Principal Mutual Life Insurance Company's
Master Simplified Employee Pension Plan
This is the Principal Mutual Life Insurance Company's Master Simplified Employee
Pension Plan for use by individuals who desire to establish a Simplified
Employee Pension Plan (SEP) as described in Section 408(k) of the Internal
Revenue Code ("Code"). Principal Mutual Life Insurance Company hereby agrees to
act as sponsor of any SEP established under the Plan and this Agreement, subject
to the following terms and conditions.
ARTICLE I -- PURPOSE
It is the intention of the Employer to adopt this SEP agreement which satisfies
the requirements of Code Section 408(k), and any amendments thereto.
Under this SEP agreement, the Employer may agree to permit Elective Deferrals to
be made in each Plan Year to the Individual Retirement Account or Individual
Retirement Annuity (IRA) as described in Code Section 408(a) or (b)
respectively, established by or on behalf of each of the Employees who are
eligible to participate in the SEP. The Employer may also make a non-elective
Employer Contribution for or on behalf of each Eligible Employee covered under
this plan. If Elective Deferrals are allowed, this Plan is intended to qualify
as a salary reduction simplified employee pension ("SARSEP") under Code Section
408(k) (6) and the regulations thereunder.
This SEP agreement is effective upon adoption. No Elective Deferrals may be made
by an Employee on the basis of Compensation that the Employee received or had a
right to receive before adoption of this agreement and execution by the Employee
of the deferral election.
The Employer may deduct, subject to the otherwise applicable limits, those
contributions made to a SEP. Contributions to the SEP are deductible for the
Employer's taxable year with or within which the Plan Year of the SEP ends.
Contributions made for a particular taxable year and contributed by the due date
of the Employer's income tax return, including extensions, are deemed made in
that taxable year.
ARTICLE II -- PARTICIPATION
Any Employee who meets the participation requirements of Section II of the
Adoption Agreement must be permitted to participate in this SEP.
Elective Deferrals shall be permitted for a Plan Year only if:
(A) Not less than 50% of the Employees that are eligible to make Elective
Deferrals elect, or have an election in effect, to have Elective
Deferrals made to the SEP. See Article VII for further information; and
(B) The Employer had no more than 25 Employees eligible to participate in
the SEP at any time during the prior Plan Year.
A new Employer who had no Employees during the prior Plan Year will meet the
limitation in Code Section 408(k)(6)(B) (regarding no more than 25 eligible
employees during the preceding year) if it had 25 or fewer Employees throughout
the first 30 days of its existence.
ARTICLE III -- CONTRIBUTIONS
Employer
The Employer agrees that an Individual Retirement Account (IRA) will be
established for each Eligible Employee. When a Participant first becomes
eligible for a Contribution from the Employer, the Employer shall arrange for
the participant to apply for a SEP. Such application shall be made prior to the
date the first Employer Contribution is made.
For each Plan Year, the Employer will contribute a non-elective Employer
Contribution to the SEP of each Participant in an amount determined by the
Employer and allocated as determined in the Adoption Agreement. The Employer
must make a Contribution for each Eligible Employee whether or not they are
still employed at the time a Contribution is made. The Contribution made must be
the same percentage of each Employee's total Compensation.
The Employer Contribution for any Plan Year shall be due on the last day of the
Plan Year and shall be payable then or not later than the due date (as extended)
of the Employer's federal income tax return for the taxable year with or within
which the Plan Year ends.
The Employer Contribution shall be paid directly to the Employee's IRA insurer,
trustee, or custodian and applied to each Participant's Account.
Employer Contributions to this SEP, in combination with any other qualified plan
the Employer maintains for the Plan Year, may not exceed the lesser of $30,000
or 15% of Compensation for any Employee. If these limits are exceeded on behalf
of any Employee for a particular plan year, that Employee's Elective Deferrals
(if any) for that year must be reduced to the extent of the excess.
Employee Elective Deferral
An Employee may elect to have Elective Deferrals made under this SEP pursuant to
a salary reduction agreement. An Employee may elect to have Compensation reduced
by a percentage or amount per pay period or for a specified pay period or
periods, as designated in writing to the Employer.
No deferral election may be based on Compensation an Employee received, before
adoption of this elective SEP. This elective SEP shall be effective upon
adoption.
