Snap-on Incorporated Retirement Plan. Account-Based Component

Transcription

1 Snap-on Incorporated Retirement Plan Account-Based Component Summary Plan Description January 1, 2017

2 Introduction No matter what your age, it s important to begin planning for retirement early. Consider this: most of us can expect to live well into our eighties and some of us into our nineties. And while you may not need the same income you have now, experts say you will need enough to replace a significant portion of your income to retire comfortably. The Snap-on Incorporated Retirement Plan (or the Plan ) is intended to provide you with a regular monthly income during retirement. This Plan works with your other Company-sponsored retirement plans, Social Security and your own personal savings and investments (such as IRAs, mutual funds, savings bonds, etc.) to help you build financial security for your retirement. On a very high level, the Account-Based Plan is calculated by adding pay credits and interest credits to your account on an annual basis. The Plan is one of your most important sources of income during retirement and is funded entirely by Snap-on Incorporated (or the Company ), at no cost to you. We ve prepared this booklet to help you get the most from this valuable benefit. As you review this booklet, keep in mind how your benefits under the Plan fit into the larger picture of your retirement income. Income from all of these sources will help you put the financial pieces together for your retirement. The following chart highlights sources of retirement income that can help you prepare for tomorrow. Future Benefits from This Source... Snap-on Incorporated Retirement Plan 401(k) Plan Are Based on... A benefit formula, in accordance with applicable final average pay or account-based Plan provisions. The formula or calculation used to determine your benefit depends on your choice program election and/or eligibility. This summary plan description describes the Account- Based Component of the Plan. The Plan Components that use a final average pay formula are the: SIRP-FAP Component (always part of the Snapon Retirement Plan) Sioux Tools Component (formerly the Sioux Tools Management Pension Plan) Tools Component (formerly the Snap-on Tools Company Pension Plan and the Sun Electric Corporation Pension Plan) Your contributions, Snap-on matching contributions and investment earnings Are Paid for by... Snap-on You and Snap-on Social Security Your pay up to the Social Security wage base You and Snap-on Personal savings and investments The amount you choose to personally save/invest and investment earnings outside of the Company. For example, you may have equity in your house or have personal investments in an IRA or bank account. You

3 This summary plan description contains a general description of the Account-Based Component of the Plan and is written to help you understand the benefits provided to eligible associates under the Account-Based formula. It does not give you all the details of the Plan. That is the purpose of the plan document, which is the legal description of the Plan. Because the Plan could change from time to time, the plan document governs if there are discrepancies between the information contained in this booklet and the plan document. You may examine the plan document or obtain a copy of it at any time by contacting the Snap-on Pension Helpline at and choosing pension. While the Company expects to continue this Plan indefinitely, the Company reserves the right to modify, amend or terminate this Plan at any time for any reason without prior notice to any participant or beneficiary. The Company has discretionary authority to interpret the Plan, any related documents (such as this summary plan description) and to make factual determinations. Consider this booklet to be your primary reference guide the first place to turn when you have a question about your Account-Based Plan benefits. Any questions you may have about the information in this booklet should be directed to the Snap-on Pension Helpline at ; when prompted, select the pension option and you will be routed to a customer service associate who will assist you. PLEASE NOTE: You may have been eligible for the Final Average Pay (FAP) Component of the Plan but elected to enter the Account-Based Component of the Plan when the choice program was offered in If so, your benefit under the Account-Based Component of the Plan can never be less than the value of the FAP Component accrued at the time of the choice program. To help you understand how the FAP Component benefit is determined, this booklet includes a high-level summary of FAP features in Appendix I: Special Plan Provisions Summary, beginning on page 29. For more detailed information about the FAP, please see the Final Average Pay summary plan description available by calling the Snap-on Pension Helpline at and choosing the pension option. Associates who were covered under the Tools Component or Sioux Tools Component of the Plan prior to the choice program should refer to the applicable summary plan descriptions describing those provisions.

4 Table of Contents Becoming a Participant... 3 Calculating Your Benefits... 4 Annual Pay Credits... 4 Annual Interest Credits... 5 Benefit Calculation Example... 6 Opening Account Balance... 7 Receiving Your Benefits After You Leave the Company... 9 When Benefits Are Paid... 9 Forms of Payment... 9 Normal Form of Payment... 9 Optional Forms of Payment Cash Refund Example Vesting Service Benefit Service Break in Service If You Die Naming a Beneficiary Paying Taxes All Payment Options Except Lump Sums Lump-Sum Payments Get Advice Applying for Your Benefits Claims Procedure Filing a Pension Claim Non-Assignment of Benefits Your Rights Plan Administration Plan Amendment or Termination Rights of Participants on Termination Your Pension Is Insured Top-Heavy Provisions... 25

