DEFINED CONTRIBUTION PROTOTYPE PLAN AND TRUST AGREEMENT

 

TABLE OF CONTENTS

 

ARTICLE I, DEFINITIONS
1.01	Account		1
1.02	Account Balance or Accrued Benefit		1
1.03	Accounting Date		1
1.04	Adoption Agreement		1
1.05	Beneficiary		1
1.06	Code		1
1.07	Compensation		1
1.08	Disability		2
1.09	Earned Income		2
1.10	Effective Date		3
1.11	Employee		3
1.12	Employer		3
1.13	ERISA		3
1.14	Highly Compensated Employee		3
1.15	Hour of Service		3
1.16	Leased Employee		4
1.17	Nonhighly Compensated Employee		5
1.18	Nontransferable Annuity		5
1.19	Paired Plans		5
1.20	Participant		5
1.21	Plan		5
1.22	Plan Administrator		5
1.23	Plan Entry Date		5
1.24	Plan Year		5
1.25	Protected Benefit		5
1.26	Related Group / Related Employer		5
1.27	Self-Employed Individual / Owner Employee / Shareholder Employee		6
1.28	Separation from Service		6
1.29	Service		6
1.30	Service with a Predecessor Employer		6
1.31	Trust		6
1.32	Trust Fund		6
1.33	Trustee		6
1.34	Vested		6
ARTICLE II, ELIGIBILITY AND PARTICIPATION
2.01	Eligibility		7
2.02	Age and Service Conditions		7
2.03	Break in Service - Participation		7
2.04	Participation upon Re-employment		8
2.05	Change in Employment Status		8
2.06	Election Not to Participate		8
ARTICLE III, EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01	Employer Contributions		9
3.02	Deferral Contributions		9
3.03	Matching Contributions		9
3.04	Employer Contribution Allocation		9
3.05	Forfeiture Allocation		11
3.06	Allocation Conditions		12
3.07	Annual Additions Limitation		13
3.08	Estimating Compensation		13
3.09	Determination Based on Actual Compensation		13
3.10	Disposition of Allocated Excess Amount		13
3.11	Combined Plans Annual Additions Limitation		14
3.12	Estimating Compensation		14
3.13	Determination Based on Actual Compensation		14
3.14	Ordering of Annual Addition Allocations		14
3.15	Disposition of Allocated Excess Amount Attributable to Plan		14
3.16	Other Defined Contribution Plans Limitation		14
3.17	Defined Benefit Plan Limitation		14
3.18	Definitions – Article III		15
ARTICLE IV, PARTICIPANT CONTRIBUTIONS
4.01	Participant Contributions		17
4.02	Employee Contributions		17
4.03	DECs		17
4.04	Rollover Contributions		17
4.05	Participant Contributions - Vesting		17
4.06	Participant Contributions - Distribution		17
4.07	Participant Contributions – Investment and Accounting		17
ARTICLE V, VESTING
5.01	Normal/Early Retirement Age		18
5.02	Participant Death or Disability		18
5.03	Vesting Schedule		18
5.04	Cash-Out Distributions to Partially-Vested Participants/Restoration of Forfeited Account Balance		18
5.05	Accounting for Cash-Out Repayment		19
5.06	Year of Service - Vesting		19
5.07	Break in Service and Forfeiture Break in Service - Vesting		19
5.08	Included Years of Service - Vesting		20
5.09	Forfeiture Occurs		20
5.10	Rule of Parity - Vesting		20
5.11	Amendment to Vesting Schedule		20
5.12	Deferral Contributions Taken into Account		20
ARTICLE VI, DISTRIBUTIONS
6.01	Timing of Distribution		21
6.02	Required Minimum Distributions		22
6.03	Method of Distribution		24
6.04	Annuity Distributions to Participants and to Surviving Spouses		25
6.05	Waiver Election - QJSA		26
6.06	Waiver Election - QPSA		26
6.07	Distributions Under Qualified Domestic Relations Orders (QDRO)		26
6.08	Defaulted Loan – Timing of Offset		27
6.09	Hardship Distribution		27
6.10	Direct Rollover of Eligible Rollover Distributions		27
6.11	TEFRA Elections		28
ARTICLE VII, EMPLOYER ADMINISTRATIVE PROVISIONS
7.01	Information to Plan Administrator		29
7.02	No Responsibility for Others		29
7.03	Indemnity of Certain Fiduciaries		29
7.04	Employer Direction of Investment		29
7.05	Evidence		29
7.06	Plan Contributions		29
7.07	Employer Action		29
7.08	Fiduciaries Not Insurers		29
7.09	Plan Terms Binding		29
7.10	Word Usage		29
7.11	State Law		29
7.12	Prototype Plan Status		29
7.13	Employment Not Guaranteed		29
ARTICLE VIII, PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01	Beneficiary Designation		31
8.02	No Beneficiary Designation/Death of Beneficiary		31
8.03	Assignment or Alienation		31
8.04	Information Available		31
8.05	Claims Procedure for Denial of Benefits		32

 

i

 

8.06	Participant Direction of Investment	32
ARTICLE IX, PLAN ADMINISTRATOR
9.01	Compensation and Expenses	33
9.02	Resignation and Removal	33
9.03	General Powers and Duties	33
9.04	Plan Loans	33
9.05	Funding Policy	33
9.06	Individual Accounts	33
9.07	Value of Participant’s Account Balance	34
9.08	Allocation and Distribution of Net Income, Gain or Loss	34
9.09	Individual Statement	35
9.10	Account Charged	35
9.11	Lost Participants	35
9.12	Plan Correction	35
9.13	No Responsibility for Others	36
9.14	Notice, Designation, Election, Consent and Waiver	36
ARTICLE X, TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.01	Acceptance	37
10.02	Receipt of Contributions	37
10.03	Investment Powers	37
10.04	Records and Statements	40
10.05	Fees and Expenses from Fund	40
10.06	Parties to Litigation	40
10.07	Professional Agents	41
10.08	Distribution of Cash or Property	41
10.09	Participant or Beneficiary Incapacitated	41
10.10	Distribution Directions	41
10.11	Third Party Reliance	41
10.12	Multiple Trustee	41
10.13	Resignation and Removal	41
10.14	Successor Trustee Acceptance	41
10.15	Valuation of Trust	42
10.16	Limitation on Liability - If Investment Manager, Ancillary Trustee or Independent Fiduciary Appointed	42
10.17	Investment in Group Trust Fund	42
10.18	Appointment of Ancillary Trustee or Independent Fiduciary	42
ARTICLE XI, PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY
11.01	Insurance Benefit	44
11.02	Limitation on Life Insurance Protection	44
11.03	Definitions	45
11.04	Dividend Plan	45
11.05	Insurance Company Not a Party to Agreement	45
11.06	No Responsibility for Others	45
11.07	Duties of Insurance Company	45
ARTICLE XII, TOP-HEAVY PROVISIONS
12.01	Determination of Top-Heavy Status	46
12.02	Definitions	46
12.03	Top-Heavy Minimum Allocation	47
12.04	Determining Top-Heavy Contribution Rates	47
12.05	Plan Which Will Satisfy Top-Heavy	47
12.06	Top-Heavy Vesting	47
ARTICLE XIII, EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
13.01	Exclusive Benefit	48
13.02	Amendment by Employer	48
13.03	Amendment by Prototype Plan Sponsor	48
13.04	Plan Termination or Suspension	49
13.05	Full Vesting on Termination	49
13.06	Post Termination Procedure and Distribution	49
13.07	Merger/Direct Transfer	49
ARTICLE XIV, CODE SECTION 401(k) AND CODE SECTION 401(m) ARRANGEMENTS
14.01	Application	51
14.02	401(k) Arrangement	51
14.03	Definitions	54
14.04	Matching Contributions/Employee Contributions	55
14.05	Deferral Deposit Timing/Employer Contribution Status	55
14.06	Special Accounting and Allocation Provisions	56
14.07	Annual Elective Deferral Limitation	57
14.08	Actual Deferral Percentage (ADP) Test	57
14.09	Actual Contribution Percentage (ACP) Test	58
14.10	Multiple Use Limitation	60
14.11	Distribution Restrictions	60
14.12	Special Allocation and Valuation Rules	61

 

ii

 

ALPHABETICAL LISTING OF DEFINITIONS

 

Plan Definition Section Reference 100% Limitation	3.19(l)
Account	1.01
Account Balance or Accrued Benefit	1.02
Accounting Date.	1.02
Actual Deferral Percentage (“ADP”) Test	14.08
Adoption Agreement	1.04
Annual Addition	3.19(a)
Average Contribution Percentage Test	14.09
Beneficiary	1.05
Break in Service for Eligibility Purposes	2.03
Break in Service for Vesting Purposes	5.07
Cash-out Distribution	5.04
Code	1.06
Code §411(d)(6) Protected Benefits	13.02(A)
Compensation	1.07
Compensation for Code §401(k) Purposes	14.03(f)
Compensation for Code §415 Purposes	3.19(b)
Compensation for Top Heavy Purposes	12.02(d)
Contract(s)	11.03(c)
Custodian Designation	10.03[B]
Deemed Cash-out Rule	5.04(C)
Deferral Contributions	14.03(g)
Deferral Contributions Account	14.06(A)
Defined Benefit Plan	3.19(i)
Defined Benefit Plan Fraction	3.19(j)
Defined Contribution Plan	3.19(h)
Defined Contribution Plan Fraction	3.19(k)
Determination Date	12.02(h)
Disability	1.08
Distribution Date	6.01
Distribution Restrictions	14.03(m)
Earned Income	1.09
Effective Date	1.10
Elective Deferrals	14.03(h)
Elective Transfer	13.06(A)
Eligible Employee	14.03(c)
Employee	1.11
Employee Contributions	14.03(n)
Employer	1.12
Employer Contribution Account	14.06
Employer for Code §415 Purposes	3.19(c)
Employer for Top Heavy Purposes	12.02(g)
Employment Commencement Date	2.02
ERISA	1.13
Excess Aggregate Contributions	14.09(D)
Excess Amount	3.19(d)
Excess Contributions	14.08
Exempt Participant	8.01(B)
Forfeiture Break in Service	5.08
Group Trust Fund	10.17
Hardship	6.09
Hardship for Code §401(k) Purposes	14.11(A)
Highly Compensated Employee	1.14
Highly Compensated Group	14.03(d)
Hour of Service	1.15
Plan Definition Section Reference
Incidental Insurance Benefits	11.01(A)
Insurable Participant	11.03(d)
Investment Manager	9.04(i)
Issuing Insurance Company	11.03(b)
Joint and Survivor Annuity	6.04(A)
Key Employee	12.02(a) (12.01
Leased Employees	1.16
Limitation Year	3.19(e)
Loan Policy	9.04(A)
Mandatory Contributions	14.04(A)
Mandatory Contributions Account	14.04(A)
Prototype Plan	3.19(f)
Matching Contributions	14.03(i)
Maximum Permissible Amount	3.19(g)
Minimum Distribution Incidental Benefit	6.03(A)
Multiple Use Limitation	14.10
Named Fiduciary	10.03[D]
Nonelective Contributions	14.03(j)
Nonhighly Compensated Employee	14.03(b)
Nonhighly Compensated Group	14.03(e)
Non-Key Employee	12.02(b)
Nontransferable Annuity	1.17
Normal Retirement Age	5.01
Paired Plans	1.18
Participant	1.19
Participant Deductible Contributions	4.02
Participant Forfeiture	3.05
Participant Loans	10.03[E]
Participant Nondeductible Contributions	4.01
Permissive Aggregation Group	12.02 (f)
Plan	1.20
Plan Administrator	1.21
Plan Entry Date	1.22
Plan Year	1.23
Policy	11.03(a)
Preretirement Survivor Annuity	6.04(B)
Qualified Domestic Relations Order	6.07
Qualified Matching Contributions	14.03(k)
Qualified Nonelective Contributions	14.03(l)
Qualifying Employer Real Property	10.03[F]
Qualifying Employer Securities	10.03[F]
Related Employer	1.25
Required Beginning Date	6.02
Rollover Contributions	4.03
Self-Employed Individual	1.26
Service	1.28
Term Life Insurance Contract	11.03
Top Heavy Minimum Allocation	12.03
Trust	1.30
Trustee	1.32
Trustee Designation	10.03[A]
Trust Fund	1.31
Weighted Average Allocation Method	14.12
Year of Service for Eligibility Purposes	2.02
Year of Service for Vesting Purposes	5.06

 

 

BRYAN, PENDLETON, SWATS & MCALLISTER, LLC

DEFINED CONTRIBUTION PROTOTYPE PLAN AND TRUST

 

DEFINED CONTRIBUTION PROTOTYPE PLAN AND TRUST AGREEMENT

BASIC PLAN DOCUMENT #01

 

Bryan, Pendleton, Swats & McAllister, LLC , in its capacity as Prototype Plan Sponsor, establishes this Prototype Plan intended to conform to and qualify under §401 and §501 of the Internal Revenue Code of 1986, as amended. An Employer establishes a Plan and Trust under this Prototype Plan by executing an Adoption Agreement. If the Employer adopts this Plan as a restated Plan in substitution for, and in amendment of, an existing plan, the provisions of this Plan, as a restated Plan, apply solely to an Employee whose employment with the Employer terminates on or after the restated Effective Date of the Plan. If an Employee’s employment with the Employer terminates prior to the restated Effective Date, that Employee is entitled to benefits under the Plan as the Plan existed on the date of the Employee’s termination of employment.

 

ARTICLE I
DEFINITIONS

 

1.01 “Account” means the separate Account(s) which the Plan Administrator or the Trustee maintains under the Plan for a Participant.

 

1.02 “Account Balance” or “Accrued Benefit” means the amount standing in a Participant’s Account(s) as of any date derived from Employer contributions and from Participant contributions, if any.

 

1.03 “Accounting Date” means the last day of the Plan Year. The Plan Administrator will allocate Employer contributions and forfeitures for a particular Plan Year as of the Accounting Date of that Plan Year, and on such other dates, if any, as the Plan Administrator determines, consistent with the Plan’s allocation conditions and other provisions.

 

1.04 “Adoption Agreement” means the document executed by each Employer adopting this Plan. References to Adoption Agreement within this basic plan document are to the Adoption Agreement as completed and executed by a particular Employer unless the context clearly indicates otherwise. An adopting Employer’s Adoption Agreement and this basic plan document together constitute a single Plan and Trust of the Employer. Each elective provision of the Adoption Agreement corresponds (by its parenthetical section reference) to the section of the Plan which grants the election. Each Adoption Agreement offered under this Plan is either a Nonstandardized Plan or a Standardized Plan, as identified in that Adoption Agreement. The provisions of this Plan apply in the same manner to Nonstandardized Plans and to Standardized Plans unless otherwise specified. All section references within an Adoption Agreement are Adoption Agreement section references unless the context clearly indicates otherwise.

 

1.05 “Beneficiary” means a person designated by a Participant or by the Plan who is or may become entitled to a benefit under the Plan. A Beneficiary who becomes entitled to a benefit under the Plan remains a Beneficiary under the Plan until the Trustee has fully distributed to the Beneficiary his/her Plan benefit. A Beneficiary’s right to (and the Plan Administrator’s or a Trustee’s duty to provide to the Beneficiary) information or data concerning the Plan does not arise until the Beneficiary first becomes entitled to receive a benefit under the Plan.

