Investment Plan Benefits

Transcription

1 Investment Plan Benefits The Investment Plan of the Major League Baseball Players Benefit Plan (the Investment Plan ) helps you save now for your financial needs during retirement. Important! For more information about your investment benefits, refer to Administration. As a member of the Investment Plan, you can accumulate a significant amount of cash that you can use to help provide financial security during retirement through tax-deferred investments and growth. The Investment Plan allows you to: put aside money on a pre- and post-tax basis; benefit from tax-deferred investment growth; and invest in a range of professionally managed investment funds. The Investment Plan is administered by the recordkeeper (currently Vanguard). 129

2 In This Section See Page Investment Plan Overview Eligibility, Enrollment, and More Who Is Eligible Enrolling in the Investment Plan When Participation Ends How the Investment Plan Works Your Contributions Major League Club Contributions Becoming Vested Managing Your Investments Investment Responsibility Your Investment Choices Changing Your Investment Elections Balancing Risk and Reward Keeping Track of Your Account Withdrawals Non-Hardship Withdrawals In-Service Hardship Withdrawals Collecting Your Benefit Termination of Active Status Requesting a Distribution Valuation Date Distribution Options When You Terminate Employment with a Club When You Reach Your Normal Retirement Age When You Die When You Must Begin Receiving a Distribution Paying Taxes Tax Treatment of Investment Plan Contributions and Distributions Eligible Rollover Distributions Additional Tax on Early Distributions Applying for Investment Plan Benefits Claims Appeal Process Notices Following Appeal

3 INVESTMENT PLAN OVERVIEW You participate in the Investment Plan You can contribute to the Investment Plan The Major League clubs make a contribution to your Investment Plan account You vest in your Investment Plan account balance You choose You can begin receiving your account balance Your beneficiary receives Generally, after you have completed one day on the active list for a Major League club. The maximum amount you can contribute is $53,000 for 2015 $18,000 (for 2015) on a pre-tax basis and $35,000 on a post-tax basis. The maximum amount of contributions is automatically deducted in equal installments from your paycheck unless you affirmatively reduce the contribution percentage or elect not to make contributions. These dollar limits may increase further in later years. As agreed between the negotiating parties in 2012, the Major League clubs made a 2012 contribution to the Investment Plan accounts of players who earned at least one quarter of credited service in the 2012 championship season. The clubs may make a contribution in other years, as provided for in the agreements between the clubs and the Players Association. If a club makes this type of contribution, the contribution counts toward the maximum $53,000 contribution (for 2015), so the contribution may result in a reduction of the amount of your post-tax contributions. Immediately. You are always 100% vested in all the contributions in your Investment Plan account. How your account is invested among the mutual funds available through the Investment Plan. As of your normal retirement date, or earlier in certain circumstances. The total account balance if you die before it is paid out to you. ELIGIBILITY, ENROLLMENT, AND MORE This section explains who is eligible to participate in the Investment Plan, and how and when to enroll. Who Is Eligible You are eligible to participate in the Investment Plan if you were a member of the Investment Plan on March 31, After such date, a player with one day of credited service with a Major League club during a championship season is eligible to participate in the Investment Plan, as well as a manager, a coach, a trainer, or an assistant trainer/physical therapist who is working during a championship season and designated by a club as eligible to participate in the Investment Plan. (See Credited Service in Understanding Your Benefits for a complete explanation of how active service is determined.) 131

4 Enrolling in the Investment Plan Automatic Enrollment! Once you are eligible to participate in the Investment Plan, you will be automatically enrolled and contributions will be deducted from your paycheck. You must complete and return a Request for Change form to your club s payroll office if you do not want to participate in the Investment Plan or if you want to contribute less than the maximum contribution amount. 132 When you meet the eligibility requirements, you are immediately enrolled in the Investment Plan. Contributions will be deducted automatically from your first paycheck after you meet the eligibility requirements, unless you return a Request for Change form to your club s payroll office to reduce your contribution amount or elect not to make contributions. (See Your Contributions on page 133 for the amounts that are deducted from your paycheck.) Although you are automatically enrolled in the Investment Plan once you are eligible to participate in the Investment Plan, you will need to contact the Benefit Plan Office or your club s payroll office to designate a beneficiary for your Investment Plan account balance in case you die before it is paid out to you. You must contact the Investment Plan s recordkeeper (currently Vanguard) to identify your choices for the investment of the money in your Investment Plan account. Remember, if you do not want to participate or if you want to reduce your contribution amount, you must return a Request for Change form to your club s payroll office. Otherwise, the maximum amount of pre-tax and post-tax contributions will be deducted automatically from your pay in equal installments. When contributions have been deducted automatically from your paycheck for the very first time, you may request that those contributions be refunded to you, without any tax consequences, but you must make this request within 90 days after the date on which your first paycheck was issued. Please contact the Benefit Plan Office in writing to request a refund of the contributions. Naming a Beneficiary When you become a member of the Investment Plan, you are asked to name a beneficiary. A beneficiary is a person or persons who would receive the balance in your Investment Plan account if you die before it is paid out to you. You must file your beneficiary designation, which is included with your enrollment form, with the Benefit Plan Office. Your designation goes into effect when it is received by the Benefit Plan Office. If you are single, you can name anyone as your beneficiary by completing a beneficiary designation form and sending it to the Benefit Plan Office. If you later marry, your new spouse will automatically replace the beneficiary you named earlier. If you do not want your new spouse to be your beneficiary, you will need to send a new beneficiary designation to the Benefit Plan Office, even if you are designating the same person whom you previously named. Your spouse will have to sign that new beneficiary designation before a notary public, in order to consent to your designation of someone else as the beneficiary. If you are married when you first become a member of the Investment Plan, your spouse is automatically your beneficiary. If you do not want your spouse to be your beneficiary, you will need to send a written beneficiary designation to the Benefit Plan Office, and your spouse will have to sign that beneficiary designation before a notary public, in order to consent to your designation of someone else as the beneficiary. If you divorce or get an annulment after you have become a member of the Investment Plan, your former spouse will no longer be your automatic beneficiary. However, if you previously signed a beneficiary designation that named your former spouse as your beneficiary, your divorce or annulment will not affect that beneficiary designation. If you want to name a different person as your beneficiary, you will need to send a new beneficiary designation to the Benefit Plan Office. If you remarry, your new spouse will automatically become your beneficiary. If you do not want your new spouse to be your beneficiary, you will need to send a new beneficiary designation to the Benefit Plan Office, even if you are designating the same person whom you

