Alcatel-Lucent Savings Plan Summary Plan Description January 2012

Transcription

1 Alcatel-Lucent Savings Plan Summary Plan Description January 2012

2 Disclaimer Disclaimer This is a summary of the benefits offered to active, non-represented, employees under the Alcatel-Lucent Savings Plan (the ALSP or the Plan ). It is provided for informational purposes and is intended to comply with Department of Labor requirements for summary plan descriptions (SPDs). More detailed information is provided in the official Plan document. This summary is based on Plan provisions in effect as of and replaces all previous SPDs for the Plan. The formal Plan document, as amended from time to time, will govern if there is a conflict between the description of the Plan contained in this SPD and the Plan document. In all instances, the Plan document will control and govern the operation of the ALSP. In addition, if there is any conflict between the information in the SPD or the Plan document and the applicable law, the law will govern. ALSP MAY BE AMENDED OR TERMINATED The Company expects to continue the Plan but reserves the right to amend or terminate the Plan, in whole or in part, at any time by resolution of the Board of Directors or its properly authorized designee. Questions regarding your benefits should be addressed to the Savings Plan Administrator. Because of the many detailed provisions of the Plan, no one other than the Savings Plan Administrator and its delegated representatives is authorized to advise you as to your benefits. For this reason, neither Alcatel-Lucent nor the Plan can be bound by statements made by unauthorized personnel or entities. In the event of a conflict between any verbal information provided to you by an authorized resource and information in the official Plan document, the Plan document will govern.

3 Table of Contents Table of Contents DISCLAIMER... INSIDE FRONT COVER ALCATEL-LUCENT SAVINGS PLAN (ALSP) HIGHLIGHTS... 1 ENROLLING IN THE ALCATEL-LUCENT SAVINGS PLAN... 3 WHO IS ELIGIBLE...3 YOUR ALSP ACCOUNT...4 UPDATES AND STATEMENTS...4 TO CHANGE YOUR PIN OR REQUEST A NEW PIN...5 BENEFICIARY DESIGNATION...5 Through the Alcatel-Lucent Savings Plan Service Center...6 CONTRIBUTING TO THE ALSP... 7 SAVE CONVENIENTLY THROUGH PAYROLL DEDUCTIONS...7 YOUR CONTRIBUTIONS...7 Catch-up Contributions... 7 Pre-tax Contributions... 8 After-tax Contributions... 9 Comparing Pre-tax and After-tax Contributions... 9 Monitor Your Elections Changing Contribution Elections When Contributions Stop COMPANY MATCHING CONTRIBUTIONS...11 Matched vs. Unmatched Contributions IRS CONTRIBUTION LIMITS...12 ROLL-IN CONTRIBUTIONS...13 INVESTING YOUR ALSP ACCOUNT INVESTMENT ADVICE...15 IMPORTANT NOTE ABOUT INVESTMENT DECISIONS...15 YOUR INVESTMENT CHOICES...16 DEFAULT INVESTMENT OPTIONS...16 SELF-DIRECTED BROKERAGE OPTION...16 INSTITUTIONAL FUNDS...16 ACCOUNTING FOR YOUR INVESTMENTS...16 VALUATION OF YOUR ALSP ACCOUNT...17 CHANGING HOW YOUR MONEY IS INVESTED...17

4 Table of Contents Investment Change for Future Contributions Investment Fund Transfer (Exchange) EXCESSIVE TRADING...19 REDEMPTION FEES...20 THE TRUSTEE MAY SUSPEND TRANSACTIONS...20 VESTING AND FORFEITURES RECEIVING YOUR ALSP MONEY LOANS...22 What You Can Borrow Types of Loans Applying for a Loan Receiving a Loan Through NetBenefits...23 Receiving a Loan through the Service Center...23 Interest on Your Loan Repaying a Loan Repaying Your Loan Early...25 Repaying by Coupon/EFT (Electronic Fund Transfer)...26 One-time Electronic Loan Repayment Option...27 Renegotiating Your Loan Defaulting on Your Loan WITHDRAWALS DURING EMPLOYMENT...28 Age 59½ In-Service Withdrawals Non-hardship, Non-suspension In-Service Withdrawals Hardship Withdrawals Requesting an In-Service Withdrawal Non-hardship and Age 59½ In-Service Withdrawal Requests...30 Hardship Withdrawal Request...31 Taxes on Your In-Service Withdrawal DISTRIBUTION OF YOUR ACCOUNT...32 How You May Receive Your Distribution Requesting a Distribution Deferring a Distribution When Payments Must Begin MRD RULES...33 TAX INFORMATION MANDATORY WITHHOLDING...35 ADDITIONAL 10% TAX IF YOU ARE UNDER AGE 59½...36 SPECIAL TAX TREATMENT FOR LUMP SUM DISTRIBUTIONS...36 ROLLOVER DISTRIBUTIONS FROM THE ALSP...36 Amount Eligible for Rollover Direct Rollover Rollover of Funds Paid to You ii

