TAYLOR CORPORATION FLEXIBLE BENEFIT PLAN SUMMARY PLAN DESCRIPTION

Transcription

1 TAYLOR CORPORATION FLEXIBLE BENEFIT PLAN SUMMARY PLAN DESCRIPTION January 1, 2010 Notice: Receipt of this Summary Plan Description does not mean that you have coverage under this Plan. You must meet eligibility requirements and enroll as set forth in the Plan.

2 TAYLOR CORPORATION FLEXIBLE BENEFIT PLAN SUMMARY PLAN DESCRIPTION This Summary Plan Description is intended to explain the Taylor Corporation Flexible Benefit Plan in a manner that you can easily understand. If you have any questions after reading this Summary Plan Description, please contact your local Human Resources Representative. TABLE OF CONTENTS Page THE PURPOSE OF THE PLAN...1 DEFINITIONS...1 BECOMING ELIGIBLE TO PARTICIPATE IN THE PLAN...5 PARTICIPATION CONDITIONS...5 PAYING FOR YOUR BENEFITS...5 DESCRIPTION OF BENEFITS PROVIDED UNDER THE PLAN...6 SPECIAL RULES RELATING TO REIMBURSEMENT BENEFITS...9 QUALIFIED RESERVIST DISTRIBUTIONS...11 RESTRICTIONS ON RECEIVING BENEFITS...12 MAKING A BENEFIT ELECTION...13 CHANGING YOUR BENEFIT ELECTION...13 LEAVES OF ABSENCE AND FAMILY OR MEDICAL LEAVES...15 QUALIFIED MEDICAL CHILD SUPPORT ORDERS...17 TAX CONSIDERATIONS...18 FACTORS TO CONSIDER ON WHETHER THIS PLAN IS RIGHT FOR YOU...20 TERMINATION OF EMPLOYMENT...21 PLAN AMENDMENT OR TERMINATION...21 YOUR RIGHTS TO CONTINUATION COVERAGE?...21 i

3 TAYLOR CORPORATION FLEXIBLE BENEFIT PLAN SUMMARY PLAN DESCRIPTION TABLE OF CONTENTS (Continued) Page PLAN ADMINISTRATION...25 PRIVACY OF PROTECTED HEALTH INFORMATION...26 CLAIMS FOR BENEFITS...26 SPECIAL RULES RELATING TO CHILDBIRTH AND GROUP HEALTH PLANS...28 REQUIRED COVERAGE FOR RECONSTRUCTIVE SURGERY FOLLOWING MASTECTOMIES...28 SUBROGATION AND REIMBURSEMENT PRIVACY RIGHTS 31 MICHELLE'S LAW..34 THE GENETIC INFORMATION NONDISCVRIMINATION ACT OF MENTAL HEALTH AND SUBSTANCE ABUSE BENEFITS.. 36 IF YOU NEED MORE INFORMATION...36 YOUR ERISA RIGHTS...37 SUMMARY OF ADMINISTRATIVE INFORMATION...40 APPENDIX.. 42 ii

4 THE PURPOSE OF THE PLAN Taylor Corporation and certain of its affiliates have established this Plan to make available to Eligible Employees different combinations of health care benefits, dental care benefits, vision care benefits, dependent care benefits, and direct compensation. DEFINITIONS Here are some definitions that will help you better understand this summary of the Plan: 1. COMPANY Taylor Corporation, its subsidiaries and affiliates. 2. DEPENDENT - A person whom you can claim as a dependent on your federal income tax return. In general, a person will qualify as your Dependent for a year if you provide more than one-half (1/2) of his or her support during the year and certain other tests are met. Your Dependents will usually include your children who were under the age of nineteen (19) at the end of the year or who were fulltime students at a school for at least five (5) months during the year, but please see Michelle s Law in the Summary Plan Description for a discussion of full-time student eligibility and medically necessary leaves of absence. Your Dependents may also include other persons who are either related to you by blood or marriage or lived in your home as a member of your household during the entire year if they had gross income less than the annual indexed gross income limitation amount for federal tax dependents under the Internal Revenue Code. The instructions to your federal income tax return discuss in some detail who qualifies as your Dependent. For purposes of health, dental, vision and health reimbursement coverage, any individual who is considered a tax dependent will be considered your Dependent, but without regard to the rules indicating that (a) an individual who is the dependent of another taxpayer is treated as having no dependent, (b) a married individual who files a joint return cannot be a dependent and (C) gross income of a qualifying relative must be less than the exemption amount and with the following exception, regarding a child of divorced parents, etc., where one or both parents have custody of the child for more than half of the calendar year and where the parents together provide more than half of the child s support for the calendar year) is treated as a dependent of both parents. 3. ELIGIBLE EMPLOYEE An Employee of the Company, who is employed in the United States and whose customary weekly employment is at least twenty (20) hours and who is classified by the Company as a Full-Time Employee or Part-Time Employee. With respect to dependent care reimbursement coverage, an employee on an unpaid leave of absence is not an eligible employee.

