Summary Plan Description AllianceRx Walgreens Prime 401(k) Plan

Transcription

1 Summary Plan Description AllianceRx Walgreens Prime 401(k) Plan Sponsored by Walgreens Specialty Pharmacy Holdings, LLC

2 OVERVIEW An Investment in Your Future About Your Summary Plan Description The AllianceRx Walgreens Prime 401(k) Plan (the Plan ) offers you a unique combination of features that are designed to help you meet your long-range savings and investment goals: you can contribute up to 75% of your eligible earnings to the Plan your contributions may be made on a pre-tax or after-tax (Roth) basis Walgreens Specialty Pharmacy Holdings, LLC (the employer ) matches a portion of your contributions to the Plan you have a choice of investment options for the investment of your contributions the Plan has withdrawal and loan provisions This Summary Plan Description (SPD) summarizes your Plan benefits, but it does not cover all of the details. Please keep in mind that: the full facts and details about your Plan are contained in the official Plan documents, which are on file with your employer and the Plan Administrator in the event of any conflict between the information shown in an online SPD or the written SPD and the official Plan documents, the official Plan documents will always govern. This Summary Plan Description is effective January 1, 2018, and updated as of April 30, i

3 Plan Eligibility and Enrollment Tax Advantages Your Personal Account Information 401(k) Contributions Investing Your Account How Vesting Works Table of Contents Eligible Employees Ineligible Employees Joining the Plan Tax Benefits Pre-Tax Contributions After-Tax Roth 401(k) Contributions Payment of Taxes Your Personal Identification Number (PIN) Personal Information Naming Your Beneficiary Quarterly Participant Statement Your Contributions Pre-Tax Contributions After-Tax Roth 401(k) Contributions Employer Match True-Up Employer Match Catch-Up Contributions Discretionary Contributions Rollover Contributions Contribution Limits Your Eligible Earnings Changing, Stopping, or Resuming Your Contributions If You Leave and Then Return Information for Veterans Making Your Investment Decision Investment Options Investment Funds Management Styles Lifecycle Funds Core Investment Funds Investment Election Investment Changes, Fund Transfers and Other Transactions Frequent Trading Limits and Other Investment Policies Investment Management Fees Information Resources What is Vesting? Vesting of Your Contributions Vesting of Matching and Discretionary Contributions Retirement Disability Death ii

4 Withdrawals While Actively Employed Borrowing From Your Account Receiving Your Plan Benefits Break-in-Service Rules What To Do If a Claim is Denied Table of Contents Withdrawals of Vested Account Balances Financial Hardship Definition of Financial Hardship Amount of Financial Hardship Withdrawal Age 59-½ Distribution Tax Consequences of Withdrawals Rollover Contributions Military Service Withdrawal Taking Out a Loan Types of Loans Number of Loans Allowed Fifteen Day Waiting Period Loan Amount Loan Repayment Loan Fees Interest Rate Termination of Employment Default Tax Consequences of Loans For More Information Applying for Benefits Vested Accounts over $5,000 Vested Accounts of $5,000 or Less Retirement Disability Death Other Termination Special Mandatory Distribution Rules General Taxation Guidelines Qualified Roth 401(k) Distributions 20% Withholding Tax Additional 10% Tax Payment to Spouse Payment to a Non-Spouse Beneficiary Rollover to Another Plan Forfeited Contributions Returning Veterans Denied Claims Appealing a Denied Claim Review of Appeal iii

5 Other Important Information Your Rights as a Plan Participant Table of Contents Plan Administrator Administrative Expenses Agent for Service of Legal Process Assignment of Benefits Employer Continuance of the Plan Employment not Guaranteed Employer Identification Number Plan Number Maximum Benefits Participating Companies Plan Administrator Plan Sponsor Plan Documents Plan Financing Plan Name Plan Trustee Plan Year Special Rules for Top Heavy Plans Type of Administration Type of Plan Participant Control of Investments (ERISA 404(c)) Plan Overview Summary Annual Report Benefit Statement Plan Fiduciaries Benefit Claims and Legal Actions Questions iv

