Retirement Accounts Individual Retirement Custodial Account Agreement

Transcription

1 Retirement Accounts Individual Retirement Custodial Account Agreement Sponsored By: U.S. Global Investors, Inc., 7900 Callaghan Road San Antonio, TX US.FUNDS

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3 INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT AGREEMENT Sponsored By U.S. GLOBAL INVESTORS, INC Callaghan Road San Antonio, Texas You can revoke your participation in this Account without charge or fee of any kind if you notify us within seven business days of the date on which you established the IRA Account. Oral notification may be given by phone during business hours. If you prefer, you may notify us in writing by mail. If you notify us by mail, the revocation is deemed made on the date of mailing. For this purpose, a notice is deemed mailed on the date of the postmark (or if sent by certified or registered mail, the date of certification or registration) if it is deposited in the mail in the United States in an envelope, or other appropriate wrapper, first class postage prepaid and properly addressed.

4 THIS DOCUMENT IS COPYRIGHTED UNDER THE LAWS OF THE UNITED STATES. UNAUTHORIZED USE, DUPLICATION OR REPRODUCTION, INCLUDING THE USE OF ELECTRONIC MEANS, IS PROHIBITED BY LAW WITHOUT THE EXPRESS CONSENT OF THE AUTHOR. TABLE OF CONTENTS ARTICLE I 1 DEFINITIONS ACCOUNT APPLICABLE LIFE EXPECTANCY BENEFICIARY CATCH-UP CONTRIBUTION CODE COMBINED IRA ACCOUNT COMPENSATION CUSTODIAN DESIGNATED BENEFICIARY DISTRIBUTION CALENDAR YEAR EDUCATION SAVINGS ACCOUNT INDIVIDUAL INDIVIDUAL S ACCOUNT BALANCE INHERITED IRA IRA APPLICATION IRA OR TRADITIONAL IRA LIFE EXPECTANCY MAXIMUM ANNUAL CONTRIBUTION PARTICIPANT PER STIRPES PLAN/IRA RETIREMENT PLAN REQUIRED BEGINNING DATE ROLLOVER IRA ROLLOVER CONTRIBUTION SARSEP SEP-IRA SPONSOR SPOUSE/SURVIVING SPOUSE SPOUSAL IRA TAX YEAR/TAXABLE YEAR TRADITIONAL IRA OR NON-ROTH IRA ACCOUNT...5 ARTICLE II 5 CONTRIBUTIONS ESTABLISHMENT OF IRA ACCOUNT TRADITIONAL IRA DEDUCTIBILITY OF TRADITIONAL IRA CONTRIBUTIONS SPOUSAL IRA PROHIBITED CONTRIBUTIONS SEP SARSEP ROLLOVER OR TRANSFER FROM A RETIREMENT PLAN ROLLOVER FROM ANOTHER IRA ROLLOVER OF EXXON VALDEZ SETTLEMENT INCOME COMBINED IRA ACCOUNT TRANSFER FROM ANOTHER IRA EXCESS CONTRIBUTIONS CONVERSION TO A ROTH IRA VALUATION OF RECHARACTERIZED AND RECONVERTED ASSETS...8 ARTICLE III 9 INVESTMENT OF ACCOUNT MAINTENANCE OF AN INDIVIDUAL S IRA INVESTMENT OPTIONS BROKERAGE ACCOUNT DIRECTED INVESTMENTS DEFAULT PROVISION NONFORFEITABILITY TRANSFERS INCIDENT TO DIVORCE PROHIBITED TRANSACTIONS...10 Page

5 ARTICLE IV 10 DISTRIBUTIONS QUALIFYING FIRST-TIME HOMEBUYER DISTRIBUTION QUALIFYING HIGHER EDUCATION EXPENSES REQUIREMENTS OF INCOME TAX REGULATIONS INCORPORATED METHODS OF PAYMENT AMOUNT OF REQUIRED MINIMUM DISTRIBUTION FOR EACH DISTRIBUTION CALENDAR YEAR DEATH OF INDIVIDUAL BEFORE DISTRIBUTIONS BEGIN DEATH OF INDIVIDUAL ON OR AFTER DISTRIBUTIONS BEGIN WAIVER OF REQUIRED MINIMUM DISTRIBUTION IN PAYMENT WHEN A MARITAL TRUST IS THE BENEFICIARY ROLLOVER TO QUALIFIED PLAN QUALIFIED CHARITABLE DISTRIBUTIONS QUALIFIED RESERVIST DISTRIBUTIONS WITHDRAWAL OF ECONOMIC STIMULUS PAYMENTS QUALIFIED HURRICANE DISTRIBUTIONS QUALIFIED RECOVERY ASSISTANCE DISTRIBUTIONS TAX ON EARLY DISTRIBUTIONS INCOME TAX WITHHOLDING SEPARATE ACCOUNTS CLOSING THE ACCOUNT...15 ARTICLE V 15 ADMINISTRATIVE DUTIES DUTIES OF SPONSOR DUTIES OF INDIVIDUAL ESCROW ACCOUNT...16 ARTICLE VI 16 POWERS AND RESPONSIBILITIES IN GENERAL INVESTMENT DISCRETION WRITTEN INSTRUCTIONS INVESTMENT INSTRUCTIONS RECORDS PROXIES AND VOTING RIGHT TO REQUEST JUDICIAL ASSISTANCE RIGHT TO ADJUDICATE CLAIMS OF MULTIPLE BENEFICIARIES INDEMNIFICATION SUBSTITUTION OF NON-BANK CUSTODIAN ASSIGNMENT OF AGREEMENT...17 ARTICLE VII 18 FEES AND EXPENSES PAYMENT OF FEES AND EXPENSES DEDUCTION OF FEES AND EXPENSES INVESTMENT MANAGEMENT AND ADVISORY FEES...18 ARTICLE VIII 18 AMENDMENT AND TERMINATION RIGHT TO AMEND IRS QUALIFICATION RIGHT TO RESIGN THE INDIVIDUAL S RIGHT TO TERMINATE...18 ARTICLE IX 19 GOVERNING LAW 19 INDIVIDUAL RETIREMENT PLAN AND CUSTODIAL ACCOUNT 1 DISCLOSURE STATEMENT...1