 

1.06 “Code” means the Internal Revenue Code of 1986, as amended and includes applicable Treasury regulations.

 

1.07 “Compensation” means a Participant’s W-2 wages, Code §3401(a) wages, or 415 compensation except, in the case of a Self-Employed Individual, Compensation means Earned Income as defined in Section 1.09. The Employer in its Adoption Agreement must specify which definition of Compensation (Section 1.07(A), (B) or (C)) applies under the Plan and any modifications thereto, for purposes of contribution allocations under Article III.

 

Any reference in the Plan to Compensation is a reference to the definition in this Section 1.07, unless the Plan reference, or the Employer in its Adoption Agreement, modifies this definition. The Plan Administrator will take into account only Compensation actually paid during (or as permitted under the Code, paid for) the relevant period. A Compensation payment includes Compensation paid by the Employer through another person under the common paymaster provisions in Code §§3121 and 3306. Compensation, unless otherwise specified in the Adoption Agreement, does not include any form of remuneration (including severance pay and vacation pay) paid to the Participant after the Participant incurs a Separation from Service.

 

(A) W-2 Wage s. W-2 wages means wages for federal income tax withholding purposes, as defined under Code §3401(a), plus all other payments to an Employee in the course of the Employer’s trade or business, for which the Employer must furnish the Employee a written statement under Code §§6041, 6051 and 6052, but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or services performed (such as the exception for agricultural labor in Code §3401(a)(2)).

 

(B)  Code §3401(a) Wages. Code §3401(a) wages means wages within the meaning of Code §3401(a) for the purposes of income tax withholding at the source, but determined without regard to any rules that limit the remuneration included in wages based on the nature or the location of the employment or the services performed (such

 

1

 

as the exception for agricultural labor in Code §3401(a)(2)).

 

(C)  Code §415 Compensation (current income definition ). Code §415 compensation means the Employee’s wages, salaries, fees for professional service and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salespersons, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits and reimbursements or other expense allowances under a nonaccountable plan as described in Treas. Reg. §1.62-2(c)).

 

Code §415 compensation does not include:

 

(a)  Employer contributions to a plan of deferred compensation to the extent the contributions are not included in the gross income of the Employee for the taxable year in which contributed, Employer contributions on behalf of an Employee to a Simplified Employee Pension Plan to the extent such contributions are excludible from the Employee’s gross income, and any distributions from a plan of deferred compensation, regardless of whether such amounts are includible in the gross income of the Employee when distributed.

 

(b)  Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture.

 

(c)  Amounts realized from the sale, exchange or other disposition of stock acquired under a stock option described in Part II, Subchapter D, Chapter 1, Subtitle A of the Code.

 

(d)  Other amounts which receive special tax benefits, such as premiums for group term life insurance (but only to the extent that the premiums are not includible in the gross income of the Employee), or contributions made by an Employer (whether or not under a salary reduction agreement) toward the purchase of an annuity contract described in Code §403(b) (whether or not the contributions are excludible from the gross income of the Employee).

 

(D)  Elective Contribution s. Compensation under Sections 1.07(A), 1.07(B) and 1.07(C) includes Elective Contributions unless the Employer in its Adoption Agreement elects to exclude Elective Contributions. “Elective Contributions” are amounts excludible from the Employee’s gross income under Code §§125, 132(f)(4), 402(e)(3), 402(h)(2), 403(b), 408(p) or 457, and contributed by the Employer, at the Employee’s election, to a cafeteria plan, a qualified transportation fringe benefit plan, a 401(k) arrangement, a SARSEP, a tax-sheltered annuity, a SIMPLE plan or a Code §457 plan. Notwithstanding the preceding sentence, amounts described in §132(f)(4) are not Elective Contributions until Plan Years beginning on or after January 1, 2001, unless the Plan Administrator operationally has included such amounts effective as of an earlier Plan Year beginning no earlier than January 1, 1998.

 

(E)  Compensation Dollar Limitation. For any Plan Year, the Plan Administrator in allocating contributions under Article III or in testing the Plan for nondiscrimination, cannot take into account more than $150,000 (or such larger or smaller amount as the Commissioner of Internal Revenue may prescribe) of any Participant’s Compensation. Notwithstanding the foregoing, an Employee under a 401(k) arrangement may make elective deferrals with respect to Compensation which exceeds the Plan Year Compensation limitation, provided such deferrals otherwise satisfy Code §402(g) and other applicable limitations.

 

(F)  Nondiscrimination. For purposes of determining whether the Plan discriminates in favor of Highly Compensated Employees, Compensation means Compensation as defined in this Section 1.07, except: (1) the Employer annually may elect operationally to include or to exclude Elective Contributions, irrespective of the Employer’s election in its Adoption Agreement regarding Elective Contributions; and (2) the Plan Administrator will disregard any elections made in the “modifications to Compensation definition” section of Adoption Agreement Section 1.07. The Employer’s election described in clause (1) must be consistent and uniform with respect to all Employees and all plans of the Employer for any particular Plan Year. The Employer, irrespective of clause (2), may elect to exclude from this nondiscrimination definition of Compensation any items of Compensation excludible under Code §414(s) and the applicable Treasury regulations, provided such adjusted definition conforms to the nondiscrimination requirements of those regulations. Furthermore, for nondiscrimination purposes, including the computation of an Employee’s actual deferral percentage (“ADP”) or actual contribution percentage (“ACP”), the Plan Administrator may limit Compensation taken into account to Compensation received only for the portion of the Plan Year in which the Employee was a Participant and only for the portion of the Plan Year in which the Plan or the 401(k) arrangement was in effect.

 

1.08 “Disability” means the Participant, because of a physical or mental disability, will be unable to perform the duties of his/her customary position of employment (or is unable to engage in any substantial gainful activity) for an indefinite period which the Plan Administrator considers will be of long continued duration. A Participant also is disabled if he/she incurs the permanent loss or loss of use of a member or function of the body, or is permanently disfigured, and incurs a Separation from Service. A Participant is disabled on the date the Plan Administrator determines the Participant satisfies the definition of Disability. The Plan Administrator may require a Participant to submit to a physical examination in order to confirm Disability. The Plan Administrator will apply the provisions of this Section 1.08 in a nondiscriminatory, consistent and uniform manner. The Employer may provide an alternative definition of Disability in an Addendum to its Adoption Agreement.

 

1.09 “Earned Income” means net earnings from self-employment in the trade or business with respect to which the Employer has established the Plan, provided personal services of the Self-Employed Individual are a material income producing factor. The Plan Administrator will

 

2

 

determine net earnings without regard to items excluded from gross income and the deductions allocable to those items. The Plan Administrator will determine net earnings after the deduction allowed to the Self-Employed Individual for all contributions made by the Employer to a qualified plan and after the deduction allowed to the Self-Employed Individual under Code §164(f) for self-employment taxes.

 

1.10 “Effective Date” of this Plan is the date specified in the Adoption Agreement unless otherwise for a specified purpose provided within this basic plan document or within (as part of the Adoption Agreement ) a Participation Agreement, an Addendum, or within Appendices A or B.

 

1.11 “Employee” means any common law employee, Self-Employed Individual, leased employee or other person the Code treats as an employee of the Employer for purposes of the Employer’s qualified plan. The Employer in its Adoption Agreement must elect or specify any Employee, or class of Employees, not eligible to participate in the Plan (an “excluded Employee”).

 

(A)  Collective Bargaining Employees. If the Employer elects in its Adoption Agreement to exclude collective bargaining Employees from eligibility to participate, the exclusion applies to any Employee included in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers if: (1) retirement benefits were the subject of good faith bargaining; and (2) two percent or less of the employees covered by the agreement are “professionals” as defined in Treas. Reg. §1.410(b)-9, unless the collective bargaining agreement requires the Employee to be included within the Plan. The term “employee representatives” does not include any organization more than half the members of which are owners, officers, or executives of the Employer.

 

(B)  Nonresident Aliens. If the Employer elects in its Adoption Agreement to exclude nonresident aliens from eligibility to participate, the exclusion applies to any nonresident alien Employee who does not receive any earned income, as defined in Code §911(d)(2), from the Employer which constitutes United States source income, as defined in Code §861(a)(3).

 

(C)  Reclassified Employees. If the Employer elects in its Adoption Agreement to exclude reclassified Employees from eligibility to participate, the exclusion applies to any person the Employer does not treat as an Employee (including, but not limited to, independent contractors, persons the Employer pays outside of its payroll system and out-sourced workers) for federal income tax withholding purposes under Code §3401(a), but for whom there is a binding determination the individual is an Employee or a Leased Employee of the Employer.

 

1.12 “Employer” means each employer who establishes a Plan under this Prototype Plan by executing an Adoption Agreement and includes to the extent described in Section 1.26 a Related Employer and a Participating Employer. The Employer for purposes of acting as Plan Administrator, including Plan amendments, terminating the Plan or performing other ERISA settlor functions, means the signatory Employer to the Adoption Agreement Execution Page and does not include any related Employer or Participating Employer.

 

1.13 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and includes applicable Department of Labor regulations.

 

1.14 “Highly Compensated Employee” means an Employee who:

 

(a)  during the Plan Year or during the preceding Plan Year, is a more than 5% owner of the Employer (applying the constructive ownership rules of Code §318, and applying the principles of Code §318, for an unincorporated entity); or

 

(b)  during the preceding Plan Year had Compensation in excess of $80,000 (as adjusted by the Commissioner of Internal Revenue for the relevant year) and, if the Employer under its Adoption Agreement Appendices A or B, makes the top-paid group electio n, was part of the top-paid 20% group of Employees (based on Compensation for the preceding Plan Year).

 

For purposes of this Section 1.14, “Compensation” means Compensation as defined in Section 1.07, except any exclusions from Compensation the Employer elects in Adoption Agreement Section 1.07 do not apply, and Compensation specifically includes Elective Contributions. The Plan Administrator must make the determination of who is a Highly Compensated Employee, including the determinations of the number and identity of the top-paid 20% group, consistent with Code §414(q) and regulations issued under that Code section. The Employer in its Adoption Agreement Appendices A or B may make a calendar year data election to determine the Highly Compensated Employees for the Plan Year, as prescribed by Treasury regulations or by other guidance published in the Internal Revenue Bulletin. A calendar year data election must apply to all plans of the Employer which reference the highly compensated employee definition in Code §414(q). For purposes of this Section 1.14, if the current Plan Year is the first year of the Plan, then the term “preceding Plan Year” means the 12-consecutive month period immediately preceding the current Plan Year.

 

1.15 “Hour of Service” means:

 

(a)  Each Hour of Service for which the Employer, either directly or indirectly, pays an Employee, or for which the Employee is entitled to payment, for the performance of duties. The Plan Administrator credits Hours of Service under this Paragraph (a) to the Employee for the computation period in which the Employee performs the duties, irrespective of when paid;

 

(b)  Each Hour of Service for back pay, irrespective of mitigation of damages, to which the Employer has agreed or for which the Employee has received an award. The Plan Administrator credits Hours of Service under this Paragraph (b) to the Employee for the computation period(s) to which the award or the agreement pertains rather than for the computation period in which the award, agreement or payment is made; and

 

3

 

(c)  Each Hour of Service for which the Employer, either directly or indirectly, pays an Employee, or for which the Employee is entitled to payment (irrespective of whether the employment relationship is terminated), for reasons other than for the performance of duties during a computation period, such as leave of absence, vacation, holiday, sick leave, illness, incapacity (including disability), layoff, jury duty or military duty. The Plan Administrator will credit no more than 501 Hours of Service under this Paragraph (c) to an Employee on account of any single continuous period during which the Employee does not perform any duties (whether or not such period occurs during a single computation period). The Plan Administrator credits Hours of Service under this Paragraph (c) in accordance with the rules of paragraphs (b) and (c) of Labor Reg. §2530.200b-2, which the Plan, by this reference, specifically incorporates in full within this Paragraph (c).

 

The Plan Administrator will not credit an Hour of Service under more than one of the above Paragraphs (a), (b) or (c). A computation period for purposes of this Section 1.15 is the Plan Year, Year of Service period, Break in Service period or other period, as determined under the Plan provision for which the Plan Administrator is measuring an Employee’s Hours of Service. The Plan Administrator will resolve any ambiguity with respect to the crediting of an Hour of Service in favor of the Employee.

 

(A)  Method of Crediting Hours of Service. The Employer must elect in its Adoption Agreement the method the Plan Administrator will use in crediting an Employee with Hours of Service and the purpose for which the elected method will apply.

 

(B)  Actual Method. Under the Actual Method as determined from records, an Employee receives credit for Hours of Service for hours worked and hours for which the Employer makes payment or for which payment is due from the Employer.

 

(C)  Equivalency Method. Under an Equivalency Method, for each equivalency period for which the Plan Administrator would credit the Employee with at least one Hour of Service, the Plan Administrator will credit the Employee with: (i) 10 Hours of Service for a daily equivalency; (ii) 45 Hours of Service for a weekly equivalency; (iii) 95 Hours of Service for a semimonthly payroll period equivalency; and (iv) 190 Hours of Service for a monthly equivalency.

 

(D)  Elapsed Time Method. Under the Elapsed Time Method, an Employee receives credit for Service for the aggregate of all time periods (regardless of the Employee’s actual Hours of Service) commencing with the Employee’s Employment Commencement Date, or with his/her Re-employment Commencement Date, and ending on the date a Break in Service begins. An Employee’s Employment Commencement Date or his/her Re-employment Commencement Date begins on the first day he/she performs an Hour of Service following employment or re-employment. In applying the Elapsed Time Method, the Plan Administrator will credit an Employee’s Service for any Period of Severance of less than 12-consecutive months and will express fractional periods of Service in days.

 

Under the Elapsed Time Method, a Break in Service is a Period of Severance of at least 12 consecutive months. A Period of Severance is a continuous period of time during which the Employee is not employed by the Employer. The continuous period begins on the date the Employee retires, quits, is discharged, or dies or if earlier, the first 12-month anniversary of the date on which the Employee otherwise is absent from Service for any other reason (including disability, vacation, leave of absence, layoff, etc.). In the case of an Employee who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first date the Employee is otherwise absent from Service does not constitute a Break in Service.

 

(E)  Maternity/Paternity Leave/Family and Medical Leave Act. Solely for purposes of determining whether an Employee incurs a Break in Service under any provision of this Plan, the Plan Administrator must credit Hours of Service during the Employee’s unpaid absence period: (i) due to maternity or paternity leave; or (ii) as required under the Family and Medical Leave Act. An Employee is on maternity or paternity leave if the Employee’s absence is due to the Employee’s pregnancy, the birth of the Employee’s child, the placement with the Employee of an adopted child, or the care of the Employee’s child immediately following the child’s birth or placement. The Plan Administrator credits Hours of Service under this Section 1.15(E) on the basis of the number of Hours of Service for which the Employee normally would receive credit or, if the Plan Administrator cannot determine the number of Hours of Service the Employee would receive credit for, on the basis of 8 hours per day during the absence period. The Plan Administrator will credit only the number (not exceeding 501) of Hours of Service necessary to prevent an Employee’s Break in Service. The Plan Administrator credits all Hours of Service described in this Section 1.15(E) to the computation period in which the absence period begins or, if the Employee does not need these Hours of Service to prevent a Break in Service in the computation period in which his/her absence period begins, the Plan Administrator credits these Hours of Service to the immediately following computation period.

