Vanguard SEP IRA Adoption Agreement

Transcription

1 R207 Vanguard SEP IRA Adoption Agreement IMPORTANT INFORMATION ABOUT OPENING A NEW ACCOUNT. Vanguard is required by federal law to obtain from each person who opens an account certain personal information including name, street address, and date of birth among other information that will be used to verify identity. If you do not provide us with this information, we will not be able to open the account. If we are unable to verify your identity, Vanguard reserves the right to close your account or take other steps we deem reasonable. Print clearly, preferably in capital letters and black ink. This form is to be completed by both employers and employees who want to establish a SEP IRA at Vanguard. Most forms, as well as booklets that provide details on our retirement services, can be downloaded from our website at Or you can call us to order them or get assistance in filling out this form at Return this form and any other required documents in the enclosed postage-paid envelope, or mail to The Vanguard Group, P.O. Box 1110, Valley Forge, PA For overnight delivery, mail to The Vanguard Group, 455 Devon Park Drive, Wayne, PA An Important Note About IRA Contribution Maximums If you are eligible to contribute to an IRA, your personal contributions as an individual and an employee to traditional, Roth, and SEP IRAs combined cannot exceed certain limits. In 2003 and 2004: If you are under age 50, you can contribute a total of 3,000 to your IRAs. If you are between ages 50 and , you can contribute a total of 3,500 to your IRAs. Beginning in the year you reach age , you cannot contribute to traditional or SEP IRAs, but you may be able to contribute up to 3,500 to a Roth IRA. 1. Account Owner Information If the account owner is not of legal adult age for the state in which he or she resides (18 for most states, 19 in Alabama and Nebraska, and 21 in Mississippi), then the account will require a custodian, who must complete Section 2. If this SEP IRA is being opened for a minor, print the words a minor after providing the name in the boxes below. Name (first, middle initial, last) Citizenship U.S. Resident Nonresident Citizen Alien Alien Country of Residence (for nonresident alien) OR Applied for. Social Security Number Individual Tax Identification Number Date of application: (if a resident or nonresident alien) Birth Date (month, day, year) Daytime Telephone Number Evening Telephone Number Street Address or APO/FPO (a P.O. box or rural route number is not acceptable) City State Zip 1

2 R207-page 2 of 8 Account s Mailing Address if Different From Above (used both as the account s address of record and for all account mailings) City State Zip 2. Custodian Information (Complete this section only if you are opening this SEP IRA for a minor.) Name (first, middle initial, last) Citizenship U.S. Resident Nonresident Citizen Alien Alien Country of Residence (for nonresident alien) OR Applied for. Social Security Number Individual Tax Identification Number Date of application: (if a resident or nonresident alien) Birth Date (month, day, year) Daytime Telephone Number Evening Telephone Number Street Address or APO/FPO (a P.O. box or rural route number is not acceptable) City State Zip 3. Payment Method (Check all that apply; you need to fill out only the sections you check. If you do not provide a tax year where requested, there will be a delay in the processing of this transaction.) Tax YearDollar Amount My Employer Will Send Vanguard a Contribution. My Employer s Contribution (Up to 25% of my compensation or Tax Year Dollar Amount 40,000, whichever is less. Make the check payable to Vanguard Fiduciary Trust Company.),.,. My Individual Contribution (Up to 3,000; 3,500 if you are between ages Tax Year Dollar Amount 50 and Make the check payable to Vanguard Fiduciary Trust Company.),.,. A Check From Assets That Had Been Held in Another IRA (Choose this Dollar Amount option if you have taken possession of the SEP or traditional IRA assets you had held at another institution. In general, you must deposit these assets in an IRA within 60 days,,. after receiving them to keep them tax-deferred. Assets not deposited within that time frame including any taxes that were withheld not only lose their tax-deferred status, they may be subject to ordinary income and penalty taxes.) An Asset Transfer (Choose this option if you want Vanguard to initiate a transfer Approximate Dollar Amount of your SEP or traditional IRA from another institution. If you want to transfer assets,,. from more than one institution, call us for instructions.) 2

3 R207-page 3 of 8 You must enclose a copy of a current account statement with this authorization. The amount of time it takes to complete an asset transfer varies greatly from one institution to another. We suggest that you contact your current institution to find out what the typical time frame is. Name of the Institution the Asset Transfer Is Coming From Street Address or Box Number City State Zip Telephone Number Name of Contact Description of Mutual Fund or Certificate of Deposit Assets Being Liquidated and Transferred (Check all that apply.) Mutual Funds (If you do not check either All or Partial below, your entire account will be liquidated and transferred to Vanguard.) Name of Investment OR,,. Account Number All Dollar Amount Name of Investment OR,,. Account Number All Dollar Amount Certificates of Deposit (If you want to transfer your CD to Vanguard when it matures, we must receive this form at least 14 days, but not more than 30 days, before the maturity date.) Account Number Maturity Date (month, day, year) Dollar Amount,,.,,. A Recharacterization (Choose this option if you want to change an employee contribution from one plan type to another or to recharacterize a Roth conversion and you want to direct it to a plan type you don t currently hold at Vanguard. You must also complete and sign a Vanguard Authorization to Recharacterize IRA Assets form. Skip to Section 5.) 3

