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HomeMy WebLinkAboutOCSD 03-10 (REPEALED)RESOLUTION NO. OCSD 03-10 APPROVING AN AMENDED DEFERRED COMPENSATION PLAN FOR OFFICERS AND EMPLOYEES OF THE DISTRICT A RESOLUTION OF THE BOARD OF DIRECTORS OF ORANGE COUNTY SANITATION DISTRICT APPROVING THE ORANGE COUNTY SANITATION DISTRICT AMENDED DEFERRED COMPENSATION PLAN (2003] FOR OFFICERS AND EMPLOYEES OF THE DISTRICT WHEREAS, the Board of Directors has, pursuant to Resolution No. OCSD 98-36, adopted July 1, 1998, adopted a Deferred Compensation Plan, known as the Orange County Sanitation District Deferred Compensation Plan [1998], for eligible Employee Participants (hereinafter referred to as the "Plan"); and WHEREAS, the United States Congress enacted the Economic Growth and Tax Relief Reconciliation Act of 2001 ("2001 Act"), in part amending Internal Revenue Code Section 457 relating to Deferred Compensation Plans; and WHEREAS, the State Legislature has enacted Senate Bill 657 (Chapter 34, 2002 STATS.), amending the California Revenue & Taxation Code to conform to the similar provisions in the Internal Revenue Code Section 457; and WHEREAS, the Board of Directors has, pursuant to Resolution No. OCSD 02-12, adopted July 17, 2002, adopted the First Amendment to the Orange County Sanitation District Deferred Compensation Plan; and WHEREAS, subsequent to adoption of the First Amendment to the Orange County Sanitation District Deferred Compensation Plan, the U.S. Secretary of Treasury, acting through the Internal Revenue Service adopted final regulations implementing amendments to the Internal Revenue Code Section 457; and WHEREAS, the Board of Directors desires to amend the Plan in order to comply with and provide the benefits of the "2001 Act", and to comply with the final regulations of the Internal Revenue Service. NOW, THEREFORE, the Board of Directors of Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE, AND ORDER: Section 1: That the Orange County Sanitation District Amended Deferred Compensation Plan (2003), as set forth in Exhibit "A", attached hereto and incorporated herein by reference as though set forth herein at length, is hereby adopted, as the restated and consolidated Deferred Compensation Plan of the District, superseding all previous plans and amendments of the District, and shall remain in effect until amended or terminated by Resolution of the Board of Directors. WS&S -#147203:05/29/02 1 REPEALED BY OCSD 05-27 Section 2: Resolution No. OCSD 02-12 and the adopted First Amendment to the Orange County Sanitation District Deferred Compensation Plan are hereby repealed. '-' ) .. 0 ' 'L 0 ..... ' PASSED AND ADOPTED at a regular meeting held ~J!~y·2e; 200~. -.,-~ ... · .. ,~ .\,_J~. <"·<':_ .,.) ! 7·,__y; ~: . /) ~() '·: ~,,,,,14<~i,..:t.<~~~~--:"-"'~!f.~! •. I) i'1 '.._,i:..:J ).·. ' \· V-·' ·'•/' .. ' I ) ' -" WS&S -#147203:05/29/02 2 ORANGE COUNTY SANITATION DISTRICT AMENDED DEFERRED COMPENSATION PLAN [2003] ADOPTED MAY 28, 2003 SECTION 1: Background. The Board of Directors of the Orange County Sanitation District, pursuant to Resolution No. OCSD 98-36, adopted July 1, 1998, has adopted a Deferred Compensation Plan, known as the Orange County Sanitation District Deferred Compensation Plan [1998], for eligible Employee Participants (hereinafter referred to as the "Plan"). U.S. Congress enacted The Economic Growth and Tax Relief Reconciliation Act of 2001 ("2001 Act"), which provided numerous changes to the Internal Revenue Code relating to Deferred Compensation Plans for public agency employees. SECTION 2: Purpose. The primary purpose of the Plan is to attract and retain personnel by permitting them to enter into Plan Participation Agreements which will provide future payments in lieu of current income upon death, disability, retirement, or other termination of employment with the Employer. Neither the Plan, nor any provision of the Plan, shall be construed as either an employment agreement, or a right to be retained by the Employer. The Employer intends that the Plan satisfy the Internal Revenue Code Section 457 requirements for an "eligible deferred compensation plan." However, the Employer does not guarantee any tax benefits due to participation in the Plan, and each Participant should consult his or her own tax representative for information and advice on the tax ramifications of participation in the Plan. SECTION 3: Definitions. For the purposes of this Plan, certain words or phrases used herein will have the following meanings: 3.1 "Applicable Dollar Amount" shall mean the maximum amount of elective deferrals that a Participant in the Employer's Section 457 Plan may defer for the taxable year, as set forth in Section 4.2 (a) and (b). 3.2 "Category A Beneficiary" shall mean any individual designated as the beneficiary by the Participant, either pursuant to the Participation Agreement or pursuant to a later written election filed with the Employer before the death of the Participant. A trust may also be designated as a beneficiary under the Plan. The individual trust beneficiaries (as opposed to the trust itself), who may receive trust distributions on account of payments from the Plan shall be deemed to be the Category A Beneficiaries under the Plan, provided that as of the later of the date that the Participant submits to the Employer the election in which the Trust is named as a beneficiary or the Required Beginning Date, and as of all subsequent periods during which the trust is named as a beneficiary of the Plan, all of the following conditions are met: (1) the trust is a valid trust under State law; (2) the trust is irrevocable; (3) the beneficiaries of the trust can be identified from the_trust instrument; and (4) a 1 copy of the trust instrument has been provided to the Employer. No other legal entity, such as a charitable foundation or the estate of the Participant, may be -a Category A Beneficiary for the purposes of the Plan. As used herein, "Beneficiary" shall refer to either a Category A or Category B Beneficiary. [2003 Plan] 3.3 "Category B Beneficiary" shall mean a beneficiary who is designated by the Participant in either the Participation Agreement or a later written election filed with the Employer before the Participant's death, and who is not a "Category A Beneficiary" within the meaning of Section 3.2 above. (Examples: a trust not meeting the requirements of Section 3.2, a charitable foundation, or the estate of the Participant.) As used herein, "Beneficiary" shall refer to either a Category B or Category A Beneficiary. [2003 Plan] 3.4 "Deferred Compensation" shall mean the amount of compensation not yet earned, which the Participant and the Employer mutually agree shall be deferred in accordance with the provisions of this Plan. 3.5 "Deferred Compensation Investment Fund" shall mean the fund to which all Deferred Compensation is credited, as described in Section 6.2. 3.6 "Early Retirement" shall mean a termination of service with the Employer which becomes effective on the first day of the calendar month after the Participant, not yet having attained Normal Retirement Age, meets the minimum age and/or service requirements, for voluntary retirement, specified in the Retirement Plan. 3.7 "Employee" shall mean any employee who is a director or officer, a permanent, full-time or part-time employee, or an independent contractor acting in the capacity of a consultant to the District for a continuous and indefinite duration and was a Participant in the Plan on or before January 1, 2002. [2003 Plan] 3.8 "Employer'' shall mean the Orange County Sanitation District, acting as Trustee for purposes of the Plan. [2003 Plan] 3.9 "lncludible Compensation" (a term defined in Internal Revenue Code Section 457(e)(5) and Treasury Regulation Section 1.457-2(e)(2)) shall mean compensation for services performed for the Employer which is currently includible in gross income. Accordingly, a Participant's includible compensation for a taxable year does not include any amount payable by the Employer that is excludable from the Participant's gross income under Internal Revenue Code section 457(a) and Treasury Regulation Section 1.457-1 (including but not limited to this Plan), Internal Revenue Code 2 Section 403(b ), or other applicable federal income tax laws. The amount of lncludible Compensation shall be determined without regard to any community property laws. 3.10 "Investment Account" shall mean a book account for the individual Participant, as more fully described in Section 6.3. 3.11 "Late Retirement" shall mean a termination of service with the Employer which becomes effective after the date on which the Participant has both exceeded the Normal Retirement Age and met the service requirements. 