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Home My WebLink About04 - Deferred Compensation Plan Adoption*TY OF NEWPORT BE0VH Item No 4X Agenda ADMINISTRATIVE SERVICES DEPARTMENT September 8, 1997 Resource Management Division • September 8, 1997 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dennis Danner, Administrative Services Director AV EY THE '11Y C'; r: 1:= CITY OF NE'vr -OF SUBJECT: DEFERRED COMPENSATION PLAN ADOPTION I I� --- E BACKGROUND: The City of Newport Beach has offered a deferred compensation plan to its employees since 1978. This plan, under Internal Revenue Code Section 457, allows employees to defer compensation, pretax, into a retirement fund for use upon retirement. It is similar in concept to a private sector 401K plan, although with very different rules for deferral and distribution. Our current plan has been administered by Cheat -West Life and Annuity Company since 1990. Our most recent Plan Document was approved by the City Council in 1994. Recent Federal Legislation has made significant changes to the rules for operation of such a plan. The four major changes are as follows: • All deferred funds must now be held in a trust or annuity for the benefit of the employee. Prior to this legislation, the deferred funds remained an asset of the City. • De Minimis distributions for accounts of $3,500 or less are now permitted provided the account has been inactive for 24 months. Prior to this legislation, distributions were permitted only upon retirement, termination, or for a qualified emergency. There is no penalty for permitted "early withdrawals ". • There now is a permitted one -time change to the "irrevocable start date" for distributions. Prior to this legislation, no changes to the chosen start date for distribution were allowed. The new start date must be later than the originally chosen start date. • The contributions to deferred compensation may now be indexed to the Consumer Price Index. Prior to this legislation, contributions were limited to $7,500 annually. The new indexing is permitted in $500 increments whenever the CPI permits such an increase. All of these changes require the City to adopt a new Plan Document for the administration of the City of Newport Beach Deferred Compensation Plan. RECOMMENDATION: That the City Council approve the attached Deferred Compensation Plan Document and Adoption Agreement. This Plan Document supersedes all previous Plan Documents. der comp 09 /02/97 9:27 AM SECTION 457 8 -97 1] 0 0 INTRODUCTION TO SECTION 457 DEFERRED COMPENSATION PLAN The attached Plan may be used by eligible governmental employers as a model in preparing deferred compensation plans intended to satisfy §457 of the Internal Revenue Code of 1986, as amended. In general, under a §457 plan, which is also referred to as an "eligible deferred compensation plan," a participant may defer amounts of compensation (and income earned on those deferrals) and avoid federal income taxation until those amounts are paid or otherwise made available to the participant. The following types of governmental entities may establish eligible §457 Plans: 1. The 50 states of the United States and the District of Columbia; 2. A political subdivision of a state (for example a county or municipality); and 3. Any agency or instrumentality of a state or a political subdivision of a state. This Plan contains provisions which may be included in an eligible deferred compensation plan. It was prepared for your convenience. You should review and, where appropriate, modify the provisions to meet your particular needs. You should also refer to any applicable state or local laws, including tax laws and rules for governmental employee benefit plans (if applicable), in the design of your plan. In designing your plan, you should take into account the investment options to be used and the terms of any trust or custodial agreements entered into with respect to the Plan. You should also ascertain the federal income tax reporting and withholding obligations, FICA and FUTA obligations (to the extent applicable), and any comparable state obligations with respect to your plan. Generally, deferred amounts under a §457 plan are not reported as income, and federal income tax is not withheld, until the amounts are paid or otherwise made available to the participant. Deferred amounts generally are included in the FICA and FUTA wage base when deferred. This Plan is not intended to provide you with legal advice, nor should it be implemented without regard to your particular needs or any applicable laws of your state. No state or federal government has passed on the legal sufficiency (including the conformity with §457) of this Plan. Neither Great -West Life & Annuity Insurance Company, nor any of its affiliated companies assumes any liability to any person or entity with respect to the adequacy of this document for any purpose, or with respect to any tax or legal ramifications arising from its use. Great -West is not a party to any plan which you may adopt and Great -West has no responsibility, accountability, or liability to you, any employer, any participant or any beneficiary with regard to the operation or adequacy of this Plan, any §457 plan prepared from this Plan, or any future amendments made to this Plan. You should consult with your legal counsel prior to adopting any plan. 8 -97 TABLE OF CONTENTS SECTION 457 DEFERRED COMPENSATION PLAN fTLT Introduction.......................................................................................... ............................... i �IX"-N-LIJIZ91�jrA 13 DI 91 D1 DI& I. INTRODUCTION ................................................................... ..............................1 II. DEFINITIONS ......................................................................... ..............................1 2.01 Administrator or Plan Administ rator ............................... ..............................1 2.02 Beneficiary ...................................................................... ..............................1 2.03 Code ................................................................................. ..............................1 2.04 Compensation .................................................................. ..............................1 2.05 Custodial Account .......................................................... ............................... l 2.06 Custodian ......................................................................... ..............................1 2.07 Deferred Compensation ................................................... ..............................1 2.08 Employee ......................................................................... ..............................1 2.09 Employer ......................................................................... ..............................1 2.10 Includible Compensation .................................................. ..............................2 2.11 Normal Retirement Age .................................................. ............................... 2 2.12 Participant ......................................................................... ..............................2 2.13 Participation Agreement ................................................... ..............................2 2.14 Plan Year .......................................................................... ..............................2 2.15 Total Amount Deferred ................................................... ............................... 2 2.16 Separation From Service .................................................. ..............................2 2.17 Trust .................................................................................. ..............................2 2.18 Trustee .............................................................................. ..............................3 2.19 Unforseeable Emergency .................................................. ..............................3 is 8 -97 u III. ADMINISTRATION ............................................................... ..............................3 3.01 Administrator .................................................................... ..............................3 3.02 Appointment and Termination of Administrator .............. ..............................3 3.03 Duties of Plan Administrator ........................................... ............................... 3 3.04 Administrative Fees and Expenses ................................... ..............................4 3.05 Actions of Administrator .................................................. ..............................4 3.06 Delegation ....................................................................... ............................... 4 3.07 Investment and Service Providers ...........................:........ ..............................4 8 -97 iii 4: IV. PARTICIPATION IN THE PLAN ........................................ ..............................5 4.01 Enrollment in the Plan .................................................... ............................... 5 4.02 Deferral Limitations ....................................................... ............................... 5 4.03 Limited Catch- up ............................................................ ............................... 6 4.04 Employer Modification of Deferral ................................ ............................... 6 4.05 Participant Modification of Deferral .............................. ............................... 7 4.06 Revocation ....................................................................... ..............................7 4.07 Re- Enrollment ................................................................ ............................... 7 4.08 Multiple Plans .................................................................. ..............................7 4.09 Custody of Plan Assets ................................................... ............................... 7 4.10 Qualified Military Service ............................................... ............................... 8 V. CREATION OF TRUST AND TRUST FUND ................... ............................... 8 5.01 Establishment of Trust .................................................... ............................... 8 5.02 Appointment and Termination of Trustee ...................... ............................... 9 5.03 Acceptance ..................................................................... ............................... 9 5.04 Control of Plan Assets .................................................... ............................... 9 5.05 General Duties of the Trustee ......................................... ............................... 9 5.06 Investment Powers of the Trustee .................................. .............................10 5.07 Trustee Fees and Expenses ............................................. .............................11 5.08 Exclusive Benefit Rules ................................................. .............................11 8 -97 iii 4: 0 5.09 Trustee Actions ......... ............................... 5.10 Delegation ................. ............................... 