4 R207-page 4 of 8 4. Investment Instructions Most of our funds have a minimum initial IRA investment of 1,000. If you choose any of these funds, you do not have to meet that minimum. However, some of our funds have a minimum initial IRA investment of 10,000 or 25,000, and you do have to meet those minimums. Fund numbers, fund names, and investment minimums can be found in the enclosed Facts on Funds. (More information on our funds can be found on our website at Vanguard charges a custodial fee of 10 a year for each IRA fund account having a balance of less than 5,000. However, we automatically waive this fee if you have assets totaling 50,000 or more at Vanguard, in any combination of accounts (whether in IRAs or not, and including employer-sponsored plans, brokerage accounts, and annuities). Percentage of Assets (if your assets are coming from your Vanguard employer or another Dollar Amount Fund Number Vanguard Fund Name institution) (if you are sending us a check for the full amount) %,,. %,,. %,,. Annual Custodial Fee %,,. Total Remitted to Vanguard Approximate Value 4

5 R207-page 5 of 8 5. Beneficiary Designation (If you need more space to list additional beneficiaries, either photocopy this section or provide all the information requested in the same format on a separate sheet.) The designations you make on this form will not affect the beneficiary designations of other IRAs you may hold at Vanguard. If you choose an option below that indicates a relationship instead of specific names, the executor or administrator of your estate (or the trustee if you designate a trust as a beneficiary) will be the one responsible for providing Vanguard with the names of your beneficiaries. If you have ever lived in a community property state while you were married, your spouse at that time may have certain rights to your IRA. We suggest that you consult your attorney for guidance on how your beneficiary designations may be affected by those state laws. Detailed information on these designations can be found on our website at Primary Beneficiaries (Check all that apply.) Those you list as primary beneficiaries will inherit your IRA following your death. If you choose more than one primary beneficiary option without indicating percentages, or if the percentages you allocate to your primary beneficiaries combined do not total 100%, we will allocate equal percentages totaling 100%. 1. To my spouse who survives me. (The person you re married to at the time of your death.) % 2. To my descendants who survive me, per stirpes. (Divides the percentage you specify equally among your % children. If a child is deceased, that child s children, if any, will share your deceased child s portion equally.) 3. Equally to my grandchildren who survive me. % 4. To the trustee of an existing trust that was created under an agreement known as % Name of Trust, dated. Trust Date (month, day, year) 5. To the trustee of a trust created under my last will. The trust is known as % Name of Trust or is located at. Section of Will 6. Other (Choose this category to specify by name individuals or charities not covered by the previous options.) Name of Individual (first, middle initial, last) or Charity % Relationship Spouse Other Individual s Birth Date (month, day, year) Name of Individual (first, middle initial, last) or Charity % Relationship Spouse Other Individual s Birth Date (month, day, year) TOTAL % I do not want to name beneficiaries at this time. (Important: If you choose this option, your beneficiary will be what is stated as the default under the Vanguard Custodial Account Agreement in effect at the time of your death. Skip to the signature section on page 7.) 5

6 R207-page 6 of 8 Secondary Beneficiaries (Check all that apply.) Those you list as secondary beneficiaries will inherit your IRA only if there are no surviving primary beneficiaries at the time of your death. If you choose more than one secondary beneficiary option without indicating percentages, or if the percentages you allocate to your secondary beneficiaries combined do not total 100%, we will allocate equal percentages totaling 100%. 1. To my spouse who survives me. (The person you re married to at the time of your death.) % 2. To my descendants who survive me, per stirpes. (Divides the percentage you specify equally among your % children. If a child is deceased, that child s children, if any, will share your deceased child s portion equally.) 3. Equally to my grandchildren who survive me. % 4. To the trustee of an existing trust that was created under an agreement known as % Name of Trust, dated. Trust Date (month, day, year) 5. To the trustee of a trust created under my last will. The trust is known as % Name of Trust or is located at. Section of Will 6. Other (Choose this category to specify by name individuals or charities not covered by the previous options.) Name of Individual (first, middle initial, last) or Charity % Relationship Spouse Other Individual s Birth Date (month, day, year) Name of Individual (first, middle initial, last) or Charity % Relationship Spouse Other Individual s Birth Date (month, day, year) TOTAL % I do not want to name secondary beneficiaries at this time. (Note that if you choose this option and either all of your primary beneficiaries predecease you or a trust you named is no longer in existence, your beneficiary will be what is stated as the default under the Vanguard Custodial Account Agreement in effect at the time of your death.) 6

7 R207-page 7 of 8 6. Signature and Custodian Acceptance YOU MUST SIGN BELOW I hereby adopt the Vanguard IRA Custodial Account Agreement that is incorporated herein by reference and that I acknowledge having received and read. I further acknowledge having received and read the Vanguard IRA Disclosure Statement and a prospectus for each Vanguard fund I elected under this agreement. If I am requesting an asset transfer, I authorize the institution that currently holds my assets to liquidate them as directed in Section 3 and transfer them to Vanguard. If you are requesting an asset transfer, your current financial institution may require you to obtain a signature guarantee (see Section 7). If it does, do not sign below until you are in the presence of an authorized officer. S I G N A T U R E Signature (If the IRA owner is a minor, the custodian identified in Section 2 must sign.) Date (month, day, year) Vanguard Fiduciary Trust Company By: Title: Secretary 7. Signature Guarantee for Individual Investor IF APPLICABLE If you are requesting an asset transfer, the institution holding your assets may require you to obtain a signature guarantee before it will release them to Vanguard Fiduciary Trust Company. Contact the institution to see if this is the case. If the institution requires a signature guarantee and you do not provide one, your asset transfer cannot be processed. You can obtain a signature guarantee from an authorized member of a bank, broker, or other eligible financial institution. A notary public cannot provide a signature guarantee. Signature of Guarantor Authorized Officer to Place Stamp Here Title / Name of Institution Date (month, day, year) Thank you for your investment! 7

