PriceCostco 401(k) Plan for California Union Employees
PriceCostco 401(k) Retirement Plan
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS.......................................................................................................1
ARTICLE 2
ELIGIBILITY AND PARTICIPATION....................................................................................14
2.1 ELIGIBILITY....................................................................................14
2.2 CONTINUANCE OF PARTICIPATION...................................................................14
2.3 PARTICIPATION UPON RE-EMPLOYMENT...............................................................15
2.4 INELIGIBLE EMPLOYEE STATUS.....................................................................15
ARTICLE 3
EMPLOYER CONTRIBUTIONS...........................................................................................15
3.1 DETERMINATION OF CONTRIBUTION..................................................................15
3.2 RETURN OF CONTRIBUTION.........................................................................16
3.3 TIME OF PAYMENT OF CONTRIBUTION................................................................17
ARTICLE 4
NONDISCRIMINATION TESTS AND
DISTRIBUTION OF EXCESS AMOUNTS...................................................................................17
4.1 DISTRIBUTION OF EXCESS DEFERRALS...............................................................17
4.2 DEFERRAL LIMITATION............................................................................17
4.3 FAMILY AGGREGATION RULES.......................................................................19
4.4 EXCISE TAXES...................................................................................20
4.5 LIMITED DISTRIBUTIONS OF SALARY DEFERRAL AND QUALIFIED
NON-ELECTIVE CONTRIBUTIONS.......................................................................................20
ARTICLE 5
ALLOCATION TO ACCOUNTS...........................................................................................21
5.1 CONTRIBUTION ALLOCATION........................................................................21
5.2 ALLOCATION OF INVESTMENT INCOME (OR LOSS)......................................................21
5.3 LIMITATION ON ANNUAL ADDITIONS.................................................................21
5.4 LIMITATION FOR MULTIPLE PLANS..................................................................22
5.5 ADJUSTMENTS FOR EXCESS ANNUAL ADDITIONS........................................................23
ARTICLE 6
PARTICIPANT CONTRIBUTIONS........................................................................................24
6.1 PARTICIPANT ROLLOVER AND TRANSFER CONTRIBUTIONS................................................24
6.2 WITHDRAWAL.....................................................................................24
ARTICLE 7
INVESTMENT OF ACCOUNTS...........................................................................................25
7.1 INVESTMENT OF ACCOUNTS.........................................................................25
7.2 OPTIONAL PASS-THROUGH VOTING OF NON-EMPLOYER STOCK.............................................25
7.3 PASS-THROUGH VOTING OF EMPLOYER STOCK..........................................................25
ARTICLE 8
VESTING AND FORFEITURES..........................................................................................27
8.1 FULL VESTING...................................................................................27
8.2 NORMAL VESTING SCHEDULE........................................................................28
8.3 ALTERNATIVE VESTING SCHEDULE FOR MISCONDUCT....................................................28
8.4 INCLUDED YEARS OF SERVICE - VESTING............................................................28
8.5 FORFEITURES....................................................................................29
8.6 RESTORATION OF FORFEITURES.....................................................................29
ARTICLE 9
DISTRIBUTION OF BENEFITS.........................................................................................29
9.1 DISTRIBUTION AFTER AGE 59 1/2..................................................................29
9.2 DISTRIBUTION UPON SEPARATION FROM SERVICE......................................................29
9.3 FORM OF DISTRIBUTION..........................................................................30
9.4 LATEST DATE FOR COMMENCEMENT OF BENEFITS.......................................................30
9.5 REQUIRED DISTRIBUTION AT AGE 70 1/2............................................................30
9.6 DEATH DISTRIBUTION PROVISIONS..................................................................31
9.7 DISTRIBUTION UNDER QUALIFIED DOMESTIC RELATIONS ORDER..........................................31
9.8 HARDSHIP WITHDRAWALS...........................................................................31
9.9 DIRECT ROLLOVER FOR ELIGIBLE DISTRIBUTIONS.....................................................33
ARTICLE 10
RIGHTS AND REMEDIES OF PARTICIPANTS..............................................................................34
10.1 ANNUAL STATEMENTS..............................................................................34
10.2 ASSIGNMENT OR ALIENATION.......................................................................35
10.3 NOTICE OF CHANGE IN TERMS......................................................................35
10.4 INFORMATION AVAILABLE..........................................................................35
10.5 DENIAL OF BENEFITS.............................................................................35
10.6 APPEAL PROCEDURE...............................................................................36
10.7 LITIGATION AGAINST THE TRUST...................................................................36
10.8 DISTRIBUTION FOR MINOR BENEFICIARY.............................................................36
ARTICLE 11
EMPLOYER ADMINISTRATIVE PROVISIONS...............................................................................37
11.1 INFORMATION TO PLAN ADMINISTRATOR..............................................................37
11.2 NO LIABILITY...................................................................................37
11.3 INDEMNITY OF TRUSTEE AND COMMITTEE.............................................................37
ARTICLE 12
PARTICIPANT ADMINISTRATIVE PROVISIONS............................................................................37
12.1 BENEFICIARY DESIGNATION........................................................................37
12.2 NO BENEFICIARY DESIGNATION.....................................................................38
12.3 PERSONAL DATA TO PLAN ADMINISTRATOR............................................................39
12.4 ADDRESS FOR NOTIFICATION.......................................................................39
12.5 NO RIGHT TO CONTINUED EMPLOYMENT...............................................................39
ARTICLE 13
POWERS AND DUTIES OF PLAN ADMINISTRATOR..........................................................................40
13.1 COMMITTEE MEMBERS' EXPENSES....................................................................40
13.2 VACANCY........................................................................................40
13.3 POWERS OF PLAN ADMINISTRATOR...................................................................40
13.4 FUNDING POLICY.................................................................................41
13.5 AUTHORIZED REPRESENTATIVE......................................................................42
13.6 INTERESTED MEMBER..............................................................................42
13.7 INDIVIDUAL ACCOUNTS............................................................................42
13.8 VALUE OF PARTICIPANT'S ACCOUNTS................................................................42
13.9 ACCOUNT CHARGED................................................................................42
13.10 UNCLAIMED ACCOUNT PROCEDURE....................................................................42
ARTICLE 14
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION........................................................................43
14.1 EXCLUSIVE BENEFIT..............................................................................43
14.2 AMENDMENT BY EMPLOYER..........................................................................43
14.3 AMENDMENT TO VESTING SCHEDULE..................................................................43
14.4 DISCONTINUANCE.................................................................................44
14.5 FULL VESTING ON TERMINATION....................................................................44
14.6 MERGER.........................................................................................45
14.7 TERMINATION....................................................................................45
ARTICLE 15
GENERAL PROVISIONS...............................................................................................45
15.1 EVIDENCE.......................................................................................45
15.2 NO RESPONSIBILITY FOR EMPLOYER ACTION..........................................................45
15.3 RESTRICTIONS OF THE ACT........................................................................46
15.4 FIDUCIARIES NOT INSURERS.......................................................................46
15.5 WAIVER OF NOTICE...............................................................................46
15.6 SUCCESSORS.....................................................................................47
ARTICLE 16
EXECUTION........................................................................................................47
PriceCostco 401(k) Plan for California Union Employees
This plan is established by Price/Costco, Inc., a Delaware corporation
("PriceCostco") effective June 1, 1995, for the exclusive benefit of eligible
employees of The Price Company in California who are covered by The Price
Company's collective bargaining agreement with the International Brotherhood of
Teamsters. The plan is intended to be a qualified retirement plan under the
Internal Revenue Code, with a salary reduction arrangement under Code Section
401(k) and a matching arrangement under Code Section 401(m).
ARTICLE 1
DEFINITIONS
Whenever used in this Plan, the following terms shall have the meanings set out
below, unless the context clearly indicates otherwise, and when the defined
meaning is intended the term is capitalized:
1.1 "Account" means the aggregate of the accounts maintained for a Participant
under the Plan.
1.2 "Act" means the Employee Retirement Income Security Act of 1974 (also known
as ERISA), as it may be amended from time to time.
1.3 "Affiliated Company" means any corporation, trade, or business comprising
with the Employer part of a controlled group (as defined in Code Sections 414(b)
and (c) as modified by Code Section 414(h)), any organization comprising with
the Employer part of an affiliated service group (as defined in Code Section
414(m)), or any employer of "leased employees" (as defined in Code Section
414(n)) of the Employer or other Affiliated Company, and any other entity
required to be aggregated with the Employer under Code Section 414(o) and the
regulations issued thereunder.
1.4 "Anniversary Date" means the last day of the Plan Year.