5 previously named. Your spouse will have to sign that new beneficiary designation before a notary public, in order to consent to your designation of someone else as the beneficiary. However, if there is a qualified domestic relations order ( QDRO ) that provides for your former spouse to remain a beneficiary under the Investment Plan with respect to all or part of your account, that QDRO will take precedence over the right that anyone else (including a new spouse) would have as a beneficiary. If you do not have a named beneficiary or if your beneficiary dies before you do, your account will be paid to your spouse. If you are not married, your account will be paid to your children, or, if you have no children, to your parents. If you have none of the above relatives, your account will be paid to your estate. In all of these cases, if there is a QDRO in effect, the QDRO will take precedence. Changing Your Beneficiary You may change your beneficiary at any time by filing a new beneficiary designation form, but the change does not take effect until the Benefit Plan Office receives your signed form. Remember, if you are married and you want to select someone other than your spouse, your spouse must consent in writing and your spouse s consent must be witnessed by a notary public. When Participation Ends Although you may leave your account balance in the Investment Plan until you are ready to receive a distribution, you will not be able to continue contributing to the Investment Plan after any of the following events: you retire or otherwise terminate employment (whether voluntarily, involuntarily, or as a result of a disability); you are a player and are no longer on the active list (see Terms for a detailed definition of active list) or you are a manager, a coach, a trainer, an assistant trainer/physical therapist and are no longer on a club s designated member list; the Investment Plan is terminated or discontinued; or you die. Note: If you leave a Major League Baseball roster during the season, you have the option to have the remaining pre-tax, post-tax, and catch-up contributions for the year deducted from your last paycheck, to the extent that you have available wages. HOW THE INVESTMENT PLAN WORKS Both you and the Major League clubs may make contributions to your Investment Plan account. You are always 100% vested in your account. Your Contributions Unless you elect not to make contributions, you make the following types of contributions to the Investment Plan once you are eligible to participate: pre-tax contributions, including catch-up contributions if you are age 50 or older; and post-tax contributions. You may also make rollover contributions with money that you are entitled to receive from certain other retirement plans. 133

6 Catch-Up Contributions Catch-up contributions allow you to increase your savings once you reach age 50 so that your retirement savings can catch up with your retirement needs. 134 Pre-tax Contributions The maximum amount of pre-tax contributions ($18,000 in 2015) is automatically deducted from your paychecks in equal amounts when you become eligible to participate, unless you opt out of the Investment Plan or reduce your contribution amounts. (See Changing Your Contributions on page 135 for more information about changing contributions or electing not to participate.) Pre-tax contributions are deposited into your pre-tax account before any federal, state, and, in some cases, local income taxes are withheld. This means that your income taxes are deferred to a later date you pay no income taxes on your contributions or their investment earnings while they remain in the Investment Plan. As a result, your savings can grow faster than they would if you saved the same amount through a regular savings account on a post-tax basis. Pre-tax contributions and their investment earnings will be subject to income taxes when distributed from the Investment Plan to you or your beneficiary. Pre-tax Contribution Limits You can save on a pre-tax basis up to the federal pre-tax annual maximum dollar limit. The annual pre-tax maximum dollar limit is $18,000 in Thereafter, increases in the contribution limit will be linked to cost-of-living increases. If you are making pre-tax contributions under more than one plan (i.e., you are making contributions to the Investment Plan and another plan), your total pre-tax contributions to all plans in a calendar year cannot exceed the annual deferral limit for that year ($18,000 for 2015). Catch-Up Contributions If you are age 50 or older and you have contributed the maximum pre-tax amount allowed by the IRS for a calendar year ($18,000 in pre-tax contributions in 2015), you are also eligible to make pre-tax catch-up contributions for that year. The maximum amount of catch-up contributions in 2015 is $6,000. If you are eligible, the maximum amount of pre-tax catch-up contributions will be deducted automatically from your paychecks unless you elect not to make those contributions or to reduce the amount that you contribute. Catch-up contributions are deducted from your paycheck in equal amounts on a pre-tax basis, the same as your regular pre-tax contributions. Catch-up contributions are in addition to your regular Investment Plan pre-tax contributions and are deposited into your catch-up contributions account. Your catch-up contributions will continue to be deducted from your paycheck until you change your catch-up contribution election or you reach the annual catch-up contribution limit. Catch-Up Contribution Limits The catch-up contribution limit is $6,000 in 2015, with increases in the limit after 2015 linked to cost-of-living increases. If you are eligible to make catch-up contributions and are making pre-tax contributions under more than one plan (i.e., you are making contributions to the Investment Plan and another plan), your total pre-tax contributions to all plans in a calendar year cannot exceed the annual deferral limit for that year ($18,000 for 2015) plus the annual catch-up for that year ($6,000 for 2015). Post-tax Contributions Once you are eligible to participate in the Investment Plan, the maximum amount of post-tax contributions ($35,000 in 2015) is also deducted automatically from your paychecks in equal amounts, unless you choose not to participate in the Investment Plan or you change