6 PLAN ELIGIBILITY AND ENROLLMENT Eligible Employees Ineligible Employees Joining the Plan You become eligible to participate in the Plan after completing 30 days of service, and attaining age 18. If you are an employee of Walgreens Specialty Pharmacy Holdings, LLC as of January 1, 2018, and you were an employee of Prime Therapeutics, LLC, Walgreen Co., or an affiliate of either entity as of December 31, 2017, you will receive credit for your prior service with these entities toward the 30-day eligibility requirement. You are not eligible to participate in the Plan during periods in which your employer does not consider you to be an employee. Once your employer begins to treat you as having the status of an employee in all respects, you will be eligible to participate in the Plan and make contributions to it. You can contact your Human Resources department if you have any questions about your employment classification or your eligibility to participate in the Plan. You will be automatically enrolled in the Plan. Unless you make a change by contacting Fidelity, 3% of your eligible earnings each pay period will be automatically deducted on a pre-tax basis and invested in one of the Fidelity Freedom K Funds, based on your age. If you wish to contribute more or less than 3% to the Plan, including 0%, or if you wish to make after-tax Roth contributions, it is your responsibility to change your automatic contribution election by contacting Fidelity no later than the date specified in the materials received from Fidelity. The company will provide you with information about your election period. Once an account has been set up for you at Fidelity, you will receive enrollment materials from Fidelity. You are encouraged to take an active role in the Plan and to choose a contribution rate and investments options that are appropriate for you. Once contributions have been deducted from your pay and deposited into your account, your contributions may not be withdrawn until you qualify for an in-service withdrawal or distribution from your account. You can contact Fidelity Investments at or log on to the Fidelity web site at to make a change to one or more of the following: the percentage of your pay you want to contribute; whether you want your contributions made on a pre-tax or after-tax (Roth) basis; the name of the investment funds you ve selected; and the percentage of your contributions you want to invest in these funds. 1

7 TAX ADVANTAGES Tax Benefits Pre-Tax Contributions After-Tax Roth 401(k) Contributions Payment of Taxes This Plan offers you a unique combination of tax advantages. These advantages apply: while you re contributing to the Plan; and while your savings are growing. You can elect to contribute to the Plan on a pre-tax basis. This means that you will not have to pay any federal income taxes on your contributions until you receive them from the Plan. Although your participation will lower your taxable income, it generally does not affect your other salary-related benefits, such as retirement, group life insurance, long term disability, or Social Security. You also may elect to make after-tax Roth 401(k) contributions. These contributions are made from your after-tax income and will not be taxed again. Earnings on your after-tax Roth 401(k) distributions may be taxed, subject to the qualified Roth distribution rules (refer to page 21 for more information). The pre-tax feature of the 401(k) Plan allows you to defer payment of taxes not avoid them altogether. Your pre-tax savings will accumulate tax-free as long as they stay in the Plan. However, you will have to pay taxes on any money that is distributed to you from the Plan. Roth 401(k) contributions are treated differently. Roth contributions are made from after-tax compensation and thus are not taxed again later when distributed. Earnings on Roth contributions also are not taxed if they meet the requirements for a qualified Roth distribution when withdrawn or distributed to you (refer to page 21 for more information). 2

8 YOUR PERSONAL ACCOUNT INFORMATION Your Personal Identification Number (PIN) Personal Information Naming Your Beneficiary When you join the Plan, you ll need to establish a Personal Identification Number (PIN) to access your account information. Your enrollment kit will contain more information about setting up your PIN. It is important for you to keep your personal information up to date. This includes: your mailing address; your beneficiary designation; and name changes or other changes in your personal information. If your mailing address or name changes, you should immediately contact Human Resources. To change your beneficiary, please refer to the procedure described below. When you join the Plan, you are asked to name your beneficiary. Your beneficiary is the person or persons who will receive the full vested value of your Plan accounts if you die. You can designate, change, and review your beneficiary at any time by accessing Fidelity s Online Beneficiary Service through NetBenefits at Simply log on to your account and click on Beneficiaries in the About You section of Your Profile. If you do not have access to the internet or prefer to complete your beneficiary by paper form, please contact Fidelity at In general, your spouse will be your beneficiary if you are married. If you are not married but get married later, your spouse becomes your beneficiary on your marriage date. Should you wish to name someone other than your spouse, your spouse must give his or her written consent to this election. Your spouse s written consent to your beneficiary designation must be notarized. If you don t name a beneficiary, or if your beneficiary is not living on the date of your death, and you are not married, the full value of your account balance will be paid to your estate. Please note that if your 401(k) account balance was transferred to this plan from the Prime Therapeutics, LLC 401(k) Plan as of January 1, 2018, your beneficiary designation under the Prime Therapeutics plan will remain in effect until a new beneficiary designation is made under this Plan. Note regarding beneficiary designations and marriage dissolution: Effective June 1, 2018, any beneficiary designation naming a spouse as beneficiary will be presumed invalid if the participant s marriage to that spouse is subsequently legally dissolved. This will be the case regardless whether the participant s marriage is dissolved by divorce, annulment or other means. Under such circumstances, the former spouse will be treated as having pre-deceased the participant, unless the participant submits a new beneficiary designation after the divorce 3