 

(F)  Qualified Military Service. Hour of Service also includes any Service the Plan must credit for contributions and benefits in order to satisfy the crediting of Service requirements of Code §414(u). The provisions of this Section 1.15(F) apply beginning December 12, 1994, or if the Employer’s Plan is effective after that date, as of the Plan’s Effective Date.

 

1.16 “Leased Employee” means an individual (who otherwise is not an Employee of the Employer) who, pursuant to an agreement between the Employer and any other person, has performed services for the Employer (or for the Employer and any persons related to the Employer within the meaning of Code §144(a)(3)) on a substantially full time basis for at least one year and who performs such services under primary direction or control of the Employer within the meaning of Code §414(n)(2). Except as described in Section 1.16(A), a Leased Employee is an Employee for purposes of the Plan. If a Leased Employee is an Employee, “Compensation” includes Compensation

 

4

 

from the leasing organization which is attributable to services performed for the Employer.

 

(A)  Safe Harbor Plan Exception. A Leased Employee is not an Employee if the leasing organization covers the employee in a safe harbor plan and, prior to application of this safe harbor plan exception, 20% or less of the Employer’s Employees (other than Highly Compensated Employees) are Leased Employees. A safe harbor plan is a money purchase pension plan providing immediate participation, full and immediate vesting, and a nonintegrated contribution formula equal to at least 10% of the employee’s compensation, without regard to employment by the leasing organization on a specified date. The safe harbor plan must determine the 10% contribution on the basis of compensation as defined in Code §415(c)(3) including Elective Contributions.

 

(B)  Other Requirements. The Plan Administrator must apply this Section 1.16 in a manner consistent with Code §§414(n) and 414(o) and the regulations issued under those Code sections. If a Participant is a Leased Employee covered by a plan maintained by the leasing organization, the Plan Administrator will determine the allocation of Employer contributions and Participant forfeitures on behalf of the Participant under the Employer’s Plan without taking into account the Leased Employee’s allocation, if any, under the leasing organization’s plan.

 

1.17 “Nonhighly Compensated Employee” means any Employee who is not a Highly Compensated Employee.

 

1.18 “Nontransferable Annuity” means an annuity contract which by its terms provides that it may not be sold, assigned, discounted, pledged as collateral for a loan or security for the performance of an obligation or for any purpose to any person other than the insurance company. If the Plan distributes an annuity contract, the contract must be a Nontransferable Annuity.

 

1.19 “Paired Plans” means the Employer has adopted two Standardized Plan Adoption Agreements offered with this Prototype Plan, one Adoption Agreement being a Paired Profit Sharing Plan and one Adoption Agreement being a Paired Pension Plan. A Paired Profit Sharing Plan may include a 401(k) arrangement. A Paired Pension Plan must be a money purchase pension plan, defined benefit plan or a target benefit pension plan. Paired Plans must be the subject of a favorable opinion letter issued by the National Office of the Internal Revenue Service. If an Employer adopts paired plans, only one of the plans may provide for permitted disparity.

 

1.20 “Participant” means an eligible Employee who becomes a Participant in accordance with the provisions of Section 2.01. An eligible Employee means an Employee who is not an excluded Employee under Adoption Agreement Section 1.11.

 

1.21 “Plan” means the retirement plan established or continued by the Employer in the form of this Prototype Plan, including the Adoption Agreement under which the Employer has elected to establish this Plan. The Employer must designate the name of the Plan in its Adoption Agreement. An Employer may execute more than one Adoption Agreement offered under this Plan, each of which will constitute a separate Plan and Trust established or continued by that Employer. The Plan and the Trust created by each adopting Employer is a separate Plan and a separate Trust, independent from the plan and the trust of any other employer adopting this Prototype Plan. All section references within this basic plan document are Plan section references unless the context clearly indicates otherwise. The Plan includes any Addendum or Appendix permitted by the basic plan document or by the Employer’s Adoption Agreement and which the Employer attaches to its Adoption Agreement. An Addendum must correspond by section reference to the section of the basic plan document or Adoption Agreement permitting the Addendum.

 

1.22 “Plan Administrator” means the Employer unless the Employer designates another person or persons to hold the position of Plan Administrator. Any person(s) the Employer appoints as Plan Administrator may or may not be Participants in the Plan. In addition to its other duties, the Plan Administrator has full responsibility for the Plan’s compliance with the reporting and disclosure rules under ERISA.

 

1.23 “Plan Entry Date” means the date(s) the Employer elects in Adoption Agreement Section 2.01.

 

1.24 “Plan Year” means the consecutive month period the Employer specifies in its Adoption Agreement. The Employer also must specify in its Adoption Agreement the “Limitation Year” applicable to the limitations on allocations described in Article III. If the Employer maintains Paired Plans, each Plan must have the same Plan Year.

 

1.25 “Protected Benefit” means any accrued benefit described in Treas. Reg. §1.411(d)-4, including any optional form of benefit provided under the Plan which may not (except in accordance with such Regulations) be reduced, eliminated or made subject to Employer discretion.

 

1.26 “Related Group”/”Related Employe r.” A Related Group is a controlled group of corporations (as defined in Code §414(b)), trades or businesses (whether or not incorporated) which are under common control (as defined in Code §414(c)), an affiliated service group (as defined in Code §414(m)) or an arrangement otherwise described in Code §414(o). Each Employer/member of the Related Group is a Related Employer. The term “Employer” includes every Related Employer for purposes of crediting Service and Hours of Service, determining Years of Service and Breaks in Service under Articles II and V, determining Separation from Service, applying the Coverage Test under Section 3.06(E), applying the limitations on allocations in Part 2 of Article III, applying the top-heavy rules and the minimum allocation requirements of Article XII, applying the definitions of Employee, Highly Compensated Employee, Compensation and Leased Employee, applying the safe harbor 401(k) provisions of Section 14.02(D), applying the SIMPLE 401(k) provisions of Section 14.02(E) and for any other purpose the Code or the Plan require.

 

(A)  Participating Employer. An Employer may contribute to the Plan only by being a signatory to the Execution Page of the Adoption Agreement or to a

 

5

 

Participation Agreement to the Adoption Agreement. If a Related Employer executes a Participation Agreement to the Adoption Agreement, the Related Employer is a Participating Employer. A Participating Employer is an Employer for all purposes of the Plan except as provided in Section 1.12.

 

(B)  Standardized/Nonstandardized Plan. If the Employer’s Plan is a Standardized Plan, all Employees of the Employer or of any Related Employer, are eligible to participate in the Plan, irrespective of whether the Related Employer directly employing the Employee is a Participating Employer. Notwithstanding the immediately preceding sentence, individuals who become Employees of a Related Employer as a result of a transaction described in Code §410(b)(6)(C) are not eligible to participate in the Plan during the Plan Year in which such transaction occurs nor in the following Plan Year, unless the Related Employer which employs such Employees becomes during such period a Participating Employer, by executing a Participation Agreement to the Adoption Agreement. If the Plan is a Nonstandardized Plan, the Employees of a Related Employer are not eligible to participate in the Plan unless the Related Employer is a Participating Employer.

 

1.27 “Self-Employed Individual”/”Owner-Employee”/ “Shareholder-Employee.” “Self-Employed Individual” means an individual who has Earned Income (or who would have had Earned Income but for the fact that the trade or business did not have net profits) for the taxable year from the trade or business for which the Plan is established. “Owner-Employee” means a Self-Employed Individual who is the sole proprietor in the case of a sole proprietorship. If the Employer is a partnership, or a limited liability company taxed for federal income tax purposes as a partnership, “Owner-Employee” means a Self-Employed Individual who is a partner or member and owns more than 10% of either the capital or the profits interest of the partnership or of the limited liability company. “Shareholder-Employee” means an employee or officer of an “S” corporation who owns (or is considered as owning under Code §318(a)(1)) more than 5% of the outstanding stock of the corporation on any day of the corporation’s taxable year.

 

1.28 “Separation from Service” means an event after which the Employee no longer has an employment relationship with the Employer maintaining this Plan or with a Related Employer.

 

1.29 “Service” means any period of time the Employee is in the employ of the Employer, including any period the Employee is on an unpaid leave of absence authorized by the Employer under a uniform, nondiscriminatory policy applicable to all Employees.

 

1.30 “Service with a Predecessor Employe r.” If the Employer maintains the plan of a predecessor employer, service of the Employee with the predecessor employer is Service with the Employer. If the Employer does not maintain the plan of a predecessor employer, the Plan does not credit service with the predecessor employer, unless the Employer in its Adoption Agreement (or in a Participation Agreement, if applicable) elects to credit designated predecessor employer service and specifies the purposes for which the Plan will credit service with that predecessor employer.

 

Unless the Employer under its Adoption Agreement Section 2.01 provides for this purpose specific Plan Entry Dates, an Employee who satisfies the Plan’s eligibility condition(s) by reason of the crediting of predecessor service will enter the Plan in accordance with the provisions of Section 2.04 as if the Employee were a re-employed Employee on the first day the Plan credits predecessor service.

 

1.31 “Trust” means the separate Trust created under the Plan.

 

1.32 “Trust Fund” means all property of every kind acquired by the Plan and held by the Trust, other than incidental benefit insurance contracts.

 

1.33 “Trustee” means the person or persons who as Trustee execute the Adoption Agreement, or any successor in office who in writing accepts the position of Trustee. The Employer must designate in its Adoption Agreement whether the Trustee will administer the Trust as a discretionary Trustee or as a nondiscretionary Trustee. If a person acts as a discretionary Trustee, the Employer also may appoint a Custodian. See Article X. If the Prototype Plan Sponsor is a bank, savings and loan association, credit union, mutual fund, insurance company, or other institution qualified to serve as Trustee, a person other than the Prototype Plan Sponsor (or its affiliate) may not serve as Trustee or as Custodian of the Plan without the written consent of the Prototype Plan Sponsor.

 

1.34 “Vested” means a Participant or a Beneficiary has an unconditional claim, legally enforceable against the Plan, to the Participant’s Account Balance or Accrued Benefit.

 

6

 

ARTICLE II
ELIGIBILITY AND PARTICIPATION

 

2.01 ELIGIBILITY . Each eligible Employee becomes a Participant in the Plan in accordance with the eligibility provisions the Employer elects in its Adoption Agreement. If this Plan is a restated Plan, each Employee who was a Participant in the Plan on the day before the restated Effective Date continues as a Participant in the restated Plan, irrespective of whether he/she satisfies the eligibility conditions of the restated Plan, unless the Employer provides otherwise in its Adoption Agreement. If the Employer contributes to the Plan under a Davis-Bacon contract, except as the contract provides, the Employer’s Adoption Agreement elections imposing age and service eligibility conditions do not apply with respect to an Employee performing Davis-Bacon contract Service.

 

2.02 AGE AND SERVICE CONDITIONS . For purposes of an Employee’s participation in the Plan, the Plan: (1) may not impose an age condition exceeding age 21; and (2) takes into account all of the Employee’s Years of Service with the Employer, except as provided in Section 2.03. “Year of Service” for purposes of an Employee’s participation in the Plan, means a 12-consecutive month eligibility computation period during which the Employee completes the number of Hours of Service (not exceeding 1,000) the Employer specifies in its Adoption Agreement.

 

The initial eligibility computation period is the first 12-consecutive month period measured from the Employee’s Employment Commencement Date. The Plan measures succeeding 12-consecutive month eligibility computation periods in accordance with the Employer’s election in its Adoption Agreement. If the Employer elects to measure subsequent periods on a Plan Year basis, an Employee who receives credit for the required number of Hours of Service during the initial eligibility computation period and also during the first applicable Plan Year receives credit for two Years of Service under Article II. “Employment Commencement Date” means the date on which the Employee first performs an Hour of Service for the Employer.

 

If the Employer under Adoption Agreement Section 2.01 elects an alternative Service condition to one Year of Service or two Years of Service, the Employer must elect in the Adoption Agreement the Hour of Service and any other requirement(s), if any, after the Employee completes one Hour of Service. Under any alternative Service condition election, the Plan may not require an Employee to complete more than one Year of Service (1,000 Hours of Service in 12-consecutive months) or two Years of Service if applicable.

 

If the Employer in its Adoption Agreement elects to apply the Equivalency Method or the Elapsed Time Method in applying the Plan’s eligibility Service condition, the Plan Administrator will credit Service in accordance with Sections 1.15(C) and (D).

 

2.03 BREAK IN SERVICE - PARTICIPATION . An Employee incurs a “Break in Service” if during any applicable 12-consecutive month period he/she does not complete more than 500 Hours of Service with the Employer. The “12-consecutive month period” under this Section 2.03 is the same 12-consecutive month period for which the Plan measures a “Year of Service” under Section 2.02. If the Plan applies the Elapsed Time Method of crediting Service under Section 1.15(D), a Participant incurs a “Break in Service” if the Participant has a Period of Severance of at least 12 consecutive months.

 

(A)  Two Year Eligibilit y. If the Employer under Adoption Agreement Section 2.01 elects a two Years of Service condition for eligibility purposes, an Employee who incurs a one year Break in Service prior to completing two Years of Service is a new Employee on the date he/she first performs an Hour of Service for the Employer after the Break in Service, and the Employee establishes a new Employment Commencement Date for purposes of the initial eligibility computation period under Section 2.02.

 

(B)  One Year Hold-Out Rul e. The Employer must elect in its Adoption Agreement whether to apply the one year hold-out rule under Code §410(a)(5)(C). Under this rule, a Participant will incur a suspension of participation in the Plan after incurring a one year Break in Service and the Plan disregards a Participant’s Service completed prior to a Break in Service until the Participant completes one Year of Service following the Break in Service. The Plan suspends the Participant’s participation in the Plan as of the first day of the Plan Year following the Plan Year in which the Participant incurs the Break in Service. If the Participant completes one Year of Service following his/her Break in Service, the Plan restores that Participant’s pre-Break Service (and the Participant resumes active participation in the Plan) retroactively to the first day of the computation period in which the Participant first completes one Year of Service following his/her Break in Service. The initial computation period under this Section 2.03(B) is the 12-consecutive month period measured from the date the Participant first receives credit for an Hour of Service following the one year Break in Service. The Plan measures any subsequent computation periods, if necessary, in a manner consistent with the Employer’s eligibility computation period election in Adoption Agreement Section 2.02. If the Employer elects to apply the one year hold-out rule, the Employer also must elect in its Adoption Agreement whether to limit application of the rule only to a Participant who has incurred a Separation from Service.

 

The Plan Administrator also will apply the one-year hold out rule, if applicable, to an Employee who satisfies the Plan’s eligibility conditions but who incurs a Separation from Service and a one year Break in Service prior to becoming a Participant.

 

This Section 2.03(B) does not affect a Participant’s vesting credit under Article V and, during a suspension period, the Participant’s Account continues to share fully in Trust Fund allocations under Article IX. Furthermore, the Plan Administrator in applying this Section 2.03(B) does not restore any Service disregarded under the Break in Service rule of Section 2.03(A).

 

(C)  No Application to 401(k) Arrangement. If the Plan includes a 401(k) arrangement and the Employer in its Adoption Agreement elects to apply the Section 2.03(B)

 

7

 

one year hold-out rule, the Plan Administrator will apply the provisions of Section 2.04 to the deferral contributions portion of the Plan without regard to Section 2.03(B).

