Exhibit 10.2.1
THE FEDERAL HOME LOAN BANK OF BOSTON
THRIFT BENEFIT EQUALIZATION PLAN
Federal Home Loan Bank of Boston (the “Bank”) adopted the Federal Home Loan Bank of Boston Thrift Benefit Equalization Plan (the “Plan”), as a component of the Federal Home Loan Bank of Boston Benefit Equalization Plan, effective January 1, 1993. The Nonqualified Deferred Compensation Program for the Directors of the Bank is merged into the Plan effective on the close of business December 31, 2006. Except as provided below, this amendment and restatement of the Plan is effective January 1, 2007. The Plan is intended to comply with Code Section 409A, as enacted by the American Jobs Creation Act of 2004 and applicable regulations thereunder.
The Plan is established and maintained by the Bank in order to provide Eligible Executives and Directors an opportunity to defer taxation on income and to provide Eligible Executives with the benefits which would have been provided under the Pentegra Defined Contribution Plan for Financial Institutions (the “Qualified Plan”) if (a) their benefits under the Qualified Plan were not limited by certain limitations imposed by the Internal Revenue Code applicable to the Qualified Plan, and (b) “Base Salary” as defined in the Qualified Plan took into account amounts paid under the Bank’s incentive compensation plan(s), as well as elective deferrals hereunder.
The Plan is a governmental plan under Section 4(b) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and is therefore exempt from coverage under ERISA. The Plan is unfunded and maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees, and Bank directors, and is not intended to be qualified under Section 401(a) of the Internal Revenue Code.
ARTICLE I
DEFINITIONS
Each word used herein not defined below that begins with a capital letter and is defined in the Qualified Plan shall have the same definition as the definition given to that word in the Qualified Plan. Wherever used herein, the following terms shall have the meanings hereinafter set forth:
1.1 “Account” or “Deferred Compensation Account” means the separate account established under the Plan for each Participant, as described in Section 5.1.
1.2 “Administrator” means the Committee or such person or persons as may be appointed by the Committee to be responsible for those functions assigned to the Administrator under the Plan.
1.3 “Affiliate” means any entity that is a member of a “controlled group” of corporations with the Bank under Code Section 414(b) or a trade or business under common control with the Bank under Code Section 414(c).
1.4 “Bank” means the Federal Home Loan Bank of Boston.
1.5 “Base Salary” means “Salary” as defined for purposes of the Qualified Plan.
1.6 “Beneficiary” means the person, persons or trust designated by a Participant as direct or contingent beneficiary in the manner prescribed by the Administrator. The Beneficiary of a Participant who has not effectively designated a beneficiary shall be the Participant’s estate.
1.7 “Board of Directors” means the Board of Directors of the Bank.
1.8 “Code Limitations” means the cap on compensation taken into account by the Qualified Plan under Code Section 401(a)(17); the limitations on Section 401(k) contributions necessary to meet the average deferral percentage (“ADP”) test under Code Section 401(k)(3); the limitations on employee and matching contributions necessary to meet the average contribution percentage (“ACP”) test under Code Section 401(m); the dollar limitations on elective deferrals under Code Section 402(g); and the overall limitation on contributions imposed by Code Section 415(c), as such provisions may be amended from time to time, and any similar successor provisions of federal tax law.
1.9 “Committee” means the Personnel Committee of the Board of Directors, which is authorized to administer the Plan and to perform the functions described in Article VII.
1.10 “Compensation” means (a) with respect to an Executive, Base Salary and/or Incentive Compensation, as applicable; and (b) with respect to a Director, the meeting fees paid by the Bank to the Director.
1.11 “Deferral Period” means the period described in Section 3.3 of the Plan.
1.12 “Director” means a member of the Board of Directors of the Bank, other than an Employee.
1.13 “Disability” means that the Participant (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; (b) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Bank; or (c) has been determined to be totally disabled by the Social Security Administration.
1.14 “Effective Date” means January 1, 2007. The Plan was initially effective January 1, 1993 and was last restated effective August 1, 2000. Any provision of this amendment and restatement required to be effective on and after January 1, 2005 in order for the Plan to comply with Code Section 409A shall become effective as of January 1, 2005 (or such later date up to January 1, 2007 as shall be permitted under applicable Code Section 409A transition rules).