8 R207-page 8 of 8 Vanguard Authorization and Delivery Instructions to the Custodian Vanguard Authorization Vanguard Fiduciary Trust Company hereby represents that it has established for the previously named individual an IRA that qualifies under Section 408 of the Internal Revenue Code and will apply the proceeds of the asset transfer described in this agreement to such IRA upon receipt. Vanguard Fiduciary Trust Company Date (month, day, year) Delivery Instructions Make check payable to: And mail to: Vanguard Fiduciary Trust Company, Custodian of [Individual s Name] s IRA The Vanguard Group Include the employee s SSN and this reference number on the check: P.O. Box 1110 Valley Forge, PA The Vanguard Group, Inc. All rights reserved. R

9 R208 Vanguard SEP IRA Employer Contribution Form Print clearly, preferably in capital letters and black ink. This form can be used to allocate only employer contributions. If you need more space to list additional employees, either photocopy this form or provide the information requested in Section 3 in the same format on a separate sheet. Most forms, as well as booklets that provide details on our retirement services, can be downloaded from our website at Or you can call us to order them or get assistance in filling out this form at Return this form and any other required documents in the enclosed postage-paid envelope, or mail to The Vanguard Group, P.O. Box 1110, Valley Forge, PA For overnight delivery, mail to The Vanguard Group, 455 Devon Park Drive, Wayne, PA Employer Information Name of Company Telephone Number Name of Contact 2. Contribution Year (If you do not provide a year at right, we will credit your contributions to the current year.) 3. Contribution Allocation To ensure proper account crediting, be sure to obtain from your employees the fund number and account number information requested below before you send us this contribution form. Employees who do not have a Vanguard IRA must complete and send to us a Vanguard SEP IRA Adoption Agreement to establish an account before you send us this contribution form. Your simply filling in the names of new or newly eligible employees below does not, and cannot, open an IRA for an employee. Name of Employee Fund Number Account Number Contribution Amount 1 Contribution Subtotal, page 1 Contribution Subtotal, page 2 TOTAL CONTRIBUTION REMITTED TO VANGUARD (If you are sending a check, make it payable to Vanguard Fiduciary Trust Company.)

10 R208-page 2 of 2 Name of Employee Fund Number Account Number Contribution Amount 4. Signature of Employer S I G N A T U R E Signature Thank you for your investment! Contribution Subtotal, page 2 Date (month, day, year) The Vanguard Group, Inc. All rights reserved. R

11 Form 5305-SEP (Rev. March 2002) Department of the Treasury Internal Revenue Service Simplified Employee Pension Individual Retirement Accounts Contribution Agreement (Under section 408(k) of the Internal Revenue Code) OMB No Do not file with the Internal Revenue Service (Name of employer) makes the following agreement under section 408(k) of the Internal Revenue Code and the instructions to this form. Article I Eligibility Requirements (check applicable boxes see instructions) The employer agrees to provide discretionary contributions in each calendar year to the individual retirement account or individual retirement annuity (IRA) of all employees who are at least years old (not to exceed 21 years old) and have performed services for the employer in at least years (not to exceed 3 years) of the immediately preceding 5 years. This simplified employee pension (SEP) includes does not include employees covered under a collective bargaining agreement, includes does not include certain nonresident aliens, and includes does not include employees whose total compensation during the year is less than 450*. Article II SEP Requirements (see instructions) The employer agrees that contributions made on behalf of each eligible employee will be: A. Based only on the first 200,000* of compensation. B. The same percentage of compensation for every employee. C. Limited annually to the smaller of 40,000* or 25% of compensation. D. Paid to the employee s IRA trustee, custodian, or insurance company (for an annuity contract). Employer s signature and date Name and title Instructions Section references are to the Internal Revenue Code unless otherwise noted. Purpose of Form Form 5305-SEP (Model SEP) is used by an employer to make an agreement to provide benefits to all eligible employees under a simplified employee pension (SEP) described in section 408(k). Do not file Form 5305-SEP with the IRS. Instead, keep it with your records. For more information on SEPs and IRAs, see Pub. 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans), and Pub. 590, Individual Retirement Arrangements (IRAs). Instructions to the Employer Simplified employee pension. A SEP is a written arrangement (a plan) that provides you with an easy way to make contributions toward your employees retirement income. Under a SEP, you can contribute to an employee s traditional individual retirement account or annuity (traditional IRA). You make contributions directly to an IRA set up by or for each employee with a bank, insurance company, or other qualified financial institution. When using Form 5305-SEP to establish a SEP, the IRA must be a Model traditional IRA established on an IRS form or a master or prototype traditional IRA for which the IRS has issued a favorable opinion letter. You may not make SEP contributions to a Roth IRA or a SIMPLE IRA. Making the agreement on Form 5305-SEP does not establish an employer IRA described in section 408(c). When not to use Form 5305-SEP. Do not use this form if you: 1. Currently maintain any other qualified retirement plan. This does not prevent you from maintaining another SEP. 2. Have any eligible employees for whom IRAs have not been established. 3. Use the services of leased employees (described in section 414(n)). 4. Are a member of an affiliated service group (described in section 414(m)), a controlled group of corporations (described in section 414(b)), or trades or businesses under common control (described in sections 414(c) and 414(o)), unless all eligible employees of all the members of such groups, trades, or businesses participate in the SEP. 5. Will not pay the cost of the SEP contributions. Do not use Form 5305-SEP for a SEP that provides for elective employee contributions even if the contributions are made under a salary reduction agreement. Use Form 5305A-SEP, or a nonmodel SEP. Note: SEPs permitting elective deferrals cannot be established after Eligible employees. All eligible employees must be allowed to participate in the SEP. An eligible employee is any employee who: (1) is at least 21 years old, and (2) has performed service for you in at least 3 of the immediately preceding 5 years. You can establish less restrictive eligibility requirements, but not more restrictive ones. Service is any work performed for you for any period of time, however short. If you are a member of an affiliated service group, a controlled group of corporations, or trades or businesses under common control, service includes any work performed for any period of time for any other member of such group, trades, or businesses. Excludable employees. The following employees do not have to be covered by the SEP: (1) employees covered by a collective bargaining agreement whose retirement benefits were bargained for in good faith by you and their union, (2) nonresident alien employees who did not earn U.S. source income from you, and (3) employees who received less than 450* in compensation during the year. Contribution limits. You may make an annual contribution of up to 25% of the employee s compensation or 40,000*, whichever is less. Compensation, for this purpose, does not include employer contributions to the SEP or the employee s compensation in excess of 200,000*. If you also maintain a salary reduction SEP, contributions to the two SEPs together may not exceed the smaller of 40,000* or 25% of compensation for any employee. You are not required to make contributions every year, but when you do, you must contribute to the SEP-IRAs of all eligible employees who actually performed services during the year of the contribution. This includes eligible employees who die or quit working before the contribution is made. Contributions cannot discriminate in favor of highly compensated employees. Also, you may not integrate your SEP contributions with, or offset them by, contributions made under the Federal Insurance Contributions Act (FICA). If this SEP is intended to meet the top-heavy minimum contribution rules of section 416, but it does not cover all your employees who participate in your salary reduction SEP, then you must make minimum contributions to IRAs established on behalf of those employees. Deducting contributions. You may deduct contributions to a SEP subject to the limits of section 404(h). This SEP is maintained on a calendar year basis and contributions to the SEP are deductible for your tax year with or * For 2003 and later years, this amount is subject to annual cost-of-living adjustments. The IRS announces the increase, if any, in a news release, in the Internal Revenue Bulletin, and on the IRS Web Site at For Paperwork Reduction Act Notice, see page 2. Cat. No J Form 5305-SEP (Rev )

