SUMMARY PLAN DESCRIPTION FOR THE BILLION MOTORS, INC. SALARY DEFERRAL 401(k) PLAN

Transcription

1 SUMMARY PLAN DESCRIPTION FOR THE BILLION MOTORS, INC. SALARY DEFERRAL 401(k) PLAN PLEASE READ THIS CAREFULLY AND KEEP FOR FUTURE REFERENCE.

2 TABLE OF CONTENTS 1. INTRODUCTION 1 2. BECOMING A PARTICIPANT 2 3. CONTRIBUTIONS TO YOUR PLAN 4 4. INVESTMENT OF PLAN FUNDS BENEFITS UNDER YOUR PLAN VESTING AND FORFEITURES BENEFIT PAYMENT OPTIONS LOANS AND IN-SERVICE DISTRIBUTIONS PLAN TERMINATION OR AMENDMENT SPECIAL TERMS PLAN ADMINISTRATION YOUR RIGHTS UNDER ERISA OTHER IMPORTANT PLAN INFORMATION 35

3 1. INTRODUCTION Billion Motors, Inc. sponsors the Billion Motors, Inc. Salary Deferral 401(k) Plan (the plan ) on behalf of itself and affiliated companies (collectively, the employer unless the context indicates a single employer). The plan is a multiple employer plan, as defined by the Internal Revenue Code. See Section 13 for a list of adopting employers. If you are an employee of Billion Motors, Inc., or one of the other adopting employers, the provisions of this booklet apply to you. See Section 11.6 for how you are affected by the plan s multiple employer status. The plan is a qualified retirement plan designed to assist you in saving for retirement by allowing you to make savings contributions on a tax-favored basis. The employer may match those contributions up to a certain amount. The plan also allows the employer to make additional discretionary contributions on your behalf. This booklet is a summary plan description ( SPD ) and is a brief description of the plan and your rights, obligations, and benefits in the plan. This SPD does not interpret, extend, or change the provisions of the plan in any way. The plan provisions may only be determined accurately by reading the actual plan document. If this SPD and the plan document conflict, the plan document always governs. A copy of the plan document is on file at your employer s office and may be read by you, your beneficiaries, or your legal representatives at any reasonable time. If you have any questions regarding either the plan or this SPD, you should contact the plan administrator (see Section 13 for contact information). If you would like a copy of the plan document, please contact the plan administrator. This SPD describes the provisions of the plan as of July 1, 2016, and is designed to comply with applicable legal requirements. The plan is subject to federal laws, such as the Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code of 1986, and other federal and state laws, which may affect your rights. The plan is subject to revision from time to time due to changes in laws or pronouncements by the Internal Revenue Service (IRS) or Department of Labor (DOL). Your employer may amend or terminate the plan, subject to certain rules and conditions (see Section 9). If the provisions of the plan described in this SPD change, your employer will notify you. Page 1

4 2. BECOMING A PARTICIPANT 2.1 WHICH EMPLOYEES CAN JOIN THE PLAN? All employees of the employer can generally join the plan. 2.2 ARE THERE CONDITIONS THAT I MUST MEET TO JOIN THE PLAN? Yes, you must be at least 18 years old. Before you can make pretax contributions (see Section 3.2) and Roth contributions (see Section 3.3) to the plan, you must complete 250 hours of service (see Section 10.2) within the 90-day period following the day you start employment with the employer. If you do not complete 250 hours during that 90-day period, you must complete one year of eligibility service (as explained below) with the employer. To be eligible for matching contributions (see Section 3.5) and nonelective contributions (see Section 3.6), you must complete one year of eligibility service (as explained below) with the employer. You will have completed a year of eligibility service if, at the end of your first 12-consecutive months of employment with your employer, you have been credited with at least 1,000 hours of service (see Section 10.2). If you have not been credited with at least 1,000 hours of service by the end of your first 12-consecutive months of employment, you will have completed a year of service at the end of any following plan year during which you were credited with at least 1,000 hours of service. See Section 10.1 for additional information on eligibility service, including prior service with Pritchard s Ford and McEleney Chevrolet-Buick-GMC-Toyota. 2.3 ONCE I MEET THE ELIGIBILITY CONDITIONS, WHEN DO I JOIN THE PLAN? You will join (enter) the plan and become a participant on the date you satisfy the eligibility requirements or as soon as administratively feasible following that date. 2.4 WHAT HAPPENS ONCE I MEET THE REQUIREMENTS FOR JOINING THE PLAN? The plan administrator will notify you when you become eligible to participate in the plan. If you want to make pretax, catch-up, or Roth contributions to the plan, call the Wells Fargo Retirement Service Center SAVE123 ( ) or sign on to the retirement plan website at wellsfargo.com to make Page 2

5 your election. If you are eligible for employer nonelective contributions, they will automatically be made to an account established for you. 2.5 UNDER WHAT CONDITIONS MAY I REENTER THE PLAN AFTER I AM REHIRED? You will immediately reenter the plan upon rehire. Page 3