5 Table of Contents EMPLOYMENT STATUS AND OTHER CHANGES AND THEIR EFFECT ON ALSP PARTICIPATION IF YOU CHANGE YOUR EMPLOYMENT STATUS...38 IF YOU TRANSFER TO THE ALSP FROM THE LTSSP...38 IF YOUR EMPLOYMENT TERMINATES...38 IF YOU TRANSFER...38 IF YOU BECOME DISABLED...39 IF YOU TAKE A LEAVE OF ABSENCE...39 Resuming Contributions upon Return to Active Employment Upon Return from a Military Leave of Absence IF YOU DIE...41 TERMS YOU SHOULD KNOW IMPORTANT CONTACTS ALCATEL-LUCENT SAVINGS PLAN SERVICE CENTER...48 Online By Phone By Mail Confirmations and Statements Confirmation Number...50 OTHER RESOURCES...51 OTHER IMPORTANT INFORMATION CLAIM AND APPEAL PROCEDURES...52 Claim Procedures Appeal Procedures BENEFITS CANNOT BE ASSIGNED...53 Top Heavy Rules NOT A CONTRACT OF EMPLOYMENT...54 BENEFITS NOT GUARANTEED BY PBGC...54 ALSP Expenses LOSS OR DENIAL OF BENEFITS...54 ALSP FUNDING AND PAYMENT OF BENEFITS...54 ALSP DOCUMENT GOVERNS...54 ALSP MAY BE AMENDED OR TERMINATED...55 ALSP SPONSOR AND ADMINISTRATOR...55 ADMINISTRATIVE INFORMATION ERISA RIGHTS APPENDIX A: PARTICIPATING COMPANIES iii

6 Highlights Alcatel-Lucent Savings Plan (ALSP) Highlights The following is a summary of the key features of the ALSP. Certain words and phrases have a specific meaning under the ALSP. These terms are capitalized whenever they appear to let you know that they are defined in the Section titled Terms Your Should Know. ALSP Feature Eligibility for Participation Your Contributions Company Matching Contributions Catch-up Contributions Vesting Investment Options Summary You are eligible to participate in the ALSP if you are an Eligible Employee. Participation is not automatic. If you are eligible to participate in the ALSP, you must enroll in the ALSP in order to make contributions. Each pay period, you may contribute between 1% and 25% of your Eligible Compensation, with either pre-tax and/or after-tax dollars, subject to limits under the Code. You may change your contribution percentage daily in accordance with the procedures prescribed by the Savings Plan Administrator. If you are Participant, your Company Matching Contribution is $1 for every $1 you contribute, including Catch-up Contributions, up to the first 6% of Eligible Compensation. If you are currently age 50 or older or will turn 50 during the calendar year, you may elect to make additional pre-tax contributions, called Catch-up Contributions, in increments of 1% of your base pay (up to 75%) to a maximum of as allowed by law, which for 2012 is $5,500. Your Catch-up Contributions begin when you reach the regular pretax limit, which is $17,000 for If you are employed by a Participating Company on or after January 1, 2010, you are 100% vested in all ALSP contributions including Company Matching Contributions. You will be able to invest your ALSP account in any one or more of the ALSP s investment choices. You may change your investment elections for future contributions daily, and exchange existing investments between funds on any Business Day. Some restrictions on trading may apply. 1

7 Highlights ALSP Feature Tax Advantages Loans and In- Service Withdrawals Distributions Information About Your ALSP Account Investment Advice Summary Pre-tax Contributions and Company Matching Contributions to your account are not taxed as current income to you. Investment earnings generated by your account also accumulate on a tax-deferred basis. You are taxed when money is distributed from your account, other than distributions of After-tax Contributions. At any time, you may take up to two Loans from your ALSP account up to the lesser of 50% of your balance, or $50,000 less your highest outstanding Loan balance in the previous 12 months. Also, in certain cases, you may withdraw money from your ALSP account. However, you may have to pay taxes, including a penalty tax for early withdrawal. There are fewer restrictions and tax consequences on an In-Service Withdrawal of your After-tax Contributions. You are eligible to receive a full or partial distribution of your ALSP account when you retire, die, attain age 70½, or incur a Severance from Employment. You may request a distribution from the ALSP after the date on which you retire or incur a Severance from Employment. You can contact the Alcatel-Lucent Savings Plan Service Center at or log on to NetBenefits for information about your ALSP account, to manage your investments and initiate other Plan transactions. Alcatel-Lucent Savings Plan Service Center representatives are available any Business Day from 8:30 a.m. to 12:00 midnight, Eastern Time. NetBenefits and the Voice Response System (VRS) are available 24 hours a day, 7 days a week. Through Financial Engines Advisors, LLC, you can take advantage of the Personal Online Advisor service. The fees for this service are paid by Plan assets unless paid by the Company. The Personal Asset Manager program, also available through Financial Engines, provides professional ongoing management of your ALSP account. This program is available to you for an annual fee, which is charged to your account quarterly. For more information, follow the Financial Engines link from NetBenefits ( You must log on first. 2

8 Enrolling in the Alcatel-Lucent Savings Plan Enrolling in the Alcatel-Lucent Savings Plan Who Is Eligible In order to enroll in the Plan you must be an Eligible Employee. How to Enroll To make contributions to the ALSP, you must affirmatively enroll in the ALSP. If you are rehired, you must re-enroll. You may enroll by logging on to NetBenefits or calling the Alcatel-Lucent Savings Plan Service Center on If you use the VRS, follow the system prompts. If you speak with a representative, he or she will ask you for the appropriate information. Here s is the contact information for enrolling in the ALSP: U.S.-Based Employees International Assignees Log on to NetBenefits at anytime Call the Alcatel-Lucent Savings Plan Service Center at to access the VRS or speak with a service representative. You may access the VRS from any phone 24 hours a day, 7 days a week. To speak to a service representative, call any Business Day from 8:30 a.m. to 12:00 midnight, Eastern Time. Call collect on Business Days from 8:30 a.m. to 12:00 midnight, Eastern Time to speak with a service representative. Hearing impaired employees may call , , or to reach a telecommunications device for the deaf (TDD). You will receive a confirmation of your enrollment elections after you enroll. When you receive the confirmation, be sure to review it and report any discrepancies to the Alcatel-Lucent Savings Plan Service Center on immediately. 3