12 Form 5305-SEP (Rev ) within which the calendar year ends. Contributions made for a particular tax year must be made by the due date of your income tax return (including extensions) for that tax year. Completing the agreement. This agreement is considered adopted when: IRAs have been established for all your eligible employees; You have completed all blanks on the agreement form without modification; and You have given all your eligible employees the following information: 1. A copy of Form 5305-SEP. 2. A statement that traditional IRAs other than the traditional IRAs into which employer SEP contributions will be made may provide different rates of return and different terms concerning, among other things, transfers and withdrawals of funds from the IRAs. 3. A statement that, in addition to the information provided to an employee at the time the employee becomes eligible to participate, the administrator of the SEP must furnish each participant within 30 days of the effective date of any amendment to the SEP, a copy of the amendment and a written explanation of its effects. 4. A statement that the administrator will give written notification to each participant of any employer contributions made under the SEP to that participant s IRA by the later of January 31 of the year following the year for which a contribution is made or 30 days after the contribution is made. Employers who have established a SEP using Form 5305-SEP and have furnished each eligible employee with a copy of the completed Form 5305-SEP and provided the other documents and disclosures described in Instructions to the Employer and Information for the Employee, are not required to file the annual information returns, Forms 5500 or 5500-EZ for the SEP. However, under Title I of the Employee Retirement Income Security Act of 1974 (ERISA), this relief from the annual reporting requirements may not be available to an employer who selects, recommends, or influences its employees to choose IRAs into which contributions will be made under the SEP, if those IRAs are subject to provisions that impose any limits on a participant s ability to withdraw funds (other than restrictions imposed by the Code that apply to all IRAs). For additional information on Title I requirements, see the Department of Labor regulation at 29 CFR Information for the Employee The information below explains what a SEP is, how contributions are made, and how to treat your employer s contributions for tax purposes. For more information, see Pub Simplified employee pension. A SEP is a written arrangement (a plan) that allows an employer to make contributions toward your retirement. Contributions are made to a traditional individual retirement account/annuity (traditional IRA). Contributions must be made to either a Model traditional IRA executed on an IRS form or a master or prototype traditional IRA for which the IRS has issued a favorable opinion letter. An employer is not required to make SEP contributions. If a contribution is made, however, it must be allocated to all eligible employees according to the SEP agreement. The Model SEP (Form 5305-SEP) specifies that the contribution for each eligible employee will be the same percentage of compensation (excluding compensation greater than 200,000*) for all employees. Your employer will provide you with a copy of the agreement containing participation rules and a description of how employer contributions may be made to your IRA. Your employer must also provide you with a copy of the completed Form 5305-SEP and a yearly statement showing any contributions to your IRA. All amounts contributed to your IRA by your employer belong to you even after you stop working for that employer. Contribution limits. Your employer will determine the amount to be contributed to your IRA each year. However, the amount for any year is limited to the smaller of 40,000* or 25% of your compensation for that year. Compensation does not include any amount that is contributed by your employer to your IRA under the SEP. Your employer is not required to make contributions every year or to maintain a particular level of contributions. Tax treatment of contributions. Employer contributions to your SEP-IRA are excluded from your income unless there are contributions in excess of the applicable limit. Employer contributions within these limits will not be included on your Form W-2. Employee contributions. You may make regular IRA contributions to an IRA. However, the amount you can deduct may be reduced or eliminated because, as a participant in a SEP, you are covered by an employer retirement plan. SEP participation. If your employer does not require you to participate in a SEP as a condition of employment, and you elect not to participate, all other employees of your employer may be prohibited from participating. If one or more eligible employees do not participate and the employer tries to establish a SEP for the remaining employees, it could cause adverse tax consequences for the participating employees. An employer may not adopt this IRS Model SEP if the employer maintains another qualified retirement plan. This does not prevent your employer from adopting this IRS Model SEP and also maintaining an IRS Model Salary Reduction SEP or other SEP. However, if you work for several employers, you may be covered by a SEP of one employer and a different SEP or pension or profit-sharing plan of another employer. SEP-IRA amounts rollover or transfer to another IRA. You can withdraw or receive funds from your SEP-IRA if, within 60 days of receipt, you place those funds in the same or another IRA. This is called a rollover and can be done without penalty only once in any 1-year period. However, there are no restrictions on the number of times you may make transfers if you arrange to have these funds transferred between the trustees or the custodians so that you never have possession of the funds. Withdrawals. You may withdraw your employer s contribution at any time, but any amount withdrawn is includible in your income unless rolled over. Also, if withdrawals Page 2 occur before you reach age , you may be subject to a tax on early withdrawal. Excess SEP contributions. Contributions exceeding the yearly limitations may be withdrawn without penalty by the due date (plus extensions) for filing your tax return (normally April 15), but are includible in your gross income. Excess contributions left in your SEP-IRA after that time may have adverse tax consequences. Withdrawals of those contributions may be taxed as premature withdrawals. Financial institution requirements. The financial institution where your IRA is maintained must provide you with a disclosure statement that contains the following information in plain, nontechnical language: 1. The law that relates to your IRA. 2. The tax consequences of various options concerning your IRA. 3. Participation eligibility rules, and rules on the deductibility of retirement savings. 4. Situations and procedures for revoking your IRA, including the name, address, and telephone number of the person designated to receive notice of revocation. This information must be clearly displayed at the beginning of the disclosure statement. 5. A discussion of the penalties that may be assessed because of prohibited activities concerning your IRA. 6. Financial disclosure that provides the following information: a. Projects value growth rates of your IRA under various contribution and retirement schedules, or describes the method of determining annual earnings and charges that may be assessed. b. Describes whether, and for when, the growth projections are guaranteed, or a statement of the earnings rate and the terms on which the projections are based. c. States the sales commission for each year expressed as a percentage of 1,000. In addition, the financial institution must provide you with a financial statement each year. You may want to keep these statements to evaluate your IRA s investment performance. Paperwork Reduction Act Notice. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section The time needed to complete this form will vary depending on individual circumstances. The estimated average time is: Recordkeeping 1 hr., 40 min. Learning about the law or the form 1 hr., 35 min. Preparing the form 1 hr., 41 min. If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA Do not send this form to this address. Instead, keep it with your records.

13 The Vanguard Traditional IRA, SEP IRA, and Roth IRA Disclosure Statement, Custodial Account Agreement, and Securities Account Agreement

14 VANGUARD RETIREMENT RESOURCE CENTER Changes to the IRA Rules Regulatory changes and the Economic Growth and Tax Relief Reconciliation Act of 2001 have changed many of the rules that govern IRAs. This booklet (The Vanguard Traditional IRA, SEP IRA, and Roth IRA Disclosure Statement, Custodial Account Agreement, and Securities Account Agreement) has been revised for these changes. Here s a brief overview of the changes: Higher maximum IRA contributions. For 2001, the maximum contribution was 2,000. For 2002 and 2003, the maximum increased to 3,000. (As before, the most you can contribute to an IRA is 100% of earned income if that amount is less than the maximum contribution of 3,000.) The maximum contribution will increase in future years. Catch-up IRA contributions for people 50 and over by December 31 of the year for which they are contributing. Beginning in 2002, people who are 50 or over can contribute an extra 500 to their IRAs. Therefore, a person who was 50 or over in 2002 can contribute a total of 3,500 for 2002 that is, the new maximum contribution of 3,000 plus a catch-up contribution of 500. Both the maximum contribution and the catch-up contribution amounts will increase in future years. Consolidating distributions from employer plans in IRAs. Beginning in 2002, distributions from most types of retirement plans (including 401(k) plans, pension and profit-sharing plans, 403(b) plans, and 457 plans) can be rolled over into an IRA. Also, after-tax contributions to an employer plan may now be rolled over into an IRA. Changes in required minimum distributions (RMDs). The method for calculating RMDs (which apply to owners of traditional IRAs who have reached age ) has been simplified. In most cases, IRA owners can now take smaller RMDs from their IRAs. If you have any questions about the changes to the IRA rules, call us at on business days from 8 a.m. to 8 p.m. or on Saturdays from 9 a.m. to 1 p.m., Eastern time.

