2017 SEP IRA A Guide for Business Owners

Transcription

1 Retirement 2017 SEP IRA A Guide for Business Owners Not FDIC Insured May Lose Value Not Bank Guaranteed OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.

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3 The Right Way to Invest Cost-Effective. Simple. Flexible. If you never thought these words could describe a retirement plan, perhaps you haven t heard about a Simplified Employee Pension (SEP) IRA. Whether you employ others or work alone, a SEP IRA can give your small business many of the potential advantages of a big company plan in a cost-effective program requiring minimal administration. A SEP IRA is a personal, tax-advantaged Individual Retirement Account (IRA) you can open for yourself and any eligible employees. An OppenheimerFunds SEP IRA can help you and your employees work toward long-term retirement goals by providing: A simplified savings solution Powerful features for small businesses Comprehensive investment options and support Talk to your financial advisor and consider whether or not an OppenheimerFunds SEP IRA is suitable for your business. 1

4 OppenheimerFunds A simplified savings solution Retirement plans are not all the same. While a SEP IRA offers some of the advantages of other plan types, it also has several important features that set it apart. These may make it a particularly good alternative for certain businesses and most self-employed individuals. Contributions are discretionary If you re hesitant about taking on the year-after-year financial commitment of a retirement plan because your profits are unpredictable, a SEP IRA s discretionary contributions may change that. Not only can you vary the percentage you put into your SEP IRA each year, you can skip contributions altogether. Maintenance is simple and costs are competitive Because a SEP IRA doesn t require government filing or IRS reporting, maintenance is simple and cost effective. In fact, the only annual administrative expense normally associated with an OppenheimerFunds SEP IRA is an annual maintenance fee of $25, which is paid by each participant. 1 Contribution limits are relatively high Compared to other plans, maximum annual contribution limits to SEP IRAs are high: $54,000 (2017) or 25% of earned income (20% if you are self-employed), whichever is less. Keep in mind that SEP IRA contributions must be nondiscriminatory, which means you re required to contribute the same income percentage to each participant s account. Please refer to page 5 for more information on calculating contributions. Fiduciary responsibility With a SEP IRA, investing decisions are the participant s responsibility. That means participants select the specific Oppenheimer mutual funds available through their SEP IRA account. Consequently, you don t have the degree of fiduciary responsibility. It s employer funded A SEP IRA is funded solely by the employer, which enhances its value as a company benefit. Employer contributions using Social Security benefits Employers who don t maintain other integrated plans are permitted to allocate contributions based on Social Security taxes paid on behalf of participants. Integration usually results in larger relative percentage contributions to the employees with earnings in excess of the Social Security wage ceiling. Why do I need a retirement plan? A retirement plan can help prepare you you to prepare financially financially for a for successful a successful retirement retirement while while making making your your business business more competitive. Benefits for you: The power of tax-deferred savings The funds you set aside in a retirement plan grow tax deferred until they re withdrawn. This means that every dollar of your account balance is working solely for you not you and Uncle Sam. As a result, savings can grow faster than they would in a taxable account. Retirement years Counting on your business alone to support your golden years could be risky. After all, a lot can change between now and the time you're ready to leave the workforce. In fact, multiple sources may be needed to fund your retirement. A plan like a SEP IRA may can be an important component to your strategy. Benefits for your business: A business tax cut Because employer contributions to a retirement plan are a tax-deductible expense, sponsoring a plan gives your business an immediate tax break. An edge in today s job market Your employees need a retirement plan for the same reason you do: financial security. Offering a plan can give your business an edge in attracting and keeping high-quality workers If the total value of the participant's investments in retirement and/or nonretirement accounts in Oppenheimer funds, excluding OppenheimerFunds direct-sold 529 plans, is $50,000 or more, the annual maintenance fee is $0.

5 The Right Way to Invest Powerful features for small businesses A SEP IRA offers the versatility and features you might expect to find in a more elaborate plan, but it s designed to be simple for small business owners to establish and maintain. How SEP IRAs work SEP IRAs must include any employee who meets all of the following criteria: Age 21 and over Employed by you for at least three of the last five years Annual earnings of at least $600 (for the 2017 tax year) Tax deductions You may take a tax deduction equal to the amount of your employer contributions, up to a maximum of 25% of compensation (20% if you re self employed) paid during the year to participants. Withdrawals Because a SEP IRA is considered a type of IRA, it s generally governed by the same distribution rules. Essentially, distributions are taxed as ordinary income and any money taken out before age 59½ is subject to an additional 10% tax penalty. Once SEP IRA accounts are set up for you and each eligible employee, any plan contributions you choose to make are then deposited directly into these accounts. However, individual participants decide how their contributions will be allocated among the Oppenheimer funds. (Note: The deadline to establish and contribute to a SEP IRA is your federal tax return deadline, including extensions.) Vesting Since plan participants have immediate and full ownership of the money you contribute to their SEP IRA accounts, you don t have to set up a vesting schedule or track service requirements. The cost of not having a SEP IRA Top-heavy testing Each year, a SEP IRA must be evaluated to ensure it doesn t unfairly favor the business owner and other key employees those who at any time during the preceding year (or current year for new plans) owned more than 5% of the company, owned more than 1% and earned more than $150,000 a year, or were officers of the company earning more than $170,000. To determine whether key employees unfairly benefited, you and your tax advisor will need to perform an annual top-heavy test. Please refer to the Top-Heavy Test Worksheet on page 9 of this booklet for step-by-step instructions. If the plan proves to be top heavy that is, if over 60% of the contributions made are in the accounts of key employees you may have to make an additional contribution on behalf of non-key employees. Not having a SEP IRA could potentially be a lot more expensive than having one. In this hypothetical example, not having a SEP IRA would have deprived the employer of a $236,430 nest egg. Salary Contribution: 10% of Income Employer $95,000 $ 9,500 Employee #1 50,000 5,000 Employee #2 45,000 4,500 Employee #3 35,000 3,500 Total Contributed $ 22,500 Less Tax Savings at 28% bracket 6,300 Net Cost $ 16,200 Less Employer s Own Contribution 9,500 Annual Net Contributions After Taxes and After Employer s Own Contribution $ 6,700 Hypothetical Growth of Employer s SEP IRA Account After 20 Years at a Compounded Annual Rate of 6%: $ 370,430 Less Annual Net Contributions After 20 Years: 134,000 Amount Potentially Foregone by Not Having a SEP IRA: $ 236,430 2 This hypothetical example is not intended to show the performance of any Oppenheimer fund for any period of time or fluctuations in principal value or investment return. Retirement assets are subject to taxes when withdrawn. 2. This figure assumes that all contributions and the employer s tax bracket remain the same for 20 years and that the employer s contributions grow at an annually compounded rate of 6% over the entire period with no distributions taken during that time period. 3