7 contribution amounts. (See Changing Your Contributions on page 135 for more information about changing contributions or electing not to participate.) Post-tax contributions are deposited into your post-tax account after any federal, state, and, in some cases, local income taxes are withheld from your paycheck. That means that you do not pay taxes on these post-tax contributions when you receive a distribution from the Investment Plan. However, the investment earnings on your post-tax contributions are subject to the same tax treatment as your pre-tax contributions and investment earnings on those contributions that is, the earnings are not taxed until they are distributed to you or to your beneficiary. Rollover Contributions You also may choose to roll over money into the Investment Plan from another eligible retirement plan after you have begun to participate in the Investment Plan. You may invest rollover contributions on a tax-favored basis just as you do other contributions. To make a rollover contribution, you must be entitled to receive a distribution from an eligible retirement plan, such as another employer s plan. The other employer s plan may be a: tax-qualified section 401(a) plan, including a section 401(k) plan; section 403(a) annuity plan; section 403(b) tax-sheltered annuity plan; or section 457(b) plan maintained by a state or local government. The amount must be payable to you as an employee, an alternate payee, or a surviving spouse, not to you as a non-spouse beneficiary. You may also make a rollover contribution from an individual retirement account ( IRA ). Your rollover contribution may be transferred directly from the trustee of the other plan or account to the Investment Plan trustee. Alternatively, if the other plan or account makes a distribution payable to you, you may elect to make a rollover contribution to the Investment Plan within 60 days of receiving that distribution. If you make a rollover contribution to the Investment Plan, it will be deposited in your rollover account and tracked separately from your other contributions. Moreover, any portion of your rollover contribution that consists of amounts that are includible in gross income will be accounted for separately from amounts that are not includible in gross income. Changing Your Contributions The maximum amounts of pre-tax, catch-up, and post-tax contributions are automatically deducted from your paychecks when you participate in the Investment Plan. To stop making contributions or to reduce the amount of these contributions, you must complete a Request for Change form and return it to your Major League club s payroll office. Your request will be processed as soon as administratively possible. Generally, your change will be effective on the payday following receipt of your request by the payroll department (assuming your request is received before the payroll cutoff date for your club). If You Take Military Leave If you take military leave and return to employment with a Major League club within 90 days after the end of your military leave, you can make pre-tax, catch-up, and post-tax contributions for the period you were serving in the military, up to the applicable maximums. 135

8 You are entitled to make these make-up contributions during the period that begins with your reemployment with a Major League club and ends with the shorter of five years or three times the number of years that you served in the military. If Contributions Exceed IRS Contribution Limits The Investment Plan complies with IRS limits on contributions that can be made in each plan year, and the Investment Plan has rules for refunding any contributions that exceed those limits. The rules that describe the limits and the Investment Plan s rules for making refunds are in the Plan document, which you can obtain by sending a request to the Benefit Plan Office. Major League Club Contributions In 2012, the Major League clubs made contributions to the Investment Plan accounts of players who had at least one quarter of active service during the 2012 championship season, pursuant to an agreement with the Players Association under Article XXIII of the Basic Agreement. The amount of any club contribution is determined by the parties in the Basic Agreement; however, the maximum amount a club can contribute on your behalf is limited to the maximum amount allowed by federal law ($53,000 in 2015). This IRS limit is a combined maximum for all contributions (club contributions and your pre-tax and post-tax contributions) (other than catch-up and rollover contributions) to the Investment Plan. Therefore, a club contribution in any year will limit the maximum post-tax contributions that you can make in that year. Club contributions will be credited to your club contributions account. You pay no taxes on the club contributions at the time they are made to your account or on the investment earnings on those contributions. Club contributions and their investment earnings will be subject to income taxes when you take a distribution from the Investment Plan. In any plan year in which the clubs make an Article XXIII contribution, you will receive a share of that contribution if you earned at least one quarter of a year of credited service (43 days of active service) in that season. Are You Eligible for Club Contributions? To be eligible for any club contribution in any plan year, you must have earned at least one quarter of credited service (43 days of active service) during the season that ends in that plan year. According to Article XXIII of the Basic Agreement with the Players Association, a club contributions account will be maintained for each eligible player, regardless of whether that player has contributed to the Investment Plan. The Major League clubs also retain the discretion to make other contributions to members Investment Plan accounts. Any such contribution would be credited to the discretionary QNEC account of each member who receives such a contribution. A discretionary QNEC is a qualified non-elective contribution that may be made by the clubs to members of the Investment Plan who are not highly compensated employees. The Basic Agreement does not require any club to make a QNEC. 136

9 Becoming Vested All contributions to your accounts, as well as all investment earnings, are held in a trust for your benefit. Your rights to these contributions depend on whether you have a vested (nonforfeitable) interest in your accounts. Vested means that you own the contributions and earnings in your accounts. You are always 100% vested in your contributions and any contributions made by the Major League clubs. This means that you have a right to receive all of those contributions and their investment earnings when you satisfy the requirements for distribution. (See Collecting Your Benefit on page 146 for more information about when you are eligible to receive a distribution.) MANAGING YOUR INVESTMENTS As a participant in the Investment Plan, you determine how the money you save is invested. Investment earnings play an important role in building your retirement savings. All contributions made to your account will be credited with investment gains or losses based on the performance of the investment funds you select. With the Investment Plan, you have the advantage of tax-deferred investment growth on your contributions (including rollovers) and on any club contributions. You will pay no taxes on the value of any investment gains posted to your accounts as long as this money remains in your accounts. Investment Responsibility The Investment Plan is intended to comply with the regulations of section 404(c) of ERISA. The fiduciaries of the Investment Plan are not responsible for any losses that are the direct result of investment choices that you or your beneficiaries make or are deemed to make. Your Investment Choices The Pension Committee selects the mutual funds that are available to participants in the Investment Plan. The Investment Plan currently offers a wide range of investment options. When you are eligible to participate in the Investment Plan, you may request a copy of the prospectus for each fund in which you choose to invest. To obtain a fund s prospectus before making your investment elections, call the Investment Plan s recordkeeper (currently Vanguard) at You can also review information about the funds by logging on to Vanguard s website, Before making any investment decision, be sure to read the prospectus or offering statement for each fund. To indicate how you wish to invest your contributions, call Vanguard at or go to to register and make your investment elections. Unless You Make Investment Elections Your contributions are invested in Vanguard LifeStrategy Conservative Growth Fund, unless you make other investment choices. You can redirect your assets into other investment options in the Investment Plan at any time. 137

