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BENEFIT UPON DEATH

 

BENEFIT UPON TERMINATION OF EMPLOYMENT

 

DETERMINATION OF VESTED INTEREST

 

HARDSHIP DISTRIBUTIONS

 

INVESTMENT OF CONTRIBUTIONS

 

TAX WITHHOLDING ON PLAN BENEFITS

Distributions Not Subject To Withholding

Distributions Subject To Withholding

 

OTHER INFORMATION

Claims For Benefits

Non-Alienation Of Benefits

Amendment Or Termination

 

STATEMENT OF ERISA RIGHTS

INTRODUCTION

 

Purpose Of This Summary

The purpose of this summary plan description is to familiarize you with important information concerning the XYZ Sample Company Profit Sharing 401(k) Plan (the Plan), which was amended by XYZ Sample Company (the Employer) on January 1, 1999. This summary, which describes the important features of the Plan in non-technical language, is intended to answer most of your questions about the Plan and replaces all prior announcements by the Employer about the Plan. It nevertheless is only a summary, and if there is any conflict between the description in this summary and the terms of the Plan, the terms of the Plan will control. If you have any questions about the Plan that are not addressed in this summary, you can contact the Administrator.

 

Administration Of The Plan

The Plan is administered by a written trust agreement, and the trustees of that agreement are responsible for the Plan=s investment policy. The names and the address of the Trustees are:

 

                                                                   

                                                                  Frugal Smart

                                                                  Conscious Cost

                                                                  Sharp Investor

                                                                  123 Any Street

                                                           Anywhere, US 00000-1111

 

All other matters concerning the operation of the Plan are the responsibility of the Administrator. The name, address, telephone number and employer I.D. number (EIN) of the Administrator are:

 

                                                                  XYZ Company

                                                                   123 Any Street

                                                          Anywhere, US 00000-1111

                                                               Tel (999) 555-1234

                                                                 EIN 00-1234567

 

PLAN PARTICIPATION

 

The Employer has assigned number 001 to the Plan; the accounting year of the Plan, called the Plan Year, begins January 1st and ends the following December 31st; and if it becomes necessary for you to bring legal action against the Plan for any reason, legal process can be served on either the Administrator, the Employer, or the Trustees.

 

Eligibility Requirements

If you are currently a Participant in the Plan, you will continue to participate. If you are not a Participant, you will be eligible to enter the Plan as a Participant when you reach Age 21 and complete 1 Year of Service.

 

Eligibility Year Of Service

A Year of Service for eligibility purposes is a 12-consecutive month period in which you complete at least 1,000 Hours of Service. An Hour of Service is any hour for which you have a right to be paid, including vacations, holidays, illness, back pay and maternity leave. To be eligible to enter the Plan as a Participant, you must complete at least 1,000 Hours of Service in any 12-consecutive month computation period in order to satisfy the 1 Year of Service eligibility requirement. Your first 12-month computation period starts on your employment commencement date. The second 12-month computation period will overlap the first computation period and will start on the January 1st which occurs prior to the first anniversary of your employment commencement date. Each succeeding 12-month computation period will begin January 1st and end December 31st.

 

Break In Service Rules

In any Plan Year in which you do not complete more than 500 Hours of Service, you will incur a Break in Service and your participation in the Plan will cease. You will not incur a Break in Service if you are absent from work because of an authorized leave; and if you are absent from work because of illness or maternity leave, you will receive credit for up to 500 Hours of Service if necessary to prevent a Break in Service. An Hour of Service is any hour for which you have a right to be paid, including vacation, holidays, illness, back pay and maternity leave. 

 

Entry Date

You will enter the Plan as a Participant on the January 1st or the July 1st, which coincides with or next follows the date on which you satisfy the eligibility requirements. Upon becoming a Participant, the Administrator will establish an Account to receive your share of any Employer contributions and investment earnings and losses. Your Account will consist of the following sub-accounts: the Elective Deferral Account, the Matching Contribution Account and the Non-Elective Contribution Account.

 

CONTRIBUTIONS AND ALLOCATIONS

 

Elective Deferrals

You can enter into a salary reduction agreement authorizing the Employer to withhold up to $10,000 of your Compensation each calendar year. This amount is called an Elective Deferral, which the Employer will contribute to the Plan and allocate to your Elective Deferral Account. The exact amount you wish to defer will be indicated in your salary reduction agreement.