9 YOUR PERSONAL ACCOUNT INFORMATION expressly naming the ex-spouse as his or her beneficiary. (If the former spouse is treated as having pre-deceased the participant, benefits will be payable to the participant s then-spouse, if he or she has remarried, or if not, to his or her contingent beneficiary/ies or, if there are none that survive the participant, to the participant s estate.) The foregoing rule is subject to the terms of a valid Qualified Domestic Relations Order. Quarterly Participant Statement After the end of each calendar quarter, you will receive a comprehensive participant statement, or you can request or review this information online. This statement reports your account activity for the quarter, including: your contributions (and any catch-up or rollover contributions) during the quarter employer matching contributions made on your behalf discretionary contributions your investment gains or losses withdrawals, transfers, loans, or other adjustments to your account Your quarterly participant statement provides a valuable record of your account activities. Keeping these statements in a safe place will help you to track your progress in the Plan. You are responsible for reviewing your account statement and contacting Fidelity within 90 days of the account statement date if you have questions or if there are errors. 4

10 401(k) CONTRIBUTIONS Your Contributions Pre-Tax Contributions After-Tax Roth 401(k) Contributions Employer Match True-Up Employer Match Catch-Up Contributions Discretionary Contributions Rollover Contributions You can contribute 1% to 75% of your eligible earnings each pay period to the Plan, subject to certain limits. You have choices to consider when making contributions to the Plan. You can make contributions: On a pre-tax basis, which means your annual taxable income is reduced by the amount you contribute during the year; On an after-tax basis, using the Plan s Roth 401(k) feature; or On a combination basis of both pre-tax and after-tax Roth 401(k) contributions. You may elect to contribute to the Plan on a pre-tax basis. Your pre-tax contributions will lower your taxable income, because they come out of your pay before federal and (in some cases) state taxes are applied. You may elect to contribute Roth 401(k) contributions to the Plan from your after-tax income. Roth contributions as well as investment earnings are separately accounted for as part of your account. Regardless of whether you are making pre-tax contributions or after-tax Roth 401(k) contributions, your employer will match one dollar for each dollar you contribute each pay period. Matching contributions will not be made for any pay period in which you do not contribute or on any catchup contributions. Maximum: The employer match applies to the first 4% of your eligible earnings you contribute only. Your contributions in excess of 4% of your eligible earnings are not eligible for the employer match. Following the end of the year, your employer will review the percentage of pay you deferred over the year. If necessary, a true-up contribution will be made to ensure that the matching contributions equal one dollar for each dollar you contributed on the first 4% of your pay. You may be eligible to make additional pre-tax or after-tax Roth 401(k) catch-up contributions if you are eligible to participate in the Plan and are age 50 or older during You may contribute up to $6,000 of catch-up contributions in 2018 if, at the end of the year, one or more of the following occurs: you reach the maximum employee contribution of $18,500 your contributions to the Plan are limited by a Plan limit Your employer may elect in the future to make additional employer contributions under the Plan. You may make a direct rollover or redeposit all or part of a lump sum payment from the following types of Plans: 401(a) or 403(a) Plan; 5

11 401(k) CONTRIBUTIONS 403(b) annuity Plan; 457(b) governmental Plan; an Individual Retirement Account (IRA) funded with assets distributed from a 401(a), 403(a), 403(b) or 457(b) Plan; a designated Roth 401(k) account from an employer-sponsored qualified 401(k)Plan, a 403(b)Plan or a 457(b) Plan. You will need to provide information about your retirement Plan distribution so that it can be determined whether it is eligible for "rollover." In a direct rollover, at your request, your previous employer provides for a transfer of your distribution directly into this Plan. In this way, your payment will not be taxed in the current year and no income tax will be withheld. The Plan can accept a rollover contribution even before you are eligible to make regular contributions under this Plan. Contribution Limits Your Eligible Earnings The maximum amount of participant contributions to the Plan may be limited under current federal law. This includes: a limit on the maximum amount of annual earnings that can be taken into account for Plan purposes. (In 2018, the limit is $275,000.) This annual earnings limit will impact the amount of matching contributions and other company contributions you are eligible to receive. a limit on the maximum amount that a participant can contribute during the calendar year, including contributions to this Plan and other savings Plans. (This limit is determined by the IRS each year. In 2018, the limit is $18,500. See the previous section entitled catch-up contributions for amounts that may be contributed over the 2018 limit if you are age 50 or older.) The employer will notify you if you are affected by the contribution limitations and your excess contributions will be returned to you. The above maximums do not apply to rollover contributions. You may elect to contribute a percentage of your eligible earnings. Your eligible earnings are your total earnings paid during the Plan year. Amounts you contribute to this Plan, a cafeteria plan, a qualified transportation plan or a qualified plan (under Sections 402(e)(3), 402(h)(1)(B), 402(k) or 457(b) of the Internal Revenue Code) are also included in your eligible earnings. Eligible earnings do not include: Reimbursements or other expense allowances, fringe benefits, moving expenses, deferred compensation, welfare benefits and unused leave. Severance pay or employee contributions to deferred compensation plans. Earnings before you became a Plan participant. 6