Under no circumstances may an Employee's Elective Deferrals in any Plan Year
exceed the lesser of fifteen percent of his or her Compensation (determined
without including the SEP-IRA contributions), or the limitation under Code
Section 402(g) based on all of the plans of the Employer. This amount may be
computed using the following formula:
Compensation (before subtracting employer SEP-IRA contributions) x
13.0435%.
If the Employer maintains any other SEP to which non-elective SEP Employer
Contributions are made for a Plan Year, or any qualified plan to which
contributions are made for such Plan Year, then an Employee's Elective Deferrals
may be limited to the extent necessary to satisfy the maximum contribution
limitations under Code Section 415(c)(1)(A).
In addition to the dollar limitation of Code Section 415(C)(1)(A), which is
$30,000 in 1991, contributions to this SEP when aggregated with contributions to
all other SEPs and qualified plans of the Employer generally may not exceed 15%
of Compensation or $30,000 for any Employee. If these limits are exceeded on
behalf of any Employee for a particular plan year, that Employee's Elective
Deferrals for that year must be reduced to the extent of the excess.
Each Employee's Elective Deferrals to this SEP may be based only on the first
$150,000 of Compensation (as adjusted annually in accordance with Code Section
408(k)(8)).
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceed 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this plan
to the limitation under section 401(a)(17) of the Code shall mean the OBRA '93
annual compensation limit set forth in this provision.
The Employer shall contribute and allocate to each Employee's IRA an amount
equal to the amount of the Employee's Elective Deferrals. Elective Deferrals
will be paid by the Employer to the Employee's IRA trustee, custodian, or
insurer (in the case of a retirement annuity contract) or an IRA established on
behalf of an Employee by the Employer.
ARTICLE IV -- EXCESS ELECTIVE DEFERRALS (402(g) LIMIT)
Code Section 402(g) limits the maximum amount of Compensation an Employee may
elect to defer under a SEP (and certain other arrangements) during the Plan
Year. This limit, which originally was $7,000, is indexed according to the cost
of living. In addition, the limit may be increased if the Employee makes
Elective Deferrals to a salary reduction arrangement under Code Section 403(b).
The Code Section 402(g) limit applies to the total Elective Deferrals the
Employee makes for the Plan Year, from all Employers, under the following
arrangements:
(A) Elective SEPs under Code Section 408(k)(6); (B) Cash or deferred
arrangements under Code Section 401(k); and (C) Salary Reduction
arrangements under Code Section 403(b).
Thus, an Employee may have excess elective deferrals even if the amount deferred
under this SEP alone does not exceed the Code Section 402(g) limit.
If an Employee who elects to defer Compensation under this SEP and any other SEP
or arrangement has made excess elective deferrals for a Plan Year, the
Participant must withdraw those excess elective deferrals by April 15 following
the calendar year to which the deferrals relate. Those excess elective deferrals
not withdrawn by such date will be subject to the IRA contribution limitations
of Code Section 219 and 408 and thus may be considered an excess contribution to
the Employee's IRA. Such excess elective deferrals, therefore, may be subject to
the six percent tax on excess contributions under Code Section 4973.
Income on excess elective deferrals is includible in gross income in the year
withdrawn from the IRA and must be withdrawn by the Participant's tax return
following the calendar year to which the deferrals relate. Income withdrawn from
the IRA after that date may be subject to the ten percent tax on early
distributions under Code Section 72(t) if the recipient is not age 59 1/2.
ARTICLE V -- EXCESS SEP CONTRIBUTIONS -- DEFERRAL PERCENTAGE LIMITATION
Elective Deferrals by a Highly Compensated Employee must satisfy the Deferral
Percentage Limitation under Code Section 408(k)(6). Amounts in excess of the
Deferral Percentage Limitation will be deemed excess SEP contributions on behalf
of the affected Highly Compensated Employee or Employees. These excess SEP
contributions must be removed from the Employee's IRA. The Employer shall notify
each Highly Compensated Employee as outlined in Article VI - Excess SEP
Contributions.
The Deferral Percentage Limitation for Highly Compensated Employees is computed
by first averaging the Deferral Percentages for each eligible non-highly
compensated employee for the Plan Year and then multiplying this result by 1.25.
