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Southwest Airlines - Profit Sharing Plan
EXHIBIT 10.7 SOUTHWEST AIRLINES CO.
PROFITSHARING PLAN
SOUTHWEST AIRLINES CO.
PROFITSHARING PLAN Table of Contents Page ARTICLE I PURPOSE 1 ARTICLE II DEFINITIONS AND CONSTRUCTION 2 2.1 Definitions 2 2.2 Construction 8 ARTICLE III ELIGIBILITY AND PARTICIPATION 8 3.1 Eligibility Requirements 8 3.2 Notification of Eligibility 8 3.3 Reentry of Prior Members 8 ARTICLE IV CONTRIBUTIONS 9 4.1 Company Contributions 9 ARTICLE V ADJUSTMENT OF INDIVIDUAL ACCOUNTS 10 5.1 Individual Accounts 10 5.2 Method of Adjustment 10 ARTICLE VI ALLOCATIONS 10 6.1 Company Contribution 10 6.2 Allocation of Forfeitures 11 6.3 Notification to Members 11 6.4 Maximum Annual Addition to Account or Benefit 11 ARTICLE VII RETIREMENT 13 7.1 Normal or Late Retirement 13 7.2 Benefit 14 ARTICLE VIII DEATH 14 8.1 Death of Member 14 8.2 Designation of Beneficiary 14 8.3 Benefit 14 8.4 No Beneficiary 14 ARTICLE IX DISABILITY 15 9.1 Disability 15 9.2 Benefit 15 ARTICLE X TERMINATION OF EMPLOYMENT AND FORFEITURES 15 10.1 Eligibility and Benefits 15 10.2 Time of Payment 16 10.3 Forfeitures 16 10.4 Forfeiture for Cause 16 ARTICLE XI WITHDRAWALS 16 11.1 Withdrawals 16
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Page ARTICLE XII INVESTMENT OF THE TRUST FUND 17 12.1 Member Direction of Investment 17 12.2 Conversion of Investments 19 ARTICLE XIII ADMINISTRATION 20 13.1 Appointment of Committee 20 13.2 Committee Powers and Duties 20 13.3 Duties and Powers of the Plan Administrator 21 13.4 Rules and Decisions 22 13.5 Committee Procedures 22 13.6 Authorization of Benefit Payments 22 13.7 Payment of Expenses 22 13.8 Indemnification of Members of the Committee 22 ARTICLE XIV NOTICES 22 14.1 Notice to Trustee 22 14.2 Subsequent Notices 23 14.3 Reliance upon Notice 23 ARTICLE XV BENEFIT PAYMENTS 23 15.1 Method of Payment 23 15.2 Time of Payment 23 15.3 Cash Out Distribution 25 15.4 Minority or Disability Payments 26 15.5 Distributions Under Domestic Relations Orders 26 15.6 Direct Rollover of Eligible Rollover Distributions 27 ARTICLE XVI TRUSTEE 28 16.1 Appointment of Trustee 28 16.2 Appointment of Investment Manager 29 16.3 Responsibility of Trustee and Investment Manager 29 16.4 Bonding of Trustee and Investment Manager 29 ARTICLE XVII AMENDMENT AND TERMINATION OF PLAN 29 17.1 Amendment of Plan 29 17.2 Termination of Plan 30 17.3 Complete Discontinuance of Contributions 30 17.4 Liquidation of Trust Fund 30 17.5 Consolidation or Merger 30 ARTICLE XVIII GENERAL PROVISIONS 31 18.1 No Employment Contract 31 18.2 Manner of Payment 31 18.3 Nonalienation of Benefits 31 18.4 Titles for Convenience Only 31 18.5 Validity of Plan 31 18.6 Plan Binding 32 18.7 Return of Contributions 32 18.8 Missing Members or Beneficiaries 32 18.9 Voting Rights 32 18.10 Preretirement Diversification Rights 34 18.11 Qualified Military Service 36 ARTICLE XIX TOP-HEAVY RULES 37 19.1 Definitions 37 19.2 Determination of Top-Heavy Status 38
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Page 19.3 Minimum Company Contribution 38 ARTICLE XX FIDUCIARY PROVISIONS 39 20.1 General Allocation of Duties 39 20.2 Fiduciary Duty 40 20.3 Fiduciary Liability 40 20.4 Co-Fiduciary Liability 40 20.5 Delegation and Allocation 41
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SOUTHWEST AIRLINES CO.