6 OppenheimerFunds SARSEP IRAs a variation of the SEP IRA Although creation of Salary Reduction Simplified Employee Pension Plans, or SARSEP IRAs, after 1996 is prohibited by law, OppenheimerFunds will continue to accept existing SARSEP IRAs on a transfer-only basis. The plans are designed for taxable businesses with 25 or fewer eligible employees, and at least 50% of those eligible must participate in the plan. Once the number of eligible employees exceeds 25, employees must stop making deferrals to the plan starting the following year. While a SARSEP IRA has similar features and benefits to a SEP IRA, there are some differences. In a SARSEP IRA, employees may fund their SARSEP IRA accounts with pretax salary deferrals up to the same indexed maximum permitted by a 401(k) plan ($18,000 in 2017* or 25% of compensation, whichever is less). Participants who are age 50 or over may make catchup contributions annually (up to $6,000). You may take a tax deduction of up to the lesser of your employer contributions or 25% of compensation paid during the year to participants. Combined annual employer and employee contributions to a SARSEP IRA cannot exceed the lesser of $54,000 or 25% of each employee s compensation (20% if you are self-employed) minus the amount of the participant s salary deferral. SARSEP IRAs involve more administration than a SEP IRA. In addition to conducting an annual top-heavy test, SARSEP IRAs must satisfy an annual nondiscrimination test. Getting started is simple. Follow the instructions on page 7. Please see pages 9 and 10 for more information on top-heavy testing and nondiscrimination testing. *The IRS releases annual cost-of-living adjustments affecting dollar limitations for retirement plans and IRAs. The limits contained in this brochure can move up in $500 increments annually. Nondiscrimination testing Nondiscrimination testing generally means that the amount of pretax salary deferrals made by a Highly Compensated Employee, expressed as a percentage of compensation, cannot exceed 125% of the actual deferral percentage of all other eligible employees. A Highly Compensated Employee is someone who owns more than 5% of the business, or has earned at least $120,000 in the prior year, and, if elected by the employer for the preceding year, was in the top 20% of employees, ranked by pay. Please refer to the SARSEP IRA Actual Deferral Percentage (ADP) Worksheet on page 10 of this booklet for step-bystep instructions. Exceed 125%: What happens? The excess is distributed to the employee as regular income. If the contributions aren t distributed by April 15 of the year following notification by the employer of the excess, the amounts are subject to a 6% excise tax for each year the excess remains in the plan. If the contributions and earnings are distributed before April 15 of the year following notification by the employer of the excess, the earnings may be subject to a 10% tax penalty. In addition, if the employer fails to notify the Highly Compensated Employee of the excess within 2½ months after the close of the plan year, a 10% penalty is imposed on the employer by the IRS If you have an IRA and haven t made a contribution to it in the same year an excess contribution was made to the SEP IRA, you may use this excess contribution (up to $5,500 for year 2017) as a regular IRA contribution. If you are age 50 or over you may use this excess contribution (up to $6,500 for year 2017) as a regular IRA contribution and catch up contribution. 4

7 The Right Way to Invest Calculating SEP IRA employer contributions Corporations SEP IRA contributions for employees of corporations are calculated based on a percentage of compensation. The following example shows a business that makes employer contributions on behalf of eligible employees. Each employee, including the owner, will receive the same contribution percentage. Worker Salary 25% Employer Contribution Owner $ 90,000 $22,500 Employee 1 35,000 8,750 Employee 2 30,000 7,500 Unincorporated businesses, partnerships and self-employed individuals Contributions for these groups are based on the net profits for the business (this figure represents the owner s net profits from the business after taking deductions for contributions made to the plan on behalf of common law eligible employees) minus one-half the amount paid by the owner in self-employment taxes for the year (determined on IRS Form 1040) divided by the contribution percentage made to the plan. Social Security integration Employers who don t have other plans integrated with Social Security may allocate contributions based on a formula that considers the Social Security taxes paid on behalf of participants. This can result in larger contributions for employees whose earnings exceed the Social Security taxable wage base of $127, Benefits for all self-employed individuals Just because you re not on the staff of a big company doesn t mean you can t have a retirement plan. In fact, it may be more reason to consider getting one. A SEP IRA lets you set aside as much as 20% of your self-employment income, up to $54, And remember that money grows tax deferred. You can also deduct the amount of your contribution from your current income taxes. Another plus once you establish the plan, ongoing administration is minimal. If you have a regular job but also have side earnings you may use a SEP IRA to shelter some of those funds from taxes while you accumulate additional retirement savings. 4. Please contact your tax advisor for more information. 5. A self-employed individual s contribution is based on self-employment income minus 50% of any self-employment taxes paid. This amount is then further reduced by any deductible plan contribution. 5