6 3. CONTRIBUTIONS TO YOUR PLAN 3.1 WHAT ARE MY ACCOUNTS? When you become a participant, the plan will establish an account and subaccounts in your name based on the types of contributions made to the plan for you. The following types of contributions can be made to the plan: Employer contributions: Matching contributions Nonelective contributions Employee Contributions: Pretax contributions Roth contributions (pretax and Roth contributions are collectively referred to as salary deferrals ) Rollover contributions Throughout the year, the plan will add your salary deferrals, if any, to your account. If the employer chooses to make matching contributions (and you are eligible to receive them, see Section 3.5) those contributions may be added to your account throughout the year or once a year, as determined by the employer. If the employer chooses to make a nonelective contribution for the plan year (and you are eligible to share in it, see Section 3.6) the plan will add your share of that contribution to your account following the conclusion of the applicable year. Investment earnings and losses will be valued daily to your account (see Section 4.1). 3.2 WHAT ARE MY PRETAX CONTRIBUTIONS? Pretax contributions (also known as pretax salary deferrals or 401(k) deferrals ) are a part of your compensation (as explained in Section 3.9) that you request the employer contribute to the plan instead of paying to you in cash. The amount contributed to the plan is not subject to federal income tax at the time the deferral is withheld from your paycheck and deposited with the plan. Rather, amounts in your pretax contributions subaccount are usually subject to taxation at the time of distribution.. You may elect to defer up to 100% of your net compensation (after deductions for benefits, FICA, and OASDI) each payroll period. However, your total deferrals in any calendar year may not exceed a dollar limit which is set by the IRS. The limit for 2016 is $18,000. The IRS may adjust this limit in future years. Page 4

7 In addition, the plan administrator has the right to reduce the pretax salary deferral made by certain highly compensated employees to ensure compliance with federal rules concerning discriminatory contributions. Generally, a highly compensated employee is one who earns more than $120,000 in 2015 or The annual amount may be adjusted by the IRS from year to year. An employee who owns more than 5% of the employer is also considered a highly compensated employee. Contact your plan administrator for additional information about being a highly compensated employee. There are two ways for you to make a pretax contribution to the plan. One way is to contact the Wells Fargo Retirement Service Center at SAVE123 ( ); the other is to sign on to the retirement plan website at wellsfargo.com. The deferral percentage must be a whole percentage. You may change your deferral rate at any time. In the event you receive a hardship distribution (see Section 8.3) from your salary deferral contributions in the plan or any other plan maintained by your employer, you will not be allowed to make salary deferrals for a period of six months after the date of distribution. 3.3 WHAT ARE ROTH CONTRIBUTIONS? Like pretax contributions, Roth contributions are a part of your compensation (as explained in Section 3.9) that you request the employer contribute to the plan instead of paying to you in cash. However, unlike a pretax contribution explained in Section 3.2, a Roth contribution is subject to federal income tax withholding before the contribution is made to the plan, so the amount contributed to the plan is made on an after-tax basis. You may elect to defer compensation from your paycheck to the plan on a pretax basis or a Roth basis or a combination of both. If you elect to make Roth contributions, the contributions are subject to federal income tax withholding in the year they are contributed to the plan, but the contributions, and, in most cases, the earnings on those contributions are not subject to federal income taxes when distributed to you. For the earnings on Roth contributions to be distributed tax-free, the distribution from your Roth contribution subaccount must be a qualified distribution under the Internal Revenue Code. To be a qualified distribution, the distribution must occur after one of the following: Your attainment of age 59½ Your disability Your death In addition, the distribution must occur after the expiration of a five-year participation period. The five-year participation period is the five-year period beginning on January 1 of the calendar year in which you first make a Roth Page 5

8 contribution to the plan (or to another 401(k) plan or 403(b) plan if such amount was rolled over into this plan) and ending on the last day of the calendar year that is five years later. For example, if you make your first Roth contribution under this plan on November 30, 2016, your participation period will end on December 31, It is not necessary that you make a Roth contribution in each of the five years or for any length of time within the five years or in any particular amount. If a distribution from your Roth subaccount is not a qualified distribution, any part of the distribution attributed to investment earnings from your Roth subaccount will be taxable to you at the time of distribution, unless you roll over the distribution to a Roth IRA or other 401(k) plan or 403(b) plan that will accept the rollover. In addition, in some cases, there may be a 10% excise tax on the earnings that are distributed. 3.4 WHAT ARE AGE 50 CATCH-UP CONTRIBUTIONS? If you are age 50 or older at any time during the calendar year, you may elect to make catch-up contributions to the plan. You can begin making catch-up contributions at any time during the calendar year in which you reach age 50 you do not need to wait until your birthday. A catch-up contribution may be made as a pretax contribution or as a Roth contribution. You can make catch-up contributions if you contribute the maximum dollar contribution limit ($18,000 in 2016) to the plan. Although you are not required to reach the above limit before you begin making catch-up contributions, you must be contributing at a rate that will allow you to reach the limits before the end of the calendar year. To determine if you will reach the dollar limit, take your expected eligible pay and multiply it by your contribution rate. You are not required to make the maximum catch-up contribution; you may choose to make a smaller catch-up contribution. Catch-up contributions can only be made through payroll deduction and must be made by the end of the calendar year. The dollar limit for catch-up contributions is $6,000 in The IRS may adjust the limit in future years. The employer will match catch-up contributions up to the limit allowed under the plan. 3.5 WHAT ARE THE EMPLOYER MATCHING CONTRIBUTIONS? Employer matching contributions are discretionary contributions your employer makes to participants who make pretax contributions, Roth contributions and/or Page 6