PROFITSHARING PLAN PREAMBLE WHEREAS, SOUTHWEST AIRLINES CO., a corporation formed under the laws of the State of Texas (the " Company" ) has previously adopted a plan and trust designated as the Southwest Airlines Co. ProfitSharing Plan (the " Prior Plan" ), effective January 1, 1973, which was subsequently amended and restated in its entirety, effective January 1, 1986, again amended and restated in its entirety, effective January 1, 1991, and again amended and restated in its entirety, effective January 1, 1996, as amended from time to time thereafter; WHEREAS, the Company now desires to continue the plan by again amending and restating the Prior Plan to implement certain provisions of, and for compliance with, the Pension Protection Act of 2006, to incorporate amendments that have previously been made to the plan, to change the designation of the plan from an employee stock ownership plan and a money purchase defined contribution plan to a profit sharing plan, and to reflect certain other operational and administrative practices; NOW, THEREFORE, in consideration of the premises and to carry out the purposes and intent as set forth above, the Prior Plan is hereby restated and amended in its entirety, superseded and replaced by this plan (hereinafter referred to as the " Plan" ), effective January 1, 2008, except as otherwise specifically provided herein. There will be no gap or lapse in time or effect between such plans, and the existence of a qualified plan and trust shall be continuous and uninterrupted. The terms and conditions of this restated Plan are as follows: ARTICLE I
PURPOSE The purpose of this Plan is to reward Employees of the Company for their loyal and faithful service, to provide the Employees with a retirement benefit, and to provide funds for their beneficiaries in the event of death or disability. The benefits provided by this Plan will be paid from a Trust Fund established by the Company and will be in addition to the benefits Employees are entitled to receive under any other programs of the Company and under the Social Security Act. This Plan and the separate related Trust forming a part hereof are established and shall be maintained for the exclusive benefit of the Members hereunder and their Beneficiaries. No part of the Trust Fund can ever revert to the Company, except as hereinafter provided, or be used for or diverted to purposes other than the exclusive benefit of the Members of this Plan and their Beneficiaries.
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ARTICLE II
DEFINITIONS AND CONSTRUCTION 2.1 Definitions . Where the following words and phrases appear in this Plan, they shall have the respective meanings set forth below, unless their context clearly indicates to the contrary: (a) Affiliate . A member of a controlled group of corporations (as defined in Section 414(b) of the Code), a group of trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c) of the Code), or an affiliated service group (as defined in Section 414(m) of the Code) of which the Company is a member, or any entity otherwise required to be aggregated with the Company pursuant to Section 414(o) of the Code and the regulations issued thereunder. (b) Allocation Date . The date on which Company Contributions and forfeitures are to be allocated, such date to be the last day of each Plan Year. (c) Annual Compensation . The total amounts paid by the Company or any Eligible Affiliate to an Employee as remuneration for personal services rendered during each Plan Year, including expense allowances (to the extent includible in the gross income of the Employee) and any amounts not includible in the gross income of the Employee pursuant to Sections 402(e)(3), 125(a), or 132(f)(4) of the Code, but excluding (1) director' s fees; (2) expense reimbursements and nontaxable expense allowances; (3) prizes and awards; (4) expatriate bonuses; (5) items of imputed income; (6) contributions made by the Company under this Plan or any other employee benefit plan or program it maintains, such as group insurance, hospitalization or like benefits; (7) amounts realized or recognized from qualified or nonqualified stock options or when restricted stock or property held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (8) Company contributions to a plan of deferred compensation that are not included in the Employee' s gross income for the taxable year in which contributed, or any distributions from a deferred compensation plan; (9) amounts, if any, paid to an Employee in lieu of a Company Contribution to this Plan in the event that such Company Contribution would constitute an annual addition, as defined in Section 415(c)(2) of the Code, in excess of the limitations under Section 415(c) of the Code; and (10) severance payments. For purposes of this Section 2.1(c), severance payments include severance pay, unfunded nonqualified deferred compensation benefits and parachute payments made after an Employee' s severance from employment, but shall not include amounts attributable to payments made within 2 1 / 2 months following severance from employment that, absent a severance from employment, would have been paid to the Employee for services rendered prior to the severance from employment and for accrued bona fide sick, vacation, or other leave (to the extent the Employee would have been able to use the leave if employment had continued). Annual Compensation shall include amounts otherwise includible, as provided above, which are paid by the Company or an Eligible Affiliate to the Employee through another person, pursuant to the common paymaster provisions of Section 3121(s) and 3306(p) of the Code.