6 INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT AGREEMENT This document is for use by Individuals who wish to establish an Individual Retirement Account (IRA) and contains the rules an Individual must follow to gain the tax benefits of an IRA. To establish an IRA Account, sign the IRA Application Form and return it to the Sponsor. Once the Account is established, the Sponsor will accept and invest contributions in accordance with the Individual s investment directions unless another person or entity has been granted investment management responsibility. Periodically, the Individual will receive a statement reflecting the investment performance of the assets in the IRA. Distributions from this Account will be made at the Individual s direction. The Account will be established and administered for the exclusive benefit of the Individual and his or her Beneficiaries. ARTICLE I DEFINITIONS 1.1 Account A Traditional IRA, Spousal IRA, Inherited IRA, Simplified Employee Pension ( SEP-IRA ), Salary Reduction Simplified Employee Pension ( SARSEP IRA ), and/or a Rollover IRA Account as described in Article II below. No Account established under this Agreement may accept SIMPLE IRA, Coverdell Education, or Roth IRA contributions (except as permitted by paragraph 2.5). This Account is established for the exclusive benefit of the Individual or his or her Beneficiaries. If this is an Inherited IRA within the meaning of Code 408(d)(3)(C) maintained for the benefit of a Designated Beneficiary of a deceased Individual, references in this document to the Individual are to the deceased Individual. 1.2 Applicable Life Expectancy The life expectancy (or joint life and last survivor expectancy of the Individual and the Individual s Designated Beneficiary) determined by use of the Income Tax Regulations. 1.3 Beneficiary The person or persons or trust designated to receive the balance held in the Account upon the Individual s death. If the Individual has failed to designate a Beneficiary or all Beneficiaries have predeceased the Individual, the Sponsor will distribute the Individual s entire Account balance to the Individual s survivors in the following order of preference: (a) (b) (c) Spouse, if any, children, if any, in equal shares Per Stirpes (as defined at paragraph 1.20), and the executor or personal representative of the Individual's estate. A trust, estate, charitable organization or other non-living entity may be designated as a Beneficiary or contingent Beneficiary. The Individual may change their Beneficiary at any time by executing and returning to the Sponsor a new beneficiary designation form. The designation will become valid when accepted by the Sponsor. If the Individual establishing this Plan is a resident of a community property state, the Individual will need the written consent of the Individual's Spouse to terminate the Spouse s interest in the Individual's IRA in order to designate a primary Beneficiary other than the Individual's Spouse. In the event that the order of the deaths of the Individual and any primary Beneficiary or, on Inherited Accounts of the Beneficiary and any primary Contingent Beneficiary, cannot be determined or are deemed to have occurred simultaneously under the law of the Individual s or the Beneficiary s domicile, as the case may be, the survivor shall be that person who is determined to survive in accordance with the law of that state at the time of the Individual s or Beneficiary s death, as the case may be. In the event that the death of the Individual or any Beneficiary is the result of a criminal act involving any other Beneficiary, the Sponsor may look to the state of domicile, including any slayer or similar statute, to determine the rights of the Beneficiaries to the assets in the Account. Contingent Beneficiary means the person or entities entitled to receive any undistributed amount credited to the Account at the time of the Beneficiary s death. A Beneficiary, whether designated by the Individual or by operation of this paragraph 1.3 may disclaim all or any part of the Beneficiary s interest in the Account by giving written notice of such disclaimer to the Custodian, the Account shall be distributed as if the disclaiming Beneficiary had predeceased the Individual in accordance wit the Income Tax Regulation under Code 401(a)(9). Notwithstanding any other provision to the contrary, the Beneficiary of an Individual after the Individual s death may name a successor Beneficiary including but not limited to a non-spouse Beneficiary to continue to receive required 1