10 A Note About the Conservative Growth Fund Your Investment Plan account balance will be invested in the Vanguard LifeStrategy Conservative Growth Fund (the Investment Plan s qualified default investment alternative), unless you make other investment elections. The Vanguard LifeStrategy Conservative Growth Fund is a fund of funds appropriate for short- to medium-term goals where you are seeking income plus some growth. It primarily holds index funds of U.S. and international stocks, plus Treasury and corporate bonds, maintaining an asset mix of roughly 40% stocks and 60% bonds and short-term cash reserves. You can direct and redirect the investment of your existing Investment Plan account balance and your future contributions into other mutual funds available under the Investment Plan at any time. (See Changing Your Investment Elections on page 141 for more information about diversification.) Investment Funds You can direct your account balance among four Vanguard LifeStrategy funds and 23 other funds that specialize in a particular asset class or style of investing. The funds offer varying levels of risk and return. You pick the fund or funds that best fit your long-term investment goals. If you do not affirmatively direct the investment of your account balance, you will be deemed to have elected to invest in the Investment Plan s qualified default investment alternative, the Vanguard LifeStrategy Conservative Growth Fund applicable to your expected retirement age. To have a fund prospectus sent to you, contact the Investment Plan s recordkeeper (currently Vanguard) at or at their website, Note: When making investment decisions, please remember that performance data for funds reflect past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so investors shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit Figures for periods of less than one year are cumulative returns. All other figures represent average annual returns. Vanguard LifeStrategy Funds: All-in-One Investments The Vanguard LifeStrategy funds let you choose a single fund consisting of a predetermined mix of stock and bond funds. Fund Name Fund Type Balanced (s and Bonds) Objective/Strategy Risk Level Vanguard LifeStrategy Income Fund 0723 Vanguard LifeStrategy Conservative Growth Fund 0724 Seeks to provide current income and some capital appreciation. Conservative to Moderate Balanced (s and Bonds) Seeks to provide current income and low to moderate capital appreciation. Moderate 138

11 Fund Name Fund Type Objective/Strategy Risk Level Vanguard LifeStrategy Moderate Growth Fund Balanced (s and Bonds) Seeks to provide capital appreciation and a low to moderate level of current income. Moderate 0914 Vanguard LifeStrategy Growth Fund 0122 Balanced (s and Bonds) Seeks to provide capital appreciation and some current income. Moderate to Specialized Funds You may create your own portfolio from among the other funds. Fund Name Fund Type Objective/Strategy Risk Level Vanguard Prime Money Market Fund 0030 Money Market Seeks to provide current income while maintaining liquidity and a stable share price of $1. Conservative Vanguard Inflation- Protected Securities Fund 0119 Vanguard Total Bond Market Index Fund 0084 Vanguard High- Yield Corporate Fund 0029 Templeton Global Bond Fund Advisor Class 3129 PIMCO All Asset Fund Institutional Class 2585 Vanguard 500 Index Fund 0040 Vanguard Equity Income Fund 0065 Vanguard Growth and Income Fund 0093 Bond Bond Bond Bond Domestic Domestic Domestic Domestic Seeks to provide investors inflation protection and income consistent with investment in inflation-indexed securities. Seeks to track the performance of a broad, market-weighted bond index. Seeks to provide a high level of current income. This fund charges a redemption fee of 1% on shares held less than one year. Seeks to provide current income with capital appreciation and growth of income. Seeks to provide maximum real return, consistent with preservation of real capital and prudent investment management. Seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks. Seeks to provide an above-average level of current income and reasonable longterm capital appreciation. Seeks to provide a total return (capital appreciation plus dividend income) greater than the return of the Standard & Poor s 500 Index. Conservative to Moderate Conservative to Moderate Moderate Moderate Moderate Moderate to Moderate to Moderate to 139

12 140 Fund Name Fund Type Objective/Strategy Risk Level Vanguard Morgan Growth Fund 0026 Vanguard Total Market Index Fund 0085 Vanguard Windsor II Fund 0073 Cohen & Steers Realty Shares 2331 Artisan Mid Cap Value Fund Investor Class 2495 Aston Fairpointe Mid Cap Fund N Class 2593 Heartland Value Fund Investor Class 3675 Munder Mid-Cap Core Growth Class Y 2642 Royce Value Plus Fund Service Class 2791 Columbia Acorn International Fund Class Z 1052 Oakmark Global Fund Class I 2778 T. Rowe Price Emerging Markets Fund Retail Class 3452 Vanguard International Growth Fund 0081 Vanguard International Value Fund 0046 Domestic Domestic Domestic Real Estate Domestic Domestic Domestic Domestic Domestic International International International International International Seeks to provide long-term capital appreciation. Seeks to track the performance of a benchmark index that measures the investment return of the overall stock market. Seeks to provide long-term capital appreciation and income. Seeks to provide total return through investments in real estate securities. This fund charges a redemption fee of 2% on shares held less than 60 days. Seeks to provide maximum long-term capital growth. The fund may change this goal without the approval of shareholders. Seeks to provide long-term total return through capital appreciation by investing primarily in common and preferred stocks and convertible securities. Seeks to provide long-term capital appreciation. Seeks to provide long-term capital appreciation. Seeks to provide long-term growth of capital. Seeks to provide long-term growth of capital. This fund charges a redemption fee of 2% on shares held less than 60 days. Seeks to provide long-term capital appreciation. Seeks to provide long-term growth of capital. This fund charges a redemption fee of 2% on shares held less than 90 days. Seeks to provide long-term capital appreciation. This fund charges a redemption fee of 2% on shares held less than two months. Seeks to provide long-term capital appreciation. This fund charges a redemption fee of 2% on shares held less than two months. Moderate to Moderate to Moderate to Moderate to

13 A Note About Risk All investing is subject to risk, including possible loss of principal. While U.S. Treasury or government agency securities provide substantial protection against credit risk, they do not protect investors against price changes due to changing interest rates. Although the market values of government securities are not guaranteed and may fluctuate, these securities are guaranteed as to the timely payment of principal and interest. Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer s ability to make payments. Because high-yield bonds are considered speculative, investors should be prepared to assume a substantially greater level of credit risk than with other types of bonds. Prices of midand small-cap stocks often fluctuate more than those of large-company stocks. s of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets. Investments in stocks or bonds issued by non-u.s. companies are subject to risks including country/regional risk and currency risk. Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility. LifeStrategy funds are subject to the risks associated with their underlying funds. Changing Your Investment Elections You can change your investment choices as often as you wish subject to any trading restrictions imposed by the particular mutual fund. You can change how your current account balance is invested, and/or you can change how future contributions to your Investment Plan account are to be invested. You must contact the Investment Plan s recordkeeper (currently Vanguard) to change investment elections. If Vanguard receives your investment change request on a business day before 4:00 p.m. Eastern time ( ET ), the change is made at the market closing price for the day on which Vanguard receives your request. If your request is received after 4:00 p.m. ET, the change is made the next business day at that day s closing price. Call Vanguard at to change your investment choices, or establish an Internet account at Vanguard s website, Balancing Risk and Reward As you consider your investment options, it is important that you carefully evaluate the combination of potential risk and reward that each option represents. When thinking about investment risk, most people think about the risk of losing money that is, market risk. The risk that the value of an investment will go up or down from time to time is a fact of investing. The stock market is a good example of an investment with risk of frequent ups and downs, or fluctuation. All investments involve some degree of market risk. There is no guarantee that any of the investment options offered by the Investment Plan will achieve their stated objectives. 141