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The Annual Compensation of each Member or former Member taken into account under the Plan for any Plan Year shall not exceed $230,000, as adjusted by the Secretary of the Treasury for increases in the cost of living at the time and in the manner set forth in Section 401(a)(17)(B) of the Code. If a Plan Year consists of fewer than twelve (12) months, then the dollar limitation in the preceding sentence will be multiplied by a fraction, the numerator of which is the number of months in the Plan Year, and the denominator of which is twelve (12). Furthermore, for purposes of an allocation under the Plan based on Annual Compensation, Annual Compensation shall only include amounts attributable to the period an Employee is a Member of the Plan. (d) Beneficiary . A person designated by a Member or former Member to receive benefits hereunder upon the death of such Member or former Member. (e) Break in Service . An Employee shall have a Break in Service for each Plan Year in which he completes less than 501 Hours of Service with the Company or an Eligible Affiliate unless he is on a leave of absence authorized by the Company or an Eligible Affiliate in accordance with its leave policy. (f) Code . The Internal Revenue Code of 1986, as amended. (g) Committee . The persons who may be appointed to administer the Plan in accordance with Article XIII. (h) Common Stock . The common stock of the Company. (i) Company . Southwest Airlines Co., or its successor or successors. (j) Company Contributions . Contributions that are made by the Company for each Plan Year pursuant to the provisions of Section 4.1 hereof. (k) Deductible Contributions . A Member' s voluntary contributions, if any, to the Plan, made prior to January 1, 1987 and deductible by such Member for federal income tax purposes in accordance with Section 219 of the Internal Revenue Code, as then in effect. (l) Deductible Contribution Account . A separate subaccount to which is credited a Member' s Deductible Contributions, if any, and any earnings attributable thereto, adjusted to reflect any withdrawals, distributions or investment losses attributable thereto. (m) Disability . A physical or mental condition that, in the judgment of the Committee, totally and presumably permanently prevents the Employee from engaging in any substantial gainful employment with the Company or an Eligible Affiliate. A determination of Disability shall be based upon competent medical evidence satisfactory to the Committee. The Committee shall apply the rules with respect to Disability uniformly and consistently to all Employees in similar circumstances.