9 Enrolling in the Alcatel-Lucent Savings Plan Your ALSP Account When you enroll in the ALSP, you will need to do the following: Provide your Social Security number; Establish your PIN; Provide the percentage that you wish to contribute as Pre-tax Contributions, After-tax Contributions and/or Catch-up Contributions (if eligible); Make your investment elections; and Designate a Beneficiary. If you do not make an investment election, your contributions will be invested in one of the ALSP s default investment options. Your ALSP account is valued daily to reflect the current market value of the funds in which it is invested. Records for your account under the ALSP are kept separately for the following types of contributions: Your Matched Contributions, Your Unmatched Contributions, Your Catch-up Contributions, Company Matching Contributions, and Roll-In Contributions. Updates and Statements You can get up-to-date information about your ALSP account, investment information and more by: Accessing NetBenefits at or Calling the Alcatel-Lucent Savings Plan Service Center at Your ALSP statement is provided electronically and may be customized by you on NetBenefits. Your custom account statements can show the value of your ALSP account for any time period during the last two years. If you do not wish to receive your statements electronically, you must affirmatively elect to receive paper statements on NetBenefits. If you elect paper statements, quarterly statements are mailed approximately 20 days after the end of each calendar quarter to your address on file with the Alcatel-Lucent Savings Plan Service Center. 4

10 Enrolling in the Alcatel-Lucent Savings Plan To Change Your PIN or Request a New PIN Once you have established your PIN, you can change it at any time by calling the Alcatel-Lucent Savings Plan Service Center at or logging on to NetBenefits. Alcatel-Lucent Savings Plan Service Center representatives are available any Business Day from 8:30 a.m. to 12:00 midnight, Eastern Time. NetBenefits and the VRS are available 24 hours a day, 7 days a week. If you have forgotten your PIN, call the Alcatel-Lucent Savings Plan Service Center. You will be asked to confirm your identity by verifying certain information and will be transferred immediately to the VRS to reset your PIN. You may also log on to NetBenefits to reset your PIN. Beneficiary Designation When you enroll, you will have the opportunity to designate a Beneficiary to receive your ALSP account if you die before your entire account is paid to you. You may name one or more individuals as your Beneficiary, or you may designate a trust, an estate or a charity. However, if you are married, your Lawful Spouse is automatically your sole, primary Beneficiary, unless your Lawful Spouse provides written, notarized consent to your designating a different Beneficiary. You may change your Beneficiary at any time, through either NetBenefits or the Alcatel-Lucent Savings Plan Service Center. If you do not designate a Beneficiary, or if neither your Lawful Spouse nor your designated Beneficiary is living when you die, your ALSP account balance will be paid to your estate. Previously existing paper beneficiary designation forms are not viewable online. To view your beneficiary designations online, go to NetBenefits and complete the online beneficiary form. Important Note: Any Beneficiary designation forms you may have on file for other plans, such as predecessor plans from AT&T or companies that Lucent, Alcatel or Alcatel-Lucent has acquired, are not valid for the ALSP. To designate or change your Beneficiary(ies): Through NetBenefits Log on to NetBenefits. From your account page, select the Your Profile tab and choose the Beneficiaries link and follow the instructions for designating or updating your beneficiaries online. You may call the Alcatel-Lucent Savings Plan Service Center at to request the form if you need one. Note: If you want to designate your primary Beneficiary to someone other than your spouse, you cannot make this designation online. You must print the beneficiary form out, have your spouse sign the appropriate place on the form in the presence of a 5

11 Enrolling in the Alcatel-Lucent Savings Plan notary public, and then mail it to the address noted on the form. Keep a copy of the form. Through the Alcatel-Lucent Savings Plan Service Center Call the Service Center ( ) and request a Beneficiary Designation Form. One will be mailed to you. You may use the VRS to request the form. Complete the form and mail the signed original to the address on the form. Keep the duplicate copy for your records. If you submit the form online, your change is effective immediately. If you mail the form, your designation is effective on the date the Alcatel-Lucent Savings Plan Service Center receives your form. In all events, for your Beneficiary designation to be effective, it must be on file with the Alcatel-Lucent Savings Plan Service Center. If you get divorced, you may designate someone other than your former Lawful Spouse as your primary Beneficiary unless there is QDRO requiring that your former Lawful Spouse be designated as your Beneficiary as to all, or a portion of your account under the ALSP. The Company has established guidelines for processing a QDRO and they are available to you upon request at no charge. If there is a QDRO associated with your divorce, contact QDRO/QMCSO Administration (see Important Contacts ). 6