5 4. EMPLOYEE A common law employee of the Company. The term Employee does not include: (i) (ii) (iii) (iv) (v) persons covered by a collective bargaining agreement to which the Company is a party, unless such collective bargaining agreement expressly provides for inclusion of such persons in the Plan; leased employees; persons classified by the Company as independent contractors; nonresident aliens who receive no earned income from the Company that constitutes income from sources within the United States; or a person that owns two percent (2%) or more of the Company that is an S corporation. 5. GRACE PERIOD Means the 75-day period immediately following the close of the Plan Year. During the Grace Period, a Participant may receive reimbursement out of any funds remaining in the Participant s Health Care Reimbursement Account as of the last day of the preceding Plan Year for Eligible Medical, Vision or Dental Expenses incurred during the Grace Period. 6. PERIOD OF COVERAGE - The Period of Coverage is generally the same as the Plan Year; however, if you become a participant after a Plan Year has started, the Period of Coverage begins on your first day of participation and ends on the last day of the Plan Year. For example, if you become a participant on March 1, 2010, the Period of Coverage for dependent care reimbursement benefits for the Plan Year ending December 31, 2010 is March 1 through December 31, There are a few exceptions to this general rule: For all benefits except dependent care reimbursement, the Period of Coverage ends on the last day of the pay period which includes your termination of employment, when you cease to be an Eligible Employee or if you stop paying for these benefits. In certain circumstances, the Period of Coverage can be continued to the end of the Plan Year by electing and paying for continuation coverage. (See YOUR RIGHTS TO CONTINUATION COVERAGE.) With respect to health care reimbursement, the Period of Coverage does not include any portion of the Plan Year for which you do not pay the applicable health care reimbursement contribution. In the case of health care reimbursement coverage, the Period of Coverage ends on the last day of the pay period which includes your termination of employment or when you cease to be an Eligible Employee. 2

6 In certain circumstances the Period of Coverage can be continued to the end of the Plan Year in which you cease to be an Eligible Employee. (See YOUR RIGHTS TO CONTINUATION COVERAGE) With respect to dependent care reimbursement coverage, the Period of Coverage will extend to the last day of the Plan Year if your participation ceases due to termination of employment or if you cease to be an Eligible Employee or stop paying for benefits. The Period of Coverage includes the Grace Period for reimbursement accounts. 7. PLAN - This TAYLOR CORPORATION FLEXIBLE BENEFIT PLAN, as it may be amended from time to time. 8. PLAN YEAR - The Plan Year is the calendar year. 9. QUALIFYING INDIVIDUAL For purposes of Dependent Care Reimbursement, The term Qualifying Individual as defined in Internal Revenue Code Section 21(b), is similar to the term Dependent, but is more narrowly defined, as some individuals who are Dependents may not be Qualifying Individuals. A Qualifying Individual is a participant s Dependent who is under the age of thirteen (13), and a participant s spouse or Dependent of any age who is physically or mentally incapable of caring for himself or herself. 10. STATUS CHANGE - A change in circumstances that qualifies as a status change under applicable regulations and is recognized by the Company as a Status Change under the Plan. These include: an event that changes your marital status, including marriage, death of your spouse, divorce, legal separation or annulment, an event that changes your number of dependents, including birth, adoption, placement for adoption or death of a dependent, termination or commencement of employment by you, your spouse, or your dependent, which results in a gain or loss of benefit eligibility, a change in employment status on the part of you, your spouse or your dependent such as a reduction or increase in hours of employment, including a switch between part-time and full time, a change in worksite, or strike or lockout, which results in a gain or loss of 3

7 benefit eligibility that causes a loss or change in coverage, commencement or return from an unpaid leave of absence by you, your spouse or your dependent, an event that causes your dependent to satisfy or cease to satisfy the eligibility requirements for coverage under this Plan or an underlying benefit plan, such as attainment of age, change in student status or any similar circumstance, or in the case of the dependent care reimbursement benefit, an event that causes your dependent to become or cease to be a Qualifying Individual, changes in the place of your residence or work or that of your spouse or dependent, but only to the extent there is a resulting change in the individual s employment status and eligibility under the individual s flexible benefit plan or other employee benefit plan. for health plan and health care reimbursement coverage only, the exercise of a right under the special enrollment rights of the Health Insurance Portability and Accountability Act ( HIPAA ), for health, dental, vision and health care reimbursement coverage only, certain court orders related to health coverage for a dependent, for health, dental, vision and health care reimbursement coverage only, the entitlement (or loss of entitlement) of you, your spouse, or your dependent ) to Medicare or Medicaid, for health, dental and vision coverage only, loss of entitlement of you or your spouse or dependent to group coverage sponsored by a governmental or educational institution. for health dental, vision and health care reimbursement coverage only, if a qualifying event under COBRA occurs with respect to you or your spouse or other dependent. 4