9 catch-up contributions. Each year, your employer decides how much to contribute in the form of matching contributions. Matching contributions are deposited in your matching contribution subaccount throughout the year or once a year, as determined by the employer. The deposit is made as soon as administratively possible following the end of each payroll period or the close of the plan year. You ll be eligible to receive a matching contribution if you make contributions to the plan during the calendar year. Matching contributions vest over a period of five years. To learn more about vesting, go to the section titled Vesting and Forfeitures. 3.6 WHAT ARE THE EMPLOYER NONELECTIVE CONTRIBUTIONS? Nonelective contributions are a type of contribution the employer may choose to make to each eligible employee s plan account. Unlike matching contributions, employees share in any nonelective contributions regardless of whether they contribute to the plan. If the employer makes a nonelective contribution for a plan year, the amount you receive will be determined by dividing your compensation for the plan year by the total compensation of all the eligible employees entitled to share in the contribution. You must be employed on the last day of the plan year and have worked at least 1,000 hours during the plan year to receive nonelective contributions. 3.7 WHAT ARE ROLLOVERS? At the discretion of the plan administrator, you may be permitted to deposit into this plan distributions you receive from other retirement plans. Such a deposit is called a rollover and may result in current tax savings to you. You should consult your professional tax advisor to determine if a rollover is in your best interest. You will be permitted to roll over money from the following types of plans: Qualified retirement plans Rollover IRAs The plan administrator may allow you to make a rollover contribution even if you have not yet become eligible to join the plan; however, you will have to satisfy the eligibility requirements prior to making or receiving other types of contributions. Page 7

10 3.8 WHAT ARE THE PLAN S TAX LAW CONTRIBUTION LIMITS? You should be aware that the Internal Revenue Code imposes certain limits on how much may be allocated to your account during any given year. The application of these limits can be complex and a detailed explanation is beyond the scope of this SPD, but generally no more than the lesser of $53,000 (for 2016) or 100% of your compensation can be contributed to your account(s) (excluding earnings and rollovers) for the year. These limits may reduce your share of the matching and nonelective contributions to an amount less than what you would have received had the limits not been in place. The plan administrator will inform you if these limits affect you. 3.9 FOR DETERMINING THE AMOUNT OF CONTRIBUTIONS THAT I CAN MAKE OR RECEIVE, WHAT DOES COMPENSATION MEAN? Compensation has a special meaning for purposes of the plan. Compensation is generally defined as your W-2 wages that are paid to you while you are a participant in the plan. For determining your salary deferrals and matching contributions for the plan, compensation does not include amounts you pay through payroll deductions for medical (health) insurance premiums, flexible medical (health) contributions, flexible childcare contributions, disability insurance premiums and elective deferrals. For all contribution types under the plan, compensation does not include fringe benefits paid to you by the employer (for example, all reimbursements or other expense allowances, moving expenses, deferred compensation and welfare benefits). Your eligible compensation also includes the following amounts paid to you after you terminate your employment with the employer, providing the payments would have been made to you if you had not terminated your employment. (1) Compensation for services performed during your regular working hours, or compensation for services outside your regular working hours, such as overtime or shift differential, commissions, bonuses, or other similar payments. (2) Nonqualified unfunded deferred compensation, if the payment is includible in gross income. (3) Amounts paid for unused sick, vacation, or other leave, if such amounts would have been included in compensation had they been paid prior to your termination of employment and you would have been able to use the leave if your employment with the employer had continued. To qualify as eligible compensation, these post-termination payments must occur within the later of: 2½ months after you terminate employment Page 8

11 The end of the year that includes the date of your termination Any other payment that is made after termination of employment is not treated as compensation. Taxable fringe benefits, such as reimbursements or other expense allowances, moving expenses, deferred compensation, and welfare benefits are not included in your compensation for plan purposes. Your compensation will be measured over the plan year; however, for the plan year in which you first become a participant, your compensation will be measured from the date you entered the plan. The plan, by law, cannot recognize compensation in excess of $265,000 in This amount may be adjusted in future years for cost of living increases. If you feel you may be affected by this rule, ask your plan administrator for further details HOW WILL MY BENEFITS UNDER THE PLAN BE AFFECTED BY MY UNIFORMED SERVICE LEAVE? The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) provides for the protection of certain benefits due to your uniformed service leave. Uniformed service leave includes not only service with the armed services, but also the commissioned corps of the public health service, and any other category of persons designated by the President in time of war or emergency. If you return to active employment with the employer within the period set by USERRA, you will be eligible to make up pretax contributions to the plan. In addition, the employer will make contributions to the plan on your behalf to which you would have otherwise been entitled but for your uniformed service leave. You may also be entitled to credit for service for vesting and eligibility purposes for your period of leave. Loan repayments to the plan may be suspended for any part of any period during which you are performing service in the uniformed services. Employees who receive wage continuation payments while in the military may benefit from law changes that were effective in If you are a veteran and are reemployed under the USERRA, you may be eligible for benefits if you become disabled while on active duty. In addition, if you die while performing in the uniformed services, your beneficiary may be entitled to receive additional benefits provided under the plan, as if you had resumed employment on the day before your death. If you believe these provisions apply to you, you should contact the plan administrator and ask for further details. Page 9

