LOAN POLICY DOCUMENT FOR AMERICAN MANAGEMENT TECHNOLOGIES, INC. PROFIT SHARING 401(k) PLAN. (A Multiple Employer Plan)

Transcription

1 LOAN POLICY DOCUMENT FOR AMERICAN MANAGEMENT TECHNOLOGIES, INC. PROFIT SHARING 401(k) PLAN (A Multiple Employer Plan)

2 TABLE OF CONTENTS Page Steps in Authorizing a Loan...3 Procedures for Applying for a Loan...3 The Basis Upon Which a Loan Will be Approved or Denied...3 Conditions and Limitations of a Loan...3 Repayment of a Loan...5 Procedures for Determining a Reasonable Rate of Interest on a Loan...5 Establishing the Repayment Period of Loans Used to Acquire a Principal Residence...5 Collateral Which May Secure a Loan...5 Events Constituting a Default on a Loan and Steps to Preserve Plan Assets in Such Event..6 Glossary of Terms...7 Section A...8 2

3 If your Plan allows loans, a Participant may borrow against the eligible vested balance from his account(s) as defined below in Section 4(e) and Section A(4). The operational issues that affect how the Participant loan program is administered are contained in this LPD. The following features of this loan program shall be effective as of the Effective Date shown in Section A. Steps in Authorizing a Loan Upon receipt of a properly completed Loan Application, the Trustee(s), or his authorized representative, will make loans to Participants and Beneficiaries based on uniform and nondiscriminatory rules. The Loan Application must satisfies all of the requirements set forth under the Plan and this LPD. Procedures for Applying for a Loan A Participant or Beneficiary may apply for a loan by any of the methods below: (a) (b) (c) submitting a properly completed and signed loan application to the Plan Trustee(s); calling Transamerica s Toll-Free Number and properly authorizing such request; or initiating and properly authorizing a request via Transamerica s Participant Website. Only one loan may be requested during any Plan Year unless otherwise specified in Section A(3). A loan will not be made to a Participant who has terminated employment with the Participating Employer, or to a Beneficiary not employed by the Participating Employer, unless otherwise specified by the Trustee(s) in Sections A(5) and (6) and in accordance with the appropriate section of the Adoption Agreement. A Participant will not be permitted to rollover the unpaid balance of a plan loan from a previous employer s plan ( prior plan ), unless otherwise specified by the Trustee(s) in Section A(7), and in accordance with the appropriate section of the Adoption Agreement. If the Trustee(s) have elected in Section A(7) to allow such a rollover loan, the loan rollover may occur only under the following circumstances: the promissory note from the prior plan is duly assigned to the Plan the loan is not in default at the time of the rollover the Employee s entire account balance moves with the loan Transamerica receives all paperwork on the rollover loan repayments on the rollover loan will be made via payroll deduction in accordance with Section 5 the events constituting a default of a loan described in Section 9 will apply to the rollover loan. The Basis Upon Which a Loan Will be Approved or Denied A loan shall be made available to all Participants and Beneficiaries on a reasonably equivalent, uniform and non-discriminatory basis, subject to any restriction(s) described in Sections 4(a) and established in Section A(9). Conditions and Limitations of a Loan The Trustee(s), or his authorized representative, shall authorize a loan to a Participant subject to the following conditions and limitations: (a) Restrictions for the use of loan funds, if any, will be established and set forth in Section A(9), and in accordance with the appropriate section of the Adoption Agreement, by the Trustee(s). Such restrictions may include immediate and heavy financial hardship as 3