12 401(k) CONTRIBUTIONS Amounts paid when you are not considered an employee. Changing, Stopping, or Resuming Your Contributions If You Leave and Then Return Information for Veterans You can elect to change, stop, or resume your contributions as of the first day of the payroll period following your election or as soon as administratively possible thereafter. You can change, stop, or resume your contributions via the web at or by calling Fidelity Investments at Fidelity will send you either an electronic or paper confirmation form, depending on your election. An electronic confirmation is sent at the time the transaction is executed or a paper confirmation is mailed to your home address within 3 to 5 business days. If you terminate employment before becoming eligible to contribute to the Plan and are later rehired, you must complete the eligibility requirements before you can begin contributing to the Plan. If you terminate employment after participating in the Plan and are later re-employed, you may start contributing again on your date of rehire. Special rules apply if you are a veteran who returns to employment while you have reemployment rights under the law following a period of qualified military service. If so, you are eligible to make up contributions to the Plan that you would have been entitled to make during your period of qualified military leave. In this case: you will be eligible to rejoin the Plan immediately after your return to work; you may make retroactive contributions to the Plan, and designate them to any Plan years during which you were in military service; the employer will also make a retroactive matching contribution, based on the amount you elect to contribute; and you may be entitled to any additional contributions the employer made for a Plan year during which you were in military service. You should contact Human Resources if you are an employee returning from military service with reemployment rights. You have a period of three times the period of military service (not exceeding five years) to make up any missed employee contributions. 7

13 INVESTING YOUR ACCOUNT Making Your Investment Decision Investment Options Investment Funds - Management Styles As a participant, you control the investment of your Plan account, and are responsible for the investment results and investment performance of your Plan account. This section provides information about your investment options and how to direct the investment of your Plan account. If you fail to provide investment instructions, your account will automatically be invested in one of the T. Rowe Price Funds, based on your birth date and assuming retirement at age 65. The decision on how and where to invest your Plan account is entirely up to you. Your employer cannot provide you with personal financial advice. Please refer to the investment options education material located at to assist you with making your investment decisions. The Plan s investment options offer an array of investment choices. You can select from the investment options which are made available by the investment fiduciary with the advice of a professional investment consultant. The investment options are structured into tiers. The tiered structure is designed to help you determine your investment approach, based on how involved you want to be in choosing your investments and monitoring their performance. The tiers include: Lifecycle Funds consisting of actively managed T. Rowe Price Retirement Funds Core Investment Funds consisting of actively managed and passively managed individual funds A list and description of each investment option are available online at Fidelity NetBenefits ( The plan s available investment options may change from time to time. You will be notified of a change in investment options. To help you evaluate the different Lifecycle Funds and Core Investment Funds in your plan, it may be helpful to be aware of each fund s distinct management style: passively managed or actively managed. Passively Managed Funds Commonly known as index funds, passively managed funds are designed to match the performance of a major stock or bond index by investing in the securities that make up a market index. Passive funds provide broad market exposure and typically charge lower investment management fees than actively managed funds. 8

14 INVESTING YOUR ACCOUNT Actively Managed Funds Actively managed funds seek to outperform a market index. The fund s holdings are actively selected by the fund managers and may differ from the index s holdings. Actively managed funds tend to have higher investment management fees than index funds because of the active investment decisions made by the fund managers. Please refer to the table below that summarizes a few key points regarding the passive and actively managed investment options available in your 401(k) Plan. Investment Goal Portfolio Composition Expenses Actively Managed Funds Beat or exceed the index Typically different from the index Tend to be higher than passively managed funds Passively Managed Funds Match the index Typically similar to the index Tend to be lower than actively managed funds Lifecycle Funds Core Investment Funds Investment Election The Lifecycle Funds consist of the T. Rowe Price Retirement Funds. These pre-mixed funds offer a blend of stocks, bonds and short-term investments. Each T. Rowe Price Retirement Fund s asset allocation is based on the fund s target retirement date. The fund will gradually adopt a more conservative asset allocation over time but you will always be invested partially in stocks. The T. Rowe Price Retirement Funds are designed for investors who want a simple approach to investing for retirement. You may want to consider these funds if you wish to benefit from asset allocation and diversification, but you feel more comfortable having a professional portfolio manager manage your asset allocation. With the Core Investment Funds, you determine and maintain the mix of investments in your account. A selection of core investment funds is available. The variety of funds available in the Core is designed to offer you an opportunity to create a diversified portfolio. The Core Investment Funds include both passive and actively managed funds, and represent the three major asset classes (short-term investments, bonds, and stocks). You may want to consider these fund options if you are comfortable managing your own asset allocation. A description of each fund is available online by logging on to You can invest your contributions in one or more of the available investment funds in multiples of 1%. 9