7 minimum distributions over the original Beneficiary s remaining distribution schedule. The distribution period has been fixed at the point the Beneficiary begin taking the distributions and the successor Beneficiary s age and life expectancy are not relevant to the distribution schedule. 1.4 Catch-Up Contribution In the case of annual contributions to a Traditional IRA, SEP IRA or IRA Rollover Account, an amount not to exceed the Applicable Amount as defined in Code 219(b)(5)(B)(i), or in the case of salary reduction contribution to a SARSEP IRA Account, an amount not to exceed the lesser of: (a) the Applicable Deferral Amount as defined in Code 414(v)(2)(A) or (b) the excess, if any, of the Individual s Compensation [as defined in paragraph 1.7] for the year, over any other elective deferrals made by the Individual for the year (other than Catch-Up Contributions). Catch-Up Contributions that may be made by or on behalf of a Individual for any Taxable Year to an IRA established under this Plan shall be reduced by the amount of Catch-Up Contributions made by or on behalf of the same Individual to any other IRA or Roth IRA for the same Taxable Year except that, in the case of Catch-Up Contributions made as salary reduction contributions to a SARSEP IRA Account, the amount of such Catch-Up Contributions allowed for any Taxable Year shall be reduced by the amount of Catch-Up Contributions made by or on behalf of the same Individual to any other Retirement Plan described in Code 401(a), 403(b), 408(p) or 457. Catch-Up Contributions may be made by or on behalf of a Individual who has attained the age of fifty (50) on or before the last day of the year for which the contribution is made. The Plan shall be interpreted to deem any Individual s contribution that exceeds the Maximum Annual Contribution as defined in paragraph 1.18 or the salary reduction limit as defined in paragraph 2.2(a) but not an amount greater than the Applicable Amount or the Applicable Deferral Amount to be a Catch-Up Contribution unless the Individual elects to treat such amount as an Excess Contribution described in paragraph Code The Internal Revenue Code of 1986, as amended. Reference to any section or subsection of the Code, includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection, and also includes reference to any Regulation issued pursuant to or with respect to such section or subsection. 1.6 Combined IRA Account An IRA established hereunder which accepts two or more IRA contributions. 1.7 Compensation The salary, wages, commissions, bonuses, overtime, and any other taxable remuneration earned for personal services the Individual performs (including, but not limited to commissions paid to salesmen, professional fees, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses) during a Tax Year. If the Individual is a self-employed Individual or a partner, Compensation means the Individual s earned income from self-employment. For purposes of this definition, Code 401(c)(2) shall be applied as if the term trade or business for purposes of Code 1042 including services described in subsection (c)(6). Earned income is defined at Code 401(c)(2) and is reduced by the deduction the Individual may take for contributions made to a self-employed retirement plan. Compensation does not include amounts derived from or received as earnings or profits from property (including, but not limited to, interest and dividends) or amounts not includible in gross income (determined without regard to Code 112). Compensation also does not include any amount received as a pension or annuity or as deferred compensation. The term "Compensation" shall include any amount includible in the Individual s gross income under Code 71 with respect to a divorce or separate maintenance agreement described in paragraph (A) of Code 71(b)(2). The term Compensation also includes any differential wage payments as defined in Code 3401(h)(2). 1.8 Custodian The institution and any successor thereto including by merger or acquisition whose name appears on this IRA Custodial Account Agreement document. 1.9 Designated Beneficiary The individual who is designated as the Beneficiary under paragraph 1.3 of the Plan and is the Designated Beneficiary under Code 401(a)(9) and 1.401(a)(9)-1, Q&A-4, of the Income Tax Regulations. The Individual's Beneficiary may, after the Individual's death, name a person, trust, estate or other entity to receive distributions of any balance remaining in the Individual's IRA after the death of the Individual's Beneficiary. Any person or entity so designated will, upon the death of the Individual's Beneficiary, become the Individual's Beneficiary for all purposes except for required minimum distributions. This additional designation may not extend the schedule 2

8 of required minimum distributions established when the Individual attains age 70½ or, if sooner, following the Individual's death Distribution Calendar Year A calendar year for which a required minimum distribution is required. For distributions beginning before the Individual s death, the First Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Individual s Required Beginning Date. For distributions beginning after the Individual s death, the First Distribution Calendar Year is the calendar year in which distributions are required to begin under paragraph 4.5. The required minimum distribution for the Individual s First Distribution Calendar Year will be made on or before the Individual s Required Beginning Date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Individual s Required Beginning Date occurs, will be made on or before December 31 of that Distribution Calendar Year Education Savings Account Referred to as an "ESA" which shall mean a Coverdell Education Savings Account (formerly known as an "Education IRA") Individual The person who has signed the IRA Application and has established an Individual Retirement Account under this document, which may be amended from time to time Individual s Account Balance The IRA account balance as of December 31 of the calendar year immediately preceding the Distribution Calendar Year. The "value" of the IRA includes the amount of any outstanding rollover, transfer and recharacterization under Q&As-7 and -8 of of the Income Tax Regulations Inherited IRA An Inherited IRA is a Traditional IRA whose Beneficiary is a person or entity named by the IRA owner to receive the IRA benefits after Individual dies. Beneficiaries of a Traditional IRA must include in their gross income any taxable distributions they receive. A Surviving Spouse may roll over an Inherited IRA distribution to another Traditional IRA or make the Inherited IRA his or her own. If a Traditional IRA is inherited from anyone other than the deceased Spouse, the Beneficiary cannot treat the Inherited IRA as his or her own. Consequently, IRA contributions cannot be made to an Inherited IRA, nor can rollover amounts be made to or from the Inherited IRA. However, the Beneficiary may directly transfer the Inherited IRA to another custodian or trustee as long as the IRA into which amounts are being moved is established and maintained in the name of the deceased IRA owner for the benefit of such Beneficiary. If a Beneficiary inherits a Traditional IRA from an Individual who had a basis in the IRA because of nondeductible contributions, that basis remains with the Inherited IRA. Unless the Beneficiary is the decedent s Spouse who chooses to treat the Inherited IRA as his or her own, the basis cannot be combined with any basis the Beneficiary may have in his or her own Traditional IRA(s) or any basis in any other Traditional IRA(s) inherited from other decedents. A Beneficiary of an Inherited IRA may be able to claim a deduction for estate tax resulting from certain distributions from a Traditional IRA. The Beneficiary can deduct the estate tax paid on any part of a distribution that is income in respect of a decedent. Such Beneficiary can take the deduction for the Tax Year the income is reported. Any taxable part of a distribution that is not income in respect of a decedent is a payment the Beneficiary must include in income and the Beneficiary cannot take any estate tax deduction IRA Application The Account application establishing an Individual Retirement Account ("IRA") under this document IRA Or Traditional IRA An Individual Retirement Account or Individual Retirement Annuity described in Code 408(a) or (b) respectively Life Expectancy Life expectancy as computed by use of the Single Life Table in Q&A-1 of 1.401(a)(9)-9 of the Income Tax Regulations Maximum Annual Contribution With respect to Traditional IRA Contributions made by or on behalf of a Individual for a Taxable Year, an amount that does not exceed the lesser of (a) the deductible amount described in Code 219(b)(5)(A) or (b) 100% of the Individual s Compensation [or, for Spousal IRA Contributions, the aggregate Compensation described in paragraph 2.2(b)], reduced by (c) the amount of any contributions made by or on behalf of the Individual (or, in the case of 3

9 Spousal IRA contributions, the Individual s Spouse) to another Traditional IRA or to a Roth IRA for the same Taxable Year Participant An Individual who adopts the Plan and who makes contributions, or on whose behalf contributions are made, to his Account. If a Traditional IRA is established by an Individual on behalf of their Spouse, Participant shall mean the Spouse for whom the Account is established. For purposes of Articles VI through XI, inclusive, if the Participant is deceased or the Participant has authorized a representative in a manner acceptable to the Sponsor and permitted by law, to provide directions or instructions with respect to the Participant s Account, the term Participant shall also mean the Beneficiary or such representative Per Stirpes When the Individual dies and there is no Beneficiary Designation on file or no surviving Beneficiary(ies), the Account shall be divided into as many equal shares as there are surviving descendents in the generation nearest to the decedent that contains at least one surviving descendent and deceased decedents in the same generation who left surviving descendents, if any. The share of each deceased descendent who leaves surviving descendents is divided in the same manner, with the subdivision repeating until the property is fully allocated among surviving descendents. A descendent who dies before the descendent and who leaves no surviving descendent is disregarded Plan/IRA The Individual Retirement Custodial Account ( IRA ) contained in this document, as may be amended from time to time Retirement Plan An employer-sponsored pension, profit sharing or stock bonus plan described in Code 401(a), a qualified cash or deferred arrangement under Code 401(k), an annuity described in Code 403(a), a tax deferred annuity described in Code 403(b), a SEP or SARSEP described in Code 408(k), a SIMPLE IRA described in Code 408(p), except that, for purposes of Rollover Contributions defined in paragraph 1.25, a SIMPLE IRA, shall only be a Retirement Plan if at least two (2) years have passed since the Participant first participated in the SIMPLE IRA, or an eligible deferred compensation plan described in Code 457(b) which is maintained by an eligible employer described in Code 457(e)(1)(A). Retirement Plan shall not mean a Roth IRA or an Education Savings Account Required Beginning Date The date on which an Individual is required to take his or her first minimum distribution from the IRA. The Individual s entire interest will be distributed, or begin to be distributed, to the Individual no later than the April 1 of the calendar year following the calendar year in which the Individual attains age 70½ Rollover IRA An IRA established by an Individual in which contributions are made pursuant to paragraphs 2.8, 2.9 or Rollover Contribution A contribution by an Individual consisting of cash or property distributed to the Individual (or to a deceased Individual s Surviving Spouse) from another IRA or Retirement Plan SARSEP An IRA established by an Individual who has adopted a Salary Reduction Simplified Employee Pension Plan pursuant to Code 408(k) and to which both the employee and employer make contributions SEP-IRA An IRA established by an Individual whose employer has adopted a Simplified Employee Pension Plan pursuant to Code 408(k) and to which the employer makes SEP contributions on behalf of such Individual Sponsor The institution and any successor thereto, which makes this document available Spouse/Surviving Spouse The person to whom an Individual is married, or was married in the case of a deceased Individual who was married at the time of his or her death. A former Spouse will be treated in the same manner as a Spouse to the extent provided under a Qualified Domestic Relations Order as described in Code Section 414(p) Spousal IRA An IRA established by or for the benefit of an Individual who meets the eligibility requirements set forth in paragraph Tax Year/Taxable Year 4

10 The period for which an Individual must report income on his or her Federal income tax return. The tax return of most Individuals is based on the calendar year Traditional IRA Or Non-Roth IRA Account An individual retirement account or individual retirement annuity described in Code 408(a) or (b), respectively, established by or for the benefit of an Individual who meets the eligibility requirements set forth in paragraph 2.2, and shall, where the context so requires, include a Traditional IRA, SEP IRA, SARSEP IRA, SEP Traditional IRA, Rollover IRA and Combined IRA. Notwithstanding anything contained herein to the contrary and without regard to the label or code number assigned to the Account, Traditional, SEP, SARSEP and Rollover IRA, contributions may be made to any one Traditional IRA, SEP IRA, SARSEP IRA, Rollover IRA or Rollover IRA Combined account established for the same individual. ARTICLE II CONTRIBUTIONS 2.1 Establishment Of IRA Account Any Individual who meets the requirements of this Article II or any employer maintaining a SEP or SARSEP (which SARSEP must have been established before January 1, 1997) under which such Individual is an eligible employee may establish this Account. The IRA shall become effective when the Sponsor accepts and executes the IRA Account Application Form. A duly authorized representative may establish an IRA on behalf of another person now includes a parent, legal guardian, conservator or other court-appointed representative of a minor child or incapacitated adult, an attorney-in-fact acting under a power of attorney, the personal representative of a decedent s estate or the beneficiary of an individual s interest in a Retirement Plan or IRA. 2.2 Traditional IRA An Individual shall make a cash contribution in any amount up to the lesser of the Maximum Annual Contribution or 100% of Compensation for a Tax Year (reduced by the amount of any contributions made by the Individual or on the Individual s behalf to another IRA or to a Roth IRA for the same Tax Year) in any year in which the Individual is under the age of 70½. Contributions may be made to an IRA for any Tax Year at any time starting on the first day of the Tax Year and ending on the day the Individual s Federal income tax return is due for such year (not including any extensions). (a) Except in the case of a Rollover Contribution [as permitted by Code 402(c), 402(e)(6), 403(a)(4), 403(b)(8), 403(b)(10), 408(d)(3) and 457(e)(16)(A)] or a contribution made in accordance with the terms of a Simplified Employee Pension (SEP) as described in 408(k), no contributions will be accepted unless they are in cash, and the total of such contributions shall not exceed $5,000 for any Taxable Year. This limit may be adjusted by the Secretary of the Treasury for cost-of-living increases under Code 219(b)(5)(D). (b) Catch-Up Contributions. If, by December 31 of any Taxable Year, an Individual is age fifty (50) or over, the annual cash limit is increased by $1,000 for any Taxable Year, as adjusted for cost-of-living increases. If the Individual is eligible, any annual contribution the Individual makes that exceeds the Individual s Maximum Annual Contribution will be treated as a Catch-Up Contribution (up to the limits described above) unless the Individual elects to treat such amounts as an Excess Contribution described in paragraph 2.13 below. (c) In addition to the amounts described in paragraphs (a) and (b) above, an Individual may make additional contributions specifically authorized by statute, such as repayments of qualified reservist distributions, repayments of certain plan distributions made on account of a Federally declared disaster and certain amounts received in connection with the Exxon Valdez litigation. (d) In addition to the amounts described in paragraphs (a) and (c) above, an Individual who was a participant in a Code 401(k) plan of a certain employer in bankruptcy described in Code 219(b)(5)(C) may contribute up to $3,000 for Taxable Years beginning after 2006 and before 2010 only. An Individual who makes contributions under this paragraph (d) may not also make contributions under paragraph (b). (e) accepted. If this is an Inherited IRA within the meaning of Code 403(d)(3)(C), no contributions will be 2.3 Deductibility of Traditional IRA Contributions (a) In General. The Individual may fully deduct their Traditional IRA contributions, up to the total of the Individual s Maximum Annual Contribution plus any Catch-Up Contributions, if 5

11 (1) the Individual is single and the Individual is not an active Participant in a Retirement Plan, (2) if the Individual is married, both the Individual and the Individual s Spouse are not active Participants in a Retirement Plan, or (3) the Individual is not an active Participant in a Retirement Plan and the Individual s Spouse is an active Participant, but the Individual and their Spouse's jointly filed adjusted gross income ( AGI ) does not exceed $176,000. If the Individual s Spouse is an active Participant and the Individual is not, their ability to deduct their Traditional IRA contribution is phased out ratably if the Individual and their Spouse s joint AGI is more than $166,000 but not more than $176,000. No deduction is permitted if the Individual and their Spouse s joint AGI exceeds $176,000. (b) Active Participants in Retirement Plans. If the Individual is an active Participant in a Retirement Plan, the Individual may deduct the Individual s Traditional IRA contribution if the AGI of the Individual and if applicable, the Individual and the Individual's Spouse is less than the Threshold Amount (see below). If the AGI of the Individual and if applicable the Individual and the Individual's Spouse equals or exceeds the Threshold Amount but is less than the Phase-out Amount (see below), the Individual s ability to deduct their Traditional IRA contribution is reduced ratably, but not below $200. If the AGI of the Individual equals or exceeds the Phase-out Amount, the Individual may not deduct any Traditional IRA contributions. The AGI limits for Individuals who are active Participants vary depending upon the Tax Year and the Individual s Federal filing status. See IRS Publication 590 for specific AGI limits and examples. 2.4 Spousal IRA A Traditional IRA may be established by or for a married Individual and contributions ( Spousal IRA contributions ) may be made to such an account if: (a) (b) the Individual s Spouse receives little or no Compensation, the Individual and the Individual s Spouse files a joint Federal income tax return, and (c) the Individual s Spouse has not attained age 70½. The maximum amount contributed to a Spousal IRA for a Tax Year shall be reduced by the amount of any contributions made by the Individual or on behalf of the Individual s Spouse to another IRA or to a Roth IRA for the same Tax Year. Spousal IRA contributions for a year may not exceed the sum of (i) the Maximum Annual Contribution as defined in paragraph 1.18, except that Compensation taken into account to determine Spousal IRA Contributions shall be the aggregate of all Compensation reported by the Individual and the Individual s Spouse on their joint Federal income tax return reduced by the amount of Traditional and Roth IRA contributions made by the Individual s Spouse for such year, and (ii) eligible Catch-up Contributions as defined in paragraph 1.4. The timing rules for making contributions to a Spousal IRA are the same rules for a Traditional IRA. 2.5 Prohibited Contributions No SIMPLE, Roth or Coverdell Education IRA contributions may be made to this IRA. The Individual must open separate SIMPLE, Roth and Coverdell IRAs to receive such contributions. The Individual may rollover distributions from a SIMPLE IRA to this IRA provided that the distribution is made more than two (2) years after the Individual first participated in an employer s SIMPLE IRA plan. 2.6 SEP The Individual s employer may voluntarily contribute on the Individual s behalf an amount in cash up to the lesser of $49,000, as adjusted for inflation, or 25% of their Compensation, for the Tax Year. If an employer makes a contribution for the Individual under a SEP, the Individual can still make a contribution to a Traditional or Spousal IRA. 2.7 SARSEP While a new SARSEP may not be established after 1996, a new SARSEP IRA may be opened, and contributions made, with respect to an employee who first participates or becomes eligible to participate after Such SARSEP contributions equal to the Participants salary deferrals but in no event more than the lesser of 100% of the Participant s Compensation or the applicable dollar amount as defined in Code 402(g)(1)(B) as adjusted plus such other contributions as may be required by Code 416 to the lesser of 25% of the Individual s Compensation, or as adjusted for inflation. If an employer makes a contribution for an Individual under a SARSEP, the Individual can still make the Individual s Traditional IRA or Spousal IRA contribution, subject to the adjusted gross income (AGI) limitation. 2.8 Rollover Or Transfer From A Retirement Plan 6

12 The Individual may rollover all or a part of a distribution received from a Retirement Plan, provided: (a) the amount from such a Retirement Plan is deposited to the IRA no later than the sixtieth (60 th ) day after the Individual receives the distribution except that a distribution which fails to be a Qualified First-Time Homebuyer Distribution solely because of a delay or cancellation of the purchase of construction of a principal residence may be rolled over within one hundred and twenty (120) days after the distribution was made, (b) the amount rolled over is not one of a series of substantially equal periodic payments made over the Individual s life expectancy, the joint life of the Individual and the Individual s Beneficiary, or a period of ten (10) years or more, (c) the amount rolled over is not being used to satisfy the minimum distribution requirements under Code 401(a)(9), (d) if the amount rolled over included property, such property is rolled over, or if sold, the proceeds of such property may be rolled over, (e) the amount rolled over does not include any amounts which would otherwise not be included in income, irrespective of the rollover. (f) does not include nondeductible or after-tax contributions except that after-tax employee contributions included in a distribution from a qualified pension, profit sharing, stock bonus or 401(k) plan may be included. 2.9 Rollover From Another IRA The Individual may rollover all or part of an IRA (including a SIMPLE IRA) the Individual may have with another trustee or custodian, provided: receipt, (a) the amount to be rolled over is contributed no later than the sixtieth (60 th ) day after the Individual s (b) if property other than money is distributed to the Individual from the other IRA, the same property or the proceeds from the sale thereof must be transferred to this IRA, and (c) the Individual confirms to the Sponsor that the rollover consists solely of amounts from the other IRA, and that the Individual has not made any similar rollover within the one (1) year period ending on the date the Individual received a distribution from the other IRA. The one (1) year limit above shall not apply to any distribution which fails to be a Qualified First-Time Homebuyer Distribution, as defined in Code 72(t)(8), solely by reason of a delay or cancellation of the purchase or construction of a principal residence nor shall such distributions be taken into account when determining whether the one (1) year limit applies to any other distribution. Any distribution from an IRA which qualifies for and is rolled over to a Roth IRA shall not be taken into account when determining whether the one (1) year limit applies to any other distribution Rollover Of Exxon Valdez Settlement Income Qualified Taxpayers who received Qualified Settlement Income may contribute all or part of the amount received to an Eligible Retirement Plan, which includes a Traditional IRA. The amount contributed cannot exceed $100,000 (reduced by the amount of Qualified Settlement Income contributed to an Eligible Retirement Plan in prior Tax Years) or the amount of Qualified Settlement Income received during the Tax Year. Contributions for the year can be made up to the due date for filing the Individual s income tax return without regard to any extension. Qualified Settlement Income that is contributed to a Traditional IRA will be treated as having been rolled over in a direct transfer to the Custodian within sixty (60) days of the distribution. The amount contributed is not included in the Individual s income at the time of the contribution and is not considered to be investment in the contract. The one (1) year waiting period between Rollover Contributions does not apply. For purposes of this paragraph: (a) a Qualified Taxpayer is defined as a plaintiff in the civil action In re Exxon Valdez, No CV (HRH) (Consolidated) (D.Alaska), or the Beneficiary of the estate of a plaintiff who acquired the right to receive Qualified Settlement Income and who is the Spouse or immediate relative of that plaintiff; and (b) Qualified Settlement Income is defined as any interest and punitive damage awards which are otherwise includible in income and received in connection with civil action In re Exxon Valdez, No CV (HRH) (Consolidated) (D.Alaska) (whether pre or post-judgment and whether related to a settlement or judgment). Qualified 7

