has analyzed any income tax assets and liabilities of the Plan and has concluded that as of December 31, 2013 and 2012, there are no uncertain income tax positions taken or expected to be taken that would require recognition of a liability or asset, or disclosure in the financial statements. The Plan is subject to audits by taxing jurisdictions, however, there are currently no audits in progress for any tax periods. The Plan Administrator believes it is no longer subject to income tax examinations for years prior to 2010.
 
NOTE 5:    PARTY-IN-INTEREST AND RELATED PARTY TRANSACTIONS
 
Certain Plan investments are shares of mutual funds managed by an affiliate of Fidelity, the Trustee, therefore these investments qualify as party-in-interest transactions.
 
At December 31, 2013, Plan investments included $588,442 (2012 - $542,607) of TransCanada common stock and $1,139 (2012 - $1,155) in a stock purchase account.  Transactions involving these investments are permitted party-in-interest transactions.

NOTE 6:    SUBSEQUENT EVENTS
 
We have evaluated significant events and transactions through June 26, 2014 and determined that there were no events or transactions that would require recognition or disclosure in the Plan’s financial statements for the year ended December 31, 2013.


8





TRANSCANADA 401(k) AND SAVINGS LOCAL 1-2 PLAN
 
EIN #:     98-0460263
PLAN #:  006
 
SCHEDULE H, PART IV, LINE 4i – SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2013
 
 
 
 
(a)
 
(b)
Identity of Issue, Borrower,
Lessor or Similar Party
 
 
 
(c)
Description of Investment
 
 
(e)
Current Value
 
 
 
 
 
 
 
*
Fidelity Freedom K® 2020 Fund
 
Mutual Fund
 
 
$
3,343,999

*
Fidelity Freedom K® 2015 Fund
 
Mutual Fund
 
 
2,822,373

*
Fidelity Freedom K® 2025 Fund
 
Mutual Fund
 
 
2,740,270

*
Fidelity® Retirement Money Market Portfolio
 
Mutual Fund
 
 
2,263,655

*
Fidelity Freedom K®  2030 Fund
 
Mutual Fund
 
 
1,786,025

*
Fidelity Freedom K® 2035 Fund
 
Mutual Fund
 
 
1,761,824

*
Fidelity Freedom K® 2010 Fund
 
Mutual Fund
 
 
1,164,817

*
Spartan® U.S. Bond Index Fund
 
Mutual Fund
 
 
1,153,178

 
Artisan Mid Cap Value Fund
 
Mutual Fund
 
 
1,057,185

*
Spartan® 500 Index Fund
 
Mutual Fund
 
 
735,249

*
Fidelity Freedom K® Income Fund
 
Mutual Fund
 
 
694,157

*
Fidelity® Dividend Growth Fund
 
Mutual Fund
 
 
590,456

*
Fidelity Freedom K® 2040 Fund
 
Mutual Fund
 
 
513,945

 
Mainstay Large Cap Growth Fund
 
Mutual Fund
 
 
467,009

 
RS Partners Fund
 
Mutual Fund
 
 
385,242

*
Fidelity® International Discovery Fund
 
Mutual Fund
 
 
300,685

 
Baron Asset Fund
 
Mutual Fund
 
 
285,259

*
Fidelity Freedom K® 2045 Fund
 
Mutual Fund
 
 
274,273

 
Vanguard Inflation Protected Securities Fund
 
Mutual Fund
 
 
174,861

*
Fidelity Freedom K® 2000 Fund
 
Mutual Fund
 
 
145,695

*
Fidelity Freedom K® 2050 Fund
 
Mutual Fund
 
 
94,336

*
Fidelity® Equity-Income Fund
 
Mutual Fund
 
 
90,104

*
Spartan® Extended Market Index Fund
 
Mutual Fund
 
 
52,834

*
Fidelity Freedom K® 2055 Fund
 
Mutual Fund
 
 
9,730

 
Vanguard Total International Stock
 
Mutual Fund
 
 
2,224

 
Total Mutual Funds
 
 
 
 
22,909,385

 
 
 
 
 
 
 
*
TransCanada Corporation
 
Common Stock
 
 
$
588,442

*
Fidelity Cash Reserves
 
Stock Purchase Account
 
 
1,139

 
 
 
 
 
 
 

*
Participant Loans
 
Interest rates ranging from 4.25% to 7.5% maturing through 2027
 
 
1,250,877

 
Total Investments
 
 
 
 
$
24,749,843

 
* Represents a party-in-interest (Note 5).
 
See accompanying Report of Independent Registered Public Accounting Firm.

9





SIGNATURES
 
 
The Plan.  Pursuant to the requirements of the Securities Exchange 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 thereunto duly authorized.
 
Date: June 26, 2014        
 
 
 
 
TransCanada 401(k) and Savings Local 1-2 Plan
 
 
 
 
By:
 
 
/s/ Jon A.Dobson
                                           
 
 
Jon A. Dobson
Member
TransCanada USA Investment Committee

 
 
 
 
 
 
 
 


10





EXHIBIT INDEX
 
 
 
23.1
Consent of Independent Registered Public Accounting Firm
 
 
 
 


11