14 There is another kind of risk that is just as important and that is the risk of not accumulating enough money to meet your retirement savings goals or to even keep up with inflation. That could happen, for example, if savings are placed in an investment with a low and fairly steady rate of return (like a bank savings account) that does not provide enough income over time to keep up with inflation. This is inflation risk. No one investment or mix of investments is appropriate for everyone. As an investor, you will need to strike a balance between market risk and inflation risk that fits with your retirement goals. Your preferred investment choices will depend on many personal factors, including: your tolerance for risk; the number of years until you retire; your life expectancy; whether you need to provide for a spouse or other dependents while you are alive and after you die; and other assets owned by you and your spouse and how they are invested. Consider how long you have until you need your Investment Plan distribution for example, if you have a relatively short time to weather the ups and downs of the stock market, you may want to limit your market risk. You may wish to consult a personal investment or financial advisor to help you review the fund prospectuses and make your investment decisions. In addition, there are independent services that provide ratings and other asset and return information about stocks and mutual funds that may be helpful to you in making your investment decisions. Some periodicals also rate mutual funds. (But you should never make an investment decision solely in reliance on these ratings.) Keep in mind that past investment return is no guarantee of future performance. Diversification Diversifying your investments means spreading your assets among several different types of investments. When you diversify your investments, you may reduce the risk of suffering a major loss in your overall accounts in the event that any one investment performs poorly. There are two ways to diversify your investments: Diversify across asset classes. You can diversify by choosing a mix of investments from all three investment types stocks, bonds, and conservative fixed-income investments. Diversify within each asset class. The more diversified your investment portfolio, the less likely you will be hurt by the poor performance of a single stock or bond. As a result, you may choose a mix within each type of investment, including a selection of both U.S. and foreign stocks. 142

15 Keeping Track of Your Account When you enroll in the Investment Plan, you will have a number of tools to help you keep track of your investments. Statements Within 30 days of the end of each calendar quarter, the Plan s recordkeeper (currently Vanguard) will mail an Investment Plan account statement to your address on file with the recordkeeper. The statement will show, by investment fund, the following information about your account: opening account balance; investment results; fund transfers; and ending account balance. The statement for the quarter ending March 31 will show your contribution for the plan year just ended. Automated Account Management Tools You can call Vanguard s automated telephone service, the VOICE Network, to access your Investment Plan fund and account information 24 hours a day. Their toll-free number, , is available from anywhere in the United States. Using the toll-free number, you can: check your account balance; review your most recent account activity; check contribution allocation percentages; check fund price and yield information; and request a fund prospectus. You can speak with a Vanguard Participant Services Associate if you call Monday through Friday during the hours of 8:30 a.m. to 9:00 p.m. Eastern time. You also can access Vanguard s website, at any time to: review and print a current summary of your account activity; obtain fund information; and perform investment transactions. Other Resources While you are an Investment Plan participant, you will receive the following types of information about the investment funds, to the extent materials are available: an updated prospectus of any of the Vanguard funds available under the Investment Plan; financial statements, reports, or similar materials relating to the investment funds; a description of the annual operating expenses of each investment option, stated as a percentage of net assets; Vanguard Account Information Vanguard Participant Services Associates are available Monday through Friday, 8:30 a.m. to 9:00 p.m. Eastern time. Toll-free number for Participant Services: To reach a Spanishspeaking Associate: For TTY (for the hearing impaired):

16 the value of the portion of your accounts invested in a particular fund; the current and past investment performance of each investment option, net of expenses; and any other information you may need. To request these materials or any other information related to the investment funds, call Vanguard s toll-free number or log on to the website. WITHDRAWALS If you need your money while you are still a participant in the Investment Plan, there are certain circumstances in which you can take a withdrawal from your account balance. You can make two different types of withdrawals: Non-Hardship Withdrawals In-Service Hardship Withdrawals Non-Hardship Withdrawals Although the Investment Plan is designed to help you save for retirement, you may be able to make a withdrawal while you are still a participant in the Investment Plan. At any time, you may choose to withdraw all or a portion of your rollover contributions or your post-tax contribution account. If you are age or older, you may also choose to withdraw all or a portion of your pretax contributions or your catch-up contributions, but no more often than once a year. The maximum amount you can withdraw is the total amount you have in those accounts. If you withdraw money, you cannot repay the amount withdrawn, and withdrawals will be taxed in the same way as any other distribution from your account. You are responsible for paying income taxes on your withdrawal in the year you receive the money, including the additional 10% penalty tax that applies to withdrawals before age of your pre-tax contributions, your catch-up contributions, and the portions of your rollover contributions that have not been previously taxed. (See Paying Taxes on page 149 for more information.) Making a Non-Hardship Withdrawal To make a non-hardship withdrawal while you are an active Investment Plan participant, contact the Investment Plan s recordkeeper (currently Vanguard) at to find out: the amount available for withdrawal in your post-tax or rollover accounts; and the documentation that is required. You cannot make withdrawals from your pre-tax account or your club contributions account, until you are age or until April 1 following your last employment in any capacity by any Major League club (including any Minor League club owned by any Major League club). 144