15 THE VANGUARD GROUP Contents Vanguard Traditional and Roth IRA Disclosure Statement Section I Revocation Section II Establishment of Your Account Section III Contributions Section IV Transfers Section V Rollover Contribution Section VI Conversions From a Traditional IRA to a Roth IRA Section VII Taxation of Distributions Section VIII Methods of Distribution Section IX Simplified Employee Pension Section X Income Tax Returns Section XI Prohibited Transactions Section XII Other Information Vanguard Traditional and Roth IRA Custodial Account Agreement Article I Definitions Article II Contributions to Account Article III Investment of Account Article IV Distribution of Account Article V Transfers Article VI Reporting, Disclosure, and Fees Article VII Amendment, Termination, and Assignment Article VIII Miscellaneous Vanguard Brokerage Services Securities Account Agreement

16 VANGUARD RETIREMENT RESOURCE CENTER Vanguard Traditional and Roth IRA Disclosure Statement Introduction This Disclosure Statement describes the general requirements and features of both a traditional and a Roth IRA, as well as the specific features of the Vanguard Traditional and Roth IRA Custodial Account Agreement. This Disclosure Statement is provided in accordance with Internal Revenue Service (IRS) regulations. (Where the requirements for a traditional and a Roth IRA are the same, this Disclosure Statement refers to both types of accounts as an IRA. ) Section I Revocation You may revoke your Vanguard IRA at any time within seven days after it is established by mailing or delivering a written notice of revocation to The Vanguard Group, P.O. Box 2600, Valley Forge, PA Any notice of revocation will be deemed mailed on the date of postmark (or if sent by certified or registered mail, the date of certification or registration) if it is deposited in the U.S. Postal Service in an envelope or other appropriate wrapper, first-class postage prepaid, properly addressed. Upon revocation, you will be entitled to a full refund of your entire IRA contribution without adjustment for administrative expenses, sales commissions (if any), or fluctuations in market value. If you have any questions concerning your right of revocation, please call during normal business hours. Section II Establishment of Your Account A. Statutory Requirements An IRA is a trust or custodial account established for the exclusive benefit of you and your beneficiaries. The Internal Revenue Code of 1986, as amended, provides for several types of IRAs, including a traditional IRA and a Roth IRA. You must clearly designate on the forms establishing your IRA that your account is either a traditional IRA or a Roth IRA. An IRA must be created by a written document that meets all of the following requirements: 1. Bank trustee or custodian. An IRA must be established with a qualified trustee or custodian, such as Vanguard Fiduciary Trust Company, which is a bank or other person approved by the IRS. You cannot be your own trustee or custodian. 2. Cash contributions up to annual contribution limit. All contributions to your IRA, excluding rollover or conversion contributions as described in Sections V and VI, must be made in cash. The total amount of contributions, other than rollover or conversion contributions as described in Sections V and VI, for any taxable year to your traditional and Roth IRAs may not exceed the contribution limit in effect for such taxable year as described in Section III[A]. 3. Nonforfeitability. The balance of your IRA account must be fully vested and nonforfeitable at all times. 4. Prohibitions against life insurance and commingling. No part of your IRA assets may be invested in life insurance contracts, nor may your IRA assets be commingled with other property except in a common trust fund or common investment fund. 5. Distribution rules. Your IRA must comply with certain minimum distribution requirements, which are described in Section VIII. (No age distribution requirements apply for Roth IRAs.) B. Tax Consequences of Traditional IRA In general, the federal income tax consequences of establishing a traditional IRA are the following: 1. Tax-deferred earnings. Earnings and gains on your traditional IRA contributions will not be subject to federal income taxes until they are actually distributed. 2. Deductible contributions. You may be permitted to make contributions to your traditional IRA that are deductible for federal income tax purposes in an amount up to the lesser of the contribution limit in effect for such year or 100% of your current-year compensation. You are permitted to make deductible traditional IRA contributions if neither you nor your spouse is an active participant in an employer-maintained retirement plan, or if your adjusted gross income for the taxable year does not exceed certain dollar limits. To the extent that your traditional IRA contributions are not deductible, they may be treated as nondeductible contributions that must be reported on your federal income tax return. See Section III[D] for more information. 3. Taxable distributions. Distributions from your traditional IRA will generally be taxable as ordinary income in the year of receipt, with the exception that if you have made any nondeductible contributions or aftertax rollover contributions to your traditional IRA, part of your traditional IRA distributions may be treated as a nontaxable return of your nondeductible traditional IRA contributions or after-tax rollover contributions. Any distributions you receive from your traditional IRA prior to age may be subject to an additional 10% tax (although exceptions may apply see Section VII[C]). You must start receiving certain minimum distributions from your traditional IRA beginning by April 1 of the year following the year in which you attain age (see Section VIII[B]). 4. Tax-free rollovers. You may be eligible to make a rollover contribution to your traditional IRA of cash or other assets you receive from another individual retirement plan or employer-maintained retirement plan. In addition, you may be eligible to roll over the taxable amount you withdraw from your traditional IRA to another individual retirement plan or an employer-maintained retirement plan. See Sections V and VI for more information. 5. State taxes. The state tax consequences of your traditional IRA will vary from state to state. You are strongly encouraged to consult a tax adviser to determine the state tax consequences of establishing a traditional IRA. 2

