Summary of Material Modifications NUSCO 401k Plan June 2011

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2 Summary of Material Modifications NUSCO 401k Plan June 2011 This supplement serves as an addendum to the Northeast Utilities Service Company (NUSCO) 401k Plan (the Plan ) Summary Plan Description (SPD), updated July 2, 2009, and provides information as a result of subsequent Plan changes. The NUSCO 401k Plan SPD can be found online at Fidelity s NetBenefits Web site ( and NU s employee Web site, the NUnet. This supplement, the SPD, and Appendix B together constitute a prospectus covering securities that have been registered under the Securities Act of Online Beneficiary Designation Participants now have the ability to register beneficiaries online at and are encouraged to do so. Naming beneficiaries helps to ensure Plan assets are distributed according to the direction of the participant. All participants are encouraged to review their online beneficiary designations periodically to ensure the designations are current. If a participant previously submitted a paper form to Fidelity indicating a beneficiary designation, this designation will continue to be valid although the designation will not be visible online. Entering beneficiary information online allows the participant the convenience of reviewing and updating designations at any time. Funding the Company Match Part of the Plan is an Employee Stock Ownership Plan (ESOP), an employee benefit that encourages increased stock ownership by employees. The Company funded a leveraged ESOP in 1992 to provide NU Common Shares to employees as part of the matching contribution allocation. A leveraged ESOP is one in which the employer borrows money to lend to a benefit plan so that it can then acquire employer stock. The loan for the ESOP was fully repaid in early 2010 and all shares acquired with the leveraged ESOP had been fully allocated by that date. The two-thirds Company match within the ESOP match account is now funded by NU Treasury shares. Dividend Options Participants who have holdings in the NU Common Shares, ESOP 1, and/or the Tax Reduction Act Employee Stock Ownership Plan (TRAESOP)/ Payroll Based Employee Stock Ownership Plan (PAYSOP) funds in their Plan account can now elect to receive dividends paid by these funds on NU Common Shares in cash or continue to have them reinvested automatically in the Plan by allocation of NU Common Shares of equal value. If a participant holds more than one of the three NU share funds, the dividend distribution election applies to all. If no active election is made, dividends will continue to be reinvested. Cash dividends paid via direct deposit or check will be reported by Fidelity to the IRS on an IRS Form 1099R and will be subject to any applicable taxes in the year in which they are paid. No income taxes will be withheld when the dividend is paid. Once a change is made, all future dividends will continue to be paid in the same way unless the participant makes another change. Participants can elect to receive cash dividends via direct deposit or check and can change an existing instruction online by logging into Fidelity NetBenefits at click on NUSCO 401k Plan and then Dividend Elections. Select Cash and choose either Check or Direct Deposit. Participants must also enter their bank information under Electronic Payments to receive cash dividends via direct 1

3 deposit. A processing fee will apply and will be deducted from the participant s Plan account. Changes should be made at least 10 days before the applicable dividend payment date. Roth In-Plan Conversions As a result of a tax law change, the Plan was amended effective December 1, 2010 to allow Roth 401(k) in-plan conversions. By making a Roth 401(k) in-plan conversion, participants can convert any of their 401k Plan account balance eligible for a current distribution to the Plan s Roth 401(k) source account. The amount converted will be subject to income taxation in the year of the conversion. Special tax rules applied for conversions made in New Fund Options with Lower Expense Ratios As part of its regular review of investment options offered under the Plan, the Treasurer (with the consent of the Advisory Committee) negotiated with the trustee and record-keeper to replace 11 of Fidelity s fund options within the Plan with similar, lower fee Fidelity funds effective December 8, These new funds, known as Fidelity Freedom K Funds and Fidelity Class K Shares, have similar investment objectives but lower expense ratios. Six New Fidelity Freedom K Funds Effective the end of trading on December 8, 2010, the Fidelity Freedom K Funds replaced the existing six Fidelity Freedom Funds in the Plan. The Fidelity Freedom K funds are a series of Fidelity target date retirement mutual funds available to large plan sponsors. Fidelity Freedom K Funds have the same management team and investment objectives and invest in the same underlying funds as the Fidelity Freedom Funds (although the Freedom K Funds often invest in a different share class of the underlying funds). New Default Funds The Fidelity Freedom K Funds replaced the Fidelity Freedom Funds as the Plan s designated default funds effective December 8, The Fidelity Freedom K Funds are used as the Plan s designated default fund and are based on the participant s date of birth and assumption that the participant will retire at age 65. The default fund is selected when a participant does not direct Fidelity, as Plan trustee and record-keeper, where to invest Plan contributions. Five New Fidelity Class K Shares The new Fidelity Class K Shares offer the same investment strategy and risk as the corresponding Fidelity funds they replaced, but the overall expenses are lower. The new Fidelity Class K Shares have different fund codes, ticker symbols, and expense ratios: 1. Fidelity Growth Company Fund Class K, Ticker Symbol: FGCKX 2. Fidelity International Discovery Fund Class K, Ticker Symbol: FIDKX 3. Fidelity Low-Priced Stock Fund Class K, Ticker Symbol: FLPKX 4. Fidelity Magellan Fund Class K, Ticker Symbol: FMGKX* 5. Fidelity Mid-Cap Stock Fund Class K, Ticker Symbol: FKMCX * The Fidelity Magellan Fund Class K will no longer be available as an investment option under the Plan effective as of the close of the New York Stock Exchange (generally 4 p.m. Eastern Time) on Wednesday, August 10, Fund Name Change The Spartan U.S. Equity Index Fund Investor Class changed its name to Spartan 500 Index Fund effective January 22, Voting of NU Common Shares held in the 401k Plan Participants are entitled to vote those NU Common shares held in their Plan accounts and the Plan trustee will vote the shares of NU Common in accordance with each participant s instruction. This 2

4 applies to shares held in the NU Common Shares fund, the portion of the matching contribution held in the ESOP 1, and any investment in NU Common shares held in the TRAESOP/PAYSOP fund. Effective December 13, 2010, the voting provisions of the Plan were amended to provide that, if a participant fails to provide timely instruction how to vote his or her shares of NU Common held in any of these funds, the unvoted shares will be voted by the Plan trustee in the same proportion as shares for which participants have provided instruction. Appendix B Appendix B to the SPD constitutes part of a prospectus for the Plan and lists the investment returns for each investment option offered by the Plan for the last three years. A copy of Appendix B can be accessed from NU s employee Web site (the NUnet) under the Employee Resources tab and the Retirement category, and through Fidelity s NetBenefits site ( under the Plan Information and Documents link and Highlights category. To obtain the most recent month-end performance for any investment option, call Fidelity at or go to (log in, choose plan, select Investment Choices and Research, and then choose investment option). Clarifications to Key Terms The following key terms have been clarified for consistency with the NUSCO 401k Plan document: K-Vantage Pay An Employee s Base Pay adjusted to include any Workers Compensation wage replacement pay, plus cash awards received by non-bargaining unit Employees (and bargaining unit Employees, as negotiated) under any incentive pay plans of the Company that apply to broad groups; Annual Incentive awards under the Northeast Utilities Incentive Plan; special salary adjustment distributions; shift differentials; Sunday premium pay; on-call pay; overtime pay (which is included at straight-time rates); and other monthly payments derived from Base Pay or hours worked according to uniform rules of the Plan Administrator. K-Vantage Pay is not reduced by pretax contributions made to the Plan. K-Vantage Pay will not include any compensation deferred under a program that is not qualified under the IRS Code. K-Vantage Pay may be limited due to maximum IRS compensation limits in determining contributions under the Plan. Total Disability Total Disability indicates a determination was made under the NUSCO Flexible Benefits Plan that the Participant suffers a total disability and is eligible to begin receiving long-term disability benefits under that plan. During such period of Total Disability, Participant contributions, Company Match contributions, and K-Vantage contributions cease. Plan Administration Fees Generally, Plan administration fees include expenses associated with recordkeeping, compliance support, trustee services, and other administrative services. Recordkeeping fees, for example, are associated with daily administration of the Plan. The Company generally absorbs Plan administration fees on behalf of the Participant. Some investments may use revenue paid on the investment to reduce overall expenses. Any administrative fees charged to a Participant will be disclosed on the Participant s account statement or in a separate communication from the Company. Your rights and benefits under the NUSCO 401k Plan are governed by the NUSCO 401k Plan document. If there is any discrepancy between the SPD and the NUSCO 401k Plan document, the NUSCO 401k Plan document will rule. 3

5 Appendix A Appendix A: Fund Options To help you make investment decisions, the Company has organized your Plan investment options into the following four tiers of funds: Life Cycle Investment Options, Core Investment Options, Specialty Investment Options, and a Self-Directed brokerage option through Fidelity. You may also choose to have all or part of your account (other than the ESOP) managed through Fidelity Portfolio Advisory Services at Work. You can contact Fidelity for more information about the funds and may request fund descriptions and/or a prospectus for the publicly-traded funds through Fidelity NetBenefits at or by calling the NUSCO 401k Service Center at Monday through Friday, 8:30 a.m. to midnight (Eastern Time), except on stock market holidays. Investment Tiers Fund Category Ticker Fund Name Tier 1: Life Cycle Investment Options Life Cycle Funds FFKAX Fidelity Freedom K Income Fund FFKBX Fidelity Freedom K 2000 Fund FFKCX Fidelity Freedom K 2010 Fund FFKDX Fidelity Freedom K 2020 Fund FFKEX Fidelity Freedom K 2030 Fund FFKFX Fidelity Freedom K 2040 Fund Tier 2: Core Investment Options Managed Income (or Stable Value) N/A Fixed Income Fund Bond N/A Intermediate Bond Fund Balanced/Hybrid N/A Frank Russell Global Balanced Fund Domestic Equities: Large Blend FUSEX Spartan 500 Index Investor Class Large Growth FMGKX Fidelity Magellan Fund Class K Small Blend N/A Frank Russell Small Capitalization Fund International/Global FIDKX Fidelity International Discovery Fund Class K MSIQX Morgan Stanley Institutional International Equity Fund Class I Tier 3: Specialty Investment Options Domestic Equities: Large Value HIADX Hartford Dividend and Growth HLS Fund Class IA Large Growth FGCKX Fidelity Growth Company Fund Class K Mid Value LMCYX Lord Abbett Mid Cap Value Fund Class I Mid Blend FLPKX Fidelity Low-Priced Stock Fund Class K Mid Growth FKMCX Fidelity Mid-Cap Stock Fund Class K Small Growth LADYX Lord Abbett Developing Growth Fund Class I International/Global: Emerging Markets MGEMX Morgan Stanley Institutional Emerging Markets Fund Class I Company Stock N/A NU Common Shares Fund Tier 4: Self-Directed Self-Directed Brokerage N/A Fidelity BrokerageLink 4