5 Administrative Information Plan History Appendix I: Special Plan Provisions Summary Appendix II: Associate Divisions/Locations Participating in the Account-Based Component of the Snap-on Incorporated Retirement Plan... 30

6 Your Account-Based Retirement Plan At-a-Glance What is a Retirement Plan? How much does the Plan cost me? When can I join? When am I vested? When will I receive benefits? What are my payment options? This summary plan description summarizes the provisions of the Snap-on Incorporated Retirement Plan that apply to what is referred to as the Account-Based Component of the Plan. The Account-Based Component of the Plan offers you a reliable source of retirement income in the form of an account balance you can see grow over time. Along with your 401(k) savings, your personal savings and Social Security, it can help you build a secure financial future. Nothing. Snap-on Incorporated, and certain related participating companies (see Appendix II: Associate Divisions/Locations Participating in the Account-Based Component of the Snap-on Incorporated Retirement Plan) referred to in this summary plan description as the Company, pay the full cost. If you were hired before January 1, 2001: Full-time salaried associates. If you elected to participate in the Account-Based Component of the Plan during the choice program, you became a participant in the Account-Based Component on July 1, Part-time salaried associates. You become a participant if you complete 1,000 hours of service during the 12 months after your first day of work (or during the 12 months ending on any later anniversary of that date). If you are hired after December 31, 2000: Regular Full-time salaried associates. You become a participant in the Account-Based Component of the Plan on your six-month anniversary date (retroactive to your date of hire). Temporary or Part-time salaried associates. You become a participant if you are still actively employed on the one-year anniversary of your first day of work (or during the 12 months ending on any later anniversary of that date) retroactive to your six-month anniversary. Change in employment status. You become a participant on the later of the date of the change or after you satisfy the six-month service requirement if: You are employed as an hourly associate and your status changes to a salaried associate of the Company; or You are a salaried associate who transfers from a non-participating employer to the Company. If you are an eligible hourly associate, as identified in Appendix II: You will become a participant in the Account-Based Component of the Plan on your six month anniversary date if you are a full-time associate, or on your twelfth month anniversary if you are temporary or part-time. For the Account-Based formula, you are vested after three years of vesting service. If you are vested, that means you are eligible to receive a benefit. If you are vested, you can start to receive your benefit when you terminate your employment with the Company. You must start your benefit no later than the April following the year in which you turn 70-1/2. If you are vested when you retire or leave employment with the Company, you have a choice of several payment options, including a lump-sum payment. If your account balance is $1,000 or more, you can leave it in the Plan until you reach age 70-1/2. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/2017 1

7 How does my account grow? How and when do I apply for my benefits? How soon can payments begin? What other benefits does the Plan offer? What if I have more questions? Your account balance grows through: Annual pay credits from 3% to 10% of your covered pay, depending on your age and years of service, which generally continue until the year before your employment terminates; and Annual interest credits based on the greater of: 3.75% or specified five-year Treasury rates, which continue until you begin to receive payment of your benefits. Your account grows because annual interest credits and annual pay credits are always positive. Contact the Snap-on Pension Helpline, up to 90 days before you plan to start your benefit payments. You will be asked to fill out a pension election form. These forms are required to start receiving your benefits. Subject to normal administrative time, you can begin to receive benefits following your termination of employment with the Company, as of the first day of any month you select. If you are vested, and die before you retire, your spouse or beneficiary is eligible for a benefit. Contact the Snap-on Pension Helpline at and select the pension option. You will be routed to a customer service associate who will assist you. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/2017 2

8 Becoming a Participant You are eligible to participate in the Plan if you: Are an associate of the Company working a regular, full-time schedule (certain part-time associates are also eligible; see below); and Are a member of one of the groups identified as covered by the Plan in Appendix II: Associate Divisions/Locations Participating in the Account-Based Component of the Snap-on Incorporated Retirement Plan; and Work in the United States and pay U.S. federal withholding taxes, or are a U.S. citizen working overseas (except on expatriate assignment); and Are not accruing benefits under any other defined benefit pension plan sponsored by the Company. If you were hired prior to January 1, 2001, and if you elected to participate in the Account- Based Component of the Plan, you became a participant in that Component on July 1, If you were hired after December 31, 2000, and you meet the eligibility requirements described above (sometimes referred to as being an eligible associate ), you become a participant on the six-month anniversary of your date of hire, but your benefits will be measured from your date of hire. If you do not work on a regular, full-time basis but meet all other eligibility requirements, you may still participate retroactively to your six-month anniversary date if you are still an associate on your first employment anniversary date. In many cases, if you transfer from hourly status to salaried status, or from an ineligible group to an eligible group, you will begin participating in the Plan on the later of the transfer date or the date you satisfy the six-month service requirement (counting your service both before and after your transfer). If you transfer, you should check with the Snap-on Pension Helpline or your local Human Resources representative at the time of your transfer to determine if you will participate in the Plan. Additionally, if you were a salaried associate hired prior to January 1, 2001 and you left Snap-on prior to the election period, upon subsequent reemployment you will be defaulted to the Account-Based Component of the Plan. Calculating Your Benefits Your account balance in the Plan grows steadily throughout your career at the Company in two ways: through annual pay credits and annual interest credits. If you transferred from the FAP Component of the Plan or the Tools Component on July 1, 2001, your account will also be credited with an opening balance (see Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/2017 3

9 Opening Account Balance on page 6). Annual Pay Credits The Company credits your account with an amount called an annual pay credit. Generally the pay credit is made on the last day of each year that you remain employed. Your annual pay credit is calculated by multiplying covered pay for that year by your current percentage. Your current percentage is based on the sum of your age and your years of benefit service as of December 31, as shown in the chart below. For more information about benefit service, please see Benefit Service on page 12. The current contribution percentages (as shown in the chart below) are calculated by giving you a point and a fraction of a point for each year of your age, and a point and a fraction of a point for each year of your benefit service. (In each case, the fraction of a point is calculated to three decimal places.) Then your age points and service points will be added, and rounded to the nearest whole number, to determine your total points. Your points are then converted into your current contribution percentage. For example, if at December 31 you are age 49 and you have 11 years of benefit service, the sum of your years and service is 60. Therefore, your current contribution percentage is 6% (see the chart below for that conversion). Credit Points (Age + Service) Current Contribution Percentage % % % % % % % % % % % If You Transfer or Leave Employment Generally, you must be an eligible associate on December 31 of a year in order to receive an annual pay credit for that year. If you transfer to a non-participating subsidiary, or to an ineligible (hourly) status during the year, but you are still employed by the Company or a subsidiary on December 31, you will receive an annual pay credit for the year of your transfer. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/2017 4

10 Your annual pay credit will be based on your pay during the entire year, both before and after your transfer, which (except for the transfer) qualifies as covered pay. Under certain circumstances you will be entitled to a partial annual pay credit on your termination date based on your previous year s covered pay, prorated based on your period of service during the year you terminate employment and on your points earned through your termination date. You will receive the partial annual pay credit if your employment ends: As a result of a permanent and total disability ; or As a result of your death; or After you are eligible for early retirement (age 50 with 10 years of vesting service if you leave Snap-on after December 31, 2012; or age 55 with 15 years of vesting service if you left Snap-on prior to January 1, 2013); or After you have worked 1,000 hours in your year of termination; or After you reach age 65. IMPORTANT TERMS: Covered Pay Your covered pay is, with certain exceptions, the total amount of regular cash pay from the Company, reported on your W-2 and subject to income tax withholding, plus your pre-tax 401(k) and Section 125 contributions. While your covered pay includes commissions, overtime and certain cash bonuses, as well as regular pay, it excludes non-cash compensation, excess life insurance contributions, non-qualified deferred compensation, founders pay, long-term incentive pay, relocation reimbursement, stock options, and any extraordinary or non-recurring compensation. The Internal Revenue Code imposes limits ($270,000 in 2017) on the amount of your covered pay that can be taken into account each year for purposes of determining annual pay credits. Annual Interest Credits Along with annual pay credits, your account balance grows through annual interest credits. Like annual pay credits, annual interest credits generally are credited to your account on the last day of the year (with some exceptions, as discussed in the NOTE below). And since the annual interest credits are guaranteed, your account balance can never decrease. NOTE: Unlike annual pay credits, even if your employment with the Company ends, annual interest credits continue to be credited to your account until you begin receiving benefit payments from the Plan. On the date that you begin receiving money from the Plan, pro rata annual interest credits will be added to your account (based on completed months), and then annual interest credits will cease. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/2017 5

11 Your annual interest credit for a particular year is determined by multiplying your account balance on the first day of the year by the interest credit rate for the year. Your annual interest credit is then added to your account balance at the end of the year, or if earlier, when your benefits commence. The Plan s annual interest credit rate changes each year, and is equal to the average yield on fiveyear Treasury constant maturities bonds in November of the prior year. A minimum of 3.75% is applied to the interest crediting rate if the five-year Treasury amounts are under this amount. Benefit Calculation Example Here is a look at how annual pay credits and annual interest credits work together to increase your account balance. PLEASE NOTE: This example is for illustrative purposes only as assumptions may change depending on your situation. Joan has an account balance on the first day of the year of $20,000; and: Is employed on the last day of the year; Is exactly 60 years old; Has completed exactly 15 years of service; and Has covered pay of $40,000. The annual interest credit rate is 5%. Joan s points (age 60 plus 15 years of service) equal 75, so her annual pay credit is 8% of her covered pay (see the table under Annual Pay Credits on page 3). Here s how Joan s account would grow during the year. Example January 1 account balance $20,000 Annual interest credit ($20,000 x 5%) + 1,000 Annual pay credit ($40,000 x 8%) + 3,200 December 31 account balance $24,200 Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/2017 6

12 Opening Account Balance If you participated in the SIRP-Final Average Pay or Tools Components on December 31, 2000, and you elected to participate in this Account-Based Component of the Plan, then, in addition to annual pay credits and annual interest credits, your account will be credited with an opening account balance. If you participated in the Plan on December 31, 2000, your opening account balance will be determined as follows: If you were not yet eligible for early retirement on June 30, Your opening account balance in this Plan is the lump-sum present value on June 30, 2001 of the monthly benefit you had earned under the Plan, payable at age 65 as a lifetime annuity based on your final average pay through December 31, If you were eligible for early retirement as of June 30, Your opening account balance in this Plan is the lump-sum present value of: The early retirement benefit you would have received if you had retired on June 30, 2001, and elected to start receiving benefits on July 1, 2001; plus The present value of your temporary supplemental benefit if you qualify (as described in the Final Average Pay Component), payable from ages 60 to 65, (or ages 57 to 62 if you met the 30-year credited service requirement as of June 30, 2001); plus The present value of the $3,000 post-age 65 retirement death benefit (but only if you had 20 years of credited service as of June 30, 2001). In each case, the benefit or present value is based on your final average pay through December 31, If you participated in the Tools Component on December 31, 2000, your opening account balance in this Plan is the lump-sum present value of your benefit (normal or early retirement, as the case may be) under the Tools Component as of June 30, 2001, calculated in a manner generally similar to the manner of calculating opening account balances for participants in the Plan (see above), but based on the provisions of the Tools Component. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/2017 7

13 WHAT IS A LUMP SUM PRESENT VALUE? Lump-sum present values of the benefits described above are calculated by taking the present value of each future monthly annuity payment expected to be paid over your lifetime (see mortality assumptions below). Present value means how much money is needed today, when invested at a certain rate of interest (see interest rate below), to provide such expected annuity payments. The interest and mortality assumptions used in calculating the lump-sum present value of your benefits under the plan in which you participated on June 30, 2001, were a 6% interest rate and the 1995 GATT Mortality, which is the mortality table prescribed by the Secretary of Treasury in effect on June 30, Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/2017 8

14 Receiving Your Benefits After You Leave the Company If you participate in the Account Based formula and leave the Company after completing three years of vesting service, you are 100% vested in your benefits under the Plan. That means you are eligible to receive your benefit even though you no longer work for the Company. If you leave before completing three years of vesting service, you are not vested in your benefit under the Plan, and you will permanently forfeit your benefits after five or more years of breaks in service. When Benefits Are Paid If, at the time your employment ends, your vested benefit is $1,000 or less, you will automatically receive your benefit in one lump-sum distribution shortly after your termination. If your vested benefit is more than $1,000, you can elect to receive an immediate distribution, or you can choose to leave your account balance in the Plan for any period of time, up to the date on which you attain age 70½, at which time distribution must be made or commenced. Remember, your account will continue to earn annual interest credits, even after you terminate employment, until you actually start to receive payments. Forms of Payment When you qualify for a distribution under the Plan, the normal form of payment is based on your marital status when payments begin. Optional forms of payment are also available, however additional documentation may be required (e.g., your spouse's written consent for the payment form or a beneficiary other than your spouse). See Optional Forms of Payment on page 9 for more information. IMPORTANT NOTE! The forms of payment available under this Plan generally include survivor protection if you should die after you begin receiving benefits. Once your benefit commences, you cannot change your form of payment to another payment form. Once your decision is made and the benefit has begun, the decision has become irrevocable. Normal Form of Payment If you are single when payments begin, you will automatically receive a monthly pension for your lifetime, unless you elect one of the optional payment forms. This form of payment is calculated based on your account balance at the time payments commence. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/2017 9

15 If you are legally married when payments begin, you will automatically receive a reduced monthly pension for your lifetime, plus a 50% benefit for your eligible spouse following your death. Your monthly payments will be reduced to account for the 50% benefit which will be paid to your spouse after your death. A cash refund payment feature also applies to the portion of your benefit earned through December 31, This means that if you and your spouse die, your secondary beneficiary will receive an amount equal to your account balance at the time your benefit started (without future annual interest credits), minus payments already received for the portion of your benefit earned as of December 31, Optional Forms of Payment If You Are Single You can elect a lump-sum payment, which means payment of your full Plan balance in a single payment. You can choose to have some or all of this single sum amount paid to an individual retirement account or to another employer s retirement plan. You can elect a 5-year, 10-year or 15-year certain and life payment option rather than the normal form of payment. These payment options provide a reduced lifetime benefit for you, including 60, 120 or 180 guaranteed monthly payments (5, 10 and 15 years, respectively). If you die before receiving all of the guaranteed payments, your beneficiary will receive the remainder of the payments. You will choose a beneficiary when you decide to start your pension. If your beneficiary predeceases you and you have not changed your beneficiary, your estate will receive the remaining payments. Once your payments have started, you cannot change your elected option. You can elect a life annuity with cash refund, as described under Cash Refund Example on page 11. If You Are Married You can elect a lump-sum payment if your spouse consents in writing. This means you receive payment of your full Plan balance in a single payment. You can choose to have some or all of this single sum amount paid to an individual retirement account or to another employer s retirement plan. You can elect another joint and survivor payment option, with or without a cash refund feature, if your spouse consents in writing. These payment options provide a lifetime benefit for you plus a lifetime benefit for your spouse after you die. Your monthly pension under these survivor payment options is actuarially adjusted based on your age and your spouse s age so that the total value of your expected payments is equal under each form of payment. Your spouse s reduced pension will begin with the payment immediately after you die. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

16 You can choose one of the following annuity forms, with or without the cash refund feature: 100% Joint and Survivor Benefit Provides a reduced lifetime benefit for you, plus 100% of your reduced benefit for your spouse s lifetime after you die. 75% Joint and Survivor Benefit Provides a reduced lifetime benefit for you, plus 75% of your reduced benefit for your spouse s lifetime after you die. 50% Joint and Survivor Benefit Provides a reduced lifetime benefit for you, plus 50% of your reduced benefit for your spouse s lifetime after you die. Single Life Annuity Provides a monthly benefit for you, for your lifetime, with no benefit for your spouse after you die. You can elect a reduced 5-year, 10-year or 15-year certain and life pension if your spouse consents in writing. These payment options provide a reduced lifetime income for you and, if you die before receiving 60, 120 or 180 payments, your beneficiary will receive the remaining payments (if any). Once your payments have started, you cannot change your elected option. You may make a separate election for payment of your benefit earned through December 31, 2012 and your benefit earned on or after January 1, 2013 only where the normal form of payment as described above differs for the two portions and where you are retaining the normal form of payment for one portion and selecting an optional form of payment for the other. For example, if you are married and wish to receive the normal form for your payment earned through December 31, 2012 (a 50% joint and survivor annuity with cash refund) but do not wish to receive the normal form for your benefit earned after 2012 (a 50% joint and survivor annuity), you could elect an optional form of payment for the post-2012 portion of your benefit. If you are married, your spouse must consent to any election of an optional form of payment. How Do I Know Which Option is Best? Before you determine which payment option you want, think about: how soon you ll need the money, your other retirement income sources, how healthy you are, whether your spouse has other income available, how soon you and your spouse will be eligible for Social Security benefits. If you retire and your spouse dies before you, your benefits will remain the same even though your spouse will not receive benefits. If your spouse dies and you remarry after commencing benefits, no survivor benefits are payable. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

17 SPECIAL NOTE! The Retirement Equity Act of 1984 requires you to provide lifetime survivor benefits to your spouse unless your spouse agrees to waive this coverage. This means that if you select the survivor pension option with a beneficiary other than your spouse, or if you select a payment form other than the 50% survivor pension, your spouse must consent in writing to your decision. This consent must be witnessed by an independent third party notary public and returned with your benefit elections. Also, under provisions of the Pension Protection Act of 2006, the right to receive a lump-sum payment for amounts in excess of $5,000 may be restricted if the Plan s funding drops below a certain level. In the event such restrictions were to become necessary, you will be notified in writing within 30 days of the date such a restriction occurs. You will again be notified in writing when a restriction is removed. Cash Refund Example The cash refund feature can be a valuable benefit. The cash refund feature pays your beneficiary(s) an amount equal to your account balance at the time your benefit started (without future annual interest credits), minus monthly benefit payments you (and your surviving eligible spouse, if any) received under your annuity. Here s a closer look at how the cash refund feature works. Let s assume: Jane is married and has an account balance of $150,000 at the time her benefit starts. The $150,000 produces a single-life monthly pension benefit of $1,000. Optional forms in which the $150,000 can be paid include: $1,000 per month under the same single-life annuity, but with the cash refund feature; or $970 per month (with $485 per month continuing to her surviving eligible spouse) under a 50% joint and survivor annuity, again with the cash refund feature. Jane dies 3 years after starting her benefit, and her eligible spouse dies 10 years later. If Jane (with the consent of her eligible spouse) had elected the single-life annuity without a cash refund, she would have received only $36,000 from the Plan ($1,000 x 36 = $36,000). By electing the cash refund, the additional benefit payable to her eligible spouse (or other beneficiary) following her death is as follows: Example Account balance at the time payments started $150,000 Total amount of payments received from the Plan prior to death ($1,000 x 36) - 36,000 Cash refund payable $114,000 Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

18 Note that in this case the cash refund equals zero after 150 months, or 12½ years $150,000 divided by $1,000 = 150 months. Since she died prior to receiving 150 monthly payments, a cash refund is payable to her beneficiary. If Jane had accepted payment in the normal form of the 50% joint and survivor with cash refund, the additional benefit payable to her designated beneficiary following the death of Jane and her eligible spouse is as follows: Example Account balance at the time payments started $150,000 Total amount of payments received from the Plan prior to death During Jane s lifetime ($970 x 36) - 34,920 To Jane s eligible spouse following her death ($485 x 120) - 58,200 Cash refund payable $56,880 Vesting Service Vesting service determines whether you are eligible to receive a benefit and when you can begin receiving benefits. Under the Account-Based Component, you are vested after you complete three full years of vesting service. If you terminate employment for any reason, including your death, before you are vested, you will forfeit your benefits. Generally, years of vesting service are measured from your date of hire with Snap-on to the date you leave Snap-on. You receive a year of vesting service for your final year if your fractional year of service plus.083 is equal to or greater than.5. Vesting service also includes: Service with subsidiaries and similar entities owned by the Company that do not participate in the Account-Based Component. Service as an independent dealer, provided you were first employed by the Company. Independent dealer service before being employed by the Company does not count for any calculation of service. All of your years of vesting service, if any, under the SIRP-Final Average Pay or Tools Components, as of June 30, Generally, vesting service starts once employed by the Company. In the case of an acquisition, whether service with the acquired company prior to the acquisition counts toward vesting service is determined on a case by case basis. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

19 Benefit Service Your benefit service is used in determining your annual pay credits. Generally, it is the period of time you are continuously employed by the Company and eligible for a pension benefit. It is counted in whole years, months and partial months. The following additional provisions apply in determining your benefit service: Only employment by the Company counts. In certain cases, employment in a nonparticipating subsidiary counts toward benefit service (see Appendix II: Associate Divisions/Locations Participating in the Account-Based Component of the Snap-on Incorporated Retirement Plan on page 28 for a list of participating companies). If you terminate employment after completing at least three years of vesting service, and later are reemployed by the Company, your service both before and after reemployment will count. (See Break in Service below for the rules for crediting prior benefit service.) If you transferred from an hourly status (with the Company) to a salaried status with the Company, your benefit service will include any pre-transfer benefit service you earned as an hourly associate or under any Company-sponsored hourly pension plan in which you participated. Only the first twelve months of an approved leave of absence counts towards benefit service, unless a leave of absence is for active military duty. In that case, benefit service will be recognized under this Plan (even in excess of twelve months) to the extent that employers are required to recognize periods of military service according to the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) or any other federal law. If you were a participant in the Final Average Pay Plan or the Tools Plan on December 31, 2000, and elected to participate in the Account-Based component as of July 1, 2001, your benefit service will include your credited service (or benefit service) in the Plan (or the Tools Plan) on June 30, Periods as an independent dealer for Snap-on are not included in benefit service. Break in Service A break in service is a year in which you are not employed for some (or all) of the year, and in which you work less than 501 hours during the year. To help you avoid a break in service, up to 501 hours may be credited for time away from work because of pregnancy or the care of a newly born or newly adopted child. You will receive this special credit in either the year you leave, or the following year, as necessary to prevent your first one-year break in service. While it is not a break in service rule, it is important for you to know that, regardless of the number of hours of service you complete, in most cases if you return to the Company as an eligible associate within 12 months of your termination of employment, the fact that you were Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

20 absent will simply be disregarded and your period of absence will be counted as service in computing your vesting service. If you stop working for the Company and are later rehired, your benefit may be affected as shown below. Situation If you were vested, leave and are later rehired If you were not vested, leave and are later rehired If you were rehired after payments are made or commenced If you were hired before January 1, 2001, left before July 1, 2001 and are later rehired If you were a Snap-on associate and transferred to a dealer before January 1, 2001 and are later rehired How Your Benefit Is Affected If you took a lump-sum distribution from the Plan, your account balance will be zero. If you left your account balance in the Plan, upon rehire your account balance will equal the balance you had before you left. It also includes annual interest credits to your rehire date. You will also be immediately vested in any benefit you earn after your rehire date. In addition, in computing your future annual pay credits you get credit for the benefit service you had before your break. If your break in service is less than five years, then your account balance when you left will be restored, and you will get credit for the vesting and benefit service you had before you left. If your break in service lasts five or more years, then your account balance will be zero, you will not get credit for the vesting and benefit service you had before you left. You also must satisfy the six-month employment requirement upon rehire before you become a participant. Your monthly payments (if any) will continue uninterrupted. Your starting account balance will be zero, you will be credited with your prior vesting and benefit service, and you will begin earning new annual pay credits and related annual interest credits. If you were vested when you left employment and you have not commenced receiving benefits, or if you were not vested but return to work before you incur five years of a break in service, you will have an opening account balance and you will receive credit for your prior vesting and credited (benefit) service. Your opening account balance will be calculated in essentially the same way as described in Opening Account Balance on page 6, except that a current lump-sum interest rate and mortality table will be used. You will be placed in the Account-Based Component with an opening account balance. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

21 If You Die Once you are vested, you have a right to a benefit. If you are vested and die before beginning to receive your pension benefit, your beneficiary will be eligible to receive a benefit as shown below. Keep in mind that if you are not vested before you die, no benefits are paid. If You Die and Are: Married Single Your Beneficiary Will Receive: 100% of your account balance in a lump sum. If your beneficiary is your eligible spouse (which it will be unless your eligible spouse has consented, in writing, to the naming of a different beneficiary), he or she may elect a single-life annuity. 100% of your account balance in a lump sum. This will be payable as soon as administratively possible to your designated beneficiary or estate. There is no annuity option. Naming a Beneficiary If you are married on the date of your death, unless you have your current eligible spouse s written consent to the naming of a different beneficiary, your current eligible spouse is automatically your beneficiary whether you die before or after you retire. If you are married, and if your current eligible spouse has consented, you can name the beneficiary your eligible spouse has approved*. If you are not married on the date of your death, you can name any beneficiary. In any event, your signed beneficiary form should be on file with the Pension Administrator. If there is no signed beneficiary form on file at the time of your death, benefits will be paid to your spouse, or, if none, to your children or, if none, then to your estate. Please contact the Snap-on Pension Helpline at ; when prompted, select the pension option and you will be routed to a customer service associate who will assist you with requesting beneficiary forms, or if you have additional questions. *Important Note: If you are married and your current spouse has consented to the naming of someone other than him or her as the beneficiary, and that election occurred before the year you turned 35, your prior election becomes null and void on January 1 of the year in which you turn 35. Your spouse then automatically becomes your beneficiary. This is a federal requirement for this kind of pension plan. To keep the non-spousal beneficiary, you must complete a new beneficiary election form and your spouse must consent to the election in writing. To get a new beneficiary election form, call the Snap-on Pension Helpline at Paying Taxes This section gives a general description of how your pension payments are currently taxed. Since laws change, you should talk to a tax advisor before choosing a payment option. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

22 All Payment Options Except Lump Sums Your pension is taxable as ordinary income when you receive it. That means the payments you receive during the year will be part of your total taxable income for that year. If you choose an annuity form of payment, you can elect the amount, if any, of income taxes to be withheld from each payment. Lump-Sum Payments As with other payment options, lump sums are taxable as ordinary income. You (or your spouse, if he or she receives a lump-sum distribution or, after December 31, 2009, your non-spouse beneficiary) can defer paying taxes on a lump-sum distribution that either is rolled over, or transferred directly, to another qualified plan, a traditional individual retirement account (IRA), an IRA annuity, a 403(b) plan, or certain plans described in section 457(b) of the Code. If you do not elect a direct transfer of the entire lump-sum distribution several things happen. First, the Plan is required to withhold 20% of the taxable amount distributed. Second, any amount not rolled over will be subject to ordinary income tax. Third, if you were not age 55 when you terminated employment, or age 59½ or disabled when you receive the lump-sum distribution, the amount you do not roll over will be subject to a 10% federal penalty tax and may also be subject to state tax penalties. You will receive a summary of current IRS rollover rules when you apply for a lump-sum payment. Get Advice Selecting the best payment option for your particular circumstances is not always an easy task. For example, while many participants elect the lump-sum payment option, if you consider all the facts, you may decide that a lump sum is not the best option for you. Before receiving benefits, you should talk to an experienced professional tax or financial consultant to help you decide which payment option best suits you. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