8 OppenheimerFunds Solid investment options and support When you or your employees establish a SEP IRA account, you can select the funds in which your contributions will be invested. OppenheimerFunds makes the process easier by offering the investment solutions and services you need to help reach your retirement savings goals. Comprehensive investments Founded in 1959, OppenheimerFunds is a global asset manager with decades of experience serving the needs of retirement plan participants and sponsors, as well as their advisors. We offer investments across every major asset class, including U.S. and international equities, and fixed-income portfolios. We also provide innovative asset allocation strategies to help investors pursue specific investment and risk management objectives. In our view, The Right Way to Invest encompasses four key principles: make global connections, look to the long term, take intelligent risks and invest with experience. Investor services and support All SEP IRA participants have access to our website, oppenheimerfunds.com, where you ll find account information, fund descriptions and much more. OppenheimerFunds also provides: Easy-to-read statements Comprehensive investment education and enrollment support A toll-free number for account inquiries and automated exchanges Technology-based solutions You can make contributions online with our Contribution Processing System. This program provides you with greater control over changing contributions, changing fund allocations and submitting plan payments. For more information, call

9 The Right Way to Invest Getting started is simple Establishing your OppenheimerFunds SEP IRA or SARSEP IRA is a matter of five simple steps: 1. Read the OppenheimerFunds Prototype SEP IRA/ SARSEP IRA plan document included and complete the SEP IRA/SARSEP IRA Adoption Agreement on page 11. Be sure to keep a copy for your files and provide a copy to each participant. 2. Notify your employees about the new plan and its benefits. 3. Enroll participants by asking them to fill out the forms in their SEP IRA/SARSEP IRA Participant Kits. In a SARSEP IRA, employees must also complete the Salary Reduction Agreement. Please keep this for your files, but do not send this form to OppenheimerFunds. 4. Send us your SEP IRA/SARSEP IRA: Completed and signed Adoption Agreement Signed copy of each participant s Application (see SEP IRA Participant Guide RB ) Contributions Transfer Request Form for rollovers (if applicable) Fax to: Mail to: OppenheimerFunds Distributor, Inc. Regular mail: P.O. Box 5390 Denver, CO Overnight mail: E. Iliff Avenue, Suite 300 Aurora, CO Remember to conduct a top-heavy test at least annually. In addition, for SARSEP IRAs, a nondiscrimination test must also be performed at least annually. The Payroll Deduction IRA Another way to help employees secure their futures Want a no-cost, no-hassle way to help employees save more for the future? Consider an OppenheimerFunds Payroll Deduction IRA. Through this program, you and your staff can put away as much as $5,500 plus $1,000 in catch-up contributions (if age 50 or over) for retirement through convenient payroll-deducted deposits. What s more, these contributions may be invested in a Traditional (pretax) or Roth (after-tax) IRA or both. Talk to your financial advisor and consider whether or not a OppenheimerFunds Payroll Deduction IRA makes sense for your business. 7

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11 SEP IRA/SARSEP IRA Top-Heavy Test Worksheet Instructions Separate eligible employees into two groups: Key Employees and Non-Key Employees. Please see OppenheimerFunds Prototype Document Simplified Employee Pension Plan in this booklet for the definition of Key Employee. List the contributions and deferrals (if a SARSEP) for each employee under their respective groups. Add up the total contribution in each group separately, then add them together for a total contribution made to the Plan. Divide the total contributions to Key Employees by the total contributions made to the Plan. If greater than 60%, the plan is top heavy. Key employees names Contributions (SEP and SARSEP) $ A. Total $ Non-Key employees names Contributions (SEP and SARSEP) $ B. Total $ C. Plan total (line A + line B) $ D. Top-heavy percentage (line A line C) (If greater than 60%, plan is top heavy) % Note: If you have additional key or non-key employees, please attach additional pages as necessary. If the Plan is top heavy, the employer must make a minimum contribution on behalf of all non-key eligible employees. The contribution must equal the highest percentage deferred by a key employee, up to a maximum of 3%, based on the non-key employee s compensation. These contributions can be made to any qualifying retirement plan (SEP or SARSEP), as indicated in the Adoption Agreement. Key employees may also receive the top-heavy contribution. OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.

12 SARSEP IRA Actual Deferral Percentage (ADP) Worksheet Instructions 1. Separate eligible employees into two groups: Non-Highly Compensated (NHC) and Highly Compensated. 2. List the compensation and salary deferral for each eligible employee under the NHC Group. Be sure to indicate a $0 for those employees who don t make salary deferrals. 4. Add up the deferral percentages for each eligible NHC employee, then divide by the number of eligible NHC employees in that group to get the average deferral percentage for the NHC Group. 5. Each Highly Compensated participant cannot defer more than 125% of the average deferral percentage of the NHC Group. 3. Determine the deferral percentage of each eligible employee in the NHC Group. 1. Eligible Non-Highly Compensated Employees (1) (2) (3) (4) Deferral percentage Employee name Elective deferrals Compensation (2) (3) $ $ % A. Total for all deferral percentages (column 4) % B. Number of eligible Non-Highly Compensated Employees (Column 1) C. Average Deferral Percentage for Non-Highly Compensated Employees (line A line C) D. Maximum Deferral Percentage for Highly Compensated Employees (line C x 1.25) % % 2. Highly Compensated Employees (1) (2) (3) (4) Maximum Deferral percentage for highly Maximum deferral compensated employees amount Employee name Compensation (line D above) (2) x (3) $ % $