12 4. INVESTMENT OF PLAN FUNDS 4.1 HOW ARE THE PLAN FUNDS INVESTED? The trustee deposits contributions and rollovers in the trust fund established for the plan. The trustee is responsible for the safekeeping of plan assets. As a participant, you are responsible for directing the manner in which the monies in your own account are invested. You may choose to invest your account among several different investment funds selected by the plan administrator. You can place 100% of those amounts in one fund or spread your account in multiples of 1% among several investment funds (just make sure your total investments add up to 100%). If you do not tell the plan administrator how you want your contributions invested, your contributions automatically will be invested in the Wells Fargo Target Date CIT Fund based on your date of birth and a retirement age of 65. The plan administrator reserves the right to change this default investment fund at any time without prior notice. You can change your investment elections by calling the Wells Fargo Retirement Service Center at SAVE123 ( ) or by signing on to the retirement plan website at wellsfargo.com. You can also make separate investment elections for your current account balance and for your future contributions to the Plan. Any changes you elect to make will become effective as soon as the plan administrator and investment provider can accomplish the change. Your account will be updated for investment earnings or losses each day that the applicable investment markets are open. Expenses of administering the Plan and related trust may be paid from the trust fund; however, fees and costs associated with the investment of your account may be charged to your account (see Section 11.3). The plan is an ERISA 404(c) plan, which means that the plan is intended to be a plan described in Section 404(c) of the Employee Retirement Income Security Act. This means you are legally responsible for your investment choices. The plan administrator, investment provider and the trustee do not have any legal responsibility to determine if your investment selection is appropriate for your circumstances. These fiduciaries may be relieved of liability for any losses that are the direct and necessary result of your investment. 4.2 HOW DO I DECIDE HOW MY FUNDS SHOULD BE INVESTED? The plan administrator (or investment provider under the direction of the plan administrator) will provide you with the following information about available investment options under the plan: Page 10

13 A description of each fund available. This description will explain the investment objectives of the fund, the types of assets in which the fund is invested, and the risk and return characteristics of the fund. It will also describe the manner in which the investments of the fund are diversified. The identity of any investment managers for each fund. A description of any fees or expenses that may be charged to your account. These fees might include commissions, sales loads, deferred sales charges, redemption fees and exchange fees. After you have made an investment in a particular fund, the plan administrator or fund provider will provide you with the fund s prospectus if one is available. Upon request, you can also receive additional information about each investment fund, including: A description of the annual operating expenses of the fund, to the extent that these expenses may reduce the rate of return of the fund. Copies of any prospectuses, financial statements and any other reports about the fund that have been provided to the plan administrator. A list of the largest assets held by the fund. Information concerning the value of shares or units of the fund, and information regarding the historical investment performance of the fund, net of expenses. Information concerning the value of shares or units of the fund held in your account. You can request this additional information by contacting the Wells Fargo Retirement Service Center at SAVE123 ( ) or by signing on to the retirement plan website at wellsfargo.com. If an investment fund is invested in common stocks or other securities that have voting rights, those voting rights are retained by the plan administrator and the trustee. You will not be given the opportunity to vote the shares of stock or other securities held by any fund. Page 11

14 5. BENEFITS UNDER YOUR PLAN 5.1 WHAT HAPPENS WHEN I RETIRE? If you continue employment with your employer until you attain normal retirement age, you automatically will become 100% vested in your entire plan account, regardless of your years of vesting service (see Section 6.1) with the employer. Normal retirement age under the Plan is 65. Your normal retirement date under the Plan is the date you actually retire from employment with your employer after attaining normal retirement age. On your normal retirement date, you will be entitled to receive your entire account balance from the Plan (less any applicable taxes and withholdings), or, in some cases, begin receiving periodic payments of a portion of your balance (see Section 7.2). 5.2 WHAT HAPPENS IF I SUFFER A DISABILITY? If you become totally and permanently disabled (as defined by the plan) while a participant and while still employed by the employer, you will automatically become 100% vested in your entire plan account, regardless of your age or years of vesting service (see Section 6.1) with the employer. In addition, should you become disabled, you may be able to receive a distribution from your account prior to separation from service (see Section 8.2). Under the plan, disability means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. The permanence and degree of such impairment must be supported by medical evidence. The plan administrator may require you to submit to a physical examination to confirm your disability. 5.3 WHAT HAPPENS IF I DIE WITH AN ACCOUNT BALANCE IN THE PLAN? If you die while a participant in the plan and while still employed by the employer, you will become 100% vested in your entire plan account, regardless of your age or years of vesting service (see Section 6.1) with the employer. Your designated beneficiary or beneficiaries will be entitled to receive your entire account balance from the plan (less any applicable taxes and withholdings) payable as soon as practicable following your death or, if later, the date on which the plan administrator receives notification of your death, subject to your beneficiary s election (see Section 8.6). If you are not married, you may designate a beneficiary of your choosing to receive your account balance in the plan in the event of your death. Page 12