 

(D)  No Rule of Parity – Participation. For purposes of Plan participation, the Plan does not apply the “rule of parity” under Code §410(a)(5)(D).

 

2.04 PARTICIPATION UPON RE-EMPLOYMENT .  A Participant who incurs a Separation from Service will re-enter the Plan as a Participant on the date of his/her re-employment with the Employer, subject to the one year hold-out rule, if applicable, under Section 2.03(B). An Employee who satisfies the Plan’s eligibility conditions but who incurs a Separation from Service prior to becoming a Participant will become a Participant on the later of the Plan Entry Date on which he/she would have entered the Plan had he/she not incurred a Separation from Service or the date of his/her re-employment, subject to the one year hold-out rule, if applicable, under Section 2.03(B). Any Employee who incurs a Separation from Service prior to satisfying the Plan’s eligibility conditions becomes a Participant in accordance with Adoption Agreement Section 2.01.

 

2.05 CHANGE IN EMPLOYMENT STATUS . The Employer in its Adoption Agreement Section 1.11 may elect to exclude certain Employees from Plan participation (“excluded Employees”). If a Participant has not incurred a Separation from Service but becomes an excluded Employee, during the period of exclusion the excluded Employee will not share in the allocation of any Employer contributions or Participant forfeitures, and may not make deferral contributions if the Plan includes a 401(k) arrangement, with respect to Compensation paid to the excluded Employee during the period of exclusion. However, during such period of exclusion, the Participant, without regard to employment classification, continues to receive credit for vesting under Article V for each included Year of Service and the Participant’s Account continues to share fully in Trust Fund allocations under Article IX. If a Participant who becomes an excluded Employee subsequently resumes status as an eligible Employee, the Participant will participate in the Plan immediately upon resuming eligible status, subject to the one year hold-out rule, if applicable, under Section 2.03(B).

 

If an excluded Employee who is not a Participant becomes an eligible Employee, he/she will participate immediately in the Plan if he/she has satisfied the eligibility conditions of Adoption Agreement Section 2.01 and would have been a Participant had he/she not been an excluded Employee during his/her period of Service. Furthermore, the excluded Employee receives credit for vesting under Article V for each included vesting Year of Service notwithstanding the Employee’s excluded Employee status.

 

2.06 ELECTION NOT TO PARTICIPATE . If the Plan is a Standardized Plan, the Plan does not permit an otherwise eligible Employee nor any Participant to elect not to participate in the Plan (“opt-out”). If the Plan is a Nonstandardized Plan, the Employer in its Adoption Agreement must elect whether any eligible Employee may elect irrevocably to opt-out. The Employee prior to his/her Plan Entry Date must file an opt-out election in writing with the Plan Administrator on a form provided by the Plan Administrator for this purpose.

 

8

 

ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES

 

Part 1. Amount of Employer Contributions and Plan Allocations: Sections 3.01 through 3.06

 

3.01 EMPLOYER CONTRIBUTIONS.

 

(A)  Amount and Types of Contribution. The Employer in its Adoption Agreement will elect the amount and type(s) of Employer Plan contribution(s). The Employer will not make a contribution to the Trust for any Plan Year to the extent the contribution would exceed the Participants’ Maximum Permissible Amounts. Unless otherwise provided in an Addendum to its Adoption Agreement, the Employer need not have net profits to make a contribution under the Plan. If the Employer’s Plan is a money purchase pension plan and the Employer also maintains a defined benefit pension plan, notwithstanding the money purchase pension plan formula in the Employer’s Adoption Agreement, the Employer’s required contribution to its money purchase pension plan for a Plan Year is limited to the amount which the Employer may deduct under Code §404(a)(7). If the Employer under Code §404(a)(7) must reduce its money purchase pension plan contribution, the Plan Administrator will reduce each Participant’s allocation in the same ratio as the reduced total Employer contribution bears to the original (unreduced) Employer contribution.

 

(B)  Form of Contribution/Related Employer. Subject to the consent of the Trustee, the Employer may make its contribution in property instead of cash, provided the contribution of property is not a prohibited transaction under the Code or under ERISA. Unless the Employer in its Adoption Agreement makes a contrary election, the Plan Administrator will allocate all Employer contributions and forfeitures without regard to which contributing Related Employer directly employs the affected Participants.

 

(C)  Time of Payment of Contribution. The Employer may pay its contribution for any Plan Year in one or more installments without interest. Unless otherwise required by contract, by the Code or by ERISA, the Employer may make its contribution to the Plan for a particular Plan Year at such time(s) as the Employer in its sole discretion determines. If the Employer makes a contribution for a particular Plan Year after the close of that Plan Year, the Employer will designate in writing to the Trustee the Plan Year for which the Employer is making its contribution.

 

(D)  Return of Employer Contribution. The Employer contributes to the Plan on the condition its contribution is not due to a mistake of fact and the Internal Revenue Service will not disallow the deduction of the Employer’s contribution. The Trustee, upon written request from the Employer, must return to the Employer the amount of the Employer’s contribution made by the Employer by mistake of fact or the amount of the Employer’s contribution disallowed as a deduction under Code §404. The Trustee will not return any portion of the Employer’s contribution under the provisions of this Section 3.01(D) more than one year after:

 

(1)  The Employer made the contribution by mistake of fact; or

 

(2)  The disallowance of the contribution as a deduction, and then, only to the extent of the disallowance.

 

The Trustee will not increase the amount of the Employer contribution returnable under this Section 3.01(D) for any earnings attributable to the contribution, but the Trustee will decrease the Employer contribution returnable for any losses attributable to the contribution.  The Trustee may require the Employer to furnish the Trustee whatever evidence the Trustee deems necessary to enable the Trustee to confirm the amount the Employer has requested be returned is properly returnable under ERISA.

 

3.02 DEFERRAL CONTRIBUTIONS . If the Plan includes a 401(k) arrangement, the Employer in its Adoption Agreement must elect the Plan limitations and restrictions, if any, which apply to deferral contributions or to cash or deferred contributions, if applicable. Under Adoption Agreement Section 3.02, for purposes of applying any Plan limit the Employer has elected on deferral contributions, the Employer must elect to take into account the Employee’s entire Plan Year Compensation or to limit Compensation to the portion of the Plan Year in which the Employee actually is a Participant.

 

3.03 MATCHING CONTRIBUTIONS. If the Plan includes a 401(k) arrangement, the Employer in its Adoption Agreement must elect the type(s) of matching contributions, the time period applicable to any matching contribution formula, and as applicable, the amount of matching contributions and the Plan limitations and restrictions, if any, which apply to matching contributions.

 

3.04 EMPLOYER CONTRIBUTION ALLOCATION.

 

(A)  Method of Allocation. The Employer in its Adoption Agreement must specify, subject to this Section 3.04, the manner of allocating Employer contributions to the Trust. For purposes of this Section 3.04, Employer contributions include as applicable, the Employer’s nonelective contributions, money purchase pension and target benefit contributions, but do not include deferral contributions or, except under Section 3.04(B), matching contributions.

 

(B)  Compensation Taken into Account. The Employer in its Adoption Agreement Section 1.07 must specify the Compensation the Plan Administrator is to take into account in allocating an Employer contribution to a Participant’s Account. For the Plan Year in which the Employee first becomes a Participant in the Plan (or in any portion of the Plan), the Employer may elect to take into account the Employee’s entire Plan Year Compensation or to limit Compensation to the portion of the Plan Year in which the Employee actually is a Participant. For all other Plan Years, the Plan Administrator will take into account only the Compensation determined for the portion of the Plan Year in which the Employee actually is a Participant. The Plan Administrator must take into account the Employee’s entire Compensation for the Plan Year to determine whether the Plan satisfies the top-heavy minimum allocation requirements of Article XII. The

 

9

 

Employer, in its Adoption Agreement, may elect to measure Compensation for allocating its Employer contribution for a Plan Year on the basis of a specified period other than the Plan Year.

 

(C)  Top-Heavy Minimum Allocation. Unless the Employer in an Addendum to its Adoption Agreement elects to satisfy any top-heavy minimum allocation requirement in another plan (not maintained under this basic plan document), the Employer in this Plan must satisfy the top-heavy requirements of Article XII.

 

(D)  Allocation Conditions. Subject to any restoration allocation required under the Plan, the Plan Administrator will allocate and credit Employer contributions to the Account of each Participant who satisfies the allocation conditions of Section 3.06.

 

(E)  Alternative Allocation Formulas. The Plan Administrator will allocate Employer contributions for the Plan Year or other applicable period in accordance with the allocation formula the Employer elects in its Adoption Agreement. The Plan Administrator, in allocating under any allocation formula which is based in whole or in part on Compensation, only will take into account Compensation of those Participants entitled to an allocation.

 

The Employer in its Adoption Agreement must elect, one or more as applicable of the following allocation formulas:

 

(1)  Nonintegrated (pro rata) allocation formula. The Plan Administrator will allocate the Employer contributions for a Plan Year in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year.

 

(2)  Two-tiered permitted disparity allocation formula. Under the first tier, the Plan Administrator will allocate the Employer contributions for a Plan Year in the same ratio that each Participant’s Compensation plus Excess Compensation (as defined in Adoption Agreement Section 3.04) for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this first tier, as a percentage of each Participant’s Compensation plus Excess Compensation, must not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under Section 3.04(D)(4).

 

Under the second tier, the Plan Administrator will allocate any remaining Employer contributions for a Plan Year in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year.

 

(3)  Four-tiered permitted disparity allocation formula. Under the first tier, the Plan Administrator will allocate the Employer contributions for a Plan Year in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant’s Compensation. Solely for purposes of this first tier allocation, a “Participant” means, in addition to any Participant who satisfies the allocation conditions of Section 3.06 for the Plan Year, any other Participant entitled to a top-heavy minimum allocation under the Plan.

 

Under the second tier, the Plan Administrator will allocate the Employer contributions for a Plan Year in the same ratio that each Participant’s Excess Compensation (as defined in Adoption Agreement Section 3.04) for the Plan Year bears to the total Excess Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant’s Excess Compensation.

 

Under the third tier, the Plan Administrator will allocate the Employer contributions for a Plan Year in the same ratio that each Participant’s Compensation plus Excess Compensation for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this third tier, as a percentage of each Participant’s Compensation plus Excess Compensation, must not exceed the applicable percentage (2.7%, 2.4% or 1.3%) listed under Section 3.04(D)(4).

 

Under the fourth tier, the Plan Administrator will allocate any remaining Employer contributions for a Plan Year, in the same ratio that each Participant’s Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year.

 

(4)  Maximum disparity table. For purposes of the permitted disparity allocation formulas under this Section 3.04, the applicable percentage is:

 

Integration level % of taxable wage base		Applicable % for 2-tiered formula		Applicable % for 4-tiered formula
100%		5.7	%	2.7	%
More than 80% but less than 100%		5.4	%	2.4	%
More than 20% (but not less than $10,001) and not more than 80%		4.3	%	1.3	%
20% (or $10,000, if greater) or less		5.7	%	2.7	%

 

(5)  Overall permitted disparity limits.

 

(i)  Annual overall permitted disparity limit. Notwithstanding Sections 3.04(D)(2) and (3), for any Plan Year the Plan benefits any Participant who benefits under another qualified plan or under a simplified employee pension plan (as defined in Code §408(k)) maintained by the Employer that provides for permitted disparity (or imputes disparity), the Plan Administrator will allocate Employer contributions to the Account of each Participant in the same ratio that each Participant’s Compensation bears to the total Compensation of all Participants for the Plan Year.

 

10

 

(ii)  Cumulative permitted disparity limit. Effective for Plan Years beginning after December 31, 1994, the cumulative permitted disparity limit for a Participant is 35 total cumulative permitted disparity years. “Total cumulative permitted disparity years” means the number of years credited to the Participant for allocation or accrual purposes under the Plan, any other qualified plan or simplified employee pension plan (whether or not terminated) ever maintained by the Employer. For purposes of determining the Participant’s cumulative permitted disparity limit, the Plan Administrator will treat all years ending in the same calendar year as the same year. If the Participant has not benefited under a defined benefit plan or under a target benefit plan of the Employer for any year beginning after December 31, 1993, the Participant does not have a cumulative permitted disparity limit.

 

For purposes of this Section 3.04(D)(5), a Participant “benefits” under the Plan for any Plan Year during which the Participant receives, or is deemed to receive, a contribution allocation in accordance with Treas. Reg. §1.410(b)-3(a).

 

(6)  Uniform points allocation formula. The Plan Administrator will allocate the Employer contributions for a Plan Year in the same ratio that each Participant’s points (as elected in Adoption Agreement Section 3.04) bear to the total points of all Participants for the Plan Year.

 

(7)  Incorporation of contribution formula. The Plan Administrator will allocate the Employer’s contributions for a Plan Year in accordance with the contribution formula the Employer has elected under Section 3.01.

 

(8)  Target benefit allocation formula. The Plan Administrator will allocate the Employer contributions for a Plan Year as provided in the Employer’s target benefit Adoption Agreement.

 

(9)  Davis-Bacon contract allocation formula. The Plan Administrator will allocate the Employer contributions for a Plan Year in accordance with the applicable Davis-Bacon contract pursuant to which the Employer has made its contributions for the Plan Year. The Employer’s contributions will take into account each Participant’s hourly rate, employment category, employment classification and such other factors the Davis-Bacon contract may specify. For purposes of the Plan, “Davis-Bacon contract” includes a contract under any state prevailing wage law.

 

(F)  Qualified Nonelective Contributions. The Employer operationally may designate all or any portion of its nonelective contributions as a qualified nonelective contribution. The Employer, to facilitate the Plan Administrator’s correction of test failures under Sections 14.08, 14.09 and 14.10, also may make qualified nonelective contributions to the Plan irrespective of whether the Employer in its Adoption Agreement has elected to provide nonelective contributions. The Employer in its Adoption Agreement must elect whether the Plan Administrator will allocate the Employer contributions designated as a qualified nonelective contribution to all Participants or solely to Nonhighly Compensated Employee Participants. The Employer operationally must elect whether the Plan Administrator will allocate qualified nonelective contributions: (1) to eligible Participants pro rata in relation to Compensation; (2) to eligible Participants in the same amount without regard to Compensation (flat dollar); or (3) under the reverse allocation or other similar method. Under the reverse allocation method, the Plan Administrator, subject to Section 3.06, will allocate a qualified nonelective contribution first to the Nonhighly Compensated Employee Participant(s) with the lowest Compensation for the Plan Year not exceeding the Maximum Permissible Amount for each Participant, with any remaining amounts allocated to the next highest paid Nonhighly Compensated Employee Participant(s) not exceeding his/her Maximum Permissible Amount and continuing in this manner until the Plan Administrator has fully allocated the qualified nonelective contribution.

 

(G)  Qualified Replacement Plan. The Employer may establish or maintain this Plan as a qualified replacement plan as described in Code §4980 under which the Plan may receive a transfer from a terminating qualified plan the Employer also maintains. The Plan Administrator will credit the transferred amounts to a suspense account under the Plan and thereafter the Plan Administrator will allocate the transferred amounts under this Section 3.04(G) in the same manner as the Plan Administrator allocates Employer nonelective contributions, unless the Employer specifies in an Addendum to its Adoption Agreement: (1) to apply such transferred amounts to the Plan’s administrative expenses; or (2) if the Plan includes a 401(k) arrangement, the Employer in its Addendum designates such transferred amounts as matching contributions.

