The Pension Plan As of January 1,

Transcription

1 The Pension Plan As of January 1,

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3 Introduction Freedom from financial worries after retirement is a goal we all share. The Pension Plan for Employees of FirstMerit Corporation and Affiliates is provided at no cost to certain employees of FirstMerit Corporation and its participating affiliates to help them achieve that goal. This booklet contains a summary (also called a summary plan description ) of the basic features of the plan and is designed to acquaint you with how the plan works. It is based on official legal documents. The actual provisions of the official plan itself shall control in all instances in the determination of any rights or benefits under the plan. The company reserves the right to modify or terminate the plan at any time within the limits provided by law. This booklet describes the provisions of the plan as of January 1, The Appendix contains important information about the calculation of your plan service, as well as certain carryover benefits or options from predecessor plans that may be available to you. Be sure to refer to the Appendix for complete information regarding your plan benefit. Please read this summary plan description carefully and keep it for future reference. If you should misplace your copy of this summary plan description, you may obtain another copy from the FirstMerit Corporate Benefits Department. i

4 Contents Page Who Is Covered by the Plan?...1 When Am I Eligible to Participate in the Plan?...1 How Is Service Credited Under the Plan?...2 Participating Years of Service...2 Credited Years of Service...2 Employment With a Non-sponsoring Affiliate...3 What Other Factors Determine My Pension Amount?...3 Average Final Compensation...3 Covered Compensation...4 Are the Retirement Benefits of Certain Participants Frozen Under the Plan?...4 When May I Retire Under the Plan?...4 Normal Retirement Date...5 Late Retirement Date...5 Early Retirement Date...5 How Is My Normal Retirement Pension Determined?...5 Benefit Amount...5 Cost-of-Living Increases...6 Frozen Benefits For Certain Participants...6 How Is My Early Retirement Pension Determined?...7 Payment Deferred to Age Payment Beginning Before Age What Are My Vested Rights in the Plan?...8 Benefit Amount...9 How Will My Pension Be Paid?...9 Normal Method for Unmarried Employees...9 Normal Method for Married Employees...9 What Are the Optional Forms of Payment?...10 Life Annuity...10 Annuity with 60, 120, or 180 Months Guaranteed % Joint and Survivor Annuity %, 66 2/3% or 50% Joint and Survivor Annuity...11 Lump-Sum Payment on June 30, 2004 Accrued Benefit...11 Special Lump-Sum Payment for Certain Participants...11 Other Form...11 Payment of Small Pensions...11 What If I Should Die Before I Retire?...12 Death After Early Retirement Age...12 ii

5 Page Death Before Early Retirement Age...12 What If I Become Disabled?...12 Can I Lose Any of My Benefits From the Plan?...13 Termination of Employment...14 Break in Service...14 Death...14 Qualified Domestic Relations Orders...14 Veteran s Reemployment Law...15 Paying Taxes on a Lump-Sum Distribution...15 When You Receive Your Benefit...15 How Do These Rules Affect Me?...16 Tax Example When You Do Not Make a Direct Rollover...16 Making a Direct Rollover...17 More Information...17 What Is a Break in Service?...17 Can Payment of My Plan Benefits Be Suspended for Any Reason?...18 How Do I File a Claim for Benefits?...19 Plan Administration...19 Plan Name...19 Plan Number...19 Primary Plan Sponsor...19 Employer Identification Number...20 Trustee...20 Plan Administrator...20 Agent for Service of Legal Process...20 Plan Year...20 Type of Plan and Administration...20 What Does the Plan Cost Me?...21 How Is the Plan Administered?...21 If My Claim Is Denied, How Do I File an Appeal?...21 Can the Plan Be Amended or Terminated?...23 Plan Termination Insurance...23 Your Rights Under ERISA...24 Receive Information About Your Plan and Benefits...24 Prudent Actions By Plan Fiduciaries...25 Enforce Your Rights...25 Assistance With Your Questions...25 Appendix...26 Appendix - First National Bank of Ohio...26 Participating Years of Service...26 Credited Years of Service...26 iii

6 Page Appendix - FirstMerit Corporation...27 Participating Years of Service...27 Credited Years of Service...27 Appendix - Old Phoenix National Bank...27 Participating Years of Service...27 Credited Years of Service...28 Appendix - EST National Bank...28 Participating Years of Service...28 Credited Years of Service...29 Carryover Options...30 Appendix - Twinsburg Banking Company...30 Participating Years of Service...30 Credited Years of Service...30 Appendix - The Exchange Bank Company...31 Participating Years of Service...31 Credited Years of Service...31 Carryover Benefits...31 Appendix - Peoples Federal National Bank...32 Participating Years of Service...32 Credited Years of Service...32 Carryover Benefits...33 Withdrawal of Plan B amounts...33 Early retirement...33 Disability payments...33 Pre-retirement death benefit...33 Optional forms of benefits...34 Appendix - First National Bank in Massillon...34 Participating Years of Service...34 Credited Years of Service...35 Carryover Options...35 Early retirement...35 Pre-retirement death benefit...36 Optional forms of benefit...36 Pre-retirement benefit...37 Appendix - Peoples Bank, National Association...37 Participating Years of Service...37 Credited Years of Service...37 Appendix - FirstMerit Trust Company, N.A...37 Participating Years of Service...37 Credited Years of Service...38 Appendix - FirstMerit Bank (Florida)...38 iv