5.11 Division of Duties and Indemnification... • ...................11 ...................11 ...................12 VI. INVESTMENTS ..................................................................... .............................13 6.01 Employer Investment Direction ..................................... .............................13 6.02 Participant Investment Direction .................................... .............................13 6.03 Participant Accounts ....................................................... .............................14 6.04 Distributions from the Trust ........................................... .............................14 VII. DISTRIBUTIONS .................................................................. .............................14 7.01 Conditions for Distributions ........................................... .............................14 7.02 Separation from Service ................................................. .............................14 7.03 Deferred Commencement Date at Separation From Service ....................... 15 7.04 One Additional Deferral of Commencement Date ......... .............................15 7.05 In- Service De Minimis Accounts ................................... .............................15 7.06 Unforeseeable Emergency .............................................. .............................15 7.07 Death Benefits ................................................................ .............................16 7.08 Payment Options ............................................................. .............................17 7.09 Default Distribution Option ............................................ .............................18 7.10 Limitations on Distribution Options ............................... .............................18 7.11 Taxation of Distributions ................................................. .............................19 7.12 Transfers .......................................................................... .............................19 7.13 Elections .......................................................................... .............................19 VIII. LEAVE OF ABSENCE .......................................................... .............................19 8.01 Paid Leave of Absence ................................................... .............................19 8.02 Unpaid Leave of Absence .............................................. .............................20 8 -97 iv is 0 1. IX. PARTICIPANT LOANS ....................................................... .............................20 9.01 Authorization of Loans ................................................... .............................20 9.02 Maximum Loan Amount .............................................. ............................... 20 9.03 Repayment of Loan ...................................................... ............................... 20 9.04 Loan Terms and Conditions ......................................... ............................... 20 X. AMENDMENT OR TERMINATION OF PLAN ............... .............................21 10.01 Termination .................................................................. .............................21 10.02 Amendment ................................................................. ............................... 22 10.03 Copies of Amendments ................................................. .............................22 XI. RELATIONSHIP TO OTHER PLANS ............................... .............................22 XII. NON - ASSIGNABILITY ........................................................ .............................22 12.01 Non - Assignability ......................................................... .............................22 12.02 Conforming Equitable Distribution Orders ................... .............................22 XIII. DISCLAIMER ........................................................................ .............................24 XIV. EMPLOYER PARTICIPATION .......... .... ............................... 24 XV. INTERPRETATION ............................................................ ............................... 24 15.01 Governing Law .............................................................. .............................24 15.02 § 457 ............................................................................... .............................24 15.03 Word Usage ................................................................... .............................24 15.04 Headings ........................................................................ .............................24 15.05 Entire Agreement ......................................................... ............................... 24 8 -97 v 0 41 SECTION 457 DEFERRED COMPENSATION PLAN In accordance with the provisions of §457 of the Intemal Revenue Code of 1986, as amended, the Employer named in the Adoption Agreement hereby establishes this Deferred Compensation Plan hereinafter referred to as the "Plan." Nothing contained in this Plan shall be deemed to constitute an employment agreement between any Participant and Employer and nothing contained herein shall be. deemed to give a Participant any right to be retained in the employ of Employer. H. 2.01 "Administrator" or "Plan Administrator" shall mean the person, persons or entity appointed by the Employer to administer the Plan pursuant to section 3.02, if any, but shall not include any company which issues policies, contracts, or investment media to the Plan in respect of a Participant, as such. 2.02 "Bone£ ciarv" shall mean the persons or entities designated by a Participant pursuant to section 4.01(c). 2.03 "Code" shall mean the Intemal Revenue Code of 1986, as amended, or any future United States internal revenue law. References herein to specific section numbers shall be deemed to include Treasury regulations thereunder and to corresponding provisions of any future United States internal revenue law. 2.04 "Compensation" shall mean all payments made to an Employee by the Employer as remuneration for services rendered, including salaries and fees. 2.05 "Custodial Account! " shall mean the account established with a bank or trust company meeting the provisions of Code §401(f), if the Employer has elected to satisfy the trust requirement of Code §457(8) by setting aside plan assets in a custodial account. 2.06 "Custodian ' shall mean the bank or trust company selected by the Employer to hold plan assets if the Employer has elected to use a custodial account pursuant to Code §457(g) and §401(f). 2.07 "Deferred Comn nca ion" shall mean the amount of Compensation not yet earned which the Participant and the Employer mutually agree shall be deferred. 0 2.08 "Emnovee" shall mean those individuals selected in the Adoption Agreement. 2.09 "Emnover shall mean the sponsor of the plan as named in the Adoption Agreement. . 8 -97 u • 0 2.10 "Includible Compensation" shall mean, for purposes of the limitation set forth in section 4.02, Compensation for services performed for the Employer that is currently includible in the Participant's gross income for Federal income tax purposes, determined without regard to any community property. laws. Includible Compensation thus does not include Compensation excludable from the Participant's gross income under §457 of the Code as a result of deferrals under this Plan, or any other eligible deferred compensation plan described in §457(b) of the Code maintained by the Employer, or under any other provision (including, but not limited to, §§ 125, 402(g)(3), 402(h)(1)(B), 403(b) and 911) of the Code. 2.11 "Normal Retirement Aee" shall mean the ages described in the Adoption Agreement. 2.12 "Participant" shall mean any Employee who executes a Participation Agreement assenting to the provisions of this Plan, once the Participation Agreement has been approved by the Administrator. Except for purposes of Articles IV, VIII, and IX, "Participant" shall include former Participants. The Administrator, if he or she is otherwise eligible, may participate in the Plan. 2.13 "Participation Agreement" shall mean the agreement executed and filed by an Employee with the Employer pursuant to section 4.01, in which the Employee elects to become a Plan Participant. 2.14 "Plan Year" shall mean the calendar year. 2.15 "Total Amount D f rr d" shall mean, with respect to each Participant, the sum of all Compensation deferred under the Plan, plus income and minus loss thereon (including amounts determined with reference to life insurance policies) calculated in accordance with section 6.03 by the method designated in the Participant's Participation Agreement(s) under which such Compensation was deferred and in any subsequent election(s) to change methods, less the amount of any expenses or distributions authorized by this Plan. 2.16 " Scparation From Service" shall mean severance of the Participant's employment with the Employer which constitutes a "separation from service" within the meaning of §402(d)(4)(A)(iii) of the Code. A Participant shall be deemed to have severed his employment with the Employer for purposes of this Plan when both parties consider the employment relationship to have terminated and neither party anticipates any future employment of the Participant by the Employer. In the case of a Participant who is an independent contractor, Separation from Service shall be deemed to have occurred when the Participant's contract for services has completely expired and terminated, there is no foreseeable possibility that the Employer shall renew the contract or enter into a new contract for services to be performed by the Participant, and it is not anticipated that the Participant shall become an Employee of the Employer. 2.17 "Trust" shall mean the trust created under Article V of the Plan if the Employer or certain employees are named as trustee(s) in the Adoption Agreement. "Trust" shall mean a trust created by a separate written agreement between the Employer and the Trustee if a bank or trust company is named as trustee in the Adoption Agreement. The Trust shall consist of all plan assets held by the Trustee named in the Adoption Agreement. 8 -97 WE 0 • 2.18 "Trustee" shall mean the Employer or such other person, persons or entity selected by the Employer who agrees to act as Trustee hereunder if elected in the Adoption Agreement. This term (except as used in Article V) also refers to the person holding the assets of any custodial account or holding any annuity contract described in section 4.09. 2.19 "Unforeseeable Emergencv" shall mean severe financial hardship to a Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in § 152(a) of the Code) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The need to send a Participant's child to college or the desire to purchase a home shall not constitute an Unforeseeable Emergency. Whether a hardship constitutes an Unforeseeable Emergency under section 7.06 shall be determined in the sole discretion of the Administrator. III \0OFIIziF- 111 17.1%103►I 3.01 Administrator. The Employer shall be the Administrator unless another person or persons is appointed by the Employer in the Adoption Agreement as set forth in 3.02. 3.02 Appointment and Termination of Administrator. An Administrator may be named in the Adoption Agreement by the Employer and may be a Participant. The Administrator shall remain in office at the will of the Employer and may be removed from office at any time by the Employer, with or without cause. Such removal shall be effective upon delivery of written notice to the Administrator or at such later time as may be designated in such notice; provided that any such notice of removal shall take effect no later than 60 days after the delivery thereof, unless such 60 day period shall be waived. The Administrator may resign at any time upon giving written notice to the Employer or at such later time as may be designated in the notice of resignation; provided that (i) any such notice of resignation shall take effect no later than 60 days after the delivery thereof, unless such 60 day period shall be waived and (ii) upon such resignation or removal the Employer shall have the power and the duty to designate and appoint a successor Administrator, and the actual appointment of a successor Administrator is a condition that must be fulfilled before the resignation or removal of the Administrator shall become effective. Upon appointment, the successor Administrator shall have all the rights, powers, privileges, liabilities and duties of the predecessor Administrator. The Administrator so resigned or removed shall take any and all action necessary to vest the rights, powers, privileges, liabilities and duties of the Administrator in the successor. 3.03 Duties of Plan Administrator. Subject to any applicable laws and any approvals required by the Employer, the Plan Administrator shall have full power and authority to adopt rules and regulations for the administration of the Plan, and to interpret, alter, amend, or revoke any rules and regulations so adopted. The Plan Administrator's duties shall include: (a) appointing the Plan's attorney, accountant, actuary, custodian or any other party needed to administer the Plan or the plan assets, (b) directing the Trustee with respect to payments from the plan assets held in Trust.. 8 -97 �n 0 (c) communicating with Employees regarding their participation and benefits under the Plan, including the administration of all claims procedures. (d) filing any returns and reports with the Internal Revenue Service or any other governmental agency. (e) reviewing and approving any financial reports, investment reviews, or other reports prepared by any party appointed under paragraph (a). (f) establishing a funding policy and investment objectives consistent with the purposes of the Plan. (g) construing and resolving any question of Plan interpretation. The Plan Administrator's interpretation of Plan provisions including eligibility and benefits under the Plan is final. 3.04 Administrative Fees and Expenses. All reasonable costs, charges and expenses incurred by the Plan Administrator in connection with the administration of the Plan (including fees for legal services rendered to the Plan Administrator) may be paid by the Employer, but if not paid by the Employer when due, shall be paid from plan assets. Such reasonable compensation to the Plan Administrator as may be agreed upon from time to time between the Employer and Plan Administrator may be paid by the Employer, but if not paid by the Employer when due shall be paid from plan assets. Notwithstanding the foregoing, no compensation other than reimbursement for expenses shall be paid to a Plan Administrator who is the Employer or a full -time Employee of the Employer. In the event any part of the assets in the plan become subject to tax, all taxes incurred shall be paid from the plan assets unless the Plan Administrator advises the Trustee not to pay such tax. 3.05 Actions of Administrator. Every action taken by the Plan Administrator shall be presumed to be a fair and reasonable exercise of the authority vested in or the duties imposed upon him, her, or it. The Plan Administrator shall be deemed to have exercised reasonable care, diligence and prudence and to have acted impartially as to all persons interested, unless the contrary be proven by affirmative evidence. The Plan Administrator shall not be liable for amounts of Compensation deferred by Participants or for other amounts payable under the Plan. 3.06 Delegation. Subject to any applicable laws and any approvals required by the Employer, the Plan Administrator may delegate any or all of his, her or its powers and duties hereunder to another person, persons, or entity, and may pay reasonable compensation for such services as an administrative expense of the Plan, to the extent such compensation is not otherwise paid. 3.07 Investment and Service Providers. Any company which issues policies, contracts, or investment media to the Employer or in respect of a Participant is not a party to this Plan and such company shall have no responsibility, accountability, or liability to the Employer, the Administrator, any Participant, or any Beneficiary with regard to the operation or adequacy of this Plan, including any future amendments made thereto. &97 • (a) An Employee may become a Participant by executing a Participation Agreement. Compensation will be deferred for any calendar month only if a Participation Agreement providing for such deferral is executed by the Participant and approved by the Administrator, before the beginning of such month. With respect to a new Employee, Compensation shall be deferred for the calendar month during which a Participant first becomes an Employee if a Participation Agreement providing for such deferral is executed by the Participant and approved by the Administrator before the first day on which the Participant becomes an Employee. (b) In signing the Participation Agreement, the Participant elects to participate in this Plan and consents to the deferral by the Employer of the amount specified in the Participation Agreement from the Participant's gross compensation for each pay period. Such deferral shall continue in effect until modified, disallowed or revoked in accordance with the terms of this Plan, or until the Participant ceases employment with the Employer. The Employer retains the right to establish minimum deferral amounts per pay period and to limit the number and/or timing of enrollments into the Plan in the Participation Agreement. (c) Beneficiary. Each Participant may designate in the Participation Agreement a Beneficiary or Beneficiaries to receive any amounts which may be distributed in the event of the death of the Participant prior to the complete distribution of benefits. A Participant may change the designation of Beneficiaries at any time by filing with the Administrator a written notice on a form approved by the Administrator. If no such designation is in effect on the Participant's death, or if the designated Beneficiary does not survive the Participant by 30 days, his Beneficiary shall be his surviving spouse, if any, and then his estate. (a) Except as provided in section 4.03, the maximum that may be deferred under the Plan for any taxable year of a Participant shall not exceed the lesser of (i) $7,500, as adjusted for cost -of- living in accordance with Code §457(e)(15) for taxable years beginning after December 31, 1996, or (ii) 33 1/3% of the Participant's Includible Compensation, each reduced by any amount specified in section 4.02(b) that taxable year. (b) The deferral limitation. shall be reduced by: (i) For a Participant who also participates in a rural cooperative plan (as defined in §401(k)(7) of the Code) and for taxable years of any other Participant beginning before January 1, 1989, any amount excludable from the Participant's gross income under §403(b) of the Code on account of Employer contributions; or Erbil 0 0 17 (ii) In all other cases, any amount excludable from the Participant's gross income attributable to elective deferrals to another eligible deferred compensation plan described in §457(b) of the Code, elective deferrals or employer contributions to an annuity program described in §403(b) of the Code, elective deferral to a qualified cash or deferred arrangement described in §401(k) of the Code or to any simplified employee pension plan described in §408(k) of the Code or Simple Retirement Account described in §408(p) of the Code, or any amount contributed on behalf of the Participant to an organization described in §501(c)(18) of the Code. 4.03 Limited Catch -up: For one or more of the Participant's last three taxable years ending before the taxable year in which Normal Retirement Age under the Plan is attained, the maximum deferral shall be the lesser of (a) $15,000, reduced by any applicable amount specified in section 4.02(b) for that taxable year; or (b) the sum of (i) the limitations established for purposes of section 4.02 of the Plan, for such taxable year (determined without regard to this section 4.03), plus (ii) so much of the limitation established under section 4.02 of the Plan or established in accordance with §457(b)(2) and the regulations thereunder under an eligible deferred compensation plan sponsored by an entity other than the Employer and located in the same state for prior taxable years (beginning after December 31, 1978 and during all or any portion of which the Participant was eligible to participate in this Plan) as has not theretofore been used under sections 4.02 or 4.03 hereof or under such other plan (taking into account the limitations under and participation in other eligible deferred compensation plans in accordance with the Code); provided, however, that this section 4.03 shall not apply with respect to any Participant who has previously utilized in whole or in part the limited catch -up under this Plan or under any other eligible deferred compensation plan (within the meaning of §457 of the Code and the regulations thereunder). 4.04 Employer Modification of Defemid. The Employer or Administrator shall have the right to modify or disallow the periodic deferral of Compensation elected by the Participant: 8 -97 (a) In excess of the limitations stated in sections 4.02 and 4.03; (b) In excess of the Participant's net Compensation for any pay period; (c) Upon any change in the length of pay period utilized by Employer. In such case the periodic deferral shall be adjusted so that approximately the same percentage of pay shall be deferred on an annual basis; (d) In order to round periodic deferrals to the nearest whole dollar amount; 6 1) i 0 (e) To reduce the future deferrals in the event that the amount actually deferred for any pay period exceeds, for any reason whatsoever, the amount elected by the Participant. In the alternative, such amount of excess deferral may be refunded to the Participant. No adjustment in future deferrals shall be made if a periodic deferral is missed or is less than the amount elected, for any reason whatsoever; or (f) If the deferral elected for any pay period is less than the minimum amount specified in section 4.01(b); Provided, however, that the Employer and the Administrator shall have no liability to any Participant or Beneficiary with respect to the exercise of, or the failure to exercise, the authority provided in this section 4.04. 4.05 Participant Modification of Deferral. A Participant may modify the Participation Agreement once during each enrollment period authorized by the Administrator with respect to Compensation payable no earlier than the calendar month after such modification is executed by the Participant and accepted by the Administrator. 4.06 Revocation. A Participant may at any time revoke the agreement to defer Compensation by filing a written request for revocation to the Administrator on a form approved by the Administrator, at least 30 days prior to the effective date of the revocation. However, the Total Amount Deferred shall be distributed only as provided in Articles VI and VII and shall be subject to the terms and provisions of the affected investment option. A Participant's request for a distribution in the event of an Unforeseeable Emergency shall in addition be treated as a request for revocation of deferrals as of a date determined by the Administrator. 