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(n) Effective Date . January 1, 2008, except as otherwise specifically provided herein. (o) Employee . Any person who is receiving remuneration for personal services rendered to the Company or any Eligible Affiliate, or who would be receiving such remuneration except for an authorized leave of absence; provided, however, that any individual whose conditions of employment are governed by a collective bargaining agreement between the Company and a labor union shall not be considered an Employee unless the collective bargaining agreement provides for coverage of such individual under the Plan. In no event shall any individual employed by any Affiliate or subsidiary of the Company be considered an Employee unless such Affiliate or subsidiary has specifically been designated by the Company as an Eligible Affiliate. Notwithstanding the foregoing, individuals whose conditions of employment are governed by a collective bargaining agreement that does not provide for coverage of such individual under the Plan shall nonetheless be deemed to be an Employee for purposes of crediting service pursuant to the provisions of subsections 2.1(t), (gg) and (kk) hereunder. The term " Employee" shall also include any " leased employee," as such term is defined below, deemed to be an employee of an Employer or any Affiliate as provided in Sections 414(n) or (o) of the Code. The term " leased employee" means any person (other than an employee of the recipient) who, pursuant to an agreement between the recipient and any other person (" leasing organization" ), has performed services for the recipient (or for the recipient and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least one year, and such services are performed under primary direction or control by the recipient. Contributions or benefits provided by the leasing organization that are attributable to services performed for the recipient shall be treated as provided by the recipient. Notwithstanding the foregoing, a leased employee shall not be considered an employee of the recipient if: (i) such employee is covered by a money purchase pension plan that provides: (1) a nonintegrated employer contribution rate of at least ten percent (10%) of compensation, as defined in Section 415(c)(3) of the Code, but including amounts contributed pursuant to a salary reduction agreement that are excludable from the employee' s gross income under Section 125, Section 402(e)(3), Section 402(h)(1)(B), or Section 403(b) of the Code, immediate vesting; and (ii) leased employees do not constitute more than twenty percent (20%) of the recipient' s nonhighly compensated work force. (p) Employer Savings Account . A separate subaccount to which is credited a Member' s Company Contributions and forfeitures, if any, and any earnings attributable thereto, adjusted to reflect any withdrawals, distributions or investment losses attributable thereto. (q) Entry Date . January 1st of each year. (r) ERISA . The Employee Retirement Income Security Act of 1974, as amended.
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(s) Fund or Trust Fund . All assets of whatsoever kind or nature held from time to time by the Trustee in the Trust forming a part of this Plan, without distinction as to income and principal and without regard to source, e.g., allocations, Company contributions, earnings, forfeitures or gifts. (t) Hour of Service . An Hour of Service shall include all hours for which pay is received or for which an Employee is entitled to payment, whether worked or not, plus service credit on the basis of the number of his regularly scheduled working hours for any other period of absence for which the Employee is paid or entitled to payment and that is authorized by the Company in accordance with its uniform leave policy for vacation, holiday, sick leave, illness, Disability, layoff, military service or civic duty. In no event shall credit for the number of Hours of Service attributable to a single continuous period for which no duties are performed exceed 501. Service credit shall also be given for each other leave of absence authorized by the Company for which the Employee is paid or entitled to payment. Hours of Service shall be computed on an equivalency basis, whereby for each month during which an Employee would be credited with at least one Hour of Service (or, in the case of flight attendants or pilots, one trip), such Employee shall be credited with one hundred ninety (190) Hours of Service. These hours must be credited to Employees in the computation period during which the duties were performed, or, if no duties were performed, during which the applicable period of absence occurred, and not when paid, if different. Credit must also be given, without duplicating any hours described above, for each hour for which back pay, irrespective of mitigation of damages, has been awarded or agreed to by the Company or any Eligible Affiliate. These hours must be credited in the computation period or periods to which the award or agreement pertains rather than that in which the payment, award or agreement was made. In determining the number of Hours of Service to be credited to an Employee in the case of a payment which is