 

3.05 FORFEITURE ALLOCATION . The amount of a Participant’s Account forfeited under the Plan is a Participant forfeiture. The Plan Administrator, subject to Section 3.06, will allocate Participant forfeitures at the time and in the manner the Employer specifies in its Adoption Agreement. The Plan Administrator will continue to hold the undistributed, non-Vested portion of the Account of a Participant who has separated from Service solely for his/her benefit until a forfeiture occurs at the time specified in Section 5.09 or if applicable, until the time specified in Section 9.11. Except as provided under Section 5.04, a Participant will not share in the allocation of a forfeiture of any portion of his/her Account. If the Plan includes a 401(k) arrangement, the Plan Administrator first will determine if a Participant’s forfeitures are attributable to nonelective or to matching contributions, and the Plan Administrator then will allocate the forfeitures in the manner the Employer has elected in its Adoption Agreement. If the Employer elects to allocate forfeitures to reduce nonelective or matching contributions and the forfeitures exceed the amount of the contribution to which the Plan Administrator will apply the forfeitures, the Plan Administrator will allocate the remaining forfeitures as an additional discretionary nonelective or discretionary matching contribution or the Plan Administrator will apply the forfeitures to the Employer’s nonelective or matching contribution in the succeeding Plan Year. A Participant’s forfeiture is attributable to matching contributions if the forfeiture is: (1) a non-Vested matching Account forfeited in accordance with Section 5.09 or, if applicable, Section

 

11

 

9.11; (2) a non-Vested excess aggregate contribution (adjusted for earnings) forfeited in correcting for nondiscrimination failures under Section 14.09 or Section 14.10; or (3) an “associated matching contribution,” which includes any Vested or non-Vested matching contribution (adjusted for earnings) made with respect to elective deferrals or Employee contributions the Plan Administrator distributes in correction of Code §402(g), Code §415 or nondiscrimination failures under Sections 14.07, 14.08, 14.09 or 14.10. An Employee forfeits an associated matching contribution unless the matching contribution is a Vested excess aggregate contribution distributed in accordance with Sections 14.09 or 14.10.

 

3.06 ALLOCATION CONDITIONS . The Plan Administrator will determine the allocation conditions which apply to Employer contributions (including matching contributions) and Participant forfeitures on the basis of the Plan Year (or on any other basis representing a reasonable division of the Plan Year) in accordance with the Employer’s elections in its Adoption Agreement. A Participant does not accrue an Employer contribution with respect to a Plan Year or other applicable period until the Participant satisfies the allocation conditions described in this Section 3.06. The Plan under a 401(k) arrangement may not impose any allocation conditions with respect to deferral contributions, safe harbor contributions or SIMPLE contributions.

 

(A)  Hours of Service Requirement. Except as required to satisfy the top-heavy minimum allocation requirement of Article XII, the Plan Administrator will not allocate any portion of an Employer contribution for a Plan Year to any Participant’s Account if the Participant does not complete the applicable minimum Hours of Service or consecutive calendar days of employment requirement the Employer specifies in its Adoption Agreement for the relevant period. The Employer in its Standardized Adoption Agreement must elect whether to require a Participant to complete during a Plan Year 501 Hours of Service or to be employed for at least 91 consecutive calendar days under the Elapsed Time Method, to share in the allocation of Employer contributions for that Plan Year where the Participant is not employed by the Employer on the Accounting Date of that Plan Year, including the Plan Year in which the Employer terminates the Plan.

 

(B)  “Last Day” Employment Requirement. If the Plan is a Standardized Plan, a Participant who is employed by the Employer on the Accounting Date of a Plan Year will share in the allocation of Employer contributions for that Plan Year without regard to the Participant’s Hours of Service completed during that Plan Year. If the Plan is a Nonstandardized Plan, the Employer must specify in its Adoption Agreement whether the Participant will benefit under the Plan if the Participant is not employed by the Employer on the Accounting Date of the Plan Year or other specified date. If the Plan is a Nonstandardized money purchase Plan or target benefit Plan, the Plan conditions Employer contribution allocations on a Participant’s employment with the Employer on the last day of the Plan Year for the Plan Year in which the Employer terminates the Plan.

 

(C)  Death, Disability or Normal Retirement Age. Unless the Employer otherwise elects in its Adoption Agreement, any allocation condition elected under Adoption Agreement Section 3.06 does not apply for a Plan Year if a Participant incurs a Separation from Service during the Plan Year on account of the Participant’s death, Disability or attainment of Normal Retirement Age in the current Plan Year or on account of the Participant’s Disability or attainment of Normal Retirement Age in a prior Plan Year.

 

(D)  Other Conditions. In allocating Employer contributions under the Plan, the Plan Administrator will not apply any other conditions except those the Employer elects in its Adoption Agreement or otherwise as the Plan may require.

 

(E)  Suspension of Allocation Conditions Under a Nonstandardized Plan. The suspension provisions of this Section 3.06(E) do not apply unless the Employer elects in its Nonstandardized Adoption Agreement to apply them. If Section 3.06(E) applies, the Plan suspends for a Plan Year the Adoption Agreement Section 3.06 allocation conditions if the Plan fails in that Plan Year to satisfy coverage under the Ratio Percentage Test, unless in an Addendum to its Adoption Agreement, the Employer specifies the Plan Administrator will apply this Section 3.06(E) using the Average Benefit Percentage Test described in Code §410(b)(2). A Plan satisfies coverage under the Ratio Percentage Test if, on the last day of the Plan Year, the Plan’s benefiting ratio of the Nonhighly Compensated Includible Employees is at least 70% of the benefiting ratio of the Highly Compensated Includible Employees.

 

The benefiting ratio of the Nonhighly Compensated Includible Employees is the number of Nonhighly Compensated Includible Employees benefiting under the Plan over the number of the Includible Employees who are Nonhighly Compensated Employees. “Includible” Employees are all Employees other than: (1) those Employees excluded from participating in the Plan for the entire Plan Year by reason of the collective bargaining unit or the nonresident alien exclusions under Code §410(b)(3) or by reason of the age and service requirements of Article II; and (2) those Employees who incur a Separation from Service during the Plan Year and for the Plan Year fail to complete more than 500 Hours of Service or at least 91 consecutive calendar days under the Elapsed Time Method.

 

For purposes of coverage, an Employee is benefiting under the Plan on a particular date if, under Section 3.04 of the Plan, he/she is entitled to an Employer contribution or to a Participant forfeiture allocation for the Plan Year.

 

If this Section 3.06(E) applies for a Plan Year, the Plan Administrator will suspend the allocation conditions for the Nonhighly Compensated Includible Employees who are Participants, beginning first with the Includible Employee(s) employed by the Employer on the last day of the Plan Year, then the Includible Employee(s) who have the latest Separation from Service during the Plan Year, and continuing to suspend the allocation conditions for each Includible Employee who incurred an earlier Separation from Service, from the latest to the earliest Separation from Service date, until the Plan satisfies coverage for the Plan Year. If two or more Includible Employees have a Separation from Service on the same day, the Plan Administrator will suspend the allocation conditions for all such Includible Employees, irrespective of whether the Plan can satisfy coverage by accruing

 

12

 

benefits for fewer than all such Includible Employees. If the Plan for any Plan Year suspends the allocation conditions for an Includible Employee, that Employee will share in the allocation for that Plan Year of the Employer contribution and Participant forfeitures, if any, without regard to whether he/she has satisfied the allocation conditions of this Section 3.06.

 

If the Plan includes Employer matching contributions subject to ACP testing, this Section 3.06(E) applies separately to the Code §401(m) portion of the Plan.

 

Part 2. Limitations On Allocations: Sections 3.07 through 3.18

 

[Note: Sections 3.07 through 3.10 apply only to Participants in this Plan who do not participate, and who have never participated, in another qualified plan, individual medical account (as defined in Code §415(l)(2)), simplified employee pension plan (as defined in Code §408(k)) or welfare benefit fund (as defined in Code §419(e)) maintained by the Employer, which provides an Annual Addition.]

 

3.07 ANNUAL ADDITIONS LIMITATION . The amount of Annual Additions which the Plan Administrator may allocate under this Plan to a Participant’s Account for a Limitation Year may not exceed the Maximum Permissible Amount. If the Annual Additions the Plan Administrator otherwise would allocate under the Plan to a Participant’s Account would for the Limitation Year exceed the Maximum Permissible Amount, the Plan Administrator will not allocate the Excess Amount, but will instead take any reasonable, uniform and nondiscriminatory action the Plan Administrator determines necessary to avoid allocation of an Excess Amount. Such actions include, but are not limited to, those described in this Section 3.07. If the Plan includes a 401(k) arrangement, the Plan Administrator may apply this Section 3.07 in a manner which maximizes the allocation to a Participant of Employer contributions (exclusive of the Participant’s deferral contributions). Notwithstanding any contrary Plan provision, the Plan Administrator, for the Limitation Year, may: (1) suspend or limit a Participant’s additional Employee contributions or deferral contributions; (2) notify the Employer to reduce the Employer’s future Plan contribution(s) as necessary to avoid allocation to a Participant of an Excess Amount; or (3) suspend or limit the allocation to a Participant of any Employer contribution previously made to the Plan (exclusive of deferral contributions) or of any Participant forfeiture. If an allocation of Employer contributions previously made (excluding a Participant’s deferral contributions) or of Participant forfeitures would result in an Excess Amount to a Participant’s Account, the Plan Administrator will allocate the Excess Amount to the remaining Participants who are eligible for an allocation of Employer contributions for the Plan Year in which the Limitation Year ends. The Plan Administrator will make this allocation in accordance with the Plan’s allocation method as if the Participant whose Account otherwise would receive the Excess Amount, is not eligible for an allocation of Employer contributions. If the Plan Administrator allocates to a Participant an Excess Amount, Plan Administrator must dispose of the Excess Amount in accordance with Section 3.10 (relating to certain “reasonable errors” and allocation of forfeitures) or, if Section 3.10 does not apply, the Plan Administrator will dispose of the Excess Amount under Section 9.12.

 

3.08 ESTIMATING COMPENSATION . Prior to the determination of the Participant’s actual Compensation for a Limitation Year, the Plan Administrator may determine the Maximum Permissible Amount on the basis of the Participant’s estimated annual Compensation for such Limitation Year. The Plan Administrator must make this determination on a reasonable and uniform basis for all Participants similarly situated. The Plan Administrator must reduce the allocation of any Employer contributions (including any allocation of forfeitures) based on estimated annual Compensation by any Excess Amounts carried over from prior Limitation Years.

 

3.09 DETERMINATION BASED ON ACTUAL COMPENSATION . As soon as is administratively feasible after the end of the Limitation Year, the Plan Administrator will determine the Maximum Permissible Amount for the Limitation Year on the basis of the Participant’s actual Compensation for such Limitation Year.

 

3.10 DISPOSITION OF ALLOCATED EXCESS AMOUNT .  If, because of a reasonable error in estimating a Participant’s actual Limitation Year Compensation, because of the allocation of forfeitures, because of a reasonable error in determining a Participant’s deferral contributions or because of any other facts and circumstances the Internal Revenue Service (“Revenue Service”) considers to constitute reasonable error, a Participant receives an allocation of an Excess Amount for a Limitation Year, the Plan Administrator will dispose of such Excess Amount as follows:

 

(a)  The Plan Administrator first will return to the Participant any Employee contributions (adjusted for earnings) and then any Participant deferral contributions (adjusted for earnings) to the extent necessary to reduce or eliminate the Excess Amount.

 

(b)  If, after the application of Paragraph (a), an Excess Amount still exists and the Plan covers the Participant at the end of the Limitation Year, the Plan Administrator then will use the Excess Amount(s) to reduce future Employer contributions (including any allocation of forfeitures) under the Plan for the next Limitation Year and for each succeeding Limitation Year, as is necessary, for the Participant. If the Employer’s Plan is a profit sharing plan, a Participant who is a Highly Compensated Employee may elect to limit his/her Compensation for allocation purposes to the extent necessary to reduce his/her allocation for the Limitation Year to the Maximum Permissible Amount and to eliminate the Excess Amount.

 

(c)  If, after the application of Paragraph (a), an Excess Amount still exists and the Plan does not cover the Participant at the end of the Limitation Year, the Plan Administrator then will hold the Excess Amount unallocated in a suspense account. The Plan Administrator will apply the suspense account to reduce Employer Contributions (including the allocation of forfeitures) for all remaining Participants in the next Limitation Year, and in each succeeding Limitation Year if necessary. Neither the Employer nor any Employee may contribute to the Plan for any

 

13

 

Limitation Year in which the Plan is unable to allocate fully a suspense account maintained pursuant to this Paragraph (c). Amounts held unallocated in a suspense account will not share in any allocation of Trust Fund net income, gain or loss.

 

(d)  The Plan Administrator under Paragraphs (b) or (c) will not distribute any Excess Amount(s) to Participants or to former Participants.

 

[Note: Sections 3.11 through 3.15 apply only to Participants who, in addition to this Plan, participate in one or more M&P defined contribution plans (including Paired Plans), welfare benefit funds (as defined in Code §419(e)), individual medical accounts (as defined in Code §415(l)(2), or simplified employee pension plans (as defined in Code §408(k)) maintained by the Employer and which provide an Annual Addition during the Limitation Year (collectively “Code §415 aggregated plans”).]

 

3.11   COMBINED PLANS ANNUAL ADDITIONS LIMITATION . The amount of Annual Additions which the Plan Administrator may allocate under this Plan to a Participant’s Account for a Limitation Year may not exceed the Maximum Permissible Amount, reduced by the sum of any Annual Additions allocated to the Participant’s accounts for the same Limitation Year under the Code §415 aggregated plans. If the amount the Employer otherwise would allocate to the Participant’s Account under this Plan would cause the Annual Additions for the Limitation Year to exceed this Section 3.11 combined plans limitation, the Employer will reduce the amount of its allocation to that Participant’s Account in the manner described in Section 3.07, so the Annual Additions under all of the Code §415 aggregated plans for the Limitation Year will equal the Maximum Permissible Amount. If the Plan Administrator allocates to a Participant an amount attributed to this Plan under Section 3.14 which exceeds this Section 3.11 combined plans limitation, the Plan Administrator must dispose of the Excess Amount in accordance with Section 3.15 (relating to certain “reasonable errors” and allocation of forfeitures) or, if Section 3.15 does not apply, the Plan Administrator will dispose of the Excess Amount under Section 9.12.

 

3.12   ESTIMATING COMPENSATION . Prior to the determination of the Participant’s actual Compensation for the Limitation Year, the Plan Administrator may determine the Section 3.11 combined plans limitation on the basis of the Participant’s estimated annual Compensation for such Limitation Year. The Plan Administrator will make this determination on a reasonable and uniform basis for all Participants similarly situated. The Plan Administrator must reduce the allocation of any Employer contribution (including the allocation of Participant forfeitures) based on estimated annual Compensation by any Excess Amounts carried over from prior years.

 

3.13   DETERMINATION BASED ON ACTUAL COMPENSATION . As soon as is administratively feasible after the end of the Limitation Year, the Plan Administrator will determine the Section 3.11 combined plans limitation on the basis of the Participant’s actual Compensation for such Limitation Year.