7 Page Participating Years of Service...38 Credited Years of Service...38 Appendix - Great Northern Savings Co. and GN Financial Services Agency, Inc...38 Participating Years of Service...38 Credited Years of Service...39 Your Normal Pension...39 Carryover Options...39 Normal Retirement...39 Disability Retirement...39 Early Retirement Benefit...40 Late Retirement...40 Vested Benefits...41 Separate Accounts...41 Optional Forms of Distribution...41 Appendix - The CIVISTA Corporation...42 Participation...42 Participating Years of Service...42 Credited Years of Service...43 Your Normal Pension...43 Carryover Options...45 Disability Retirement...45 Early Retirement Benefit...46 Late Retirement Benefit...46 Vested Benefit...47 Optional Forms of Distribution...48 Death Benefits and Life Insurance...49 Appendix - FirstMerit Mortgage Corporation...49 Prior Employment with Affiliated Employer...50 Participation...50 Participating Years of Service...50 Credited Years of Service...50 Appendix - FirstMerit Securities, Inc...50 Participation...50 Participating Years of Service...51 Credited Years of Service...51 Appendix - Abell & Associates, Inc...51 Participation...51 Participating Years of Service...51 Credited Years of Service...52 Appendix - First Western Bank, National Association Branches...52 v

8 Page Participation...52 Participating Years of Service...52 Credited Years of Service...52 Appendix - CoBancorp, Inc., PremierBank & Trust, Jefferson Savings Bank...53 Participation...53 Participating Years of Service...53 Credited Years of Service...53 Your Normal Pension...53 Carryover Options...54 Disability Retirement...54 Early Retirement...54 Vested Benefit...54 Optional Forms of Distribution...55 Appendix - Security First Corp., Security Federal Savings and Loan Association of Cleveland, and First Federal Savings Bank of Kent...55 Participation...55 Participating Years of Service...56 Credited Years of Service...56 Appendix - Signal Corp.; Signal Bank, National Association; Summit Bank, National Association; First Federal Savings Bank of New Castle; Home Financial Services Corp.; Professional Appraisal Services Corp.; Signal Capital Trust I; Signal Insurance Agency, Inc.; Signal Mortgage Corp.; Signal R. Corp.; Signal Securitization Corp.; Summit Banc Investments Corp...56 Participation...56 Participating Years of Service...57 Credited Years of Service...57 Appendix - Mobile Consultants, Inc...57 Participation...57 Participating Years of Service...58 Credited Years of Service...58 vi

9 Who Is Covered by the Plan? The plan is frozen to all eligible employees who did not become participants on or before December 31, No eligible employee may commence participation in the plan after December 31, The following is a summary of the eligibility and participation provisions of the plan as it applies to eligible employees who become participants in the plan prior to January 1, If you are eligible, you will become a member of the plan as soon as certain age and service requirements are satisfied. If you are an eligible employee of FirstMerit Corporation or any of its affiliates who was hired prior to January 1, 2007, you will become a member in the plan as soon as you satisfy certain age and service requirements. Individuals not eligible to participate in the plan are: Employees of any affiliate of FirstMerit Corporation that has not adopted the plan. Employees covered under a collective bargaining agreement unless the agreement provides for participation. Individuals performing services for FirstMerit Corporation or any of its affiliates pursuant to an agreement, contract, or arrangement under which they are classified as independent contractors, consultants, or any classification other than employee. Employees hired on and after January 1, Employees hired prior to January 1, 2007 who did not meet the age and service requirements specified in the following section by December 31, FirstMerit Corporation and all participating affiliates may be referred to in this summary as FirstMerit Corporation or the company. When Am I Eligible to Participate in the Plan? There are two ways you can become a member of the plan. You will become a member in the plan in one of the following ways: If you were participating in the plan on December 31, 2006, you are automatically included as a member on January 1, If you do not qualify for membership under the above provision, you will become a member on the date on which you satisfy both of the following requirements: -- You have completed one year of service (that is, 1,000 hours of ser- 1

10 2 vice within the 12-consecutive-month period beginning with your date of hire, or 1,000 hours of service within any calendar year beginning after your date of hire), and -- You have attained age 21. How Is Service Credited Under the Plan? There are two types of service used to determine your pension eligibility and benefit amount. Participating Years of Service This is the service used to determine if you are eligible for a normal, early, or vested benefit. For example, you need five participating years of service to be fully vested. After January 1, 1976 (or the date your employer first becomes a sponsor of the plan, if later) You will receive one participating year of service for each calendar year in which you have at least 1,000 hours of service - including time worked, paid vacations, holidays and sick leave, and military leave. You will not receive credit for any calendar year in which you have fewer than 1,000 hours of service. Before January 1, 1976 (or the date your employer first becomes a sponsor of the plan, if later) Your participating service will depend on the provisions of the superseded plan, if any, that covered you. Please refer to the Appendix for an explanation of the superseded plan s provisions. Credited Years of Service This is the service used to determine the amount of your pension. Your retirement benefits under the plan are frozen as of December 31, This means that your retirement benefits, including the amount of your years of credited service, will be determined based on your eligible plan compensation and credited years of service as of December 31, 2012, or the date of your termination of employment, if earlier. The following is a summary of how your credited years of service is determined prior to January 1, After January 1, 1976 (or the date your employer first becomes a sponsor of the plan, if later) You will receive one credited year of service for each calendar year in