3.12 "Maximum Annual Deferral" shall mean the overall maximum annual dollar amount (except for roll-over amounts) that a Participant in the Employer's Section 457 Plan may def~r pursuant to Sections 4.2 and 4.3 of the Plan. 3.13 "Normal Retirement" shall mean a termination of service with the Employer which becomes effective on the first day of the calendar month after the Participant attains Normal Retirement Age and meets any service requirements necessary for voluntary retirement, specified in the Retirement Plan. 3.14 "Normal Retirement Age" shall mean the age specified in the Retirement Plan contract between the Employer and the Board of Administration of the Orange County Employees' Retirement System; provided, however, that a Participant who continues to work for the Employer after attaining Normal Retirement Age may elect, for the purposes of Section 4.3 below, an alternate Normal Retirement Age, which may be an age greater than age 70Y2, but which shall be a date or age not later than either (a) any mandatory retirement age specified by the Employer, or (b) the date or age at which the Participant actually separates from service with the Employer. The Participant shall make any such election by delivering to the Employer, prior to separation from service with the Employer, written notice specifying the chosen alternate Normal Retirement Age. Nothing in this Section 3.14 shall be construed to mean that the Employer has imposed a mandatory retirement age or that the Participant has agreed to retire at a designated age. 3.15 "Participant" shall mean an Employee who has elected to participate in the Plan. 3.16 "Participation Agreement" shall mean the agreement which is executed by the Employee and filed with the Employer in accordance with Section 4, and pursuant to which the Employee elects to become a Participant in the Plan and defers a portion of his income. 3 3.17 "Plan" shall mean the Orange County Sanitation District Amended Deferred Compensation Plan, as established hereunder. 3.18 "Plan Administrator" or "Administrator" shall mean the District's Director of Human Resources, or such other person designated and appointed by adopted Resolution or Minute Order action of the Board of Directors, as defined in Section 6.1 of the Plan. [2003 Plan] 3.19 "Plan Year'' shall mean the calendar year. 3.20 "Qualified Domestic Relations Order (QDRO")" is a judgment, decree, or order (such as an order approving of a property settlement agreement) that (1) relates to the provision of child support, spousal support, or marital property rights to a spouse, former spouse, child, or other dependent of a Participant; and (2) creates or recognizes the existence of an alternate payee's right to receive all or a portion of the Participant's Investment Account. [2003 Plan] 3.21 "Required Beginning Date" shall mean the latest date that distributions are permitted to commence under Section 10.3. 3.22 "Retirement Plan" shall mean the retirement plan of the Orange County Employees' Retirement System, which is governed by the County Employees Retirement Law of 1937 (California Government Code Section 31450 et seq.) and is made available to the employees of the Employer pursuant to contract. 3.23 "Salary" shall mean the full, regular, basic salary which would be paid by the Employer to or for the benefit of the Employee (if he were not a Participant in the Plan) for actual services for the period that he is a Participant. 3.24 "Termination of Service" shall mean the severance, prior to retirement and other than by death, of the Participant's employment with the Employer. For an independent contractor, termination of service shall mean the expiration of the contract (or contracts) under which services are performed for the Employer, provided that the expiration constitutes a good-faith and complete termination of the contractual relationship as defined in Code Section 457 and the Regulations thereunder. [2003 Plan] 3.25 "Unforeseeable Emergency" shall mean a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Internal Revenue Code Section 152(a) of the Participant, loss of the Participant's property due to casualty, or 4 other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute an Unforeseeable Emergency will depend upon the facts of each case. Examples of what are not considered to be Unforeseeable Emergencies include the need to send a Participant's child to college or the desire to purchase a home. SECTION 4: Participation in the Plan. 4.1 Any Employee designated by the Employer to be eligible may elect to become a Participant in the P Ian by executing and filing a Participation Agreement with the Employer. An election to participate in the Plan and to defer compensation under the Plan shall become effective with respect to compensation earned by the Participant during the period commencing with the beginning date of the first pay period in the month following the month in which the Employer consents to and approves of the Participation Agreement. Such Participation Agreement and election to defer compensation shall continue thereafter in full force and effect unless and until terminated by the Participant as provided in Section 4.4, Section 10.4 or Section 11. 4.2 Each Participation Agreement shall specify the amount of compensation, either by dollar amount or by percentage of Salary, which is to be deferred pursuant to the Plan and to be withheld out of the Salary otherwise payable to the Participant for each pay period. The amount deferred each year may not exceed the lesser of: (a) The "applicable dollar amount" determined in accordance with the following table: Taxable Year Applicable Dollar Amount 2002 $11,000 2003 $12,000 2004 $13,000 2005 $14,000 2006 or thereafter $15,000 [2003 Plan] 1 1 Cost-of-Living adjustments: In the case of taxable years beginning after December 31,2006, the Secretary [of the Treasury] shall adjust the $15,000 amount (A) at the same time and in the same manner as under Internal Revenue Code Section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2005, and any increase under this section which is not a multiple of $500 shall be rounded to the next lowest multiple of $500. [2001 Amendment] 5 (b) One Hundred Percent (100%) of the Participant's lncludible Compensation, or (c) Be less than Three Hundred Dollars ($300.00) each year. This Three Hundred Dollar ($300.00) limitation shall not be applied to any Participant who is paid less than $1,200.00 per year for services rendered to the Employer. 4.3 Notwithstanding the provisions of Section 4.2 herein, during any or all of the last three (3) taxable years ending before a Participant attains Normal Retirement Age (or the alternate Normal Retirement Age chosen pursuant to Section 3.14 above, the maximum amount which may be deferred annually shall be the lesser of: (a) Twice the dollar amount in effect in Subsection 4.2(a) for the taxable year; [2003 Plan] or (b) The sum of: (i) The maximum deferral amount established forthe purposes of Section 4.2 for the taxable year (determined without regard to this Section 4.3), plus (ii) The maximum deferral amount established in Section 4.2 for any prior taxable year or years, less the amount of compensation deferred under the Plan, for such prior taxable year or years, pursuant to either Section 4.2 or this Section 4.3. A prior taxable year shall be taken into account under subdivision (ii) only if: (a) it begins after December 31, 1978; (b) the Participant was eligible to participate in the Plan during all or any portion of the taxable year; and (c) compensation deferred (if any) under the Plan during the taxable year was subject to the maximum deferral amount under Section 4.2 herein. A Participant will be considered to have been eligible to participate in the Plan for a taxable year if the Participant was an Employee for any part of that taxable year. A prior taxable year includes a taxable year in which the Participant was eligible to participate in an Internal Revenue Code section 457 eligible deferred compensation plan sponsored by an entity other than the Employer, provided that such other entity is located in the State of California. 6 4.4 A Participant may terminate his election to defer compensation under the Plan by executing and filing with the Employer a written notice at least thirty (30) days prior to the effective date of termination. In the event a Participant ceases to qualify under Section 3 hereof as a Participant, his election to defer compensation shall automatically terminate on the same date as he becomes ineligible. A Participant (including a former Participant who is again eligible to participate) may not resume the deferral of compensation during the calendar month in which termination occurred; however, he may elect to resume the deferral of compensation in subsequent calendar months after a lapse of not less than three (3) months. No amounts shall be payable to an Employee upon the termination of deferral of compensation, unless otherwise provided for in either Section 10 or Section 11 . 4.5 A Participant may change the amount of compensation to be deferred in a subsequent calendar month by executing and filing notice with the Employer at I east thirty ( 30) days prior tot he beginning of such month; provided, however, that such change may be made not more than four (4) times in a calendar year. 4.6 In applying the provisions of this Section 4, amounts deferred shall be taken into account at present value in the Plan Year in which deferred. 4.7 For any taxable year that a Participant has a period of qualified military service as described in Section 414(u)(2)(A) of the Internal Revenue Code, the Participant may, over the period described in Section 414(u)(2)(A)(i) of the Code defer the amount that he or she could have deferred during any such period of qualified military service, had the Participant performed services for the Employer and received includable compensation from the Employer during such period as described in Section 414(u )(7) of the Code based on the rate of compensation the Participant would have received from the Employer, but for the period of military service, to the extent required by and in accordance with the Uniformed Services Employment and Re- employment Rights Act of 1994. [2003 Plan] 4.8 Notwithstanding the provision of Section 4.2 herein, all Participants who are eligible to make elective deferrals under this Plan and who have attained age 50 before the close of the year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. These catch up contributions shall only be available in years in which the catch-up contribution, pursuant to this Section, exceeds the amount permitted to be contributed pursuant to Section 4.3. [2003 Plan] 7 4.9 To the extent required by Treasury Regulations, in the event that a Participant defers more than the maximum amount permitted under Sections 4.2, 4.3, and 4.8 of this Plan, such excess amounts ("Excess Deferrals") will be distributed to the Participant, with allocable net income, as soon as administratively practicable after the Plan determines that the amount is an Excess Deferral. [2003 Plan] SECTION 5: Deferral of Compensation. During the period of participation, the Employer shall not pay the Participant his full Salary, but shall defer payment of such part of his Salary as is specified by the Participant in the Participation Agreement, which has been executed and filed with the Employer. SECTION 6: Administration of the Plan. 6.1 The Employer shall, by Resolution of its Board of Directors, appoint a person or persons to act as the Administrator of the Plan (the "Administrator''). The Administrator shall have full authority and power to adopt the rules and regulations for the administration of the Plan, and to interpret, amend, alter, and revoke any rules and regulations so adopted. The actions of the Employer and of the Administrator, with respect to the Plan, and the administration of the Plan, shall be presumed to be fair, reasonable, and impartial, and the Employer and the Administrator shall be deemed to have exercised reasonable care, diligence, and prudence, unless the contrary is proven by affirmative evidence. The Administrator, pursuant to a delegation from the Employer, shall have authority to control and manage the operation and administration of the Plan. The Administrator shall have all powers necessary to exercise its authority and discharge its responsibilities, including, but not by way of limitation, the following: (a) To construe and interpret the Plan and determine all questions relating to the eligibility of employees to participate; (b) To maintain all necessary records for the administration of the Plan other than those maintained by third parties; (c) To compute and certify the amount and kind of benefits payable to Participants and Beneficiaries; (d) To authorize and direct all disbursements and distributions from the Trust; (e) To make and publish such rules for the regulation of the_Plan as not inconsistent with the terms hereof; 8 • (f) To employ one or more persons to render advice with regard to any responsibility any fiduciary has under the Plan; (g) To prescribe administrative policies and procedures; (h) To receive from the Employer and the Employee such information and prescribe the use of such forms as shall be necessary for the proper administration of the Plan; (i) To prepare and distribute, in such manner as the Administrator determines to be appropriate, information explaining the Plan; G) To furnish the Employer, upon request, such annual reports with respect to the administration of the Plan as are reasonable and appropriate; (k) To receive and review reports of the financial condition and of the receipts and disbursements of the Trust; (I) To delegate any duty or power; (m) To appoint or employ for the Plan any agents it deems advisable, including but not limited to, brokers, investment advisors, accountants, or legal and actuarial counsel, to assist the Administrator in discharging its duties hereunder; (n) To administer a Participant Loan Program as provided in Section 12.5 of the Plan; (o) To exercise any power delegated to it by the Trustee pursuant to Section 8.2 of the Plan; and (p) To appoint or employ an independent certified public accountant to prepare reports of the Plan, as required by law, and for general audit purposes. [2003 Plan] 6.2 The Employer shall establish a Deferred Compensation Investment Fund to which all Deferred Compensation shall be credited at such times as the amounts deferred would have been payable to the individual Employee if he were not a Participant in the Plan. 9 6.3 The Employer shall maintain a book account (the "Investment Account") for each Participant, to which shall be credited the Deferred Compensation of the individual Participant. The Participant's Investment Account shall be credited with the earnings thereof, if any, and shall be credited or debited, as the case may be, with the net amount of any gains or losses which may result from the investment of all or any portion of the amount in the Participant's Investment Account. The Employer, its directors, officers and employees, shall not be liable for any losses on any investment credited to any Investment Account. On a quarterly basis, the Employer shall credit the earnings and/or gains and debit the losses on each Investment Account. Such credits and debits shall be made, and the final quarterly balance of the Investment Account shall be posted, as of the last day of each quarter. 6.4 All administrative expenses with respect to the Plan, including but not limited to, legal and consulting fees, audit fees, insurance and trustees fees, if any, may, in the discretion of the Employer, be charged to and deducted from the Trust Fund. Notwithstanding the lack of a provision specifically providing for the charging of an expense incurred by the Plan or Trust with respect to a Participant, all expenses incurred by the Plan or Trust with respect to a Participant may be recovered from such Participant or such Participant's Account in accordance with the procedures established by the Administrator. [2003 Plan] SECTION 7: Return of Contributions. If an Employer contribution is made by virtue of a mistake of fact, Paragraph 9 shall not prohibit the return of such contribution to the Employer within one (1) year after the payme~t of the contribution. [2003 Plan] SECTION 8: Declaration of Trust. 8 .1 Notwithstanding the provisions of Section 6 , a II Deferred Compensation credited to the Deferred Compensation Investment Fund, all property and rights purchased with amounts credited to the Deferred Compensation Investment Fund, and all income attributable to such amounts, property, or rights (collectively, the 'Trust Estate") shall be held, by the Employer as trustee, in trust for the exclusive benefit of the Participants and their beneficiaries, per the terms and conditions of Section 8.2 below. Except as provided in Section 7, no portion of the Trust Estate shall revert to the Employer or be used or diverted to purposes other than the exclusive benefit of the Participants and their beneficiaries. 8.2 The Employer shall be the Trustee. As Trustee, and in accordance with applicable law, the Employer, (or if the Employer delegates these functions to the Administrator, the Administrator) [2003 Plan]: 10 (a) shall have the power to invest and reinvest the Trust Estate in all assets permitted under Government Code Section 53609; (b) shall have the power to retain in cash, without obligation for interest, such portion of the Trust Estate as it may deem (i) advisable to meet Plan obligations, or (ii) to be in the best interests of the Plan; (c) shall have the power to retain, manage, operate, administer and otherwise deal with the Trust Estate in such manner as it deems appropriate; (d) shall have the power to transfer, sell, exchange, redeem and dispose of the assets of the Trust Estate, in any manner and at any time, by private or public sale or otherwise; (e) shall have the power, with respect to the assets of the Trust Estate, to exercise all the rights of an individual owner, including, but not limited to, the power to give proxies, to participate in any voting trusts, mergers, consolidations or liquidations, and to exercise or sell stock subscriptions or conversion rights; (f) shall have the power to hold, authorize the holding of, and register any assets of the Trust Estate in any manner permitted by law; (g) shall have the power, in its discretion, to compromise, contest (whether through legal proceedings or otherwise), arbitrate, or abandon claims and demands on behalf of the Trust Estate and/or the Plan, and to commence, maintain or defend the Trust Estate and/or the Plan in suits or legal proceedings; (h) shall have the power to employ brokers, consultants, accountants, depositories, agents and legal counsel on behalf of the Trust Estate and/or the Plan; (i) shall have the power to open, maintain and close any bank account(s}, in any federally insured financial institution permitted by law, in the name of the Plan, the Employer or, to the extent permitted by law, any nominee or agent of the Plan or the Employer; U) shall have the power to charge to, and pay from, the Trust Estate: (i) any taxes levied or assessed upon or in respect to the assets of the Trust Estate, (ii) any commissions and similar expenses with respect 11 to the assets of the Trust Estate, (iii) the reasonable compensation of any third-party manager or administrator utilized by the Employer in the management or administration of the Trust Estate and/or the Plan, and (iv) the reasonable expenses of such third-party manager or administrator or the Employer incurred in connection with Trust Estate and/or Plan management or administration (including, but not limited to, legal, accounting, investment and custodial services); (k) shall pay benefits to Plan Participants and their beneficiaries, in cash or in kind or partly in each, in accordance with the terms hereof; (I) shall have the power: (i) to retain any funds or property subject to any dispute, without liability to pay interest, (ii) to decline to make payment or delivery of the funds or property until final adjudication of the dispute is made by a court of competent jurisdiction, and (iii) to charge an Investment Account with the Employee's legal expenses and costs incurred due to a dispute concerning that Investment Account; (m) shall have the power to make Participant loans, as described in Section 12.5; (n) shall administer the Plan and the Trust Estate as described in Section 6 and this Section 8; (o) shall have the discretion: (i) to make limited investment options available to the Participant and to change those investment options from time to time, (ii) to eliminate an investment option, even if all or a portion of a Participant's Investment Account is already invested therein, with the result that such amount must be reinvested in another, permitted, investment), and (iii) to invest the amounts in a Participant's Investment Account either as requested by the Participant, or as otherwise determined by the Employer; (p) shall not be required to invest the amounts in the Trust Estate; however, it is the Employer's intent to invest and reinvest such amounts in a manner intended to increase the same, and the net interest, accumulation and increments thereon shall be credited to, and held in, the Trust Estate for the exclusive benefit of the Participants and their beneficiaries; the Employer shall not be responsible for any loss due to the investment or failure of investment of such assets; nor shall the Employer be required to replace any loss whatsoever which may result from said investments; and 12 (q) shall have the power to make, execute, acknowledge and deliver any and all instruments necessary or proper for the accomplishment of, and to do any and all other acts that it may deem necessary or appropriate to carry out, the foregoing powers. 8.3 If the Administrator permits Participants and Beneficiaries to direct the selection of investments with respect to his/her own accounts pursuant to Section 8.2(o), then the Participant or Beneficiary shall be solely responsible for the results of the investment of their account and the Administrator and the Trustee shall be relieved of liability for such investments. No action of the Employer or Administrator shall be considered an endorsement or guarantee of a ny investment or fund, and neither the Employer nor the Administrator shall be treated as having guaranteed the Participant's accounts or investments, or any part thereof, against loss or depreciation nor promise any results. Neither the Employer nor its Directors or agents or employees, shall be liable to any Participant or Beneficiary for any results or losses from any investments election directed by such Participant or Beneficiary, and all Participants and Beneficiaries shall hold the Employer, its Directors, agents, and employees harmless from any costs, liabilities, or losses arising from such investment choices. [2003 Plan] 8.4 The Employer may permit Participants and Beneficiaries to elect to invest all or a portion of their accounts in one or more life insurance contracts, provided that such Participant or Beneficiary shall be solely responsible for such decision. Further, as a condition to permitting such investment, the Administrator may require that any Participant or Beneficiary who chooses to invest in life insurance must separately agree in writing to hold the Employer, its Directors, agents, and employees, harmless from any costs, liabilities, or losses arising from investment in life insurance contracts. [2003 Plan] SECTION 9: Plan Benefits. Deferred Compensation benefits are payable on the happening of any of the following events: (a) Early Retirement of a Participant; (b) Normal Retirement of a Participant; (c) Late Retirement of a Participant; (d) Termination of Service of a Participant; or 13 (e) Death of a Participant who dies either before or after Deferred Compensation payments commence, and before the entire amount of his Investment Account is paid. SECTION 10: Distribution of Benefits. 10.1 Termination of Employment by Retirement. The Participant is eligible to receive distributions of benefits, with respect to retirement, after the Participant has met the requirements for Normal Retirement and has retired from service with the Employer. The Participant may submit to the Employer an application for distribution of benefits under the Plan as early as the date he notifies the Employer of his intended retirement and as late as thirty (30) days following the actual date of termination of employment due to retirement. Pursuant to such application, the Participant shall elect one of the benefits described below, expressed in terms of both payment option and commencement date option. Notwithstanding anything to the contrary in this Plan, effective as of January 1, 2002, Participants who have made payment elections, may revoke existing payment elections and make new elections or elect to defer all remaining benefits, provided that any such new election or deferral must meet the requirements of Section 10.7.4 and Section 401(a)(9) of the Code and the regulations thereunder. There shall be no limit on the number of times that a Participant may revoke or modify an existing election to receive installment payments. [2003 Plan] 10.1.1 Options. Following the Participant's termination of employment due to retirement and the receipt of such application, the Employer shall pay to the Participant one of the following benefits (expressed in terms of both payment option and commencement date option) as elected by the Participant: A. PAYMENT OPTION - (1) Options: (a) Consecutive regular payments paid no less frequently than annually (i.e., monthly, quarterly, or annually)_ over a period certain, as determined by the Participant; provided, however, that any such period certain may not extend beyond the life expectancy of the Participant or the joint life and last survivor expectancy of the Participant and the Participant's Category A Beneficiary. 14 (b) Consecutive regular payments paid no less frequently than annually (i.e., monthly, quarterly, or annually) for the life of the Participant or for the lives of the Participant and his Category A Beneficiary. (c) Annuity payments pursuant to an annuity that is offered by a Plan provider providing services to the Employer and that is structured so as to comply with all applicable provisions of the Internal Revenue Code, the Treasury Regulations and all other applicable laws. (d) A single payment equal to the balance of the Participant's Investment Account. (e) A single lump-sum payment in an amount to be determined by the Participant, with the remainder of the Participant's Investment Account to be paid under payment o ption ( a), p ayment o ption ( b ), o r payment option (c) above. (2) Modified or Delayed Election: In years prior to January 1, 2002, the Participant may modify his payment option election at any time until the date which is thirty (30) days before the commencement date as finally determined pursuant to Subsection 10.1.1, 10.1.2, or 10.1.3, as applicable (the "Final Commencement Date"). Or, the Participant may choose to defer making a payment option election altogether, until a date as late as thirty (30) days before the Final Commencement Date. In years prior to January 1, 2002, thirty (30) days before the Final Commencement Date, the most recent payment option election on file with the Employer shall become irrevocable. If there is no payment option election on file with the Employer at that time, the Employer shall pay the sum in the Participant's Investment Account to the Participant in consecutive regular monthly payments beginning on the Final Commencement Date and continuing for the life of the Participant. [2003 Plan] B. COMMENCEMENT DATE OPTION - (a) The date which is thirty (30) days following termination of employment due to retirement, or 15 (b) A later date which is the first day of a calendar month. In the case of payment option (e) above, the lump sum must be paid on the same date that the first payment over time is paid. In the case of payment option (e) above, the lump sum must be paid on the same date that the first payment over time is paid. C. LIMITATIONS - The foregoing options are limited by, and these payments shall be made subject to, the provisions of Sections 10.3, 10.5, 10.6 and 10.7 hereof. The total amount of any benefits paid pursuant to payment options (a) through ( e) above shall not exceed the sum of the amounts deferred by the Participant, as adjusted for any earnings or losses thereon. 10.1.2 Default Election. Should the Participant fail to elect one of the benefits hereunder by way of an application for retirement benefits filed with the Employer no later than fifteen (15) days after retirement, the Employer shall pay the sum in the Participant's Investment Account according to the "Benefit A" election previously made pursuant to either the Participation Agreement or a modification thereof. However, if there is no such previous election, then the Employer shall pay the sum in the Participant's Investment Account to the Participant in consecutive, regular monthly payments, beginning on the Required Beginning Date and continuing for the life of the Participant. 