13 SEP IRA/SARSEP IRA Adoption Agreement Used to establish a SEP IRA Plan or transfer an existing SARSEP IRA Plan E 1 Employer information Note: A new SARSEP cannot be established after December 31, If you re an Employer with an existing SARSEP, you may transfer to an OppenheimerFunds SARSEP. You will need to provide proof that the plan existed. Name of Plan: Simplified Employee Pension Plan ( ) Name of Employer Contact name 1 Telephone number Business street address Employer Tax Identification number City State Zip Ending date of fiscal year ( ) address Fax number The Employer is a (check one): Sole Proprietorship (Owner-Employee only) Corporation/Partnership Sole Proprietorship (with employees) 2 Eligibility requirements You must complete Parts A and B. Please complete Part C to exclude employees described in that section. Each Employee of the Employer who meets the eligibility requirements specified below shall become a Participant on the first day of the Plan Year during which such requirements are attained. A. Service requirement Employees must have performed service for the Employer during at least years (shall not exceed three of the immediately preceding five years); and B. Age requirement (check one) None Employees must attain the age of (shall not exceed 21); and C. Class requirements (optional) All employees will be eligible to participate in the Plan with the exception of the following (check one or more): Employees with total Compensation during the tax year of less than $550 (as adjusted annually pursuant to Code Section 408(k)(8)). Nonresident Alien Employees who have received no earned income from the Employer that constitutes earned income from sources within the United States. Employees who are included in a unit of employees covered by a collective bargaining agreement that was preceded by good faith bargaining over retirement benefits. 1. This person is responsible for submitting contributions to OppenheimerFunds. OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity. RE Page 1 of 4

14 3 Annual employer contributions E Please check A, B, C, D or E and complete, if applicable. Nonintegrated Allocation Formulas Employer Contributions to the Plan for a Plan Year, if any, shall be made in accordance with the terms of the Plan and the Employer s election below, provided that the contribution on behalf of each Participant is limited to the lesser of 25% of the Participant s Compensation for the Plan Year or $53,000, as adjusted under Code Section 415(d). For purposes of this limit, Compensation cannot exceed $265,000 (as adjusted under Code Section 401(a)(17)(B)). For purposes of the 25% limitation described in the preceding sentence and the formulas below, a Participant s Compensation does not include any Elective Deferral described in Code Section 402(g)(3) or any amount that is contributed by the Employer at the election of the Employee and that is not includable in the gross income of the Employee under Code Sections 125, 132(f)(4) or 457. A. Discretionary Nonintegrated Plan The Employer s discretionary contribution, if any, shall be allocated to the Account of each Participant in the same proportion as such Participant s Compensation (not to exceed the lesser of 25% of Compensation or $53,000, as adjusted under Code Section 415(d)) bears to all Participants Compensation for that year. B. Definite Nonintegrated Plan The Employer shall make a contribution of the lesser of % (not to exceed 25%) of each Participant s Compensation for the Plan Year, or $53,000, as adjusted under Code Section 415(d). C. Flat-Dollar Plan The Employer shall make a contribution of $ for each Participant (not to exceed the lesser of 25% of the Participant s Compensation or $53,000, as adjusted under Code Section 415(d)). Integrated Allocation Formulas These options may not be used if the Employer maintains another SEP or qualified plan that provides for permitted disparity or imputes disparity (i.e., integrated with Social Security) pursuant to Code Section 401(l). D. Discretionary Integrated Plan The Employer s discretionary contribution, if any, shall be allocated to the Account of each Participant as provided in Section 4.2(d) of the Plan. E. Definite Integrated Plan The Employer shall contribute an amount equal to % (i.e., the base contribution percentage which must not be less than 3%) of each Participant s Compensation for the Plan Year, up to the Integration Level plus % (i.e., the excess contribution percentage, not less than 3% and not to exceed the base contribution percentage by more than the lesser of: (i) the base contribution percentage or (ii) the maximum disparity rate) of such Participant s Compensation in excess of the Integration Level. However, for any Participant who has exceeded the Cumulative Permitted Disparity Limit, the Employer will contribute an amount equal to the excess contribution percentage multiplied by the Participant s total Compensation. The Integration Level shall be equal to the Taxable Wage Base or such lesser amount elected by the Employer below: The Integration Level is equal to: (check one) The Taxable Wage Base (i.e., the contribution and benefits base in effect under Section 230 of the Social Security Act at the beginning of the Plan Year: $118,500 for year 2015; or % of the Taxable Wage Base (not to exceed 100%). Except as provided below, the maximum disparity rate for a Definite Integrated Plan is equal to the lesser of: (i) 5.7%; or (ii) The applicable percentage determined in accordance with the table below: If the Integration Level is: More than But not more than Applicable percentage is $0 X 1 5.7% X 1 80% of the Taxable Wage Base 4.3% 80% of the Taxable Wage Base Y 2 5.4% If the Integration Level is equal to the Taxable Wage Base, the applicable percentage is 5.7%. 1. X = The greater of $10,000 or 20% of the Taxable Wage Base. 2. Y = Any amount more than 80% of the Taxable Wage Base but less than 100% of the Taxable Wage Base. RE Page 2 of 4