made or due to an Employee under the provisions of the paragraphs above, the Committee shall apply the rules set forth in Department of Labor Regulations 2530.200b-2(b) and (c), which rules are incorporated into and made a part of this Plan by reference. For purposes of determining whether an Employee has incurred a Break in Service as defined in Section 2.1(e), the Committee shall credit an Employee with Hours of Service during absence from work for maternity or paternity reasons which would otherwise have been credited to such Employee but for such absence. For purposes of this Plan, an Employee shall be deemed to be on maternity or paternity leave if the Employee' s absence from work is (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the adoption of such child by the Employee, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this paragraph shall be limited to the lesser of (1) the number necessary to prevent the Employee from incurring a Break
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in Service or (2) 501 Hours of Service. Hours of Service credited under this paragraph shall be credited in the Plan Year in which the absence begins, but if the Employee does not need those Hours of Service to prevent a Break in Service in the Plan Year in which the absence began, then they shall be credited in the immediately following Plan Year. (u) Individual Account . The account or record maintained by the Committee showing the monetary value of the individual interest in the Trust Fund of each Member, former Member and Beneficiary. (v) Investment Managers . The qualified and acting Investment Managers, as defined in ERISA, who under this Plan may be appointed by the Company to invest and manage Plan assets as fiduciaries. (w) Member . An Employee who has met the eligibility requirements for participation in this Plan, as set forth in Article III hereof. (x) Named Fiduciary . The Committee shall be the Named Fiduciary designated to manage the operation and administration of the Plan. (y) Nondeductible Contributions . A Member' s voluntary contributions, if any, to the Plan, made prior to January 1, 1987, which are not deductible by such Member for federal income tax purposes. (z) Nondeductible Contribution Account . A separate subaccount to which is credited a Member' s Nondeductible Contributions, if any, and any earnings attributable thereto, adjusted to reflect any withdrawals, distributions or investment losses attributable thereto. (aa) Normal Retirement Date . The date on which a Member attains the age of fifty-nine and one-half (59 1 / 2 ) years. (bb) Plan . Southwest Airlines Co. ProfitSharing Plan, as amended from time to time. (cc) Plan Administrator . Such person or persons as designated by the Committee, which shall be the Committee unless and until it designates such other person or persons. (dd) Plan Year . The annual period beginning January 1st and ending December 31st, both dates inclusive of each year. (ee) Prior Plan . The Southwest Airlines Co. ProfitSharing Plan, effective January 1, 1973, as heretofore amended and restated from time to time. (ff) Retirement . Separation from service after a Member has reached his Normal Retirement Date. Retirement shall be considered as commencing on the day immediately following a Member' s last day of service.
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(gg) Service . A period or periods of employment by an Employee used in determining eligibility for Plan participation or in determining the amount of benefits. If the Company is a member of a controlled group of corporations (as defined in Section 414(b) of the Code), is one of a group of trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c) of the Code), is a member of an affiliated service group (as defined in Section 414(m) of the Code) or is otherwise required to be aggregated with any entity pursuant to Section 414(o) of the Code and the regulations issued thereunder, then Service shall include any employment with any such Affiliate from and after the date such entity becomes an Affiliate, including Service prior to the Effective Date. (hh) Trust . Southwest Airlines Co. ProfitSharing Trust, as amended from time to time, the Trust established to hold and invest contributions made under the Plan and Prior Plan for the exclusive benefit of the Members included in the Plan from which the benefits will be distributed. (ii) Trustee . The qualified and acting Trustee under the Trust, who shall be the fiduciary designated to invest and manage the Plan assets, other than those which may be managed exclusively by an Investment Manager, and to operate and administer the Trust Fund. (jj) Valuation Date . Each business day on which the financial markets are open for trading activity. (kk) Vesting Service . Vesting Service is the period of employment used in determining eligibility for benefits. A year of Vesting Service shall be granted for each Plan Year in which an Employee has completed 1,000 or more Hours of Service with the Company or an Affiliate, subject to the following exceptions: (i) Vesting Service prior to January 1, 1973 shall be excluded. (ii) Vesting Service completed after December 31, 1972 and prior to January 1, 1976 shall be excluded if such