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Glossary of Terms

Account(s)

A Participant's Non-Elective Employer Contribution Account, Elective Contribution Account, Qualified Non-Elective Contribution Account, Matching Contribution Account, Qualified Matching Account, Rollover Contribution Account, etc.

Accrued Benefit

The value of a Participant's accounts in a Defined Contribution (DC) plan or the amount of benefit earned in a Defined Benefit (DB) Pension plan, at any given date.

Actual Deferral Percentage (ADP)

Equals, for an individual Participant, the amount of Qualifying Section 401(k) Contributions made on behalf of each eligible Participant for the Plan Year divided by the Participant's Compensation for the Plan Year. With respect to the group of Highly Compensated Employees (HCE) who are eligible Participants and all Non Highly Compensated Employees (NHCE), the ADP is calculated for each individual Participant and then the average of the group is used for non discrimination testing purposes.

Alternate Payee

Is a spouse, former spouse, child, or other dependent of the Participant who is recognized by a domestic relations order as having a right to receive all or a portion of the benefits payable under a qualified retirement plan with respect to the Participant. See section entitled Spousal Rights for more information. With respect to the group of HCE who are eligible Participants and NHCE, the contribution percentage is calculated for each individual and then the average of the group is used for non discrimination testing purposes.

Anniversary Date

The last day of the Plan Year.

Average Contribution Percentage

Equals, for an individual Participant, the amount of Matching (IRC 401(m)) Contributions made on behalf of each Eligible Participant for the Plan Year divided by the Eligible Participant's Compensation.

Beneficiary Designation Form

Is the form upon which a Participant instructs the trustee who is to receive his or her benefits in the event of the Participant's death. See section entitled Beneficiary Designation Rules for further information.

Board

The Board of Directors of the Employer, if a Corporation. If the Employer is not a corporation, Board Means the managing partner(s) of a partnership, the manager of a limited liability company or the sole proprietor of an unincorporated business.

Break in Service

Occurs when an Employee does not perform more than 500 Hours of Service in a Plan Year. An Employee who is granted a Maternity of Paternity Leave of Absence shall receive credit for eight (8) Hours of Service per day of such absence. In general, Leaves of Absence shall not cause a Break-in-Service.

Code

Code means the Internal Revenue Code of 1986, as amended from time to time.

Committee

Committee means the administrative committee appointed by the sponsoring Employer's Board.

Compensation

Compensation means the wages, salaries, fees and other amounts paid by the Employer to the Employee for personal services. See section entitled Contribution Limitations for an extensive discussion on the definition of Compensation.

Compensation Limitation

Compensation Limitation is the maximum amount of compensation of each Employee taken into account. For 2003 this amount equals $200,000. This amount is adjusted annually for cost of living increases, in $5,000 increments.

Controlled Group

Controlled Group means the Employer and all members of its controlled or affiliated group of trades or businesses whether or not incorporated (including an affiliated service group).

Defined Benefit Dollar Limitation

Defined Benefit Dollar Limitation is the maximum annual benefit that can be provided for in a Defined Benefit (DB) Pension Plan. The maximum limit in 2003 is $160,000, adjusted annually for cost of living.

Defined Contribution Dollar Limitation

Defined Contribution Dollar Limitation is the maximum annual additions allowed to a Participant's account in a DC plan. The maximum limit in 2003 is $40,000, adjusted annually for cost of living in $1,000 increments.

DEFRA

DEFRA means the Deficit Reduction Act of 1984, as amended from time to time.

Designated Beneficiary or Beneficiary

Designated Beneficiary or Beneficiary means the person(s) or entity(ies) designated by the Participant to receive benefits as a result of the death of the Participant.

Determination Date

Determination Date means with respect to any Plan Year, is generally the last day of the Plan Year.

Direct Rollover

Direct Rollover is the Account Balance or Accrued Benefit of a Participant that is transferred from one qualified plan or IRA to another.

Distributee

Distributee means any person who receives a distribution from the Plan as an Employee, former Employee, an Employee's or former Employee's surviving spouse, an Employee or former Employee's spouse or former spouse, a deceased Participant's other Beneficiary or an Alternate Payee under a Qualified Domestic Relations Order.

Distribution Election Form

Distribution Election Form is the form upon which a Participant or Beneficiary eligible for a distribution indicates how he or she would like their benefits to be distributed. It may vary from plan to plan, but the most common distribution options are as follows: 1. Receive a cash lump sum distribution, which will generally be taxed as ordinary income. 2. Have the Trustee use the Account Balance to purchase a paid up Life Annuity or Joint and Survivor Annuity. 3. Leave the money in the plan until reaching the Normal Retirement Date. This allows for continuing deferral of federal income taxes. 4. Have a Direct Rollover to an Individual Retirement Account or other qualified retirement plan.