17 In-Service Hardship Withdrawals You may withdraw your pre-tax contributions, regardless of your age, if you have a qualifying financial hardship. To qualify for a hardship withdrawal, you must show that: you have an immediate and heavy financial need; and your need meets the requirements of IRS regulations for one or more of the following categories: purchase of primary residence (but not to make mortgage payments); payments to prevent eviction from or foreclosure on your primary residence; burial or funeral expenses for certain close relatives; tuition, fees, and room and board for post-secondary education for you, your spouse, or your dependent children for the next 12 months; unreimbursed medical expenses for you, your spouse, or a dependent; or expenses to repair damage to your primary residence. Additionally, you must have taken all other withdrawals available to you, including an optional early partial distribution from the Pension Plan (if available), before taking a hardship withdrawal. The minimum amount you can withdraw is $1,000, and the maximum amount is the amount of contributions you have made to your pre-tax contribution account (minus any withdrawals you have previously made, and not including investment earnings) but not any money in your discretionary QNEC account. If you withdraw money from your account, you cannot repay the amount withdrawn, and withdrawals will be taxed in the same way as any other distribution from your accounts. You will also be disqualified from making any pre-tax or post-tax contributions to the Investment Plan or to any other plans maintained by your employing Major League club for six months after the hardship distribution. You are responsible for paying income taxes on your withdrawal in the year you receive the money, including the additional 10% penalty tax that applies to withdrawals before age (See Paying Taxes on page 149 for more information.) What Is an Immediate and Heavy Financial Need? Generally, you will be considered to have an immediate and heavy financial need if you need the funds to: purchase your primary residence (excluding mortgage payments); prevent eviction from or foreclosure on your primary residence; pay unreimbursed medical expenses for yourself, your spouse, or your dependents; pay post-secondary (college) tuition expenses and related educational fees, including room and board for you, your spouse, or your dependents for the next 12 months; pay burial or funeral expenses for certain close family members; or pay repair expenses for damage to your primary residence. 145

18 Pension Committee Approval Keep in mind that the Pension Committee has final approval of your hardship withdrawal. Valuation Date When you request a distribution, the value of your account will be determined by the value of the mutual funds in your account at the close of the New York Exchange on your valuation date. The valuation date is generally the day on which Vanguard processes the request for distribution that has been approved by the Investment Plan (but not later than the next trading day after Vanguard receives the request). If you choose installment payments, you will choose how frequently you want to receive the installments. Your account s valuation date for each prescheduled installment payment will be the day on which Vanguard processes the payment. Applying for a Hardship Withdrawal If you wish to make a hardship withdrawal, you must complete and return an application form, as well as any required documentation, to the Pension Committee. The Pension Committee will determine both the existence of a hardship and the amount necessary to meet the hardship. A Hardship Withdrawal Application and instructions will be sent to you. If your request is approved, you will receive a check. The timing may vary depending on the circumstances. If your request for a hardship withdrawal is approved, your pre-tax, post-tax, and catch-up contributions to the Investment Plan and your contributions to any other qualified or nonqualified plan, such as a plan maintained by an individual Major League club, will be automatically suspended for six months after you receive your hardship withdrawal. After this six-month suspension period, you must contact the Benefit Plan Office and your club s payroll department to resume contributions to the Investment Plan. COLLECTING YOUR BENEFIT You can receive distributions from your post-tax and rollover contributions accounts at any time. You may take a distribution from your pre-tax account and your club contributions account, if any, when you: terminate all of your employment with all Major League clubs and continue without employment by any Major League club (including any Minor League club owned by any Major League club) in any capacity until the next April 1; reach age ; reach your normal retirement age; or die. When one of these events occurs, you (or your beneficiary, in case of your death) must decide: when to take your distribution; or whether you want to leave your money in the Investment Plan until a later date. (By law, you must take a distribution by the April 1 of the calendar year after the year in which you reach age or, if later, the year you terminate all employment with Major League clubs. This is your required beginning date. ) When you receive a distribution, you will owe income taxes on the taxable portion of your distribution. If you elect to roll over some or all of your Investment Plan balance to another plan or a traditional IRA, you can delay paying taxes on that amount until you receive a distribution from the other plan or IRA. (See Paying Taxes on page 149 and Eligible Rollover Distributions on page 150 for more information.) If you choose to leave your money in the Investment Plan, you can request payment at any time after terminating all employment by a Major League club. If you reach your required beginning date before requesting a distribution, the total amount of all your vested account balances will be paid to you in a single lump-sum payment. In the event of your death, your beneficiary is entitled to a distribution of any remaining account balance(s). (See Naming a Beneficiary in Enrolling in the Investment Plan on page 132 for details.) 146

19 Termination of Active Status When you have terminated your employment with a Major League club, you will need to contact the Benefit Plan Office to terminate your Investment Plan active status. You will need to submit a signed statement to the Benefit Plan Office indicating your last date of employment before your active status can be terminated. Requesting a Distribution When you request a distribution, you will receive a termination/rollover kit that explains your payment options, contains election forms, and includes other information you will need to know (such as the tax consequences of taking a distribution). To receive a distribution from your account after you have terminated your active status through the Benefit Plan Office, you can simply call Vanguard Participant Services at and complete an express application. Important Planning Tip April 1 is an important date. You will not be eligible to take a distribution until April 1 of the plan year following the plan year in which you were last employed in any capacity with a Major League Baseball club or related Minor League club. You may be eligible for a hardship withdrawal in certain circumstances, if you have an immediate need. Valuation Date When you request a distribution, the value of your accounts will be determined by the value of the mutual funds in your account at the close of the New York Exchange on your valuation date. The valuation date is generally the day on which the Investment Plan s recordkeeper (currently Vanguard) processes the request for distribution that has been approved by the Investment Plan (but not later than the next trading day after Vanguard receives the request). If you choose installment payments as your distribution option, you will choose how frequently you want to receive installments. Your account s valuation date for each pre-scheduled installment payment will be the day on which Vanguard processes the payment. If You Leave Your Money in the Investment Plan After You Leave a Major League Club you can continue to direct your investments; and you cannot make new contributions. Important! Be sure to keep the Benefit Plan Office informed of any change in address. Distribution Options You have several distribution options available to you. You may: take a lump-sum distribution; take a partial withdrawal and leave the remainder of your account balance(s) in the Investment Plan; request installment payments over a period that will not exceed your life expectancy or the joint life expectancy of you and your beneficiary; or roll over some or all of your account balances to a traditional IRA or a Roth IRA, or another employer s eligible retirement plan. If you elect to receive a distribution, you will owe income taxes on the taxable portion. However, if you elect to roll over your vested account balances to another plan or an IRA, you can delay paying taxes on that amount until you receive a distribution from the other plan or IRA. Tax Laws Change Tax laws change from time to time, and the tax impact of receiving payments from your accounts will vary with your individual situation. None of the information presented here is intended to provide personal tax advice. You should consult a professional tax advisor or financial expert for advice about your specific circumstances. 147