10.1.3 One-Time Change in Commencement Date Election. For distributions made on or after January 1, 1997, and prior to January 1, 2002, notwithstanding anything to the contrary in this Section 10.1, the Participant may, at any time more than thirty (30) days after termination of employment duet o retirement, and a t I east thirty ( 30) days before the scheduled commencement date, pursuant to either Subsection 10.1.1 or the Benefit "A" election on file with the Employer as of the date of retirement, elect to further defer the commencement date, to a date later than that previously elected (but not later than the Required Beginning Date). The Participant may exercise his or her right, under this Subsection 10.1.3, to file a changed commencement date election only once. 16 10.2 Termination of Employment Prior to Retirement. Following the Termination of Service of a Participant, the Employer shall pay to the Participant the benefit elected by the Participant pursuant to either (a) "Benefit B" of the Participation Agreement submitted by the Participant at the time of election to participate in the Plan or (b) a later written election delivered to the Employer no later than thirty (30) days following Termination of Service. Except as otherwise provided in Subsection 10.2.3 below, the commencement date portion of the latest such election filed with the Employer shall become irrevocable upon the lapse of the thirtieth (30th) day following Termination of Service. 10.2.1 Options. A. PAYMENT OPTION - ( 1 ) Options: (a) Consecutive regular payments paid no less frequently than annually (i.e., monthly, quarterly, or annually) over a period certain, as determined by the Participant; provided, however, that any such period may not extend beyond the life expectancy of the Participant or the joint life and last survivor expectancy of the Participant and the Participant's Category A Beneficiary. (b) Consecutive regular payments paid no less frequently than annually (i.e., monthly, quarterly, or annually)_ for the life of the Participant or for the lives of the Participant and his Category A Beneficiary. ( c) Annuity payments pursuant to an annuity that is offered by a Plan provider providing services to the Employer and that is structured so as to comply with all applicable provisions of the Internal Revenue Code, the Treasury Regulations and all other applicable laws. (d) A single payment equal to the balance of the Participant's Investment Account. (e) A single lump-sum payment in an amount to be determined by the Participant, with the remainder of the Participant's Investment Account to be paid under payment option (a), payment option (b), or payment option (c) above. 17 (2) Modified or Delayed Election: The Participant may modify his payment option election at any time until the date which is thirty (30) days before the commencement date as finally determined pursuant to Subsection 10.2.1, 10.2.2, or 10.2.3, as applicable (the "Final Commencement Date"). Or, the Participant may choose to defer making a payment option election altogether, until a date as late· as thirty (30) days before the Final Commencement Date. Thirty (30) days before the Final Commencement Date, the most recent payment option election on file with the Employer shall become irrevocable. If there is no payment option election on file with the Employer at that time, the Employer shall pay the sum in the Participant's Investment Account to the Participant in consecutive, regular monthly payments, beginning on the Final Commencement Date and continuing for the life of the Participant. Effective for Terminations of Service occurring on or after January 1, 2003, should the Participant fail to make an election hereunder no later than thirty (30) days after Termination of Service, then the Participant shall be deemed to have elected to defer commencement of distributions until the earlier of (a) the date that the Participant elects to receive distributions; or (b) the date that distributions are otherwise required by the provisions of this Plan under Section 401 (a)(9) of the Code and the regulations thereunder, in which case, payment shall be made as required in Section 10.7.4. [2003 Plan] B. COMMENCEMENT DATE OPTION - (a) The date which is forty-five (45) days following Termination of Service; or (b) A later date which is the first day of a calendar month. In the case of payment option (e) above, the lump sum must be paid on the same date that the first payment over time is paid. C. LIMITATIONS - The foregoing options are limited by, and these payments shall be made subject to, the provisions of Sections 10.3, 10.5, 10.6 and 10. 7 hereof. 18 The total amount of any benefits paid pursuant to payment options (a) through.( e) above shall not exceed the sum of the amounts deferred by the Participant, as adjusted for any earnings or losses thereon. 10.2.2 Default Election. Should the Participant fail to elect one of the benefits h ereunder either pursuant to the "Benefit B" provisions of the Participation Agreement or pursuant to a subsequent written election delivered to the Employer no later than thirty (30) days after Termination of Service, then the Employer shall pay the total amount in the Participant's Investment Account to the Participant in consecutive, regular monthly payments, beginning on the date which is forty-five (45) days following Termination of Service and continuing over the life of the Participant. Effective for Terminations of Service occurring on or after January 1, 2003, should the Participant fail to elect one of the benefits hereunder either pursuant to the Benefit "B" provisions of the Participation Agreement or pursuant to a subsequent written election delivered to the Employer no later than thirty (30) days after Termination of Service, then the Participant shall be deemed to have elected to defer commencement of distributions until the earlier of (a) the date that the Participant elects to receive distributions; or (b) the date that distributions are otherwise required by the provisions of this Plan under Section 401 (a)(9) of the Code and the regulations thereunder in which case payments shall be made as required in Section 10. 7.4. [2003 Plan] 10.2.3 One-Time Change in Commencement Date Election. Effective for Termination of Service on or after January 1, 1997 and prior to January 1, 2002 [2003 Plan] and notwithstanding_ anything to the contrary in this Section 10.2, the Participant may, at any time more than forty-five (45) days following Termination of Service occurs, and at least thirty (30) days before the scheduled commencement date, pursuant to either Subsection 10.2.1 or the Benefit "B" election on file with the Employer as of the date of Termination of Service, elect to further defer the commencement date, to a date later than that previously elected (but not later than the Required Beginning Date). The Participant may exercise his or her right, under this Subsection 10.2.3, to file a changed commencement date election only once. 10.3 Required Distributions. Notwithstanding any other provision of the Plan: (a) Payments under Sections 10.1 and 10.2 shall begin no later than the later of: (i) April 1 of the calendar year following the calendar year in 19 which the Employee attains age 70-1/2; or (ii) April 1 of the calendar year following the calendar year in which the Employee retires; (b) With respect to distributions under the Plan made on or after January 1, 2001, the Plan will apply the requirements of Section 401 (a)(9) of the Code in accordance with the proposed regulations under Section 401 (a)(9) that were issued in 2002 and with respect to distributions under the Plan made on or after January 1, 2002, the Plan will apply the requirements of Section 401 (a)(9) of the Code in accordance with the final regulations under Section 401 (a)(9) that were issued in 2002, and as may be subsequently amended. [2003 Plan] 10.4 Acceleration of Payment of Small Investment Accounts. Notwithstanding the provisions of Sections 10.1 and 10.2 above, a Participant may elect to receive the full balance of his or her Investment Account at any time, but only on the following conditions: (a) the balance of the Investment Account does not exceed the maximum amount permitted under Internal Revenue Code section 457(e)(9) (or a successor provision) at the time of the withdrawal; (b) no amount has been deferred under the Plan with respect to the Participant during the two-year period ending on the date of the distribution; and (c) there has been no prior distribution to the Participant under this Section 10.4 (i.e., the acceleration right can be exercised only once). Any distribution under this Section 10.4 shall be deemed a termination of participation in the Plan. The (former) Participant may re-elect to participate in the Plan, pursuant to Section 4.1, after a lapse of at least three (3) months after the date of distribution under this Section 10.4. 10.5 Lifetime Distribution Requirements. The distributions under this Plan must be made primarily for the benefit of the Participant and the schedule elected by the Participant for payment of benefits under Sections 10.1 and 10.2 of the Plan must be such that benefits payable to a beneficiary are not more than incidental, according to the applicable Treasury Regulations. Payments under those sections shall be distributed over the life of the Participant or over the lives of the Participant and a Category A Beneficiary (or over a period not extending beyond the life expectancy of the Participant or the joint life and last survivor expectancy of the Participant and a Category A Beneficiary), in accordance with the Treasury Regulations und~r Internal Revenue Code Section 401 (a)(9). 20 In addition, as required by Internal Revenue Code section 401 (a)(9)(G), and except as otherwise provided in Section 10.7 below, all distributions shall be made in accordance with the incidental death benefit requirements of Internal Revenue Code section 401 (a). As more fully described in the applicable Treasury Regulations, as promulgated pursuant to the authority of Internal Revenue Code section 401 (a)(9), this means that distributions must be made in accordance with a certain formula designed to ensure that the entire Investment Account of the Participant is distributed over a period of time not to exceed the joint life and last survivor expectancy of the Participant and a Category A Beneficiary who is not more than ten years younger than the Participant. 