15 4 Annual employee elective deferrals E If only Employer Contributions will be made to the Plan, check A and go to Section 5. If the Plan permits Employee Elective Deferrals, please complete this entire Section. Please note that Elective Deferrals are not permitted if the Employer (1) did not maintain a SARSEP on December 31, 1996; (2) at any time during the prior Plan Year had more than 25 employees who would have been eligible to participate; (3) has any leased employees within the meaning of Code Section 414(h)(2); (4) is a governmental or tax-exempt entity; or (5) has eligible employees whose taxable year is not the calendar year. A. Employees will not be permitted to make Elective Deferrals to the Plan. B. Employees will be permitted to make Elective Deferrals pursuant to Section 4.4 of the Plan, provided an Employee has executed the OppenheimerFunds Simplified Employee Pension Salary Reduction Agreement. A salary reduction agreement may specify a percentage or a dollar amount by which the Participant reduces his/ her Compensation. The Employer shall not apply the salary reduction agreement to a bonus unless the salary reduction agreement specifies its application to bonuses. A Participant s total Elective Deferrals for the Plan Year may not exceed percent ( %) of Compensation (not including the Participant s Elective Deferrals and Employer Contributions) for the Plan Year (no more than 25%). C. Catch-Up Elective Deferrals. An eligible employee who has or will attain age 50 or over by the end of the calendar year: May make catch-up Elective Deferral contributions up to the catch-up limit in effect under Code Section 414(v) for the year. May not make catch-up Elective Deferral contributions for the year. D. A Participant may revoke a salary reduction agreement: Once during any Plan Year but not later than (date) of the Plan Year; As of the first day of any month; or Other (specify, must be at least once a year). E. A Participant who revokes his/her salary reduction agreement may file a new salary reduction agreement with an effective date: No earlier than the first day of the next Plan Year; As of the first day of any month subsequent to the month in which he/she revoked a salary reduction agreement; or Other (specify, must be at least once a year). F. A Participant may modify his/her salary reduction agreement to increase or decrease the rate of deferral as of the following date: / /. (month) (day) (year) 5 Top-heavy contributions Unless another SEP plan or Section 401(a) qualified plan of the Employer is designated in the space below to satisfy the top-heavy contribution requirements of Code Section 416, for each Plan Year the Plan is top heavy, the Employer will make a minimum contribution to the account of each Participant who is a Non-Key Employee, which, in combination with other Employer Contributions, if any, shall be equal to the lesser of 3% of such Participant s Compensation or a percentage of Compensation equal to the percentage of Compensation at which Elective Deferrals and Employer Contributions are made under the Plan for the year for the key employee for whom such percentage is the largest. The top-heavy contribution requirement shall be satisfied by (please check one): A. This Plan. B. (name of other qualified plan or SEP plan of the Employer). 6 Effective date Please check one. A. The Plan shall become effective as of the first day of the Employer s current fiscal year. B. The Plan shall become effective as of the following date: / /. (month) (day) (year) RE Page 3 of 4

16 7 Plan year E Please check one. A. The Plan Year shall be the calendar year ending each December 31. B. The Plan Year shall be the Employer s fiscal year. 8 Contribution submission and administrative reports A. Contribution Processing System (CPS) B. Self Set-up C. Administrative Reports All retirement plan contributions are submitted to OppenheimerFunds using the online Contribution Processing System (CPS). CPS is an Internet-based system that allows plan sponsors to submit retirement plan contributions online via Automated Clearing House (ACH) or by check. CPS includes the capability to receive confirmation of submitted contributions instantaneously, as well as the ability of the plan sponsor to review historical records of past contributions. CPS is the only method for a plan sponsor to submit contributions to OppenheimerFunds. Definitions of payment methods for contributions. ACH: Electronically withdraws the contribution dollar amount from your bank account once your contribution instructions are entered into the system. Check: Once you enter your contribution instructions into the system a confirmation number is generated to enter in the memo field of your check. OppenheimerFunds will the Plan Contact upon establishment of the plan (See Section 1). Upon this notification the Plan Contact will be able to self set-up a user ID, password and payment method. The Participant Summary and Transaction Detail reports are designed to help you to administer your retirement plan. These reports are in addition to the quarterly participant statements and are available monthly, quarterly, annually or on a fiscal-year basis. Register to obtain these reports at oppenheimerfunds.com. Click on "Access Accounts & Services" Click on "Plan Sponsors" Register 9 Employer s statement The Employer named above hereby adopts the Plan in accordance with its terms and conditions and agrees to provide each Participant with a current copy of this Adoption Agreement, the Prototype document, and, if Employees are permitted to make Elective Deferrals, the Notice to Employees. The Employer hereby allows allocation and dollar amount changes to be made to participant accounts through the Contribution Processing System (CPS). On behalf of the Employer named above, the undersigned hereby authorizes OppenheimerFunds Services to debit the designated bank account for purchases of shares to the accounts listed under the referenced plan. I hereby represent that I am an authorized representative of the Employer named above and am authorized by the Employer to enter into this Agreement on behalf of the Employer. The Employer agrees that OppenheimerFunds Services is purchasing such shares voluntarily at my request upon submission of contribution data via the Internet and shall not be liable for any loss arising from any delay in processing or failure to process such purchases. If the Employer designates a different bank account for this purpose, the Employer agrees to notify OppenheimerFunds Services promptly in writing. In addition, the Employer agrees to give adequate prior notice (normally 15 days) to OppenheimerFunds Services to terminate this service. The Employer agrees to notify OppenheimerFunds in the event that the Employer-appointed CPS Contact leaves the company and a replacement is named. Allocation and dollar amount changes may be made by the Employer to participant accounts through the Contribution Processing System. If a transaction cannot be made because of insufficient funds or because the account has been closed, the Employer acknowledges that this service will be canceled. The Employer further acknowledges that any of the features and privileges described herein may be modified, suspended or canceled by OppenheimerFunds Services or the applicable fund at any time without notice and that all services described herein are subject to the terms of the applicable fund prospectus, which the Employer acknowledges that it has received and read. Name (Please print) Title Signature Title RE Page 4 of 4