12 Contributing to the ALSP Contributing to the ALSP The ALSP provides you with a convenient way to save and invest through payroll deductions. If you decide to contribute to the ALSP, the Company will match a portion of your Matched Contributions to the ALSP. Save Conveniently Through Payroll Deductions The ALSP makes it easy to save regularly and invest for your future. Your elected contribution percentage is deducted from your paycheck and automatically deposited in your account under the ALSP. Your Contributions You may contribute between 1% and 25% of your Eligible Compensation using any combination of pre-tax dollars and after-tax dollars. You must contribute in whole percentages, in 1% increments (1%, 2%, 3% and so on). If you make both Pre-tax Contributions and After-tax Contributions, the minimum amount you can contribute is 1% of each contribution type, with a maximum combined total of 25%. Your contributions (Pre-tax and/or After-tax), as well as any Company Matching Contributions, if any, will be deposited in your ALSP account as soon as practicable after each payroll period. Catch-up Contributions If you are age 50 or older at any time during the Plan Year (January 1 December 31), you may make additional Pre-tax Contributions to your account beyond certain limits imposed by the IRS, such as the maximum pre-tax deferral limit (for 2012 $17,000) or the limit resulting from operation of the nondiscrimination test on Highly Compensated Employees Pre-Tax Contributions, or beyond any limit imposed by the ALSP, such as the 25% limit on Eligible Compensation that can be contributed each payroll period, or the limit on Eligible Compensation that can be taken into account for Pre-Tax Contributions (for 2012 $250,000). These additional Pre-tax Contributions are called Catch-up Contributions. If you wish to make a Catch-up Contribution, you must make an affirmative election to make such Catch-up Contribution. By making such election, you will be able to contribute between 1% and 75% of your eligible compensation for each payroll period. However, please note that the IRS limits the amount of Catch-up Contributions that you can make each year. For 2012, this annual limit is $5,500. The IRS will periodically adjust this limit for cost of living increases. 7

13 Contributing to the ALSP You may contribute less than the annual Catch-up Contribution limit by changing or canceling your election during the year. Unless you make an election not to make Catch-up Contributions, they will automatically restart in the following calendar year. Catch-up Contributions are eligible for Company Matching Contributions. To make Catch-up Contributions, call the Alcatel-Lucent Savings Plan Service Center at or log on to NetBenefits. Pre-tax Contributions You receive an immediate tax advantage by making Pre-tax Contributions to the ALSP. Each pre-tax dollar you contribute lowers your current taxable income, so you end up reducing the current federal income tax that you pay. In most cases, you will also pay lower state and local income taxes. (However, you will still have to pay Social Security taxes on your Pre-tax Contributions.) The following is an example of how contributing pre-tax dollars reduces your current taxable income. Assume your Eligible Compensation is $80,000 and you elect to save 6% on a pre-tax basis: Pre-tax Savings Example Eligible Compensation: $80,000 Pre-tax Contributions (6%): - 4,800 Taxable income: $75,200 Assuming an effective federal tax rate of 20%, you would save $960 ($4,800 x 20%) in federal taxes for the year. In addition, you might also save on state and local taxes, depending on where you live. You will see tax savings in every paycheck because your tax withholdings will be reduced. Remember, by making Pre-tax Contributions, you are not avoiding taxes, just postponing them. Taxes will be due when you take a distribution. However, because you may be in a lower tax bracket when you retire, you might end up paying taxes at a lower rate. If your Pre-tax Contributions reach the annual IRS limit during the year, any additional contributions will be treated as After-tax Contributions, unless you chose not to have your Pre-tax Contributions automatically treated as After-tax Contributions. If you want to change the amount that will be treated as After-Tax contributions you must actively make that change once the maximum Pre-tax Contribution limit is reached. Note, however, if you have elected to make Catch-up Contributions, your Catch-up Contribution election will be implemented before any After-tax Contribution election. If you have made Pre-tax contributions or Catch-up contributions during the Plan Year to another employer's tax-qualified plan, you will need to keep track of those 8

14 Contributing to the ALSP contributions to make sure that those contributions, together with your contributions to the ALSP do not exceed your Pre-tax Contribution limit and/or Catch-up Contribution limit for the year. After-tax Contributions If you make After-tax Contributions to the ALSP, you pay income taxes on that money before your contributions are withheld from your Eligible Compensation. Although Aftertax Contributions do not offer the same immediate tax advantages as Pre-tax Contributions, the investment earnings on After-tax Contributions grow on a taxdeferred basis until they are distributed. So, you pay no additional taxes on After-tax Contributions when they are paid out of the ALSP, but you do pay taxes on the investment earnings. Comparing Pre-tax and After-tax Contributions Before you choose to contribute with pre-tax or after-tax dollars, or with some of both, it may be helpful to compare these types of contributions. The following chart can help you understand the differences, as well as the advantages of each type of contribution. Key Features Your contributions lower your current taxable income for federal income tax Your contributions may lower your current taxable income for state and local tax Your contributions may lower your current tax bracket Your contributions are subject to income tax before being deducted from your paycheck Your contributions are subject to FICA taxes (Social Security and Medicare) before being deducted from your paycheck Your investment earnings are tax-deferred as long as they remain in the ALSP Your investment earnings are taxable when paid from the ALSP Your contributions are subject to income tax when paid from the ALSP Your contributions are limited by the IRS and the ALSP Pre-tax Dollars YES YES YES NO YES YES YES YES YES After-tax Dollars NO NO NO YES YES YES YES NO YES 9