4.07 Re- Enrollment. A Participant who revokes the Participation Agreement as set forth in section 4.06 above may again become a Participant by executing in an enrollment period authorized by the Administrator a new Participation Agreement to defer Compensation payable no earlier than the calendar month after such new Participation Agreement is executed by the Participant and accepted by the Administrator. 4.08 Multiple Plans. In the case of a Participant who participates in more than one deferred compensation plan governed by §457 of the Code, the limitations set forth in sections 4.02 and 4.03 shall apply to all such plans considered together. For purposes of sections 4.02 and 4.03, Compensation deferred shall be taken into account at its value in the later of the Plan Year in which deferred or the Plan Year in which such Compensation is no longer subject to a substantial risk of forfeiture (within the meaning of §457 of the Code). 4.09 Custody of Plan Assets. All amounts of Compensation deferred under the Plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property or rights shall be held for the exclusive benefit of participants and their beneficiaries. The trust requirement of Code §457(8) shall be satisfied as specified in the Adoption Agreement. Depending upon the choices made in the Adoption Agreement, plan assets shall be set aside as follows. 8 -97 is • (a) Plan assets shall be set aside in one or more annuity contracts described in Code §401(1) of the Code if elected in Box C. 1 of the Adoption Agreement. The owner of the annuity contract is the "deemed trustee" of the assets invested under the contract for purposes of Code §457(8). (b) Plan assets shall be set aside in trust pursuant to Article V of this Plan with the Employer or certain employees of (or holders of certain positions with) the Employer named as trustee if elected in Box C. 2 of the Adoption Agreement. The Trustee shall be named on page 6 of the Adoption Agreement and shall accept such appointment by executing same. (c) Plan assets shall be set aside in one or more custodial accounts described in Code §401(f) if elected in Box C. 3 of the Adoption Agreement. The bank or trust company named on page 5 of the Adoption Agreement shall be the Custodian and "deemed trustee" for purposes of Code §457(g) and shall accept such appointment by executing same. The Employer and Custodian must enter into a separate written custody agreement. (d) Plan assets will be set aside in trust pursuant to a separate written trust agreement entered into between the Employer and the bank or trust company named as trustee if elected in Box C. 4 of the Adoption Agreement. The bank or trust company named on page 6 of the Adoption Agreement shall be the trustee and shall accept such appointment by executing same. 4.10 Qualifies Service. Notwithstanding any provision of this Plan to the contrary, contributions and benefits with respect to qualified military service shall be provided in accordance with §414(u) of the Code. 5.01 Establishment of Trust. If elected in Box C. 2 of the Adoption Agreement, the Employer or named employees of Employer (or certain holders of positions with the Employer) shall serve as Trustee as evidenced by the trustee's execution of page 6 of the Adoption Agreement. In that event, a Trust is hereby created to hold all of the assets of the Plan for the exclusive benefit of Participants and Beneficiaries. The Trust shall consist of all contributions made under the Plan and the investment thereof and earnings thereon. All contributions and the earnings thereon less payments made under the terms of the Plan, including fees and expenses, shall constitute the Trust. Except to the extent that the Employer enters into a separate written trust agreement with an institutional Trustee, the assets in Trust shall be administered as provided in this document. If elected in Box C. 4 of the Adoption Agreement, the bank or trust company named in the Adoption Agreement shall serve as Trustee as evidenced by the trustee's execution of page 6 of the Adoption Agreement. In that event, a Trust shall be created to hold all of the assets of the Plan for the exclusive benefit of Participants and Beneficiaries pursuant to a separate written trust instrument between the Employer and the Trustee setting out the Trustee's duties, rights, responsibilities, fees and expenses, the division of duties and indemnification.. The Trust shall consist of all contributions made under the Plan which are held by the Trustee. The provisions of this Article V shall not apply. 8 -97 1i • • 5.02 Anointment and Termination of Trustee. A Trustee may be named by the Employer and may be a Participant. The Trustee shall remain in office at the will of the Employer and may be removed from office at any time by the Employer, with or without cause. Such removal shall be effective upon delivery of written notice to the Trustee or at such later time as may be designated in such notice; provided that any such notice of removal shall take effect no sooner than 30 days and no later than 60 days after the delivery thereof, unless such 30 or 60 day period shall be waived. The Trustee may resign at any time upon giving written notice to the Employer or at such later time as may be designated in the notice of resignation; provided that (i) any such notice of resignation shall take effect no sooner than 30 days and no later than 60 days after the delivery thereof, unless such 30 day or 60 day period shall be waived and (ii) upon such resignation or removal the Employer shall have the power and the duty to designate and appoint a successor Trustee, and the actual appointment of a successor Trustee is a condition that must be fulfilled before the resignation or removal of the Trustee shall become effective. Upon appointment, the successor Trustee shall have all the rights, powers, privileges, liabilities and duties of the predecessor Trustee. The Trustee so resigned or removed shall take any and all action necessary to vest the rights, powers, privileges, liabilities and duties of the Administrator in his, her or its successor. 5.03 Amgptance. By signing the Adoption Agreement the Trustee accepts the Trust created under the Plan and agrees to perform the obligations imposed. 5.04 Control of Plan Assets. The assets of the Trust or evidence of ownership shall he held by the Trustee, under the terns of the Plan and under either this Article V or under the separate written trust agreement with a bank or trust company. If the assets represent amounts transferred from a former plan, the Trustee shall not be responsible for the propriety of any investment under the former plan. 5.05 General Duties of the T rustee. The Employer or named individuals in the employ of the Employer named as Trustee(s) in the Adoption Agreement shall be responsible for the administration of investments held in the Plan. The Trustee's duties shall include: (a) receiving contributions under the terms of the Plan. (b) making distributions from plan assets held in trust in accordance with written instructions received from an authorized representative of the Employer. (c) keeping accurate records reflecting its administration of the Trust assets and making such records available to the Employer for review and audit. Within 90 days after each Plan Year, and within 90 days after its removal or resignation, the Trustee shall file with the Employer an accounting of its administration of the Trust assets during such year or from the end of the preceding Plan Year to the date of removal or resignation. Such accounting shall include a statement of cash receipts and disbursements since the date of its last accounting and shall contain an asset list showing the fair market value of investments held in the Trust as of the end of the Plan Year. 0 8 -97 0 The value of marketable investments shall be determined using the most recent price quoted on a national securities exchange or over the counter market. The value of non - marketable investments shall be determined in the sole judgment of the Trustee which determination shall be binding and conclusive. The value of investments in securities or obligations of the Employer in which there is no market shall be determined in the sole judgment of the Employer and the Trustee shall have no responsibility with respect to the valuation of such assets. The Employer shall review the Trustee's accounting and notify the Trustee in the event of its disapproval of the report within 90 days, providing the Trustee with a written description of the items in question. The Trustee shall have 60 days to provide the Employer with a written explanation of the items in question. (d) employing such agents, attorneys or other professionals as the Trustee may deem necessary or advisable in the performance of its duties. The Trustee's duties shall be limited to those described above. The Employer shall be responsible for any other administrative duties required under the Plan or by applicable law. 5.06 Investment Powers of the Trustee. The Trustee shall implement an investment program based on the Employer's investment objectives. If either the Employer or the Employee fails to issue investment directions as provided in sections 6.01 and 6.02, the Trustee shall have authority to invest the Trust assets in its sole discretion. In addition to powers given by law, the Trustee may: 8 -97 (a) invest the Trust assets in any form of property, including common and preferred stocks, exchange and trade put and call options, bonds, money market instruments, mutual funds (including Trust assets for which the Trustee or its affiliates serve as investment advisor), Treasury bills, deposits at reasonable rates of interest at banking institutions including but not limited to savings accounts and certificates of deposit, and other forms of securities or investment of any kind, class, or character whatsoever, or in any other property, real or personal, having a ready market. (b) invest and reinvest all or any part of the Trust assets in any insurance policies or other contracts with insurance companies including but not limited to individual or group annuity, deposit administration, and guaranteed interest contracts. Such contracts shall be held in the name of the Trustee. (c) transfer any assets of the Trust to any group or common, collective or commingled fund that is maintained by a bank or other institution that is established to permit the pooling of Trust assets of separate trusts so long as such Trust assets are available to §457 plans. (d) hold cash uninvested and deposit same with any banking or savings institution at reasonable interest. 10 I'I I 0 a (e) join in or oppose the reorganization, recapitalization, consolidation, sale or merger of . corporations or properties, including those in which it is interested as a Trustee, upon such terms as it deems wise. (f) hold investments in nominee or bearer form. (g) to vote or refrain from voting any stocks, bonds, or other securities held in the Trust, to exercise any other right appurtenant to any securities or other property held in the Trust, to vote or refrain from voting proxies. (h) exercise all ownership rights with respect to assets held in the Trust. (i) do any and all other acts that may be deemed necessary in the performance of the Trustee's duties hereunder. 