4 described in the Plan, expenses for medical care, costs directly related to the purchase of a principal residence, payment of tuition and related educational fees, payments necessary to prevent eviction from or foreclosure on the mortgage of a principal residence. (b) (c) (d) (e) (f) (g) (h) The minimum loan amount will be $1,000, unless a lower amount is specified in Section A(1). If the minimum loan amount is less than $1,000, the Plan may be considered individually designed by the IRS. Under no circumstances will the minimum loan amount exceed $1,000. Loans must be adequately secured and bear a reasonable rate of interest, in accordance with Section 408(b)(1) of the Employee Retirement Income Security Act of 1974 ( ERISA ), as determined by the Trustee(s). Unless an alternative interest rate is otherwise specified by the Trustee(s) in Section A(10), and to the extent it does not violate Section 6, the interest rate charged to loans made in any calendar month shall be determined by adding one (1) percentage point to the Prime Interest Rate published in the Wall Street Journal on the first business day of the month in which the loan is processed. In no event may the amount of any loan exceed the lesser of (1) $50,000 reduced by the excess (if any), of the Participant s highest outstanding loan balance under this Plan and all plans of the Participating Employer, during the 12-month period ending on the day prior to the date the loan is made, over the outstanding balance of his loans from this Plan and such other plans of the Participating Employer on the date the loan is made; or (2) 50% of the present value of the Participant s vested balance in his account(s). In some instances, there may be restrictions on the types of contributions that may be used for loans. The contribution types that may be used for loans are set forth in Section 4(e) unless otherwise specified by the Trustee(s) in Section A(4). When determining whether a loan amount exceeds the maximum loan amount under Internal Revenue Code ( Code ) section 72(p), the outstanding balance of all loans to a Participant, including loans which during the past 12 months are fully pre-paid at any time after issuance, will be considered. For the purpose of the preceding limitation, all loans from all plans of the Participating Employer and all entities aggregated with the Participating Employer under Code sections 414(b), 414(c), 414(m) and 414(o) of the Code are aggregated. Loan amounts will be withdrawn from the Participant s or Beneficiary s account(s) on a prorata basis across all investment funds and all allowable contribution types, as follows, unless otherwise specified by the Trustee(s) in Section A(4): (i) Elective Contributions and Rollover Contributions; (ii) Matching Contributions; and (iii) Non-Matching Contributions. A Participant will only be permitted to have one (1) outstanding loan at any given time, unless otherwise specified by the Trustee(s) in Section A(3) and in the appropriate section of the Adoption Agreement. In no event will the Plan allow a Participant to have more than five (5) outstanding loans at any given time. If the Plan only allows for one (1) outstanding loan at any given time, a Participant may refinance his outstanding loan if the Trustee(s) of the Plan makes an affirmative election in Section A(8) and in the appropriate section of the Adoption Agreement. The prior loan and the refinanced loan must meet the requirements of Code section 72(p). Any loan, by its terms, must require repayment within five (5) years. The Plan may allow a longer repayment period in the case of a loan used to acquire a dwelling unit that will be used as the principal residence of the Participant. As provided in Section A(12), Participant loan Repayments may be suspended during a period of unpaid authorized leave of absence up to a maximum of twelve (12) months, 4

5 unless the leave of absence is a qualified military leave; however, the term of the loan will not be extended due to the leave of absence. (i) (j) (k) As provided under Code section 414(u), and as specified in Section A(11), Participant loan Repayments may be suspended during a leave of absence for military service even if the leave exceeds twelve (12) months, provided loan Repayments are resumed after the Participant returns to work The loan will be funded from, and withdrawn against the Participant s account(s) in the Plan as described in Section 4(e). Loan amounts withdrawn from the Participant s account(s) will not share in investment gains or losses until such amounts are repaid and allocated to the Participant s account. No loan shall be made on or after termination of the Plan. Repayment of a Loan Loan Repayments must be made by salary deduction only in the case of a Participant or Beneficiary who is also an Employee of the Participating Employer. In the case of a Participant who is no longer employed by the Participating Employer or a Beneficiary who is not an Employee, repayment will be made through the standard Plan contributions remittance method. Transamerica will not accept a personal or cashier s check, or a money order from a Participant who has terminated employment or a Beneficiary who is not an Employee. The loan must be repaid under an amortization schedule requiring substantially level installments over the term of the loan, in the same frequency as elective contributions, if applicable, but not less frequently than quarterly. Loan Repayments shall be allocated to the Participant s account(s) in accordance with the Participating Employer s direction in effect at the time of repayment, or if the investment of Plan contributions is directed by the Participant, in accordance with the Participant s investment direction currently in effect at the time of repayment. Pre-payment of a loan in full can be made at any time. Partial pre-payments are not allowed under the Plan. Procedures for Determining a Reasonable Rate of Interest on a Loan Each loan must be adequately secured and bear a reasonable rate of interest, in accordance with 4(c) above. Such rate of interest must provide the Plan with a return commensurate with the prevailing interest rate charged by persons in the business of making loans under similar circumstances, as determined in accordance with Section A(10). Establishing the Repayment Period of Loans Used to Acquire a Principal Residence As defined in Section 4(g) of this LPD, any loan, by its terms, must require repayment within five (5) years. The Plan may allow a longer repayment period in the case of a loan used to acquire a dwelling unit that will be used as the principal residence of the Participant. The maximum length of the longer repayment period, established in Section A(2), must be commensurate with the repayment periods allowed by persons in the business of making residence loans under similar circumstances. Collateral Which May Secure a Loan 5