15 Contributing to the ALSP Monitor Your Elections After you make your initial elections, you may find it helpful to review them periodically. You should re-evaluate whether the amounts you are saving on a pre-tax and/or aftertax basis are appropriate for your current level of income and long-term savings objectives, or if a change makes sense. You can use the investment advice service provided to the Plan by Financial Engines, LLC to help you determine the level of savings appropriate for your needs. You can check your elections by looking at your pay statement, which identifies your contributions by category. This information also is available from the Alcatel-Lucent Savings Plan Service Center and in your Transaction History or Online Statement on NetBenefits. Changing Contribution Elections You may change your contribution elections daily. You may: Increase or decrease the percentage of your Pre-tax Contributions and/or After-tax Contributions, Increase or decrease the percentage of your Catch-up Contributions (if you are eligible), Stop your contributions, Resume your contributions, and Change from Pre-tax Contributions to After-tax Contributions and vice versa. To change your contribution elections, go online to NetBenefits, or call the Alcatel- Lucent Savings Plan Service Center at If you use NetBenefits or the VRS, follow the system prompts. If you speak with a representative, he or she will ask you for the appropriate information. You will receive a confirmation of your transaction after you complete it. When you receive the confirmation, be sure to review it and report any discrepancies immediately. Generally, the change will be effective in the first paycheck practicable following your transaction. It is a good idea to check your pay stub to make sure your requested change is made. When Contributions Stop Your contributions stop if you elect to discontinue them. Contributions also stop if any of the following situations occur: Your contributions reach the IRS dollar limit on Pre-tax Contributions and you did not elect spillover into After-tax contributions; 10

16 Contributing to the ALSP You elected Catch-up Contributions and you reach the IRS dollar limit on Catch-up Contributions; Your employment status changes from management to occupational, such that you are no longer eligible to participate in the ALSP; You take an unpaid leave of absence; Your Eligible Compensation does not cover your elected contributions; You are receiving Workers Compensation payments; You are suspended from contributing to the ALSP because you have taken a type of In-Service Withdrawal that requires contributions to be suspended (your contributions will restart automatically after the six month suspension); You transfer to a non-participating company; You are laid off; or You terminate employment for any reason. Company Matching Contributions When you become a Participant in the ALSP and elect to make contributions, the Company will match a part of the contributions that you make to the ALSP (Matched Contributions). If your contributions stop for any reason, Matching Contributions also stop. Company Matching Contributions apply to the first 6% of your Eligible Compensation that you contribute to the ALSP. The Company will contribute $1 for every $1 you contribute to the ALSP up to the first 6% of Eligible Compensation. Contributions in excess of 6% are not matched. For example, if your monthly Eligible Compensation is $4,000 and you contribute 6% (or $240 a month) to the ALSP, the Company will make a Matching Contribution equal to $240 a month for a total monthly contribution of $480. In another example, if your monthly Eligible Compensation is $4,000 and you contribute 5% (or $200 a month) to the ALSP, the Company will make a Matching Contribution equal to $200 a month for a total monthly contribution of $400. Matched vs. Unmatched Contributions If you contribute more than 6% percentage of your Eligible Compensation to the ALSP, the Company does not match those amounts. For example, if you contribute 10% of your Eligible Compensation to the ALSP, the Matching Contributions would apply only to the first 6% of Eligible Compensation, provided you are otherwise eligible to receive 11

17 Contributing to the ALSP Company Matching Contributions. In this example, the first 6% of your Eligible Compensation that you contribute would be a Matched Contribution and the additional 4% would be an Unmatched Contribution. For example, if your monthly Eligible Compensation is $4,000 and you contribute 10% (or $400 a month) to the ALSP, the Company will make a Matching Contribution equal to $240 (6% of your Eligible Compensation of $4,000) a month for a total monthly contribution of $640. Therefore, of your $400 contribution, $240 would be a Matched Contribution and $160 ($400-$240) would be an Unmatched Contribution. IRS Contribution Limits The IRS has established certain rules that govern the amount that can be contributed to plans such as the ALSP. It is important for you to understand these rules because they may limit the amount that you or the Company can contribute to the ALSP. The IRS places an annual dollar limit on the amount of Pre-tax Contributions you can make to the ALSP during any Plan Year. In 2012, you can contribute up to $17,000 as Pre-tax Contributions to the ALSP. The IRS also places an annual dollar limit on the amount of Catch-up Contributions you can make to the ALSP during any Plan Year. In 2012, you can contribute up to $5,500 as Catch-up Contributions to the ALSP. These limits will be periodically adjusted by the IRS for cost of living increases. The IRS also limits the amount of compensation that can be used to determine contributions to the ALSP. The limit on Eligible Compensation for 2012 is $250,000. Annual compensation is tracked on a calendar-year basis, beginning January 1 of each year, rather than on the date a Participant's contributions to the ALSP begin. Consequently, in 2012, at the point in the calendar year that your Eligible Compensation has reached $250,000, your contributions and Company Matching Contributions will stop (except for Catch-up Contributions), even if the Pre-tax Contribution limit ($17,000 in 2012) has not been reached. This limit will be periodically adjusted by the IRS for cost of living increases. In addition to the limit on Pre-tax Contributions and Eligible Compensation, the IRS limits the amount of all contributions that can be made to the ALSP on your behalf (Pretax Contributions, After-tax Contributions and Company Matching Contributions). For 2012, the limit is the lesser of 100% of compensation or $50,000. This limit may be periodically adjusted by the IRS for cost of living increases. Catch-up Contributions are not taken into account for this limit. If you exceed these limits solely within this Plan in any Plan Year, you will be notified and the excess contributions and earnings will be returned to you as soon as practicable after the Plan Year ends. The IRS further requires that employees at all levels of the Company have the same opportunity to take advantage of saving through the ALSP. To ensure this happens, the ALSP must pass certain nondiscrimination tests. If the ALSP fails these tests and you are 12