The deferral percentage for a Plan Year of any Highly Compensated Employee
eligible to participate in this SEP may not be more than the resulting product,
the Deferral Percentage Limitation.
Only Elective Deferrals are included in this computation. Non-elective Employer
Contributions may not be included. The determination of the Deferral Percentage
for any Employee is to be made in accordance with Code Section 408(k)(6) and
should satisfy such other requirements as may be provided by the Secretary of
the Treasury.
For purposes of making this computation, the calculation of the number and
identity of Highly Compensated Employees, and their deferral percentages, is
made on the basis of the entire Affiliated Employer.
In addition, for purposes of determining the Deferral Percentage of a Highly
Compensated Employee, the Elective Deferrals and Compensation of the Employee
will also include the Elective Deferrals and Compensation of any Family Member.
This special rule applies, however, only if the Highly Compensated Employee is a
5% owner or is one of a group of the ten most Highly Compensated Employees. The
Elective Deferrals and Compensation of Family Members used in this special rule
do not count in computing the average of the deferral percentages of non-highly
compensated employees.
ARTICLE VI -- EXCESS SEP CONTRIBUTIONS -- TAX CONSEQUENCES AND NOTIFICATION
OF EMPLOYEES
Elective Deferrals
The Employer is responsible for notifying each affected Employee, if any, within
2 1/2 months following the end of the Plan Year, of the amount of excess SEP
contributions to that Employee's SEP-IRA. Such excess SEP contributions are
includible in the Employee's gross income in the calendar year as of the
earliest date that any Elective Deferrals by the Employee during the Plan Year
would have been received by the Employee had he or she originally elected to
receive the amounts in cash. Income allocable to the excess SEP contributions is
includible in gross income in the year of withdrawal from the IRA. However, if
the excess SEP contributions (not including allocable income) total less than
$100, then the excess contributions are includible in the Employee's gross
income in the calendar year of notification. Income allocable to the excess SEP
contributions is includible in gross income in the year of notification. Income
allocable to the excess SEP contributions is includible in gross income in the
year of withdrawal from the IRA.
If the Employer fails to notify any affected Employees within 2 1/2 months
following the end of the Plan Year of an excess SEP contribution, the Employer
must pay a tax equal to 10% of the excess SEP contribution. If the Employer
fails to notify Employees by the end of the Plan Year following the Plan Year in
which the excess SEP contributions arose, the SEP will no longer be considered
to meet the requirements of Code Section 408(k)(6). If the SEP no longer meets
the requirements of Code Section 408(k)(6), then any contribution to an
Employee's IRA will be subject to the IRA contribution limitations of Code
Sections 219 and 408 and thus may be considered an excess contribution to the
Employee's IRA.
The Employer's notification to each affected Employee of the excess SEP
contributions must specifically state in a manner calculated to be understood by
the average Employee:
(A) The amount of the excess SEP contributions attributable to that
Employee's Elective Deferrals (B) The calendar year in which the excess
SEP contributions are includible in gross income; and (C) That the
Employee must withdraw the excess SEP contributions (and allocable
income) from the SEP-IRA by the due date (including extensions) for
filing the income tax return following the calendar year of
notification by the Employer. Those excess contributions not withdrawn
by April 15 following the year of notification will be subject to the
IRA contribution limitations of Code Sections 219 and 408 for the
preceding calendar year and thus may be considered an excess
contribution to the Employee's IRA. Such excess contributions may be
subject to the six percent tax on excess contributions under Section
4973. If income allocable to an excess SEP contribution is not
withdrawn by April 15 following the calendar year of notification by
the Employer, the income may be subject to the ten percent tax on early
distributions under Code Section 72(t) when withdrawn.
For information on reporting excess SEP contributions, see Notice 87-77, 1987-2
C.B. 385, and Notice 88-33, 1988-1 C.B. 513, as modified by Notice 89-32, 1989-1
C.B. 671. The Employer shall notify each Employee who makes an Elective Deferral
for a Plan Year that, notwithstanding the prohibition on withdrawal restrictions
contained in the SEP, any amount attributable to such Elective Deferrals which
is withdrawn or transferred before the earlier of 2 1/2 months after the end of
the particular Plan Year and the date the Employer notifies its Employees that
the Deferral Percentage Limitations have been calculated, will be includible in
income for purposes of Code Sections 72(t) and 408(d)(1).
Employer Contribution
Any Employer Contribution that is more than the yearly limitation may be
withdrawn without penalty by April 15 for the Employee's tax return, but is
includible in income. Excess SEP contributions left in the Employee's SEP-IRA
after that time may have adverse tax consequences. Withdrawals of those
contributions may be taxed as premature withdrawals.
ARTICLE VII -- FAILURE TO SATISFY THE 50% TEST
If the Employer determines, as of the end of the Plan Year, that more than half
of the eligible Employees have chosen not to make Elective Deferrals for that
Plan Year, then all Elective Deferrals made by Employees for that Plan Year
shall be considered "disallowed deferrals", i.e. IRA contributions that are not
SEP-IRA contributions.
The Employer must notify each affected Employee, within 2 1/2 months following
the end of the Plan Year to which the disallowed deferrals relate, that the
Participant's deferrals are no longer considered SEP-IRA contributions. Such
disallowed deferrals are includible in the Employee's gross income in the
calendar year as of the earliest date that any Elective Deferrals by the
Employee during the Plan Year would have been received by the Employee had the
Participant originally elected to receive the amounts in cash. Income allocable
to the disallowed deferrals is includible in the Employee's gross income in the
year of withdrawal from the IRA.
The notification to each affected Employee of the disallowed deferrals must
specifically state in a manner calculated to be understood by the average
Employee:
(A) The amount of the disallowed deferrals;
(B) The calendar year in which the disallowed deferrals are includible in
gross income; and
(C) That the Employee must withdraw the disallowed deferrals (and allocable
income) from the SEP-IRA by April 15 for filing the Employee's tax
return following the calendar year of notification by the Employer.
Those disallowed deferrals not withdrawn by such tax filing deadline
will be subject to the IRA contribution limitations of Code Sections
219 and 408 and thus may be considered an excess contribution to the
Employee's IRA. These disallowed deferrals thus may be subject to the
six percent tax on excess contributions under Section 4973. If income
allocable to a disallowed deferral is not withdrawn by April 15 for
filing the Employee's tax return, the income may be subject to the ten
percent tax on early distributions under Code Section 72(t) when
withdrawn.
Disallowed deferrals should be reported in the same manner as are excess SEP
contributions.
ARTICLE VIII -- TOP HEAVY REQUIREMENTS
This SEP is "top-heavy" for a plan year if, as of the last day of the previous
plan year (or current plan year if this is the first year of the SEP) the total
of elective and non-elective contributions made on behalf of key employees for
all the years this SEP has been in existence exceeds 60% of such contributions
for all employees. If the employer maintains (or maintained within the prior
five years) any other SEP or defined contribution plan in which a key employee
participates (or participated), the contributions or account balances, whichever
is applicable, must be aggregated with the contributions made to this SEP. The
employee who ceases to be a key employee or an individual who has not been in
the employ of the employer for the previous five years shall be disregarded.
During any Plan Year in which this Plan is a Top-heavy Plan, the Employer shall
make a minimum contribution or allocation on the last day of the Plan Year for
each person who is an Employee on that day and who either was or could have been
an Active Participant during the Year. The minimum contribution and allocation
for such persons shall be equal to the lesser of (A) or (B) below:
(A) Three percent of such person's Compensation
(B) If the contribution rate for all Key Employees is less than three
percent of Compensation, then the highest contribution rate that
applies to any Key Employee.
If the Employer Contributions and allocations otherwise required under the
defined contribution plans are at least equal to the minimum above, no
additional contribution or allocation shall be required. If the Employer
Contributions and allocations are less than the minimum above and the Employer
Contributions under this Plan are allocated to Participants, the Employer
Contributions (other than Elective Deferral Contributions) shall be reallocated
to provide the minimum. The remaining Contributions shall be allocated as
provided in the preceding articles of this Plan. If total Contributions and
allocations are less than the minimum above and the Employer's Contributions
under this Plan are not allocated, the Employer shall contribute the difference
for the year. The minimum contribution or allocation applies to all of the
defined contribution plans in the aggregate which are Top-heavy Plans. A minimum
allocation under a profit sharing plan shall be made without regard to whether
or not the Employer has profits.