service would have been disregarded under the break in service rules of the Prior Plan, as then in effect. For this purpose, break in service rules are those rules which result in the loss of prior vesting because of service termination or failure to complete a required period of service within a specified time. (iii) In the case of an Employee who has a Break in Service, his years of Vesting Service before such Break in Service shall not be taken into account until he has completed a year of Vesting Service following his reemployment. Prior to January 1, 1985, in the case of an Employee who has any Break in Service, all years of Vesting Service incurred after such Break shall be disregarded for purposes of measuring years of Vesting Service before such Break. However, effective January 1, 1985, and thereafter, in the case of an Employee who has five (5) or more consecutive Breaks in Service, all years of
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Vesting Service incurred after such Breaks in Service will be disregarded for purposes of measuring years of Vesting Service before such Breaks in Service. (ll) Eligible Affiliate . An Affiliate, the employees of which the Company has specifically designated as being eligible to participate in the Plan. 2.2 Construction . The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, unless the context clearly indicates to the contrary. The words " hereof," " herein," " hereunder," and other similar compounds of the word " here" shall mean and refer to the entire Plan, not to any particular provision or section. The Plan and Trust shall each form a part of the other by reference and terms shall be used therein interchangeably. ARTICLE III
ELIGIBILITY AND PARTICIPATION 3.1 Eligibility Requirements . Every Employee who was a Member in the Prior Plan on the day before the Effective Date shall continue to be a Member in the Plan. Except as otherwise provided herein, every other Employee shall become a Member in the Plan as of the first Entry Date concurrent with or next following his employment commencement date or the date on which his employer became an Eligible Affiliate, whichever is later. The employment commencement date is the first day for which an Employee is entitled to be credited hereunder with an Hour of Service. Notwithstanding the foregoing, non-resident aliens who receive no earned income from the Company that constitutes income from sources within the United States shall not be eligible to participate in the Plan. Furthermore, " leased employees" (as such term is defined in Section 2.1(o) hereof) and Employees classified by the Company as interns shall not be eligible to participate in the Plan. A person who is not treated as an Employee on the Company' s books and records (such as a person who as a matter of practice is treated by the Company as an independent contractor, but who is later determined to be an Employee as a matter of fact) shall not be an eligible Employee during any part of a Plan Year in which such person was not treated as an Employee, despite any retroactive recharacterization. 3.2 Notification of Eligibility . The Committee shall notify in writing each Employee of the qualifications for eligibility and shall furnish each Employee a copy of such explanation of the Plan as the Committee shall provide for that purpose. 3.3 Reentry of Prior Members . An Employee who terminates employment after becoming a Member hereunder shall be eligible to participate immediately upon his completion of one Hour of Service following his reemployment by the Company or an Eligible Affiliate. An Employee who terminates employment after satisfying the requirements of Section 3.1 hereof, but prior to the first Entry Date following the satisfaction of such requirements, shall be eligible to participate immediately upon his completion of one Hour of Service following his reemployment by the Company or an Eligible Affiliate, or, if later, the first Entry Date following the satisfaction of such requirements.
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ARTICLE IV
CONTRIBUTIONS 4.1 Company Contributions . The Company may, for each of its taxable years, contribute to the Trust Fund such profit sharing contribution, if any, as the Company shall determine by resolution of its board of directors. The amount of the profit sharing contribution, if any, shall be determined in the sole and absolute discretion of the board of directors of the Company; provided, however, that in the absence of any action of the board of directors to the contrary, the amount of the profit sharing contribution shall be an amount equal to 15% of ANP, reduced by the contribution made to the Southwest Airlines Co. 2005 Deferred Compensation Plan for Pilots for such Plan Year pursuant to section 3.2 of such plan. For purposes of the foregoing, " ANP" is the operating profit of the Company for such Plan Year. As used herein, the term " operating profit" of the Company for any Plan Year shall mean its income for such Plan Year before income taxes, derived in accordance with generally accepted accounting principles, and as set forth in the Company' s audited statement of income included in the annual report to shareholders, before provision for any