Description of the Plan
The following description of the Oppenheimer & Co., Inc. 401(k) Plan (formerly known as Fahnestock & Co., Inc. 401(k) Plan) (the "Plan") provides only general information. Participants should refer to the plan agreement for a more complete description of the Plan’s provisions.
General
The Plan was established on January 1, 1987 and was amended and restated to add a profit-sharing provision effective January 1, 1991. The Plan was subsequently amended effective January 1, 1998 to change the rates used in computing the discretionary profit sharing contribution from Oppenheimer & Co., Inc. (the "Company").
Effective January 1, 1999, employees of the First of Michigan Division of the Company became eligible to participate in the Plan.
Effective July 1, 2002, the following plans were merged into the Plan:
First of Michigan A Division Oppenheimer & Co., inc. Capital Accumulation 401(k) Plan
Josepthal & Co., Inc. Employee Savings Plan
Prime Charter Limited Tax Deferred Savings Plan
Buy&Hold.com Inc. 401(k) Retirement Plan
The Plan document was amended effective July 1, 2002. Nationwide Trust Company was appointed as trustee and The 401(k) Company was hired to administer the Plan.
The Plan document was amended effective September 2, 2003 to change the name of the Plan and, effective from the plan year ending December 31, 2003, to change the rates used in computing the discretionary profit sharing contributions from the Company.
Employees of the Company who have completed one year of service shall be eligible to receive an allocation of the discretionary profit sharing contribution. Employees of the Company who are 18 shall be eligible to make elective deferrals into the Plan.
Allocation Provisions
Under the terms of the Plan, the individual makes all investment decisions with respect to his/her account balance, subject to available investment alternatives. Participants should refer to the respective fund prospectus for a more complete description of the investment objectives. As of December 31, 2002 these investment alternatives were Federated Cash Trust, PIMCO Total Return Fund, Delaware Group: Real Estate Investment Trust, Washington Mutual Investors Fund, Barclays Global Investors Equity Index Fund, First Trust Portfolio – S&P Target 24 Portfolio Fund, Growth Fund of America, Lord Abbett Mid Cap Value Fund, Artisan Mid Cap Fund, First Trust Portfolio – Value Line Target 25 Portfolio Fund, Strong Advisor Small Cap Value Fund, AIM Small Cap Growth Fund, Oppenheimer Global Fund, Putnam International Growth Fund, MFS International New Discovery Fund, Oppenheimer Holdings Inc. Common Stock , and Certificate of Deposit Fund.
As of December 31, 2003, the investment alternatives were the same except that Barclay’s Global Investors Equity Index Fund, First Trust Portfolio – S&P Target 24 Portfolio Fund, First Trust Portfolio – Value Line Target 25 Portfolio Fund, Putnam International Growth Fund, and Certificate of Deposit Fund were removed and Templeton Foreign Fund, SEI Stable Asset Fund and State Street S&P Index Fund were added.
Contributions
As discussed above, the Company may contribute to the Plan a discretionary profit-sharing amount (the "Employer Regular Contribution"). The Employer Regular Contribution is determined by its Board of Directors and is subject to guidelines set forth in the Plan agreement.
Employer Regular Contributions for the year ending December 31, 2003 were determined as follows:
1.25% of the first $30,000 of a participant’s compensation;
3% of the next $35,000 of a participant’s compensation;
2.5% of the next $35,000 of a participant’s compensation;
1.25% of the next $60,000 of a participant’s compensation; and
0% above $160,000 of a participant’s compensation.
If participants elect to receive their Employer Regular Contribution in the form of common stock of Oppenheimer Holdings Inc. ("Holdings"), the Company may make an additional contribution of Holdings common stock up to or equal to 15 percent of the purchase price of the common stock (the "Employer Stock Contribution") at the discretion of the Directors of the Board.
Employees may make salary deferral contributions of up to 50% of compensation. Current law limits participant pre-tax deferrals to $12,000 for the plan year ended December 31, 2003.
Vesting
All participants are immediately and fully vested in all Employee Elective Deferrals and the income derived from the investment of such contributions.
Participants will be vested in Employer Regular Contributions plus the income thereon upon the completion of service with the Company or an affiliate at the following rate:
Years or Service Vested Percentage
Less than 3 years 0%
3 years but less than 4 20%
4 years but less than 5 40%
5 years but less than 6 60%
6 years but less than 7 80%
7 years or more 100%
All years of service with the Company or an affiliate are counted to determine a participant’s nonforfeitable percentage except years of service before the Plan was restated in 1991. Participants will be 100 percent vested in the additional portion of the Employer Stock Contributions only upon completion of 5 years service.
At December 31, 2003, forfeited nonvested accounts totaled approximately $257,069. These accounts will be used to reduce future employer contributions.
Company Qualified Matching and Qualified Non-Elective Contributions, as defined in the Plan document, if required, are fully vested when made. No payments under these provisions were required during the year ended December 31, 2003.
Notwithstanding the vesting schedules specified above, with respect to retirement, a participant’s right to his or her accounts will be nonforfeitable upon the attainment of: the later of age 65 or the fifth anniversary of the participation commencement date; death; or disability, as defined.
Payment of Benefits
Payment of vested benefits under the Plan will be made in the event of a participant’s termination of employment, death, retirement, or financial hardship and may be paid in either a lump-sum distribution or over a certain period of time as determined by IRS rules or by participant election.
Loans to Participants
Loans are made available to all participants. Loans must be adequately collateralized using not more than fifty percent of the participant’s vested account balance and bear a interest rate of the current Treasury rate plus 4%. Loan principal and interest repayments are reinvested in accordance with the participant’s current investment selection.
Income Tax Status
The Plan received a determination letter on October 30, 2002, from the Internal Revenue Service (IRS) qualifying the Plan under the IRS code as exempt from Federal income taxes. The Plan has been amended since receiving the determination letter. However, the Plan administrator believes that the Plan continues to be designed and operated in compliance with the applicable requirements of the Internal Revenue Code.
Significant Accounting Policies
Securities transactions are recorded on a trade date basis with gains and losses reflected in income. Interest and dividend income are recorded on the accrual basis.
Investments are stated at fair value, based on quoted market prices for valuation of common stock, debt obligations, and mutual funds. Assets held in money market accounts are valued at cost which approximates fair value.
Benefits are recorded when paid.
Expenses related to loan origination and maintenance are paid to the administrator.
Life insurance policies are recorded at cash surrender value. Changes in cash surrender value due to dividend additions are recorded in dividend income in the Statement of Changes in Net Assets Available for Benefits.
The Plan presents in the statement of changes in net assets available for benefits the net appreciation in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of additions and contribution to, and deductions from net assets during the reporting period. Actual results could differ from those estimates.
The Plan provides for various investment options in any combination of stocks, bonds, fixed income securities, mutual funds, and other investment securities. Investment securities are subject to interest rate, market, foreign exchange and credit risks.
Due to the risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in the near term could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits and the statement of changes in net assets available for benefits.
Related Parties
For the period January 1, 2002 to June 30, 2002, the Company acted as investment advisor and administrator. It was the custodian of the Plan assets in the Bond Fund, the Money Market Fund, the Certificate of Deposit Fund, and the Oppenheimer Holdings Inc. Common Stock Fund. The Company executed the Plan’s transactions and provided accounting and other administrative services for which no charge was made to the Plan. The Trustees of the Plan were also officers and directors of the Company.
Effective July 2, 2002, Nationwide Trust Company is the Trustee of the Plan.
Concentration of Investments
The following investments represent 5% or more of net assets available for plan benefits as of December 31, 2003:
