HORACE MANN MONEY PURCHASE PENSION PLAN (MPPP) SUMMARY PLAN DESCRIPTION Money Purchase Pension
TABLE OF CONTENTS I. Introduction...1 II. Eligibility...2 III. Contributions...3 IV. Vesting...5 V. Retirement...6 VI. Distributions...7 VII. Miscellaneous...8 Money Purchase Pension
MONEY PURCHASE PENSION PLAN (MPPP) Summary Plan Description I. Introduction Introduction The Money Purchase Pension Plan (MPPP) is a defined contribution plan sponsored by the company since 1966. In 1976, this plan covered only agents and agency managers. After a 1977 amendment, this plan included agents only. Effective Jan. 1, 1992, all employees of the company participate in the MPPP. Specifically this includes those employees who were formerly only eligible to participate in the HMPP. Contributions to the individual participant accounts are percentages of compensation. Assets contributed to the MPPP portfolio prior to July 1, 2002, are managed by Blackrock Financial Management, Inc.; Commonwealth Life Insurance Company guarantees the principal and quarterly rate of return on the portfolio. The investment of contributions made on and after July 1, 2002, are self-directed as described below. After 3 years of service with the company, a participant is 100 percent vested in their account. This Summary Plan Description (SPD) is a brief description of the Plan and your rights, obligations and benefits under the Plan. This SPD is not meant to interpret, extend or change the provisions of the plan in any way. The provision of the Plan may only be determined accurately and fully by reading the actual Plan document. A copy of the Plan is on file at the Plan Office and may be read by you, your beneficiaries or your legal representative at any reasonable time. You may also purchase copies of the Plan document at a reasonable cost from the Plan Administrator. In the event of any discrepancy between this SPD and the actual provisions of the Plan, the Plan will govern. Coordination of the MPPP and HMPP Since 1992, there has been a coordination between the MPPP and the Horace Mann Pension Plan (HMPP). The HMPP was established on Aug. 29, 1989, after our sale from CIGNA Corporation. The HMPP is a spin-off plan from CIGNA Pension Plan and, like its predecessor, is a defined benefit plan. Participants are vested after 5 years of service with the company and, in general, benefits were calculated using a 1.5 percent formula for retirements after Aug. 29, 1989. Effective Jan. 1, 1992, the HMPP was amended to cover all Horace Mann employees. Specifically, that includes all participants formerly only eligible for the MPPP. However, at that date, the HMPP and the MPPP became "floor/offset" plans. The HMPP established a minimal level of benefits, or a "floor." The benefit provided by the HMPP was reduced, or "offset" by the value of benefits provided under the MPPP. For more information on the HMPP benefit, and the value of the offset, please consult the HMPP Summary Plan Description. Money Purchase Pension 1
Effective Jan. 1, 1999, the HMPP participation was limited to employees who were employed or have an adjusted service date of Dec. 31, 1998 or before. All employees hired Jan. 1, 1999 and after are eligible to participate in the MPPP solely. The HMPP was frozen effective as of April 1, 2002. At that time, participants stopped accruing new benefits under the HMPP. Participants retained accrued benefits but no credit will be given for years of service worked or salary earned after March 31, 2002. Cost of the Plan The company pays the entire cost of the MPPP. Basic factors regarding your pension Your eligibility for Plan benefits and the amount of your pension benefit depends on the following factors: your length of service, which determines your vesting percentage, when you can retire and, if were hired before April 1, 1997, the percentage of contribution made by the company; your age, which in conjunction with your length of service, determines your eligibility for normal or early retirement benefits; your eligible compensation, upon which the company bases its percentage of contribution; and the investment results on your account balance. II. Eligibility Eligibility As explained above, effective as of Jan. 1, 1992, all fulltime agents and full-time and part-time non-agent employees of the Horace Mann Service Corporation are eligible to participate in the MPPP. Contract employees (part-time agents) and temporary employees are not eligible. Prior to Jan. 1, 1992, only full-time agents participated in the plan. If you began employment with the company after Dec. 31, 1991,but prior to April 1, 2002, your participation in the MPPP began on your hire date. Employees hired on or after April 1, 2002 must complete one year of continuous service in order to be eligible to participate in the MPPP. Eligible service Your eligible service is used to determine your eligibility to receive a benefit from the plan. Your total years of service with the company as a full-time agent, and/or full- or part-time non agent are used to determine your vested right to your MPPP benefit and your age when your retirement benefit could begin and, if you were hired before April 1, 1997, the company s contribution percentage. The following types of service are includable as eligible service for Plan purposes: all active employment with the company (including predecessor companies) up to the date of your retirement, death, or termination of employment, whichever is earliest; Money Purchase Pension 2