contribution to this Plan, excluding (1) nonoperating or non-recurring gains or losses not arising from the Company' s usual business operations, including those gains or losses recognized under Statement of Financial Accounting Standards No. 133 that are factored into the Company' s presentation of " economic" results and gains or losses from the sale or exchange of capital assets, as set forth in the Company' s audited statement of income or disclosed in the notes thereto, and (2) profits or losses incurred by TranStar or any separately definable division of the Company; provided, however, that notwithstanding the foregoing, profits and losses incurred by Morris Air Corporation shall be taken into account for Plan Years beginning after December 31, 1993. The contribution shall be made either (1) in cash, (2) in Common Stock having a fair market value equal to the amount of the contribution, or (3) in cash and Common Stock having an aggregate fair market value equal to the amount of the contribution. The fair market value of any Common Stock contributed shall be based on the mean of the reported high and low sales prices of Common Stock on the New York Stock Exchange-Composite Tape on the day of the contribution to the Plan; except however, if the Company acquires Common Stock on the open market and contributes it to the Plan immediately following the settlement date, then the fair market value of the contribution shall be equal to the cost paid by the Company for the Common Stock, including commissions and other expenses which the Trustee would incur in the acquisition of Common Stock if the Trustee acquired the Common Stock directly. Any portion of the contribution made in Common Stock may be made in the form of authorized but unissued shares or shares previously issued and reacquired by the Company. Company Contributions shall be added to and become a part of the Trust Fund, and, as of each Allocation Date, shall be credited to the Individual Accounts of the Members, as provided in Section 6.1 hereof.
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ARTICLE V
ADJUSTMENT OF INDIVIDUAL ACCOUNTS 5.1 Individual Accounts . The Committee shall establish an Individual Account for each Member showing the monetary value of the individual interest in the Trust Fund of each Employee, former Employee and Beneficiary. The Individual Account of each Member shall be composed of an Employer Savings Account, to which Company Contributions and forfeitures, if any, shall be credited. In addition, if a Member was at any time prior to the Effective Date a member of the Prior Plan who, prior to January 1, 1987, made voluntary Deductible Contributions or Nondeductible Contributions, his Individual Account shall include a Deductible Contribution Account and/or Nondeductible Contribution Account, as applicable. Such accounts are primarily for accounting purposes and do not require a segregation of the Trust Fund, except as otherwise provided herein. 5.2 Method of Adjustment . As of each Valuation Date, before any restoration of accounts as required pursuant to Section 15.3 hereof and before taking into account the contributions of the Company and forfeitures for the period since the last preceding Valuation Date, the Committee or the Trustee, as directed by the Committee, shall value the assets of each investment fund and adjust the Individual Accounts of all Members who have elected to participate in such investment fund as follows. (a) The Committee shall determine the market value of the investment fund, including the effect of expenses of administration and other charges against such investment fund since the last Valuation Date. (b) The Committee shall determine the total aggregate value of all Individual Accounts participating in the investment fund as shown in its records as of the prior Valuation Date. The Individual Account balances of Employees, former Employees and Beneficiaries shall be reduced by any amounts paid to them from the investment fund since the last Valuation Date. (c) The Committee shall then adjust the value of each Individual Account participating in the investment fund by crediting each Individual Account with its proportion of the difference between (a) and (b) if (a) is the larger or charging it with its proportion of the difference between (a) and (b) if (b) is larger; the proportion to be so credited or charged to each Individual Account shall be calculated by multiplying the difference between (a) and (b) by a fraction, the numerator of which is the then value of said Individual Account and the denominator of which is the then aggregate value of all Individual Accounts participating in such investment fund. ARTICLE VI
ALLOCATIONS 6.1 Company Contribution . As of each Allocation Date, but after any adjustment of Individual Accounts, as provided in Section 5.2, and other applicable provisions herein, the Committee shall credit the Company Contribution, as described in Section 4.1 hereof, for the Plan Year ending with said Allocation Date to the Individual Accounts of all Members and