 

Salary Reduction Agreements

You can change your salary reduction agreement semi-annually on dates determined by the Administrator. You can also suspend or cancel the agreement at any time upon reasonable written notice not to exceed 30 days. If you do cancel or suspend your salary reduction agreement, you will not be permitted to put a new agreement into effect until the next semi-annual election period. If necessary to insure that the Plan satisfies certain non-discrimination tests, the Employer can also amend or terminate your agreement. In any Plan Year in which you have not authorized the Employer to withhold from your Compensation at the maximum rate permitted, you can authorize  that a supplemental amount up to 100% of your Compensation be withheld for one or more pay periods. However, the amount withheld under your salary reduction agreement plus the supplemental withholding cannot exceed 25% of your Compensation.

 

Matching Contributions

The Employer may make a discretionary Matching Contribution each Plan Year. Matching Contributions made on your behalf will be allocated to your Matching Contribution Account. 

 

Participants Eligible For Allocations

All Participants who are employed on December 31st and who complete at least 1,000 Hours of Service during the Plan Year will receive an allocation of all Employer contributions made for that Plan Year. Participants who terminate employment before December 31st will only receive a contribution allocation (other than Matching Contributions) if they complete at least 1,000 Hours of Service before termination.    

 

Top Heavy Contributions

A top-heavy plan is a plan in which more than 60% of the Employer=s contributions are allocated to the Accounts of Participants who are Key Employees (certain owners and officers). For each year in which this Plan is top heavy, the Account of each Participant who is a Non-Key Employee and who is employed by the Employer on December 31st will receive a minimum top heavy allocation equal to the lesser of 3% of his or her Compensation or the percentage of Compensation allocated to the Accounts of Participants who are Key Employees.

 

Rollover Contributions

If you participated in another retirement plan before you were employed by the Employer, you can transfer (or rollover) to this Plan any distribution you received from that plan if all legal requirements (and any requirements imposed by the Administrator) for the transfer are satisfied. Do not withdraw funds from any other plan or account until you receive written approval from the Administrator to roll those funds over to this Plan. If you decide to make a rollover contribution and it is accepted by the Administrator, it will be kept in your Rollover Account, in which you will have a 100% Vested Interest. Your Rollovers can be withdrawn from the Plan at any time. 

 

BENEFIT UPON RETIREMENT

 

You are entitled to receive 100% of your Account after you reach Normal or Early Retirement Age. Normal Retirement Age is the later of the date you reach age 65 or your 5th anniversary of becoming a Participant in the Plan. Early Retirement Age is the date you reach age 55 and complete 10 Years of Service. You can elect to postpone retirement and continue working, in which case you can either postpone receipt of your Account until you actually retire, or you can have your Account distributed while you are still employed. Your Account will be distributed in a lump sum as soon as administratively feasible after you request payment.

 

BENEFIT UPON DISABILITY

 

If you become disabled before your Account is distributed, you are entitled to receive the Vested Interest in your Account. To be considered disabled for purposes of the Plan, you must suffer a physical or mental condition that qualifies you for disability benefits under the Social Security Act; but even if you qualify for Social Security disability benefits, you will not be considered disabled if the physical or mental condition is caused (1) by the use of intoxicants or other substances; (2) by an intentionally self-inflicted injury or sickness; (3) by an unlawful act on your part; or (4) by military service which qualifies you for a military disability pension.

 

If your Vested Interest does not exceed $5,000, it will be distributed in a lump sum as soon as administratively feasible after you become disabled. If your Vested Interest is over $5,000, you can elect to have it distributed as soon as administratively feasible after you become disabled, or you can defer distribution until a later date; but you cannot defer distribution beyond April 1^st of the calendar year which follows the calendar year in which you reach age 702. When distribution is made, your Vested Interest will be distributed in a lump sum payment.

 

BENEFIT UPON DEATH

 

If you die before your Account is distributed, your beneficiary is entitled to receive the Vested Interest in your Account. If you are not married, you can name anyone to be your beneficiary. If you are married, your spouse is deemed by law to be your named beneficiary unless he or she waives the death benefit in writing. Your death benefit will be distributed to your beneficiary in a lump sum as soon as administratively feasible after your death.

