Roth 401(k) Amendment to the UBS Prototype 401(k) Plan

Transcription

1 ab Roth 401(k) Amendment to the UBS Prototype 401(k) Plan

2 Steps to Adopt the Discretionary Roth 401(k) Amendment to the UBS Prototype 401(k) Plan Employers may offer a Roth (i.e., after-tax) contribution feature in their 401(k) plans. 401(k) plans that offer this feature enable plan participants to designate all or a portion of their elective deferrals as Roth after-tax instead of traditional pre-tax contributions. Similar to Roth IRAs, distributions of Roth 401(k) contributions and their earnings are not taxable once certain requirements are met. As the sponsoring employer, you have the option to add this feature to your plan. Step 1: Step 2: Step 3: Step 4: Step 5: Step 6: Notify the plan s trustee that Roth 401(k) contributions will be permitted. Have the business board of directors or other governing body adopt the enclosed sample resolutions. Insert, in the applicable space, the name of your company, the name of the plan, and the effective date of the amendment. Have an appropriate officer or other authorized individual complete, sign and date the enclosed plan amendment. Retain the completed and adopted resolutions and the executed amendment with other important plan documents. Do not return these documents to UBS Financial Services Inc. Notify the participants that the Roth 401(k) feature has been added to your plan and the effective date of the feature. Distribute a revised summary plan description (SPD) to participants. (A sample SPD is available on the UBS Financial Services Inc. website at Coordinate implementation of the Roth 401(k) feature with your plan administrator. The plan s notices and election forms, recordkeeping and reporting systems, and possibly your payroll system will need to be revised to accommodate this feature. The sample resolutions and the amendment in this package and their use, and the other steps required to implement a Roth contribution feature, are complex and can affect legal rights and obligations. Neither UBS Financial Services Inc. nor its employees or representatives provide legal or tax advice. Thus, UBS Financial Services Inc. strongly urges you to discuss these documents and their use with your legal or tax advisor and your plan administrator. 2

3 Sample Resolutions Sample Resolutions for Adopting an Amendment Permitting Designated Roth Contributions to UBS Financial Services Inc. Prototype 401(k) Plan WHEREAS, (the Company ) has been maintaining the (the Plan ); and WHEREAS, the Company now wishes to amend the Plan to permit participants to make designated Roth contributions, IT IS THEREFORE RESOLVED, that, effective as of (the Effective Date ), the Plan be and hereby is amended in the manner set forth in the document entitled Amendment to the UBS Prototype 401(k) Plan to Permit Designated Roth Contributions (the Amendment ) attached to a copy of these resolutions; and it is further RESOLVED, that, pursuant to the Amendment and the foregoing resolution, participants in the Plan shall be allowed to make designated Roth contributions to the Plan, in accordance with the provisions of the Amendment, on and after the Effective Date; and it is further RESOLVED, that the appropriate employees, officers and representatives of the Company be and hereby are authorized and directed to execute the Amendment, and to prepare, execute and distribute such documents, forms, notices and communications, and to take such other steps as they deem appropriate, to carry out the foregoing resolutions. 3

4 Amendment to the UBS Prototype 401(k) Plan to Permit Designated Roth Contributions Article Fourteen is added to the Plan, effective as of the date indicated in the Employer s resolution adopting this amendment, to read as follows: Article Fourteen Designated Roth Account Definitions The following definitions shall apply for purposes of this Article 14: A. Catch-Up Roth Contributions shall mean the contributions described in Section 14.04(F) of the Plan. B. Designated Roth Account shall mean a separate bookkeeping account to which Designated Roth Contributions are credited. C. Designated Roth Contribution shall mean a designated Roth contribution described in Section 402A(c)(1) of the Code. D. Elective Deferral, Excess Deferral, Excess Contribution and Excess Aggregate Contribution shall each have the meaning assigned to such term under Article 11. E. Employee, Employer, Affiliated Company and Individual Account shall each have the meaning assigned to such term under Article 1. F. Pre-Tax Elective Deferral shall mean any Elective Deferral which is not treated as being a Designated Roth Contribution. G. Qualified Rollover Contribution shall mean a rollover contribution which is accepted by the Plan under Section 14.04(D)(4) of the Plan. H. Qualified Roth Contribution Program shall mean a qualified Roth contribution program, described in Section 402A(b)(1) of the Code, maintained under another qualified plan. I. Required Starting Date shall mean, with respect to any Participant, the April 1 following the later of (1) the calendar year in which the Participant attains age 70 and 1 2 or (2) the calendar year in which the Participant terminates employment with the Employer and the Affiliated Companies Establishment of an Account On and after the effective date of this Article Fourteen, a Participant may make Designated Roth Contributions to the Plan. The Plan Administrator shall establish and maintain, on behalf of each Participant who elects to make such contributions (or who makes a Qualified Rollover Contribution to the Plan), a Designated Roth Account. The Plan Administrator shall establish and maintain one or more sub-accounts under any Designated Roth Account, as is required below or as may be helpful in keeping records or otherwise administering such account Requirements for Designated Roth Accounts A Participant s Designated Roth Account shall satisfy each of the following rules and requirements: A. The entire interest of the Participant in the balance of the Designated Roth Account shall be nonforfeitable at all times. No contribution may be accepted by the Designated Roth Account after the Participant ceases to be an Employee. 4

5 B. The Designated Roth Account, and the records relating thereto, shall be maintained separately from the other accounts (including Individual Accounts) and records maintained for Participants under the Plan. The Designated Roth Account shall be designated as such on the Plan Administrator s records. The Plan Administrator shall keep a record of the contributions credited to, and the distributions and withdrawals charged to, the Designated Roth Account, including the amount of the contributions which have not been distributed or withdrawn from such account. Gains, losses and other credits and charges of the Plan must at all times be separately allocated on a reasonable and consistent basis among the Designated Roth Account and the other accounts maintained for Participants under the Plan. In addition, as to any separate sub-account established and maintained under the Designated Roth Account, the Plan Administrator shall keep a record of the contributions credited to, and the distributions and withdrawals charged to, such sub-account, including the amount of the contributions which have not been distributed or withdrawn from the sub-account. Gains, losses and other credits and charges of the Designated Roth Account must at all times be separately allocated on a reasonable and consistent basis among the sub-accounts maintained under such account. The requirements of this subsection (B) shall apply at the first time a Designated Roth Contribution or a Qualified Rollover Contribution is accepted by the Plan, and shall continue to apply until the entire balance of the Designated Roth Account has been distributed. C. No forfeitures, and no contributions other than Designated Roth Contributions and Qualified Rollover Contributions, may be allocated or credited to the Designated Roth Account. D. The Participant s Designated Roth Account shall be valued at the same time and in the same manner as the Participant s Individual Account is valued. Any contribution, withdrawal, distribution or other amount to be credited or charged to the Designated Roth Account shall be so credited or charged at the time determined in accordance with the rules of Section 4.03(B)(3) of the Plan Additional Rules Applicable to Designated Roth Accounts A. How Contributions Are Made A Participant shall make a Designated Roth Contribution by designating any contribution which is made under Article 11 of the Plan, and which would otherwise be treated as being an Elective Deferral under Article 11, as being a Designated Roth Contribution. A designation of an Elective Deferral as a Designated Roth Contribution shall be made at the same time as the deferral election to which such Elective Deferral relates is made, and in the manner otherwise prescribed by the Plan Administrator. The Participant may not change or revoke any such designation after it has been made. The Participant may increase, decrease or stop Designated Roth Contributions by increasing, decreasing or stopping the underlying Elective Deferrals in accordance with Article 11. In addition, the Participant may stop Designated Roth Contributions by ceasing to designate Elective Deferrals as being such. The Employer must treat any Designated Roth Contribution as being includable in the Participant s gross income, and as being includable in wages for wage withholding and employment tax purposes, at the time that such contribution would have been paid to the Participant but for his or her deferral election under Article 11. No Elective Deferral made pursuant to a negative election in effect under Section 11.02(E) of the Plan shall be treated as being a Designated Roth Contribution. Any Designated Roth Contribution made by the Participant shall be credited to his or her Designated Roth Account. B. Limit on Contributions The total amount of Designated Roth Contributions which may be made to the Plan by a Participant for any taxable year, when aggregated with the Participant s other Elective Deferrals for such taxable year, shall not exceed $15,000. For any taxable year beginning after 2006, the $15,000 amount in the preceding sentence shall be increased as provided in Section 402(g)(4) of the Code. 5