15 If you have been married at least one year at the time of your death, your spouse is automatically designated as the beneficiary of your entire account balance in the plan. If you wish to designate a beneficiary other than your spouse, your spouse must irrevocably consent to waive his or her right to be your sole beneficiary. Your spouse s consent must be in writing, be witnessed by a notary or a plan representative, and acknowledge a specific nonspouse beneficiary. If you change your designation, your spouse must again consent to the change. The plan administrator will furnish you with the forms and information necessary to designate a nonspouse beneficiary. Forms and information also may be obtained by contacting the Wells Fargo Retirement Service Center at SAVE123 ( ). If a valid waiver from your spouse is not in effect, your entire account balance will be payable to your spouse as he or she elects, in any form allowed by the Plan (see Section 7.2). Since your spouse participates in these elections and has certain rights in the event of your death, you should immediately report any change in your marital status to the plan administrator. Regardless of the method of distribution selected, your entire death benefit generally must be paid to a nonspouse beneficiary within five years after your death. A spouse may delay payment longer than five years. If you d like more information on beneficiary designation and beneficiary distributions, contact your plan administrator or call the Wells Fargo Retirement Service Center at SAVE123 ( ). 5.4 WHAT ARE MY BENEFITS IF I TERMINATE EMPLOYMENT? If your employment terminates for reasons other than retirement, disability, or death, you will be entitled to receive only your vested percentage of your account balance (less any applicable taxes, penalties, and withholdings) and any nonvested percentage of your account will be forfeited (see Section 6). See Section 7 for an explanation on how distributions are paid. Page 13

16 6. VESTING AND FORFEITURES 6.1 WHAT IS VESTING? Vesting is the term that refers to the portion of your account that cannot be forfeited by you or taken away from you. You are always 100% vested in your pretax contributions, your Roth contributions, and your rollover contributions. For all other contributions, see the vesting schedules below. Your vested percentage in your employer matching contribution account and your employer nonelective contribution account is determined under the following schedule and is based on your credited years of service. Vesting Schedule Years of Service Vested Percentage 1 10% 2 25% 3 50% 4 75% 5 100% You will have completed a year of service for vesting purposes if you are credited with at least 1,000 hours of service during a plan year, even if you were not employed on the first or last day of the plan year. If you die or become disabled while a participant and while employed by the employer, you will become 100% vested in your employer matching contribution and employer nonelective contribution accounts regardless of your vesting service. For vesting purposes, all of your service with any adopting employer is considered. If you were employed with Pritchard s Ford on January 24, 2016, and were immediately employed by Billion of Clear Lake, Inc. (BCL), or another adopting employer of the plan, on January 25, 2016, as part of BCL s acquisition of Pritchard s Ford, your service of Pritchard s Ford is counted for determining vesting service. If you were employed with McEleney Chevrolet-Buick-GMC-Toyota on July 10, 2016, and were immediately employed by Billion Hawkeye, Inc. (Hawkeye), or another adopting employer of the plan, on July 11, 2016, as part of Hawkeye s acquisition of McEleney Chevrolet-Buick-GMC-Toyota, your service of McEleney is counted for determining vesting service. Your vested percentage may not be reduced by any plan amendments. Page 14

17 6.2 WHAT ARE FORFEITURES? If you end employment with the employer before you are 100% vested (see Section 6.1) in your nonelective and matching contributions (and related investment earnings), the nonvested portion of your account is called a forfeiture. When an amount is forfeited, you lose your right to have that amount paid to you as a benefit. 6.3 WHEN DO FORFEITURES OCCUR? You will forfeit the nonvested portion of your account on the earlier of the following dates: 1. The last day of the plan year in which you first incur five consecutive breaks in service (see Section 10.3). 2. The date you receive distribution of the entire vested balance of your account. If the value of your vested account is zero, any nonvested account balance will be forfeited immediately. 6.4 WHAT HAPPENS TO FORFEITURES? The plan administrator has the discretion to apply forfeitures in following manner, in any order and any amount: Forfeitures resulting from nonvested matching contributions will be used to reduce the amount of matching contribution the employer may make to the plan for the same plan year in which the forfeiture occurred. These forfeitures will then be reallocated to participants entitled to receive a matching contribution for that year. Forfeitures resulting from nonvested nonelective contributions will be added to the amount of nonelective contribution the employer may make to the plan for the same plan year in which the forfeiture occurred. These forfeitures will then be reallocated to participants entitled to share in the nonelective contribution for that year using the allocation method described in Section 3.6. Forfeitures from any source may be used at any time to pay reasonable expenses of the plan. 6.5 CAN A FORFEITED BALANCE BE RESTORED? Yes, forfeitures can be restored. If you leave employment without being fully vested and are later reemployed by the employer, you may repay the total amount Page 15