 

BENEFIT UPON TERMINATION OF EMPLOYMENT

 

If you terminate employment before reaching Normal or Early Retirement Age, or before death or disability, you will be entitled to receive the Vested Interest in your Account. If your Vested Interest does not exceed $5,000, it will be distributed in a lump sum as soon as administratively feasible after the last day of the Plan Year in which you terminate employment. If your Vested Interest is over $5,000, you can elect to have it distributed as soon as administratively feasible after the last day of the Plan Year in which you terminate employment, or you can defer distribution until a later date; but you cannot defer distribution beyond April 1^st of the calendar year which follows the calendar year in which you reach age 702. When distribution is made, your Vested Interest will be distributed in a lump sum payment.

 

DETERMINATION OF VESTED INTEREST

 

Your Vested Interest is the percentage of your Account to which you are entitled at any point in time. You will have a 100% Vested Interest in your Account if you reach Normal or Early Retirement Age prior to termination of employment, or upon your death or disability prior to that date. The determination of your Vested Interest at any other time, including termination of employment prior to your retirement, death or disability, is described in the next paragraph.

 

Your Vested Interest in all Elective Deferrals allocated to your Account will be 100% at all times; but your Vested Interest in all Matching Contributions and Non-Elective Contributions will be determined by the number of Years of Service you have completed as indicated in the vesting schedule following this paragraph. A Year of Service for vesting purposes is a Plan Year in which you complete at least 1,000 Hours of Service. Any portion of your Account in which you do not have a Vested Interest will be forfeited upon termination of employment.

                                                 

 

HARDSHIP DISTRIBUTIONS

 

You can withdraw up to 100% of your Elective Deferrals, plus up to 100% of your Vested Interest in your Matching Contribution and Non-Elective Contribution Accounts to help pay for a financial hardship caused by (1) eligible medical expenses incurred by you or your family; (2) the purchase (excluding mortgage payments) of your principal residence; (3) tuition for the next 12 months of college for you or your family; or (4) payments needed to prevent your eviction from, or foreclosure on the mortgage of, your principal residence. You cannot make any Elective Deferrals for 12 months after you receive a hardship distribution, and the maximum amount you can defer for the calendar year after the distribution will be limited to your maximum permitted deferral minus the amount you actually deferred during the calendar year in which the hardship distribution was made. A hardship distribution will be made in a lump sum. 

 

INVESTMENT OF CONTRIBUTIONS

 

You will be able to direct the investment of your Account. With regard to your directed investments, you will be allowed to choose from a range of mutual funds and related investments approved by the Trustees. All earnings on the funds you invest will be credited to your account. You will be able to switch between funds at such times as permitted by the Employer by contacting the Trustees or their designee in writing or through an 800 number which will be made available to you. Any change you wish to make to your investment alternatives will go into effect as soon as practicable after the change is received by the Trustees or their designee. In addition, you can invest in any investment alternatives approved by the Trustees, including but not limited to stocks bonds and mutual funds. The Trustees maintain the right to limit your choice of investment vehicles and firms. All earnings on your directed investments will be credited to your Account. You will be able to switch between these alternative investments as often as permitted under the investment vehicles you choose. This Plan is intended to comply with Section 404(c) of the Employee Retirement Income Security Act of 1974. This means that if the plan permits you to exercise independent control over the assets in your account, then the fiduciaries of the Plan, including the Trustees, the Administrator and the Employer, are relieved of liability for any losses resulting from your exercise of such control.

 

TAX WITHHOLDING ON PLAN BENEFITS

 

Distributions Not Subject To Withholding

Any distribution that is eligible to be rolled over and which is directly transferred to another qualified retirement plan or to an individual retirement account (IRA) is not subject to income tax withholding. Generally, any part of a distribution can be rolled over to another qualified plan or an IRA unless the distribution (1) is part of a series of equal periodic payments made over your lifetime, over the lifetime of you and your beneficiary, or over a period of 10 years or more; or (2) is a minimum benefit payment which must be paid to you because you have reached age 702. There are additional distributions that are not eligible to be rolled over. Contact the Administrator if you have questions regarding whether a Plan distribution is eligible to be rolled over.

 

Distributions Subject To Withholding

If you choose to have your Plan benefit paid to you and the benefit is eligible to be rolled over, you only receive 80% of the benefit payment. The Administrator is required by law to withhold 20% of the benefit payment and remit it to the Internal Revenue Service as income tax withholding to be credited against your taxes. If you receive the distribution before you reach age 592, you may also have to pay an additional 10% tax. You cannot elect out of the 20% withholding. The only way to avoid the 20% withholding is to leave your benefit in this Plan or have it transferred directly to an IRA or to another qualified retirement plan that accepts rollovers. You can still rollover any eligible distribution that is paid to you by putting the eligible distribution into an IRA or into another qualified retirement plan within 60 days of receiving it. If you want to rollover 100% of the eligible distribution to an IRA or to another qualified retirement plan, you must find other money to replace the 20% that was withheld. Due to the complexities and frequency of changes in the federal tax law that governs withdrawal penalties and taxes, you should consult your tax advisor to determine your personal tax situation before taking any distribution from the Plan.

 

OTHER INFORMATION

 

Claims For Benefits

If you are not satisfied with a decision made about your Plan benefits, you should submit a written claim to the Administrator. If your claim for benefits is denied, the Administrator will notify you within 90 days after you filed your claim. If your claim is denied, you can have the denial reviewed by making a written request to the Administrator, which along with a written statement explaining your position must be filed within 60 days of the date you were notified in writing that the claim was denied.  The Administrator may (but is not required to) provide you with a hearing, but must decide your appeal within 60 days and give written notice of the decision. If your claim for benefits is denied or ignored, in whole or part, you can file suit in a state or federal court.

 

Non-Alienation Of Benefits

Your general creditors cannot garnish or levy upon your Account, and you cannot sell, transfer, assign, or pledge your Account. In the event you separate from your spouse or get divorced, a court can direct that all or part of your benefit be paid to an alternate payee, usually your ex-spouse or your children.

 

Amendment Or Termination

Although the Plan is intended to be permanent, the Employer can amend or terminate the Plan at any time. If the Plan and trust are terminated, all Participants will have a 100% Vested Interest in their Accounts as of the date of termination, and all benefits will be distributed in a lump sum. Should the Plan ever be amended or terminated, each Participant (and each beneficiary receiving benefits) will be notified in writing.

 

STATEMENT OF ERISA RIGHTS

 

As a Plan Participant, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Participants are entitled to examine without charge at the Administrator's office and at other specified locations (such as worksites and union halls) all Plan documents, including insurance contracts, collective bargaining agreements and copies of all Plan documents filed with the U.S. Department of Labor, such as detailed annual reports and Plan objectives; are entitled to obtain copies of all Plan documents and other information upon written request to the Administrator (who may make a reasonable charge for the copies); are entitled to receive a summary of the Plan's annual financial report and a copy of the Administrator's summary annual report; and are entitled to obtain a statement telling if you have a right to receive a pension at normal retirement age and if so, what your benefits would be if you stopped working now. If you do not have a right to a pension, the statement will tell you how many more years you have to work to get a pension. This statement must be requested in writing, is not required to be given more than once a year, and must be provided free of charge.

 

The Employee Retirement Income Security Act also imposes duties upon the people responsible for the operation of the plan. These people, called fiduciaries, have a duty to do so prudently and in the interest of all Participants. No one, including the Employer, a union, or any other person, may fire you or discriminate against you in any way to prevent you from obtaining a pension benefit or exercising your ERISA rights. If your claim is denied in whole or part, you must receive a written explanation, and you have the right to have the Plan review and reconsider your claim.

 

There are steps you can take to enforce your rights under ERISA. For instance, if you request materials from the Plan and do not receive them within 30 days, you may file suit in a federal court. If fiduciaries misuse the Plan's money or if you are discriminated against for asserting your ERISA rights, you may seek help from the United States Department of Labor, or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you win your suit, the court may order the person you sued to pay the costs and fees. If you lose your suit, the court may order you to pay court costs and legal fees, if, for example, the court finds that your claim was frivolous. If you have questions about the Plan, contact the Administrator. If you have questions about this statement or about your rights under ERISA, contact the nearest Area Office of the U.S. Labor-Management Services Administration, Department of Labor.