 

3.14   ORDERING OF ANNUAL ADDITION ALLOCATIONS . If, because of a reasonable error in estimating a Participant’s actual Limitation Year Compensation, because of the allocation of forfeitures, because of a reasonable error in determining a Participant’s deferral contributions or because of any other facts and circumstances the Revenue Service considers to constitute reasonable error, a Participant’s Annual Additions under this Plan and the Code §415 aggregated plans result in an Excess Amount, such Excess Amount will consist of the Amounts last allocated. The Plan Administrator will determine the Amounts last allocated by treating the Annual Additions attributable to a simplified employee pension as allocated first, followed by allocation to a welfare benefit fund or individual medical account, irrespective of the actual allocation date. If the Plan Administrator allocates an Excess Amount to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, unless the Employer specifies otherwise in an Addendum to its Adoption Agreement, the Excess Amount attributed to this Plan will equal the product of:

 

(a)  the total Excess Amount allocated as of such date, multiplied by

 

(b)  the ratio of (i) the Annual Additions allocated to the Participant as of such date for the Limitation Year under the Plan to (ii) the total Annual Additions allocated to the Participant as of such date for the Limitation Year under this Plan and the Code §415 aggregated plans.

 

3.15   DISPOSITION OF ALLOCATED EXCESS AMOUNT ATTRIBUTABLE TO PLAN . The Plan Administrator will dispose of any allocated Excess Amounts described in and attributed to this Plan under Section 3.14 as provided in Section 3.10 or, as applicable under Section 9.12.

 

[Note: Section 3.16 applies only to Participants who, in addition to this Plan, participate in one or more qualified defined contribution plans maintained by the Employer during the Limitation Year, but which are not M&P plans described in Sections 3.11 through 3.15.]

 

3.16 OTHER DEFINED CONTRIBUTION PLANS LIMITATION . If a Participant is a participant in another defined contribution plan maintained by the Employer, but which plan is not an M&P plan described in Sections 3.11 through 3.15, the Plan Administrator must limit the allocation to the Participant of Annual Additions under this Plan as provided in Sections 3.11 through 3.15, as though the other defined contribution plan were an M&P plan, unless the Employer specifies otherwise in an Addendum to its Adoption Agreement.

 

3.17 DEFINED BENEFIT PLAN LIMITATION . If the Employer maintains a defined benefit plan, or has ever maintained a defined benefit plan which the Employer has terminated, then the sum of the defined benefit plan fraction and the defined contribution plan fraction for any Participant for any Limitation Year beginning before January 1, 2000, must not exceed 1.0. The 1.0 limitation of the immediately preceding sentence does not apply for Limitation Years beginning after December 31, 1999, unless the Employer in Appendix B to its Adoption Agreement specifies a later effective date. To the extent necessary to satisfy the 1.0 limitation, if the Employer still

 

14

 

maintains the defined benefit plan as an active plan, the Employer in its Adoption Agreement Appendix B will elect whether to reduce the Participant’s projected annual benefit under the defined benefit plan under which the Participant participates, or to reduce its contribution or allocation on behalf of the Participant to the defined contribution plan(s) under which the Participant participates. If the Employer has frozen or terminated the defined benefit plan, the Employer will reduce its contribution or allocation on behalf of the Participant to the defined contribution plan(s) under which the Participant participates. The Employer must provide in Appendix B to its Adoption Agreement the manner in which the Plan will satisfy the top-heavy requirements of Code §416 after taking into account the existence (or prior maintenance) of the defined benefit plan.

 

3.18 DEFINITIONS - ARTICLE III .  For purposes of Article III:

 

(a)  “Annual Additions” means the sum of the following amounts allocated to a Participant’s Account for a Limitation Year: (i) all Employer contributions (including Participant deferral contributions); (ii) all forfeitures; (iii) all Employee contributions; (iv) Excess Amounts reapplied to reduce Employer contributions under Section 3.10 or Section 3.15; (v) amounts allocated after March 31, 1984, to an individual medical account (as defined in Code §415(l)(2)) included as part of a pension or annuity plan maintained by the Employer; (vi) contributions paid or accrued after December 31, 1985, for taxable years ending after December 31, 1985, attributable to post-retirement medical benefits allocated to the separate account of a key-employee (as defined in Code §419A(d)(3)) under a welfare benefit fund (as defined in Code §419(e)) maintained by the Employer; (vii) amounts allocated under a Simplified Employee Pension Plan; and (viii) corrected excess contributions described in Code §401(k) and corrected excess aggregate contributions described in Code §401(m). Excess deferrals described in Code §402(g), which the Plan Administrator corrects by distribution by April 15 of the following calendar year, are not Annual Additions.

 

(b)  “Compensation” for purposes of applying the limitations of Part 2 of this Article III, means Compensation as defined in Section 1.07, except, for Limitation Years beginning after December 31, 1997, Compensation includes Elective Contributions, irrespective of whether the Employer has elected to include these amounts as Compensation under Section 1.07 of its Adoption Agreement and any exclusion the Employer has elected in Section 1.07 of the Adoption Agreement does not apply.

 

(c)  “Employer” means the Employer and any Related Employer. Solely for purposes of applying the limitations of Part 2 of this Article III, the Plan Administrator will determine Related Employer by modifying Code §§414(b) and (c) in accordance with Code §415(h).

 

(d)  “Excess Amount” means the excess of the Participant’s Annual Additions for the Limitation Year over the Maximum Permissible Amount.

 

(e)  “Limitation Year” means the period the Employer elects in its Adoption Agreement Section 1.24. All qualified plans of the Employer must use the same Limitation Year. If the Employer amends the Limitation Year to a different 12-consecutive month period, the new Limitation Year must begin on a date within the Limitation Year for which the Employer makes the amendment, creating a short Limitation Year.

 

(f)  “M&P Plan” means a prototype plan the form of which is the subject of a favorable opinion letter (or prior to Revenue Procedure 2000-20, a favorable notification or favorable opinion letter) from the Revenue Service.

 

(g)  “Maximum Permissible Amount” means the lesser of: (i) $30,000 (or, if greater, the $30,000 amount as adjusted under Code §415(d)), or (ii) 25% of the Participant’s Compensation for the Limitation Year. If there is a short Limitation Year because of a change in Limitation Year, the Plan Administrator will multiply the $30,000 (or adjusted) limitation by the following fraction:

 

Number of months in the short Limitation Year

12

The 25% limitation does not apply to any contribution for medical benefits within the meaning of Code §401(h) or Code §419A(f)(2) which otherwise is an Annual Addition.

 

(h)  “Defined contribution plan” means a retirement plan which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which the plan may allocate to such participant’s account. The Plan Administrator must treat all defined contribution plans (whether or not terminated) maintained by the Employer as a single plan. Solely for purposes of the limitations of Part 2 of this Article III, employee contributions made to a defined benefit plan maintained by the Employer is a separate defined contribution plan. The Plan Administrator also will treat as a defined contribution plan an individual medical account (as defined in Code §415(l)(2)) included as part of a defined benefit plan maintained by the Employer and, for taxable years ending after December 31, 1985, a welfare benefit fund under Code §419(e) maintained by the Employer to the extent there are post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code §419A(d)(3)).

 

(i)  “Defined benefit plan” means a retirement plan which does not provide for individual accounts for Employer contributions. All defined benefit plans (whether or not terminated) maintained by the Employer are a single plan.

 

[Note: The definitions in Paragraphs (j), (k) and (l) apply only if the limitation described in Section 3.17 applies to the Plan.]

 

15

 

(j)  “Defined benefit plan fraction” means the following fraction:

 

The lesser of: (i) 125% (subject to the “100%
limitation” in Paragraph (l)) of the dollar limitation in
effect under Code §415(b)(1)(A) for the Limitation
Year, or (ii) 140% of the Participant’s average
Compensation for his/her high three (3) consecutive
Years of Service

 

To determine the denominator of this fraction, the Plan Administrator will make any adjustment required under Code §415(b) and will determine a Year of Service, unless the Employer provides otherwise in an Addendum to its Adoption Agreement, as a Plan Year in which the Employee completed at least 1,000 Hours of Service. The “projected annual benefit” is the annual retirement benefit (adjusted to an actuarially equivalent straight life annuity if the defined benefit plan expresses such benefit in a form other than a straight life annuity or qualified joint and survivor annuity) of the Participant under the terms of the defined benefit plan on the assumptions he/she continues employment until his/her normal retirement age (or current age, if later) as stated in the defined benefit plan, his/her compensation continues at the same rate as in effect in the Limitation Year under consideration until the date of his/her normal retirement age and all other relevant factors used to determine benefits under the defined benefit plan remain constant as of the current Limitation Year for all future Limitation Years.

 

Current Accrued Benefit. If the Participant accrued benefits in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986, the dollar limitation used in the denominator of this fraction will not be less than the Participant’s Current Accrued Benefit. A Participant’s Current Accrued Benefit is the sum of the annual benefits under such defined benefit plans which the Participant had accrued as of the end of the 1986 Limitation Year (the last Limitation Year beginning before January 1, 1987), determined without regard to any change in the terms or conditions of the defined benefit plan made after May 5, 1986, and without regard to any cost of living adjustment occurring after May 5, 1986. This Current Accrued Benefit rule applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Code §415 as in effect at the end of the 1986 Limitation Year.

 

(k)  “Defined contribution plan fraction” means the following fraction:

 

The sum of the lesser of the following amounts
determined for the Limitation Year and for each prior
Limitation Year of service with the Employer: (i)
125% (subject to the “100% limitation” in Paragraph
(l)) of the dollar limitation in effect under Code
§415(c)(1)(A) for the Limitation Year (determined
without regard to the special dollar limitations for
employee stock ownership plans), or (ii) 35% of the
Participant’s Compensation for the Limitation Year

 

For purposes of determining the defined contribution plan fraction, the Plan Administrator will not recompute Annual Additions in Limitation Years beginning prior to January 1, 1987, to treat all Employee contributions as Annual Additions. If the Plan satisfied Code §415 for Limitation Years beginning prior to January 1, 1987, the Plan Administrator will redetermine the defined contribution plan fraction and the defined benefit plan fraction as of the end of the 1986 Limitation Year, in accordance with this Section 3.18. If the sum of the redetermined fractions exceeds 1.0, the Plan Administrator will subtract permanently from the numerator of the defined contribution plan fraction an amount equal to the product of: (1) the excess of the sum of the fractions over 1.0, times (2) the denominator of the defined contribution plan fraction. In making the adjustment, the Plan Administrator must disregard any accrued benefit under the defined benefit plan which is in excess of the Current Accrued Benefit. This Plan continues any transitional rules applicable to the determination of the defined contribution plan fraction under the Plan as of the end of the 1986 Limitation Year.

 

(l)  “100% limitation” means the limitation in Code §416(h) which applies if the plan is top-heavy. If the 100% limitation applies, the Plan Administrator must determine the denominator of the defined benefit plan fraction and the denominator of the defined contribution plan fraction by substituting 100% for 125%. If this Plan is a Standardized Plan, the 100% limitation applies in all Limitation Years, unless the Employer specifies otherwise in an Addendum to its Adoption Agreement. If the Employer overrides the 100% limitation under a Standardized Plan, the Employer must specify in its Addendum the manner in which the Plan satisfies the extra minimum benefit requirement of Code §416(h) and the 100% limitation must continue to apply if the Plan’s top-heavy ratio exceeds 90%. If this Plan is a Nonstandardized Plan, the 100% limitation applies only if: (i) the Plan’s top-heavy ratio exceeds 90%; or (ii) the Plan’s top-heavy ratio is greater than 60%, and the Employer does not specify in its Adoption Agreement to provide extra minimum benefits which satisfy Code §416(h)(2).

 

16

 

ARTICLE IV
PARTICIPANT CONTRIBUTIONS

 

4.01   PARTICIPANT CONTRIBUTIONS . For purposes of this Article IV, Participant contributions means all Employee contributions described in Section 4.02, deductible Participant contributions described in Section 4.03 (“DECs”) and rollover contributions described Section 4.04.

 

4.02   EMPLOYEE CONTRIBUTIONS . An Employee contribution is a nondeductible contribution which a Participant makes to the Trust as permitted under this Section 4.02. A deferral contribution made by a Participant under a 401(k) arrangement is not an Employee contribution. Employee contributions must satisfy the nondiscrimination requirements of Code §401(m). See Section 14.09. An Employer must elect in its Adoption Agreement whether to permit Employee contributions. If the Employer elects to permit Employee contributions, the Employer also must specify in its Adoption Agreement any conditions or limitations which may apply to Employee contributions. If the Employer permits Employee contributions, the Employer operationally will determine if a Participant will make Employee contributions through payroll deduction or by other means.

 

The Employer must elect in its Adoption Agreement whether the Employer will make matching contributions with respect to any Employee contributions and any conditions or limitations which may apply to those matching contributions. Any matching contribution must satisfy the nondiscrimination requirements of Code §401(m). See Section 14.09.

 

4.03   DECs . A DEC is a deductible Participant contribution made to the Plan for a taxable year commencing prior to 1987. If a Participant has made DECs to the Plan, the Plan Administrator must maintain a separate Account for the Participant’s DECs as adjusted for earnings, including DECs which are part of a rollover contribution described in Section 4.04. The DECs Account is part of the Participant’s Account for all purposes of the Plan, except for purposes of determining the top-heavy ratio under Article XII. The Plan Administrator may not use a Participant’s DECs Account to purchase life insurance on the Participant’s behalf.

 

4.04   ROLLOVER CONTRIBUTIONS . A rollover contribution is an amount of cash or property which the Code permits an eligible Employee or Participant to transfer directly or indirectly to this Plan from another qualified plan. A rollover contribution excludes Employee contributions, as adjusted for earnings. An Employer operationally and on a nondiscriminatory basis, may elect to permit or not to permit rollover contributions to this Plan or may elect to limit an eligible Employee’s right or a Participant’s right to make a rollover contribution. If an Employer permits rollover contributions, any Participant (or as applicable, any eligible Employee), with the Employer’s written consent and after filing with the Trustee the form prescribed by the Plan Administrator, may make a rollover contribution to the Trust. Before accepting a rollover contribution, the Trustee may require a Participant (or eligible Employee) to furnish satisfactory evidence the proposed transfer is in fact a “rollover contribution” which the Code permits an employee to make to a qualified plan. The Trustee, in its sole discretion, may decline to accept a rollover contribution of property which could: (1) generate unrelated business taxable income; (2) create difficulty or undue expense in storage, safekeeping or valuation; or (3) create other practical problems for the Trust. A rollover contribution is not an Annual Addition under Part 2 of Article III.

 

If an eligible Employee makes a rollover contribution to the Trust prior to satisfying the Plan’s eligibility conditions, the Plan Administrator and Trustee must treat the Employee as a limited Participant (as described in Rev. Rul. 96-48 or in any successor ruling). A limited Participant does not share in the Plan’s allocation of Employer contributions nor Participant forfeitures and may not make deferral contributions if the Plan includes a 401(k) arrangement until he/she actually becomes a Participant in the Plan. If a limited Participant has a Separation from Service prior to becoming a Participant in the Plan, the Trustee will distribute his/her rollover contributions Account to him/her in accordance with Article VI as if it were an Employer contributions Account.

 

4.05   PARTICIPANT CONTRIBUTIONS – VESTING . A Participant’s Participant contributions Account is, at all times, 100% Vested.