periods of authorized leaves of absence with or without pay; and the period between termination of employment and rehire by the company provided your reemployment occurs within 12 months of your termination date. Service that is not eligible for plan purposes is that which includes: periods accumulated between termination of employment from and rehire by the company for more than 12 months; and during any period that you are a part-time agent or contract employee. III. Contributions Contributions to the MPPP All contributions to your MPPP benefit are made by the company semi-monthly. Contributions are equal to a percentage of your eligible compensation. If you were hired prior to April 1, 1997, the percentage is determined according to your years of eligible service according to the schedule below. Years of Service Contributed Percent of Eligible Earnings 5 but less than 15 years 6% 15 years or more 7% For those employees that were hired April 1, 1997 and after, the contribution percentage will be at a rate of 5%. This 5% contribution will remain at that level, regardless of any future years of service. For those employees hired prior to April 1, 1997, the Plan will continue the above schedule for all employees with more than 5 years of service. These employees will continue to earn a 6% contribution until they reach 15 years of service, and then 7% thereafter. Contributions will cease when you terminate employment with or retire from the company, when you die, or cease to be an Eligible Employee. Eligible compensation Eligible compensation includes: base salaries and/or training allowances; commissions or similar sales compensation; overtime; and shift differential pay. On a non-discriminatory basis, the Pension Plan Administrator may determine that other types of Money Purchase Pension 3
compensation similar to those mentioned above are eligible earnings for pension purposes. Although compensation voluntarily deferred by an employee cannot be eligible earnings for pension purposes, there is a special exception for employees who participate in the Supplemental Retirement and Savings Plan (401k). The employee's tax-deferred contributions to that plan are eligible earnings under the MPPP. In addition, any amounts elected under the Salary Reduction Program are also considered eligible earnings under the MPPP. Examples of non-eligible compensation for the pension are: amounts paid after termination of employment even though earned while employed; expense reimbursements or allowance; payments of awards for suggestions, employment referrals, educational achievements or awards; cash value of merchandise or similar awards; cash bonuses, awards; current cash incentive and performance bonuses; imputed taxable value of merchandise or use of company automobiles; lump sum payments for unused time off; severance pay or related continuity bonuses; compensation over and above the federal annual limit for includable compensation ($200,000 in 2003); and any other types of similar compensation as described above. Participation while receiving LTD benefits For those employees who became disabled prior January 1, 2002 and are receiving disability benefits from the Horace Mann Life Insurance Company's Long Term Disability Plan (unless you are considered a highly compensated employee as defined by the Internal Revenue Code), the HMLIC Long Term Disability Plan will make a contribution to the MPPP on your behalf for each semi-monthly pay period during which you are receiving such disability benefits. The percentage of contribution shall be the same as was made by the company at the time the disability commenced. For those employees who became disabled subsequent to December 31, 2001, all contributions to the Money Purchase Pension Plan will cease until the employee returns to work. Money Purchase Pension 4 IV. Vesting
Vesting "Vested" means you have acquired a non-forfeitable right to your pension benefits. Once you become vested, your pension cannot be canceled or forfeited. Therefore, if you are vested and you terminate employment with the company before you are eligible to retire, you can still receive a benefit when you become eligible. Vested benefits are based on the provisions of the pension plan in place on the date your employment terminates. Effective January 1, 2007, the vesting schedule changed to 3 years of service to be 100% vested. For any participant that terminated employment December 31, 2006 or before, the vesting remains at five years of service to 100% vested. Your vested portion in the value of the company contributions is determined in accordance with the following schedule for employees actively working as of January 1, 2007: Years of Service Vesting Percentage Less than 3 years 0% 3 years or more 100% Vested benefits The MPPP provides pension benefits for employees who terminate employment with the company and are vested under the Plan. These benefits are payable once certain eligibility requirements are met. The Plan allows payment of pension proceeds only upon attainment of a qualified retirement. This would include: early retirement--attainment of age 55-- provided you had 10 years of service with the company; normal retirement--attainment of age 65--and 3 years of service with the company; disability retirement due to a total and permanent disability; or upon your death. However, if you terminate and your vested account balance is $5,000 or less, it will be distributed to you in a lump sum amount. This will be done as soon as practical after termination. Between your termination of employment and payment of your benefit, your pension will be credited with investment results and you will continue to receive statements on your MPPP account. Money Purchase Pension 5
V. Retirement Early retirement You can retire as early as age 55 and receive a pension benefit, provided you have completed at least 10 years of eligible service on your retirement date. Normal retirement You can retire at age 65 with at least three eligible years of service. Postponed retirement You are not required to retire on your normal retirement date. If you continue to work past normal retirement age (65 years), the company will continue to make contributions to your MPPP account. Employment beyond age 70 1/2 The Plan has no mandatory retirement age. Generally, federal law requires that the Plan begin making payments to you by April 1 of the calendar year after the later of the calendar year in which you reach age 70 ½ or the calendar year in which you retire, unless you are a 5% owner of the employer, in which case the payments will begin no later than the April 1 of the calendar year after the calendar year in which you reach age 70 ½. If you began receiving distributions at age 70 ½ and remain employed, you will continue to participate in the MPPP, and you may continue to receive additional company contributions. It may be necessary to recalculate your payments each year until you retire as you continue to receive additional contributions. Disability retirement Should you become disabled, you may qualify for a disability retirement, provided you have five years of service under the Plan at the time the disability retirement is requested. However, employees are entitled to Long Term Disability Plan benefits and accrue additional pension benefits while on a disability leave of absence. Money Purchase Pension 6