20 Lump-Sum Distributions You may choose to receive your distribution as a lump-sum payment. A lump-sum payment is a one-time payment of the entire amount of your Investment Plan account balance or a portion of your Investment Plan balance. You may take a series of partial lump-sum distributions so long as your entire Investment Plan account balance is distributed at least as rapidly as required under IRS rules. (See When You Must Begin Receiving a Distribution on page 149 for more information about your required beginning date.) Installment Payments You may choose to have your Investment Plan account balance paid in installment payments over a period that is not greater than your life expectancy or the joint life expectancies of you and your beneficiary. Installment payments may not be delayed beyond certain limits required by federal tax rules. Rollovers You may roll over an eligible rollover distribution into a traditional IRA, a Roth IRA, or another employer s eligible retirement plan. This can allow you to postpone paying income taxes on the distribution and may provide other advantages for you. (For more information on rollovers, see Eligible Rollover Distributions on page 150.) When You Terminate Employment with a Club When you retire, become disabled, or otherwise terminate all employment with a Major League club, you are eligible to receive your Investment Plan account balance. Payment may begin as soon as possible following the later of: the date your application for a distribution is received; or the April 1 following the plan year in which you last worked for a Major League club in any capacity (including any Minor League club owned by any Major League club). You have several payment options available to you. (See Distribution Options on page 147 for more information.) If you elect to receive a distribution, you will owe income taxes on the taxable portion of your distribution. (See Paying Taxes on page 149 for more information about the taxes you must pay.) When You Reach Your Normal Retirement Age When you reach your normal retirement age, you are eligible to receive your Investment Plan account balances. Normal retirement age for the Investment Plan is age 62. Payment will begin as soon as possible following the later of the date you reach your normal retirement age or the date your application for a distribution is received. You have several payment options available to you. (See Distribution Options on page 147 for more information.) When you elect to receive a distribution, you will owe income taxes on the taxable portion of your distribution. (See Paying Taxes on page 149 for more information about the taxes you must pay.) 148

21 When You Die If You Die Before Benefits Begin If you die before benefits begin, your beneficiary is entitled to receive your Investment Plan account balances. At your beneficiary s election, payment will be made in the form of a total or partial lump-sum distribution or in installment payments. The timing of the payment depends on who your beneficiary is. If your beneficiary is your surviving spouse, payment will begin by December 31 of the calendar year following the calendar year in which you died, or by December 31 of the calendar year in which you would have reached age (if that date is later). Alternatively, your surviving spouse may elect to roll your Investment Plan account balances over to a traditional IRA, Roth IRA, or another employer s eligible retirement plan, provided the distribution is an eligible rollover distribution. If your beneficiary is not your surviving spouse, payment will begin by December 31 of the calendar year following the calendar year in which you died. A beneficiary other than your surviving spouse may elect to roll the account balance over to an IRA or Roth IRA that is treated as an inherited IRA. If You Die After Benefits Begin If you die after benefits begin, your beneficiary is entitled to receive any outstanding amount of your Investment Plan account balance that has not been paid to you. Your beneficiary may choose to continue receiving installment payments, if you elected one of those payment options, or to receive any outstanding account balance as a lump-sum payment. Payment will begin as soon as administratively possible. When You Must Begin Receiving a Distribution Unless you elect otherwise, payment of your benefits will begin no later than the April 1 after the end of the calendar year in which you reach age This is your required beginning date. If you are still employed by a Major League club on that April 1, your benefits must begin as soon as you terminate all employment with any Major League club. PAYING TAXES Because the Investment Plan is intended to be a long-term savings program for retirement, it enjoys certain tax advantages. Your pre-tax contributions, catch-up contributions, any club contributions, and any investment earnings are not subject to federal income taxes as long as they remain in the Investment Plan. You will owe income taxes when you withdraw your retirement savings, but this will most likely occur when you are retired and in a lower tax bracket. Federal and state tax laws are complicated and subject to change. This summary is not intended to provide personal tax advice. 149

22 Funding of the Investment Plan The Investment Plan is funded entirely through contributions to individual participants accounts maintained in the Investment Plan trust. For that reason, benefits under the Investment Plan are not insured by the Pension Benefit Guaranty Corporation ( PBGC ). The PBGC is a government agency that insures certain benefits provided by other types of plans. Investment fees are ongoing charges for managing the assets of each of the Investment Plan s investment funds. Investment fees are paid to the fund s investment manager from fund assets and are incorporated into the computation of the fund s price (net asset value). Any administrative expenses that are attributable to activity in your individual accounts, including expenses attributable to a qualified domestic relations order ( QDRO ), will be charged to those accounts. Other administrative expenses (including expenses such as legal, recordkeeping, and consulting fees) may be paid by the clubs. If they are not paid by the clubs, those expenses will be charged pro rata to participants accounts. Tax Treatment of Investment Plan Contributions and Distributions The amounts you contribute to your pre-tax account and your catch-up contributions account come out of your paycheck before federal income taxes are withheld so, generally, you pay no income taxes on those contributions or their investment earnings while they remain in your account. (State and local income tax rules may differ in some cases.) Your pre-tax and catchup contributions are subject to Social Security and Medicare taxes when the contributions are made. You also owe no tax on club contributions, if any, or any investment earnings while these amounts remain in the Investment Plan. Your post-tax contributions are subject to income tax in the year that you contribute them to the Investment Plan, but you do not owe any tax on the investment earnings that accumulate in your account from post-tax contributions until those amounts are distributed to you. When you receive a distribution from your account, the money you receive is subject to 20% federal income tax withholding, excluding the contribution amounts in your post-tax contributions account because you have already paid taxes on these contributions. The distribution is taxed in the year you receive it unless, within 60 days of receiving your distribution, you deposit your eligible rollover distribution in a traditional IRA, Roth IRA or another employer s eligible retirement plan that will accept the rollover. If you roll over your eligible rollover distribution directly to an IRA or to another employer s eligible retirement plan (without receiving the money first), no income tax withholding is required on such amount. Eligible Rollover Distributions To postpone paying income taxes on a distribution from your account, you can make a direct rollover to a traditional IRA, a Roth IRA, or another employer s eligible retirement plan that will accept it, including a: tax-qualified section 401(a) plan, including a section 401(k) plan; section 403(a) annuity plan; section 403(b) tax-sheltered annuity plan; or section 457(b) plan maintained by a state or local government. 150