 

4.06   PARTICIPANT CONTRIBUTIONS – DISTRIBUTION . Subject to any contrary Employer election in its Adoption Agreement Appendix A, an Employee, after attaining age 70½ may elect to receive distribution prior to Separation from Service (“in-service distribution”) of all or any part of his/her Participant contributions Account. The Employer in its Adoption Agreement Section 6.01 must elect the additional in-service distribution election rights, if any, a Participant has with respect to his/her Participant contributions Account. For purposes of the Employer’s Adoption Agreement elections regarding in-service distribution of Participant contributions, a Participant’s Employee contributions also includes DECs. A Participant will not incur a forfeiture of any Account under the Plan solely as a result of the distribution of his/her Participant contributions.

 

The Trustee, following a Participant’s Separation from Service, will distribute to the Participant his/her Participant contributions Account in accordance with Article VI in the same manner as the Trustee distributes the Participant’s Employer contributions Account.

 

4.07   PARTICIPANT CONTRIBUTIONS- INVESTMENT AND ACCOUNTING . The Plan Administrator must maintain a separate Account in the name of each Participant to reflect his/her Participant contributions (including, if applicable, the different types of Participant contributions), as adjusted for earnings. The Trustee will invest all Participant contributions as part of the Trust Fund.

 

17

 

ARTICLE V
VESTING

 

5.01   NORMAL/EARLY RETIREMENT AGE . The Employer in its Adoption Agreement must specify the Plan’s Normal Retirement Age. An Employer in its Adoption Agreement may specify an Early Retirement Age. A Participant’s Account Balance derived from Employer contributions is 100% Vested upon and after his/her attaining Normal Retirement Age (or if applicable, Early Retirement Age) if the Participant is employed by the Employer on or after that date.

 

5.02   PARTICIPANT DEATH OR DISABILITY . Unless the Employer elects otherwise in its Adoption Agreement, a Participant’s Account Balance derived from Employer contributions is 100% Vested if the Participant’s Separation from Service is a result of his/her death or his/her Disability.

 

5.03   VESTING SCHEDULE . Except as provided in Sections 5.01 and 5.02, for each Year of Service as described in Section 5.06, a Participant’s Vested percentage of his/her Account Balance derived from Employer contributions equals the percentage under the vesting schedule the Employer has elected in its Adoption Agreement.

 

For purposes of Adoption Agreement Section 5.03, “6-year graded,” “3-year cliff,” “7-year graded” or “5-year cliff” means an Employee’s Vested percentage, based on each included Year of Service, under the following applicable schedule:

 

6-year graded		7-year graded
0-1 year / 0%		0-2 years / 0%
2 years / 20%		3 years / 20%
3 years / 40%		4 years / 40%
4 years / 60%		5 years / 60%
5 years / 80%		6 years / 80%
6 years / 100%		7 years / 100%
3-year cliff		5-year cliff
0-2 years / 0%		0-4 years/ 0%
3 years / 100%		5 years / 100%

 

(A)  “Grossed-Up” Vesting Formula. If the Trustee makes a distribution (other than a cash-out distribution described in Section 5.04) to a partially-Vested Participant, and the Participant has not incurred a Forfeiture Break in Service at the relevant time, the provisions of this Section 5.03(A) apply to the Participant’s Account Balance. At any relevant time following the distribution, the Plan Administrator will determine the Participant’s Vested Account Balance derived from Employer contributions in accordance with the following formula: P(AB + D) - D.

 

To apply this formula, “P” is the Participant’s current vesting percentage at the relevant time, “AB” is the Participant’s Employer-derived Account Balance at the relevant time and “D” is the amount of the earlier distribution. If, under a restated Plan, the Plan has made distribution to a partially-Vested Participant prior to its restated Effective Date and is unable to apply the cash-out provisions of Section 5.04 to that prior distribution, this special vesting formula also applies to that Participant’s remaining Account Balance. The Employer, in an Addendum to its Adoption Agreement, may elect to modify this formula to read as follows: P(AB + (R x D)) - (R x D). For purposes of this alternative formula, “R” is the ratio of “AB” to the Participant’s Employer-derived Account Balance immediately following the earlier distribution.

 

(B)  Special Vesting Elections. The Employer in its Adoption Agreement may elect other specified vesting provisions which are consistent with Code §411 and applicable Treasury regulations.

 

5.04   CASH-OUT DISTRIBUTIONS TO PARTIALLY- VESTED PARTICIPANTS/ RESTORATION OF FORFEITED ACCOUNT BALANCE . If, pursuant to Article VI, a partially-Vested Participant receives a cash-out distribution before he/she incurs a Forfeiture Break in Service, the Participant will incur an immediate forfeiture of the non-Vested portion of his/her Account Balance. If a partially-Vested Participant’s Account is entitled to an allocation of Employer contributions or Participant forfeitures for the Plan Year in which he/she otherwise would incur a forfeiture by reason of a cash-out distribution, the Plan Administrator will apply the cash-out forfeiture rule as if the partially-Vested Participant received a cash-out distribution on the first day of the immediately following Plan Year. A partially-Vested Participant is a Participant whose Vested percentage determined under Section 5.03 is more than 0% but is less than 100%. A cash-out distribution is a distribution to the Participant (whether involuntary or with required consent as described in Article VI), of his/her entire Vested Account Balance due to the Participant’s Separation from Service.

 

(A)  Forfeiture Restoration and Conditions for Restoration. A partially-Vested Participant re-employed by the Employer after receiving a cash-out distribution of the Vested percentage of his/her Account Balance may repay to the Trust the entire amount of the cash-out distribution attributable to Employer contributions without any adjustment for gains and losses, unless the Participant no longer has a right to restoration under this Section 5.04(A). If a re-employed Participant repays his/her cash-out distribution, the Plan Administrator, subject to the conditions of this Section 5.04(A), must restore the Participant’s Account Balance attributable to Employer contributions to the same dollar amount as the dollar amount of his/her Account Balance on the Accounting Date, or other valuation date, immediately preceding the date of the cash-out distribution, unadjusted for any gains or losses occurring subsequent to that Accounting Date, or other valuation date. Restoration of the Participant’s Account Balance includes restoration of all Protected Benefits with respect to that restored Account Balance, in accordance with applicable Treasury regulations. The Plan Administrator will not restore a re-employed Participant’s Account Balance under this Section 5.04 (A) if:

 

18

 

(1)  5 years have elapsed since the Participant’s first re-employment date with the Employer following the cash-out distribution;

 

(2)  The Participant is not in the Employer’s Service on the date the Participant repays his/her cash-out distribution; or

 

(3)  The Participant has incurred a Forfeiture Break in Service. This condition also applies if the Participant makes repayment within the Plan Year in which he/she incurs the Forfeiture Break in Service and that Forfeiture Break in Service would result in a complete forfeiture of the amount the Plan Administrator otherwise would restore.

 

(B)  Time and Method of Forfeiture Restoration. If none of the conditions in Section 5.04(A) preventing restoration of the Participant’s Account Balance applies, the Plan Administrator will restore the Participant’s Account Balance as of the Plan Year Accounting Date coincident with or immediately following the repayment. To restore the Participant’s Account Balance, the Plan Administrator, to the extent necessary, will allocate to the Participant’s Account:

 

(1)  First, the amount, if any, of Participant forfeitures the Plan Administrator otherwise would allocate under Section 3.05;

 

(2)  Second, the amount, if any, of the Trust Fund net income or gain for the Plan Year; and

 

(3)  Third, the Employer contribution for the Plan Year to the extent made under a discretionary formula.

 

In an Addendum to its Adoption Agreement, the Employer may eliminate as a means of restoration any of the amounts described in clauses (1), (2) and (3) or may change the order of priority of these amounts. To the extent the amounts described in clauses (1), (2) and (3) are insufficient to enable the Plan Administrator to make the required restoration, the Employer must contribute, without regard to any requirement or condition of Article III, the additional amount necessary to enable the Plan Administrator to make the required restoration. If, for a particular Plan Year, the Plan Administrator must restore the Account Balance of more than one re-employed Participant, the Plan Administrator will make the restoration allocations from the amounts described in clauses (1), (2) and (3) to each such Participant’s Account in the same proportion that a Participant’s restored amount for the Plan Year bears to the restored amount for the Plan Year of all re-employed Participants. A cash-out restoration allocation is not an Annual Addition under Part 2 of Article III.

 

(C)  Deemed Cash-out of 0% Vested Participant. Except as the Employer may provide in an Addendum to its Adoption Agreement, the deemed cash-out rule of this Section 5.04(C) applies to any 0% Vested Participant. A “0% Vested Participant” is a Participant whose Account Balance derived from Employer contributions is entirely forfeitable at the time of his/her Separation from Service. If a 0% Vested Participant’s Account is not entitled to an allocation of Employer contributions for the Plan Year in which the Participant has a Separation from Service, the Plan Administrator will apply the deemed cash-out rule as if the 0% Vested Participant received a cash-out distribution on the date of the Participant’s Separation from Service. If a 0% Vested Participant’s Account is entitled to an allocation of Employer contributions or Participant forfeitures for the Plan Year in which the Participant has a Separation from Service, the Plan Administrator will apply the deemed cash-out rule as if the 0% Vested Participant received a cash-out distribution on the first day of the first Plan Year beginning after his/her Separation from Service. For purposes of applying the restoration provisions of this Section 5.04, the Plan Administrator will treat a re-employed 0% Vested Participant as repaying his/her cash-out “distribution” on the date of the Participant’s re-employment with the Employer.

 

5.05   ACCOUNTING FOR CASH-OUT REPAYMENT . As soon as is administratively practicable, the Plan Administrator will credit to the Participant’s Account the cash-out amount a Participant has repaid to the Plan. Pending the restoration of the Participant’s Account Balance, the Plan Administrator under Section 9.08(B) may direct the Trustee to place the Participant’s cash-out repayment in a temporary segregated investment Account. Unless the cash-out repayment qualifies as a Participant rollover contribution, the Plan Administrator will direct the Trustee to repay to the Participant as soon as is administratively practicable, the full amount of the Participant’s cash-out repayment if the Plan Administrator determines any of the conditions of Section 5.04(A) prevents restoration as of the applicable Accounting Date, notwithstanding the Participant’s repayment.

 

5.06   YEAR OF SERVICE - VESTING . For purposes of determining a Participant’s vesting under Section 5.03, “Year of Service” means the 12-consecutive month vesting computation period the Employer elects in its Adoption Agreement during which an Employee completes the number of Hours of Service (not exceeding 1,000) specified in the Adoption Agreement or, if the Plan applies the Elapsed Time Method of crediting Vesting Service, the vesting computation period for which the Employee receives credit for a Year of Service under the Service crediting rules of Section 1.15(D). A Year of Service includes any Year of Service completed prior to the Effective Date of the Plan, except as provided in Section 5.08.

 

5.07   BREAK IN SERVICE AND FORFEITURE BREAK IN SERVICE - VESTING . For purposes of this Article V, a Participant incurs a “Break in Service” if during any vesting computation period he/she does not complete more than 500 Hours of Service or, if the Plan applies the Elapsed Time Method of crediting Service, the Participant has a Period of Severance of at least 12 consecutive months. If, pursuant to Section 5.06, the Plan does not require more than 500 Hours of Service to receive credit for a Year of Service, a Participant incurs a Break in Service in a vesting computation period in which he/she fails to complete a Year of Service. A Participant incurs a Forfeiture Break in Service when he/she incurs 5 consecutive Breaks in Service. The Plan does not apply the Break in Service (one year hold-out) rule for vesting under Code §411(a)(6)(B). Therefore, an Employee need not complete a Year of Service after a Break in Service before

 

19

 

the Plan takes into account the Employee’s otherwise includible pre-Break Years of Service under this Article V.

 

5.08   INCLUDED YEARS OF SERVICE - VESTING . For purposes of determining “Years of Service” under Section 5.06, the Plan takes into account all Years of Service an Employee completes with the Employer except:

 

(a)  For the sole purpose of determining a Participant’s Vested percentage of his/her Account Balance derived from Employer contributions which accrued for his/her benefit prior to a Forfeiture Break in Service or receipt of a cash-out distribution, the Plan disregards any Year of Service after the Participant first incurs a Forfeiture Break in Service or receives a cash-out distribution (except where the Plan Administrator restores the Participant’s Account under Section 5.04(A)). !

 

(b)  Consistent with Code §411(a)(4), any Year of Service the Employer elects to exclude under its Adoption Agreement.

 

5.09   FORFEITURE OCCURS . A Participant’s forfeiture of his/her non-Vested Account Balance derived from Employer contributions occurs under the Plan on the earlier of:

 

(a)  The last day of the vesting computation period in which the Participant first incurs a Forfeiture Break in Service; or

 

(b)  The date the Participant receives a cash-out distribution.

 

The Plan Administrator determines the percentage of a Participant’s Account Balance forfeiture, if any, under this Section 5.09 solely by reference to the vesting schedule the Employer elected in its Adoption Agreement. A Participant does not forfeit any portion of his/her Account Balance for any other reason or cause except as expressly provided by this Section 5.09 or as provided under Section 9.11.

 

5.10   RULE OF PARITY - VESTING . The Employer may elect in its Adoption Agreement to apply the “rule of parity” under Code §411(a)(6)(D) for purposes of determining vesting Years of Service. Under the rule of parity, the Plan Administrator excludes a Participant’s Years of Service before a Break in Service if: (a) the number of the Participant’s consecutive Breaks in Service equals or exceeds 5; and (b) the Participant is 0% Vested in his/her Account Balance derived from Employer contributions at the time he/she has the Breaks in Service.

 

5.11   AMENDMENT TO VESTING SCHEDULE . The Employer under Section 13.02 may amend the Plan’s vesting schedule(s) under Section 5.03 at any time. However, the Plan Administrator will not apply the amended vesting schedule to reduce any Participant’s existing Vested percentage (determined on the later of the date the Employer adopts the amendment, or the date the amendment becomes effective) in the Participant’s existing and future Account Balance attributable to Employer contributions, to a percentage less than the Vested percentage computed under the Plan without regard to the amendment. Furthermore, an amended vesting schedule will apply to a Participant only if the Participant receives credit for at least one Hour of Service after the new vesting schedule becomes effective.

 

If the Employer amends the Plan’s vesting schedule, each Participant having completed at least 3 Years of Service (as described in Section 5.06) with the Employer prior to the expiration of the election period described below, may irrevocably elect to have the Plan Administrator determine the Vested percentage of his/her Account Balance without regard to the amendment. The Participant must file his/her election with the Plan Administrator within 60 days of the latest of: (a) the Employer’s adoption of the amendment; (b) the effective date of the amendment; or (c) the Participant’s receipt of a copy of the amendment. The Plan Administrator, as soon as practicable, must forward a true copy of any amendment to the vesting schedule to each affected Participant, together with a written explanation of the effect of the amendment, the appropriate form upon which the Participant may make an election to remain under the pre-amendment vesting schedule and notice of the time within which the Participant must make an election to remain under the pre-amendment vesting schedule. The election described in this Section 5.11 does not apply to a Participant if the amended vesting schedule provides for vesting at least as rapid at any time as the vesting schedule in effect prior to the amendment. For purposes of this Section 5.11, an amendment to the vesting schedule includes any Plan amendment which directly or indirectly affects the computation of the Vested percentage of a Participant’s Account Balance. Furthermore, any shift in the Plan’s vesting schedule under Article XII, due to a change in the Plan’s top-heavy status, is an amendment to the vesting schedule for purposes of this Section 5.11.