6 C. Minimum Distribution Requirement Notwithstanding any other provision of the Plan to the contrary, the distribution of a Participant s interest in his or her Designated Roth Account shall begin by the Participant s Required Starting Date, and shall be made at least as rapidly as required under Section 401(a)(9) of the Code, the incidental death benefit requirements of Section 401(a) of the Code and the applicable Treasury regulations, the provisions of which are incorporated herein by reference (the minimum distribution requirement ). To the extent permitted under the Code, the Treasury regulations and any applicable guidance issued by the Internal Revenue Service, a distribution or withdrawal from a Participant s Individual Account may be taken into account in satisfying the minimum distribution requirement applicable to the Designated Roth Account, and a distribution or withdrawal from the Participant s Designated Roth Account may be taken into account in determining whether the distributions made from the Participant s Individual Account satisfy the requirements of Section 401(a)(9) of the Code. D. Rollovers: 1. Notwithstanding any other provision of the Plan to the contrary, the portion of a distribution or withdrawal which is taken by a Participant from the Designated Roth Account may be included in a direct rollover only to the extent that the direct rollover is being made to the Participant s designated Roth account under a Qualified Roth Contribution Program, or to a Roth IRA (within the meaning of Section 408A(b) of the Code) of the Participant, and only to the extent that such direct rollover is permitted under Section 402(c) of the Code. 2. The Plan will not allow a direct rollover (including an automatic rollover) for distributions or withdrawals made from a Participant s Designated Roth Account during a year if the amount of such distributions or withdrawals which are eligible for rollover treatment are reasonably expected to total less than $200 during such year. In addition, for purposes of applying Section 6.10(B)(1)(e) of the Plan, any distribution or withdrawal from a Participant s Designated Roth Account is not taken into account in determining whether distributions or withdrawals from a Participant s other accounts under the Plan are reasonably expected to total less than $200 during a year. However, when applying the Plan s automatic direct rollover rules, any eligible rollover distribution made from the Participant s Designated Roth Account is aggregated with any eligible rollover distribution made, at the same time, from the Participant s other account or accounts under Plan for purposes of determining whether a mandatory distribution exceeds $1, The provision of Section 6.10(A) of the Plan under which a Participant may elect to make a direct rollover of a portion of any eligible rollover distribution, provided that such portion is at least $500, is applied separately to an eligible rollover distribution made from the Participants Designated Roth Account and an eligible rollover distribution made from any other account or accounts of the Participant under the Plan, even if the distributions from the Designated Roth Account and the other account or accounts are made at the same time. 4. The Plan may accept a rollover by a Participant of a distribution made to the Participant from a Qualified Roth Contribution Program, to the extent allowed by the Plan Administrator and permitted under the Code, the Treasury regulations and any applicable guidance issued by the Internal Revenue Service. Any such rollover made by the Participant and the earnings attributable thereto shall be credited to and held under a separate sub-account of the Participant s Designated Roth Account. The Plan Administrator shall retain in its records any statement it receives from the plan administrator (or other responsible person) of the distributing plan in connection with any direct rollover from a Qualified Roth Contribution Program which the Plan accepts. 6

7 E. Other Plan Provisions: 1. Matching Contributions shall be made with respect to Designated Roth Contributions, as if such contributions were any other Elective Deferrals. Any Designated Roth Contribution shall be treated as any other Elective Deferral for purposes of (a) applying the nondiscrimination tests of Section of the Plan, the safe harbor rules of Section of the Plan, and the 415 limits in accordance with Section 11.08(B) of the Plan, (b) determining the Plan s Excess Deferrals, Excess Contributions and Excess Aggregate Contributions, and (c) satisfying the top-heavy requirements of Section 416, as set forth in the Plan. The amount of Designated Roth Contributions which may be made to the Plan in any year shall be subject to the limitations imposed by the nondiscrimination tests and 415 limits in (a), and any Designated Roth Contributions which are included in Excess Deferrals, Excess Contributions or Excess Aggregate Contributions under (b) shall be subject to correction by distribution or recharacterization under Section 11.06(E), (F), (G) or (H) of the Plan, as applicable, as if such Designated Roth Contributions were any other Elective Deferrals, and as if the Designated Roth Account was a part of the applicable Participant s Elective Deferral sub-account under the Participant s Individual Account. Any Excess Deferrals of a Participant which arise for a taxable year, and any Excess Contributions of a Participant which arise for any Plan Year, shall be treated as consisting of first any Pre-Tax Elective Deferrals which the Participant made for such taxable year or Plan Year, as applicable, and second any Designated Roth Contributions which the Participant made for such taxable year or Plan Year, again as applicable, except as otherwise elected by the Participant. For purposes of correcting Excess Deferrals or Excess Contributions, any distribution of Excess Deferrals or Excess Contributions shall be treated as including the amount of Pre-Tax Elective Deferrals and the amount of Designated Roth Contributions determined under the preceding sentence. However, any distribution or withdrawal from the Designated Roth Account must come first from any Excess Deferrals or Excess Contributions, and the earnings attributable to such deferrals or contributions, held in the account. 2. A Participant shall become entitled to receive a distribution, and shall be permitted to take withdrawals, from his or her Designated Roth Account in accordance with Section of the Plan, as if the Designated Roth Contributions were any other Elective Deferrals, and as if the Designated Roth Account were a part of the sub-account described in Section 11.08(A) of the Plan which holds Elective Deferrals. If the Participant will receive a distribution or take a withdrawal from the Plan, and if such distribution or withdrawal may be taken from the Participant s Designated Roth Account and or any other account maintained for the Participant under the Plan, the Participant shall specify the extent to which the distribution or withdrawal shall be taken from his or her Designated Roth Account. F. Catch-Up Roth Contributions If this Plan accepts Designated Roth Contributions, then a Participant who is age 50 or older at the end of any taxable year may make Catch-Up Roth Contributions to the Plan for such year, by designating any contributions which would otherwise be treated as being Catch-Up Contributions under Article 11 for such year as being Catch-Up Roth Contributions. The maximum amount of a Participant s Catch-Up Roth Contributions, for any taxable year, shall be the maximum amount of additional elective deferrals which, when aggregated with the Participant s Catch-Up Contributions not designated as being Catch-Up Roth Contributions, the Participant could make to the Plan for such year under Section 414(v) of the Code. The rules and requirements of this Article 14 (including the rules pertaining to the designation of contributions in Section 14.04(A) of the Plan) shall apply to Catch-Up Roth Contributions as if they were Designated Roth Contributions, except that (1) a Participant s Catch-Up Roth Contributions, and the earnings thereon, shall be held in a separate sub-account under the Participant s Designated Roth Account, (2) the limitation of Section 14.04(B) of the Plan shall not apply to Catch-Up Roth Contributions, (3) no Matching Contributions may be made with respect to Catch-Up Roth Contributions, (4) Catch-Up Roth Contributions shall not be taken into account (i) when applying the nondiscrimination tests of Section of the Plan, the safe harbor rules of Section of the Plan, or the 415 limits of Section 3.05 and 11.08(B) of the Plan or (ii) when determining the Plan s Excess Deferrals, Excess Contributions or Excess Aggregate Contributions. 7