18 Contributing to the ALSP a Highly Compensated Employee, the amount you can contribute to the ALSP may be limited or excess contributions may be returned to you. You will be notified if these limits apply to you. Roll-In Contributions If you receive a distribution from an Eligible Employer Plan, you may be able to roll that distribution into the ALSP and continue deferring income taxes on that money. You may also roll in most distributions from Traditional IRAs, and amounts you receive from a qualified plan as the surviving spouse of a participant in that plan. You may make a Direct Roll-In or a 60-day Roll-In. There are differences between the two types of Roll-Ins. With a Direct Roll-In: You receive payment from the Eligible Employer Plan or Traditional IRA in the form of a check made payable directly to the ALSP, No taxes are withheld from the amount you roll in, and You continue to defer taxes on your entire Roll-In Contribution until you receive a distribution from the ALSP. With a 60-Day Roll-In: You receive payment from the Eligible Employer Plan or Traditional IRA in the form of a check made payable to you, You must roll in the distribution within 60 days after you receive payment, and There may be tax consequences if you do not roll in the full amount of your Eligible Rollover Distribution (including any amount that was withheld for taxes when payment was made). You can make a Roll-In Contribution if you are: A Participant in the ALSP regardless of whether you are making contributions to the ALSP, A terminated or retired Participant with an account balance who is no longer employed by the Company. If you need more detailed information on Roll-In Contributions, call the Alcatel-Lucent Savings Plan Service Center at

19 Contributing to the ALSP To make a Roll-In Contribution of your distribution from an Eligible Employer Plan or a Traditional IRA, complete the Application to Establish a Roll-In Account Form that you received in your enrollment package, or call the Alcatel-Lucent Savings Plan Service Center at to request the form. When you complete the form, be sure to make your investment elections. If you do not have a balance in the ALSP, and do not indicate any investment elections, and a service representative is not able to reach you within two Business Days of the date your form is received, your Roll-In Contribution cannot be accepted. If you do have an account balance in the ALSP, and do not make a separate investment election, your Roll-In Contributions will be invested in accordance with your current account balance investment mix. For a Direct Roll-In, send the Alcatel-Lucent Savings Plan Service Center: Your completed Application to Establish a Roll-In Account Form; A statement from your previous plan or IRA institution that includes The name of the plan or IRA institution, The total amount of the distribution, and The taxable amount of the distribution; A check from the other plan or IRA made payable to Fidelity Investments Institutional Operations Company, FBO (for benefit of): (your name). To make a Roll-In Contribution of your distribution from the Alcatel-Lucent Retirement Income Plan, follow the directions provided in your Alcatel-Lucent pension distribution package. For a 60-day Roll-In, call the Alcatel-Lucent Savings Plan Service Center at to learn the correct procedures for making the Roll-In Contribution. A statement confirming receipt of your application and Roll-In check will be mailed to you within five Business Days after the Alcatel-Lucent Savings Plan Service Center receives your paperwork. If you do not receive the statement, or if there are any discrepancies, contact the Alcatel-Lucent Savings Plan Service Center immediately. You also may call the Alcatel-Lucent Savings Plan Service Center at to obtain more detailed information about Roll-In Contributions. Please note that Alcatel-Lucent does not match Roll-In Contributions. 14

20 Investing Your ALSP Account Investing Your ALSP Account The ALSP provides a variety of fund choices for investing your Plan account. The funds differ in their investment objectives and opportunities for risk and return. You choose how you want your ALSP account invested. Your investment elections apply to both your contributions and the Company Matching Contributions. You may invest in one or more of the funds to meet your personal financial goals. The value of your investments will fluctuate in response to changing market conditions. You must consider the risks and potential rewards of each of the investment options. You should always carefully weigh your investment elections and decide on the best investment strategy for your situation. You might also wish to consult a professional financial or investment advisor. Investment Advice The Company cannot give investment advice; however, the Company has contracted with Financial Engines Advisors, LLC to provide personalized, objective investment advice regarding your ALSP account. Financial Engines Personal Online Advisor service will be paid from Plan assets unless paid by the Company. The Personal Asset Manager program, also available through Financial Engines, provides professional ongoing management of your ALSP account. The Personal Asset Manager program is available for an annual fee, which is deducted from your account on a quarterly basis. For more information, including the applicable fee schedule, follow the link for Financial Engines from NetBenefits. You must log on first. You may also want to take advantage of the investment tools available at NetBenefits. These do not provide investment advice but help you make informed decisions about your account. Important Note About Investment Decisions In general, all contributions allocated to your account will be invested in one or more of those investment funds in accordance with your investment instructions. By providing you with a broad range of investment alternatives, the ALSP enables you to make the choices that are right for you and your family. Because you control the investment of your account, the ALSP is intended to be covered by Section 404(c) of ERISA and related Department of Labor regulations. Because the ALSP is a Section 404(c) plan, the ALSP s fiduciaries are relieved of liability for any losses that are the direct and necessary result of investment instructions given by you. 15