15 INVESTING YOUR ACCOUNT Investment Changes, Fund Transfers and Other Transactions Frequent Trading Limits and Other Investment Fund Policies Fidelity Retirement Services maintains an automated phone service and web site that is available to you 24 hours a day, 7 days a week. In addition, Fidelity service representatives are available Monday through Friday, 8:00 a.m. - Midnight ET. By calling or logging on to you can: view your investment elections transfer money between the investment funds change your investment election for future contributions to the Plan change your payroll deduction contributions order literature and prospectuses You can also use the automated phone service or web site to obtain current investment fund prices, check your transaction history, and obtain other valuable information. Plan loans may be initiated through the web site or by speaking to a service representative. Keep in mind that you ll need your PIN to access your personal account information. Generally, changes, transfers and transactions made by 4:00 p.m. ET will be effective that business day. If you call later in the day, your change or transfer will be effective the next business day. Fidelity will send you either an electronic or paper confirmation form, depending on your election. An electronic confirmation is sent at the time the transaction is executed or a paper confirmation is mailed to your home address within 3 to 5 business days. The investment options offered in this Plan are subject to the policies and procedures of the mutual fund companies or fund managers offering these options. Many mutual funds have now, or may in the future impose restrictions, limitations or penalties on investors, including retirement Plans, that engage in activities they consider to be disruptive, such as frequent short term trading. These restrictions respond to concerns that frequent trading can be harmful to other investors. Some mutual funds could impose restrictions upon an entire retirement plan where only some participants engage in such activities. In order to assure that the investment options offered under this Plan remain available on favorable terms to participants who do not engage in such practices, the Plan administrator will ordinarily implement any such restrictions or limitations imposed by mutual funds or fund managers. Although the precise rules applied by mutual fund companies and fund managers' policies may differ, the rules followed by a specific fund must be disclosed in its prospectus, which may be viewed on-line at or by calling To the extent possible, you will receive advance notice of any new or different trading restrictions or limitations of mutual funds and fund managers. Advance notice may not be practicable in all situations, such as where the mutual fund imposes policies or procedures with limited or no notice to the Plan administrator. You will receive information about the restrictions or limitations as soon as practicable. 10

16 INVESTING YOUR ACCOUNT Each fund company or fund manager may reserve the right to change its policies and procedures relative to frequent trading at any time. Investment Management Fees Information Resources Generally, investment management fees and other fees related to the operation of the Plan s investment funds are charged to participant accounts at the fund level as part of the investment process. To obtain further information on these fees and how they are charged, please refer to the prospectus or speak to a Fidelity service representative at if a prospectus is not available. You will also receive an annual Participant Disclosure Notice with fee information. As a participant in the Plan, you have access to a variety of resources for investment education, personal financial planning, and information on each of the available investment funds. Fund Information: Each of the available funds has important informational material that you should carefully read before deciding to invest in a given fund. This is Fidelity s Retirement Services web site, which includes: investment fund descriptions on-line fund prospectuses other information of general interest to investors Automated phone service: You can access the automated phone service at any time by calling You can use this system to initiate fund transfers, investment changes, and other transactions related to your Plan account. Fidelity Retirement Services Specialists: A Fidelity representative is available to answer your questions or provide assistance Monday through Friday, 8:00 a.m. Midnight ET. Fidelity Mailing Address: You can contact Fidelity at the following addresses: For regular mail: Fidelity Investments Attn: FITSCo P. O. Box Cincinnati, OH For express mail: Fidelity Investments Institutional Operations Company, Inc. Attn: FITSCo 100 Crosby Parkway, KC1E Covington, KY

17 HOW VESTING WORKS What is Vesting? Vesting of Your Contributions Vesting of Matching and Discretionary Contributions Vesting is your ownership of or nonforfeitable right to receive a Plan benefit. You earn vesting as you accrue service. Current and prior employment with your employer count toward vesting. As described on page 1, prior employment with certain predecessor employers also counts toward vesting. Your vesting percentage determines the portion of the employer matching and discretionary contributions to which you have a nonforfeitable right if you terminate employment. Also, in the event you terminate employment with this employer, and are rehired within the 12 consecutive month period following your termination date, your years of service will include your previous vesting service, if valid, and up to 12 months between your periods of employment. Your years of service for vesting may include periods of leased employment, qualified military service, layoff or leave of absence. If you are hired as a regular employee by the company after a period of leased employment with a temporary service agency, your leased service may count toward vesting. If you go on a maternity or paternity leave and return to work, your period of leave may count toward vesting service under the Plan. The length of your leave is one of the factors that determines whether this leave is counted. If you return to your employment within the period specified by law after a period of qualified military service, your period of military service may count toward vesting service under the Plan. In addition, if you die while in active qualified military service, you will be treated as if you had returned to active employment and then terminated employment as a result of your death. You are always 100% vested in the value of your own contributions to the Plan (including any associated earnings or losses on these contributions). This means that you are always 100% vested in the value of your contributions, including any catch-up and rollover contributions. Matching contributions made on your behalf (including any associated earnings or losses on these contributions) become 100% vested after two years of service. A special vesting rule applies if you were a Prime Therapeutics employee and your account balance from the Prime Therapeutics 401(k) Plan transferred over to this Plan on January 2, Your matching contributions under the Prime Therapeutics 401(k) Plan that were not 100% vested at the time they were transferred to this Plan became 100% vested under this Plan as of the January 2, 2018 date of transfer. Retirement Regardless of your length of service, you automatically become 100% vested in your Plan account when you reach age 65, if you are still employed by the employer at that time. Disability You automatically become 100% vested in your Plan account if you 12