1.15 “Elective Deferral” means the amount of Compensation a Participant elects to defer pursuant to Article III of the Plan.
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1.16 “Eligible Executive” or “Executive” means an employee of the Bank who is a corporate officer and who has been selected to be a Participant in the Plan by the Committee.
1.17 “Hardship” means an unforeseeable emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (a) a sudden and unexpected illness or accident of the Participant or the spouse or a dependent of the Participant (as defined in Code Section 152(a)), (b) a loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster), or (c) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Administrator. In addition, the need to pay for medical expenses, including non-refundable deductibles, as well as for the costs of prescription drug medication, or the need to pay for the funeral expenses of a spouse or a dependent may also constitute a Hardship event. The Administrator shall determine whether the circumstances presented by the Participant constitute an unanticipated emergency. Such circumstances and the Administrator’s determination will depend on the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved as described in Sections 6.1.1 through 6.1.4 below.
1.18 “Incentive Compensation” means bonuses under the Bank’s Executive Incentive Plan and, if applicable, any long-term incentive compensation payable to a Participant under the Bank’s incentive compensation plan(s).
1.19 “Matching Contribution” means the amounts credited to a Participant’s Account under Article IV of the Plan with respect to Elective Deferrals.
1.20 “Participant” means (a) an Executive or former Executive who elects to participate in the Plan in accordance with the terms and conditions of the Plan or who has an Account in the Plan that has not been fully distributed; and (b) any Director who elects to participate in the Plan or who has an Account in the Plan that has not been fully distributed.
1.21 “Plan” means The Federal Home Loan Bank of Boston Thrift Benefit Equalization Plan, as set forth herein or as it may be amended or restated from time to time.
1.22 “Plan Year” means the calendar year.
1.23 “Qualified Plan” means the Pentegra Defined Contribution Plan for Financial Institutions, as from time to time amended.
1.24 “Required Withholdings” means the federal, state or local employment taxes, including applicable FICA and FUTA taxes required to be withheld under Sections 3101 and 3501, respectively, of the Code from any (a) Elective Deferrals, (b) elective deferrals on behalf of the Participant to the Qualified Plan, (c) contributions by the Participant to any welfare benefit plan maintained by the Bank, and/or (d) any other compensation not paid to the Participant in cash, and all federal, state or local income taxes attributable thereto required to be withheld from income, and any additional federal, state or local income or employment taxes attributable to such withholdings. The Administrator shall determine Required Withholdings in its discretion.
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1.25 “Scheduled Distribution” means a distribution from a Participant’s Scheduled Distribution Sub-Account in accordance with Section 6.3.
1.26 “Scheduled Distribution Sub-Accounts” or “Sub-Accounts” means the separate bookkeeping accounts established by the Administrator under Section 5.1 to record the portion(s) of a Participant’s Account subject to separate Scheduled Distribution elections.
1.27 “Termination of Service” means, with respect to an Executive, the severing of employment with the Bank and any Affiliate, voluntarily or involuntarily, for any reason. A Participant will not be deemed to have incurred a Termination of Service while he or she is on military leave, sick leave, or other bona fide leave of absence (such as temporary employment by the government) if the period of such leave does not exceed six months or such longer period as the Participant’s right to reemployment with the Bank is provided either by statute or by contract. If the period of leave exceeds six months and the Participant’s right to reemployment is not provided either by statute or by contract, the Termination of Service will be deemed to occur on the first date immediately following such six-month period. With respect to a Director, the term “Termination of Service” means that the Director has ceased to be a member of the Board of Directors of the Bank, and is not an employee of the Bank or any Affiliate. Whether an individual has incurred a Termination of Service shall be determined in accordance with the provisions of Section 409A.
1.28 “Valuation Date” means the close of business of each business day, or such other valuation date or dates established by the Administrator.
ARTICLE II
PARTICIPATION
2.1 Eligibility. Each Executive may become a Participant upon the effective date of his or her designation as an Executive eligible for participation in the Plan by the Board of Directors or the Committee. Each Director may become a Participant upon his or her becoming a member of the Board of Directors of the Bank.