5.07 Trustee Fees and Expenses. All reasonable costs, charges and expenses incurred by the Trustee in connection with the administration of the Trust assets(including fees for legal services rendered to the Trustee) may be paid by the Employer, but if not paid by the Employer when due, shall be paid from the Trust. Such reasonable compensation to an institutional Trustee as may be agreed upon from time to time between the Employer and the Trustee may be paid by the Employer, but if not paid by the Employer when due shall be paid by the Trust. The Trustee shall have the right to liquidate trust assets to cover its fees. Notwithstanding the foregoing, no compensation other than reimbursement for expenses shall be paid to a Trustee who is the Employer or a full -time Employee of the Employer. In the event any part of the Trust assets become subject to tax, all taxes incurred shall be paid from the Trust unless the Plan Administrator advises the Trustee not to pay such tax. 5.08 Exclusive Benefit Rules. No part of the Trust assets shall be used for, or diverted to, purposes other than for the exclusive benefit of Participants, former Participants with a interest in the Plan, and the beneficiary or beneficiaries of a deceased Participant having an interest in the Trust assets at the death of the Participant. 5.09 Trustee Actions. Every action taken by the Trustee shall be presumed to be a fair and reasonable exercise of the authority vested in or the duties imposed upon him, her, or it. The Trustee, shall be deemed to have exercised reasonable care, diligence and prudence and to have acted impartially as to all persons interested, unless the contrary be proven by affirmative evidence. The Trustee shall not be liable for amounts of Compensation deferred by Participants or for other amounts payable under the Plan. 5.10 Delegation. Subject to any applicable laws and any approvals required by the Employer, the Trustee may delegate any or all powers and duties hereunder to another person, persons, or entity, and may pay reasonable compensation for such services as an administrative expense of the Plan, to the extent such compensation is not otherwise paid. E 8 -97 11 • 0 LI (a) The Trustee shall have the authority and discretion to manage and govern the Trust assets to the extent provided in this instrument, but does not guarantee the Trust in any manner against investment loss or depreciation in asset value, or guarantee the adequacy of the Trust assets to meet and discharge all or any liabilities of the Plan. (b) The Trustee shall not be liable for the making, retention or sale of any investment or reinvestment made by it, as herein provided, or for any loss to, or diminution of the Trust assets or for any other loss or damage which may result from the discharge of its duties hereunder except to the extent it is judicially determined that the Trustee has failed to exercise the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character with like aims. (c) The Employer warrants that all directions issued to the Trustee by it or the Plan Administrator shall be in accordance with the terms of the Plan and not contrary to the provisions of the Internal Revenue Code and regulations issued thereunder. (d) The Trustee shall not be answerable for any action taken pursuant to any direction, consent, certificate, or other paper or document on the belief that the same is genuine and signed by the proper person. All directions by the Employer or the Plan Administrator shall be in writing from the authorized individual or individuals named on page 6 of the Adoption Agreement. (e) The duties and obligations of the Trustee shall be limited to those expressly imposed upon it by this instrument or subsequently agreed upon by the parties. Responsibility for administrative duties required under the Plan or applicable law not expressly imposed upon or agreed to by the Trustee shall rest solely with the Employer. (f) The Trustee shall be indemnified and held harmless by the Employer from and against any and all liability to which the Trustee may be subjected, including all expenses reasonably incurred in its defense, for any action or failure to act resulting from compliance with the instructions of the Employer, the employees or agents of the Employer, the Plan Administrator, or any other fiduciary to the Plan, and for any liability arising from the actions or nonactions of any predecessor trustee, custodian or other fiduciaries of the Plan. (g) The Trustee shall not be responsible in any way for the application of any payments it is directed to make or for the adequacy of the Trust assets to meet and discharge any and all liabilities under the Plan. 8 -97 12 0 0 Vl. INVESTMENTS 6.01 Employer Investment Direction. (a) The Employer shall in its sole discretion select certain investment options to be used to determine income to be accrued on deferrals. These investment options may include specified life insurance policies, annuity contracts, or investment media issued by an insurance company. In any event, it shall be the sole responsibility of the Employer to ensure that all investments options offered under the Plan are appropriate and in compliance with any and all state laws pertaining to such investments. (b) The Employer shall have the right to direct the Trustee with respect to investments of the Trust assets, may appoint an investment manager to direct investments, or may give the Trustee sole investment management responsibility. Any investment directive shall be made in writing by the Employer or investment manager. In the absence of such written directive, the Trustee shall automatically invest the available cash in its discretion in an appropriate interim investment until specific investment directions are received. Such instructions regarding the delegation of investment responsibility shall remain in force until revoked or amended in writing. The Trustee shall not be responsible for the propriety of any directed investment made and shall not be required to consult with or advise the Employer regarding the investment quality of any directed investment held hereunder. (c) The Employer may from time to time change the investment options under the Plan. If the Employer eliminates a certain investment option, all Participants who had chosen that investment shall select another option. If no new option is selected by the Participant, money remaining in the eliminated investment option shall be moved at the direction of the Employer. The . Participants shall have no right to require the Employer to select or retain any investment option. To the extent permitted by and subject to any rules or procedures adopted by the Administrator, a Participant may from time to time change his choice of investment option. Any change with respect to investment options made by the Employer or a Participant, however, shall be subject to the terms and conditions (including any rules or procedural requirements) of the affected investment options and may affect only income to be accrued after that change. (d) If the Employer fails to designate an investment or an investment manager, the Trustee shall have full investment authority. (a) Participants shall have the option to direct the investment of their personal contributions and their share of any Employer. contributions among alternative investment options established as part of the overall Trust, unless otherwise specified by the Employer. Such investment options shall be under the full control of the Trustee. A Participant's right to direct the investment of any, contribution shall apply only to making selections among the options made available under the Plan. 0 8 -97 13 �b 0 r (b) Each Participant shall designate on his Participation Agreement the investment that shall be used to determine the income to be accrued on amounts deferred by him. If the investment chosen by the Participant experiences a gain, the Participant's benefits under the Plan likewise shall reflect income for that period. If the investment chosen by a Participant experiences a loss, or if charges are made under such investment, the Participant's benefits under the Plan likewise shall reflect such loss or charge for that period. (c) Neither the Employer, the Administrator, the Trustee nor any other person shall be liable for any losses incurred by virtue of following the Participant's directions or with any reasonable administrative delay in implementing such directions. 6.03 Participant Accounts. The Administrator shall maintain or cause to be maintained a deferred compensation ledger account or similar individual account for each Participant. At regular intervals established by the Administrator, each Participant's account shall be credited with the amount of any Deferred Compensation paid into the Trust; debited with any applicable administrative or investment expense, allocated on a reasonable and consistent basis; credited or debited with investment gain or loss, as appropriate; and debited with the amount of any distribution. At least once a year each Participant shall be notified in writing of his Total Amount Deferred. 6.04 Distributions from the Trust. The payment of benefits from the Trust in accordance with the terms of the Plan may be made by the Trustee, or by any custodian or other person so authorized by the Employer to make such distribution. Neither the Plan Administrator, the Trustee nor any other person shall be liable with respect to any distribution from the Trust made at the direction of the Employer or a person authorized by the Employer to give disbursement direction. 7.01 Conditions for Distributions. Payments from the Plan to the Participant or Beneficiary shall not be made, or made available, earlier than: (a) The Participant's separation from service or death; (b) The Participant's account meets all of the requirements for an in- service De Minimis Distribution pursuant to 7.05 (if so specified in the Adoption Agreement), or (c) The Participant incurs an approved unforeseeable emergency pursuant to 7.06 (if so specified in the Adoption Agreement). 7.02 Scparation from Service. Distributions to a Participant shall commence on the 61st day following his or her separation from service (or on the first regular distribution commencement date thereafter as the Employer or Administrator may establish from time to time), in a form and manner determined pursuant to sections 7.08 and 7.09, unless a deferred commencement date is elected in • accordance with section 7.03. 8 -97 14 -�1 i • 0 7.03 Deferred Commencement Date at SWaration Fmm Service. No later than sixty (60) days following the date of the Participant's separation from service, the Participant may elect a deferred commencement date for all or a portion of the Participant's account balance. Except as specified in section 7.04, such election shall be irrevocable. If the Participant elects to defer the entire account balance, the future commencement date may not be later than April 1" of the calendar year following the later of (i) the calendar year in which the Participant attains age 70'V2, or (ii) the calendar year in which the Participant separates from service. If the Participant elects to defer only a portion of the account, the future date elected to begin receiving the balance of the account may not be later than the end of the calendar year following the year a partial distribution was received. 7.04 One Additional Deferral of Commencement Date. Effective on or after January 1, 1997, the Participant may irrevocably postpone the original deferred distribution date elected in section 7.03 above to a later date, but not later than April 1 of the calendar year following the calendar year the . Participant attains age 70%2, provided that: (a) Such election is made prior to the deferred commencement date elected in section 7.03 above and before distributions have commenced; and (b) The Participant may make only one (1) such election. 