23 Some distributions and withdrawals cannot be rolled over, including: hardship withdrawals; required minimum payments after age or termination of all employment with a club, whichever is later; and any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for your life (or life expectancy) or the joint lives of you and your beneficiary or for a period of 10 or more years. If your distribution is eligible to be rolled over, you can choose to roll over all or any portion of the distribution. You may roll over your distribution directly, without receiving the money, or you may have the money paid to you and roll it over within 60 days after you receive it. If you receive the distribution, it will be subject to income tax withholding. Be sure to check with the plan receiving the rollover for specific information the Investment Plan will need to make a direct rollover. Your spouse, former spouse, or surviving spouse also may request a direct rollover if he or she is entitled to receive a distribution, either because of your death or under the terms of a qualified domestic relations order ( QDRO ). (See Court Orders in Administration for details about QDROs.) Non-spouse beneficiaries may make direct rollovers, but only to an IRA or Roth IRA that is treated as an inherited IRA. If You Choose a Rollover If you choose a direct rollover of an eligible rollover distribution (that is, you do not receive it first): your payment will not be taxed in the current year and no income tax will be withheld; your payment will be made directly to your traditional IRA, Roth IRA, or, if you choose, to another employer s eligible plan that accepts your rollover. (Your Investment Plan distribution cannot be rolled over to a SIMPLE IRA or an education IRA); and amounts rolled over to another plan or IRA will be subject to tax when distributed from that plan or IRA. You will receive additional information on direct rollover when you request a distribution kit from Vanguard. 60-Day Rollover Option If you receive a cash distribution that is eligible for rollover, you can still decide to roll over all or part of it to a traditional IRA, Roth IRA, or another employer s eligible retirement plan that will accept the rollover. You must do so within 60 days after you receive your distribution. The portion of your distribution rolled over will not be taxed until you take it out of the IRA or other plan. In order to postpone paying taxes on the entire amount of the distribution, you will have to use other sources of money to make up the 20% that the Investment Plan was required to withhold for federal taxes, and roll over the entire amount into the IRA or other plan. 151

24 Voluntary Income Tax Withholding Some payments from the Investment Plan such as hardship withdrawals are not eligible for rollover. You may elect not to have federal income tax withheld from these payments. To elect not to have taxes withheld, complete the tax election section of the request form electing not to withhold taxes from the disbursement. Generally, 20% of the distribution will be withheld unless you elect otherwise. Additional Tax on Early Distributions If you receive a payment, including a hardship withdrawal, before you reach age , you may owe an additional 10% federal penalty tax on the taxable portion this is in addition to ordinary income taxes. The additional 10% tax generally will not apply in the following situations: the payment is a return of your post-tax contributions; the payment is made to you after you become disabled (as determined by IRS standards); the payment is made to your beneficiary in the event of your death; you receive a distribution in a year in which you have deductible medical expenses in excess of 7.5% of your adjusted gross income the exception to the 10% additional tax is limited to the amount of your deductible medical expenses paid during the taxable year; payment is directed to an alternate payee by a qualified domestic relations order ( QDRO ) (See Court Orders in Administration for more information about QDROs); or you roll over the taxable amount of your accounts to a traditional IRA, Roth IRA, or another employer s eligible retirement plan. Consult your own tax advisor about how these rules apply to your individual circumstances. APPLYING FOR INVESTMENT PLAN BENEFITS To elect a distribution under the Investment Plan, follow the instructions in Collecting Your Benefit on page 146 for the particular type of distribution you want to elect. Contact Participant Services of the Investment Plan s recordkeeper (currently Vanguard) at to obtain a termination/rollover kit that explains your options and other information you will need to know. Your application for a distribution from the Investment Plan is considered a claim. If your claim is denied, you will receive a letter called a notice of adverse determination. Claims Appeal Process You (or an authorized representative) will have 60 days after receiving notice of an adverse distribution determination to file an appeal. To file an appeal, you should submit: a request for review, in writing, to the Pension Committee; and written comments, documents, records, and other information relating to the distribution request to the Pension Committee. 152

25 The Pension Committee will make a full and fair review of the appeal and all new information submitted, whether or not presented or available at the initial determination, and may require additional documents as it deems necessary or desirable in performing a review. A final decision on the review will be made not later than the Pension Committee s next quarterly meeting, provided that your request for review is received 30 days before that meeting. If special circumstances require an extension of time for processing, you will be notified of the reasons for the extension and the date by which the Pension Committee expects to make a decision. If an extension is required due to your failure to submit the information necessary to decide the appeal, the notice of extension will specifically describe the necessary information and the date by which you need to provide it. The decision of the Pension Committee will be communicated to you as soon as possible, but not later than five days after the decision is made on the appeal. Notices Following Appeal Benefits will be paid only if the Pension Committee determines that you are entitled to them. If you believe that your benefit was improperly denied, the administrative appeal process described in this Claims section must be completed before you begin any legal action regarding your claim. The Pension Committee will provide you with written notification of the determination on appeal. In the case of an adverse benefit determination, such notice will indicate: the specific reason for the adverse determination on appeal; the reference to the specific provisions of the Investment Plan on which the determination is based; a statement that you are entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the benefits claim; a description of your right to bring a civil action under ERISA in federal court following an adverse determination on appeal; and if any internal rules, guidelines, protocols, or similar criteria were used as a basis for the adverse determination, either the specific rule, guideline, protocol, or other similar criteria or a statement that a copy of such information will be made available free of charge upon request. 153

26 154 INVESTMENT PLAN BENEFITS