18 HOW VESTING WORKS terminate employment after becoming disabled, as determined by the Plan Administrator. Death Your beneficiary will receive 100% of your Plan account if your death occurs during your active employment. 13

19 WITHDRAWALS WHILE ACTIVELY EMPLOYED Withdrawals of Vested Account Balances Financial Hardship Definition of Financial Hardship This Plan is intended to provide retirement benefits and build retirement savings. Therefore, you generally cannot withdraw funds from your vested account balance while you are employed. The following are exceptions to this rule: withdrawals for financial hardship withdrawals after age 59-½ rollover contributions withdrawals for military service The withdrawal options described in this section apply to your pre-tax contributions and Roth contributions. All requests for a financial hardship withdrawal are subject to approval. There are several important points to remember in connection with financial hardship withdrawals: You must first take the maximum loan amount available to you under the Plan. Your withdrawal request must meet specific rules established by the IRS for financial hardship. The amount of your withdrawal cannot exceed the amount necessary to meet your financial need and may include funds necessary to pay any income taxes and penalties that you reasonably expect to incur. Only one hardship withdrawal is permitted during a twelve-month period. There is a limit on the amount available for a hardship withdrawal. Employer matching and discretionary employer contributions may not be withdrawn. Your participation in the Plan will be suspended for 6 months after you take a hardship withdrawal. Your contributions will automatically recommence following the 6-month suspension period, unless you elect otherwise. A hardship withdrawal is not eligible for rollover. Under the Plan, you may qualify for a financial hardship withdrawal only for the following reasons: uninsured medical expenses for yourself, spouse or dependents (as defined by the IRS); the purchase of a principal residence; rent or mortgage payments needed to prevent the eviction from or the foreclosure on the mortgage of a principal residence; tuition, education-related fees and room and board expenses for the next twelve months of post-secondary education for yourself, spouse or dependents (as defined by the IRS); 14

20 WITHDRAWALS WHILE ACTIVELY EMPLOYED burial or funeral expenses for your parents, spouse, children, or dependents (as defined by the IRS); or repairs of damage to a primary residence that would qualify as a casualty deduction under IRS rules (determined without regard to whether the loss exceeds 10% of adjusted gross income); or any other expenses specified in the future by the IRS. Amount of Financial Hardship Withdrawal Age 59-½ Distribution Tax Consequences of Withdrawals Rollover Contributions Military Service Withdrawal A financial hardship withdrawal must be for a minimum of $500. If you qualify for a financial hardship withdrawal, you may withdraw an amount up to the lesser of: the amount necessary to meet your financial need, plus an amount needed to cover taxes or penalties that you reasonably expect to incur on the withdrawal; or the amount available in your account for withdrawal. Distribution of your financial hardship withdrawal will be made as soon as reasonably possible after your withdrawal request is received and approved, and will be based on your account balance as of the date that your hardship withdrawal request is approved. For information about withdrawals, including the amount you have available for a financial hardship withdrawal, you should call Fidelity at If you are an active employee age 59-½ or over, you may request all or a portion of the full vested value of your Plan account, without having to prove financial hardship. Your application for an age 59-½ distribution will not affect your continued participation in the Plan. If you are under age 59-½, you will ordinarily have to pay an additional 10% early withdrawal tax (in addition to ordinary income taxes) on a taxable withdrawal, unless an exception applies. You should check with your tax advisor concerning the tax treatment of your withdrawal. You may elect to receive a distribution of all or any portion of your account balance from any rollover contributions you made to the Plan. Employees who are members of the military for at least 30 days may receive a distribution of all or any portion of his or her contributions to the Plan. However, following this distribution, he or she will not be eligible to make contributions to the Plan for a six-month period. In addition, members of a military reserve component who are ordered, called or recalled to active duty for a period in excess of 179 days or for an indefinite period may elect to receive a Qualified Reservist Distribution from his or her account. This distribution may include all or any portion of his or her contributions made to the Plan. 15