6 A loan will be secured by the Participant s vested balance in the Plan at the time of the loan, but no more than 50% of the Participant s vested balance in the Plan may be used to secure the loan. Events Constituting a Default on a Loan and Steps to Preserve Plan Assets in Such Event A loan will be in default and treated as a Deemed Distribution if: The Participant or Beneficiary fails to make a payment by the last day of the calendar quarter following the calendar quarter in which the loan payment is due. Except as provided in the following paragraph, the Participant s leave of absence extends beyond twelve (12) months and the Participant fails to make the loan payment by the earlier of (i) the due date following the suspension period or (ii) the due date of the last installment. If a Participant s leave of absence is on account of qualified military leave, and such leave of absence extends beyond 12 months, this event will not constitute a default provided Repayments are resumed after the Participant returns to work within the grace period provided by the Plan. The Participant revokes his payroll deduction election, or it becomes invalid, even though he or she remains in active employment. A lien is made against the loan collateral. A defaulted loan remains an outstanding debt payable to the Plan and must still be fully repaid, unless a distributable event occurs such as termination of employment, retirement, etc., whereby the loan can be distributed. Once a loan is deemed distributed, the interest that accrues thereafter on that loan is not included in income. Repayments received for a defaulted loan are treated as after-tax contributions, but are not treated as after-tax contributions for purposes of Code section 401(m) or 415(c)(2)(b). 6

7 Glossary of Terms Affiliate Beneficiary Deemed Distribution Employee Participant Participating Employer Party in Interest Plan Principal Participating Employer Repayment Trustee(s) Any organization which is a member of a controlled group of corporation (under Code section 414(b)), a group of trades of businesses under common control (under Code section 414(c)), or an affiliated service group (as defined in Code section 414(m)) of which a Participating Employer is a member, or any entity required to be aggregated with the Participating Employer pursuant to Code section 414(n) or 414(o) and regulations thereunder. An individual designated to receive any amount payable under the Plan by reason of the Participant s death. A Deemed Distribution occurs when payment is not received by the last day of the calendar quarter following the calendar quarter in which the loan payment is due unless qualified military leave applies or other authorized leave of absence. Any person in the employ of the Participating Employer Any Employee who is in eligible employment with the Participating Employer or an Affiliate of the Participating Employer which has adopted the Plan and Trust Agreement and who has completed the eligibility requirements of the Plan. Participant shall also include any terminated or retired former Employee who is receiving or who is entitled to receive benefits under the Plan. Any legal entity which adopts this Multiple Employer Plan by execution of an Adoption and Acceptance Agreement. Any individual or entity described in Section 3(14) of ERISA, including, among others: (a) the Participating Employer, (b) any Employee, officer, director or 10% or more shareholder of the Participating Employer, (c) a service provider to the Plan or (d) a fiduciary, counsel or employee of the plan. Generally, an Employee will cease to be a Party in Interest at the point that his service as an Employee is terminated, unless the former Employee satisfies the Party in Interest definition via some other category, (e.g. the former Employee remains a 10% or more shareholder of the Participating Employer whose employees are covered by such plan; he remains a fiduciary of the Plan, etc.) The Plan named in Section A and page 11 of this LPD. The Principal Participating Employer named on page 11 of this LPD. Loan payments are due each pay period via payroll deduction in the case of a Participant or Beneficiary who is also an Employee of the Participating Employer. In the case of a Participant who is no longer employed or Beneficiary who is not an Employee, repayment may be made through standard Plan contributions remittance method or any method mutually agreeable between the Trustee(s) and Transamerica. The Trustee(s) named under the Plan. 7

