The Toro Company Retirement Plan
Plan Overview
The Plan is a defined contribution plan providing retirement benefits to Participants, including a profit-sharing portion and an ESOP portion. Current employees become eligible after 30 days of employment and are automatically enrolled to contribute 4% of their pre-tax compensation, with an escalation provision increasing the contribution rate by 1% annually up to 15%. Participants can opt for different contribution rates or the Roth option, with total contributions (pre-tax and after-tax) capped at 50% of compensation. The Company matches 100% of participants' salary reduction contributions up to 4% of eligible compensation, with matching contributions vesting fully after two years of service.
Contributions and Vesting
Participants are immediately 100% vested in their own contributions. Discretionary annual contributions (cash or Common Stock) may be made by the Company, with eligibility requiring meeting participation criteria, employment on the last day of the Plan year, and 1,000 hours of service. These contributions vest at 20% after one year and an additional 20% annually thereafter. Rollover contributions from other qualified plans are permitted, and participants can withdraw or transfer these amounts.
Investments and Risks
Participants can invest their accounts in various options, including Common Stock, with a limit of 25% in Common Stock. The Plan's investments are valued at fair value, with most categorized as Level 1 assets (e.g., mutual funds, money market funds, Common Stock). However, investments in Common Stock (13% and 16% of assets in 2025 and 2024, respectively) create concentration risk, making net assets sensitive to stock value fluctuations.
Accounting Policies
The financial statements are prepared on the accrual basis under U.S. GAAP. Key accounting estimates and risks include investment valuations, market volatility, and the impact of Common Stock concentration. Administrative costs are shared by the Company and participants, with investment management fees netted against investment income.
Fair Value Measurement
Assets are categorized into Level 1 (most reliable), Level 2 (observable inputs), and Level 3 (unobservable inputs) based on the fair value hierarchy. Mutual funds, money market funds, and Common Stock are Level 1, while Common Collective Trust Funds are Level 2 or measured using net asset value as a practical expedient.
Plan Tax Status
The Plan is a qualified plan under Section 401(a) of the IRC, with the trust exempt from federal income tax under Section 501(a). No uncertain tax positions are recognized as of December 31, 2025.
Key Data
- 2025 Delinquent Participant Contributions: $0.5 million
- 2024 Delinquent Participant Contributions: $0.8 million
- 2025 Common Stock Holdings: 2,355,182 shares
- 2024 Common Stock Holdings: 2,707,945 shares
- 2025 Vanguard Retirement Savings Trust IV Investment: $35.7 million
- 2024 Vanguard Retirement Savings Trust IV Investment: $43.1 million
Supplemental Information
Schedule H provides details on delinquent participant contributions and assets held at the end of 2025.