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7 Contents Contents About the NUSCO 401k Plan... 1 Participating Companies... 1 Eligibility... 1 Enrollment... 1 Revisions and Updates... 2 Plan Resources... 2 Fidelity Investments... 2 NUnet... 2 HR Service Center... 2 Participant Contributions... 3 Pre-Tax Contributions... 3 Roth 401(k) Contributions... 3 Regular After-Tax Contributions...3 Catch-up Contributions... 3 Military Leave/Uniformed Services Employment and Reemployment Rights Act... 4 Rollover Contributions... 4 IRS Plan Limits... 4 Company Contributions... 6 Company-Matching Contributions... 6 Employer Match Account... 7 ESOP Match Account... 7 TRAESOP/PAYSOP Account...7 ESOP and TRAESOP/PAYSOP Diversification...7 K-Vantage... 7 K-Vantage Vesting... 8 K-Vantage Forfeiture... 8 Contribution Sources...9 Investments...10 Investment Tiers...10 Choosing Investments...11 Investing Future Contributions...11 Exchanging Investments...11 Default Investments...11 Account Statements and Valuation...11 Fidelity Portfolio Advisory Services at Work...12 Plan Fees...12 i

8 Contents In-Service Withdrawals...13 Withdrawal Procedures...13 Sequence of Withdrawals...13 Financial Hardship Withdrawals...14 TRAESOP/PAYSOP Account Withdrawals...14 Military Reservist Withdrawals...14 Total Disability Withdrawals...15 K-Vantage Account Withdrawals...15 BrokerageLink Withdrawals...15 Post-Service Distributions...16 Form of Distribution...16 Distribution Timing...16 Keeping Money in the Plan...16 Rollover Distributions...17 Direct Rollovers...17 Indirect Rollovers...17 Minimum Required Distributions...17 Reemployment...17 Alternate Payees...17 Survivor Benefits...18 Death...18 Beneficiary Designations...18 Payments to Beneficiaries...18 Death of a Participant Before Distributions Have Begun...19 Death of a Participant After Distributions Have Begun...19 Taxes on Plan Distributions and Withdrawals...20 Special Tax Averaging...21 Net Unrealized Appreciation...21 Loans...22 Eligibility...22 Loan Processing...22 Loan Amounts...22 Source of Loan Funds...23 Interest Rate...23 Security...23 Repayments...23 Prepayments...23 Default...23 Loan Repayment During Military Leave of Absence...23 Retirement, Termination of Employment, or Death...24 Plan Information...25 Plan Sponsor...25 ii

9 Contents Plan Identification...25 Type of Plan...25 Plan Administrator...25 Plan Year...25 Agent for Service of Legal Process...25 Voting Rights...25 Effect on Other Benefits...26 When Benefits Are Not Paid...26 Incorporation of Documents by Reference...26 Top-Heavy Provisions...26 Claims and Appeals Procedure...26 Filing an Appeal...27 Pension Benefit Guaranty Corporation (PBGC)...27 Lost Participant, Beneficiary or Alternate Payee...27 Qualified Domestic Relations Order...28 Future of the Plan...28 No Right to Employment...28 Plan Administrator s Discretion...28 Plan Administration and Funding...29 ERISA Rights...30 Prudent Actions by Plan Fiduciaries...30 Enforcement of Rights...30 Account Statements...31 Questions...31 Key Terms...32 This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of iii