10.6 Death of Participant. In the event of the death of the Participant, either before or after termination of employment (by retirement or otherwise), and before the entire amount of his Investment Account has been distributed, the Employer shall d istribute the a mount then remaining in the Participant's Investment Account pursuant to Subsections 10.6.1 through 10.6.3 below. 10.6.1 When Participant Dies on or after the Required Beginning Date and after Distributions Have Begun. If distributions have already begun during a Participant's lifetime, and the Participant dies on or after the Required Beginning Date and before the entire amount of his Investment Account has been distributed, then the remaining portion of the Participant's Investment Account shall be distributed, as elected by the Participant, pursuant to either the "Benefit C" provisions of the Participation Agreement or a later written election delivered to the Employer before the death of the Participant, unless the Participant's election would permit distributions to be made less rapidly after death than under the method of distribution being used as of the date of death. In order to comply with Internal Revenue Code Section 401 (a)(9), distributions (under this Subsection 10.6.1) after death must be made at least as rapidly as under the method of distribution being used as of the date of death. 10.6.2 When Participant Dies either before the Required Beginning Date or before Distributions Have Begun. If a Participant dies either before the Required Beginning Date or before distribution of his Investment Account has begun, and, if any portion of the Investment Account is payable to (or for the benefit of) a Category A or B Beneficiary, then the Employer shall pay such portion as follows: 21 A. CATEGORY A BENEFICIARIES - (1) Category A Beneficiary Other than Surviving Spouse: If the Category A Beneficiary is other than the surviving spouse, the portion of the Investment Account payable to such beneficiary shall be distributed according to one of the following options, expressed in terms of both payment option and commencement date option: PAYMENT OPTION: (a) consecutive regular payments paid no less frequently than annually (i.e., monthly, quarterly, or annually) over a period not to exceed the shorter of fifteen (15) years or the life expectancy of the Category A Beneficiary; (b) annuity payments pursuant to an annuity that is offered by a Plan provider providing services to the Employer and that is structured so as to comply with all applicable provisions of the Internal Revenue Code, the Treasury Regulations and all other applicable laws; (c) a single lump-sum payment; or (d) a single lump-sum payment, in an amount to be determined by the Participant, with the remainder of the Participant's Investment Account to be paid under either payment option (a) or payment option (b) above. COMMENCEMENT DATE OPTION: Such distributions shall begin on the date designated by either the Participant or, if permitted by the Participant, the Category A Beneficiary, but in no event later than . December 31 of the calendar year immediately following the calendar year in which the Participant dies. If the Category A Beneficiary submits a permitted benefits election, the election must be filed with the Employer within forty-five (45) days after the 22 Participant's death, and the earliest commencement date shall be the date which is sixty (60) days following the date of d eath of the Participant. I f payment i s made under payment option (d) above, the lump sum must be paid on the same date that the first payment over time is paid. (2) Surviving Spouse: If the Category A Beneficiary is the surviving spouse of the Participant, the portion of the Investment Account payable to the surviving spouse shall be distributed according to one of the following options, expressed in terms of both payment option and commencement date option: PAYMENT OPTION: (a) consecutive regular payments paid no less frequently than annually (i.e., monthly, quarterly, or annually)_ over a period not to extend beyond the life expectancy of the surviving spouse; (b) annuity payments pursuant to an annuity that is offered by a Plan provider providing services to the Employer and that is structured so as to comply with all applicable provisions of the Internal Revenue Code, the Treasury Regulations and all other applicable laws; (c) a single lump-sum payment; or (d) a single lump-sum payment, in an amount to be determined by the Participant, with the remainder of the Participant's Investment Account to be paid under either payment option (a) or payment option (b) above. COMMENCEMENT DATE OPTION: Such distributions shall begin on the date designated by either the Participant or, if permitted by the Participant, the surviving spouse, but in no event later than the later of (i) December 31 of the calendar year immediately following the calendar year in which the Participant dies, 23 and (ii) December 31 of the calendar year in which the Participant would have attained age 70%. Notwithstanding the foregoing, however, if as of the date of the Participant's death, both the surviving spouse and another are Category A Beneficiaries, then distributions shall begin on 'or before December 31 of the calendar year immediately following the calendar year in which the Participant dies. If the surviving spouse submits a permitted benefits election, the election must be filed with the Employer within forty-five (45) days after the Participant's death, and the earliest commencement date shall be the date which is sixty (60) days following the date of death of the Participant . If payment is made under payment option (d) above, the lump sum must be paid on the same date that the first payment over time is paid. 3) Elections: PARTICIPANT'S ELECTION: All elections (as to both payment option and commencement date) to be made under this Subsection 10.6.2 shall be made by the Participant pursuant to either the "Benefit C" provisions of the Participation Agreement or a later written election delivered to the Employer before the death of the Participant. Notwithstanding the foregoing, however, the Participant, in the Participation Agreement or such later written election, may s pecify that, following the death of the Participant, the Category A Beneficiary may elect, subject to the foregoing limitations, the form of payments and the commencement date of distributions. BENEFICIARY'S ELECTION: Any permitted beneficiary election must be in the form of a written election filed with the Employer no later than forty-five (45) days following the date of death of the Participant. In the absence of any such timely election, the portion of the Investment Account payable to such Category A Beneficiary shall be distributed to him or her 24 in consecutive, regular monthly payments beginning on the date which is sixty (60) days following the date of death of the Participant occurs and continuing (i) for fifteen (15) years, if the Category A Beneficiary is other than the surviving spouse; or (ii) for the life of the surviving spouse, if the Category A Beneficiary is the surviving spouse. The commencement date portion of the Beneficiary's election shall become irrevocable on the date forty-five (45) days after the Participant's death. However, the Beneficiary may modify his payment option election up to thirty (30) days before the previously elected commencement date. (4) Death of a Categorv A Beneficiarv: If a Category A Beneficiary dies within six months of the date of the Participant's death and before the entire portion of the Investment Account allocated to him has been paid pursuant to this Subsection 1 0.6.2, then the remainder of such portion shall be paid to the contingent beneficiary, if any, designated by the Participant in either the Participation Agreement or a later written election delivered to the Employer before the Participant's death. If there is no such contingent beneficiary, or if the Category A Beneficiary dies more than six months after the date of the Participant's death and before the entire portion of the Investment Account allocated to him has been paid pursuant to this Subsection 10.6.2, then the remainder of such portion shall be paid to the estate of the deceased Category A Beneficiary. Any payment under this paragraph shall be made in a lump sum on the earliest practicable date following the date of death of the Category A Beneficiary. (5) Trust Beneficiary as Category A Beneficiary: In the case of a trust meeting the requirements of Section 3.2, any individual beneficiary of the Trust who is eligible to receive Trust distributions on account of payments from the Plan, shall be deemed to be a Category A Beneficiary under the Plan. (For example, if the Participant designates as his Beneficiary a Trust which meets the requirements of Section 3.2, and of which his surviving spouse is the Life Beneficiary, and elects lifetime payments, then for the purpose of this Subsection 10.6.2, the surviving spouse shall be deemed to be the Category A Beneficiary, and the terms of this Subsection shall 25 be applied by basing distributions on the life expectancy of the surviving spouse.) B. CATEGORY B BENEFICIARIES - If the Beneficiary is a Category B Beneficiary, which is a validly existing legal entity (such as a Trust not meeting the requirements of Section 3.2, a_ charitable foundation, or the estate of the Participant), the portion of the Investment Account payable to such beneficiary shall be distributed as a lump sum on the earliest practicable date following the death of the Participant. In no event, however, shall that payment date be more than five (5) years following the date of death of the Participant. 