11 which you complete at least 1,800 hours of service. If you have between 1,000 and 1,800 hours of service, you will receive partial credit for the year (actual hours divided by 1,800). You will not receive credit for any calendar year in which you have fewer than 1,000 hours of service. Before January 1, 1976 (or the date your employer first becomes a sponsor of the plan, if later) Your credited service will depend on the provisions of the superseded plan, if any, that covered you. Please refer to the Appendix for an explanation of the superseded plan s provisions. Employment With a Non-sponsoring Affiliate If you work for an affiliate of FirstMerit Corporation that does not sponsor the plan, your service with that affiliate will be counted toward your participating years of service for vesting should you transfer employment to FirstMerit or any other sponsoring affiliate. Your prior employment will not, however, count toward credited service in the plan. If you work for FirstMerit or an affiliate that sponsors the plan and transfer employment to a non-sponsoring affiliate, you will cease to actively participate in the plan as of the date of your transfer. Your service with the non-sponsoring affiliate will be counted toward your participating years of service, but not credited years of service, under the plan. You will not be entitled to receive your plan benefit until you have actually terminated employment with the non-sponsoring affiliate. What Other Factors Determine My Pension Amount? In addition to participating years of service and credited years of service, your average final compensation and covered compensation are used in calculating your pension benefit. Average Final Compensation This is the monthly average of your pay [including any salary reduction deferrals under the 401(k) Salary Savings Retirement Plan or BancChoice Plans but excluding bonuses, overtime, incentive awards, severance pay, or other special pay] over your highest-paid four consecutive calendar years in the last ten calendar years just before you retire or terminate employment. If you have fewer than 2,080, but more than 1,000 hours of service in any calendar year (other than the year of your termination of service), your compensation is increased by the ratio that 2,080 hours bears to your ac- 3

12 tual hours of service. By law, the plan cannot recognize compensation in excess of the maximum IRS limits for each year in which you earn a benefit under the plan. This limit will be adjusted periodically for inflation. Covered Compensation Your covered compensation is derived from an average of Social Security taxable wage bases. Every year, the Social Security Office establishes a taxable wage base for that year. For any plan year, your covered compensation is the average of the taxable wage bases for the 35 years ending with the last day of the calendar year in which you reach (or will reach) your Social Security retirement age (age 65 if you were born prior to January 1, 1938; age 66 if you were born after December 31, 1937 but before January 1, 1955; and age 67 if you were born after December 31, 1954). The taxable wage base for the current plan year and any future plan years is assumed to be the taxable wage base for the current plan year. Your covered compensation will be automatically adjusted (generally upward for each plan year. A chart showing the various covered compensation levels currently in effect is available from the Administrative Committee upon reasonable request. This may be helpful to you in estimating your plan benefit. Are the Retirement Benefits of Participants Frozen Under the Plan? Yes. If you were a participant in the Plan but were not credited with at least five participating years of service as of December 31, 2006, your retirement benefit has been frozen as of December 31, A participant s frozen retirement benefit is based on his or her average final compensation, Social Security covered compensation, and credited years of service not later than as of December 31, In addition, the retirement benefits of all remaining participants have been frozen as of December 31, This means that your retirement benefits are based on your average final compensation, Social Security covered compensation, and credited years of service as of December 31, 2012, or the date of your termination of employment, if earlier. When May I Retire Under the Plan? There are three possible retirement dates under the plan. 4

13 Normal Retirement Date This is the first day of the month following the later of your 65th birthday or the fifth anniversary of the date on which you became a plan member. If the later of these two dates falls on the first day of the month, that day is your normal retirement date. Late Retirement Date If you continue working after your normal retirement age, the first day of the month following your actual retirement is your late retirement date. If you retire on the first day of the month, that day is your late retirement date. If you continue working after your normal retirement age, no pension will be paid until you actually retire. Early Retirement Date You may retire on the first day of any month after you reach age 55 if you have at least 15 participating years of service. How Is My Normal Retirement Pension Determined? Here is how your lifetime normal pension is calculated. When you reach normal retirement at age 65 with at least five years of plan participation, your lifetime normal pension was computed based on: The number of your credited and participating years of service and The amount of your average final compensation and Your covered compensation. Benefit Amount The formula used to determine your monthly normal retirement pension is the sum of (a) and (b): (a) (i) 1.35% of your average final compensation multiplied by your credited years of service earned prior to January 1, 2005, up to 40 years plus (ii).55% of your average final compensation in excess of 1/12th of your covered compensation multiplied by your credited years of service earned prior to January 1, 2005, up to 35 years. 5