8 BECOMING ELIGIBLE TO PARTICIPATE IN THE PLAN A new Eligible Employee may elect to become a participant in the Plan on the first day of the month following one calendar month of service with the Company by satisfying the participation conditions. You will need to enroll using a valid application as specified by the Company within 30 days of hire. If you miss the 30-day deadline, you will have to wait until the next annual enrollment period unless you experience a Status Change. (See CHANGING YOUR BENEFIT ELECTION.) Special service crediting and entry date rules may apply if you become an Eligible Employee in connection with a merger or acquisition. PARTICIPATION CONDITIONS As a condition to participation in the Plan and to receiving reimbursement benefits under this Plan, you must be an Eligible Employee and: (1) Execute and deliver to the Company a valid application to participate in the Plan and a valid benefit election; (2) Authorize pre-tax contributions in the required amount (See PAYING FOR YOUR BENEFITS); (3) Observe all Plan rules and regulations; (4) Agree to inquiries by the Company with respect to services covered by this Plan; and (5) Submit to the Company all reports, bills, and other information that the Company may reasonably require. If you do not make a valid benefit election within the time period required by the Plan, you will not be eligible to participate in the Plan until the first day of the following Plan Year, unless you have a Status Change or another event occurs that would permit you make an election change. (See CHANGING YOUR BENEFIT ELECTION.) PAYING FOR YOUR BENEFITS You pay for your benefits under the Plan on a pre-tax basis. You authorize the salary reduction by completing a valid application as specified by the Company and submitting it to the Company. This money is used to pay the cost of coverage or credited to your reimbursement accounts. 5

9 DESCRIPTION OF BENEFITS PROVIDED UNDER THE PLAN The types of benefits available to you under the Plan are described below and listed in the Appendix. 1. HEALTH, VISION AND DENTAL PLAN COVERAGE. Payment of the employee cost of coverage under the health, vision and dental plans sponsored by the Company. Note that you may not change the type of coverage selected during a Plan Year unless you experience a Status Change or other event permitting an election change. The Company s current health, vision and dental plans are described in a separate summary booklet. 2. HEALTH CARE REIMBURSEMENT. If you elect health care reimbursement coverage, you can use your available contributions to be reimbursed for certain health care expenses, as found in IRS Publication 502, incurred during the Period of Coverage for a Plan Year that are related to the diagnosis, treatment, or prevention of disease or for sickness and injury. Expenses that are generally eligible are such costs as deductibles, co-payments, and out of pocket expenses related to the health care you receive. The cost of coverage for health, dental or vision coverage and similar expenses (e.g., payments for HMO coverage) are not reimbursable. In addition, health care expenses that either will be covered by any health or accident plan or insurance policy or for which you may be reimbursed from another source are not reimbursable. If you elect to receive health care reimbursement coverage, you will elect your level of coverage for the Plan Year, within the Plan s limits. The maximum level of coverage is $4,000 per Plan Year. If you join the Plan midyear, the maximum may be prorated. The minimum contribution per Plan Year is $100. The Health Care Reimbursement Account has a 75-day Grace Period immediately following the close of the Plan Year. During the Grace Period, a Participant may receive reimbursement out of any funds remaining in the Participant s Health Care Reimbursement Account as of the last day of the preceding Plan Year for Eligible Medical, Vision or Dental Expenses incurred during the Grace Period. For example, if you went to the doctor on January 8, 2010 and still had funds left from 2009 that had not been used, the expenses from January 8 could be submitted for the 2009 plan year. If a claim is incurred after March 16, that claim will always be applied to the new plan year. Examples of eligible health care expenses (see IRS Publication 502) include: 6

10 medical, dental and vision expenses not reimbursed by the underlying plan(s), including deductibles, copayments, coinsurance and provider charges that exceed reasonable and customary (R&C) limits. any other health care expenses not reimbursed by the underlying plan(s), such as the cost of eyeglasses and unreimbursed orthodontia expenses. Over-the-counter ( OTC ) medications for (1) pain relief, (2) treatment of allergies, (3) treatment of colds and flu or (4) treatment of certain stomach conditions, such as antacids for indigestion. OTC medical supplies such as splints and wrist braces purchased to treat a specific medical condition (Note: these require a doctor s note indicating that the item is necessary to treat a specific medical condition). OTC medical supplies such as gauze, bandages and ointments that contribute to the treatment of a medical condition. Examples of expenses that are not eligible for reimbursement under this Plan include: insurance and COBRA premium payments. medical, dental and vision expenses that have been reimbursed through another policy or plan or insurance wellness credits. fees for health clubs, spas and gyms. cosmetic surgery fees. a divorced spouse s medical bills. OTC medications other than those specifically listed as eligible expenses, above. OTC items purchased for general good health or appearance, such as toiletries, cosmetics and vitamins. 3. DEPENDENT CARE REIMBURSEMENT EXPENSES. You may also set aside available contributions in a dependent care reimbursement account. This account can be used to reimburse you for amounts paid for the care of a Qualifying Individual or for household services attributable in part to the care of the Qualifying Individual, if those amounts are paid to permit you (and your spouse, if you are married) to be gainfully employed. Subject to Plan limits, you will elect your level of dependent care expense coverage during a Plan Year. The current maximum level of coverage is $5,000 per Plan Year. When making 7