17 OppenheimerFunds Prototype Document Simplified Employee Pension Plan Terms and Conditions Article 1 Introduction By executing the related Adoption Agreement, the Employer has established a Simplified Employee Pension Plan intended to be in accordance with Code Section 408(k), as amended from time to time. Article 2 Definitions 2.1 Account means an OppenheimerFunds Individual Retirement Account which meets the requirements of Code Section 408(a). 2.2 Adoption Agreement means the accompanying instrument executed by the Employer which establishes a definite, written allocation formula and participation requirements and whereby the Plan is adopted. 2.3 Code means the Internal Revenue Code of 1986, as amended. 2.4 Compensation means: (a) Wages, salaries, and fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer maintaining the Plan to the extent that the amounts are includable in gross income (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements, or other expense allowances under a non-accountable plan (as described in Section (c) of the Regulations)), and excluding the following: (i) Employer contributions to a plan of deferred compensation which are not includable in the Employee s gross income for the taxable year in which contributed, or Employer contributions under a Simplified Employee Pension Plan, or any distributions from a plan of deferred compensation; (ii) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (iii) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (iv) Other amounts which receive special tax benefits such as premiums for group-term life insurance (but only to the extent the premiums are not includable in the gross income of the Employee). (b) For self-employed individuals covered under the Plan, Compensation will mean earned income as defined in Code Section 401(c)(2). (c) Compensation shall only include that Compensation which is actually paid to the Participant during the year. (d) Notwithstanding paragraph (a), above, Compensation shall include any elective deferral described in Code Section 402(g)(3) or any amount that is contributed by the Employer at the election of the Employee and that is not includable in the gross income of the Employee under Code Sections 125, 132(f)(4), 402(e)(3), 402(h) or 403(b). (e) The annual Compensation of each Participant taken into account under the Plan for any year shall not exceed $230,000 for 2008 (as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17)(B)). If a Plan determines Compensation on a period of time that contains fewer than 12 calendar months, then the annual Compensation is an amount equal to the annual Compensation limit for the calendar year in which the Compensation period begins multiplied by the ratio obtained by dividing the number of full months in the period by Cumulative Permitted Disparity Limit means, effective for Plan Years beginning on or after January 1, 1995, 35 total cumulative permitted disparity years. Total cumulative permitted disparity years means the number of years credited to the Participant for allocation or accrual purposes under this Plan or any qualified plan described in Code Section 401(a) (whether or not terminated) ever maintained by the Employer. For purposes of determining the Participant s Cumulative Permitted Disparity limit, all years ending in the same calendar year are treated as the same year. If the Participant has not benefited under a defined benefit or target benefit plan for any year beginning on or after January 1, 1994, the Participant has no Cumulative Permitted Disparity limit. 2.6 Deferral Percentage means the ratio (expressed as a percentage) of the sum of the Elective Deferrals (other than catch-up Elective Deferrals) under the Plan on behalf of an Employee for the Plan Year to the Employee s Compensation for the Plan Year. The Deferral Percentage of an Employee who is eligible to make Elective Deferrals, but who does not make a deferral during the year, is zero. 2.7 Elective Deferrals means contributions made during the Plan Year by the Employer, at the election of the Participant, in lieu of cash compensation and shall include contributions made pursuant to a salary reduction agreement. No Elective Deferrals may be based on compensation an Employee could have received before adoption of the Plan and execution by the Employee of a salary reduction agreement. 2.8 Employee means any individual who is employed by the Employer. 2.9 Employer means each person or organization who adopts this Plan by executing an Adoption Agreement, and any other person or organization which is a member with the Employer of the same controlled group of corporations as defined in Code Section 414(b), which is a trade or business (whether or not incorporated) under the same common control as defined in Code Section 414(c) or which is a member of an affiliated service group within the meaning of Code Section 414(m) or any entity required to be aggregated with the Employer under Code Section 414(o) Employer Contributions means contributions made by the Employer which are not Elective Deferrals Highly Compensated Employee means an individual defined in Code Section 414(q) who during the current or preceding year: (a) was a 5% owner of the Employer as defined in Code Section 416(i)(1)(B)(i); or (b) received Compen sa tion in excess of $105,000, as adjusted pursuant to Code Section 414(q)(1), and was in the top-paid group (the top 20% of Employees by Compensation) Integration Level means the lesser of the Taxable Wage Base or the amount elected by the Employer in the Adoption Agreement Key Employee means any Employee or former Employee (and the beneficiaries of these employees) who at any time during the preceding Plan Year is: (a) an officer of the Employer if such individual s annual Compensation was greater than $150,000 (as adjusted under Code Section 416(i)(1)(A); or (b) a 1% owner of the Employer with Compensation greater than $150,000; or OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.