10 About the NUSCO 401k Plan About the NUSCO 401k Plan The Northeast Utilities Service Company 401k Plan (the Plan ) is a defined contribution pension plan and a qualified plan under the federal Internal Revenue Code ( Code ). It is also a self-directed plan in accordance with section 404(c) of the Employee Retirement Income Security Act ( ERISA ). This means that Employee Pre- Tax contributions, Company contributions, rollover contributions, and earnings in the Plan will not be taxed until a Plan distribution is taken, and that Participants determine how Plan contributions are invested to the extent they are not held in the Employee Stock Ownership Plan (ESOP) portion of the Plan. This document is the Summary Plan Description ( SPD ) for the Plan, which provides an overview of the Plan s key features. This SPD also constitutes part of a prospectus covering securities that have been registered under the Securities Act of This SPD, as a prospectus, incorporates important business and financial information about Northeast Utilities from documents not included in or delivered with this SPD. Refer to the Incorporation of Documents by Reference section of the Plan Information chapter for instructions on how to obtain copies of these documents. This SPD applies to those individuals eligible to participate in the Plan and describes Plan features as of July 1, If employment is terminated prior to July 1, 2009, benefits are determined based upon the terms of the Plan at the time of termination. However, many provisions of the Plan and this SPD may still apply. This SPD does not cover every provision of the Plan. Complete details about the Plan can be found in the official Plan Document, a legal document that meets Code and ERISA requirements and governs the operation of the Plan. Rights and benefits under the Plan are governed by the formal Plan Document. If there is a discrepancy or inconsistency between this document and the Plan Document, the Plan Document will govern to the extent permitted by law. Participating Companies As of July 1, 2009, Northeast Utilities Service Company ( NUSCO ), as the Plan sponsor, and the following Northeast Utilities System companies ( Participating Companies ) participate in the Plan: The Connecticut Light and Power Company (CL&P) Public Service Company of New Hampshire (PSNH) Western Massachusetts Electric Company (WMECO) Yankee Gas Services Company Select Energy, Inc. E.S. Boulos (not K-Vantage) Northeast Generation Services (not K-Vantage) Collectively, NUSCO and the Participating Companies will be referred to as the Company or Employer. Any updates to this list are available by contacting the NUSCO Human Resources Service Center. (See HR Service Center under the Plan Resources section of this chapter.) Participation in the Plan will not be affected if Employees switch employment between or among NUSCO and the participating companies. (See exception for K-Vantage in the Company Contributions chapter). Eligibility Employees of the Company are eligible to participate in the Plan. This right extends to nonbargaining unit and bargaining unit Employees, as negotiated. Eligibility or right to benefits under the Plan should not be interpreted as a guarantee of employment. The Company s employment decisions are made without regard to the benefits it offers as part of total compensation. Enrollment Enrollment may begin immediately upon employment or at any time thereafter. Generally, enrollment at least one week prior to any payday will allow contributions to Print Date: September 1,

11 About the NUSCO 401k Plan begin with the first paycheck following enrollment. Once participation begins, an account is set up in the Employee s name to record contributions and earnings. Subject to collective bargaining, new Employees and rehired Employees are automatically enrolled in the Plan generally 60 days after the date of employment or reemployment to make Pre-Tax contributions of three percent of their Base Pay. Employees subject to auto-enrollment can choose to enroll sooner or at a different percentage of Base Pay, or for a different type of contribution (for example, Roth 401(k) instead of Pre-Tax), or may choose to disenroll at any time by changing their contribution percentage to 0. Revisions and Updates NUSCO is the sponsor of the Plan, and, by action of its Board of Directors, reserves the right at any time to change in any way or terminate the Plan or any benefit or provision under the Plan, to the extent allowed by law. This SPD is current as of July 1, Plan changes will be announced as a Plan supplement or other communication. Participants are provided with periodic updates to the SPD electronically and/or in print. Copies of any Plan supplements or prospectuses should be kept with this SPD for reference. To continue receiving Plan information as a terminated Employee, Beneficiary, or Alternate Payee, the HR Service Center should be notified of any address change to ensure NU has a correct mailing address. (See the HR Service Center section below.) Plan Resources Fidelity Investments The Plan is administered under a contract with Fidelity Investments, provider of recordkeeping services and trustee. Personal account information can be accessed through Fidelity NetBenefits at or by calling Fidelity s NUSCO 401(k) Service Center. Fidelity NetBenefits at Participants have online account access through Fidelity s NetBenefits Web site, which provides up-to-date account information and the ability to perform a complete range of online account management activities. NetBenefits provides investment information (account balance information, performance information, and prospectuses for the Fidelity mutual funds and other mutual funds offered in the Plan), interactive financial planning calculators, and workshops to help with retirement planning. Participants can also download a Designation of Beneficiary Form, which includes instructions on how to submit the form to Fidelity once completed. To access account information online through Fidelity NetBenefits at Participants are required to register by entering their Social Security number and Personal Identification Number (PIN). As an added security measure, Participants are urged to establish a unique Customer ID to replace the use of a Social Security number as a personal identifier. Fidelity s NUSCO 401(k) Service Center Current and former Employees, Alternate Payees, and Beneficiaries interested in account information can contact the NUSCO 401(k) Service Center by calling , Monday through Friday, 8:30 a.m. to midnight (Eastern Time) except on stock market holidays. NUnet Participants can obtain copies of this SPD and any Plan supplements in addition to a link to Fidelity NetBenefits at through NU s Employee Web site, NUnet. NUnet can be accessed from HR Service Center Participants without Internet access can obtain copies of this SPD, Plan supplements, and Plan Documents by contacting the Northeast Utilities Human Resources Service Center (the HR Service Center ) at or toll-free at (800-TDD-TDD4 or for hearing impaired), Monday through Friday, 8 a.m. to 4:30 p.m., except on certain holidays. Print Date: September 1,