14 and (b) 1% of your average final compensation multiplied by your credited years of service earned on and after January 1, In this formula your credited service is limited to 40 years minus the credited service earned by you prior to January 1, Your pension will never be less than the amount you had earned under a predecessor plan. Example Let us consider an example of Employee Smith who retires at age 65 in 2005 with $4,500 monthly average final compensation and 38 participating and credited years of service. Since Employee Smith was born in 1940, his monthly covered compensation is $4,058. His lifetime normal pension would be the sum of:.0135 x $4,500 x 37 years (at 1/1/2005) $2, Plus.0055 x ($4,500-4,058) x 35 years Plus.01 x $4,500 x 1 year (after 1/1/2005) Monthly Normal Pension: $2, The monthly normal pension from the plan is in addition to Social Security benefits. Cost-of-Living Increases The sponsoring employers may, from time to time, increase the monthly pensions being paid to retired members or their survivors. Such increases will be made in the manner and amount determined by the employers to be appropriate in view of changes in the annual cost of living. Frozen Benefits Retirement benefits are frozen for all participants. See the section Are the Retirement Benefits of Participants Frozen Under the Plan? on page 4 for more information. 6

15 How Is My Early Retirement Pension Determined? You may elect to retire before your normal retirement date if you have at least 15 participating years of service and have reached age 55. Your early retirement benefit is calculated in one of two ways, depending on when you want payment to begin. Payment Deferred to Age 65 If you decide to postpone payment of your early retirement benefit to age 65, your benefit is computed as described above using your credited years of service, average final compensation, and covered compensation at the date of your termination of service. Example Employee Miller retires in 2005 at age 60 with $2,500 monthly average final compensation and 23 participating and credited years of service. Her monthly covered compensation is $4,981. Her monthly retirement pension is calculated as follows:.0135 x $2,500 x 22 years to 1/1/2005 $ x $2,500 x 1 year after 1/1/ Monthly Deferred Early Pension $ (commencing at age 65): Note that since Employee Miller s average final compensation is less than her monthly covered compensation, there is no calculation of the excess part of the benefit. Payment Beginning Before Age 65 If you want payment to begin at any time between ages 55 and 65, the early pension payable to you is the amount of the deferred early pension described above and reduced according to your participating years of service: 25 years or more -- reduced 1/4th of 1% for each month your retirement precedes your normal retirement date fewer than 25 years -- reduced 1/4th of 1% for each month your retirement precedes your normal retirement date, back to age 62, and.4166 of 1% for each month before age 62 7

16 The pension amount is reduced because payments normally will be made over a longer period of time. The reduction percentages described above are summarized in the following table: Your Age When Payment Begins Percentage of Normal Pension You Will Receive over 25 years % 100% 64 97% 97% 63 94% 94% 62 91% 91% 61 88% 86% 60 85% 81% 59 82% 76% 58 79% 71% 57 76% 66% 56 73% 61% 55 70% 56% Example Let us assume that Employee Miller from the previous example wants her pension payments to begin when she terminates employment at age 60 with 23 participating years of service. Deferred early pension $ Apply early reduction factor x.81 Early Pension Payable at Age 60: $ What Are My Vested Rights in the Plan? Fewer than 25 years If you should terminate employment before normal retirement age, you will still be entitled to a benefit if you have become vested in the plan. To become vested means that your right to plan benefits cannot be forfeited if your employment terminates. You are fully vested when you have five participating years of service. You have no vested interest in your retirement benefit before being credited with five participating years of service. This deferred vested pension is payable only if you are not entitled to any other benefit under the plan. 8

17 Benefit Amount Your deferred vested benefit is computed in the same manner as an early retirement benefit, as described previously. The pension that you have earned at the time of your separation will normally be paid starting at age 65. But, if you have at least 15 participating years of service, you may elect to have your pension payments begin at any time after your 55th birthday. As in the case of early retirement, however, your pension will be reduced because it will be paid for a longer period of time than if it had begun at age 65. How Will My Pension Be Paid? Your benefit will be paid in one of the normal methods, depending on your marital status when you retire or separate from employment, unless you elect an optional form of payment. Normal Method for Unmarried Employees If you are unmarried at the time you retire or separate from employment, your pension will be paid for your lifetime only, unless you elect an optional form of payment. Normal Method for Married Employees If you are married at the time you retire or separate from employment, your pension will be paid in the form of a qualified joint and 50% survivor benefit, unless you elect an optional form of payment. Under the qualified joint and 50% survivor benefit, your spouse receives 50% of your pension benefit for the remainder of his or her lifetime after your death. Because payments under this arrangement are made over the lives of two persons, the amount of pension you receive while alive is reduced. The amount of reduction depends on the ages of you and your spouse when you retire. The following table illustrates the effect of a qualified joint and 50% survivor benefit on a monthly benefit of $100: 9

18 Employee Retiring at Age 65 (monthly adjusted benefit per $100) Your Spouse s Age Relative to Yours Payable to You Payable to Your Spouse After Your Death 10 years younger $89.30 $ years younger $91.40 $ years younger $92.20 $46.10 Same age $93.40 $ years older $94.20 $ years older $95.30 $ years older $96.80 $48.40 You may reject the qualified joint and 50% survivor benefit and elect to receive your pension under an optional form of payment. However, if you are married, your election will not be valid unless your spouse consents, in writing, to the optional form of payment by waiving his or her right to a survivor benefit. At the appropriate time, the Administrative Committee will provide you with a written explanation of the terms and conditions of the qualified joint and 50% survivor benefit, as well as your right to elect against it, the effect of such an election, and your spouse s rights under the plan. What Are the Optional Forms of Payment? You may elect an optional form of payment during the 180-day period immediately preceding your retirement date. Information showing your actual benefit amount and the effect each optional form of payment would have on your benefit will be supplied to you shortly after you apply for retirement, so you can make an informed decision. Your benefit election is irrevocable after your actual retirement date. Life Annuity You receive your full, unreduced benefit for your lifetime only. Annuity with 60, 120, or 180 Months Guaranteed You receive a reduced monthly benefit during your lifetime. If you die before 60, 120, or 180 (you make the choice at retirement) monthly payments have been made, your spouse or other beneficiary will receive the payments remaining in the guaranteed period. 10

19 100% Joint and Survivor Annuity You receive a reduced monthly benefit during your lifetime. After your death, the same monthly amount will continue to be paid to your spouse or other beneficiary for his or her lifetime. 75%, 66 2/3% or 50% Joint and Survivor Annuity These options are similar to the 100% joint and survivor option, except that your spouse or other beneficiary receives 75%, 66 2/3% or 50% of your monthly pension amount after your death. The amount by which your pension payments will be reduced during your lifetime is adjusted accordingly. Lump-Sum Payment on June 30, 2004 Accrued Benefit You receive a single lump-sum payment equal to the current actuarial value of your normal or early retirement benefit that was credited to you as of June 30, You can elect to receive the portion of your normal or early retirement benefit credited to you after June 30, 2004 in one of the other forms of benefits described in this section. If you are married, your spouse must consent to the lump-sum payment in excess of $5,000. Special Lump-Sum Payment for Certain Participants If your retirement benefit was frozen as of December 31, 2006, you may receive a single lump-sum payment equal to the current actuarial value of your full normal or early retirement benefit. If you are married, your spouse must consent to the lump-sum payment in excess of $5,000. Other Form You may elect to receive any other form of payment, as long as the form you choose meets certain legal requirements designed to ensure that you receive the majority of the benefit during your lifetime. Payment of Small Pensions If the actuarial value of your benefit is $5,000 or less, the Administrative Committee will pay your benefit to you in a cash lump sum. This payment will be made as soon after your retirement or separation of employment as practical. However, you must first make a written election to receive your benefit in cash or to roll over the value of your benefit to an eligible IRA or other eligible retirement plan. Effective for distributions on and after March 28, 2005, if you do not make the written election to receive your entire benefit in cash or to roll it over, and the amount of your distribution is more than $1,000 but not more than $5,000, the Plan will automatically roll over your benefit to an IRA in your name. The IRA will be invested in an investment product designed to preserve prin- 11

20 cipal and provide a reasonable rate of return and liquidity. Your IRA will be charged with all fees imposed by the IRA sponsor on the IRA. For further information concerning the automatic rollover rules, the IRA sponsor, and the fees and expenses of the IRA, please contact the Administrative Committee. What If I Should Die Before I Retire? If you are married and vested in your pension when you die, your spouse will be protected. The date on which your spouse s benefit payments begin depends on which of the following circumstances apply. Death After Early Retirement Age If you have satisfied the requirements for a normal, early, or vested pension and die after the earliest retirement age of 55, but before you actually retire, your surviving spouse will be entitled to receive a survivor pension starting on the first day of the month following your death. His or her benefit will be 50% of the reduced amount you would have received if you had retired with an immediate qualified joint and 50% survivor benefit on the day before your death. Death Before Early Retirement Age If you have satisfied the requirements for a vested pension and die at or before age 55, your surviving spouse will be entitled to receive a survivor benefit starting on the first day of the month after the date you would have become age 55. His or her benefit will be 50% of the reduced amount you would have received if you had separated from service on the date of death (or your actual termination of employment, if earlier), survived to age 55, retired at that time with an immediate qualified joint and 50% survivor benefit, and then died on the day after the day you attained age 55. What If I Become Disabled? If you become disabled, you can continue to receive credited years of service for a limited period of time and a pension benefit on your normal retirement date. If you become totally and permanently disabled after completing at least five participating years of service, you will continue to earn credited years of service based on the hours of service with which you would normally have been credited had you not been totally and permanently 12

21 disabled. However, such credited service will not continue beyond: Your normal retirement date (if you became totally and permanently disabled before July 1, 1993); or Two years from the date on which you become totally and permanently disabled (if you become totally and permanently disabled on or after July 1, If at any time you cease to be totally and permanently disabled, your credited service will also cease. For plan purposes, a total and permanent disability is a mental or physical condition by reason of which: You are completely unable to perform the duties of your regular occupation and are receiving either long-term disability payments under a plan of the company or Social Security disability benefits; or You are completely and continuously unable to perform the material duties of any gainful occupation for which you are reasonably suited by reason of training, education, or experience, and you are receiving Social Security disability benefits. Disabilities caused by the following are excluded: Current and chronic use of intoxicants, narcotics, or other drugs, the use or possession of which is unlawful under the Controlled Substances Act, as amended; and Disabilities incurred as a result of engaging in an unlawful activity. If your disability continues to your normal retirement age, you will receive a normal pension commencing at your normal retirement date. If your disability ceases before normal retirement age and you do not resume active employment, you will have a termination of service on the date your disability ceases. You will not earn participating years of service during your period of disability. Therefore, if your disability ceases before normal retirement age and you do not resume active employment with a sponsoring employer, you will not be eligible for any pension benefit unless your participating years of service before your period of disability qualify you for a deferred vested or early retirement benefit. Can I Lose Any of My Benefits From the Plan? You can lose pension benefits if you end employment before vesting, incur a break in service, or die. 13

22 Our pension plan is a valuable tool for planning for your retirement years. As you work, you continue to build service for vesting and earn additional amounts of monthly pension benefits. Although you may intend to continue your employment until retirement, there may be a time when your personal situation will prevent you from carrying out your intentions. Consequently, you should be aware of the following circumstances that could cause you to lose or forfeit your pension under the plan. Termination of Employment If you terminate employment before becoming vested (that is, before completing five participating years of service), you will lose any service you have accumulated in the plan. If you are rehired, you may get your service back, provided you meet certain conditions explained under What Is a Break In Service? on page 14. Break in Service If you have fewer than 501 hours of service in any calendar year, you will be considered to have a break in service. If you have a break in service before becoming vested (that is, before completing five participating years of service), you could lose any service and pension that you have accumulated in the plan, as explained under What Is a Break in Service? on page 15. Death If you die while receiving a life-only pension, no benefits will be paid to your surviving spouse or beneficiary. If you die prior to age 55 and before you retire, no benefits will be paid to your surviving spouse unless you were vested at the time of your death. If you are not married at the time of your death before retirement, no benefits will be paid under the plan. Qualified Domestic Relations Orders As a general rule, your benefit under the plan, including your vested interest, may not be alienated. This means that your benefit may not be sold, used as collateral for a loan, given away, or otherwise transferred. In addition, your creditors may not attach, garnish, or otherwise interfere with your benefit. However, there is an exception to this general rule. The Administrative Committee must honor a qualified domestic relations order, which is defined as a decree or order issued by a court that obligates you to pay child support or alimony or otherwise allocates a portion of your assets in the plan to your spouse, former spouse, child, or other dependent and which satisfies certain requirements of the Internal 14

23 Revenue Code. If a qualified domestic relations order is received by the Administrative Committee, all or a portion of your benefit may be used to satisfy the obligation. The Administrative Committee will determine the validity of any domestic relations order it receives. A copy of the QDRO procedures may be obtained from the Administrative Committee, without charge, upon request. Veteran s Reemployment Law In 1994, the Uniformed Services Employment & Reemployment Rights Act was enacted and applies to certain veterans returning to their previous employment. Under this law, members whose rights are protected by law are entitled to receive credit for their time in the military in calculating their participating and credited service. In addition, a service member will be credited with compensation (equal to his rate of compensation immediately prior to going in the military) for plan benefit calculation purposes while in the military. If you have questions about the Act, please contact FirstMerit Corporate Benefits Department for additional details. Paying Taxes on a Lump-Sum Distribution It s important that you understand the rules regarding how lump-sum payments from the plan are handled for federal income tax purposes if you re taking a lump-sum distribution when you leave the company. Briefly: The IRS requires FirstMerit Corporation to withhold 20% of the taxable portion of your distribution. Withholding is required even if you later decide to roll over part or all of your distribution. The only way you can avoid the withholding is to arrange a direct rollover of your distribution from our plan to an IRA or another employer s eligible retirement plan. When You Receive Your Benefit When you leave your company, if you elect to receive your plan benefit in a single lump-sum payment, you ll have several choices available to you, each with different tax consequences: Arrange a direct rollover. You can ask the company to roll over all or part of your payment directly to another employer s eligible retirement plan or to an IRA. Taxes will be deferred on the amount rolled over until you actually take payment from the other employer s plan or IRA. Receive your distribution and roll it over yourself within 60 days. 15

24 FirstMerit Corporation is required to withhold 20%. Most of the amount withheld may be returned to you when you file your taxes. But, unless you personally contribute the amount withheld to the new plan or IRA, you will pay taxes on the amount withheld, plus a potential 10% early withdrawal penalty tax. The 10% penalty tax does not apply if you terminate employment on or after age 55, receive a distribution after age 59 1/2, or in certain other cases. Receive your distribution and spend or invest it elsewhere. First- Merit Corporation is required to withhold 20% of the taxable amount of your distribution. Your distribution will be subject to ordinary income taxes (unless special income averaging is available) and possibly a 10% early withdrawal penalty tax. How Do These Rules Affect Me? If you don t plan to roll over your lump-sum distribution, you can think of the withholding as simply a credit against your taxes owed for the year. (If you re in a tax bracket that s higher than 20%, you may owe taxes on the distribution when you file your tax return, and you may be required to pay estimated taxes.) The rules have a greater effect on you if you intend to move the money from our plan to another. If you receive a distribution from our plan, the 20% withholding will apply even if you later roll over your distribution, as the example below shows. The only way to avoid the 20% withholding is to arrange a direct rollover from our plan to another plan or IRA. Tax Example When You Do Not Make a Direct Rollover Here s an example of how the tax treatment might work on a rollover that is not a direct rollover. Suppose you have a taxable distribution of $100,000. Instead of arranging a direct rollover, you take the payment and then decide to roll it over yourself to an IRA within 60 days. Because you elect to receive payment, FirstMerit Corporation is required to withhold 20%, or $20,000. So you actually have only $80,000 in hand to roll over at this point in time (unless, as explained below, you add $20,000 from your personal finances to make the full $100,000 rollover). If you only roll over the $80,000 you will not have to pay income tax on this amount but will have to file for an income tax refund to get any excess withholding returned to you. However, the $20,000 withheld is considered part of your taxable income because it was not rolled over. 16

25 If, for example, you re in a 27% tax bracket, you would pay $5,400 in taxes on the $20,000 that was not rolled over. And, in some cases, you may also be required to pay a 10% early payment penalty tax, or an additional $2,000. So, in this example, you could conceivably pay $7,400 in taxes if you roll over your payment yourself, rather than arranging a direct rollover. As mentioned earlier, you can avoid payment of these taxes if you can find a way to add the amount withheld to the rest of your distribution and make a full rollover. In this example that would mean coming up with $20,000 from your personal savings. Most of us would find that difficult to do. Making a Direct Rollover You can arrange a direct rollover of all or part of your distribution. If you want to make a direct rollover, notify FirstMerit Corporate Benefits when you apply for your benefits. If you re changing jobs, you ll need to talk with your new employer about whether its plan will accept a direct rollover. Otherwise, you ll need to set up an IRA to accept the rollover. You can set up an IRA with an organization such as a bank, mutual fund company, brokerage house, or insurance company. Once you give First- Merit Corporate Benefits specific information on the receiving plan or IRA, they ll take the next steps. More Information You will receive a more detailed explanation of the tax consequences of taking a lump-sum distribution after you apply for your benefit. If you need more information about making a direct rollover, the FirstMerit Corporate Benefits Department will be happy to help. Before making any decision about payment of your distribution, you should consult with a tax advisor. What Is a Break in Service? You incur a break in service any year you were not credited with at least 501 hours of service. You have a break in service in any calendar year you are not credited with at least 501 hours of service. Any year in which you have between 501 and 1,000 hours of service is not considered a break in service; however, neither does it count for participating or credited years of service. If you have five or more participating years of service, you are vested and will not lose any service or benefits accrued before a break in ser- 17

26 vice. However, you must complete at least 1,000 hours of service in the 12-month period beginning with your date of rehire, or in any calendar year beginning after your date of hire, in order to be credited with service or benefits accrued before your break in service. If you have a break in service before becoming vested, you will forfeit prior service and benefits unless you meet certain reemployment conditions. If you have a break in service before becoming vested and are then reemployed, your pre-break and post-break service will be added together if you complete at least 1,000 hours of service in a 12-month period before the number of breaks in service equals or exceeds the greater of (1) five years, or (2) your total pre-break participating years of service. Otherwise, you will be treated as a new employee for vesting purposes. During maternity or paternity leave, as defined in the plan, you will receive credit for your normal hours of service, up to 501 hours, in a calendar year only for purposes of avoiding a break in service. The hours will be counted in the calendar year your absence begins if needed to prevent a break in service in that period, otherwise, in the following calendar year. These hours will not count for vesting or benefit accrual purposes. Can Payment of My Plan Benefits Be Suspended for Any Reason? Under certain circumstances, your benefits may be suspended. You may continue in the employment of FirstMerit Corporation or a sponsoring affiliate beyond your normal retirement date, but your pension payments will not begin until you actually terminate employment. If you defer retirement or are rehired after you have taken early or normal retirement, the Administrative Committee will provide you with further information concerning the suspension of your benefits. Monthly pension benefits will be suspended in any calendar month in which you are paid for more than 80 hours of service. You may request, and the Administrative Committee will within a reasonable period of time provide, a determination of whether your contemplated employment or reemployment will result in suspension of your benefits. If your benefits are to be suspended, the Administrative Committee will so notify you by personal delivery or first-class mail dur- 18

