The following description of Sauer-Danfoss Employees' Savings Plan (the Plan) provides only general information. Participants should refer to the Plan's Agreement for a more complete description of the Plan's provisions.
(a) General
The Plan is a defined contribution plan which generally covers person regularly employed by Sauer-Danfoss (US) Company and its affiliates (collectively, the "Company") in the US.
Excluded from coverage are persons covered by a collective bargaining agreement between employee representatives and the Company where retirement benefits were a subject of the good faith bargaining between the parties. Also excluded from coverage are persons regularly employed on a temporary or irregular basis for fewer than 1,000 hours per year, until the time that such person completes 1,000 hours of service in a consecutive twelve month period.
(b) Administration
The Plan is administered by the Employee Benefit Committee of the Company (the Plan Administrator).
(c) Trustee
AMVESCAP National Trust Company has been designated as Trustee of the Plan.
(d) Contributions
The Plan is funded primarily by employee contributions. Participating employees may contribute a percentage of their eligible compensation ranging from 1% to 100%. Annual contributions, including life insurance purchased, may not exceed $13,000 and $12,000 in 2004 and 2003, respectively as indexed by the Internal Revenue Service. The Plan also places certain restrictions on contributions from those employees defined as highly compensated.
Participating employees are generally entitled to receive employer contributions into the Plan on their behalf. Employees that continue to accrue a benefit under the final average pay formula in the Sauer-Danfoss Employees' Retirement Plan, a separate defined benefit pension plan maintained by the Company, are ineligible to receive employer contributions into the Plan.
For employees receiving such contributions, the employer contributions consist of two components:
1) A base contribution equal to 2% of the employee's eligible compensation; and
2) A matching contribution equal to 50% of the employee's contribution, subject to a maximum matching contribution of 2% of eligible compensation.
(e) Participant Accounts
Participants have the option to invest contributions in the following funds or collective trusts:
- INVESCO Stable Value Trust
- INVESCO Structured Small Cap Value Equity Trust
- INVESCO 500 Index Trust
- INVESCO International Equity Trust
- Fidelity Equity Income Fund
- PIMCO Total Return Admin Fund
- Lord Abbett Mid Cap Value A Fund
- American Funds American Balanced - R4 Fund
- American Funds Growth Fund of America - R4 Fund
- Managers Special Equity Fund
- Fidelity Advisor Mid Cap - T Fund
Participants can also invest in the Sauer-Danfoss Inc. Stock Fund, which invests in the common stock of Sauer-Danfoss Inc., the Company's parent.
Participant accounts are credited for contributions and allocations of Plan earnings or losses. Plan earnings or losses are allocated to participants based upon their relative percentages of each fund's investment account balance.
In addition, prior to August 30, 1998, participants were able to elect to invest in a life insurance fund which purchased coverage for the participant and/or their families. Life insurance policies purchased prior to August 30, 1998 continue to be maintained under the Plan but new investments in the life insurance fund are no longer permitted. Assets invested in participant life insurance coverage are generally excluded from Plan assets in the attached financial statements. Balances included in the life insurance fund represent unremitted employee withholdings from participants. They do not represent assets available for benefits but rather premiums which are subsequently remitted to the life insurance provider.
Participants may also elect to borrow up to amounts defined in the Plan. Participant loans amounting to $2,426,012 and $2,449,112 at December 31, 2004 and 2003, respectively, are included in investments. Interest rates ranged from 5.50% to 11.00% at December 31, 2004 and December 31, 2003.
(f) Vesting
Participants are immediately vested in their own voluntary contributions and earnings thereon.
The interests of participants in the employer contributions and earnings thereon vest as follows:
- Upon termination of employment at or after age sixty-five - 100%.
- Upon death or disability - 100%.
- Upon any other termination of employment, the following vesting schedule is applicable:
Years of service
| | Vesting
percentage |
Less than 3 | | -% | |
3 or more | | 100 | |
(g) Payment of Benefits
While still employed, a participant may, for certain documented hardship reasons, make a withdrawal from his or her Participant's Contribution Account at any time. While still employed, a participant may also withdraw all or any portion of his or her vested Plan benefit upon attaining age 59½ or becoming disabled.
On termination of service for any reason other than death, a participant may elect to receive an amount equal to the value of the participant's vested interest in his or her account in either a lump-sum payment or in quarterly, semi-annual or annual installments over a fixed period of time that is not less than two years and not more than the joint life expectancy of the participant and his or her beneficiary. On termination of service by reason of death, the participant's beneficiary(ies) may elect to receive an amount equal to the value of the participant's vested interest in his or her account in either a lump-sum payment or in quarterly, semi-annual, or annual installments over a fixed period of time that is not less than two years and not more than five years.
Distributions are generally payable in cash. A participant may elect to receive amounts distributed from the Sauer-Danfoss Inc. Stock Fund in whole shares, with any fractional shares paid in cash.
(h) Plan Expenses
Administrative expenses of the Plan are paid by the Company, except for mutual fund investment fees which are paid by the Plan.
(i) Forfeitures
Forfeited nonvested accounts will be used to reduce future employer contributions. Employer contributions were reduced by $0 and $330 from forfeited nonvested accounts in 2004 and 2003, respectively.
(a) Basis of Presentation
The accompanying financial statements have been prepared on an accrual basis and present the net assets available for benefits and changes in those net assets. The Plan's assets consist of the assets of the Sauer-Danfoss Employees' Savings Plan Trust (the Trust).
The Plan Administrator has made certain estimates and assumptions relating to the reporting of assets, and changes thereto in preparing these financial statements in conformity with U.S. generally accepted accounting principles. Actual results could differ from these estimates.
(b) Valuation of Investments
Investments are valued at quoted market prices, if available. Investments not having an established market are valued at fair value as determined by the Trustee.
Investments in participant loans are carried at their unpaid balance.
Purchases and sales of securities are recorded on a trade-date basis. Realized gains and losses from security transactions are reported on the average cost method.
(c) Federal Income Taxes
The Internal Revenue Service has determined and informed the Company by a letter dated February 22, 2001 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Continued qualification of the Plan will depend on the operation of the Plan in compliance with the IRC. The Plan Administrator believes the Plan is currently designed and being operated in compliance with applicable requirements of the IRC.