VI. Distributions Pension distribution options By federal law, if you are legally married at the time of distribution, the qualified distribution of your account will be issued in the form of a joint and 50 percent survivor annuity. The joint and 50 percent survivor annuity, as described in the plan, is a reduced monthly benefit payable to you during your lifetime with 50% of such monthly benefit payable to your spouse commencing after your death and continuing for the remaining lifetime of your spouse. However, if you do not have a spouse, or your spouse consents by a written notarized statement, you can elect optional forms of benefits such as; a lump sum distribution; a lifetime only annuity; 66 2/3 percent joint and survivor annuity; 75 percent joint and survivor annuity; 100 percent joint and survivor annuity; or five, 10 or 15 year payments certain annuity. Death benefit while actively employed If you die while you are employed by the company, you become 100 percent vested in your pension benefit regardless of your meeting the five year service requirement. Your account balance will be used to purchase a lifetime annuity for your surviving spouse, if you have one at the time of your death. Or your spouse can elect to receive a lump sum distribution of your accumulated account balance or purchase an annuity. If you don't have a surviving spouse or if your surviving spouse consents in a written notarized statement, a lump sum distribution of your accumulated benefit can be paid to your designated beneficiary. Spouse's rights Under federal law, your legal spouse automatically is your beneficiary upon your death. If you are married and wish to designate someone other than your spouse as your primary beneficiary, a special beneficiary designation form must be signed by your spouse and your spouse's signature must be notarized. Your spouse must also approve, in writing, any subsequent change of beneficiary designation if anyone other than your spouse is designated as primary beneficiary. Once your spouse has consented to the designation of someone else as beneficiary, that consent can only be revoked by the submission of a new designation form signed by you, and if necessary by your spouse. If you become legally divorced, your former spouse's consent is no longer needed to name a beneficiary. Money Purchase Pension 7
If you are single and wish to designate a different beneficiary than the Plan designates, complete a special beneficiary form and submit it to the plan office. If you are single and designate someone as your beneficiary, the designation will be invalid if you marry because automatically your spouse becomes your beneficiary. In absence of a spouse or a designation of beneficiary, your benefit will be paid to your estate upon your death. Disability To be eligible for a disability distribution, you must no longer be an employee of The Horace Mann Companies. You must also be permanently disabled and be receiving Social Security Disability Income (SSDI). To substantiate your disability, you will need to send a copy of your acceptance letter from Social Security that states you are receiving SSDI and that you are permanently disabled. Domestic Relations Orders Federal law requires the Plan Administrator to honor Qualified Domestic Relations Orders (QDRO) from a judgment, decree, or property settlement agreement arising from a state domestic relations law. These orders would relate to and specify that they arise from child support, alimony or marital property rights. The Plan Administrator has developed procedures for reviewing Domestic Relations Orders. You may contact the Plan Administrator to request a copy of these procedures. VII. Miscellaneous Statement of account The MPPP is a defined contribution plan. Your accumulated pension benefit under the plan is expressed in the form of a statement of account. This statement reflects the accumulated company contributions and credited investment gains. As a Plan participant, you will receive a Plan statement at least once annually. The current practice is to provide statements at least semi-annually. Non-alienation of benefits. The right of any participant or beneficiary to any benefit payment shall not be subject to any voluntary alienation or assignment, other than those established pursuant to a Qualified Domestic Relations Order (QDRO). Termination of the plan The company anticipates this to be a permanent Plan. However, because future conditions cannot be foreseen, the company must reserve the right to change or terminate the Plan or to stop making contributions at any time. Money Purchase Pension 8
Upon termination or partial termination of the Plan the rights of all affected participants to benefits accrued to the date of the termination or partial termination shall become non-forfeitable. How to Apply for Benefits You (or your beneficiary) will be given the appropriate forms to apply for your benefits. You should complete the forms and return them to the Plan Administrator in accordance with the instructions on the form. The Plan Administrator must inform you within ninety (90) days of receiving your claim for benefits whether your claim has been approved or denied. You will be notified before the end of the initial ninety (90) day period if an extension of time is required in which to respond due to special circumstances. In any event, the Plan Administrator must either approve or deny your claim within one hundred eighty (180) days from the date on which you filed your claim. If your application is denied, you will receive written notification of the denial. The