If an Employer has more than one Top-heavy Plan, the minimum top-heavy
contribution does not need to be duplicated under each Plan. For Employees who
are Participants under both Top-heavy Plans, one of the Plans may provide the
minimum benefit required. For Employees who are Participants under only one
Top-heavy Plan, that Plan in which they are Participants shall provide the
top-heavy minimum contribution.
If the Employer has more than one Plan, all of the Plans of the Employer may be
required to be aggregated when testing to see if the Plans are top-heavy. This
"required aggregation group" consists of each Plan of the Employer
(A) in which a Key Employee is a Participant and
(B) any other Plan which causes a Plan covering Key Employees to meet the
requirements of Code Sections 401(a)(4) or 410.
If the "required aggregation group" is top-heavy, each Plan in the group is a
Top-heavy Plan.
The Employer is permitted to include other Plans when testing to see if the
group as a whole is top-heavy. This group as a whole is considered as
"permissive aggregation group". If this group is not top-heavy, none of the
Plans in the group is a Top-heavy Plan.
Calculations to determine if this Plan is a Top-heavy Plan and the
identification of Key Employee's shall be determined according to the provisions
of Code Section 416 and regulations thereunder. Compensation for determining the
top-heavy minimum excludes Elective Deferrals.
For purposes of satisfying the minimum contribution requirement under Code
Section 416, all non-elective Employer Contributions under the SEP shall be
taken into account, but Elective Deferrals shall not be taken into account.
The requirements of this section shall be met without regard to contributions
under Chapter 2 of the Code (relating to tax on self-employment), Chapter 21 of
the Code (relating to Federal Insurance Contributions Act), Title II of the
Social Security Act or any other Federal or state law.
ARTICLE IX -- DEFINITIONS
10.1 Adoption Agreement means the attached document which contains
the selections and specifications for the Plan.
10.2 Affiliated Employer means any corporation that is a member of a
controlled group of corporations (as described in Code Section 414(b))
that includes the employer; any trade or business (whether or not
incorporated) that is under common control (as defined in Code Section
414(c)) with the employer; any organization (whether or not
incorporated) which is a member of an affiliated service group (as
defined in Code Section 414(m)) that includes the employer; and any
other entity required to be aggregated with the employer pursuant to
regulations under Code Section 414(o).
10.3 Code means the Internal Revenue Code of 1986, as amended.
10.4 Compensation means information required to be reported under Code
Section 6041 and 6051 (Wages, Tips and Other Compensation Box on Form
W-2). Compensation is defined as a Participant's wages within the
meaning of Code Section 3401(a) and all other payments of compensation
to an Employee by the Employer (in the course of the Employer's trade
or business), for which the Employer is required to furnish the
Employee a written statement under Code Section 6041(d) and 6051(a)(3),
which is actually paid by the Employer for a specified period.
Compensation is determined without regard to any rules under Code
Section 3401(a) that limit the remuneration included in wages based on
the nature or location of the employment or services performed (such as
the exception for agricultural labor in Code Section 3401(a)(2)).
Compensation shall include elective contributions but shall exclude
contributions made to this SEP-IRA by the Employer. Elective
contributions are amounts excludable from the gross income of the
Employee under Code Sections 125, 402(a)(8), 402(h) or 403(b), and
contributed to the Employer at the Employee's election, to a Code
Section 401(k) arrangement, a simplified employee pension, cafeteria
plan or tax-sheltered annuity. Elective contributions also include pay
deferred under a Code Section 457 plan maintained by the Employer and
Employee contributions "picked up" by a governmental entity and,
pursuant to Code Section 414(b)(2), treated as the Employer's
contributions. Compensation shall include amounts received for personal
services actually performed (see Reg. 1.219-1(c)).
For purposes of Elective Deferral Contributions only, Compensation
shall not include reimbursements or other expense allowances, fringe
benefits (cash or non-cash), moving expenses, deferred compensation,
and welfare benefits, unless otherwise specified.
For any self-employed individual covered under the plan, Compensation
will mean earned income defined by Code Section 401(C)(2). Compensation
shall include only that Compensation which is actually paid to the
participant during the Plan Year.