2.2 Participation in the Plan. An Eligible Executive or Director may elect to participate in the Plan for any Plan Year by delivering to the Administrator a properly executed election at the time and in the form provided by the Administrator, pursuant to which the Eligible Executive or Director elects to defer receipt of a specified portion of the Compensation that would otherwise be payable to such Executive for the Plan Year, as described in Article III hereof.
2.3 Cessation of Participation. An Executive shall cease to be a Participant in the Plan if (a) he or she incurs a Termination of Service for any reason, (b) he or she remains in the service of a Bank but ceases to be an Eligible Executive as described in Section 1.16 due to a change in employment status, except to the extent that the Committee determines otherwise, or (c) the Plan is terminated or otherwise amended so that the Executive ceases to be eligible for participation; provided, however, that such individual shall continue to be a Participant solely with respect to his or her vested Account balance until such Account balance is distributed from
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the Plan. Such cessation of participation shall be effective upon the date of the change in status described in clause (a) or (b) above, or upon the effective date of an amendment or termination of the Plan described in clause (c) above. A Director shall cease to be a Participant in the Plan if he or she ceases to be a member of the Board of Directors for any reason; provided, however, that such individual shall continue to be a Participant solely with respect to his or her vested Account balance until such Account balance is distributed from the Plan.
ARTICLE III
DEFERRAL OF COMPENSATION
3.1 Election to Defer. A Participant may elect to defer receipt of a portion of his or her Compensation for a Plan Year by delivering a properly executed election to the Administrator within the time specified in Section 3.2. The Participant’s election shall be in a written form acceptable to the Administrator and shall specify:
3.1.1. the whole percentage of Salary, other than Incentive Compensation, for the Plan Year to be deferred to the Plan, which percentage may not exceed 100%; provided, however, that the Elective Deferral percentage shall be reduced to the extent necessary to provide for any Required Withholdings;
3.1.2. the whole percentage of Incentive Compensation for the Plan Year to be deferred to the Plan, which percentage may not exceed 100%, reduced to the extent necessary to provide for any Required Withholdings;
3.1.3. if applicable, the investment fund or funds in which the Participant’s Elective Deferrals, and Matching Contributions attributable to such Elective Deferrals, will be deemed to be invested pursuant to Section 5.2;
3.1.4. if applicable, the specific Scheduled Distribution Sub-Account or Sub-Accounts into which all or a portion of such Elective Deferrals and Matching Contributions will be directed, as described in Section 6.3; and
3.1.5. to the extent permitted by the Administrator under Section 6.4.1, the payment commencement date and method of distribution to apply to benefits distributable upon the Participant’s Termination of Service.
An Executive who elects not to participate in the Plan at the time he or she first becomes eligible to do so may elect to become a Participant in any subsequent Plan Year by filing an election to defer Compensation as described above within the time provided in Section 3.2, provided that he or she is then eligible to participate in the Plan.
3.2 Date for Filing Election.
3.2.1. Except as provided below, an election to defer Compensation to be earned in a Plan Year shall be filed by the Participant with the Administrator as of a date established by the Administrator which is no later than December 31 of the Plan Year preceding the year in which such Compensation is earned.
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3.2.2. In the case of an individual first employed as an Executive or becoming a Director, or first becoming eligible for this Plan (and any similar account-based deferred compensation plan of the Bank) during a Plan Year, an election to defer Compensation earned subsequent to the initial date of employment or eligibility may be filed by such Executive or Director with the Administrator within thirty (30) days of such initial date of service or eligibility.
3.2.3. An election to defer Incentive Compensation meeting the requirements for “performance-based” compensation under Proposed Treasury Regulation Section 1.409A-1(e) (or any successor regulation issued under Code Section 409A) shall be filed with the Administrator as of a date established by the Administrator which is at least six months prior to the end of the performance period in which such Incentive Compensation is earned.