18 of any distribution you received that caused the forfeiture of your nonvested account balance, and the forfeited portion of your account will be restored. To be eligible for forfeiture restoration, you must: 1. repay your vested account balance within five years of your reemployment date; 2. be employed by the employer on the date your repayment is made to the plan; and 3. not have incurred five consecutive breaks in service (see Section 10.3). If your vested interest in your plan account was zero when you ended employment (so you were unable to take a distribution), your prior account balance will automatically be restored if you are reemployed before you experience five consecutive breaks in service. Page 16

19 7. BENEFIT PAYMENT OPTIONS 7.1 WHEN ARE BENEFITS PAID FROM THE PLAN? The plan permits payment of benefits to be made (or begin to be made) as soon as practicable after you sever employment with the employer, subject to your written consent if required (and in some cases, that of your spouse) and submission of the necessary forms and instructions required by the plan administrator and trustee. A distribution may be postponed by the plan administrator for administrative convenience or due to circumstances beyond its control. By law, payment of benefits generally must begin no later than the 60th day after the close of the plan year in which the latest of the following events occurs: The date on which you reach normal retirement age (see Section 5.1). The 10th anniversary of the year in which you became a participant in the plan. The date you terminate employment with your employer. If you do not own more than 5% of the employer, you can delay distribution of benefits until the later of the date you attain age 70½ and your normal retirement date (explained in Section 5.1). A participant who owns more than 5% of the employer must begin taking distributions no later than age 70½ regardless of his or her employment status. When your employment with the employer ends, you will be given detailed information regarding your plan benefits and the right to receive a distribution or request a rollover to another eligible retirement plan or individual retirement account. 7.2 IN WHAT FORM AND MANNER WILL MY BENEFITS BE PAID? In most cases, your benefit will be paid in a single, lump-sum, cash payment. Except as provided in the subsection Required Minimum Distributions below and the in-service distribution features in Section 8.2, the plan does not offer benefit payment in a form other than a single, lump sum. Generally, if you have terminated employment with the employer, a distribution can be made without your consent after you attain your normal retirement date (see Section 5.1). However, if your account balance exceeds $5,000 (including any amount in a rollover account), the plan administrator will offer you the opportunity to roll over your distribution to an individual retirement account or other qualified plan (see Section 8.5). Page 17

20 Subject to the small balance cash out rule below, if you have terminated service with the employer and have not attained your normal retirement date, you must consent to a distribution from the plan. Small balance cash out. If you separate from service with the employer before you attain your normal retirement date, and your vested balance does not exceed $1,000 (including any amount in your rollover account), the plan administrator can distribute your vested account balance as a single, lump-sum, cash payment without your consent. If you separate from service with the employer before you attain age 62 and your vested balance exceeds $1,000, the plan administrator must obtain your consent before making a distribution. Required minimum distribution. If you separate from service with the employer and have not requested a distribution, the plan administrative may treat your failure to request a distribution as an election to delay distribution until age 70½. Regardless of whether you elect to delay the receipt of benefits, IRS rules generally require minimum payments to begin no later than the April 1st following later of (i) the year terminate employment, or (ii) the year in which you reach age 70½. However, if you own more than 5% of the employer, you must begin receiving benefit payments no later than the April 1 of year following the year in which you attain age 70½, regardless of whether you continue to be employed with the employer. Payment of required minimum distributions generally will be paid in annual installments, in an amount which satisfies the required minimum distribution rules under the Internal Revenue Code. However, if you are required to take required minimum distributions, you may elect to receive payments in monthly, quarterly or annual installments equal to or exceeding the annual required amount. If you think this situation may apply to you, you should contact a professional tax consultant for further information and advice. Page 18

21 8. LOANS AND IN-SERVICE DISTRIBUTIONS 8.1 MAY I BORROW MONEY FROM THE PLAN? Yes, you may apply to the plan administrator for a loan from the plan. In addition to the rules outlined below, your employer has established a written loan program which explains the plan s loan requirements in more detail. You can request a copy of the loan program from the plan administrator. Loan Requirements: Generally, the rules for loans include the following: Loans must be made available to all participants on a uniform and nondiscriminatory basis. All loans must be adequately secured. You may use up to one-half (½) of your vested account balance under the plan as security for the loan. All loans must bear a reasonable rate of interest. The employer has determined a reasonable rate to be the prime rate as determined by Wells Fargo Bank, N.A., plus 1%. All loans must have a definite repayment period, requiring payments not less frequently than quarterly, and for the loan to be amortized on a level basis over a reasonable period of time, not to exceed five years. If you use the loan to acquire your principal residence, however, the loan term may not exceed 30 years. All loans will be considered a directed investment from your account under the plan. All payments of principal and interest by you on a loan will be credited to your account. The plan may also require that repayments on the loan obligation be by payroll deduction. The amount the plan may loan to you is governed by IRS rules, which limit the amount of the loan to the lesser of: 1. $50,000 reduced by the excess, if any, of your highest outstanding balance of loans from the plan during the one year period prior to the date of the loan over your current outstanding loan balance; 2. One-half (½) of your vested account balance. No loan in an amount less than $1,000 will be granted by the plan administrator. You may have only two plan loans outstanding at any given time. Page 19