The annual Compensation of each Participant taken into account under
the plan for any year shall not exceed $150,000. This limitation shall
be adjusted by the Secretary at the same time and in the same manner as
under Code Section 415(d), except the dollar increase in effect on
January 1 of any calendar year is effective for years beginning in such
calendar year and the first adjustment to the $150,000 limitation is
effected on January 1, 1990. If this plan determines Compensation on a
period of time that contains fewer than 12 months, then the annual
Compensation limit is an amount equal to the annual Compensation limit
for the calendar year in which the compensation period begins
multiplied by the ratio obtained by dividing the number of full months
in the period by 12.
In determining the Compensation of a Participant the rules of Code
Section 414(q)(6) shall apply, except in applying such rules, the term
Family Member shall include only the spouse of the Participant and any
lineal descendants of the Participant who have not attained age 19
before the close of the year. If, as a result of the application of
such rules the adjusted $150,000 is exceeded, then (except for purposes
of determining the portion of Compensation up to the Integration Level
if this plan provides for permitted disparity), the limitation shall be
prorated among the affected individuals in proportion to each such
individual's Compensation as determined under this section prior to the
application of this limitation.
Compensation for the purposes of the $300 limit of Code Section
408(k)(2)(C) shall be defined as Code Section 414(q)(7) compensation.
10.5 Contribution means Employer, Elective Deferrals, or Rollover
Contributions unless the text clearly indicates only one, or certain of
these are meant.
10.6 Deferral Percentage means the ratio (expressed as a percentage) of an
Employee's Elective Deferrals for a year to the Employee's Compensation
for that year. The Deferral Percentage of an Employee who is eligible
to make an Elective Deferral, but who does not make a deferral during
that year, is zero.
10.7 Deferral Percentage Limitation means the maximum amount of Elective
Deferrals, as expressed as a percentage of Compensation, that can be
contributed on behalf of any Highly Compensated Employee for a
particular plan year and it equals the product of (i) the average of
the amounts Elective Deferrals (expressed as a percentage of each such
Employee's Compensation) made on behalf of all the non-highly
compensated employees for the same Plan Year, and(ii) 1.25. In
calculating this average, the percentage for an eligible non-highly
compensated employee who chooses not to have Elective Deferrals made on
his or her behalf for a Plan Year, is zero.
10.8 Elective Deferrals means Contributions made to a Participant's
Simplified Employee Pension during the Plan Year by the Employer, at
the election of a Participant, in lieu of cash Compensation and
pursuant to a salary reduction agreement.
10.9 Eligible Employee means an Employee who meets the requirements
specified in section 2.1 of the Adoption Agreement.
10.10 Employee means an individual who is employed by the Employer, including
an employee within the meaning of Code Section 401(c)(1). For purposes
of a SARSEP plan, the term Employee shall not include a leased employee
within the meaning of Code Section 414(n)(2). The term Employee shall
include a leased employee within the meaning of Code Section 414(n)(2)
who is deemed an employee under the provisions of Code Section
414(n)(1)(A), but not earlier than the time prescribed by Code Section
414(n)(4). The term Employee shall not mean an independent contractor.
10.11 Employer means the person named in Section 1 of the Adoption Agreement.
The term shall also include any other person who has obtained the
written consent of the person named in section 1.1, and adopts this
Plan in writing; provided, however, that such person(s) is under common
control, within the meaning of Code Section 414(b) or (c), or forms
part of an affiliated service group within the meaning of Section
414(m) of the code with the person named in section 1.1.
10.12 Excess Elective Deferrals means amounts deferred for the year in excess
of the limit on Elective Deferrals of Code Section 402(g).
10.13 Family Member means an individual who is related to a Highly
Compensated Employee as a spouse, or as a lineal ascendant (such as a
parent or grandparent) or descendant (such as a child or grandchild) or
spouse of either of those, in accordance with Code Section 414(q) and
the regulations thereunder.
10.14 Fiscal Year means the Employer's taxable year as identified in Section
1 of the Adoption Agreement.