3.3 Deferral Period. The Deferral Period for a Participant’s Compensation earned during any Plan Year shall begin on the first day of such Plan Year, provided that the Participant has filed an election to defer Compensation prior thereto, as described in Section 3.2.1. Notwithstanding the foregoing, in the case of an individual who is first employed as an Executive or first becomes a Director, or who first becomes eligible for participation during a Plan Year, the Deferral Period shall begin as of the first day of the payroll period (or, in the case of a Director, the first day of the month) beginning after the filing of a timely election by the Participant in such Plan Year, as described in Section 3.2.2. In each case, such Deferral Period shall end on the last day of the Plan Year. The Deferral Period for Incentive Compensation meeting the requirements for “performance-based” compensation under Proposed Treasury Regulation Section 1.409A-1(e) (or any successor regulation issued under Code Section 409A) Plan shall be the performance period (which shall not be shorter than a Plan Year) to which such Incentive Compensation relates.
3.4 Revocation or Change of Deferral Election.
3.4.1. A Participant may not voluntarily revoke or amend an election to defer Compensation under Section 3.1.1 after commencement of the Deferral Period. Such election shall automatically expire at the conclusion of the applicable Deferral Period, unless renewed within the time provided in Section 3.2.
3.4.2. A Participant may not revoke or amend an election to defer Incentive Compensation meeting the requirements for “performance-based” compensation under Proposed Treasury Regulation Section 1.409A-1(e) (or any successor regulation issued under Code Section 409A) after the date which is six months prior to the end of the performance period in which such Incentive Compensation is earned.
3.4.3. Notwithstanding the above, if a Participant incurs a Hardship, the Participant’s Elective Deferrals under this Plan may, upon the request of the Participant and with the consent of the Administrator, be permanently suspended for a period of six (6) months (the “suspension period”). At the end of the suspension period, the Participant’s Elective Deferrals shall automatically resume, provided that the Participant
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has timely filed a deferral election under Sections 3.1 and 3.2 with respect to the Deferral Period in effect when the suspension period ends.
3.5 Vesting of Elective Deferrals. A Participant shall be 100% vested in the balance of his or her Deferred Compensation Account attributable to Elective Deferrals at all times.
ARTICLE IV
BANK MATCHING CONTRIBUTIONS
4.1 Matching Contributions for Eligible Executive Participants.
4.1.1. Except as provided in Section 4.1.3 below, for each Elective Deferral credited to a Participant’s Deferred Compensation Account under Section 3.1.1, such Participant’s Account shall also be credited with a Matching Contribution under this Plan equal to (a) the matching contribution, if any, that would have been credited under the terms of the Qualified Plan with respect to such amount if contributed to the Qualified Plan, determined without regard to the Code Limitations, minus (b) the maximum matching contribution available to the Participant under the terms of the Qualified Plan with respect to the period to which such Elective Deferral relates, with regard to the Code Limitations and assuming that the Participant has made the largest elective deferral to the Qualified Plan for such period (and preceding periods during the Deferral Period) for which a matching contribution is available under the Qualified Plan; provided, however, that no Matching Contribution shall be made under Sections 4.1.1 and 4.1.2 with respect to Elective Deferrals under Section 3.1.1 exceeding 3% of Base Salary. To the extent that a Participant has not met applicable service requirements for participation in matching contributions under the terms of the Qualified Plan, clause (a) of the preceding sentence shall be applied as though the Participant is eligible for matching contributions under the Qualified Plan; and no reduction under clause (b) of the preceding sentence shall apply until the Participant is actually eligible for such matching contributions.
4.1.2. If, for any Plan Year beginning on or after the Effective Date, a Participant (a) has contributed to the Qualified Plan the maximum amount of elective deferrals permitted under the terms of the Qualified Plan (including “catch-up” contributions, if available to the Participant and eligible for matching contributions); but (b) was credited with an amount of matching contributions under the Qualified Plan which is less than the amount set forth in Section 4.1.1(b) above, then the Participant shall be credited with an additional Matching Contribution under this Plan equal to the amount set forth in Section 4.1.1(b) above for such Plan Year minus the amount of matching contributions actually credited to the Participant under the Qualified Plan for such Plan Year. Notwithstanding the foregoing, a Participant shall be eligible for a Matching Contribution under this Section 4.1.2 only if he or she is an Employee on the last day of the applicable Plan Year.
4.1.3. For each Incentive Compensation Elective Deferral credited to a Participant’s Deferred Compensation Account under Section 3.1.2, such Participant’s Account shall also be credited with a Matching Contribution under this Plan equal to the matching contribution, if any, that would be credited under the Qualified Plan with
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respect to such amount if contributed to the Qualified Plan, determined without regard to the Code Limitations and on the basis that such Incentive Compensation is Salary under the Qualified Plan in the year payable; provided, however, that no Matching Contribution shall be made hereunder with respect to Elective Deferrals under Section 3.1.2 exceeding 3% of Incentive Compensation.
4.1.4. No Matching Contribution shall be made with respect to a participating Director.
4.2 Vesting of Matching Deferrals. A Participant shall be 100% vested in the balance of his or her Deferred Compensation Account attributable to Matching Deferrals at all times.
ARTICLE V
INVESTMENT OF DEFERRED COMPENSATION
5.1 Deferred Compensation Account. The Administrator shall establish a Deferred Compensation Account on the books of the Plan for each Participant, reflecting Elective Deferrals and Matching Contributions made for the Participant’s benefit, together with any adjustments for income, gain or loss attributable thereto under Section 5.2, and any payments, distributions, transfers or forfeitures therefrom. The opening balance of the Participant’s Deferred Compensation Account as of January 1, 2007 shall equal the balance of such Account as of the close of the preceding business day.
5.2 Time for Crediting Contributions. Elective Deferrals to the Plan with respect to any pay period, and Matching Contributions attributable to such Elective Deferrals, shall normally be credited to the Participant’s Account within five (5) business days of the date that corresponding contributions attributable to Compensation earned in such pay period are credited under the Qualified Plan or would otherwise be paid to the Participant; provided, however, that no adjustment of earnings or losses shall be made with respect to Elective Deferrals or Matching Contributions under Section 5.3 prior to the earlier of (a) the 15th business day of the calendar month following the calendar month in which the Elective Deferral would otherwise have been paid to the Participant but for the Participant’s deferral election, or (b) the date such amounts are actually credited to the Participant’s Account on the books of the Plan; provided, however, that clause (a) shall not apply to any Matching Contribution made under Section 4.1.2 or as a result of Code Limitation testing (such as ADP testing) normally conducted on an annual basis. The Administrator shall establish on the books of the Plan one or more Sub-Accounts in each Participant’s Deferred Compensation Account to reflect such Participant’s Scheduled Distribution elections and such additional accounts or sub-accounts as he deems necessary or advisable.
5.3 Hypothetical Investment of Accounts. The Deferred Compensation Account of a Participant, including each Sub-Account thereof, shall be adjusted as of each Valuation Date to reflect the income, gain or loss that would accrue to such Account, if assets in the Account were invested as described in this Section 5.2. Each Participant shall direct the hypothetical investment of the Elective Deferrals and Matching Contributions credited to the Plan on his or
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her behalf among such investment funds as are from time to time made available by the Committee. A Participant may, as of any Valuation Date, change the investment allocation of future Elective Deferrals or Matching Contributions, and may elect to transfer all or a portion of the balance of his or her Account hypothetically invested in one investment fund to any other investment fund or funds then available under the Plan, by directing the Administrator in such form and at such time as the Administrator shall require.
The hypothetical investment fund options available under the Plan shall be those designated by the Committee from time to time in its discretion. The Administrator may promulgate uniform and nondiscriminatory rules and procedures governing investment elections under the Plan, including rules governing how credits or debits to an Account or Sub-Account shall be allocated among investment funds in the absence of a valid election.
5.4 Statement of Account. A statement shall be sent to each Participant as to the balance of his or her Deferred Compensation Account at least once each Plan Year. Electronic distribution (including a reminder that such statement is available electronically) will satisfy this requirement.