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former Members, except those Members and former Members who failed to complete at least 1,000 Hours of Service during such Plan Year. The amount of the annual Company Contribution allocated to the Individual Account of each eligible Member or former Member shall be in the proportion that his Annual Compensation during the applicable Plan Year bears to the total Annual Compensation of all eligible Members and former Members during the applicable Plan Year. 6.2 Allocation of Forfeitures . If a Member or former Member forfeits a portion of his Individual Account as provided in Section 10.3 hereof, then said forfeited amount shall be used first to restore the Individual Accounts of rehired Members, as required under Section 15.3 hereof, and next to reduce Company Contributions made in accordance with Section 18.11 hereof for Plan Years prior to the Plan Year in which a Member returns from qualified military service, as well as any such Company Contributions outstanding as of the effective date hereof. Any remaining forfeitures shall be allocated as soon as practicable following the Plan Year in which said forfeiture occurs among the Individual Accounts of the Members and former Members who are eligible to have a Company contribution credited on their behalf for such Plan Year, as set forth in Section 6.1 hereof. The amount of the forfeiture allocated under this Section 6.2 to the Individual Account of such Member or former Member shall be in the proportion that his Annual Compensation for such Plan Year bears to the total Annual Compensation for such Plan Year of all such Members and former Members. If a Member or former Member who does not have any nonforfeitable right to his Individual Account terminates his employment and thereby forfeits his Individual Account, then in the event such Member or former Member is reemployed before he has incurred five (5) or more consecutive Breaks in Service, his Individual Account that was forfeited shall be restored by the Company at the time of his reemployment. 6.3 Notification to Members . At least annually, the Committee shall advise each Member, former Member and Beneficiary for whom an Individual Account is held hereunder of the then balance in such account. 6.4 Maximum Annual Addition to Account or Benefit . (a) Limitations . If the Employer maintains this Plan and one or more other qualified defined contribution plans, the Annual Additions (as defined in subsection (b) below) allocated under this Plan to any Member' s Individual Account shall be limited in accordance with the allocation provisions of this subsection 6.4(a). The amount of the Annual Additions that may be allocated under this Plan to the Individual Account of any Member as of any Allocation Date, together with Annual Additions allocated on behalf of any such Member under any other defined contribution plan of the Employer for the Limitation Year (as defined in subsection (b) below) in which such Allocation Date occurs, shall not exceed the Maximum Permissible DC Amount (as defined in subsection (b) below), based upon Annual Compensation up to such Allocation Date for such Limitation Year.
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If the Annual Additions allocated on behalf of a Member or former Member under this Plan and any other defined contribution plan of the Employer are to be reduced as of any Allocation Date as a result of exceeding the limitations described in the next preceding two paragraphs, such reduction shall be, to the extent required, effected by first reducing the Annual Additions to be allocated on behalf of such Member or former Member under this Plan as of such Allocation Date. If as a result of the first three paragraphs of this subsection 6.4(a) the allocation of Annual Additions under this Plan is to be reduced, such reduction shall be allocated to a suspense account as of such Allocation Date and held therein until the next succeeding Allocation Date on which Company Contributions and forfeitures could be allocated under the provisions of the Plan, at which time such reduction shall be allocated and reallocated to the Individual Accounts of Members hereunder (in accordance with the provisions of Section 6.1 hereof and subject to the limitations of this Section 6.4) before any Company Contributions may be made to the Plan for the limitation year ending on such Allocation Date. In the event of termination of the Plan, the suspense account shall revert to the Company to the extent it may not be allocated to any Individual Account. If a suspense account is in existence at any time during a Limitation Year pursuant to this Section, it will not participate in the allocation of the Trust Fund' s investment gains and losses. (b) Definitions Applicable to Section 6.4 . For purposes of Section 6.4, the following definitions shall apply: (i) Annual Additions . Annual Additions are the sum of the following amounts allocated on behalf of a Member or former Member for a Limitation Year: (1) all Employer contributions; (2) forfeitures, if any; (3) all Employee contributions; and (4) amounts allocated after March 31, 1984, to an individual medical benefit account, as defined in Code Section 415(1)(2) that is part of a pension or annuity plan maintained by the Employer, and amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such dat...
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