17 THE VANGUARD GROUP C. Tax Consequences of Roth IRA In general, the federal income tax consequences of establishing a Roth IRA are the following: 1. Tax-deferred earnings. Earnings on contributions to a Roth IRA will accumulate on a tax-deferred basis and may ultimately be tax-free if the earnings are part of a qualified distribution. (A qualified distribution is generally a distribution made to you after age and after you have held your Roth IRA account at least five years [see paragraph 3, below].) 2. Nondeductible contributions. Contributions to a Roth IRA are not deductible for federal income tax purposes. 3. Qualified distributions are completely tax-free. A distribution from a Roth IRA will be tax-free for federal income tax purposes as long as it is a qualified distribution. A qualified distribution is a distribution from a Roth IRA: (1) made after a five-year holding period, and (2) made after age , due to death or disability, or for the first 10,000 of qualified first-time home purchase expenses. See Section VII[B] for more details. 4. Nonqualified distributions are tax- and penalty-free return of contributions first; taxable earnings last. Any distribution that is not a qualified distribution (for example, a distribution taken before you hold your Roth IRA for five years) is first considered a tax- and penalty-free distribution of your contributions to your Roth IRA. Once an amount equaling the cumulative contributions to your Roth IRA has been recovered tax-free, all further distributions that are not qualified distributions will be subject to both ordinary income tax and possibly an additional 10% penalty tax (if you are under age ). See Section VII[B] for more details. 5. Tax-free Roth IRA-to-Roth IRA rollovers. You may be eligible to make a rollover contribution to your Roth IRA of cash or other assets you receive from another Roth IRA. In addition, you may be eligible to roll over the amount you withdraw from your Roth IRA to another Roth IRA. See Section V for more details. 6. Traditional IRA-to-Roth IRA conversions. If you have adjusted gross income for a year of 100,000 or less (on a single or joint filing basis) and you are not a married individual filing a separate tax return, you may roll over or convert a traditional IRA into a Roth IRA. You will owe tax in the year of the conversion on the amount converted to the Roth IRA (less any nondeductible contributions that you would have recovered had you simply received the conversion amount as a traditional IRA distribution). However, you will not owe a 10% early withdrawal penalty tax on the conversion amount. For purposes of qualifying for taxfree distributions from your Roth IRA, there is a separate five-year holding period for the amounts attributable to each year you make a conversion from a traditional IRA to a Roth IRA. 7. State taxes. The state tax consequences of your Roth IRA will vary from state to state. You are strongly encouraged to consult a tax adviser to determine the state tax consequences of establishing a Roth IRA. Section III Contributions A. Amount and Timing of Traditional and Roth IRA Contributions Maximum annual contributions to all IRAs. The total amount of contributions to all of your IRAs (both traditional and Roth IRAs) for any taxable year (excluding any rollover or conversion contributions as described in Sections V and VI) may not exceed the lesser of the contribution limit in effect for such taxable year as described below or 100% of your compensation for the taxable year. If you reach age 50 before the close of the tax year for which you are making a contribution, your annual contribution limit is increased by 500 for taxable years beginning in 2002 through 2005, and 1,000 for any taxable year beginning in 2006 or thereafter as described below. In addition, the maximum contribution permitted under a Roth IRA is phased out to 0 for individuals earning above a certain level of adjusted gross income (see Section III[C]). The annual IRA contribution limits for 2002 and later years are shown below. Year Maximum Annual Contribution Maximum Annual Contribution Individuals Under Age 50 Individuals Age 50 or Older ,000 3, ,000 3, ,000 3, ,000 4, ,000 5, ,000 5, ,000 6,000 For years after 2008, the contribution limit will be periodically indexed for inflation in 500 increments. Definition of compensation. For purposes of the IRA contribution limits, your compensation includes all wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services, and any earned income from self-employment. It does not include earnings and profits from property such as dividends, interest, or capital gains, or amounts received as a pension or annuity, or as deferred compensation. Your compensation includes any taxable alimony or separate maintenance payments you may receive under a decree of divorce or separate maintenance. IRA for your spouse. If both you and your spouse earn compensation for a taxable year, you may each make contributions to a traditional or Roth IRA up to the lesser of the contribution limit in effect for such taxable year or 100% of your compensation for the taxable year, although your Roth IRA contribution limit may be phased out based on your adjusted gross income for the year (see Section III[C]). In addition, under a special rule for spousal IRAs (explained in Section III[E]), contributions of up to the contribution limit in effect for such taxable year may be made to either a traditional IRA or, subject to the adjusted gross income phaseout discussed in Section III[C], a Roth IRA of a spouse, regardless of the income level of the spouse, provided the married couple files a joint tax return and has total compensation at least equal to their combined IRA contributions. Contributions in cash. All contributions to your traditional or Roth IRA (other than rollover contributions as described in Section V) must be made in cash, check, or by electronic transfer. If you wish to use shares of a previously established Vanguard fund account for your annual IRA contribution, you must first redeem the amount of shares you wish to invest, and then use the cash proceeds as your IRA contribution. 3