21 Investing Your ALSP Account Your Investment Choices The ALSP offers you a choice of investment funds with varying levels of risk and potential for return. You may invest in one or more of the available funds in increments of 1%. You choose the investment mix that is right for you. Detailed information about the investment options is available on NetBenefits, or by calling the Alcatel-Lucent Savings Plan Service Center at Default Investment Options If you do not make an investment election, your contributions will be invested in one of the ALSP s Qualified Default Investment Alternatives ( QDIAs ). The ALSP s QDIAs constitute the ALSP s qualified default investment alternatives within the meaning of Section 404(c)(5) of ERISA and regulations thereunder. Each year, the Plan notifies Participants of the applicable QDIA. More information about the ALSP s QDIAs is available on NetBenefits, or by calling the Alcatel-Lucent Savings Plan Service Center at Self-Directed Brokerage Option In addition to being able to select from the Plan s core investment choices, you also have the freedom to design you own unique investment portfolio. Fidelity BrokerageLink is a discount brokerage account, available to you within the ALSP. Fidelity BrokerageLink may be appropriate for you if you are willing to be exposed to additional risk and if you are prepared to take on the additional responsibility of more closely managing this portion of your portfolio. Investment opportunities available through BrokerageLink are neither reviewed nor monitored by Alcatel-Lucent or the ALSP, nor do they fall within the advice offered by Financial Engines. Institutional Funds Other than the BrokerageLink option, the funds offered in the ALSP are institutionally managed funds. Institutional funds are commingled funds available only to large institutions. These funds differ from retail mutual funds in that they are not SECregistered investment vehicles. As a result, they are exempt from some of the reporting and accounting functions required of mutual funds that have both taxable and taxexempt clients, and can therefore offer lower expense ratios than retail mutual funds. An expense ratio is the total expenses of a fund expressed in basis points relative to the size of the assets of the fund. Expense ratios include all fees, including fees for investment management, recordkeeping, legal and other administrative expenses, communications, etc. You can determine the expense ratio for an investment option by reviewing the Fund Fact Sheet on NetBenefits. Accounting for Your Investments Your account statement reflects your ownership in your investment funds in units. Unitization allows the underlying investments to be purchased, exchanged and 16

22 Investing Your ALSP Account redeemed on a daily basis with flexibility. The unit price of a fund is equal to the total market value of the fund divided by the number of units outstanding. Valuation of Your ALSP Account All funds in the ALSP are valued daily. This allows you to monitor and maintain your investments on a daily basis, if you wish. The performance of each of the Plan's investment funds is available on NetBenefits. The current market value of your ALSP account is equal to the sum of all the contributions in your ALSP account plus or minus any investment gains or losses. Stated another way, the current market value is equal to the number of units in your ALSP account times the price of the units. Changing How Your Money Is Invested At times, you may want to change how your contributions are invested to meet your changing financial needs. The ALSP allows you to change the investment mix for both your future contributions and existing account balance. Investment Change for Future Contributions You may change the way future contributions are invested on a daily basis. You may choose to invest in one or more of the available funds. All allocations to investment options must be in 1% increments. When you make a change to how your future contributions are invested, it applies to both your contributions and Company Matching Contributions. The change does not affect your existing ALSP account balance. To change the investment of your future contributions: Access NetBenefits, or Call the Alcatel-Lucent Savings Plan Service Center at You will receive a confirmation of your transaction after you complete it. When you receive the confirmation, be sure to review it and report any discrepancies to the Alcatel-Lucent Savings Plan Service Center immediately. Investment Fund Transfer (Exchange) You may transfer (exchange) all or part of your existing account balance between one or more of the available funds on any Business Day. Exchanges may be in 1% increments or for a specific dollar amount and must meet the following rules: You can not transfer money directly from the Stable Value Fund to the Money Market Fund. Instead, if you want to move money from the Stable Value Fund to the Money Market Fund, you must first transfer the money to a non- 17

23 Investing Your ALSP Account competing fund and leave it there for at least 60 days before transferring it into the Money Market Fund. Redemption fees are imposed on certain exchanges in or out of certain funds. See Redemption Fees Section. When you make fund exchanges for your existing investment balances, it does not affect the investment direction of your future contributions to your ALSP account. To exchange existing balances between funds: Access NetBenefits, or Call the Alcatel-Lucent Savings Plan Service Center at The time your exchange is confirmed with the Alcatel-Lucent Savings Plan Service Center or NetBenefits determines when the exchange is effective: If your exchange is confirmed before 4:00 p.m. Eastern Time on a Business Day your exchange is effective after the close of business on that day. If you want to cancel a pending exchange, you must call the Alcatel-Lucent Savings Plan Service Center at or log on to NetBenefits and confirm your cancellation before 4:00 p.m. Eastern Time that same day. If you request more than one exchange before 4:00 p.m. Eastern Time on a Business Day the exchanges will be processed in the following order, regardless of the order in which they were placed and confirmed: 1. Cash amount exchanges, e.g., $500 of fund balance exchanged to another fund; 2. Percent total exchanges, e.g., 25% of remaining fund total exchanged to another fund(s); 3. Percent available exchanges, e.g., 100% of remaining available fund assets exchanged to another fund(s). 18

