General ERISA requirements

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=90 BGCOLOR="#006699" TEXT="#080000" bgproperties="fixed" background="0be285a1erlcgo.gif"> <div> <FONT SIZE="5" COLOR="#FFCC66" FACE="Arial" ><B>NONQUALIFIED PLANS</B></FONT><B>     |     </B><A HREF="index.htm" TARGET="_top" TITLE="NONQUALIFIED PLANS"><U><B>home</B></U></A><B>                              </B><A HREF="id19.htm" TARGET="_top" TITLE="TABLE OF CONTENTS"><U>TABLE OF CONTENTS</U></A>   |   <A HREF="id48.htm" TARGET="_top" TITLE="FINAL EXAMINATION"><U>FINAL EXAMINATION</U></A></div> <div> <A HREF="id22.htm" TARGET="_top" TITLE="NONQUALIFIED PLANS "><U>NONQUALIFIED PLANS </U></A>   |   <A HREF="id23.htm" TARGET="_top" TITLE="DEFERRED COMPENSATION"><U>DEFERRED COMPENSATION</U></A>   |   <A HREF="id24.htm" TARGET="_top" TITLE="EXECUTIVE BONUS PLANS"><U>EXECUTIVE BONUS PLANS</U></A>   |   <A HREF="id26.htm" TARGET="_top" TITLE="GROUP 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requirements</B></I></div> <bR> <div> Retirement plans that meet the general rules imposed by ERISA (Employment Retirement Income Security Act of 1974) "qualify" for special tax status, namely, contributions to these plans earn the contributor a tax deduction and earnings within the qualified retirement plan grow tax-deferred — retirees will be taxed on distributions when they are taken out of the plan.  To earn this special tax status, the plan must:</div> <bR> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">be a <B>written</B><B> plan</B> that is communicated to employees,</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">be for the <B>exclusive benefit </B>of employees or their beneficiaries,</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">require no more than <B>two</B><B> years of service</B><B> </B>to participate,</div> <div> <B><IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">limit annual </B><B>contributions</B>,</div> <div> <B><IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">not discriminate </B>in favor of highly compensated employees,</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">meet the <B>minimum</B><B> vesting</B> rules,</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">not allow employers from reclaiming assets held in the plan,</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">provide for a <B>"separate accounting"</B> of the different types of employer and employee contributions, </div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">not require participation as a <B>condition for </B><B>other benefits, </B>or impose other conditions on participation,</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">impose <B>penalties on "premature" distributions</B>, generally prior to age 59½</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">provide that an employee's entire interest be <B>paid out when the employee retires</B> or reaches age 70½, </div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">provide a qualified joint and survivor annuity as a payout  alternative,</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">allow for rollover of benefits to another qualified plan,</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">contain a spendthrift provision, and</div> <div> <IMG BORDER="0" SRC="Symb075c00b700dc00000000.gif" HEIGHT="15" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">file various <B>reports</B> with the IRS and the Department of Labor.</div> <bR> <bR> <div> The aim of ERISA is to assure "equal" treatment of employees, from executives down to rank-and-file.  The result being that benefits may not be targeted exclusively to the employees the employer wishes to reward; the employer cannot place conditions on receipt of the benefits; employers cannot contribute as much as they would like; and once contributed, funds cannot be recovered by the employer.    So, beyond the administrative cost of complying with these regulations, many employers find that ERISA requires them to provide benefits to a wider range of employees, and at a faster rate than they feel would be best.   </div> <bR> <div> Deferred compensation plans are not subject to most of the requirements of the Employee Retirement Income and Security Act of 1974 (ERISA). Consequently, payments into a deferred compensation plan are not income tax-deductible when made. However, the ultimate recipient of the benefit — either the employee or his or her survivors — pays ordinary income tax on the funds when they are received.</div> <bR> <div> Because nonqualified plans are not generally subject to ERISA, they are considerably more flexible than qualified plans. The state of the art in deferred compensation plans has evolved to the extent that these plans are flexible and are generally custom designed to meet the needs of the purchasing business and the executive.</div> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <TABLE BORDER="2" CELLPADDING="2" CELLSPACING="1" WIDTH="76" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" BGCOLOR=#FFCC66 > <tR> <tD VALIGN=TOP HEIGHT= 23 WIDTH="64"><div> <A HREF="id65_erisa.htm" TARGET="_top" TITLE="NONQUALIFIED PLAN ADVANTAGES"><U><B>BACK</B></U></A></div> </tD> </tR> </TABLE></div> <div> <I><B>  </B></I></div> <bR> <bR> <bR> <bR> </td> </tr></table></body>