 

5.12   DEFERRAL CONTRIBUTIONS TAKEN INTO ACCOUNT .  If the Plan includes a 401(k) arrangement, the vesting rules described in Article V must take into account a Participant’s deferral contributions for purposes of determining: (1) if a Participant’s distribution is of his/her entire Vested Account balance as required for a cash-out distribution under Section 5.04; (2) if a Participant repays the entire amount of a prior cash-out distribution so the Participant is entitled to restoration under Section 5.04(A); and (3) if a Participant is 0% vested under Section 5.04(C) and under Section 5.10.

 

20

 

ARTICLE VI
DISTRIBUTIONS

 

6.01   TIMING OF DISTRIBUTION . The Plan Administrator will direct the Trustee to commence distribution of a Participant’s Vested Account Balance in accordance with this Section 6.01 upon the Participant’s Separation from Service for any reason, or if the Participant exercises an in-Service distribution right under the Plan. The Trustee may make Plan distributions on any administratively practicable date during the Plan Year, consistent with the Employer’s elections in its Adoption Agreement.

 

(A)  Distribution upon Separation from Service (other than death).

 

(1)  Participant’s Vested Account Balance not exceeding $5,000. Upon the Participant’s Separation from Service for any reason other than death, the Plan Administrator without any requirement of Participant or spousal consent) will direct the Trustee to distribute the Participant’s Vested Account Balance (determined in accordance with Section 6.01(A)(6)) not exceeding $5,000 in a lump sum (without regard to Section 6.04), at the time specified in the Adoption Agreement, but in no event later than the 60th day following the close of the Plan Year in which the later of the following events occur: (a) the Participant attains Normal Retirement Age; or (b) the Participant Separates from Service.

 

(2)  Participant’s Vested Account Balance exceeds $5,000. Upon the Participant’s Separation from Service for any reason other than death, the Plan Administrator, subject to the Participant’s election to postpone distribution under this Section 6.01(A)(2) and the consent requirements of Section 6.01(A)(5), will direct the Trustee to commence distribution of the Participant’s Vested Account Balance (determined in accordance with Section 6.01(A)(6)) exceeding $5,000, at the time specified in the Adoption Agreement and in a form under Section 6.03 elected by the Participant. Any election under this Section 6.01(A)(2) is subject to the requirements of Section 6.02 and of Section 6.04.

 

A Participant eligible to make an election under this Section 6.01(A)(2) may elect to postpone distribution beyond the time the Employer has elected in its Adoption Agreement, to any specified date including, but not beyond the Participant’s Required Beginning Date, unless the Employer, in its Adoption Agreement, specifically limits a Participant’s right to postpone distribution of his/her Account Balance to the later of the date the Participant attains age 62 or Normal Retirement Age. The Plan Administrator will reapply the notice and consent requirements of Section 6.01(A)(4) and Section 6.01(A)(5) to any distribution postponed under this Section 6.01(A)(2).

 

In the absence of a Participant’s consent and distribution election (as described in Section 6.01(A)(5)) or in the absence of the Participant’s election to postpone distribution prior to his/her annuity starting date, the Plan Administrator, consistent with the Employer’s elections in its Adoption Agreement, will treat the Participant as having elected to postpone his/her distribution until the 60th day following the close of the Plan Year in which the latest of the following events occurs: (a) the Participant attains Normal Retirement Age; (b) the Participant attains age 62; or (c) the Participant Separates from Service. At the applicable date, the Plan Administrator then will direct the Trustee to distribute the Participant’s Vested Account Balance in a lump sum (or, if applicable, the annuity form of distribution required under Section 6.04).

 

(3)  Disability. If the Participant’s Separation from Service is because of his/her Disability, the Plan Administrator will direct the Trustee to pay the Participant’s Vested Account Balance in the same manner as if the Participant had incurred a Separation from Service without Disability.

 

(4)  Distribution notice/annuity starting date. At least 30 days and not more than 90 days prior to the Participant’s annuity starting date, the Plan Administrator must provide a written notice (or a summary notice as permitted under Treasury regulations) to a Participant who is eligible to make an election under Section 6.01(A)(2) (“distribution notice”). The distribution notice must explain the optional forms of benefit in the Plan, including the material features and relative values of those options, and the Participant’s right to postpone distribution until the applicable date described in Section 6.01(A)(2). For all purposes of this Article VI, the term “annuity starting date” means the first day of the first period for which the Plan pays an amount as an annuity or in any other form but in no event is the “annuity starting date” earlier than a Participant’s Separation from Service.

 

(5)  Consent requirements/Participant distribution election. A Participant must consent, in writing, following receipt of the distribution notice, to any distribution under this Section 6.01, if at the time of the distribution to the Participant, the Participant’s Vested Account Balance exceeds $5,000 and the Participant has not attained the later of Normal Retirement Age or age 62. Accounts which are distributable prior to the foregoing applicable age are “immediately distributable.” Furthermore, the Participant’s spouse also must consent, in writing, to any distribution, for which Section 6.04 requires the spouse’s consent. The Participant may reconsider his/her distribution election at any time prior to the annuity starting date and elect to commence distribution as of any other distribution date permitted under the Plan or under the Adoption Agreement. A Participant may elect to receive distribution at any administratively practicable time which is earlier than 30 days following the Participant’s receipt of the distribution notice, by waiving in writing the balance of the 30 days. However, if the requirements of Section 6.04 apply, the Participant may not elect to commence distribution less than 7 days following the Participant’s receipt of the distribution notice. The consent requirements of this Section 6.01(A)(5) do not apply with respect to defaulted loans described in Section 10.03(E).

 

(6)  Determination of Vested Account Balance. For purposes of the consent requirements under this Article VI, the Plan Administrator determines a Participant’s Vested Account Balance as of the most recent valuation date immediately prior to the distribution date, and takes into

 

21

 

account the Participant’s entire Account, including deferral contributions. The Plan Administrator in determining the Participant’s Vested Account Balance at the relevant time, will disregard a Participant’s Vested Account Balance existing on any prior date, except as the Code otherwise may require.

 

(7)  Consent to cash-out/forfeiture. If a Participant is partially-Vested in his/her Account Balance, a Participant’s election under Section 6.01(A)(2) to receive distribution prior to the Participant’s incurring a Forfeiture Break in Service, must be in the form of a cash-out distribution as defined in Section 5.04.

 

(8)  Return to employment. A Participant may not receive a distribution by reason of Separation from Service, or continue any installment distribution based on a prior Separation from Service, if, prior to the time the Trustee actually makes the distribution, the Participant returns to employment with the Employer.

 

(B)  Distribution upon Death. In the event of the Participant’s Separation from Service on account of death, the Plan Administrator will direct the Trustee, in accordance with this Section 6.01(B) and subject to Section 6.02(D), to distribute to the Participant’s Beneficiary the Participant’s Vested Account Balance remaining in the Trust at the time of the Participant’s death.

 

The Plan Administrator, subject to the requirements of Sections 6.04 and 6.02(D) or to a Beneficiary’s written election (if authorized by the next paragraph of this Section 6.01(B)), must direct the Trustee to distribute or commence distribution of the deceased Participant’s Vested Account Balance, as soon as administratively practicable following the Participant’s death or, if later, the date on which the Plan Administrator receives notification of, or otherwise confirms, the Participant’s death. If the Participant’s Vested Account Balance determined in accordance with Section 6.01(A)(6) does not exceed $5,000, the Trustee will distribute the balance in a lump sum without regard to Section 6.04. If the Participant’s Vested Account Balance exceeds $5,000, the Trustee will distribute the balance subject to Section 6.02(D).

 

If the Participant’s death benefit is payable in full to the Participant’s surviving spouse, the surviving spouse may elect distribution at any time and in any form (except a joint and survivor annuity) the Plan would permit a Participant to elect upon Separation from Service. The Participant, on a form prescribed by the Plan Administrator, may (subject to the requirements of Section 6.04) elect the payment method or the payment term or both, which will apply to any Beneficiary, including his/her surviving spouse. The Participant’s election may limit any Beneficiary’s right to increase the frequency or the amount of any payments. Any payment term elected by the Participant must not exceed the payment term the Code otherwise would permit the Beneficiary to elect upon the Participant’s death.

 

(C)  In-Service Distributio n. The Employer must elect in its Adoption Agreement the distribution election rights, if any, a Participant has prior to his/her Separation from Service (“in-service distribution”). Subject to any contrary Employer election in Appendix A to its Adoption Agreement, a Participant upon attaining age 70½, until he/she incurs a Separation from Service, has a continuing election to receive all or any portion of his/her Account Balance, including Employer contributions and Participant contributions. If the Employer elects in its Adoption Agreement additional in-service distribution of any Employer contribution (including deferral contributions), the Employer in its Adoption Agreement must specify events or conditions, if any, applicable to such in-service distributions. For special requirements regarding hardship distributions, see Section 6.09. The Employer also must elect in its Adoption Agreement the additional in-service distribution rights, if any, a Participant has with respect to Participant contributions as defined in Section 4.01. If a Participant receives an in-service distribution as to a partially-Vested Account, and the Participant has not incurred a Forfeiture Break in Service, the Plan Administrator will apply the vesting provisions of Section 5.03(A).

 

A Participant must make any permitted in-service distribution election under this Section 6.01(C) in writing and on a form prescribed by the Plan Administrator which specifies the percentage or dollar amount of the distribution and the Participant’s Plan Account (Employer contributions or Participant contributions and type) to which the election applies. If the Plan permits in-service distributions, a Participant only may elect to receive one in-service distribution per Plan Year under this Section 6.01(C) unless the election form prescribed by the Plan Administrator provides for more frequent distributions. The Trustee, as directed by the Plan Administrator and subject to Sections 6.01(A)(4), 6.01(A)(5) and 6.04, will distribute the amount(s) a Participant elects in single sum, as soon as administratively practicable after the Participant files his/her in-service distribution election with the Plan Administrator. The Trustee will distribute the Participant’s remaining Account Balance in accordance with the other provisions of this Article VI.

 

The Trustee, prior to a Participant’s Normal Retirement Age or Disability may not make any in-service distribution to the Participant with respect to his/her Account Balance attributable to assets (including post-transfer earnings on those assets) and liabilities transferred, within the meaning of Code §414(l), to a profit sharing plan from a money purchase pension plan or from a target benefit plan qualified under Code §401(a) (other than any portion of those assets and liabilities attributable to Employee contributions).

 

6.02  REQUIRED MINIMUM DISTRIBUTIONS .

 

(A)  Priority of Required Minimum Distribution. If any distribution under this Article VI (by Plan provision or by Participant election or nonelection), would commence later than the Participant’s required beginning date (“RBD”), the Plan Administrator instead must direct the Trustee to make distribution on the Participant’s RBD, subject only to the TEFRA election, if applicable, under Section 6.11. The Employer in its Adoption Agreement Appendix B may elect to apply a special effective date to the RBD definition or may elect in Appendix A to continue to apply the RBD definition in effect prior to 1997 (“pre-SBJPA RBD”). The Employer in its Adoption Agreement also may elect to require distribution earlier than the RBD.

 

(1)  RBD – more than 5% owne r. A Participant’s

 

22

 

RBD is the April 1 following the close of the calendar year in which the Participant attains age 70½ if the Participant is a more than 5% owner (as defined in Code §416) with respect to the Plan Year ending in that calendar year. If a Participant is a more than 5% owner at the close of the relevant calendar year, the Participant may not discontinue required minimum distributions notwithstanding the Participant’s subsequent change in ownership status.

 

(2)  RBD – non 5% owners. If the Participant is not a more than 5% owner, his/her RBD is the April 1 following the close of the calendar year in which the Participant incurs a Separation from Service or, if later, the April 1 following the close of the calendar year in which the Participant attains age 70½. If a Participant is not a more than 5% owner, his/her pre-SBJPA RBD (if applicable) is April 1 following the close of the calendar year in which the Participant attains age 70½.

 

(3)  Form of distribution. The Trustee will make a required minimum distribution at the Participant’s RBD in a lump sum (or, if applicable, the annuity form of distribution required under Section 6.04) unless the Participant, pursuant to the provisions of this Article VI, makes a valid election to receive an alternative form of payment.

 

(B)  Participant Transitional Elections.

 

(1)  Election to discontinue distributions. A Participant who: (a) is not a more than 5% owner; (b) had attained age 70½ prior to 1997; (c) had commenced prior to 1997 required minimum distributions under the pre-SBJPA RBD; and (d) has not incurred a Separation from Service, has a continuing election to discontinue receiving distributions from the Plan (which previously were required minimum distributions under the Plan). A Participant who makes an election under this Section 6.02(B)(1) must establish a new annuity starting date when he/she recommences payment of his/her Account Balance under the Plan. A married Participant who is subject to Section 6.04 must obtain spousal consent: (a) to discontinue his/her distributions under this Section 6.04(B)(1) if distributions are in QJSA form; and (b) to recommence benefits in a form other than a QJSA. A Participant may not make any election under this Section 6.02(B)(1) which is inconsistent with any QDRO applicable to the Participant’s Account.

 

(2)  Election to postpone distributions. A Participant who: (a) is not a more than 5% owner; and (b) attained age 70½ after 1996 (or who attained age 70½ in 1996, but who had not commenced his/her required minimum distributions in 1996) may elect under this Section 6.02(B)(2) to postpone distribution of required minimum distributions until the Participant’s RBD established under Section 6.02(A). If the Participant attained age 70½ in 1996, he/she must have elected under this Section 6.02(B)(2) to postpone distributions by December 31, 1997. If the Participant attained age 70½ after 1996, he/she must make the election to postpone distribution under this Section 6.01(B)(2) not later than April 1 of the calendar year following the year in which the Participant attains age 70½.

 

(3)  Election requirements. All Participant elections made under this Section 6.01(B) are subject to and must be consistent with the Employer’s RBD elections in its Adoption Agreement Appendices A and B. A Participant makes his/her election under this Section 6.02(B) in writing on a form prescribed by the Plan Administrator.

 

(C)  Minimum Distribution Requirements for Participant s. The Plan Administrator may not direct the Trustee to distribute the Participant’s Vested Account Balance, nor may the Participant elect to have the Trustee distribute his/her Vested Account Balance, under a method of payment which, as of the Participant’s RBD, does not satisfy the minimum distribution requirements under Code §401(a)(9) and the applicable Treasury regulations.

 

(1)  Calculation of amount. The required minimum distribution for a calendar year (“distribution calendar year”) equals the Participant’s Vested Account Balance as of the latest valuation date preceding the beginning of the distribution calendar year (such valuation date being within the “valuation calendar year”) divided by the Participant’s life expectancy or, if applicable, the joint and last survivor expectancy of the Participant and his/her designated Beneficiary (as determined under Article VIII, subject to the requirements of Code §401(a)(9)). The Plan Administrator will increase the Participant’s Vested Account Balance, as determined on the relevant valuation date, for contributions or forfeitures allocated after the valuation date and by December 31 of the valuation calendar year, and will decrease the valuation by distributions made after the valuation date and by December 31 of the valuation calendar year. For purposes of this valuation, any portion of the required minimum distribution for the first distribution calendar year made after the close of that year is a distribution occurring in that first distribution calendar year.

 

(2)  Recalculation. In computing a required minimum distribution, the Plan Administrator must use the unisex li