7.05 In-Service De Minimis Accounts. If so specified in the Adoption Agreement, the Participant may elect to receive or the Employer may distribute, without the consent of the Participant, the Participant's entire account in a lump sum if all of the following conditions are met: (a) The value of a Participant's account does not exceed $3,500; (b) No amount has been deferred under the Plan with respect to the Participant during the two -year period ending on the date of the distribution; and (c) There has been no prior distribution under the Plan to the Participant pursuant to this section. 7.06 Unforeseeable Ememencies. If so specified in the Adoption Agreement and if the Plan Administrator has determined that a Participant has incurred a genuine Unforeseeable Emergency and that no other resources of financial relief are available, the Plan Administrator may grant, in its sole discretion, a Participant's request for a payment from the Participant's account. Any payment made under this provision shall be in a lump sum. (a) The Plan Administrator shall have the right to request and review all pertinent information necessary to assure that hardship withdrawal requests are consistent with the provisions of §457 of the Code. (b) In no event, however, shall an Unforeseeable Emergency distribution be made if such hardship may be relieved: 0 8 -97 15 ,a 0 • (1) through reimbursement or compensation by insurance or otherwise; (2) by liquidation of the Participant's assets, to the extent the liquidation of the Participant's assets would not itself cause a severe financial hardship, or (3) by cessation of deferrals under this Plan. (c) The amount of any financial hardship benefit shall not exceed the lesser of (1) the amount reasonably necessary, as determined by the Plan Administrator, to satisfy the hardship; or (2) the amount of the Participant's account. (d) The Employer or Administrator may suspend the Participant's salary deferral election during the pendency of the Participant's request for a financial hardship distribution. Payment of a financial hardship distribution shall result in mandatory suspension of deferrals for a minimum of 12 months from the date of payment. (e) Currently, the following events are not considered unforeseeable emergencies under the Plan: (1) Enrollment of a child in college; (2) Purchase of a house; (3) Purchase or repair of an automobile; (4) Repayment of loans; (5) Payment of income taxes, back taxes, or fines associated with back taxes; (6) Unpaid expenses including rent, utility bills, mortgage payments, or medical bills; (7) Marital separation or divorce; or . (8) Bankruptcy except when resulting directly and solely from illness or casualty loss. (a) If the Participant dies after the commencement of distributions to the Participant, the Participant's remaining account shall be distributed to the Beneficiary at least as rapidly as under the method of distribution in effect on the date of the Participant's death. (b) If the Participant dies prior to the commencement of distributions to the Participant, and: (1) If the Beneficiary is the Participant's surviving spouse: (i) The commencement date shall be no later than the last day of the calendar year in which the Participant would have attained age 70' /x (or, if later, the calendar year immediately following the year of the Participant's death); and 0 8-97 16 a3 (ii) Distribution shall be made to the Beneficiary over a period that does not exceed the life expectancy of the Beneficiary. 0 (2) If the Beneficiary is not the Participant's surviving spouse: (i) The entire account balance shall be distributed no later than the last day of the calendar year which includes the fifth (5") anniversary of the Participant's death; or (ii) If distributions to the Beneficiary commence by the last day of the calendar year immediately following the year of the Participant's death, the entire account balance shall be distributed over a period not exceeding fifteen (15) years or, if earlier, the Beneficiary's life expectancy. (3) Subject to the limitations set forth above, distributions shall be made to the Beneficiary commencing on the 61 st day after the Plan Administrator receives satisfactory proof of the Participant's death (or on the first regular distribution commencement date thereafter as the Employer or Administrator may establish from time to time), unless prior to such date the Beneficiary irrevocably elects a deferred commencement date consistent with this section. (4) Distribution shall be made in a form and manner determined under sections 7.08 and 7.09 that is consistent with the limitations set forth above. (c) If there are two or more Beneficiaries, the provisions of this section and section 7.10 shall be applied to each Beneficiary separately with respect to each Beneficiary's share in the Participant's account. (d) If the Beneficiary dies after beginning to receive benefits but before the entire account balance has been distributed, the remaining account balance shall be paid to the estate of the Beneficiary in a lump sum. (e) Under no circumstances shall the Employer be liable to the Beneficiary for the amount of any payment made in the name of the Participant before the Plan Administrator receives satisfactory proof of the Participant's death. 7.08 Payment O Lions. A Participant's or Beneficiary's election of a payment option must be made at least thirty (30) days prior to the date that the payment of benefits is to commence. If a timely election of a payment option is not made, benefits shall be paid in accordance with section 7.09. Subject to applicable law and the other provisions of this Plan, distributions may be made in accordance with one of the following payment options. Once payments have commenced, the form of payment option may not be changed. (a) A single lump -sum payment; 8 -97 17 -A 0 9 • (b) Substantially nonincreasing installment payments for a period of years (payable on a monthly, quarterly, semi - annual, or annual basis) which extends no longer than the life expectancy of the Participant or such longer period as permitted under section 7.07; (c) Substantially nonincreasing installment payments for a period of years (payable on a monthly, quarterly, semi - annual, or annual basis) automatically adjusted for cost -of- living increases based on the rise in the Consumer Price Index for All Urban Consumers (CPI -U) from the third quarter of the last year in which a cost -of- living increase was provided to the third quarter of the current year. Any increase shall be made in periodic payment checks beginning the following January. (d) Partial lump -sum payment of a designated amount, with the balance payable in substantially nonincreasing installment payments for a period of years, as described in subsection (b), as long as such installment payments begin prior to the end of the calendar year following the year the partial lump -sum payment was made; (e) Annuity payments (payable on a monthly, quarterly, or annual basis) for the lifetime of the Participant or for the lifetimes of the Participant and Beneficiary if permitted under section 7.07; or (f) Such other forms of substantially nonincreasing installment payments as may be approved by the Employer consistent with the limitations of section 7.07. If a Participant has Trust assets with more than one investment provider under the Employer's deferred compensation plan, funds from each investment provider must be coordinated and distributed in a manner that does not violate the "substantially nonincreasing amount" provision in §457(d) as amended from time to time. 7.09 Default Distribution Option. If the Participant fails to make a timely election of one of the payment options described in section 7.08 for distributions pursuant to section 7.02, payments shall be made in equal monthly installments over a period of five years without the inclusion of a cost -of- living increase. If a Beneficiary fails to make a timely election of one of the payment options described in section 7.08 for distributions pursuant to section 7.07, distribution shall be made in a lump sum. 7.10 Limitations on Distribution Options. No distribution option may be selected by a Participant or Beneficiary under this Article VII unless it satisfies the requirements of §401(a)(9) and §457(d) of the Code, including the requirement that installment payments be made in substantially nonincreasing amounts and that payments commencing before the death of the Participant satisfy the incidental death benefits requirement. A cost -of- living increase included as part of a payment option is intended to comply with written IRS guidance such that the substantially nonincreasing amount rule shall not be violated. Unless otherwise elected by the Participant (or spouse, in the cases of certain distributions described in section 7.07), life expectancies of the Participant and/or spouse shall be recalculated annually in . determining the required minimum distribution amount under §401(a)(9). 8 -97 18 -S An election of non - recalculation must be made as part of the election of a payment option under section 7.08, and shall be irrevocable as to the Participant (or spouse, if applicable) for all subsequent years. The life expectancy of a nonspouse Beneficiary may not be recalculated. The terms of this Article shall be construed in accordance with all applicable Code sections and the regulations thereunder. 7.11 Taxation of Distributions. To the extent required by law, income and other taxes shall be withheld from each benefit payment, and payments shall be reported to the appropriate governmental agency or agencies. 7.12 Transfers. If so specified in the Adoption Agreement, transfers shall be available as follows. (a) Transfers to the Plan: If the Participant was formerly a Participant in an eligible deferred compensation plan maintained by another employer, and if such plan permits the direct transfer of the Participant's interest therein to the Plan, then the Plan shall accept assets representing the value of such interest; provided, however, that the Participant has separated from service with that employer and become an Employee of Employer. Such amounts shall be held, .accounted for, administered and otherwise treated in the same manner as Compensation Deferred by the Participant except that such amounts shall not be considered Compensation Deferred under the Plan in the taxable year of such transfer in determining the maximum deferral under section 4.02. The Employer may require such documentation from the predecessor plan as it deems necessary to confirm that such plan is an eligible deferred compensation plan within the meaning of §457, and to assure that transfers are provided under such plan. The Employer may refuse to accept a transfer in the form of assets other than cash, unless Employer and the Committee agree to hold i such other assets under the Plan. # (b) Transfers From the Plan. If a Participant separates from service prior to his or her required beginning date, and becomes a Participant in an eligible deferred compensation plan of another employer, and provided that payments under this Plan have not begun, such Participant may request a transfer of his or her account to the eligible deferred compensation plan of the other employer. Requests for such transfers must be made in writing to the Plan Administrator and shall be granted in the sole discretion of the Plan Administrator. If an amount is to be transferred pursuant to this provision, the Plan Administrator shall transfer such amount directly to the eligible deferred compensation plan of the other employer. Amounts transferred to another eligible deferred compensation plan shall be treated as distributed from this Plan and this Plan shall have no further responsibility to the Participant or any beneficiary with respect to the amount transferred. 