18 (c) a 5% owner of the Employer as defined in Code Section 416(i)(1)(B)(i). The determination of who is a Key Employee will be made in accordance with Code Section 416(i) (1) and the regulations thereunder Maximum Disparity Rate is equal to the lesser of: (a) 2.7%, or (b) the applicable percentage determined in accordance with the table below: If the Integration Level used is equal to the Taxable Wage Base, the applicable percentage is 2.7%. For purposes of the above allocation, only the first $230,000 (as adjusted in accordance with Code Section 401(a)(17)(B)) of a Participant s Compensation can be used. In no event can the amount allocated to each Participant s Account exceed the lesser of 25% of the Participant s Compensation or $46,000, as adjusted under Code Section 415(d) Non-Highly Compensated Employee means an Employee of the Employer who is not a Highly Compensated Employee Non-Key Employee means any Employee who is not a Key Employee Owner-Employee means an individual who owns more than 10% of either the capital interest or profits interest of the Employer which is an unincorporated business Participant means an Employee who meets the eligibility requirements specified in the Adoption Agreement Plan means this Simplified Employee Pension Plan as established in accordance with the Adoption Agreement Plan Year means the calendar year ending each December 31, or at the election of the Employer, the Employer s fiscal year. The initial Plan Year shall commence on the effective date of the Plan as set forth in the Adoption Agreement. The same Plan Year must be used for both participation and contribution/allocation purposes Taxable Wage Base means the contribution and benefit base in effect under Section 230 of the Social Security Act in effect as of the beginning of the Plan Year Top-Heavy Plan means this Plan is a Top- Heavy Plan for any Plan Year if, as of the last day of the preceding Plan Year, the total of elective and non-elective contributions made on behalf of Key Employees for all the years this Plan has been in existence exceeds 60% of such contributions for all Employees. If the Employer maintains (or maintained within the preceding Plan Year) any other SEP or qualified plan in which a Key Employee participates (or participated), the contributions, the account balances or present value of accrued benefits, whichever is applicable, must be aggregated with the contributions made to the Plan. The Contributions (and account balances and present value of accrued benefits, if applicable) of an Employee who ceases to be a Key Employee or of an individual who has not performed services for the Employer in the preceding Plan Year shall be disregarded. The identification of Key Employees and the top-heavy calculation shall be determined in accordance with Code Section 416 and any guidance thereunder. For purposes of determining whether a Plan is a Top-Heavy Plan, Elective Deferrals are considered Employer Contributions. Article 3 Participation 3.1 Coverage. The Plan shall cover each Employee (including all Employees of controlled groups as described in Section 414(b) of the Code, groups under common control as described in Section 414(c) of the Code, and affiliated service groups as described in Section 414(m) of the Code, and all leased employees who are not employees of the Employer but are required to be treated as employees of the Employer under Section 414(n) of the Code, and all employees required to be aggregated under Section 414(o) of the Code) who satisfies the service requirements set forth in the Adoption Agreement. 3.2 Elective Deferral Participation Requirement. If the Employer elects in the Adoption Agreement to permit Elective Deferrals, Elective Deferrals shall only be permitted for a Plan Year if the Employer had no more than 25 Employees at all times during the prior Plan Year (or such other number as stated in Code Section 408(k) (6)(B)) who were eligible to participate in the Plan and not less than 50% of the Employees eligible to participate elect to have Elective Deferrals contributed to their Accounts on their behalf. If the Employer is a new Employer which had no Employees during the prior Plan Year, the Employer will meet the limitation of Code Section 408(k)(6)(B) if it had 25 (or such other number as stated in Code Section 408(k)(6)(B)) or fewer Employees throughout the first 30 days that it was in existence. 3.3 Failure to Meet Elective Deferral Participation Requirement. If the 50% requirement of Section 3.2, above, is not satisfied as of the end of any Plan Year, all Elective Deferrals made by Employees for that Plan Year shall be considered disallowed deferrals, i.e., IRA contributions that are not Elective Deferrals. If the Integration Level: The Employer shall notify each affected Employee, within 2½ months after the end of the Plan Year to which the disallowed deferrals relate, that the deferrals are no longer considered Elective Deferrals. Such notification shall specify the amount of the disallowed deferrals and the calendar year of the Employee in which they are includable in income. The Employer must also provide an explanation of applicable penalties if disallowed deferrals are not withdrawn in a timely fashion. The notice to an affected Employee must state specifically: (a) The amount of the disallowed deferrals; (b) That the disallowed deferrals are includable in the Employee s gross income for the calendar year or years in which the amounts deferred would have been received by the Employee in cash had the Employee not made an election to defer, and that the income allocable to such disallowed deferrals is includable in the year withdrawn from the Account; and (c) That the Employee must withdraw the disallowed deferrals (and allocable income) from the Account by April 15 following the calendar year of notification by the Employer. Those disallowed deferrals not withdrawn by April 15 following the year of notification will be subject to the IRA contribution limitations of Code Sections 219 and 408 and thus, may be considered an excess contribution to the Employee s Account. Disallowed deferrals may be subject to the 6% tax on excess contributions under Section If income allocable to disallowed deferral is not withdrawn by April 15 following the year of notification by the Employer, the income may be subject to the 10% tax on early distributions under Section 72(t) when withdrawn. Disallowed deferrals are reported in the same manner as excess contributions as described in Article 5. Article 4 Contributions 4.1 Establishment of Account. When a Participant first becomes eligible for contributions, the Employer shall arrange for the Participant to establish an Account. The establishment of an Account for an Employee shall be made at or prior to the time a contribution is made by the Employer. The Employer may execute any necessary documents on behalf of an Employee who is entitled to an Employer contribution if the Employee is unable or unwilling to execute such documents or the Employer is unable to locate the Employee. Contributions shall be made directly to the trustee or custodian so specified by the Account. is more than: but not more than: the applicable percentage is: $0 X* 2.7% X* 80% of Taxable Wage Base 1.3% 80% of Taxable Wage Base Y** 2.4% TWB = Taxable Wage Base X* = The greater of $10,000 or 20% of the Taxable Wage Base Y** = Any amount more than 80% of the Taxable Wage Base but less than 100% of the Taxable Wage Base