8 Section A Plan Name: American Management Technologies, Inc. Profit Sharing 401(k) Plan Contract Number: Effective Date: May 1, 2005 (1) In accordance with Section 4(b) of this LPD, the minimum loan amount will be $1,000 unless otherwise specified here. If the minimum loan amount will not be $1,000, this Plan s minimum loan amount will be: (If the minimum loan amount is less than $1,000, the Plan may be considered individually designed by the IRS. Under no circumstances will the minimum loan amount exceed $1,000.) $ (2) In accordance with Section 4(g) of this LPD, if the loan is to be used to acquire a dwelling unit that will be used as the principal residence of the Participant, the maximum period for repayment will be 30 years, unless otherwise specified here. (3) By completing this Section A(3), the Trustee(s) overrides the single loan provision of this LPD and designates that a Participant may have a maximum of five (5) loans at any given time, unless fewer loans is otherwise specified here. 2 (4) The Plan will allow loans across all allowable contribution types in accordance with Section 4(e), except as otherwise excluded here: Elective/Rollover Contributions Matching Contributions Non-Matching Contributions (5) Loans to Participants who have terminated employment shall be allowed: Yes No (6) Loans to Beneficiaries who are not Employees of the Participating Employer shall be allowed: Yes No (default) (7) In accordance with Section 2 of this LPD, this Plan shall accept rollovers of Participant loans from another qualified retirement plan only under the circumstances defined in Section 2, unless otherwise specified here: Yes No (default) (8) This Plan shall permit refinancing of outstanding loans under the following circumstances: Refinancing is treated as a continuation of a prior loan, plus a new loan to the extent of any increase in the loan balance. A prior loan with an original term of less than five (5) years may be extended to a term of five (5) years from the date of the prior loan. 8 Yes No

9 (9) There will be no restrictions for the use of loan funds, unless otherwise specified here (example: hardship reasons, college or educational expenses, etc. See Section 4(a): (10) The loan interest rate is as defined in Section 4(c), unless otherwise specified here, in which case the Trustee(s) will notify Transamerica of any changes in the interest rate by sending an to: (11) Loan Repayments while a Participant is on leave of absence during a period of qualified military leave, as provided under Code section 414(u) of USERRA: (12) For a leave of absence not due to military service, loan repayments while a Participant is on authorized leave, either without any pay from the Employer or at a rate of pay from the Employer (after income and employment tax withholding) that is insufficient to cover the loan Repayments: [NOTE: Loan Repayments will continue if the authorized leave of absence is with pay.] Interest Rate shall be the equal to the Prime Rate, not Prime plus 1% will be suspended (default) will not be suspended will be suspended for 12 months (default) will be suspended for months (cannot exceed 12 months) will not be suspended (13) A Participant who is no longer employed, and whose Vested Interest has not been distributed, is permitted to continue making scheduled loan Repayments: Yes No (default) (14) If Section A(13) above is Yes, the Trustee(s) will obtain loan Repayments from Participants who are no longer employed or from Beneficiaries through any of the methods indicated here. The Trustee(s) will transmit loan Repayments to Transamerica through the standard Plan contributions remittance method. Personal Check Cashier s Check Money Order Automatic Electronic Transfer Mutually Agreeable Method 9

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