Domestic Relations Order

Domestic Relations Order is a judgment, decree, or other order made pursuant to a state domestic relations law that related to the provision of child support, alimony, or marital property rights.

Earned Income

Earned Income means the net earnings subject to self employment tax of a Self-Employed individual from self-employment or from a partnership, to be reduced by contributions to the plan and the deduction for 1/2 of the self employment tax.

Election Period

Election Period means the period of time in which Employees decide if they will make Elective Deferrals and, if so, how much. For most of our Plans this is the thirty (30) days prior to the first day of the Plan Year.

Elective Contribution Account

Elective Contribution Account means the account maintained to record the Participant's Elective Contributions.

Elective Contributions

Elective Contributions means in any Plan Year the amount of a Participant's Compensation elected by him or her to be reduced and deferred to the Plan on his behalf.

Elective Deferrals

Elective Deferrals means the sum of an individual's election to defer income, which is not includable in the individual's gross income for the taxable year. Such as a 401(k) Elective Deferral or Elective Contributions made under any qualified cash or deferred arrangement (CODA).

Eligibility Computation Period

Eligibility Computation Period means the initial 12 consecutive month period commencing on an Employee's Employment Commencement Date.

Eligible Employee

Eligible Employee is an Employee who has satisfied the plan's eligibility requirements.

Eligible Participant

Eligible Participant is an Employee who has satisfied the plan's eligibility requirements, is not excluded from participation and was still employed on the plan's next Entry Date after satisfying the eligibility requirements.

Eligible Retirement Plan

Eligible Retirement Plan means an individual retirement account, individual retirement annuity or qualified trust that accepts a Distributee's Eligible Rollover Distribution.

Eligible Rollover Distribution

Eligible Rollover Distribution means any distribution of $200 or more of the Distributee's vested Accrued Benefit excluding any Required Minimum Distribution (401(a)(9) of the Code)

Employee

Employee means every person employed by the Employer whose income is subject to withholding of income tax or for whom social security contributions are made by the Employer. If the Employer is an Unincorporated Entity, Employee also means a Self-Employed Individual.

Employee After-Tax Contributions

Employee After-Tax Contributions are contributions made after the Employer withholds income and other applicable employment taxes from the Participant's pay. Such contributions are allocated to a separate account to which the attributed earnings and losses are allocated. Certain restrictions imposed on After-Tax Contributions in 1987 rendered them useless and inadvisable. None of our plans allow for After-Tax Contributions.

Employer Contributions

Employer Contributions are contributions made on a Participant's behalf, which come from the Employer (as opposed to Employee Contributions or Elective Deferrals).

Employment Commencement Date

Employment Commencement Date means the date upon which an Employee first completes one (1) Hour of Service.

ERISA

ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.

Excess Aggregate Contributions

Excess Aggregate Contributions means, with respect to any Plan Year, the amount of Matching Contributions actually made on behalf of Highly Compensated Employees, which exceed the maximum amount of such contributions permitted under the Contribution Percentage limitation.

Excess Contributions

Excess Contributions means, with respect to any Plan Year, the amount of 401(k) Elective Contributions made on behalf of Highly Compensated Employees, which exceed the maximum amount of such contributions permitted under the Actual Deferral Percentage limitation.

Family Member

Family Member means an Employee or former Employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants.

Fiduciary

Fiduciary is a person who exercises any discretionary authority or control over the management of the plan or its assets, or who is paid to give investment advice regarding plan assets.

Five Percent (5%)-Owner

Five Percent (5%)-Owner means any person who owns directly or indirectly more than five percent (5%) of the outstanding stock of the Employer OR possessing more than five percent (5%) of the total combined voting power of all stock of the Employer. If the Employer is not a Corporation, 5%-Owner means any person who owns more than five percent (5%) of the capital or profits interests in the Employer.

Forfeitures

Forfeitures occur when a Participant who is less than 100% Vested receives a Distribution or incurs five consecutive one year Breaks in Service. The Participant is entitled to receive only the portion of his or her Account Balance in which he or she is vested and the remaining portion, the Forfeiture, is allocated to the other active Participants in the Plan; or used to pay plan administrative expenses.