11 your election, you should keep in mind that the IRS limits the total amount of dependent care benefits that you and your spouse (if you are married) can exclude from income. (See TAX CONSIDERATIONS for more information.) Qualifying Individual - The term Qualifying Individual means (1) any individual in your family who is under the age of 13, who resides with you and whom you can claim as a dependent on your tax return, or (2) your spouse or any other dependent who is mentally or physically incapable of self-care. However, an exception may apply if you are divorced or separated. Under the exception, if you are the custodial parent, you can treat your child under age 13 as a Qualifying Individual even if you cannot claim the child s exemption. If you are the noncustodial parent, you cannot treat your child under age 13 as a Qualifying Individual, even if you can claim the child s exemption. If you have questions about whether a particular individual is a Qualifying Individual, consult IRS Publication 503. If expenses are incurred outside of your household, they will be eligible for reimbursement only if they are incurred for the care of a Qualifying Individual who (1) is under the age of 13 or (2) spends at least eight hours per day in your household. In addition, if the expense is incurred outside your home at a facility that provides care for more than 6 individuals who do not regularly live in the facility, the facility must comply with all applicable state and local laws and regulations, including any applicable licensing requirements. For further information about eligible dependent care expenses, consult IRS Publication 503, which you may view or download on the Internet at or request by calling EXAMPLE: If you must place your four-year-old son in a child care center in order for you to work, or to enable your spouse to work or seek employment while you remain employed, this child care expense would be eligible for reimbursement. The cost of schooling for first grade or higher is not eligible for reimbursement under the Plan, but the cost of care provided before and after school is eligible. In addition, the Plan will not reimburse you for amounts you pay for services performed by your dependent, a dependent of your spouse, or your child under the age of 19. For example, a payment to your 15-year-old daughter for babysitting your son would not be eligible for reimbursement. Your contributions will be used to fund your account. At any point in time during the Plan Year you can claim dependent care reimbursement benefits in an amount equal to the remaining balance in your account. Your account for each Plan Year only covers expenses incurred during your Period of Coverage for that Plan Year. 8

12 4. MASSACHUSETTS CONNECTOR COVERAGE. For employees residing in Massachusetts or otherwise subject to Massachusetts law, payment of the cost of coverage for policies of medical insurance that have been granted the seal of approval by the Commonwealth Health Insurance Connector Authority (hereafter the Connector. ) Any medical care coverage option that subsequently loses the Connector s seal of approval will continue to be a medical care coverage option under the Plan, but only to the extent Participants enrolled in such medical care coverage option on the date the seal of approval is lost remain enrolled in that medical care coverage option without interruption. Such medical care coverage options are available to Participants on a voluntary basis, without endorsement by the Company and are not intended to be part of the Company s benefit program. SPECIAL RULES RELATING TO REIMBURSEMENT BENEFITS 1. FORFEITURES. Federal tax laws require that your health care expense reimbursement and dependent care reimbursement accounts for each Plan Year operate on a use it or lose it basis. For this reason, if you do not use the entire amount available for reimbursement benefits for a Plan Year, YOU WILL FORFEIT the unused amount, and you will have no further claim to it. EXAMPLE: Assume you allocate $2,400 during the Plan Year ending December 31, 2010 to your dependent care reimbursement account. During the Period of Coverage for this Plan Year, however, you incur only $2,200 of dependent care expenses eligible for reimbursement under the Plan. You will forfeit the $200 remaining in your account for that Plan Year, after you have been reimbursed for all of your eligible expenses. All such forfeitures under the Plan will be used by the Plan to offset any losses to the Plan and to cover administrative costs of the Plan. 2. THE PLAN YEAR AND THE PERIOD OF COVERAGE. Your health care reimbursement coverage and dependent care reimbursement accounts for a particular Plan Year can only be used to provide reimbursement for eligible expenses incurred during your Period of Coverage for that Plan Year. EXAMPLE: If you become a participant on March 1, 2010, and elect to receive health care reimbursement coverage for your first Plan Year ending December 31, 2010, and are employed for the remainder of that Plan Year, you can receive reimbursement under your coverage for that Plan Year for eligible expenses incurred from March 1 through December 31, 2010, which is your Period of Coverage for that Plan Year. (The Period of Coverage for reimbursement 9

13 accounts may be modified by the Grace Period.) Expenses incurred in February 2010, are not eligible for reimbursement under your coverage for that Plan Year. In the case of health care reimbursement coverage, your Period of Coverage will end as of the last day of the pay period for which you pay for coverage. For example, assume your employment terminates on June 15, you paid for health care reimbursement coverage through the last day of the pay period that includes June 15 and you do not elect to pay for continuation coverage with after-tax dollars (see YOUR RIGHTS TO CONTINUATION COVERAGE). Your Period of Coverage would end on the last day of the pay period that includes June 15. As a result, you would not be entitled to reimbursement for expenses incurred after the last day of the pay period through December of that year. This would be true even if, through June, you had contributed $1,200 toward your health care reimbursement coverage for the Plan Year and had incurred only $600 in eligible health care expenses. If you elect to pay for continuation coverage on an aftertax basis, your Period of Coverage would be extended. 3. WHEN IS AN EXPENSE INCURRED? A health care expense or dependent care expense is incurred when the health care or dependent care service (or supply) is received. The date of billing or payment is irrelevant. EXAMPLE: If you visit your dentist on December 15, 2010, are billed for the dental services on January 5, 2011, and pay the bill on January 14, 2011, you will have incurred the expense on December 15, Consequently, the expense would be eligible for reimbursement under your health care reimbursement coverage for the Plan Year ending December 31, 2010, but not under your coverage for the Plan Year ending December 31, HOW DO I CLAIM REIMBURSEMENT BENEFITS? If you have elected reimbursement coverage, you may claim reimbursement for eligible health care and/or dependent care expenses until March 31 after the close of the Plan Year for expenses incurred in the prior plan year. Please remember, the Health Care Reimbursement is subject to the 75-day grace period immediately following the end of the Plan Year. To be reimbursed under the health care reimbursement benefit, you must deliver a completed claim form to the companies designated provider. Benefits are paid at least weekly under the health care reimbursement benefit To be reimbursed under the dependent care reimbursement, you must deliver a completed claim form to the companies designated provider. Benefits are paid at least weekly under the dependent care reimbursement benefit. 10