notice will explain the reason for the denial, including specific reference to the Plan provisions on which the denial is based, and the process by which you may seek a review of the denial. If the denial was based on a lack of information, the notice will list the additional materials or information necessary to complete your claim. You will have sixty (60) days to request a review of the denial by the Plan Administrator, who will provide a full and fair review. Your request for review must be written and submitted to the Plan Administrator. You or your duly authorized representative will be given an opportunity to review pertinent documents and to submit issues and you feel the Plan Administrator will need to consider to make final determination with respect to the denial. In most cases, the Plan Administrator will make a decision within sixty (60) days of request on appeal. Special circumstances may require an extension of time in which to complete the review. If such an extension is necessary, you will be notified. In any event, the Plan administrator must render a decision within one hundred twenty (120) days after he or she receives your request for review. Money Purchase Pension 9
Basic Facts Plan Year: January 1 through December 1 Plan Sponsor and Employer Company: Horace Mann Service Corporation 1 Horace Mann Plaza Springfield, Illinois 62715 Employer Identification Number: 37-0911756 Plan Administrator: Agent for Service of Legal Process*: Plan Administrative Committee In care of: Kathryn E. Karr 1 Horace Mann Plaza #G107 Springfield, Illinois 62715 (217) 789-5106 Ann Caparrós, General Counsel 1 Horace Mann Plaza Springfield, Illinois 62715 * Participants may also make service of legal process on the Plan Administrator or the Plan Trustee. Trustee: ANB Trust Co. One North LaSalle Street Chicago, Illinois 60690 End of Plan Year: December 31 Money Purchase Pension 10
No PBGC Coverage The Pension Benefit Guaranty Corporation (PBGC), a federal agency, was established to guarantee benefits under defined benefit pension plans because the assets of such plans may not be sufficient to provide the benefits that have been earned. However, the PBGC does not cover defined contribution plans because the assets of such plans are always sufficient to provide the benefits that have been earned. Since this Plan is a defined contribution plan, the PBGC is not involved. Continuation of the Plan Horace Mann Service Corporation expects to maintain this Plan indefinitely. However, Horace Mann Service Corporation reserves the right to amend, modify, or terminate the Plan at any time by written instrument of the Board of Directors or the Committee appointed by the Board of Directors in accordance with the Plan document. In general, no amendment or modification will diminish any benefit accrued to the date of amendment or modification. Future accruals of benefits may be modified, suspended or ended as the result of such a change. Your Rights Under ERISA As a participant in the MPPP, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all plan participants shall be entitled to: Receive Information About Your Plan and Benefits Examine, without charge, at the plan administrator's office and at other specified locations, such as worksites and union halls, all documents governing the plan, including insurance contracts, if any, and a copy of the latest annual report (Form 5500 Series) filed by the plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Pension and Welfare Benefit Administration. Obtain, upon written request to the plan administrator, copies of documents governing the operation of the plan, including insurance contracts, if any, and copies of the latest annual report (Form 5500 Series) and updated summary plan description. The administrator may make a reasonable charge for the copies. Receive a summary of the plan's annual financial report. The plan administrator is required by law to furnish each participant with a copy of this summary annual report. Obtain a statement telling you whether you have a right to receive a pension at normal retirement age (age 65) and if so, what your benefits would be at normal retirement age if you stop working under the plan now. If you do not have a right to a pension, the statement will tell you how many more years you have to work to get a right to a pension. This statement must be requested in writing and is not required to be given more than once every twelve (12) months. The plan must provide the statement free of charge. Money Purchase Pension 11
Prudent Actions by Plan Fiduciaries In addition to creating rights for plan participants ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate your plan, called fiduciaries of the plan, have a duty to do so prudently and in the interest of you and other plan participants and beneficiaries. No one, including your employer, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a pension benefit or exercising your rights under ERISA. Enforce Your Rights If your claim for a pension benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of plan documents or the latest annual report from the plan and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the plan administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court. In addition, if you disagree with the plan's decision or lack thereof concerning the qualified status of a domestic relations order or a medical child support order, you may file suit in Federal court. If it should happen that plan fiduciaries misuse the plan's money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. Assistance with Your Questions If you have any questions about your plan, you should contact the plan administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the plan administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration at (866) 444- EBSA [3272]. (Prior to February 3, 2003, inquiries should be directed to the Pension and Welfare Benefits Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You could also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Pension and Welfare Benefits Administration prior to that date.) Money Purchase Pension 12