10.6.3 Default Provision. If, upon the death of the Participant, there exists neither a Category A Beneficiary nor a Category B Beneficiary to receive any portion of the Participant's Investment Account, then the Employer shall, on the earliest possible date following the death of the Participant, pay that portion in a lump sum to the estate of the Participant. 10.7 General Distribution Requirements and Provisions. Notwithstanding any other provisions of this Plan to the contrary, all distributions under this Plan shall be made shall be made in accordance with the provisions of this Section 10.7 and, to the extent of any inconsistency, the provisions of this Section 10.7 shall control. 10.7.1 Calculation of Life Expectancy. For the purpose of ascertaining the relevant distribution periods and amounts hereunder, life expectancy, where applicable, shall RGt be recalculated annually. Notwithstanding the foregoing, however, with respect to permitted annuity distributions, life expectancy may be calculated in any manner permitted by the Internal Revenue Code, the Treasury Regulations, and all other applicable tax laws. 10. 7 .2 Additional Distribution Requirements. For years prior to January 1, 2002 [2003 Plan] any payments payable over a period of more than one year shall only be made in substantially non-increasing amounts, paid not less frequently than annually. 10.7.3 Employer Payout of Small Accounts. The Employer, in its sole and absolute discretion, shall have the right, at any time when subparagraphs (a)-(c) of Section 10.4 are satisfied, to distribute 26 the entire balance of the Participant's Investment Account to the Participant. In addition, after distributions have begun under Sections 10.1, 10.2 or 10.6, if the balance of the Participant's Investment Account, or any portion thereof payable to a beneficiary, should be less than or equal to the amount provided in Internal Revenue Code Section 457(e)(9) (or a successor provision), the Employer, in its sole and absolute discretion and for administrative ease, may distribute such balance or such portion in a lump sum on the date of the first regularly scheduled payment of the next calendar year. 10. 7.4 Statutory Compliance. All distributions under this Plan shall be made in accordance with the Treasury Regulations under Internal Revenue Code section 401 (a)(9), including both the minimum distribution requirements of Treasury Regulation Section 1.401(a)(9)-1, and, (in accordance with Internal Revenue Code Section 401 (a)(9)(G)) the minimum distribution incidental benefit requirements of Treasury Regulation Section 1.401 (a)(9)-2. To the extent that any distribution option hereunder is inconsistent with Internal Revenue Code Section 401 (a)(9), the provisions of Internal Revenue Code Section 401 (a)(9) shall control and the Plan shall be administered so as to conform with Section 401 (a)(9). Notwithstanding the foregoing, however, if, pursuant to Internal Revenue Code Section 457(d)(2)(B)(i)(I), Treasury Regulations (the "Superseding Regulations") should be issued which require more rapid distributions than those required by Internal Revenue Code Section 401 (a)(9)(G) and the Treasury Regulations under Section 401 (a)(9)(G), then the distributions under this Plan shall be made pursuant to such Superseding Regulations, to the extent inconsistent with Section 401 (a)(9) and the Treasury Regulations under that Section. 10. 7 .5 Cost-of-Living Adjustment of Periodic Payments. The Participant or a Category A Beneficiary, at the time of submitting a distribution option election permitted under Section 10.1, Section 10.2, or Section 10.6 of the Plan, may elect that any distributions made pursuant to a periodic payment option may be made not in fixed amounts, but rather in increasing amounts, based on increases in the cost-of-living. The formula for determining cost-of-living increases shall be established by the Employer from time to time. 10.8 Direct Rollovers. A Participant or Beneficiary who is entitled to receive an Eligible Rollover Distribution may direct the Employer to pay all or a portion of such distribution directly to an Eligible Retirement Plan, in lieu of paying 27 such amount to the Participant or Beneficiary. A. The Employer shall establish reasonable rules and procedures with respect to elections to make direct rollover distributions to an Eligible Retirement Plan. B. The Employer shall treat the election by a Participant or Beneficiary to make or not make a direct rollover with respect to one (1) payment in a series of periodic payments as applicable to all subsequent payments in the series unless the Participant or Beneficiary subsequently changes the election. C. For purposes of this Paragraph, the following definitions shall apply: (1) "Eligible Rollover Distribution" shall mean any distribution of all or any portion of the balance to the credit of the Participant or Beneficiary, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Participant or Beneficiary, or the joint lives (or joint life expectancies) of the Participant or Beneficiary and such Participant's or Beneficiary's designated beneficiary, or for a specified period of ten (10) years or more; any distribution to the extent such distribution is required under Section 401 (a)(9) of the Code; any distribution on account of an unforeseeable emergency; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) "Eligible Retirement Plan" shall mean an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, an annuity contract as described in Section 403(b) of the Code, or another eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state that accepts the Participant's or Beneficiary's Eligible Rollover Distribution and which agrees to separately account for amounts transferred into such plan from this Plan. However, in the case of an Eligible Rollover Distribution to the 28 • surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (3) "Beneficiary" shall include a Participant's former spouse who is the alternate payee under a Qualified Domestic Relations Order, as defined in Section 414(p) of the Code, with respect to the interest of the former spouse. [2003 Plan] SECTION 11: Emergency Withdrawals. In the event of an Unforeseeable Emergency, to be determined by the Employer in its sole discretion, the Employer may pay to the Participant all or any portion of the amount in such Participant's Investment Account, as of the month end following the date when such determination is made. Payment may not be made to the extent that the hardship resulting from the Unforeseeable Emergency is or may be relieved (a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (c) by cessation of deferrals under the Plan. The amount that may be paid out is limited to the amount reasonably necessary to alleviate the Unforeseeable Emergency need and, in most cases, will be paid only in a single lump sum. In the event of an Unforeseeable Emergency which causes the initial lump sum payment to be inadequate to meet the Unforeseeable Emergency need, the Participant (or former Participant) may apply for the payment of subsequent lump-sum amounts, up to the entire amount in the Participant's (or former Participant's) Investment Account. Any distribution under this section shall be deemed a termination of the election to defer compensation under Section 4.4 above, and no further deferral of compensation shall be made unless the Participant subsequently re-elects to defer compensation under the Plan, as provided in Section 4.4. Moreover, any distribution of 100% of the Participant's Investment Account under this section shall be deemed a revocation of the Participant's agreement to participate in the Plan. The (former) Participant may re-elect to participate in the Plan, pursuant to Section 4.1, after a lapse of not less than three (3) months. SECTION 12: Assignments and Transfers. 12.1. Consistent with Section 8 above, no one, including the Participant, his beneficiary or designee, or any other person, shall have any right to commute, sell, assign, transfer, or otherwise convey the right to receive any payments hereunder, which payments and right thereto are expressly declared to be non-assignable and non-transferable. The Employer shall have no liability to either the Participant or a purported assignee or transferee, on account of any attempted assignment or transfer. In addition, except to the extent otherwise provided by law, no interest of the Participant in the Plan shall be subject to attachment, garnishment or execution, or be 29 transferable by operation of law, whether due to bankruptcy, insolvency, liquidation for the benefit of creditors, or any other cause. 