12 Participant Contributions Any changes will be effective on the next payroll or the following payroll if there is not sufficient processing time. Pre-Tax Contributions Participant Contributions Employees can contribute from one to 25 percent of their Base Pay to the Plan in increments of.1 percent. (Additional amounts can be contributed through Catch-Up contributions described separately in this chapter). Participants can choose from three different savings options (or any combination of the three): 1. Pre-Tax contributions 2. Roth 401(k) contributions 3. Regular After-Tax contributions Federal law limits the amount of total (both the Employee s and the Company s) contributions made to an Employee s account in any year. (See the IRS Plan Limits section further in this chapter.) The ability to make Roth 401(k) contributions is subject to collective bargaining. Shortly after each payday, the Company sends the Employee s and Company s contributions (if applicable) to Fidelity for investment. Employees can find a record of their contribution on their paystub and at Fidelity NetBenefits at Pre-Tax and Roth 401(k) contributions are eligible for Company-matching contributions up to the three percent combined limit of the Employee s Base Pay. Regular After-Tax contributions are not eligible for Company-matching contributions. Employees can make the following changes to their contributions at any time: Increase or decrease their contribution percentage from Base Pay, or stop making contributions; Switch contributions among Pre-Tax, Roth 401(k), and Regular After-Tax; and Change the way contributions are invested. Employees can elect to contribute Pre-Tax contributions (investing part of their pay before it is subject to income taxes), which results in reduced taxable wages and income tax withholding. However, an Employee s Pre-Tax contributions are subject to applicable Social Security and Medicare tax withholding. Pre-Tax contributions to the Plan and related earnings are not subject to immediate income taxation. Employees are generally subject to income taxes on these amounts when a Plan distribution is made (unless it is rolled into an IRA or other employer plan), although special tax treatment may be available. (See the Taxes on Plan Distributions and Withdrawals chapter.) Roth 401(k) Contributions Employees can elect to contribute after-tax contributions in the form of Roth 401(k) contributions (subject to collective bargaining). Because Roth 401(k) contributions are made on an after-tax basis, they are not taxable on distribution. Earnings on Roth 401(k) contributions are also exempt from income taxation on distribution if the Participant satisfies two requirements: (1) the Participant takes a distribution from his or her Roth 401(k) source after he or she reaches age 59½, and (2) five years have passed since the Employee made his or her first Roth 401(k) contribution to the Plan. Regular After-Tax Contributions Employees can elect to contribute after-tax contributions other than Roth 401(k) contributions to the Plan in the form of Regular After-Tax contributions. Because Regular After- Tax contributions are taxed before they are deposited into the Plan, these contribution amounts are not subject to income tax when paid out. However, unlike the Roth 401(k) account, investment earnings on these contributions are always taxable at the time received. Catch-Up Contributions Eligible Employees can elect to contribute additional Catch-Up contributions from one to 25 percent of Print Date: September 1,

13 Participant Contributions their Base Pay each pay period in increments of.1 percent as Pre-Tax, Roth 401(k), or Regular After-Tax contributions, as applicable. (See IRS Plan Limits below.) Employees are eligible to begin making Catch- Up contributions in the year they turn age 50 and can continue to do so thereafter. Military Leave/Uniformed Services Employment and Reemployment Rights Act (USERRA) Participants who are entitled to reemployment under USERRA following a military leave of absence and who return to employment within a prescribed time will be allowed make-up contributions to the Plan (Pre-Tax/Roth 401(k)/Regular After-Tax contributions, as applicable). Make-up contributions are eligible for Company-matching contributions up to applicable limits. These USERRA makeup contributions must be made between the Employee s reemployment date immediately following the military leave and the earlier of the following: (a) the date that corresponds to three times the duration of the Employee s military leave of absence, or (b) five years from the Employee s reemployment date. These make-up contributions are reduced by any contributions the Participant made to the Plan during his or her military leave of absence. The Participant will continue to earn Vesting Service during the qualified military leave provided he or she is reemployed by the Company within the prescribed time under USERRA. Rollover Contributions Employees (and former Employees and Beneficiaries with account balances of more than $1,000) can initiate a rollover from another qualified plan or IRA to the Plan. Adequate documentation relating to the incoming rollover must be provided. Rollover forms are available online through Fidelity NetBenefits at or by calling the NUSCO 401(k) Service Center at IRS Plan Limits Employee and Company contributions are limited under the Plan and applicable tax law. Updates to the IRS limits are posted annually on Fidelity NetBenefits at or can be obtained by calling the NUSCO 401(k) Service Center at Annual Pre-Tax and Roth 401(k) Contributions (401(k) Dollar Limit) An Employee s combined Pre-Tax and Roth 401(k) contributions for a calendar year cannot exceed an IRS maximum dollar amount, periodically adjusted for inflation. The maximum dollar limit for Employees who are not age 50 before January 1, 2010 is $16,500. Catch-Up Contributions Employees who are at least age 50, or who will turn age 50 by the end of the calendar year, are also eligible to make Catch-Up constributions to their Pre-Tax or Roth 401(k) accounts. The 2009 maximum dollar limit for Catch-Up contributions is $5,500. Once an Employee reaches the applicable 401(k) dollar limit for any Plan Year, his or her combined Pre-Tax/ Roth 401(k) contributions to the Plan will stop for the remainder of that Plan Year. The Employee may continue to contribute to the Plan for the remainder of the Plan year by making Regular After-Tax contributions up to the 25 percent of Base Pay limit. Annual Contribution Limits The total amount an Employee contributes to the Plan within a year (other than rollover or Catch-Up contributions), plus the amount that the Company contributes on the Employee s behalf (in matching and K-Vantage contributions), cannot exceed the Employee s total pay for the year and cannot exceed an IRS maximum dollar amount, periodically adjusted for inflation. The 2009 maximum dollar limit for total annual contribution is $49,000. Annual Compensation Limit No contributions can be made to the Plan with respect to compensation for the year in excess of an IRS maximum dollar amount, periodically adjusted for inflation. The 2009 maximim dollar limit is $245,000. New Employees The annual 401(k) dollar limit applies to the total amount an Employee (as a taxpayer) contributes to the Plan and all other 401(k) and similar plans for a Plan Year including plans sponsored by other employers (such as another company that the Employee worked for prior to being hired by the Company). Print Date: September 1,

14 Participant Contributions It is possible for a new Employee s total Pre-Tax and Roth 401(k) contributions for the year to exceed the IRS dollar limit after combining his or her contributions to the Plan and the plan of his or her prior employer. If this occurs, the Employee must notify his or her former employer and/or the HR Service Center by March 1 of the following year to make arrangements to have the excess amount refunded. The amount in excess of the annual contribution limits must be refunded by April 15 of the following year to be effective. If the Employee does not direct this correction, the excess over the 401(k) dollar limit may be subject to taxation for the year of contribution, and again when it is later distributed. It is the Employee s obligation to ensure that the total of his or her contributions to all 401(k), 403(b), and 457 plans does not exceed the 401(k) dollar limit for a year in which the Employee contributes to plans maintained by separate employers. Annual Testing Requirements The Plan has to perform a special test annually of Employee and Company contributions to the Plan to assure that Employees at all pay levels are contributing generally similar percentages of pay. If the test is failed, excess contributions made by Employees in the upper pay group may be refunded. Print Date: September 1,

15 Company Contributions When an Employee makes Pre-Tax or Roth 401(k) contributions, Company-matching contributions are allocated each pay period to the following two source accounts: 1. Employer Match account 2. ESOP Match account Company Contributions Company-Matching Contributions Employees are always fully Vested in their contributions to the Plan and in Company-matching contributions including the ESOP Shares allocated to the Employee s ESOP Match account. Employees who have completed six months of Service are eligible to receive a Company-matching contribution allocation on their Pre-Tax and Roth 401(k) Plan contributions. The Company-matching contribution is equal to 100 percent, up to the first three percent of Base Pay the Employee contributes to his or her Pre-Tax and/or Roth 401(k) accounts for any Plan year. No Company-matching contributions are made during an Employee s six-month eligibility period, or on Regular After-Tax contributions, rollover contributions, or Employee contributions in excess of three percent of the Employee s Base Pay. Matching contributions are allocated to an Employee s account each pay period and calculated on a year-to-date basis. This allows an Employee to receive a Companymatching contribution even in pay periods when the Employee is making contributions of less than three percent of his or her Base Pay (after completing six months of Service and assuming the Employee has made contributions exceeding three percent of Base Pay earlier in the year). See the Example below. Company-matching contributions stop only when they equal three percent of the Employee s Base Pay for the Plan Year or the lesser amount that the Employee contributed on a Pre-Tax or Roth 401(k) basis during the Plan Year while eligible for matching contributions. Example Employee contributes six percent of Base Pay for nine months Pat elects to contribute six percent of her Base Pay to the Plan on a pre-tax basis beginning January 1, but reduces her Pre-Tax contribution to zero beginning October 1 through the end of the year. Assuming that Pat s annual Base Pay is $52,000 ($2,000 each bi-weekly pay period), Pat s Pre-Tax contribution is $120 each pay period ($2,000 Base Pay multiplied by six percent) and her total matching contributions each pay period are $60 ($2,000 Base Pay multiplied by three percent). Pat contributes a total of $2,280 before her contributions stop on October 1. Even though Pat did not contribute to the Plan from October through December, matching contributions will continue to be made for each pay period from October 1 through December 31. Why? Because Pat s total contribution of $2,280 is more than three percent of her annual Base Pay, which makes her eligible for the maximum matching contribution equal to three percent of her annual Base Pay. Therefore, she will continue to receive contributions of three percent each pay period for the rest of the Plan Year. Print Date: September 1,