22 A one-time loan processing fee of $75 will be charged for each new loan taken from the plan. The fee will be withheld from the loan proceeds you receive. If you fail to make timely payments when they are due under the loan, your loan will be in default. A loan that is in default may be considered a distribution from the plan for tax purposes, and could be subject to a 10% penalty tax in addition to regular income taxes. The plan administrator will foreclose on the security for the loan as soon as administratively feasible. Defaulting on a plan loan may cause you to be ineligible for future plan loans. In any event, your failure to repay a loan will reduce the benefit you would otherwise be entitled to from the plan. 8.2 MAY I RECEIVE A DISTRIBUTION FROM THE PLAN BEFORE I TERMINATE EMPLOYMENT? In-service distributions of your vested account balance are available in limited circumstances from certain contributions, as explained below. Rollover contributions: If you have made a rollover contribution to the plan (see Section 3.7), you can request a distribution of those funds at any time and for any reason. Pretax and Roth contributions: You can request an in-service distribution from your salary deferral subaccounts at any time in the event of a financial hardship (see Section 8.3) or should you suffer a disability (see Section 5.2). However, earnings credited to your pretax contributions after December 31, 1988, are not available for hardship distribution. You can also request an in-service distribution of your salary deferrals and the earning thereon any time after you attain age 59½. ). In-service distribution of Roth contributions and their investment earnings are subject to the qualified distribution rule explained in Section 3.3. Matching contributions and nonelective contributions: You can request an inservice distribution from the vested portion of matching contributions and nonelective contributions credited to your account (see Sections 3.5 and 3.6), and their investment earnings, any time after you attain age 59 ½. You can also request an in-service distribution from these funds at any time should you suffer a disability (see Section 5.2) or incur a financial hardship (see Section 8.3). Special provisions for military personnel. Qualified reservist distributions. If you: (i) are a reservist or National Guardsman; (ii) were/are called to active duty after September 11, 2001; and (iii) were/are called to duty for at least 180 days or for an indefinite period, you may take a distribution of your salary deferrals under the plan while you are on active duty, regardless of your age. The 10% premature distribution penalty tax, normally applicable to plan distributions made before you reach age 59 1/2, will not apply to the distribution. You also may repay the distribution to an IRA, without limiting amounts you otherwise could contribute to the IRA, provided Page 20

23 you make the repayment within two years following your completion of active duty. Distributions for deemed severance of employment. If you are on active duty for more than 30 days, then the plan generally treats you as having severed employment for purposes of receiving a distribution from the plan. This means that you may request a distribution from any of your contribution subaccounts within the Plan. If you request a distribution under this deemed severance of employment provision and all or part of the distribution is taken from salary deferrals, then you are not permitted to make any pretax or Roth contributions to the plan for six months after the date of the distribution. 8.3 WHAT ARE THE CONDITIONS FOR OBTAINING A HARDSHIP DISTRIBUTION? IRS rules require that you must first exhaust all of your other financial resources before a hardship distribution is available to you. Generally any hardship distribution you receive will be subject to regular income taxes and a 10% early withdrawal tax penalty on the full amount of the distribution. Your plan allows hardship distributions in the event of your immediate and heavy financial need. A hardship withdrawal will reduce the value of the benefits you receive at retirement. A hardship distribution will be authorized only if the distribution is to be used for one of the following purposes: The payment of medical expenses previously incurred by you or your dependent or necessary for you or your dependent to obtain medical care. The costs directly related to the purchase of your principal residence (excluding mortgage payments). The payment of tuition and related educational fees for the next 12 months of post-secondary education for yourself, your spouse, or dependent. The payment necessary to prevent your eviction from your principal residence or foreclosure on the mortgage of your principal residence. The payment of burial or funeral expenses for your deceased parent, spouse, children, or dependents. To pay for the repair of damages to your principal residence that would qualify for the casualty deduction on your federal tax return and are not paid through homeowners insurance or other insurance of federal or state reimbursement programs. Page 21

