HomeMy WebLinkAboutOCSD 05-27 (REPEALED)_,
RESOLUTION NO. OCSD 05-27
APPROVING AN AMENDED DEFERRED COMPENSATION PLAN
[20051 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 DEFERRED COMPENSATION PLAN
[20051 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 has, pursuant to Resolution No. OCSD 03-10,
adopted May 28, 2003, adopted the Amended Deferred Compensation Plan [2003]
which incorporates these final regulations which implement amendments to the Internal
· Revenue Code 457; and
WHEREAS, subsequent to the adoption of the Amended Deferred Compensation
Plan [2003], the Economic Growth and Tax Relief Reconciliation Act of 2001 ("2001
Act"} the Internal Review Service provided clarification in December 2004 to the 2001
Act with respect to mandatory distributions of amounts equal to $5,000 or less made
pursuant to Internal Revenue Code 457(d}(1 }(C));
WHEREAS, the Board of Directors desires to amend the Plan in order to comply
with the clarification provided by the Internal Revenue Service regarding mandatory
distributions of amounts equal to $5,000 or less imposed by the "2001 Act."
NOW, THEREFORE, the Board of Directors of Orange County Sanitation District,
DOES HEREBY RESOLVE, DETERMINE, AND ORDER:
WS&S -#209203:10/12/05 1
REPEALED BY
OCSD 09-02
Section 1: That the Orange County Sanitation District Amended Deferred
Compensation Plan [2005], 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 rested
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.
Section 2: Resolution No. OCSD 02-12 and the adopted Orange County
Sanitation District Amended Deferred Compensation Plan [2003] are hereby repealed.
PASSED AND ADOPTED at a regular meeting held November 16, 2005.
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ORANGE COUNTY SANITATION DISTRICT
AMENDED DEFERRED COMPENSATION PLAN [2005]
ADOPTED NOVEMBER 16, 2005
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
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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 defer 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
70~. 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.
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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
other similar extraordinary and unforeseeable circumstances arising as a
4
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 Plan 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 for the 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.
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
6
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 least thirty (30) days prior to the 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]
4.9 To the extent required by Treasury Regulations, in the event that a
Participant defers more than the maximum amount permitted under Sections
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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;
(f) To employ one or more persons to render advice with regard to
any responsibility any fiduciary has under the Plan;
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(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;
U) 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.
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
9
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 payment of the contribution. [2003 Plan]
SECTION 8: Declaration of Trust.
8.1 Notwithstanding the provisions of Section 6, all 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]:
(a) shall have the power to invest and reinvest the Trust Estate in all
10
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;
0) 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
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,
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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
(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.
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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 any 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
( 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.
13
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.
(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.
14
(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.
(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
(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.
15
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 due to retirement, and at least 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.
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
16
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.
(2) Modified or Delayed Election:
The Participant may modify his payment option election at any
17
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.
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.
18
10.2.2 Default Election.
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 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
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
19
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 under Internal
Revenue Code Section 401 (a)(9).
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
20
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 distribute the amount 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:
A. CATEGORY A BENEFICIARIES -
(1) Category A Beneficiary Other than Surviving Spouse:
If the Category A Beneficiary is other than the surviving
21
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 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.
22
(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,
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
23
•
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 specify 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
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
24
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 Category A Beneficiary:
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 10.6.2, 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 survivfng spouse shall be deemed to be the
Category A Beneficiary, and the terms of this Subsection shall
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),
25
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 Ret 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. [Deleted 2005]
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
26
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 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
27
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
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
28
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
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 plan 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.
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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 to
transfer to this Plan, 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 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
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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 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:
31
..
(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]
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 (ATIN: 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 agrees to pay each Participant the amount of money determined as if the
Participant had terminated his employment, said payment to be made in accordance with
the provisions of Section 10.2.
32
•
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]
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
Revised 10/13/05
33