7.13 Election . Elections under this Article shall be made in such form and manner as the Plan Administrator may specify from time to time. 1 1 � ►y 8.01 Paid Leave of Ab en If a Participant is on an approved leave of absence from the Employer with compensation, or on approved leave of absence without compensation that does not 8 -97 19 Flo E 0 • constitute a separation from service within the meaning of §402(d)(4)(A)(iii) of the Code, which under the Employer's current practices is generally a leave of absence without compensation for a period of one year or less, said Participant's participation in the Plan may continue. 8.02 11agaid Leave of Absence. If a Participant is on an approved leave of absence without compensation and such leave of absence continues to such an extent that it becomes a separation from service within the meaning of §402(e)(4)(A)(iii) of the Code, said Participant shall have separated from service with the Employer for purposes of this Plan; provided, however, that pursuant to section 7.03, said Participant may elect to postpone commencement of benefit payments until a future date. Upon tennination of leave without pay and return to active status, the Participant may execute a new Participation Agreement to be effective when permitted by section 4.01 of the Plan. 9.01 Authorization of Loans. If so specified in the Adoption Agreement, the Employer may authorize the Trustee to make loans to Participants pursuant to the terms of this Article. Such loans shall be made on the written application of the Participant and on such terms and conditions as are (i) set forth in this Article or by the Administrator or (ii) appropriate and desirable to comply with applicable law. In making such loans, the Administrator shall follow uniform policies and shall not discriminate in favor of or against any Participant or group of Participants. 9.02 Maximum Loan Amount. In no event shall any loan made to a Participant be in an amount which shall cause the outstanding aggregate balance of all loans made to such Participant under this Plan exceed the lesser of: (a) $50,000, reduced by the excess (if any) of: (i) the highest outstanding balance of loans from the Plan to the Participant during the one -year period ending on the day before the date on which the loan is made; over (ii) the outstanding balance of loans from the Plan to the Participant or the Beneficiary on the date on which the loan is made; or (b) One -half of the Participant's Total Amount Deferred. 9.03 E=a=ent of Loan. Each loan shall mature and be payable, in full and with interest, within five years from the date such loan is made, unless (a) The loan is used to acquire any dwelling unit that within a reasonable time (determined at the time the loan is made) will be used as the principal residence of the Participant; or (b) Loan repayments are, at the Employer's election, suspended as permitted by §414(u)(4) of the Code (with respect to qualified military service). 9.04 Loan Terms and Conditions. In addition to such rules and regulations as the Administrator may adopt, all loans to Participants shall comply with the following terms and conditions: 8 -97 WE P (a) Loans shall be available to all Participants on a reasonably equivalent basis. (b) Loans shall bear interest at a reasonable rate to be fixed by the Administrator based on interest rates currently being charged by commercial lenders for similar loans. The Administrator shall not discriminate among Participants in the matter of interest rates, but loans granted at different times may bear different interest rates based on prevailing rates at the time. (c) Each loan shall be made against collateral, including the assignment of no more than one -half of the present value of the Participant's Total Amount Deferred as security for the aggregate amount of all loans made to such Participant, supported by the Participant's collateral promissory note for the amount of the loan, including interest. (d) Payments of principal and interest must be made at least quarterly and such payments shall be sufficient to amortize the principal and interest payable pursuant to the loan on a substantially level basis. The Administrator may require that loan repayments be made by payroll deduction. (e) A loan to a Participant or Beneficiary shall be considered a directed investment option for such Participant's account balance. (f) No distribution shall be made to any Participant, or to a Beneficiary of any such Participant, unless and until all unpaid loans, including accrued interest thereon, have been satisfied. If a Participant terminates employment with the Employer for any reason, the outstanding balance of all loans made to him shall become fully payable and, if not paid within thirty days, any unpaid balance shall be deducted from any benefit payable to the Participant or his Beneficiary. In the event of default in repayment of a loan or the bankruptcy of a Participant who has received a loan, the note will become immediately due and payable, foreclosure on the note and attachment of security will occur, the amount of the outstanding balance of the loan will be treated as a distribution to the Participant, and the defaulting Participant's Accumulated Deferrals shall be reduced by the amount of the outstanding balance of the loan (or so much thereof as may be treated as a distribution without violating the requirements of the Code). (g) The loan program under the Plan shall be administered by the Administrator in a uniform and nondiscriminatory manner. The Administrator shall establish procedures for loans, including procedures for applying for loans, guidelines governing the basis on which loans shall be approved, procedures for determining the appropriate interest rate, the types of collateral which shall be accepted as security, any limitations on the types and amount of loans offered, and the events which shall constitute default and actions to be taken to collect loans in default. s_u l ►11 u,l_ ►Y � : M :,.0 l ► :_ 1 ► 1 � : ►I 10.01 Termination. The Employer may at anytime terminate this Plan; provided, however, that no termination shall affect the amount of benefits which at the time of such termination shall have accrued for Participants or Beneficiaries. Such accrued benefit shall include any Compensation deferred before the time of the termination and income thereon accrued to the date of the termination. 8 -97 21 ') q • • Such amount shall be calculated in accordance with section 6.02(b) and the terms and conditions of the affected investment option. Upon such termination, each Participant in the Plan shall be deemed to have revoked his agreement to defer future compensation as provided in section 4.06 as of the date of such termination. Each Participant's full Compensation on a nondeferred basis shall be restored. 10.02 Amendment. The Employer may also amend the provisions of this Plan at any time, provided, however, that no amendment shall affect the amount of benefits which at the time of such amendment shall have accrued for Participants or Beneficiaries, to the extent of and Compensation deferred before the time of the amendment and income thereon accrued to the date of the amendment, calculated in accordance with section 6.03 and the terms and conditions of the investment options hereunder; and provided further, that no amendment shall affect the duties and responsibilities of the Trustee unless executed by the Trustee. 10.03 Copies of Amendments. The Administrator shall provide a copy of any plan amendment to any Trustee or custodian and to the issuers of any investment options selected pursuant to section 6.01. It is intended that pursuant to §457 of the Code, the amount of Deferred Compensation shall not be considered current compensation for purposes of Federal income taxation. This rule shall also apply to State income taxation unless applicable state laws provide otherwise. Such amounts shall, however, be included as compensation to the extent required under the Federal Insurance Contributions Act (FICA). Payments under this Plan shall supplement retirement and death benefits payable under the Employer's group insurance and retirement plans, if any. .1► : ► ri 12.01 Non -Assi age bilitY. It is agreed that neither the Participant, nor any Beneficiary, nor any other designee shall have any right to commute, sell, assign, transfer, or otherwise convey the right to receive any payments hereunder, which payments and right thereto are expressly declared to be non - assignable and non - transferable; and in the event of attempt to assign or transfer, the Employer shall have no further liability hereunder, nor shall any unpaid amounts be subject to attachment, garnishment or execution, or be transferable by operation of law in event of bankruptcy, insolvency, except to the extent otherwise required by law. 12.02 ConformingFquitable Distribution Orders. If so specified in the Adoption Agreement, domestic relations orders approved by the Plan Administrator shall be administered as follows. (a) To the extent required under a final judgment, decree, or order made pursuant to a state domestic relations law, herein referred to as a Conforming Equitable Distribution Order (CEDO), which is duly filed upon the Employer, any portion of a Participant's Account may be paid or set aside for payment to a spouse, former spouse, or a child of the Participant. Where necessary to carry out the terms of such a CEDO, a separate account shall be established with respect to the spouse, former spouse, or child, and such person shall be entitled to make investment selections 8 -97 22 -A 9 with respect thereto in the same manner as the Participant. All costs and charges incurred in carrying out the investment selection shall be deducted from the account created for the spouse, former spouse, or child making the investment selection. Any amounts so set aside for a spouse, former spouse or a child shall be paid out in a lump sum at the earliest date that benefits may be paid to the Participant, unless the CEDO directs a different form of payment or later payment date. In no event is the spouse, former spouse or child entitled to receive a distribution from the Plan prior to the time that the Participant separates from service with the Employer or becomes age 70'/2. Nothing in this section shall be construed to authorize any amounts to be distributed under the Employer's plan at a time or in a form that is not permitted under §457 of the Internal Revenue Code. Any payment made to a person other than the Participant pursuant to this section shall be reduced by required income tax withholding. The fact that payment is made to a person other than the Participant may not prevent such payment from being includible in the gross income of the Participant for withholding and income tax reporting purposes. Such withholding and income tax reporting shall be done under the terms of the Internal Revenue Code as amended from time to time. (b) The Employer's liability to pay benefits to a Participant shall be reduced to the extent that amounts have been paid or set aside for payment to a spouse, former spouse or child pursuant to this section. No amount shall be paid or set aside unless the Employer, or its agents or assigns, has been provided with satisfactory evidence releasing them from any further claim by the Participant with respect to these amounts. The Participant shall be deemed to have released the Employer from any claim with respect to such amounts in any case in which the Employer has been notified of or otherwise joined in a proceeding relating to a CEDO which sets aside a portion of the Participant's Account for a spouse, former spouse or child, and the Participant fails to obtain an order of the court in the proceeding relieving the Employer from the obligation to comply with the CEDO. (c) The Employer shall not be obligated to comply with any judgment, decree or order which attempts to require the Plan to violate any plan provision or any provision of §457 of the Internal Revenue Code. Neither the Employer nor its agents or assigns shall be obligated to defend against or set aside any judgment, decree, or order described herein or any legal order relating to the division of a Participant's benefits under the plan unless the full expense of such legal action is bome by the Participant. In the event that the Participant's action (or inaction) nonetheless causes the Employer, its agents or assigns to incur such expense, the amount of the expense may be charged against the Participant's account and thereby reduce Employer's obligation to pay benefits to the Participant. In the course of any proceeding relating to divorce, separation, or child support, the Employer, its agents and assigns shall be authorized to disclose information relating to Participant's individual account to the Participant's spouse, former spouse or child (including the legal representatives of the spouse, former spouse or child), or to a court. 8 -97 23 0 .7o 0 XIII. DISCLAIME R The Employer and the Administrator make no endorsement, guarantee or any other representation and shall not be liable to the Plan or to any Participant, Beneficiary, or any other person with respect to (a) the financial soundness, investment performance, fitness, or suitability (for meeting a Participant's objectives, future obligations under the Plan, or any other purpose) of any investment option offered pursuant to section 6.01 or any investment vehicle in which amounts deferred under the Plan are actually invested, or (b) the tax consequences of the Plan to any Participant, Beneficiary or any other person. u' 8 1__t ;. Ie Notwithstanding any other provisions of this Plan, the Employer may add to the amounts payable to any Participant under the Plan additional Deferred Compensation for services to be rendered by the Participant to the Employer during a calendar month, provided (a) the Participant has elected to have such additional Compensation deferred, invested, and distributed pursuant to this Plan, prior to the calendar month in which the Compensation is earned, and (b) such additional Compensation deferred, when added to all other Compensation deferred under the Plan, does not exceed the maximum deferral permitted by Article W. XV. 15.01 Govemine 3,aw. This Plan shall be construed under the laws of the state in which the Employer is located. 15.02 %J2. This Plan is intended to be an eligible deferred compensation plan within the meaning of §457 of the Code, and shall be interpreted so as to be consistent with such section and all regulations promulgated thereunder. 15.03 Word Usage. Words used herein in the singular shall include the plural and the plural the singular where applicable, and one gender shall include the other genders where appropriate. 15.04 Headings. The headings of articles, sections or other subdivisions hereof are included solely for convenience of reference, and if there is any conflict between such headings and the text of the Plan, the text shall control. 15.05 Entire Agreem ent. This Plan, the Adoption Agreement and any properly adopted amendment thereof, shall constitute the total agreement or contract between the Employer and the Participant regarding the Plan. No oral statement regarding the Plan may be relied upon by the Participant. This Plan and any properly adopted amendment, shall be binding on the parties hereto and their respective heirs, administrators, trustees, successors, and assigns and on all designated Beneficiaries of the Participant. 8 -97 24 1 8 -97 0 ADOPTION AGREEMENT SECTION 457 DEFERRED COMPENSATION PLAN 0 r -� 0 • SECTION 457 DEFERRED COMPENSATION PLAN The Employer named below hereby establishes (or, as applicable, amends and restates) a Deferred Compensation Plan for eligible Employees as provided in this Adoption Agreement and the accompanying Plan. A. EMPLOYER INFORMATION 1. EMPLOYER'S NAME AND ADDRESS: City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 90740 2. TELEPHONE NUMBER: (714) 644 -3123 3 Q TAX ID NUMBER: 95- 6000751 NAME OF PLAN: City of Newport Beach Deferred Compensation Plan 5. NAME OF PLAN ADMINISTRATOR (the Employer unless another person(s) is appointed as set forth in section 3.02 of the Plan): Dennis C. Danner B. EFFECTIVE DATE.Check box 1 OR box 2 and fill in the blank(s). 1. ❑ This is a new Plan having an effective date of. 2. ® This is an amended Plan. 8 -97 The effective date of the original Plan was. 1978 The effective date of the amended Plan is 7 -1 -97 -,3 0 0 C. CUSTODY OF ASSETS. Check each box that applies. The trust requirement of Internal Revenue Code ( "Code ") §457(g) shall be satisfied by • setting aside plan assets for the exclusive benefit of participants and beneficiaries, as follows: 1. ® No trustee or custodian is being appointed with respect to those plan assets held in one or more annuity contracts meeting the requirements of Code §401(f). The Employer, as owner of the annuity contract shall be the deemed trustee for purposes of Code §457(g). 2. ❑ All or part of plan assets will be held in trust pursuant to the provisions of Article V of the Plan. The Employer, or certain employees (or holders of certain positions with Employer) as named on page 6 of this Adoption Agreement shall be the Trustee. 3. ❑ All or part of plan assets will be held in a custodial account meeting the requirements of Code §401(f), pursuant to a separate written agreement with the bank or trust company named on page 5 of this Adoption Agreement. The custodian shall be the deemed trustee of all assets held in the custodial account for purposes of Code §457(8). 4. ❑ All or part of plan assets will be held in trust pursuant to a separate written trust agreement entered into between the Employer and the bank or trust company named on page 6 of this Adoption Agreement. The trust provisions of Article V of the Plan shall NOT apply. D. DEFINITIONS. "Employee" shall mean: (Check one or both boxes below.) ® any common law employee ❑ any independent contractor (including elected or appointed officials) who performs services for and receives any type of compensation from the Employer (or any agency, department, subdivision or instrumentality of the Employer) for whom_ services are rendered. 2. "Normal Retirement Ate" shall mean: (Fill in blank below.) Age 70 1/2, unless the Participant has elected an alternate Normal Retirement Age by written instrument delivered to the Administrator prior to Separation from Service. A Participant's Normal Retirement Age determines the period during which a Participant may utilize the catch -up limitation of section 4.03 of the Plan. Once a Participant has to any extent utilized the catch -up limitation of section 4.03 of the Plan, his Normal Retirement Age may not be changed. I* i • A Participant's alternate Normal Retirement Age may not be earlier than the earliest date the Participant will become eligible to retire under the Employer's basic retirement plan without the Employer's consent and to receive immediate retirement benefits without actuarial or similar reduction because of early retirement, and may not be later than age 70'/2 . If a Participant continues to be employed by Employer after attaining age 70'/2, not having previously elected an alternate Normal Retirement Age, the Participant's alternate Normal Retirement Age shall not be later than the mandatory retirement age, if any, established by the Employer, or the age at which the Participant actually separates from service if the Employer has no mandatory retirement age. If the Participant will not become eligible to receive benefits under a basic retirement plan maintained by the Employer, the Participant's alternate Normal Retirement Age may not be earlier than age and may not be later than age 70'/2. E. DE MINIMIS DISTRIBUTIONS. Check the appropriate boxes. ® De Minimis Distributions described in section 7.05 of the Plan SHALL BE allowed as follows: (If Box 1 is checked, also check one or both boxes below.) ® Participants may elect to receive an in- service De Minimis distribution. ® The Employer may distribute De Minimis account balances without the Participant's consent. 2. ❑ De Minimis Distributions described in section 7.05 of the Plan shall NOT be allowed. F. UNFORESEEABLE EMERGENCY DISTRIBUTIONS. Check box 1 OR box 2. ® Unforeseeable Emergency distributions pursuant to sections 2.19 and 7.06 of the Plan SHALL BE allowed. 2. ❑ Unforeseeable Emergency distributions pursuant to sections 2.19 and 7.06 of the Plan shall NOT be allowed. G. PLAN TO PLAN TRANSFERS. Check box 1 OR box 2. ® Plan to Plan Transfers described in section 7.12 of the Plan SHALL BE allowed. 2. ❑ Plan to Plan Transfers described in section 7.12 of the Plan shall NOT be allowed. _b • s H. PARTICIPANT LOANS. Check box 1 OR box 2. 1. ❑ Participant loans described in Article IX of the Plan SHALL BE allowed. 2. ® Participant loans described in Article IX of the Plan shall NOT be allowed. L DOMESTIC RELATIONS ORDERS. Check Box 1 OR box 2. 1. ® The Plan SHALL comply with domestic relations orders as provided in section 12.02 of the Plan. 2. ❑ The Plan shall NOT comply with domestic relations orders as provided in section 12.02 of the Plan. This Plan and Adoption Agreement are duly executed on behalf of the Employer. EMPLOYER: By: By: Title: Mayor Title: Date: Date: I 4 0 36 CUSTODIAN Employer has elected to meet the trust requirement of Code §457(8) by setting plan assets aside for the exclusive benefit of participants and beneficiaries in a custodial account meeting the requirements of Code §401(f). The bank or trust company custodian named below shall be the "deemed trustee' of plan assets held pursuant to the custodial agreement. A. Effective the following named bank or trust company is hereby appointed as custodian of all or a portion of the assets of the Employer's §457 Deferred Compensation Plan: B. INDIVIDUAL(S) AUTHORIZED TO ISSUE INSTRUCTIONS TO CUSTODIAN/TRUSTEE: This appointment is duly signed on behalf of the Employer and the Custodian. EMPLOYER [Signature] [Title] [Date] CUSTODIAN [Signature] [Title] [Date] L...J 0 i TRUSTEE A. Effective the following is hereby appointed as trustee for and accepts the trust created ho the Employer's §457 Deferred Compensation Plan: 1. ❑ The Employer 2. ❑The following named employees 3. ❑ The following named bank or trust company: B. NAME(S) OF INDMDUAL(S) AUTHORIZED TO ISSUE INSTRUCTIONS TO TRUSTEE: This Trustee appointment is duly signed on behalf of the Employer and the Trustee. EMPLOYER TRUSTEE [Signature] [Signature] [Title] [Title] [Date] [Date] TRUSTEE TRUSTEE [Signature] [Signature] [Title] [Title] [Date] [Date] 2 0 0