21 BORROWING FROM YOUR ACCOUNT Taking Out a Loan Types of Loans Number of Loans Allowed Fifteen Day Waiting Period Loan Amount Loan Repayment The Plan s loan feature allows you to borrow from your account while still actively employed. You must sign a promissory note at the time you take a loan. In the case of a paperless loan, your endorsing, depositing or cashing the loan check acts as a signature to a promissory note. By signing this note, you commit to the loan payment terms and the loan interest rate to which you agreed. Taking out a loan will not affect your ability to make continued contributions to the Plan. There are two types of loans: general-purpose loan principal residence loan General Purpose Loan: A general-purpose loan may be taken for any reason. The minimum term for a general purpose loan is six months; and the maximum term f is five years. Principal Residence Loan: A principal residence loan is available only for the purchase of a home as a principal residence. It cannot be used to refinance or remodel an existing home. The minimum term for a principal residence loans is sixty months; and the maximum term f is 15 years. Only two loans may be outstanding at any given time. Of the two outstanding loans, only one may be a principal residence loan. You may not take out more than one loan in any 12-month period. After paying off an existing loan, you will need to wait 15 days before requesting or initiating a new loan from the Plan. This waiting period is to facilitate administration and help ensure 401(k) loans are administered in compliance with IRS requirements. A loan may be made from your vested account balance. The minimum loan amount is $1,000. Loan amounts must be made in multiples of $100. The maximum loan amount is set by law and is equal to the lesser of: $50,000 reduced by your highest outstanding loan balance in the last twelve months; or 50% of your total vested account balance in the Plan, less your current outstanding loan balance. Your loan is repaid with interest via after-tax payroll deductions and your repayments will go back into your Plan account. These repayments will be made in approximately equal installments. You may repay the entire balance of your outstanding loan at any time. If you take an unpaid leave of absence of one year or less, you may stop making loan repayments temporarily. The missed loan payments, including interest, are added to the end of the loan period, except that the term of a general purpose loan may not extend beyond 5 years. 16

22 BORROWING FROM YOUR ACCOUNT For a military leave of absence, special rules apply and loan repayments are not required during the military leave of absence. Loan repayments must resume upon the employee s return from military leave; however, the entire loan must be repaid within five years from the original date of the loan, not taking into account the period of military leave during which payments were suspended. The missed payments, including interest, are added to the end of the loan period. The interest rate applied to the period of missed payments is the lesser of the rate established when the loan was first taken or 6%. Loan Fees Interest Rate Termination of Employment There is a loan origination fee of $50 that will be deducted from your account balance when you take a new loan. If you have an existing Prime loan that was taken before July 3, 2017 and transferred over, a quarterly administrative fee of $3.75 is deducted from your account balance for the duration of the respective loan. The interest rate charged for a Plan loan will be equal to the prime rate published by Reuters on the last business day of the month plus 1% and will apply to new loans beginning in the following month. Plan Under current tax laws, loan interest payments are not tax deductible. You have several options if you terminate employment while you have an outstanding loan. The first option is that you may repay the outstanding balance on your loan before the grace period ends and before you have taken a distribution. The grace period ends on the last day of the calendar quarter following the calendar quarter in which a scheduled loan repayment is not made. You also have the option to continue to repay your loan through an electronic loan payment service. The electronic loan payment service uses the Automated Clearing House Association (ACH). If you decide to use this service, loan payments would be debited directly from your bank account on a monthly basis. Electronic payment of loans using ACH is the only loan repayment method that may be used if you choose to continue to repay your loan. Contact Fidelity at for more information on the electronic payment service and how to enroll. If you choose to use this service, you must set it up promptly so that your loan does not go into default. A loan is considered in default if the scheduled loan payment is not received by the end of the grace period described above. For example, if your last loan repayment was made April 15, all remaining loan repayments due through June 30 must be made no later than September 30. If you terminate employment and either fail to pay off the outstanding loan before the end of the loan grace period, or you use ACH and the loan goes into default, the following will occur: the outstanding loan balance will be deducted from your account 17

23 BORROWING FROM YOUR ACCOUNT balance and will reduce any Plan benefit that you or your beneficiary may be eligible to receive, and the outstanding loan balance will be considered a distribution, subject to applicable taxes and penalties. You may be entitled to roll over the entire amount of your distribution, including the amount of the loan balance, to an IRA or another employersponsored Plan. To roll over the amount of your loan balance to an IRA, you would need to repay the loan using funds from another source (such as your savings or a commercial loan) within the 60-day rollover period. You may be entitled to roll over the entire amount of your distribution, including the amount of the loan balance, to an IRA or another employersponsored Plan. To roll over the amount of your loan balance, you would need to obtain these funds from another source (such as your savings or a commercial loan) within the 60-day rollover period. Default Tax Consequences of Loans For More Information Active employees are generally required to make loan repayments through payroll deductions. If payment is not received by the end of the calendar quarter following the first calendar quarter in which a scheduled loan repayment is not made, your loan will be considered in default. The Plan will use up to 50% of your vested account balance as security for your loan. In the event that an outstanding loan is declared in default, the following will take place: the outstanding loan balance will be considered a distribution under tax laws, subject to applicable taxes and penalties. the loan remains part of your account until you are eligible for a complete distribution from the Plan. you must agree to and make loan repayments through payroll deductions for any subsequent loan, otherwise the subsequent loan will also be declared in default. Loans taken from your account are not subject to income taxes unless you fail to make your loan repayments and your loan goes into default. If this occurs, your outstanding balance will become taxable and you may also be subject to an additional 10% tax penalty. For information about Plan loans, including the amount you have available for a loan, you should call Fidelity at or log on to 18