12.2 Notwithstanding the foregoing, however, the amounts deferred by a former Participant may be transferred to another Internal Revenue Code section 457 eligible deferred compensation p Ian of which the former Participant has become a participant, if the following conditions are met: (1) the plan to which the former Participant wishes to transfer amounts deferred is located within the State of California; (2) the plan receiving such amounts provides for the acceptance of such amounts; (3) the employer accepting the transfer funds gives written notice of its agreement to accept such transfer and assumes liability therefor; and ( 4) the Participant provides a written release to the Employer releasing the Employer from any claim or liability under the Plan after the date such transfer of funds occurs. If a Participant separates from service in order to accept employment with another entity which permits the Participant to participate in a section 457 eligible deferred compensation plan, and if the four conditions enumerated above are met, payout of benefits will not commence upon separation from service, notwithstanding any other provision of the Plan, and amounts previously deferred will automatically be transferred to that other entity's section 457 eligible deferred compensation plan, to be credited to the Participant's account. 12.3 A Participant, who was formerly employed by another public agency located within the State of California, may transfer, to the Plan, funds from an Internal Revenue Code section 457 eligible deferred compensation plan maintained by that former employer, if that eligible deferred compensation plan permits transfers to other section 457 eligible deferred compensation plans and if the Participant complies with all applicable terms and conditions of both the transferring plan and this Plan in effectuating the transfer. As a condition tot ransfer tot his P Ian, the Employer may require that assets transferred from another plan be in the form of cash or cash equivalents. Effective for distributions made on or after January 1, 2002, a Participant who receives an "Eligible Rollover Distribution", as defined in Sections 401 (a)(31),408(d){3), 403(b)(8), and 457(e)(16) of the Code from an eligible plan as defined in Section 401 (c)(8)(B of the Code may transfer or rollover 30 • such distribution to this Plan. All such rollover contributions shall be separately accounted for. [2003 Plan] 12.4 Notwithstanding any other provision of these Distribution rules to the contrary, if a Qualified Domestic Relations Order ("QDRO") provides that a Participant's benefit is to be divided and a portion allocated to an alternate payee under the terms of a QDRO (such as a spouse or former spouse), Such distribution shall not violate this Section. Where a spouse (or a former spouse) of a Participant in the Employer's Section 457 Plan receives a distribution under the terms of a QDRO, the spouse (or former spouse) will be treated as the distributee and taxed on the benefits received. Distributions under the Employer's Section 457 Plan made to an alternate payee other than a spouse (or former spouse) under a QDRO are taxable to the Participant." [2003 Plan] 12.5 Upon application duly made in form and content satisfactory to the Employer, the Employer authorizes the Plan Administrator to make loans on behalf of the Employer, as Trustee, from the Trust Fund to Participants on such terms and conditions as the Employer may prescribe from time to time, including but not limited to, the following: 12.5.1. Amount of Loan. The aggregate principal balance of all Participant loans of all qualified plans maintained by the Employer (including any affiliated employers) shall not exceed the lesser of (a) Fifty Thousand Dollars ($50,000) reduced by the excess, if any, of (i) the highest outstanding loan balance from the Plan during the one (1) year.period ending on the day before the date such loan is made, over (ii) the outstanding balance of loans from the Plan on the date such loan is made; or (b) one-half (1/2) of the sum of the Participant's Account balance. 12.5.2. Loan Provisions. All Participant loans shall have a specific maturity date and bear a reasonable rate of interest in an amount to be determined by the Employer comparable to the rate then being charged for similar loans, but in no event exceeding the maximum rate then permitted by law. All Participant loans shall be secured by the Participant's beneficial interest in the Plan and such other security as the Employer shall determine. All Participant loans shall require that substantially equal payments of principal and interest be made at least quarterly. 12.5.3. Loan Term. All loans shall be required to be repaid within five (5) years; except that any loan used to acquire any dwelling unit which within a reasonable time is to be used as the principal residence of 31 the Participant, may be made for a term of up to thirty (30} years. 12.5.4. Default. Should the Participant fail to repay the loan within the time prescribed by the note evidencing the loan, or default on any of the loan terms, the Employer may, at its option, (i) enforce the rights of the Plan against any or all real or personal property securing the loan; or (ii) take such other remedies as may be available under the law. 12.5.5. Employer Decisions. The Employer's determination as to_whether or not any loan application shall be granted shall be final and conclusive on all parties, and there shall be no appeal or dispute. 12.5.6 Earmarked Investments. The Employer shall treat any loan made pursuant to the provisions of this Article as an earmarked investment and shall allocate all gains and losses to the account of the borrowing Participant. 12.5.7 Written Procedures. This loan program shall be administered in accordance with the rules set forth in this Section 12, and such other written procedures as may be established by the Employer and the Administrator. Such written procedures shall include, but need not be limited to the following: (a) The identity of the person or position authorized to administer the Participant loan program; (b) The procedures for applying for Plan loans; (c) The basis on which loans will be approved or denied; (d) The limitation, if any, on the types and amounts of loans offered; (e) The procedure for determining a reasonable rate of interest to be charged for Plan loans; (f) The types of collateral which may secure a Participant's loan; and (g) The events constituting default and the steps that will be taken to preserve Plan assets in the event of such default. [2003 Plan] 32 • • .. 12.6 If a Participant so elects, the Plan may make a direct trustee-to-trustee transfer-of all or a portion of the Participant's Account to a defined benefit governmental plan (as defined in Section 414(d) of the Code for the purchase of permissive service credit (as defined in Section 415(n)(3)(A) under such Plan, or a repayment to which Section 415 does not apply by reason of Subsection (k)(3) thereof. [2003 Plan] SECTION 13: Notice. Any notice or other communication required or permitted under the Plan shall be in writing, and, if directed to the Employer (ATTN: Director of Human Resources), shall be sent to the Employer at its principal office, and, if directed to a Participant or a beneficiary, shall be sent to such Participant or beneficiary at his last- known address as it appears on the Employer's records. Such notice shall be deemed given when mailed, unless notice is given in person, in which case such notice shall be deemed given upon receipt. SECTION 14: Amendment or Termination of Plan. The Employer may, at anytime, terminate this Plan for all Participants. Upon such termination, the Participants in the Plan shall be deemed to have withdrawn from the Plan as of the date of such termination; each Participant's full Salary on a non-deferred basis will be thereupon restored; and the Employer a grees to p ay each Participant the a mount of money d etermined a s if the Participant had terminated his employment, said payment to be made in accordance with the provisions of Section 10.2. The Employer may also amend the provisions of this Plan at any time; provided, however, that no amendment shall affect the rights of the Participants or their beneficiaries to the receipt of payment of benefits, to the extent of any compensation already deferred at the time of the amendment, as adjusted for investment experience prior to and subsequent to the amendment. SECTION 15: Liability of Employer. Neither the Employer, its Directors, nor its Employees, shall be liable for any action taken or not taken with respect to the Plan and Trust, except for its or their own gross negligence or willful misconduct. Neither the Employer, its Directors, nor its Employees, shall be liable upon any contract, agreement, or other instrument made or executed by it or them in its or their behalf in the administration of the Plan and Trust. Neither the Employer, its Directors, nor its Employees, shall be liable for the neglect, omission, or wrongdoing of any other person in connection with the administration of the Plan and Trust, nor shall any such person be required to make inquiry into the propriety of any other person in conjunction with the administration of the Plan and Trust. [2003 Plan] 33 The Employer hereby establishes, on the terms and conditions set forth above, the Orange County Sanitation District Amended Deferred Compensation Plan (2003). This Amended Plan shall constitute an amendment and restatement and consolidation of all Deferred Compensation Plans previously established, maintained, or acquired by the District, and shall supercede all such Deferred Compensation Plans which have been previously established, maintained, or acquired by the District. All such Plans shall be deemed to have been merged into this Plan, so that this Plan shall be the only Deferred Compensation Plan pursuant to Section 457 of the Code which is offered by the District, although the District, in its sole discretion, may continue with or enter into various contracts or agreements with various investment providers pursuant to this Plan. [2003 Plan] WS&S:05/20/03:167255 34 •• .. '