19 4.2 Employer Contributions. Each Plan Year, the Employer shall make contributions, if any, to the Plan in accordance with the Employer s election in Section 3 of the Adoption Agreement. Such Employer Contributions shall be allocated to the Account of each Employee who satisfies the eligibility requirements of Section 2 of the Adoption Agreement as follows: (a) Discretionary Non-Integrated Plans If the Employer elects in the Adoption Agreement a discretionary non-integrated Plan, Employer Contributions, if any, shall be allocated to each Participant s Account in the same proportion as such Participant s Compensation for the Plan Year bears to all Participants Compensation for that Plan Year. (b) Definite Non-Integrated Plans If the Employer elects in the Adoption Agreement a definite non-integrated Plan, the Employer will allocate to each Participant s Account that percentage of the Participant s Compensation as specified in the Adoption Agreement. (c) Flat Dollar Plans If the Employer elects in the Adoption Agreement a flat dollar Plan, the Employer will allocate such flat dollar amount as specified in the Adoption Agreement to each Participant s Account. (d) Discretionary Integrated Plans If the Employer elects in the Adoption Agreement a discretionary integrated Plan (i.e., correlating benefits or contributions under the Plan with those under Social Security), Employer Contributions, if any, shall be allocated to each Participant s Account as follows: Step One: Contributions will be allocated to each Participant s Account in the ratio that the Participant s total Compensation bears to all Participants total Compensation, but not in excess of 3% of the Participant s Compensation. Step Two: Any contributions remaining after the allocation in Step One will be allocated to each Participant s Account in the ratio that the Participant s Compensation for the Plan Year in excess of the Integration Level bears to the Compensation of all Participants in excess of the Integration Level, but not in excess of 3% of the Participant s Compensation. For purposes of this Step Two, in the case of any Participant who has exceeded the Cumulative Permitted Disparity Limit, such Participant s total Compensation for the Plan Year will be taken into account. Step Three: Any contributions remaining after the allocation in Step Two will be allocated to each Participant s Account in the ratio that the sum of the Participant s total Compensation and Com pen sation in excess of the Integration Level bears to the sum of all Participants total Compensation and Compensation in excess of the Integration Level, but not in excess of the Maximum Dis par i ty Rate. For purposes of this Step Three, in the case of any Participant who has exceeded the Cum u la tive Permitted Disparity Limit, two times such Participant s total Compensation for the Plan Year will be taken into account. Step Four: Any remaining Employer Contributions will be allocated to each Participant s Account in the ratio that each Participant s Total Com pen sa tion for the Plan Year bears to all Participants total Compensation for that Plan Year. (e) Definite Integrated Plans If the Employer elects in the Adoption Agreement a definite integrated Plan, the Employer shall allocate to each Participant s Account the amount determined in accordance with the formula specified in the Adoption Agreement. Employment by a Participant on the last day of the Plan Year cannot be a condition to an allocation of an Employer Contribution under the Plan for that Plan Year. However, the Employer shall not make a contribution for a particular Plan Year for any Employee whose compensation (as defined in Code Section 414(q)(7)) is less than $500 during that Plan Year (or such larger amount as the Commissioner of Internal Revenue may prescribe). Except as provided in Sections 4.2(d) and 4.2(e), all Employer Contributions to the Plan shall bear a uniform relationship to the total Compensation (not to exceed $230,000, as adjusted pursuant to Code Section 401(a)(17)(B)) of each Participant. If the Employer elects in the Adoption Agreement to make flat dollar contributions, such contributions shall be deemed to bear a uniform relationship to the total Compensation of each Participant. 4.3 Limitation on Employer Contributions. The total of the Employer Contributions (as determined under Section 4.2) allocated to a Par ti ci pant s Account for any Plan Year shall not exceed the lesser of 25% of the Participant s Compensation or $46,000 (as adjusted under Code Section 415(d)). For purposes of the 25% limitation described in the preceding sentence, a Participant s Compensation does not include any Elective Deferral described in Code Section 402(g)(3) or any amount that is contributed by the Employer at the election of the Employee and that is not includable in the gross income of the Employee under Code Sections 125, 132(f)(4) and Elective Deferrals. If elected by the Employer in the Adoption Agreement, each Participant may make Elective Deferrals, which the Employer shall contribute to the Participant s Account in lieu of cash payments, through either single sum or continuing contributions, or both, pursuant to a salary reduction agreement, provided: (a) the Employer maintained a Simplified Employee Pension Plan on December 31, 1996, that permitted Elective Deferrals; (b) the Employer did not have more than 25 Employees eligible to participate in the Plan at any time during the preceding year (or such other number as stated in Code Section 408(k)(6)(B)); (c) an election under this Section is made or in effect for at least 50% of the Employees of the Employer; (d) the Deferral Percentage (other than catch-up Elective Deferrals determined before application of the Deferral Percentage) for each Highly Compensated Employee is not more than the product of 1.25 times the Deferral Percentage for Non-Highly Compensated Employees. The Deferral Percentage calculation and the number and identity of Highly Compensated Employees shall be made on the basis of the Employer and all entities required to be aggregated with the Employer as described in Section 2.9. The determination and treatment of the Elective Deferrals and Deferral Percentage of any Participant shall be made in accordance with Code Section 408(k)(6) and 414(v) and any guidance thereunder; (e) the Employer is not a state or local government or political subdivision thereof, or an agency or instrumentality thereof or a taxexempt organization; (f) no deferral election is based on Compensation an Employee received, or had a right to receive, before executing the salary reduction agreement; (g) the Employer does not have any leased em ploy ees, within the meaning of Code Section 414(n). 4.5 Limitation on Elective Deferrals. A Participant s Elective Deferrals in any Plan year may not exceed the lesser of 25% of his or her Compensation (determined without including his or her Elective Deferrals) or the limitation under Code Section 402(g)(1) (without regard to Code Section 402(g)(1)(C)) based on all of the plans of the Employer, unless the Employee would attain age 50 or over by the end of the calendar year. For such Employee, the limits in this Section 4.5 are increased by the catch-up Elective Deferral limit for the year. The limitation under Code Section 402(g)(1) (without regard to Code Section 402(g)(1)(C)) is $15,500 for After 2007, the limitation will be adjusted by the Secretary of the Treasury for cost-ofliving increases under Code Section 402(g)(4). Such adjustments will be in multiples of $500. Each Employee s Elective Deferrals under this Plan may be based only on the first $230,000 (as adjusted in accordance with Code Section 401(a)(17)(B)) of Compensation for the Plan Year. 4.6 Catch-up Elective Deferral Contributions. If selected by the Employer in the Adoption Agreement, an eligible Employee who would attain age 50 or over by the end of the calendar year can choose to have an additional amount of Elective Deferrals made by the Employer, up to the catch-up Elective Deferral contribution limit for the year, over any dollar or percentage limit applicable to eligible employees in the absence of any catch-up Elective Deferral contributions. The catch-up Elective Deferral contribution limit is $5,000 for After 2007, the limit will be adjusted by the Secretary of the