14 You must attach a copy of your bill or receipt or other satisfactory third party documentation of the amount of the expense and the date(s) the expense was incurred (a canceled check is not sufficient), and you must certify that each expense is eligible for reimbursement under the Plan, that it has not been previously reimbursed under the Plan, and that it is not reimbursable from any other source (e.g., insurance or your spouse s flex plan). In addition, the bill or receipt accompanying an eligible over-the-counter ( OTC ) expense must list the name of the OTC medication or supply. OTC supplies may also require a doctor s note indicating that the item is necessary to treat a specific medical condition. After your claim is reviewed, processed, and approved, you will receive a check or voucher. If an expense is eligible for both health care and dependent care reimbursement, you may choose whether to submit the expense as a health care expense or a dependent care expense. You may also submit part of the expense for reimbursement under one type of coverage, and the remainder for reimbursement under the other, but you may only be reimbursed once for any expense. QUALIFIED RESERVIST DISTRIBUTIONS The Plan permits you, if you are ordered or called to active duty in the military; to receive a distribution (called a qualified reservist distribution ) of all or a portion of your health care expense reimbursement account balances. These distributions are an exception to the general rule that the Plan may not make distributions other than to pay or reimburse substantiated medical expenses, and provide a way for the Plan to help you avoid unwanted forfeitures under the use-or-lose rule. (In the past, if you were called to active duty, you were unable to use all of your contributions to reimburse medical expenses.) Please remember that a qualified reservist distribution is included in your gross income, in contrast to health care reimbursement distributions to pay or reimburse eligible medical care expenses (which are tax-free). 1. Who Is Eligible for a Qualified Reservist Distribution? To be eligible for a qualified reservist distribution, you must be a member of a reserve component and must be ordered or called to active duty either for a period of at least 180 days or for an indefinite period. A qualified reservist distribution cannot be based on an order or call to active duty of anyone other than you (e.g., a spouse's or dependent's call to active duty cannot be the basis for a qualified reservist distribution). The Company must receive a copy of your order or call to active duty before a qualified reservist distribution may be paid, and that the Company may rely on the order or call to determine the period of active duty and whether the duration requirements are met. If the order or call specifies a period of 180 days or more (or an indefinite period), your eligibility for a qualified reservist distribution will not be affected if the actual period ends up being less than 180 days. If the period specified is less than 180 days, a qualified 11

15 reservist distribution is not permitted, but subsequent calls or orders that increase the total period of active duty to 180 days or more will qualify you for a qualified reservist distribution, so long as other applicable requirements are met. 2. What Amount Is Available as a Qualified Reservist Distribution? The qualified reservist distribution amount is the amount contributed to the health FSA as of the date of the qualified reservist distribution request, minus health FSA reimbursements received as of that date. For example, assume that you make an election of healthcare reimbursement coverage of $1,200 for the 2009 plan year. During the first three months of the year, you contribute $300 and receive no reimbursements. On April 1, if you are called to active duty for an indefinite period and elect a qualified reservist distribution, you could receive a distribution of $300. A qualified distribution may only be made with respect to an employee s health care expense reimbursement balance as in existence on or after January 1, Consequently, a qualified reservist distribution may not be made with respect to amounts that were forfeited on or before that date. Moreover a qualified reservist distribution may not include amount attributable to a prior plan year. 3. Deadlines for Requesting and Paying Qualified Reservist Distributions You must request a qualified reservist distribution during the period beginning with the date of the order or call to active duty and ending on the last day of the plan year (or any applicable grace period) during which the order or call occurred. You must be paid within a reasonable time not to exceed 60 days after the date of the employee's request. A qualified reservist distribution cannot be made for a plan year that ended before the date of the order or call. Note that if a request for a qualified reservist distribution is denied because the employee does not meet the requirements to be eligible for a distribution, this will likely constitute an adverse benefit determination under the Plan s claims procedure regulations that would require a denial notice that complies with the federal law. RESTRICTIONS ON RECEIVING BENEFITS Tax laws impose a variety of nondiscrimination requirements and benefits tests that must be met before benefits under the Plan will be nontaxable to all employees. These are generally intended to restrict the amount of nontaxable benefits available to certain employees of the Company who are officers, directors, or highly compensated. If the Company believes that any of these requirements or limits may be violated, it may limit the amount of contributions certain participants may allocate to nontaxable benefits, so that the Plan and its benefits will not be discriminatory. 12