Highly Compensated Employee

Highly Compensated Employee means any Employee who performs services during the Plan Year and was either; (1) a 5%-Owner during the Plan Year or Look Back Year, or (2) a Family Member ofr a 5%-Owner, or (3) received Compensation from the Employer in an amount that exceeded the Compensation Limit defining a Highly Compensated Employee (See Current Year Limits) during the Look Back Year. Also, the Employer may elect to require an Employee to be a member of the Top Paid Group. We usually recommend our 401(k) clients to make this election as it tends to help ADP Testing. (see "Top Paid Group")

Hour of Service

Hour of Service means: a) Each hour for which an Employee is directly or indirectly paid, or entitled to payment. b) Each hour for which an Employee is directly or indirectly paid, or entitled to payment, by the Employer for a period of time during which no services are performed. Such instances may be due to vacation, holiday, illness, incapacity, disability, layoff, jury duty, military duty, or Leave of Absence with pay. c) Each hour for which an Employee has been awarded or for which the Employer has agreed to pay back pay. All such hours shall be credited to the Employee for the period(s) in which the services are performed and not when paid, if different.

Inactive Participant

Inactive Participant means a Participant whose participation in the plan is suspended because of a change of employment status but whose total benefits have not yet been distributed. Such a change in status may be due to termination of employment, incurring a Break in Service or becoming a member of a class of Employees which has been excluded from participation.

Investment Manager

Investment Manager means a Fiduciary designated by the Employer or the Committee, to whom has been delegated the responsibility and authority to manage, acquire and dispose of the Trust assets, and who is registered as an investment advisor under the Investment Advisors Act of 1940; a bank or an insurance company, who has acknowledged in writing that he or she is a Fiduciary with respect to the management and control of the Trust assets.

Joint and Survivor Annuity

Joint and Survivor Annuity - see Qualified Joint and Survivor Annuity

Key Employee

Key Employee is any Employee who, during the prior Plan year was an officer of the Employer with annual Compensation that exceeded the Compensation Limit defining a Key Employee (See Current Year Limits), a more than 1% owner of the Employer with annual Compensation above $150,000, or a more than 5% Owner of the Employer. This definition is used for determining if a Plan is Top Heavy. (see separate section entitled Top Heavy Plans).

Leased Employee

Leased Employee means any person who has performed services for the Employer on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by Employees in the business field of the Employer.

Leave of Absence

Leave of Absence means a leave granted by the Employer for reasons of health or public service or for reasons determined by the Employer to be in its best interests.

Lifetime Distribution

Lifetime Distribution is a series of scheduled substantially equal periodic payments for either the life of the Participant or the joint life of the Participant and the Participant's joint annuitant. In order to avoid the Premature Distribution penalty, the payments must begin after a separation from service and they may not be modified before the end of the five-year period after benefits commence and the attainment of age 59.

Loan Program

Loan Program is the document, sometimes part of the plan document, that outlines the conditions and rules by which a Participant can borrow money from the Trust.

Look Back Year

Look Back Year means the 12-month period immediately preceding any relevant Plan Year. The Look Back year may also be the calendar year ending with or within the Plan Year.

Matching Contributions

Matching Contributions are Employer contributions made in addition to or in lieu of profit sharing contributions. The matching contribution is typically a percentage of the Employee's Elective Deferral and, therefore, is allocated only to those Employees making elective contributions. Many Employers will match the Employee's Elective Deferral as a way of encouraging Employee participation in the plan.

Maternity or Paternity Leave of Absence

Maternity or Paternity Leave of Absence means an absence because of an Employee's pregnancy, because of the birth of a child of the Employee, because of the adoption of a child and placement of the child with the Employee or for purposes of caring for such child for a period beginning immediately following such birth or placement. No Hours of Service for Maternity of Paternity Leave of Absence shall be credited to a Participant unless he or she timely furnishes to the Committee such information as the Committee may request to establish that the absence is for a Maternity or Paternity Leave of Absence and the number of days of such absence. The total Hours of Service to be credited for Maternity or Paternity Leave of Absence shall not exceed 501 in any computation period.

Net Profits

Net Profits means the net income of the Employer as determined for federal income tax purposes without any deduction for taxes based upon income or for contributions made by the Employer to any Retirement Plan(s). For Self-Employed individuals, Net Profits means Earned Income.

Non-Highly Compensated Employee

Non-Highly Compensated Employee is an Employee of the Employer who is neither a Highly Compensated Employee nor a Family Member of a Highly Compensated Employee.

Non-Key Employee

Non-Key Employee means any Employee who is not a Key Employee.