13 Settlement Income can be received as periodic payments or as a lump sum. For information regarding the reporting of Qualified Settlement Income, see IRS Publication Combined IRA Account The Individual's IRA may be used to receive two or more types of contributions. These accounts are known as Combined Accounts. The permitted Combined Accounts are Rollover/Traditional, Rollover/SEP and SEP/Traditional. For this purpose, a SEP includes a SARSEP. In a Combined Account, the features and tax consequences of each separate type of IRA apply to the contributions made for that IRA. Regardless of the title given to the Individual's Account, Traditional (including Spousal) SEP, SARSEP and Rollover Contributions may be made to the same Traditional IRA. If an Individual combines Rollover Contributions from a Retirement Plan with any other type of IRA contributions, the Individual will still retain the ability to roll such contributions from the Individual's IRA into another Retirement Plan, a 403(b) plan or a government sponsored 457 Plan. If the Individual rolls into any IRA, a lump sum distribution eligible for forward averaging or capital gain treatment, the Individual will lose the ability to apply these special tax treatments if the Individual commingles the lump sum with any other IRA contributions. To preserve these special tax treatments, the Individual must contribute the lump sum to a Rollover IRA and then rollover a distribution from the Rollover IRA to a Retirement Plan Transfer From Another IRA The Individual may directly transfer from another trustee or custodian, all or part of an IRA that the Individual has established with that other trustee or custodian. The one (1) year waiting period applicable to IRAs at paragraph 2.9, does not apply to this type of transfer since the Individual did not receive any part of the IRA assets Excess Contributions If the Individual contributes more than allowed with respect to a Tax Year, the Individual must notify the Sponsor to return to the Individual the excess contribution, together with any investment earnings on that amount, or to apply the excess contribution as a contribution for the Individual s next succeeding Tax Year. The Individual must notify the Sponsor in writing prior to the date on which the Individual files, or are required to file, the Individual s income tax return for the Tax Year for which the excess contribution was made Conversion To A Roth IRA The Individual may direct the Sponsor to convert all or a portion of the Individual s Traditional IRA to a Roth IRA provided the Individual s AGI for the year of conversion does not exceed $100,000 (not counting the amount added to the Individual s gross income because of the conversion) and the Individual is not married filing a separate Federal income tax return. If the Individual s AGI does not exceed $100,000, any distribution from the Individual s IRA (other than a minimum required distribution described in Article IV) may be rolled over to a Roth IRA (except that the one (1) year rule in paragraph 2.8 above does not apply). If the Individual converts or rolls over the Individual's IRA to a Roth IRA, the Individual must include in the Individual's gross income any amount which would be included if it were not part of a Rollover Contribution (the amount of the deductible IRA contributions plus earnings on the IRA contributions which are included in the distribution and rolled over to a Roth IRA). Pursuant to 1.408A-6, Q&A-5, the 10% premature penalty tax does not apply to the return of a conversion contribution to the extent that the converted amount was not includable in income because it represented after-tax IRA contributions. Beginning in 2010 the modified AGI and filing status requirements for converting a Traditional IRA to a Roth IRA are eliminated. Additionally, for any 2010 rollover from an IRA other than Roth IRA to Roth IRA, any amounts that would be included as income will be included in income in equal amounts in 2011 and Alternatively, Individuals may choose to include the entire amount in income in Valuation Of Recharacterized And Reconverted Assets Requests to recharacterize or reconvert an Account will be processed as soon as practicable after being received in a form acceptable to the Sponsor. Due to the volume of such requests and the different processes followed to transfer or liquidate different assets held in an Account, the recharacterization or reconversion may not begin for some period of time and, once begun, may take place in a series of transactions over an additional period of time. The value of Account assets transferred or liquidated in connection with a recharacterization or reconversion will be determined as of the close of business on the date of transfer, or, if liquidated, using the liquidation price received. Due to market fluctuations, the value of Account assets used for income tax reporting purposes or to determine the number of shares of a security that must be liquidated and transferred, may vary from the value on the date the request is made. The Sponsor will not be responsible for any market fluctuations that effect the Individual s taxable income or the number of shares of a security needed to complete the recharacterization or reconversion. Rollover IRAs that: (a) (b) qualify as conduit IRAs under Code 408(d)(3)(A)(ii), are rolled over or converted to a Roth IRA, and 8

14 (c) are subsequently recharacterized to a Rollover IRA; do not lose their status as conduit IRAs solely because of the conversion and recharacterization. ARTICLE III INVESTMENT OF ACCOUNT 3.1 Maintenance Of An Individual s IRA The Sponsor will establish and maintain an IRA in the Individual s name under this document. The Individual s Account will be administered separately from any other IRA and the assets of the Individual s IRA will not be commingled with the assets of any other IRA, except in a common trust fund or common investment fund as described in Code 408(a)(5). 3.2 Investment Options Permissible investment alternatives may include but are not limited to stocks, bonds, money market instruments, savings accounts, certificate of deposit, mutual funds, (including funds for which the Sponsor, or any of the Sponsor s affiliates serve as investment advisor), obligations issued or guaranteed by the United States, or in any other investment alternative available for acquisition through the Sponsor in its regular course of business and approved by the Sponsor for investment through this IRA Account. Notwithstanding the above, the Sponsor reserves the right to limit the investment vehicles available to include securities, savings accounts or certificate of deposits issued by the Sponsor and/or any of the Sponsor's affiliates. The Code prohibits the Sponsor from investing any part of an IRA in life insurance contracts or in collectibles. Collectibles include but are not limited to, art works, rugs antiques, metals, gems, stamps, alcoholic beverages, and certain other tangible personal property. Investment in gold, platinum and silver coins issued under the laws of the U.S. government or any state, or gold, silver, platinum, or palladium bullion are not considered collectibles and are permitted as an investment. The Individual may direct the Sponsor to transfer all or part of the Individual s IRA to an IRS approved group or collective trust established to permit the pooling of assets of separate pension and profit-sharing trusts described at Code 401(a) and 501(a). The commingling of assets of the Individual IRA with assets of other qualified trusts is specifically authorized, and to the extent of the investment of the Individual's IRA is such a group or collective trust shall be considered to be a part of this Plan. The Sponsor will exercise all ownership rights with respect to the investments of the Individual's IRA upon the Individual s instructions. These activities include holding any investments and collecting investment income. 3.3 Brokerage Account The Individual may enter into a separate brokerage account agreement with the Sponsor. Under the terms of that agreement, the Individual shall have the right to invest in any investment permitted under the brokerage account agreement which is incorporated by reference into this document. 3.4 Directed Investments The Individual or the Individual s duly authorized representative may delegate investment management of all or a portion of the Individual s Account to an Investment Manager, agent or attorney-in-fact, including but not limited to a division or affiliate of the Sponsor, by notifying the Sponsor in writing on a form acceptable to the Sponsor of such delegation, including the name of the person or persons to whom such responsibility is delegated and the assets with respect to which such Investment Manager, agent or attorney-in-fact will direct. The Sponsor shall follow the directions of such Investment Manager, agent or attorney-in-fact. The Individual s written instructions regarding the retention of investment management authority, the appointment of an Investment Manager, or the delegation of investment management responsibility to the Sponsor will remain in effect until revoked or amended in writing. The Sponsor is not responsible for the propriety of any directed investment and will not be required to consult with or advise the Individual regarding the quality of the investment of any directed investment. 3.5 Default Provision If the Individual does not delegate in writing investment management responsibility to either an Investment Manager, or to the Sponsor, the Individual will be responsible for the investment of assets in the Individual s Account. 3.6 Nonforfeitability The entire amount in the Individual s IRA belongs to the Individual, which means that benefit is nonforfeitable at all times. However, the Individual may not pledge any part of the Individual's IRA as security for a loan nor can the Individual assign, transfer, appropriate, encumber, commute, or anticipate the Individual's IRA. The Individual's Account is also protected from legal process to levy upon, garnish, or attach for payment of any claim against the 9