16 MAKING A BENEFIT ELECTION Prior to the start of your participation in the Plan for a Plan Year, at a time announced by the Company, the Company must receive a valid application as specified by the Company setting out your benefit elections and indicating the amount of your pre-tax contributions, if any, that you want used to pay your benefits. If you do not make a benefit election within the required time period, you will have elected not to participate in any of the benefits provided under the Plan and you will not be able to participate in the Plan for the Plan Year, unless you have a Status Change or another event occurs that would permit you to make an election change. (See CHANGING YOUR BENEFIT ELECTION.) CHANGING YOUR BENEFIT ELECTION After a Plan Year begins you generally cannot change your benefit election or your allocation of contributions. However, if there is a Status Change you may change your elections. Any benefit election change must be consistent with the Status Change, permitted under the terms of the underlying benefit plan or policy, and made using a valid application as specified by the Company before or after the Status Change, but not later than within 30 days of the Status Change. If you miss the 30 day deadline, you will have to wait until the next annual enrollment period. In general, a benefit election change will be consistent with a Status Change if the benefit election change is on account of and corresponds with the Status Change and the Status Change affects eligibility for benefit plan coverage, or, in the case of the dependent care reimbursement account, eligibility of dependent care expenses for exclusion from income under the tax code. You may not reduce your health care reimbursement coverage to a level lower than the amount of health care reimbursement benefits that you have already claimed for the Plan Year. For example, if your spouse becomes unemployed, you may stop or reduce the rate of additions to your dependent care reimbursement account. If the Status Change is your divorce, annulment or legal separation, the death of your spouse or dependent, or a dependent ceasing to satisfy the eligibility requirements for coverage, a benefit election change to drop coverage for anyone other than the spouse or dependent involved in the Status Change will not correspond with the Status Change. If you are dropping coverage for yourself or another person because the Status Change has caused other coverage to become available, the persons whose coverage is dropped must actually enroll for the other coverage. The benefit election change will be effective as of the later of the date that the Status Change occurs or the date your valid application as specified by the Company is received by the Human Resources Office. If the Status Change is an increase in the number of your dependents due to birth, adoption or placement for adoption, however, the benefit election change will be effective as of the date of the birth, adoption or 13

17 placement, provided your application is received and approved within 30 days of the event. If you are eligible but did not enroll in medical, dental, vision or health care reimbursement coverages, you may enroll under two additional circumstances, which are: Termination of Medicaid or a State Child Health Insurance plan coverage resulting from loss of eligibility and you request coverage; or Becoming eligible for a premium assistance subsidy under the Plan or a benefit offered under the Plan through Medicaid or a State Child Health Insurance Plan. You must request coverage under the Plan within 60 days of termination or the date it is determined that you or your child are eligible for assistance in order to be entitled to these special enrollment rights. If you stop participating in the Plan because of a termination of employment and are reemployed as an Eligible Employee during the same Plan Year and within 30 days, you will not be able to make a new benefit election for that Plan Year. Your prior election will be automatically reinstated, unless you have had an intervening Status Change or there has been a significant change in cost or coverage, in which case you may change your election in accordance with the election change rules described in this Section. If you are reemployed as an Eligible Employee during the same Plan Year but more than 30 days after termination, you may make a new benefit election for the balance of the Plan Year. All benefit elections by reemployed participants are subject to the terms of the underlying plans. There may be limitations on any new elections to participate in the Health Care Reimbursement Coverage for the remainder of the Plan Year. If, during a Plan Year, there is a change in the employee cost of coverage for a pre-tax benefit provided under the Plan (other than health care reimbursement coverage), your payroll deductions may be automatically adjusted by the Company if the change is insignificant, as determined by the Company in its sole discretion. In addition, the Company may, to the extent permitted under applicable law and the terms of the underlying plans, permit you to change your benefit election (but, in some cases, only if similar replacement coverage is elected) or add coverage, on a prospective basis, if, during a Period of Coverage: there is a significant increase or decrease in the cost of a benefit plan or coverage option provided under the Plan, coverage under a benefit plan is significantly curtailed or lost, 14

18 a significant increase or decrease in cost is imposed by your dependent care provider (who is not your relative) or you change your dependent care provider or the coverage provided by such a provider, a new benefit or coverage option is added or an existing benefit or coverage option is significantly improved, or you wish to make a benefit election change on account of and corresponding with a change made under another employer plan (other than a health care reimbursement account), provided that the change under the other plan meets the IRS requirements for mid-year election changes or the other plan has a different period of coverage. These changes are not permitted in the case of the health care reimbursement account coverage benefit. Any benefit election change must be made by using a valid application as specified by the Company within 30 days before or after the change in cost or coverage The benefit election change will be effective as of later of the date that the change in cost or coverage occurs or the date your application is received by the Human Resources Department. LEAVES OF ABSENCE AND FAMILY OR MEDICAL LEAVES If you take a leave of absence, you should contact your local Human Resources/Benefits contact in order to discuss your continued participation in the Plan during the leave. Paid Leave In general, if you continue to be paid by the Company during a leave, your benefit election will remain in effect and the Company will continue to withhold contributions on the same basis and in the same manner as prior to your leave. However, if the leave is a Family or Medical Leave, you also have the option of dropping coverage under any group health plan (including the Health Care Reimbursement coverage) during the leave. With regard to Health Care Reimbursement Coverage, if you elected to drop coverage during a FMLA leave, upon return from the leave, your coverage will be reinstated at the original level (paying additional contributions to make up the missing payments) or at the contribution level in effect before the leave but with a reduced prorated amount of coverage. For other group health plan coverage, if you elected to drop coverage during the FMLA leave, and upon return from leave you elect to be reinstated under such coverage, your prior election will be reinstated. You may change your Dependent Care Reimbursement election only if you have a qualifying status change or change in cost or coverage. Unpaid Leave 15