24 Investing Your ALSP Account If your exchange is confirmed at or after 4:00 p.m. Eastern Time on a Business Day or any time on a holiday or weekend, your exchange will be effective after the close of business on the next Business Day. If you want to cancel a pending exchange, you must call the Alcatel-Lucent Savings Plan Service Center at or log on to NetBenefits and confirm your cancellation before 4:00 p.m. Eastern Time on the next Business Day. Exchanges confirmed after 4:00 p.m. Eastern Time will be processed in the same order indicated above on the following Business Day. You will receive confirmation of your transaction after you complete it. When you receive the confirmation, be sure to review it and report any discrepancies to the Alcatel-Lucent Savings Plan Service Center immediately at Excessive Trading You may have read or heard of concerns regarding excessive trading or market timing in mutual funds, including mutual funds offered as investment options in workplace retirement savings programs. Although the overwhelming majority of ALSP Participants do not trade frequently, the Company as the Plan Sponsor is concerned about excessive trading in this Plan. The Plan is intended to be a vehicle for retirement savings, and therefore is long-term in nature. After review of Fidelity s policies regarding their mutual funds, the Company made the decision to adopt Fidelity s policy in this regard for some of the funds in the Plan. Currently, Fidelity s excessive trading policy includes a monitoring process that is based upon the concept of a roundtrip within a fund. A roundtrip transaction occurs when a Participant exchanges into and then out of a fund option within 30 days. For the purpose of the policy, purchases and sales do not include systematic contributions or In- Service Withdrawals (i.e., regular contributions, Loan payments, hardship withdrawals) as permitted by the Plan, and applies only to Participant-initiated exchanges greater than $1,000. Participants are limited to two roundtrip transactions per fund within any rolling 90-day period, subject to an overall limit of four roundtrip transactions across all funds according to this policy over a rolling 12-month period. The first roundtrip in any fund results in a warning letter. Participants with two or more roundtrip transactions in a single fund within a rolling 90-day period will be blocked from making additional purchases of the fund for 85 days. Participants with four or more roundtrip transactions across all funds within a plan during any rolling 12-month period will be limited to one exchange day per calendar quarter for a one-year period. Participants can always sell any fund position. Once the 12-month exchange limitation expires, any additional roundtrip in any fund in the next 12-month period will result in another 12-month limitation of one exchange day per quarter. Please note that a suspension or restriction, as described above, would not affect your ability to make Loan repayments, transact In-Service Withdrawals, or continue to allocate employee/employer contributions to the Fund. In other words, your right to redeem is not affected by these policies. 19

25 Investing Your ALSP Account We know that you share our commitment to assuring fair and equitable treatment of all investors participating in the ALSP. To review a fund fact sheet for more information about an investment option, please visit NetBenefits. If you have any questions regarding the ALSP Excessive Trading Policy, go to NetBenefits, or call the Alcatel-Lucent Savings Plan Service Center at Redemption Fees If you make a fund transfer (exchange) that results in a redemption of shares in either the U.S. Small Cap Fund or the International Equity Fund, a short-term redemption fee will be assessed on redemptions of shares in these funds that were held for 30 days or less. Short-term redemption fees are paid to the fund to help protect long-term shareholders of the fund from the effects of short-term trading, and to discourage market timing activity. Currently, the redemption fee for both the U.S. Small Cap Fund and the International Equity Fund is 2% of the value of shares redeemed. The Trustee May Suspend Transactions The Trustee or the investment manager of each fund maintains a cash balance to provide monies for net Participant fund exchanges, Loans, In-Service Withdrawals and distributions. The amount of the cash balance for an investment option may be revised in response to the anticipated changes in cash needs of an investment option. If an investment option experiences insufficient liquidity due to unusual Participant activity, the Trustee may either: Temporarily stop taking fund exchange instructions relating to the investment option, or For a period of time, suspend: Fund exchanges, Loans, In-Service Withdrawals, and Distributions. 20

26 Vesting and Forfeitures Vesting and Forfeitures Vesting refers to your ownership of the funds in your ALSP account. You are always fully vested in your Pre-tax Contributions, Catch-up Contributions and After-tax Contributions. If you are an active employee of a Participating Company on or after January 1, 2010, you are always 100% Vested in your entire ALSP account balance. If you participated in the ALSP before January 1, 2010 and terminated employment from a participating company before that date, certain vesting rules might apply to amounts credited to your Company Matching Contribution Account before you terminated employment. Additionally certain prior plans that were merged into the ALSP (or a predecessor plan) might have imposed special vesting rules on amounts contributed to those plans. Contact the Alcatel-Lucent Savings Plan Service Center at if you think either of the following applies to you: You terminated employment with a Participating Company (or prior participating company) prior to January 1, 2010, or You were a participant in a prior plan that was subject to special vesting requirements. 21

27 Receiving Your ALSP Money Receiving Your ALSP Money You are entitled to receive your account under the ALSP upon incurring a Severance from Employment. If you die before receiving your entire account, your Beneficiary will receive it. While employed, you may be able to receive a portion of your account by taking a Loan or an In-Service Withdrawal. Loans Although the ALSP is designed to help you save money for retirement, you may access the money in your account through the Plan s Loan feature. You may take a Loan if you are an active, terminated or retired employee with a balance in the ALSP. However, you may have no more than one outstanding general Loan and one outstanding home Loan at any one time. A Loan is not considered a taxable distribution because you repay the borrowed amount, plus interest, to your account under the ALSP on an after-tax basis. However, if you default on your Loan, the outstanding balance is reported to the IRS as taxable income and is subject to taxes. Also, remember that you pay interest on a Loan rather than earning investment return on that money. The potential lost earnings can make a big difference in your account. Loans are made only in cash. You may elect to receive your Loan as a check or have it deposited directly into your checking account via Electronic Funds Transfer (EFT). What You Can Borrow The minimum amount of a Loan is $1,000. The maximum Loan amount is the lesser of: 50% of your ALSP account balance, or $50,000 minus your highest outstanding Loan balance during the previous 12 months. Call the Alcatel-Lucent Savings Plan Service Center at to find out the actual dollar amount you may borrow (see Important Contacts ). Types of Loans There are two types of Loans available under the ALSP general Loans and home Loans. There is a $50 Loan establishment fee for all Loans. You are permitted to take one general Loan and a home Loan at the same time. 22