23 Applying for Your Benefits We recommend that you call the Snap-on Pension Helpline, at and select the pension option, up to 90 days before you plan to start your benefit payments. You will be routed to a customer service associate who will assist you with requesting your pension election forms. These forms are required to start receiving your benefits. You may be asked for proof of: Your age; Your spouse s age; Marriage; and Your current address. If you have questions about how your benefit is determined, contact the Snap-on Pension Helpline at and select the pension option. Claims Procedure Filing a Pension Claim If you think an error has been made in figuring or determining your pension or if you think you have been improperly denied participation in the Plan, call the Snap-on Pension Helpline at and select the pension option. You will be routed to a customer service associate who will assist you. If you are still not satisfied, file a written claim with the Appeals Committee. Your claim should include: Your reasons for making the claim; The facts supporting your claim; The amount you are claiming; and Your name and address. The Appeals Committee will conduct an initial review of your claim and send a reply, usually within 90 days. If your claim is denied, you will receive a written notice advising you of: The specific reason(s) for the adverse determination; References to the specific provisions in the Plan on which the adverse determination is based; A detailed description of any added documents or information needed to complete the claim and an explanation of why the added information is needed; and An explanation of the review and appeal procedure and time limits which are applicable, including your right to review any relevant plan documents and a statement of your right to bring civil action under section 502(a) of ERISA following an adverse determination on review. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

24 You will be provided upon request and free of charge, reasonable access to, and copies of, plan documents that are relevant to your claim for benefits. Filing an Appeal If your claim is denied you can appeal the denial, and at your request you will be provided with the necessary forms. You must complete the forms and submit them to the Appeals Committee (see below) or a company representative authorized by the Appeals Committee to receive appeals within 90 days of the date your denial was mailed to you. Your written request for appeal must contain: A statement of the reason(s) for the appeal; References to the specific provisions in the Plan on which your appeal is based; The reasons you feel the claim should be granted and evidence supporting each reason; and Any other relevant documents or comments you wish to submit to support your appeal. APPEALS COMMITTEE The Company has established an Appeals Committee to review appeals of denied claims. The Appeals Committee meets every other month. They generally make a decision at the Appeals Committee meeting that immediately follows your filing of an appeal, or at the second Appeals Committee meeting if your appeal is filed less than 30 days before any such meeting (the Appeal Response Date ). Their decision will be based on all the available evidence concerning your claim. It will give specific reasons and references to the Plan provisions that support their decision, and you should be notified of their decision within five days after the Appeal Response Date. If Your Claim or Appeal Is Denied Ordinarily you will receive a written or electronic notice advising you of: The specific reason for the adverse determination; References to the specific Plan provisions on which the benefit determination is based; Your right to receive upon request reasonable access to, and copies of, all documents, records and other information relevant to your claim for benefits; and Your rights to bring an action under section 502(a) of Employee Retirement Income Security Act of 1974 (ERISA). If you do not receive a decision concerning your initial claim or your appeal within the applicable time described in this discussion of claims, your claim will be deemed to have been denied upon review. Although the decisions of the Appeals Committee are final and binding, you may have the right to file a lawsuit under ERISA if you are not satisfied with the results of the appeal. However, you may not file such a suit unless you have first complied with the Plan s claims and appeals Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/

25 procedures in a timely manner. See Your Rights on page 19 for more information about lawsuits under ERISA, including who is responsible for paying attorney s fees. Extensions of Time for Review Both the 90-day initial review and the Appeal Response Date of the Appeals Committee, respectively, can be extended under special circumstances. If an extension is needed, you will receive a notice before the original deadline expires explaining the special circumstances and the date on which the determination will be made. An extension of an initial review can be no more than 90 days. The Appeal Response Date can be extended to as late as the third Appeals Committee meeting after receipt of your request for review. Non-Assignment of Benefits The Pension Administrator is ultimately responsible for authorizing all payments to participants and beneficiaries. You cannot assign to another person the benefits payable to you. However, benefits will be paid to someone else if the Plan receives a valid Qualified Domestic Relations Order (QDRO). A QDRO is an order from a state court that meets certain legal specifications and directs the Plan Administrator to pay all or a portion of a participant s Plan benefits to a spouse, former spouse or dependent child. The Plan Administrator has no discretion in these matters. You will be notified immediately if an attempt is made to assign your benefits through a court order. If you disagree with the Plan s decision or lack thereof concerning the QDRO, you may file suit in federal court. By contacting the Snap-on Pension Helpline at and selecting the pension option, you will be routed to a customer service representative who can send you, at no charge, a copy of the Plan s procedures for determining whether a domestic relations order is qualified. Account-Based Snap-on Incorporated Retirement Plan - Last Updated: 1/1/