19 If you are not being paid by the Company during the leave: For Dependent Care Reimbursement, you may elect to cease contributions to your account during your leave, and upon your return to work, you may elect to have your prior election reinstated. However, if you do not make that election prior to your leave, your current election will remain in place and you will be responsible for funding that election upon your return to work. Generally, expenses incurred during your leave are not eligible expenses under the Plan and will not be reimbursed. For example, dependent care expenses during a leave are not eligible expenses if they are not paid to permit you to be gainfully employed. For Health, Dental, Vision Plan Coverage and Health Care Reimbursement, you may: (1) drop coverage under the Plan during the period of unpaid leave, or (2) continue coverage during the period of unpaid leave and pay for such coverage in accordance with the following options: (a) (b) For a leave of less than thirty (30) days, you must enter into an arrangement with the Company that (i) you are electing to continue coverage while on an unpaid leave, (ii) the Company will advance the payments for this coverage on your behalf during your leave, and (iii) you will repay these advanced amounts to the Company when your leave ends. Repayment will be made from your compensation to the extent possible. For a leave of thirty (30) days or longer, you may either: (i) (ii) (iii) pay for your benefits for the duration of the leave on an aftertax basis by a single lump-sum payment at the beginning of the leave; or pay for your benefits on an after-tax basis during the leave by sending your payment to Taylor Corporation Human Resources Department, on the schedule communicated to you by the Administrator If you fail to make the required lump sum payment under option (i), you will have elected option (ii). The Company will determine prior to the start of your leave whether or not the total unpaid portion of your leave will be less than 30 days, which will determine which of the above payment options is available to you for the unpaid period. If a leave that was expected to be less than 30 days extends for a longer period, the 16

20 Company may, at its option, require you to begin making payments in accordance with payment option (b)(ii). If you fail to make arrangements to pay for your benefits during an unpaid leave or fail to make the required contributions, the Company reserves the right to recover the cost of such coverage from you at the end of the leave to the fullest extent and by any method authorized by law, including but not limited to recovering these costs by a reduction of your salary upon your return from the leave. Reinstatement upon Return from Unpaid Leave Dependent Care Reimbursement Your prior election will be reinstated at the original rate; that is, you will resume making contributions for such coverage at the rate in effect before your leave and unless you elected to cease contributions during your leave, you will be responsible for catching up the contributions you did not make during your leave. If you elected to cease contributions during your leave, you must submit a valid application as specified by the Company to reinstate coverage. All Other Benefits If you elected to drop coverage during the leave, and upon return from leave you elect to be reinstated under such coverage, your prior election will be reinstated. With regard to Health Care Reimbursement Coverage, your coverage will be reinstated at the original level (paying additional contributions to make up the missing payments) or at the contribution level in effect before the leave but with a reduced prorated amount of coverage. Expenses incurred during the leave period when coverage lapsed are not eligible for reimbursement. Election Rights If you are on a leave, you have the right to revoke or change a benefit election under the same terms and conditions that apply to participants who are working and not on leave, including the right to make election changes for a subsequent Plan Year or in the event of a status change, or a change in cost or coverage. You may also change your election upon your return from leave in the event of a status change or a change in cost or coverage. Please contact your local Human Resources Representative as soon as you know you will be taking a family or medical leave or other leave. QUALIFIED MEDICAL CHILD SUPPORT ORDERS 17