27 ing the first calendar month of the suspension. You must notify the Administrative Committee when there is a calendar month during which you have not completed more than 80 hours of service or when you have terminated employment. The Administrative Committee will provide you with a form for this purpose. Your pension payments will commence or resume no later than the first day of the third calendar month after the month in which your notice is received by the Administrative Committee. If you believe that your benefits should not be suspended, you may appeal the suspension by following the appeal procedure set forth in the section titled, If My Claim Is Denied, How Do I File an Appeal, on page 21. The Department of Labor regulations governing suspension of benefits may be found in Section of the Code of Federal Regulations. How Do I File a Claim for Benefits? If you wish to file a claim for benefits under the plan, the Administrative Committee will, upon request, supply you with the necessary forms. You may request the forms from: FirstMerit Corporation Corporate Benefits Department III Cascade Plaza, 2nd Floor Akron, Ohio (330) Plan Administration This section provides information about who is responsible for plan administration. Plan Name Pension Plan for Employees of FirstMerit Corporation and Affiliates Plan Number

28 Primary Plan Sponsor FirstMerit Corporation III Cascade Plaza Akron, Ohio (330) A complete list of participating employers is available for examination at the office of the Administrative Committee and will be provided to any plan member or beneficiary upon reasonable request. Employer Identification Number The nine-digit Employer Identification Number assigned by the Internal Revenue Service to FirstMerit Corporation is Trustee FirstMerit Bank, National Association; 106 South Main Street, 6th Floor; Akron, Ohio (330) Plan Administrator Administrative Committee c/o FirstMerit Corporation III Cascade Plaza Akron, Ohio (330) A complete list of the current members of the Administrative Committee is available for examination at the above address and will be provided to any plan member or beneficiary upon reasonable request. Agent for Service of Legal Process Administrative Committee c/o FirstMerit Corporation III Cascade Plaza Akron, Ohio Legal process may also be made upon the trustee of the plan. Plan Year The fiscal records of the plan are kept on a plan year basis beginning each January 1 and ending on each December 31. Type of Plan and Administration The plan described in this booklet is a defined benefit plan. Funds are 20

29 accumulated in a trust fund held by the trustee. What Does the Plan Cost Me? The sponsoring employers pay the entire cost of the plan. The plan costs you nothing. The sponsoring employers pay the full cost of the plan through periodic contributions to the trust fund established for that purpose. The amount of these contributions is based on calculations of an enrolled actuary. In addition, the employers pay all other expenses of the plan. You are neither required nor permitted to make contributions to the plan. You pay no taxes on contributions to the plan since these are made by the employers. However, you must pay income tax on your pension payments when you receive them. How Is the Plan Administered? The plan is administered by the Administrative Committee. The plan is administered by an Administrative Committee of three or more members appointed by the Compensation Committee of the Board of Directors of FirstMerit Corporation. Members of the Committee are officers or management personnel of sponsoring employers and serve without compensation. Except for powers specifically reserved by the employers, the Administrative Committee has full responsibility for interpreting and administering the plan (but not for managing the trust fund). The Administrative Committee s responsibilities include the resolution of any questions concerning an employee s eligibility, the calculation and payment of benefits, the authority to employ the enrolled actuary and other advisors, and compliance with government regulations and reports. If My Claim Is Denied, How Do I File an Appeal? You can take certain steps to appeal your case if a claim is denied. A decision on your claim for benefits will generally be made by the Administrative Committee within 90 days after the receipt of such claim. If 21

30 special circumstances require an extension of time to decide your claim, you will be notified of such extension and such special circumstances prior to the end of the 90-day period. In such case, the Administrative Committee or its designee will notify you of when it expects to decide your claim. An extension of time cannot be for more than an additional 90 days. If your claim for benefits under the plan is denied, in whole or in part, you will receive a written notice of the denial, including: the specific reasons for the denial; the plan provisions on which the denial is based; any additional information or material necessary to complete the claim along with an explanation of why it is needed; and an explanation of the plan s claim review procedures, including an explanation of your right to bring a civil action under Section 502(a) of ERISA following an adverse determination upon review. If you believe that you were improperly denied benefits under the plan, you have the right to have your claim denial reviewed. You must indicate the reason for requesting the review and be prepared to submit any additional evidence to support your claim. You also have the right to receive copies of all documents, records, and other information relevant to your claim for benefits. Your request for a review must be in writing and submitted to the Administrative Committee within 60 days after you receive written notification of the denial of your claim. The Administrative Committee will complete a review of your request and send you a final written decision. The decision will be made within a reasonable period of time but generally not later than 60 days after receiving your request for review. If special circumstances require an extension of time to decide your claim, you will be notified of the extension and such special circumstances prior to the end of the 60-day period. The review must take into account all comments, documents, records, and other information submitted by you relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. In such case, the Administrative Committee will notify you of when it expects to decide your claim. An extension of time cannot be for more than an additional 60 days. The decision on your request for review will include the specific reasons for the decision with reference to the pertinent plan provisions on which the decision is based and will inform you of your right to bring a civil action under Section 502(a) of ERISA. You do not have the right to sue for benefits under the plan unless you have complied with the claims and appeals procedures set forth in this section. 22