15 Individual except as may be provided by law. 3.7 Transfers Incident To Divorce All or any portion of the Individual s interest in the IRA may be transferred to a former Spouse pursuant to a divorce decree or written incident to divorce as provided in Code 408(d)(6), in which event the transferred portion of the IRA shall be held as a separate IRA for the benefit of such Spouse in accordance with the terms and conditions of this IRA Custodial Account Agreement. 3.8 Prohibited Transactions Generally, a prohibited transaction is any improper use of an IRA. Examples include borrowing money from an IRA Account or selling property to the IRA. If an Individual engages in a prohibited transaction, the IRA will lose its tax-exempt status, and the entire value of the Account will be included in the Individual s gross income. Additionally if the IRA is disqualified prior to attainment of age 59½, the Individual may be required to pay the 10% premature distribution penalty tax. Pledging an IRA as security for a loan will cause the portion pledged to be treated as a distribution to the Individual, includible in gross income and subject to the 10% additional tax on early distributions if the Individual is under age 59½. ARTICLE IV DISTRIBUTIONS 4.1 Qualifying First-Time Homebuyer Distribution A qualifying first-time homebuyer distribution is any distribution used within one-hundred-twenty (120) days of the date the distribution is received by the Individual, the Individual s Spouse or the child, grandchild or ancestor of the Individual and the Individual's Spouse, to pay for the acquisition, construction or reconstruction of the Individual's principal residence, provided that the Individual (and the Individual s Spouse) for whom the principal residence is acquired or constructed had no present ownership interest in a principal residence during the two (2) year period ending on the date a binding contract to acquire the principal residence was entered into or on which construction or reconstruction of the principal residence was commenced. The aggregate amount of distributions received by the Individual during the Individual's lifetime and which may be treated as Qualified First-time Homebuyer Distributions may not exceed $10, Qualifying Higher Education Expenses A qualifying higher education expense includes tuition, fees, books, supplies, and equipment required for the enrollment or attendance of the Individual, Individual s Spouse, Individual s child [as defined in Code 151(c)(3)] or the Individual or the Individual s Spouse s grandchild, at an eligible educational institution [as defined in Code 529(e)(5)] reduced, for any Tax Year, by any amount paid for the benefit of the student including a qualified scholarship, educational assistance allowance or similar payment which is excludable from gross income under the Code or any other Federal law. 4.3 Requirements Of Income Tax Regulations Incorporated All distributions required under this Article will be determined and made in accordance with the Income Tax Regulations under Code 401(a)(9). The required minimum distributions payable to a Designated Beneficiary from this IRA may be withdrawn from another IRA the Beneficiary holds from the same decedent in accordance with Q&A-9 of of the Income Tax Regulations. Notwithstanding any provision of this IRA to the contrary, the distribution of the Individual s interest in the Account shall be made in accordance with the requirements of Code 408(a)(6) and the Regulations thereunder, the provisions of which are herein incorporated by reference. If distributions are made from an annuity contract purchased from an insurance company, distributions thereunder must satisfy the requirements of Q&A-4 of 1.401(a)(9)-6 of the Income Tax Regulations, rather than paragraph 4.6(b), (c) and (d) below and paragraph 4.7. The required minimum distributions calculated for this IRA may be withdrawn from another IRA of the Individual in accordance with Q&A-9 of of the Income Tax Regulations. If this is an Inherited IRA within the meaning of Code 408(d)(3)(C), the preceding sentence and paragraph 4.6(b), (c) and (d) below do not apply. 4.4 Methods Of Payment The Individual s retirement benefits must begin to be paid to the Individual no later than the April 1 following the calendar year in which the Individual reaches age 70½ (the Required Beginning Date). Such distributions shall be made in accordance with Code 408(a)(6) or 408(b)(3) and the Regulations issued thereunder. Not later than March 1 of the year following the calendar year in which the Individual reaches age 70½, the Individual may elect to have the balance in the IRA paid to the Individual in: 10