10.15 Highly Compensated Employee means any Employee described in code
Section 414(q) who, during the current Plan Year or the preceding Plan
Year--(a) was at any time a 5-percent owner (as defined in Code Section
416(i)(1)(B)(i));
(b) received Compensation from the Employer in excess of $75,000 (as
adjusted pursuant to Code Section 415(d)
)
(c) received Compensation from the Employer in excess of $50,000 (as
adjusted pursuant to Code Section 415(d)) and was a member of the
top-paid group for such year (the top 20% of Employees, by
compensation)
(d) was at any time an officer of the Employer and received
compensation during such year that is greater than 50 percent of
the dollar limitation in effect under Code Section 415 for defined
benefit plans. No more than three Employees shall be treated as
officers and at least one (the highest paid officer) shall be
treated as Highly Compensated regardless of compensation.
Compensation includes the Participant's Elective Deferrals and any
elective contributions to a Section 125 cafeteria plan, Section
401(k) cash or deferred arrangement or Section 403(b)
tax-sheltered annuity.
10.16 Individual Retirement Account (IRA) means a personal retirement savings
program as set out in Code Section 408.
10.17 Integration Level means the Integration Level defined in section III of
the Adoption Agreement.
10.18 Key Employee means any Employee or former Employee (including
beneficiaries of deceased Employees) who at any time during the
determination period was
(a) one of the officers (subject to the maximum below) whose
Compensation for the Year exceeds 50 percent of the dollar
limitation under Code Section 415(b)(1)(A),
(b) one of the ten Employees who owns (or is considered to own, under
Code Section 318) more than a half percent ownership interest and
one of the largest interests in the Employer during any year of
the determination period if such person's Compensation for the
year exceeds the dollar limitation under Code Section
415(c)(1)(A).
(c) a five-percent owner of the Employer as defined in Code Section
416(i)(1)(B)(i), or (d) a one-percent owner whose Compensation for
the Year is more than $150,000.
Each Affiliated Employer shall be treated as a separate employer for
purposes of determining ownership. Compensation for determining which
Employees are key Employees includes Elective Deferrals.
The determination period is the current Plan Year and the four
preceding Plan Years. If there are fewer than 30 Employees, no more
than three Employees shall be treated as Key Employees because they are
officers. If there are over 30 Employees, no more than 10 percent of
the Employees shall be treated as Key Employees because they are
officers. The determination of who is a Key Employee shall be made
according to Code section 416(i)(1) and the regulations thereunder.
10.19 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 Code Section 414(n)(6)).
10.20 Maximum Integration Rate is equal to the lesser of (a) 5.7% or (b) the
applicable % determined according to the following schedule:
MAXIMUM
INTEGRATION INTEGRATION
LEVEL RATE
100% of TWB 5.7%
Less than 100%, but more
than 80% of TWB 5.4%
More than greater of $10,000
or 20% of TWB, but not
more than 80% of TWB 4.3%
Not more than greater of
$10,000 or 20% of TWB 5.7%
TWB means the Taxable Wage Base as defined in Section 10.26. On any
date the portion of the rate of tax under Code Section 3121(a)(1) (in
effect on the latest Yearly Date) which is attributable to old age
insurance exceeds 5.7%, such rate shall be substituted for 5.7% and
5.4% and 4.3% shall be increased proportionately.
10.21 Participant means an Eligible Employee who meets the participation
requirements of Section 2 of the Adoption Agreement and is included in
this Plan.
10.22 Plan Year means the plan year elected in section 1.3 of the Adoption
Agreement.
10.23 Service means employment with the Employer, including self-employment.
For purposes of determining whether an Employee has satisfied the
service requirement in section 2.1, service with any entity which is
controlled by the Employer, is controlling the Employer, or forms part
of an affiliated service group, within the meaning of Code Section
414(b), (c), or (m), shall be treated as Service with the Employer.
Service for a leased employee shall include the entire period for which
the leased employee performed services for the Employer, or a related
person within the meaning of Code Section 144(a)(3), issued by the
Insurer.
10.24 Simplified Employee Pension (SEP) means an approved Individual
Retirement Account described in Code Section 408(a), issued by the
Sponsor or an approved Individual Retirement Annuity contract described
in Code Section 408(b).
10.25 Sponsor means Principal Mutual Life Insurance Company.
10.26 Taxable Wage Base means the contribution and benefit base in effect
under Section 230 of the Social Security Act at the beginning of the
Plan Year.
10.27 Top-heavy Plan means a Plan considered top heavy within the meaning of
Code Section 416 and regulations thereunder.