18 VANGUARD RETIREMENT RESOURCE CENTER Contributions up to the date your return is due (April 15). You may make contributions to your traditional or Roth IRA for a taxable year at any time during the year, either periodically or in a lump sum, or in the next year, up to the due date for filing your federal income tax return for the taxable year, not including extensions. For taxpayers who file on a calendar-year basis, the latest date for any year is April 15 of the following year. If you do not inform the Custodian of the year for which an IRA contribution is made, the Custodian will assume that the contribution is made for the year in which it is received. Only Roth IRA contributions permitted after age If you are otherwise eligible, you are permitted to make Roth IRA contributions even after you have attained age You are not permitted to make traditional IRA contributions (either deductible or nondeductible) after you have attained age (other than rollover contributions as described in Section V). Maximum contributions not required. You do not have to contribute to your traditional or Roth IRA every year, nor are you required to make the maximum contribution for any year. However, if you decide in any year not to make the maximum IRA contribution, you may not make up the missed contribution amount in later years. Under the Vanguard Traditional and Roth IRA, there is a minimum initial contribution required when you establish your account, as described in Section XII[D]. Custodial or trustee fees. Custodial or trustee fees that are billed separately and paid by you in connection with your IRA may be separately deductible on your federal income tax return as ordinary and necessary business expenses (subject to the 2% adjusted gross income limit for miscellaneous deductions). The separate payment of your IRA custodial or trustee fees will not serve to limit the maximum amount of contributions you are otherwise eligible to make to your IRA. Under the Vanguard Traditional and Roth IRA, you are provided the opportunity to pay separately your annual custodial or trustee fee, as explained in Section XII[E]. B. Traditional IRA: Deductible Contributions Contributions to your traditional IRA may be deductible in whole or in part for federal income tax purposes, as determined by the rules summarized below. Remember that contributions to a Roth IRA are not deductible for federal income tax purposes. You should contact your tax adviser to determine the deductibility of IRA contributions for state income tax purposes. Fully deductible contributions if you do not participate in an employer plan. If neither you nor your spouse is an active participant in an employermaintained retirement plan, your annual traditional IRA contributions up to the lesser of the contribution limit in effect for the taxable year (as described in Section III[A]) or 100% of current-year compensation are generally fully deductible (regardless of your level of adjusted gross income). Phase-out of deduction if you participate in an employer plan. If you are an active participant in an employer-maintained retirement plan for a taxable year, your traditional IRA deduction is phased out as your adjusted gross income approaches the upper limits of the applicable phase-out range. The phase-out ranges for joint and single filers for 2002 and later years are shown in the next column. Joint Filers Single Filers Year Phase-Out Range Year Phase-Out Range ,000 to 64, ,000 to 44, ,000 to 70, ,000 to 50, ,000 to 75, ,000 to 55, ,000 to 80, and after 50,000 to 60, ,000 to 85, and after 80,000 to 100,000 Formula for deduction phase-out for active participants. As stated, if you are an active participant in an employer-maintained retirement plan for a taxable year, your traditional IRA deduction limit for the year is phased out as your adjusted gross income exceeds the applicable adjusted gross income threshold for the tax year. This phase-out is accomplished as follows: Your maximum traditional IRA deduction is reduced by an amount, rounded down to the nearest 10, that bears the same ratio to the maximum deductible amount as your excess adjusted gross income for the taxable year i.e., for 2003, if you are married and file a joint return, your adjusted gross income over 60,000, or over 40,000 if you are single bears to 10,000. (For joint filers, this figure increases to 20,000 for the year 2007 and later.) Example: In 2003, a single individual under age 50 has adjusted gross income in the amount of 44,000 and is an active participant in an employer-maintained retirement plan. The individual may make traditional IRA contributions for the taxable year that are deductible for federal income tax purposes in the amount of 1,800 (assuming he or she has at least 1,800 of compensation) determined as follows: 2003 maximum traditional IRA deduction... 3,000 Excess adjusted gross income...44,000 40,000 = 4,000 Reduction in traditional IRA deduction... 3,000 x 4,000 = 1,200 10,000 Resulting traditional IRA deduction limit... 3,000 1,200 = 1,800 If this individual makes 1,800 of deductible traditional IRA contributions for the year, he or she may also make nondeductible IRA contributions to a traditional IRA or a Roth IRA in the amount of 1,200, resulting in total IRA contributions of 3,000 for the year. If the individual in the example above was age 50 or older, his maximum deduction of 3,500 for 2003 would be reduced by 1,400, resulting in a deduction limit of 2,100). Deduction limit for spouse. If you are married and file a joint return, and neither you nor your spouse is an active participant in an employer-maintained retirement plan, the traditional IRA contributions for each spouse for the taxable year will be fully deductible regardless of the level of your combined adjusted gross income. If you are married and file a joint return and both you and your spouse are active participants in employer-maintained retirement plans, the traditional IRA deduction limit for each spouse for the taxable year is phased out as your combined adjusted gross income exceeds the applicable threshold (see the phase-out ranges above). For example, for 2003 the traditional IRA deduction limit for each spouse for the taxable year is phased out as your combined adjusted gross income exceeds 60,000. 4