Nonelective Employer Contributions

Nonelective Employer Contributions means Employer contributions other than Matching Contributions, which the Employee may not elect to have the contributions paid to the Employee in cash or other benefits.

Owner-Employee

Owner-Employee means a Self-Employed Individual who owns the entire interest of an Unincorporated Entity, or a partner who owns more than a 10% capital or profits interest in a partnership.

Participant

Participant means any Eligible Employee who enters the plan and who has not received payment of his or her total vested Accrued Benefit.

Participant Loans

Participant Loans occur when Participants borrow money from the Plan. The plan is not required to permit participant loans, but many plans, including most plans we write, do allow Participant Loans. Such provisions give the plan sponsor the ability to help a Participant in need of cash or facing a financial emergency with no risk and, in most cases, little cost to the sponsoring employer. (see section on Participant Loans)

Participating Employer

Participating Employer means any entity other than the sponsoring Employer who adopts the plan.

Party in Interest

Party in Interest includes, generally, plan Fiduciaries, service providers, sponsoring employers, and those who control the Employer, as well as individuals who are related to any of the aforementioned by family or business ties.

Paternity or Maternity Leave of Absence

Paternity or Maternity Leave of Absence means an absence because of an Employee's pregnancy, because of the birth of a child of the Employee, because of the adoption of a child and placement of the child with the Employee or for purposes of caring for such child for a period beginning immediately following such birth or placement. No Hours of Service for Maternity of Paternity Leave of Absence shall be credited to a Participant unless he or she timely furnishes to the Committee such information as the Committee may request to establish that the absence is for a Maternity or Paternity Leave of Absence and the number of days of such absence. The total Hours of Service to be credited for Maternity or Paternity Leave of Absence shall not exceed 501 in any computation period.

Plan Administrator

Plan Administrator is the party responsible for the administration of the plan, responsible for filing the form 5500, distribute required information to Employees, etc. The Employer is generally the Plan Administrator.

Plan Year

Generally, any 12-consecutive-month period identified by the plan for keeping its records. The plan year does not have to coincide with the employer's taxable year or begin on the first day of the month. Changing a plan year may require the consent of the IRS.

Pre Retirement Survivor Annuity

Pre Retirement Survivor Annuity - see Qualified Pre Retirement Survivor Annuity.

Premature Distributions

Premature Distributions occur when a Participant chooses to receive a Distribution prior to reaching age 59 1/2. Such Distributions are punishable by a 10% federal penalty and a 2% state penalty. (see section on Distributions)

Qualified Domestic Relations Order (QDRO)

Qualified Domestic Relations Order (QDRO) means a judgment, decree or order, which assigns to an Alternate Payee the right to receive all or a portion of the benefits payable to a Participant of the Plan. QDRO's usually relate to provisions of child support, alimony payments or marital property rights. Furthermore, QDRO's may not alter the amount or form of plan benefits. (see section on Distributions)

Qualified Joint and Survivor Annuity

Qualified Joint and Survivor Annuity means, with respect to a married Participant, an immediate annuity for the life of the Participant with a survivor annuity for the life of his or her spouse which is 50% or up to 100% of the amount of the annuity paid for the joint lives of the Participant and his or her spouse.

Qualified Matching Contributions

Qualified Matching Contributions mean Matching Contributions that are immediately 100% vested.

Qualified Nonelective Employer Contributions

Qualified Nonelective Employer Contributions means Employer contributions that are immediately 100% vested.

Qualified Pre-Retirement Survivor Annuity

Qualified Pre-Retirement Survivor Annuity means an immediate annuity for the life of the Participant's spouse.

REACT

REACT means the Retirement Equity Act of 1984, as amended from time to time.

Required Minimum Distribution (RMD)

Required Minimum Distribution (RMD): If a Participant is no longer employed and has reached age 70 1/2, he must begin taking distributions. Furthermore, if a Participant is a 5%-Owner and has reached age 70 1/2, he must begin taking distributions even if he is still employed. See section entitled Distributions for an in depth discussion.

Rollover Contribution Account

Rollover Contribution Account means the account maintained to record a Participant's Rollover Contributions.

Rollover Contributions

Rollover Contributions are transfers of an Employee's retirement funds from one plan's Trust (usually a former Employer) into another plan's Trust (usually a current Employer). Also, a Plan may allow for Rollover Contributions from Employees who are not yet Participants. Plans are not required to accept Rollover Contributions, however, every single one of our Plans does allow for them. This satisfies the desires of many Employees to consolidate their retirement plan funds.

Safe Harbor Matching Contributions

Safe Harbor Matching Contributions are contributions made to a plan in order to satisfy the Average Contribution Percentage test. There are several complicated limitations and restrictions to such contributions. For example, they must be fully vested, a notice must be issued to all Employees informing them that such contributions will be made and there are intricate allocation rules.

Safe Harbor Nonelective Employer Contributions

Safe Harbor Nonelective Employer Contributions are contributions made to a Plan in order to satisfy the Average Deferred Percentage test. There are several complicated limitations and restrictions to such contributions. For example, they must be fully vested, a notice must be issued to all Employees informing them that such contributions will be made and there are intricate allocation rules.

Self-Employed Individual

Self-Employed Individual means a person who has Earned Income for the taxable year from the trade or business for which a plan is established, including an individual who would have Earned Income but for the fact that the trade or business had no Net Profits for the taxable year.

Shareholder-Employee

Shareholder-Employee means an Employee of a subchapter S corporation who owns more than five percent (5%) of the outstanding stock of such corporation.

Simple 401(k) Contributions

Simple 401(k) Contributions mean Matching or Nonelective Employer contributions under a simple 401(k) Plan and which are subject to certain allocation, administrative and notice requirements.

Simple 401(k) Plan

Simple 401(k) Plan is a Plan which must satisfy additional requirements and in doing so is allowed to avoid certain testing requirements normally imposed on 401(k) Plans. Such restrictions are: - The sponsoring Employer may not have more than 100 Employees - The plan limits Elective Deferrals to $6,500 (in 2001), whereas a normal 401(k) is allowed $12,000 (in 2003) - The Employer must make a 3% of pay Matching Contribution or 2% of pay Non-Elective Contribution to all Employees. If a plan satisfies these and a few other requirements, it is deemed a Simple 401(k) and may ignore the ADP and ACP tests, which a normal 401(k) must undergo.

Single Employer Plan

Single Employer Plan means a plan maintained by one Employer, or a plan maintained by more than one Employer, all of which are members of a Controlled Group.

Social Security Retirement Age

Social Security Retirement Age means age 65 for a Participant born before January 1, 1938; age 66 for Participant born after December 31, 1937 and before January 1, 1955; and age 67 for a Participant born after December 31, 1954.

Sponsoring Employer

Sponsoring Employer is the Employer who is responsible for the administration of the plan.

TEFRA

TEFRA means the Tax Equity and Fiscal Responsibility Act of 1982, as amended from time to time.

Top Heavy Minimum Contribution

Top Heavy Minimum Contribution is the contribution an Employer is required to make when the plan is determined to by Top Heavy. See section entitled Top Heavy Plans for a further discussion.

Top Heavy Plan

Top Heavy Plan - A plan is Top Heavy when a large percentage of the plan's Account Balances or Accrued Benefits are attributable to Key Employees. See section entitled Top Heavy Plans for a further discussion.

Top Paid Group

Top Paid Group means the group consisting of the top 20% of the Employees when ranked by Compensation.

Total Disability

Total Disability means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which has lasted or can be expected to last for a continuous period of not less then 12 months. This must be determined by a licensed physician or approved by the Committee.

TRA '86

TRA '86 means the Tax Reform Act of 1986, as amended from time to time.

Transferred Benefits

Transferred Benefits mean the benefits of a Participant derived from another qualified plan that are involuntarily transferred to this Plan.

Trust

Trust means the Trust Agreement entered into between the Employer and the Trustee. A Trust may include a custodial agreement or insurance contract, if applicable.

Trustee

Trustee is the person(s) or institution responsible for handling Trust assets. The Trustee(s) are named an agreement between the Trustee(s) and the Employer.

Unincorporated Entity

Unincorporated Entity means a sole proprietorship or a partnership.

Vesting

Vesting refers to the percentage of a Participant's Account Balance or Accrued Benefit which is actually owned by the Participant and is non-forfeitable.

Vesting Computation Period

Vesting Computation Period means the 12 consecutive month period ending on the last day of the Plan Year.

Waiver Election

Waiver Election means a written election by a Participant to receive the payment of the Participant's vested Accrued Benefit in a manner other than a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity. The Participant's spouse must sign the Waiver Election in front of a notary public. The only exceptions are if the Committee deems there is no spouse or the spouse cannot be located. Also, a former spouse's consent to a Waiver Election shall not be binding on a new spouse.

Year of Service

Year of Service means a 12-month period, generally the Plan Year, in which an Employee has at least 1,000 Hours of Service.

  

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