24 RECEIVING YOUR PLAN BENEFITS Applying for Benefits Vested Accounts Over $5,000 Vested Accounts of $5,000 or Less You need to call Fidelity to initiate a distribution. A brochure with general information about your distribution options and a Special Tax Notice describing your tax considerations will be sent to you from Fidelity. In general, if your vested account balance is more than $5,000, you may elect to receive your benefits under the Plan at any time following termination of employment, but not later than age 70-½. You may elect to have your account paid to you in one of the following ways: Lump Sum Payment - You may elect to receive the vested value of your Plan account in a single lump sum; or Installment Payments - You may choose to have the vested value of your Plan account paid to you in bi-weekly, monthly, quarterly, semiannual, or annual installments or in a specific dollar amount, provided your vested account balance is more than $5,000. The installment period, subject to certain limits, will depend on your age. After you begin receiving installment payments, you may choose to receive your remaining account balance in a lump sum. You should always consult with a tax advisor before making any changes to your payment schedule. Certain changes to your payment schedule may have severe tax consequences. Partial Distribution You have the option to take a partial distribution from the Plan. If you don t make an election, your account will be paid to you in a lump sum. After you terminate employment, if the full value of your Plan account is $5,000 or less, you will receive a mandatory distribution. You will be notified if your vested account balance is $5,000 or less and you are required to take a distribution of your account balance. Special rules apply depending on the amount of your vested account balance and whether you affirmatively elect a distribution from the Plan: Balances of $1,000 or less - Your account balance will be distributed, according to your election, either as a lump sum distribution paid as a rollover to an Individual Retirement Account (IRA) or another employer retirement plan, or as a cash payment to you in the form of a check. If you do not make an election, the distribution is paid to you in the form of a check with taxes withheld. Balances greater than $1,000 and less than or equal to $5,000 - Your account balance will be distributed, according to your election, either as a lump sum distribution paid as a rollover to an IRA or another employer retirement plan, or as a cash payment to you in the form of a check. If you do not make an election, your account balance will be distributed from the Plan and transferred to a rollover IRA with Fidelity. Following is a brief description of the rollover IRA with Fidelity: 19

25 RECEIVING YOUR PLAN BENEFITS The rollover IRA is invested in the Fidelity Cash Reserves Fund, which is a money market mutual fund designed to preserve principal and provide a reasonable rate of return consistent with liquidity. Fidelity may offer alternative IRA investments. All fees and expenses related to the rollover IRA will be paid by you. There is no IRA set-up or annual maintenance fee. A $50 termination/account closure fee applies at the time the IRA account is closed. For further information about the Plan s procedures, Fidelity as the rollover IRA provider, and fees and expenses, contact the Plan Administrator: National Employee Benefits Committee Blue Cross and Blue Shield Association 225 North Michigan Avenue Chicago, Illinois (312) Retirement Disability Death Other Termination Regardless of your length of service, you will be eligible to receive the full value of your Plan account if you terminate employment on or after the date that you reach normal retirement age (age 65). Regardless of your length of service, you will be eligible to receive the full value of your Plan account if you become disabled (as determined by the Plan Administrator) during active employment and then terminate employment. For Plan purposes, you are considered to be disabled if your disability prevents you from engaging in your regular occupation or any comparable occupation that has a similar salary level or range. In the event of your death during active employment, the full value of your Plan account will be paid to your beneficiary. This applies regardless of your length of service at the time of death. In the event of your death after termination of employment, the value of your vested program account (if any) will be payable to your beneficiary. Any person who would qualify as a surviving spouse or beneficiary shall be disqualified to receive a survivor benefit from this Plan on your behalf if it is determined by a criminal court that such person was responsible for your death as a result of a criminal act which involved the intentional or reckless taking of your life. In such a case that person will be treated as if he or she predeceased you. Please see page 3 regarding beneficiary designations and marriage dissolution. If you terminate employment for any other reason or retire before age 65, you will receive your contributions and earnings and your vested employer contributions and earnings if you apply for a final distribution. You will not receive the employer contributions and earnings in which you are not vested. 20