ARTICLE VI
PAYMENT OF DEFERRED COMPENSATION
6.1 Hardship Distributions. A Participant may request that all or a portion of his or her vested Account balance be distributed at any time by submitting a written request to the Administrator, provided that the Participant has incurred a Hardship, and the distribution is necessary to alleviate such Hardship. In determining whether the Hardship distribution request should be approved, the Administrator shall be entitled to rely on the Participant’s representation that the Hardship cannot be alleviated:
6.1.1. through reimbursement or compensation by insurance or otherwise;
6.1.2. by the Participant taking any withdrawals then available to him or her under the terms of the Qualified Plan;
6.1.3. by reasonable liquidation of the Participant’s assets, including amounts available for withdrawal from the Qualified Plan, to the extent such liquidation would not itself cause a severe financial hardship; or
6.1.4. by cessation of his or her elective deferrals under Section 3.4.3 of this Plan or a similar deferred compensation plan to the extent available.
6.2 Administration of Hardship Distributions. The Administrator shall deem a distribution to be necessary to alleviate a Hardship if the distribution does not exceed the amounts necessary to satisfy the Participant’s Hardship, plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution. The Account balance that is not distributed pursuant to the Hardship request shall remain in the Plan. Distributions to alleviate a Hardship will be made as soon as administratively feasible after the Administrator has reviewed and approved the request. An amount to be distributed for Hardship shall be debited from the
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Participant’s Deferred Compensation Account not held in a Scheduled Distribution Sub-Account, or (if such amount is not sufficient) from the Sub-Account(s) having the latest scheduled distribution date.
6.3 Scheduled Distribution. A Participant may elect to receive a Scheduled Distribution with respect to an Elective Deferral at the time he or she files the applicable deferral election under Section 3.1. A Participant may elect in accordance with Section 3.1.4 to direct all or a portion of his or her Elective Deferrals for the Plan Year into one or more Sub-Account(s), provided that any such Sub-Account has a scheduled distribution date which is not earlier than twelve (12) months after the end of the Deferral Period to which the Elective Deferral relates. The Administrator may establish uniform and nondiscriminatory rules and procedures governing Scheduled Distribution Sub-Accounts, including establishing limitations on the number of Sub-Accounts available to Participants for any Deferral Period or in the aggregate, and the minimum length of deferral to be provided under any newly-established Sub-Account, as the Administrator deems appropriate.
Except to the extent the Participant elects otherwise in accordance with Section 6.7, any “Post-Secondary Education Subaccounts” of the Participant as in effect under the terms of the Plan immediately prior to the Effective Date of this amendment and restatement shall be redesignated as Scheduled Distribution Sub-Accounts hereunder, having the same scheduled distribution date(s) and method of distribution.
To the extent permitted by the Administrator, such election may designate whether the elected Scheduled Distribution date shall continue to apply notwithstanding the Participant’s intervening retirement, death, Disability or Termination of Service. Except as otherwise elected by a Participant under the preceding sentence, an election of a Scheduled Distribution shall automatically terminate upon the Participant’s retirement, death, Disability or Termination of Service, at which time the provisions of Sections 6.4, 6.5 and 6.6 shall govern distribution of the Participant’s Account.
A Participant may, with the consent of the Administrator and to the extent permitted under Code Section 409A and regulations thereunder, elect to (a) revoke a Scheduled Distribution (provided that the Participant’s Scheduled Distribution election would otherwise automatically terminate upon the Participant’s Termination of Service for any reason), in which case the balance of the applicable Sub-Account will be restored to the Participant’s Deferred Compensation Account, or (b) extend to a later date the date on which a Scheduled Distribution will occur, in which case the applicable Sub-Account will be redesignated or merged with another existing Sub-Account having the same designated distribution date. A Participant may make an election under the preceding sentence by filing a new election prior to his or her Termination of Service at such time and in such form as the Administrator shall designate. Any election to revoke or extend the date of a Scheduled Distribution shall not take effect until at least twelve months after the date on which it is made and must provide for a deferred distribution date not earlier than five years after the date such Scheduled Distribution was otherwise scheduled to be made and not later than the date set forth in Section 6.6. A Scheduled Distribution may be made in a single lump sum payment or in installments over two to ten years (as described in Section 6.5.1 or 6.5.2, respectively).
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