24 In addition, a distribution may be made only if you certify and agree that the following conditions are satisfied: 1. The distribution is not in excess of the amount of your immediate and heavy financial need. 2. You have obtained all distributions, other than hardship withdrawals, and all nontaxable loans currently available under all plans maintained by your employer. If you receive a hardship distribution from your pretax contributions, your pretax contributions and Roth contributions must be suspended for at least six months. A hardship distribution from your Roth subaccount is subject to the qualified distribution rule explained in Section 3.3. Hardship distributions cannot be rolled over to an IRA or another eligible plan such as another employer s 401(k). If you are requesting a hardship distribution, you may need to speak with the plan administrator, who will give you instructions about the documentation needed to demonstrate the hardship and the amount necessary to meet the need. 8.4 HOW DO I REQUEST A DISTRIBUTION? If you are eligible for a distribution from the plan, you may request the appropriate form to complete by calling the Wells Fargo Retirement Service Center at SAVE123 ( ) or by signing on to the retirement plan website at wellsfargo.com/retirementplan. 8.5 ARE THERE TAXES DUE ON DISTRIBUTIONS FROM THE PLAN? When you receive a distribution from your plan, it will normally be subject to income taxes. You may, however, reduce, or defer entirely, the tax due on your distribution by making a rollover contribution to an individual retirement account (IRA) or to another qualified plan. The portion of your distribution that is rolled over is not taxable income to you until you withdraw it from the IRA or the other eligible retirement plan. The amount rolled over also is not subject to any penalty tax for early withdrawal. There are two ways to roll your distribution over into an IRA or another eligible retirement plan. 1. You may take the distribution in cash and then contribute it to the IRA or eligible retirement plan within 60 days of the original distribution. If you choose this method, the distribution you receive will be subject to mandatory federal income tax withholding at a rate of 20%, which will reduce the amount you receive. To obtain the maximum tax benefit, you must also Page 22

25 contribute an amount equal to the amount of taxes withheld to the IRA or eligible retirement plan. 2. You may elect a direct rollover, in which the trustee of this plan pays the amount directly to the trustee or custodian of the IRA or eligible retirement plan. A direct rollover will result in no tax being due until you withdraw funds from the IRA or other employer plan. Either way, the amount rolled over escapes current federal income taxation, but only the direct rollover allows you to avoid certain federal tax withholding requirements. Most distributions qualify for a rollover, but certain distributions may not be rolled over. If your distribution is in the form of installments for a period of ten years or more, the installments may not be rolled over. Whenever you receive a distribution, the plan administrator will give you a more detailed written explanation of these options; however, the rules that determine whether you qualify for favorable tax treatment are very complex. You should consult with your tax advisor before making a choice. Distributions made prior to your attaining age 59½ and still employed by the employer that are not rolled over into another retirement plan or IRA may be subject to a 10% federal penalty tax in addition to regular income taxes. Distributions you receive after you are age 55 or older and are no longer employed by the employer are not subject to the 10% federal penalty tax. 8.6 WHAT HAPPENS TO MY BENEFIT IF I DIE? Generally, if you die, your benefit will be paid to your beneficiary as soon as practicable following your death or, if later, the date on which the plan administrator receives notification of, or otherwise confirms, your death. However, if your designated beneficiary is a person, that beneficiary may elect to delay payment of the benefit for up to 5 years. If an amount owed to a beneficiary does not exceed $5,000, the plan administrator may cause the benefit to be paid automatically to the beneficiary, in a single lump sum, without the beneficiary s prior consent. If your beneficiary is your spouse, your spouse can roll over his or her portion of the benefit to an IRA or Roth IRA. The rollover can be direct or indirect (see Section 8.5). If your beneficiary is not your spouse, your beneficiary can transfer his or her portion to an IRA or Roth IRA, but only as a direct rollover. In addition, if your spouse is your beneficiary, he or she may roll over the distribution into a traditional IRA. However, a beneficiary who is not your spouse can only request a direct rollover to an inherited IRA. A direct rollover will result in no tax being due until the beneficiary withdraws funds from the inherited IRA. However, the amount transferred to the inherited IRA is subject to Page 23

26 the nonspouse minimum distribution rules of the Internal Revenue Code. A beneficiary should consult with a qualified tax consultant before requesting such a rollover. 8.7 WHAT IS A QUALIFIED DOMESTIC RELATIONS ORDER, AND HOW WOULD ONE AFFECT MY BENEFITS UNDER THE PLAN? A Qualified Domestic Relations Order, (QDRO), is a court order that provides child support, alimony, or marital property rights to an alternate payee (your spouse, former spouse or dependent) from your account in the plan. A QDRO must be issued pursuant to a state domestic relations law and must meet certain technical requirements. A QDRO cannot require the plan to provide any type or form of payment or any option not permitted by the plan; although, it can require payment before you terminate employment. Under a QDRO, a former spouse may be entitled to the same rights as a current spouse with respect to some or all of your account. If this is the case, then any provisions in the plan that require spousal approval, such as naming a nonspouse beneficiary or (if applicable) choosing certain optional forms of payment, may apply to your former spouse with respect to the portion of your account designated for the former spouse. If the total vested amount of all your account balances is $5,000 or less on the date the QDRO is effective, the alternate payee under the QDRO will receive a cash distribution for the full value of his or her share of the account. If it appears that you may be subject to a QDRO, you should contact the plan administrator immediately. You can obtain, without charge, a copy of the plan s QDRO procedures from the plan administrator. Page 24