21 Generally, your Plan benefits may not be assigned or alienated. However, an exception applies in the case of a qualified medical child support order (QMCSO). This Plan will comply with the terms of a QMCSO. A QMCSO is an order or judgment from a court or administrative body directing the Plan to cover a child of an insured participant under a group health plan. Federal law provides that a medical child support order must meet certain form and content requirements in order to be a QMCSO. When an order is received, each affected participant and each child (or the child s representative) covered by the order will be given notice of the receipt of the order and a copy of the Plan s procedure for determining if the order is valid. Coverage under the Plan pursuant to a QMCSO will not become effective until the Plan Administrator determines that the order is a QMCSO. If you have any questions or would like to receive a copy of the written procedure for determining whether a QMCSO is valid, please contact your local Human Resources Representative. TAX CONSIDERATIONS Subject to applicable nondiscrimination requirements discussed above, the Company believes that contributions used to pay for benefits other than the dependent care benefits will not be subject to federal (or state income taxes, if applicable) or to social security taxes. These contributions and benefit payments will not be reduced by income tax or social security withholding. Because each individual s situation is different, the Company cannot predict whether it would be more beneficial to you to take the tax credit for dependent care expenses or to have your expenses reimbursed under the Plan. You can use IRS Form 2441 to help you make this determination. YOU MAY ALSO WISH TO CONSULT A TAX ADVISOR FOR ASSISTANCE. Dependent care benefits you receive from your dependent care reimbursement account during a calendar year generally will not be taxable unless they exceed the lower of (a) $5,000 ($2,500 if you are married but file a separate return for the year), reduced by the amount of any dependent care credit you claim for other expenses (see NOTICE CONCERNING DEPENDENT CARE EXPENSES) or (b) your income limitation for that year. If the amount of dependent care benefits exceeds your income limitation, the excess will be taxable. If you are single, your income limitation for a year is your earned income for that year. If you are married, your income limitation is the lower of (a) your earned income for the year, or (b) your spouse s earned income for the year. If your spouse is a full-time student or is physically or mentally incapable of caring for himself or herself during the year, your spouse will be considered to have earned income of $200 per month if you have one Dependent who qualifies for coverage or $400 per month if you have two or more Dependents who qualify for coverage. To sustain the nontaxable status of dependent care benefits you receive from the Plan, you will be required to report the amount of those reimbursements and the name, 18

22 address, and the social security number or employer identification number of the dependent care provider on your federal income tax return. By each January 31, as part of your W-2, the Company will provide you with a statement showing the amount of dependent care reimbursement paid to you during the preceding calendar year so that you can calculate the amount, if any, that was taxable. The Company will not withhold income taxes or social security taxes from dependent care benefit payments. To illustrate the tax savings offered by the Plan, suppose Terry, a Minnesota resident, expects to be paid a gross salary of $30,000 during the year. Terry is married and has two children and expects to have $1,780 in eligible health care expenses, $900 in cost of coverage for the Company-sponsored group health plan ($75 per month), and no dependent care expenses. If Terry participates in the Plan, she can receive benefits from the Plan which allow her to pay the expenses with pre-tax dollars. The difference is illustrated in the following table. The illustration assumes that Terry and her spouse will file Married Filing Jointly, claim four exemptions, and take the standard deduction. Without Plan With Plan Terry s annual earnings $30,000 $30,000 Health care expenses/cost of coverage paid -0-2,680 through Plan Taxable compensation $30,000 $27,320 Estimated Federal Income Taxes (2010-1,892-1,640 rates) Social Security and Medicare (FICA) Tax (2010 rate 7.65%) -2,295-2,090 Estimated Minnesota State Income Taxes (2010 rates) After-tax compensation $24,990 $22,856 Health care expenses/cost of coverage paid -2,680-0 after-tax Spendable income after taxes and expenses $22,310 $22,856 Terry s total gross compensation, considering both gross salary and Plan benefits, will have stayed the same, but her compensation after federal taxes, state taxes, health care expenses, and the cost of coverage for health care will have increased by $546. Tax rates vary based on your income level and deductions. Therefore, actual savings will vary and depend on your particular circumstances. This illustration is based on a Minnesota resident who is a Minnesota employee; not all 19

23 states allow you to exclude health care expenses and the cost of coverage from state income taxes (if applicable). The full or partial nontaxability of benefits is the primary benefit of the Plan. However, the exact effect the Plan will have on you will depend on the benefits you elect as well as other factors that affect the amount of income taxes you pay. If you receive nontaxable reimbursement from the Plan for health care or dependent care expenses, you may not deduct or take a credit for these expenses on your tax return. NOTICE CONCERNING DEPENDENT CARE EXPENSES Under current law, a tax credit is available for dependent care expenses of the same type eligible for reimbursement through the Plan. The amount of the credit depends on the taxpayer s adjusted gross income and ranges from 20% to 35% of eligible expenses up to a limit of $3,000 of expenses if there is one eligible dependent and $6,000 of expenses if there are two or more eligible dependents. As indicated above, however, you will not be eligible to take the tax credit for any expenses reimbursed through the Plan. In addition, the maximum amount of expenses eligible for the credit will be reduced on a dollar-for-dollar basis for each dollar of dependent care reimbursements you receive under the Plan. For example, if you have two children and incur $5,000 of dependent care expenses in 2010, $2,000 of which are reimbursed through the Plan, the maximum amount of your expenses used in determining the credit would be $4,000 ($6,000 less $2,000). Determining whether taking the credit or reimbursement under the Plan is more beneficial involves complex calculations. YOU MAY WANT TO CONSULT A TAX ADVISOR FOR ASSISTANCE. FACTORS TO CONSIDER ON WHETHER THIS PLAN IS RIGHT FOR YOU 1. IRS regulations do not allow the Company to return unused contributions to you at the end of the year, with the exception of the Qualified Reservist Distributions described above. 2. Under federal law, an earned income credit is available for individuals with lower incomes. Participation in the Plan may affect your eligibility for the earned income credit and/or the amount of the credit. You should consult your federal tax return instructions to determine whether this credit applies to you. In addition, for some people, the federal tax credit for dependent care may provide for greater tax savings than the dependent care reimbursement account. 20