16 Company Contributions Employer Match Account One-third of the Company match will be contributed to the Employee s Employer Match account and will be invested in the manner in which the Employee has directed the investment of his or her Pre-Tax contributions, or in the manner in which his or her Roth 401(k) contributions are invested (if the balance in a Participant s Pre-Tax account is 0 ). ESOP Match Account Part of the Plan is an Employee Stock Ownership Plan ( ESOP ). An ESOP is an employee benefit that encourages increased stock ownership by Employees. A leveraged ESOP is one in which the employer borrows money to lend to a benefit plan for the purpose of acquiring employer stock. The Company funded a leveraged ESOP in 1992 to provide NU Common Shares to Employees as part of the matching contribution allocation. As payments are made on the ESOP loans, ESOP Shares are released for allocation to Employees who make Pre-Tax/Roth 401(k) contributions to the Plan, up to the Plan limits. Two-thirds of the Company match will be in the form of NU Common Shares held in the ESOP portion of the Plan. The number of ESOP Shares to be allocated to an Employee s account is calculated by dividing the value of the two-thirds match (or dividend, when one is paid) by the closing price of an NU Common Share on the New York Stock Exchange on the transaction processing date. TRAESOP/PAYSOP Account The NUSCO Tax Reduction Act Employee Stock Ownership Plan ( TRAESOP ) and the NUSCO Payroll Based Employee Stock Ownership Plan ( PAYSOP ) were two employee benefit plans that previously provided NU Common Shares to participating Employees. These two benefit plans merged into the Plan in Employees who have a TRAESOP/PAYSOP account in the Plan have NU Common Shares held in this account. These shares are held with ESOP Shares in the ESOP portion of the Plan. ESOP and TRAESOP/PAYSOP Diversification All active Employees with three or more years of Service and all former Employees, regardless of length of Service, may exchange their ESOP and TRAESOP/PAYSOP Shares into other Plan investments at any time. K-Vantage K-Vantage is the retirement benefit that was added when the NUSCO Retirement Plan was discontinued for new Employees in Employees may not actively participate in K-Vantage and in the NUSCO Retirement Plan unless they opted in to K-Vantage in which case they will continue to have a frozen benefit in the NUSCO Retirement Plan. All nonbargaining unit Employees hired after 2005 and bargaining unit Employees hired on dates as negotiated are eligible to receive K-Vantage contribution allocations from the Company, effective on their first date of employment. No enrollment in K-Vantage is required. Nonbargaining unit Employees hired before 2006 (and bargaining unit Employees hired before a negotiated date) may also participate in K-Vantage if they opted in to K-Vantage during specified enrollment periods. Rehired Employees will also participate in K-Vantage, provided they have not started to receive pension payments under the NUSCO Retirement Plan before their reemployment date. K-Vantage contributions are added to a K-Vantage Employee s account each pay period and are calculated based on the sum of the eligible Employee s years and months of age and K-Vantage Service, rounded down to a whole year as of January 1 of each Plan Year as follows: Age Plus K-Vantage Service % of K-Vantage Pay Less than or more but less than or more 6.5 The applicable K-Vantage percentage is multiplied by the Employee s K-Vantage Pay to arrive at the K-Vantage contributions for the pay period. Employees elect how K-Vantage contributions are invested by choosing among the different Plan investment options. If a K-Vantage Employee does not actively make an investment election for his or her K-Vantage contributions, they will be invested in the default investment fund (Fidelity Print Date: September 1,

17 Company Contributions Freedom Fund) based on the Employee s target retirement date. The K-Vantage Employee may switch from the default investment at any time. An Employee s (or Beneficiary s) K-Vantage account is not eligible for withdrawal during employment, may not be invested in the BrokerageLink option until Vested, and may not be liquidated for a Plan loan. K-Vantage Vesting K-Vantage Employees Vest in their K-Vantage accounts on the earliest of the following events: Completion of three years of Vesting Service in the Plan (subject to Break in Service rules), Attainment of age 65, Commencement of long-term disability payments under the NUSCO Flexible Benefits Plan, or Death. K-Vantage Forfeiture If an Employee leaves the Company before having a Vested right to his or her K-Vantage account, he or she will lose K-Vantage Vesting Service unless he or she becomes reemployed by the Company within five years following his or her termination. Any unvested K-Vantage account balance will be forfeited upon the earlier of (a) a complete distribution of the former Employee s Plan account balance, or (b) five years. Should the former Employee be rehired by the Company within five years, any forfeited account balance and K-Vantage Vesting Service will be reinstated. Print Date: September 1,

18 Contribution Sources Contribution Sources Fidelity maintains an account for each Participant and records all contributions, investment gains and losses, and any other activities that affect the amount of the Plan account. The record of the Participant s and the Company s contributions and investment activity within the account is recorded by Fidelity in different source accounts depending on the nature of the contribution. Refer to the chart below. Source Accounts Contribution Type Participant Contributions Pre-Tax Account Pre-Tax Catch-Up Account Roth 401(k) Account Roth 401(k) Catch-Up Account Regular After-Tax Account Pre-Tax Rollover Account Roth 401(k) Rollover Account After-Tax Rollover Account Pre-Tax contributions and related earnings Pre-Tax Catch-Up contributions and related earnings Roth 401(k) contributions and related earnings Roth 401(k) Catch-Up contributions and related earnings This account contains all After-Tax contributions to the Plan other than Roth 401(k) contributions and related earnings Taxable contributions and related earnings as a result of a rollover or direct transfer from another tax-qualified plan or IRA Roth 401(k) contributions and related earnings as a result of a rollover or direct transfer of Roth 401(k) monies from another tax-qualified plan or a Roth IRA After-Tax contributions and related earnings other than Roth 401(k) as the result of a rollover from another tax-qualified plan Company Contributions ESOP Match Account Employer Match Account K-Vantage Account The two-thirds Company-matching contribution in ESOP Shares allocated to a Participant s ESOP account and related dividends reinvested in ESOP Shares The one-third Company-matching contribution allocated to a Participant s non- ESOP account and related earnings The age and Service-based Company contributions to a K-Vantage Employee and related earnings TRAESOP/PAYSOP Account NU Shares and related earnings allocated to the account of an Employee who participated in the Northeast Utilities Service Company Tax Reduction Act Employee Stock Ownership Plan (TRAESOP) or the Northeast Utilities Service Company Payroll Based Employee Stock Ownership Plan (PAYSOP) Print Date: September 1,