8 G. Statements If the Plan makes a direct rollover of a distribution from the Participant s Designated Roth Account to a designated Roth account under a Qualified Roth Contribution Program, the Plan Administrator shall provide, to the plan administrator or other responsible person of the recipient program, a statement which indicates either (1) the first year of the Participant s 5-taxable year period of participation, within the meaning of the Treasury regulations under Section 402A of the Code, and the portion of such distribution which constitutes investment in the contract, within the meaning of Section 72 of the Code (such investment being referred to below as Basis ), or (2) that such distribution is a qualified distribution, within the meaning of Section 402A(d)(2) of the Code (a Qualified Distribution ). If a distribution from the Participant s Designated Roth Account is not paid as a direct rollover, the Plan Administrator shall provide the Participant, upon the Participant s request, with a statement which indicates either (i) the portion of such distribution which constitutes Basis, or (ii) that such distribution is a Qualified Distribution. The Plan Administrator shall so provide such statement within a reasonable period after the date on which the direct rollover is made or the date on which the Participant s request is received, as applicable, but in any event within 30 days after such applicable date. H. Earliest Designated Roth Contribution The Plan shall not accept any Designated Roth Contribution or any Qualified Rollover Contribution prior to January 1, I. Notice To The Trustee Before the Plan accepts any Designated Roth Contribution or any Qualified Rollover Contribution, the Employer shall notify the Trustee that the Plan may accept such contributions. Signature of Employer: Date Signed: Type or Print Name: Title: 8

9 Additional Plan Provisions for Designated Roth Contributions Effective as of January 1, 2006, the Plan s provisions pertaining to Designated Roth Contributions are amended as follows: 1. The Employer must treat any Designated Roth Contribution as being an Elective Deferral which is not excludable from gross income, and as being includable in wages for wage withholding and employment tax purposes, at the time that such contribution would have been paid to the Participant but for his or her deferral election under the Plan. 2. No Elective Deferral made pursuant to a negative election or a deemed election may be treated as a Designated Roth Contribution. If an elective contribution would not have been includable in gross income if it had been paid directly to the Employee (rather than being subject to a cash or deferral election), the elective contribution may nevertheless be treated as a Designated Roth Contribution, provided that the Employee is entitled to treat such contribution as an investment in the contract under Section 72(f)(2) of the Code and all other requirements of the Code applicable Treasury regulations for treatment as a Designated Roth Contribution are satisfied. 3. When applying the Plan s automatic direct rollover rules, any eligible rollover distribution made from the Participant s Designated Roth Account is treated as being a separate distribution from any other eligible rollover distribution made at the same time from the Participant s other account or accounts under the Plan, for purposes of determining whether a mandatory distribution exceeds $1, In the case of any Self-Employed Individual, a contribution may not be treated as being a Designated Roth Contribution unless such individual does not claim a tax deduction for such contribution. 9

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