19 Investments options under the Plan to help ensure that their retirement savings will meet their retirement goals. Investments The Plan offers a wide range of investment options. Each investment option is different and has its own specific objective. Participants are responsible for choosing how to invest their Plan account in one or more of the available investment options (with the exception of the ESOP account, which cannot be selected until the Employee has completed three years of Service.) To help achieve long-term retirement security, Participants should give careful consideration to the benefits of a wellbalanced and diversified investment portfolio. Spreading investments among different types of investments can help achieve a favorable rate of return, while minimizing the overall risk of losing money. Market and other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. Therefore, if a Participant invests more than 20 percent of his or her retirement savings in any one company or industry, the Participant s savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help manage investment risk. In deciding how to invest retirement savings, Participants should take into account all of their assets including any retirement savings outside of the Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerances for risk. Therefore, Participants should carefully consider the mix of all of their investments, including investments in NU Common Shares through the Plan. It is also important for Participants to periodically review their investment portfolio, their investment objectives, and the investment Participants are advised to read all information regarding Plan investment options including applicable prospectuses to understand how each investment fits into their investment strategy. Fidelity offers information online through Fidelity NetBenefits at and by calling the NUSCO 401(k) Service Center at Participants can also consult the Department of Labor s Web site at for more information about individual investing and portfolio diversification. The Treasurer of the Company (with the advice of the NUSCO 401(k) Advisory Committee) is a named fiduciary of the Plan and is responsible for selecting and reviewing the Plan s investment options with the exception of options available through Fidelity s BrokerageLink. The investment options have been chosen to provide a diversified portfolio of risk/return options. The Plan is intended to constitute a plan as described in Section 404(c) of ERISA, and Title 29 of the Code of Federal Regulations Section (c)-1, so that fiduciaries of the Plan may be relieved of liability for any losses that are the direct and necessary result of investment instructions given by a Participant or his or her Beneficiary. The Treasurer may add, eliminate, or otherwise change the Plan s investment options at any time, with advance notification to Participants. Investment Tiers Plan investment options are divided into the four tiers described below. See Appendix A for a description of each available investment option. Tier 1: Lifecycle Investment Options These options operate under the Fidelity Freedom Fund trademark and offer a simple approach to long-term retirement investing. The Fidelity Freedom Funds are designed to target investments in equities (stocks), fixed income (bonds), and cash (money market), based on the Participant s target retirement date. Print Date: September 1,

20 Investments Tier 2: Core Investment Options The core investment options include stock and bond mutual funds and a stable value fund that, when used in combination, can provide significant diversification. The Participant chooses investments from Tier 2 to build a diversified investment portfolio according to the level of desired risk. Tier 3: Specialty Investment Options The specialty investment options represent a variety of funds with a narrower focus than those available in Tiers 1 and 2. Included among these funds is the NU Common Shares Fund, which invests solely in shares of NU Common and includes a cash component for liquidity. Tier 4: Self-Directed Brokerage Participants who want more flexibility can use Fidelity s BrokerageLink to invest Plan assets in a variety of mutual funds and individual stocks not included in Tiers 1, 2, and 3. Participants who choose the BrokerageLink are responsible for paying transaction fees (if applicable) and other costs, which are taken out of the actual sale or purchase in accordance with the investment option selected. A minimum $2,500 Vested account balance is required to start an investment in the BrokerageLink. Choosing Investments Upon initial enrollment, Participants indicate how they wish to direct the investment of their contributions and Company contributions (other than ESOP) among the available investment options. Company-matching contributions (other than ESOP) in the Employer Match account are invested in the manner in which Pre-Tax contributions are invested (or Roth 401(k) contributions are invested, if there is no balance in the Pre- Tax account). If a Participant fails to direct investment of his or her Plan contributions or K-Vantage contributions, these contributions will be invested in the default investment fund. Participants can change from the default investment at any time for both future contributions and existing balances. (See the Default Investments section further in this chapter.) Trading restrictions may apply to certain investment options. Investing Future Contributions A Participant must allocate at least five percent of new contributions to any individual investment. Participants can change the way future contributions are invested and reallocate past investments among the available investment options at any time. Participants can make an investment change online through Fidelity NetBenefits at or by calling the NUSCO 401(k) Service Center at Exchanging Investments Subject to administrative procedures established under the Plan, a Participant may at any time direct Fidelity to sell any or all of the assets in his or her non-esop account (and in an Employee s ESOP Match account once three years of Service have been completed) in whole percents, shares/units, or dollar increments, and at the same time inform Fidelity how to distribute the proceeds of such sale into other investment options. A Participant may not exchange into and out of certain funds more than a total of three times per calendar quarter. When the Participant directs Fidelity to exchange investments (except for exchanges in the ESOP or TRAESOP/PAYSOP accounts, which offer real-time trades), the Participant receives the end-of-day market price for that investment. Fund exchange frequency information can be found online through Fidelity NetBenefits at or by calling the NUSCO 401(k) Service Center at Default Investments The Treasurer has designated the Fidelity Freedom Funds as the default investment option if a Participant fails to indicate how his or her contributions should be invested. Account Statements and Valuation A Participant s account will be valued at the close of each business day on which the New York Stock Exchange is open for trading. Participant contributions are allocated to the Participant s account as soon as practicable after each payroll. Print Date: September 1,