1.5 "Annual Addition" means (for purposes of applying the limitations of Code
Section 415) the sum of the following amounts allocated on behalf of a
Participant for a Limitation Year under all qualified defined contribution plans
of the Employer:
(a) All Employer contributions (including Excess Contributions
and Excess Aggregate Contributions);
(b) All Employee contributions;
(c) All forfeitures; and
(d) All amounts allocated after March 31, 1984, to an
individual medical account, as defined in Code Section 415(1)(2), which
is part of a pension or annuity plan maintained by the Employer, and
amounts derived from contributions paid or accrued after December 31, 1985,
with respect to taxable years ending after such date, which are attributable to
post-retirement medical benefits, as defined in Code Section 419(A)(d)(3),
allocated to the separate
PriceCostco 401(k) Plan for California Union Employees Page 1
account of a Key Employee, as defined in Code Section 416(i), under a welfare
benefit fund, as defined in Code Section 419(e), maintained by the Employer.
1.6 "Approved Absence" means an Employee's leave without pay for a specified
period of time on such terms and conditions and for such reasons as the Employer
may determine in its sole discretion, which leave is approved by the Employer in
advance and in writing.
1.7 "Average Deferral Percentage (ADP)" means the average (expressed as a
percentage calculated to the nearest one-hundredth of one percent) of the
Deferral Percentages of the Participants in a specified group of eligible Highly
Compensated Employees or Non-Highly Compensated Employees.
1.8 "Beneficiary" means a person or entity designated by a Participant or by the
terms of the Plan who is entitled to a benefit under the Plan in the event of
the Participant's death. A Beneficiary who becomes entitled to a benefit under
the Plan shall remain a Beneficiary under the Plan until the Trustee has fully
distributed the Beneficiary's interest. A Beneficiary's right to (and the Plan
Administrator's or the Trustee's duty to provide to the Beneficiary) information
or data concerning the Plan shall not arise until the Beneficiary first becomes
entitled to receive a benefit under the Plan.
1.9 "Break in Service" means a Period of Severance of 12 consecutive months,
during which a Participant completes no Hours of Service.
1.10 "Code" means the Internal Revenue Code of 1986, as amended.
1.11 "Committee" means the PriceCostco Benefits Committee appointed by
PriceCostco to administer this Plan. At the effective date of this instrument,
the members of the PriceCostco Benefits Committee are: John Eagan, Richard
Galanti, John Matthews, Monica Smith, and Jay Tihinen, each of whom shall serve
until resignation by the member, removal of the member by the Board of
Directors, termination of employment with all PriceCostco affiliated companies,
or the appointment of a new Benefits Committee by the Board of Directors.
1.12 "Compensation" for purposes of Salary Deferral and Matching Contributions
means wages within the meaning of Section 3401(a) of the Code (that is, wages
subject to federal income tax withholding) before reduction for any nontaxable
amounts that are contributed by the Employer pursuant to a salary reduction
agreement under Sections 125, 402(e)(3), 402(h), or 403(b) of the Code and
before reduction for any salary (but not any bonus) deferred under the
PriceCostco Deferred Compensation Plan for Employees of Costco Wholesale
Corporation or the PriceCostco Deferred Compensation Plan for Employees of The
Price Company. However, such compensation shall exclude the following types of
payments: bonuses paid to salaried employees, severance pay, safety awards,
scholarships, gain sharing payments, ridesharing or carpool payments, dependent
care assistance reimbursements, taxable life insurance, earned income credits,
distributions from the PriceCostco Deferred Compensation Plan for Employees of
Costco Wholesale Corporation or the PriceCostco Deferred Compensation Plan for
Employees of The Price Company, relocation expenses, automobile allowances,
FlexCredits under the
PriceCostco 401(k) Plan for California Union Employees Page 2
PriceCostco FlexPlan, any payment for a period of less than two weeks, any
non-cash compensation, and effective January 1, 1996, bonuses paid to hourly
employees.
Compensation taken into account in a Participant's first year of
participation in the Plan shall not include the Compensation earned by the
Participant prior to the Entry Date on which the Participant first commenced
participation in the Plan. Furthermore, under the Act, the annual Compensation
of any Participant taken into account for determining any benefit provided under
the Plan shall not exceed $150,000, as adjusted in accordance with Sections
401(a)(17) and 415(d)(1) of the Code. In determining the Compensation of a
Participant for purposes of this limitation, the family aggregation rules of
Code Section 414(q)(6) shall apply to Five Percent Owners and Top-Ten Highly
Compensated Employees. However, for this purpose, the term Family Member shall
include only the spouse of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the close of the Plan Year. If
the maximum compensation limitation would otherwise be exceeded as a result of
the application of the family aggregation rules, then, for purposes of
determining benefits under the Plan, the limitation shall be prorated among the
affected family members in proportion to each member's compensation determined
under this section prior to the application of the maximum compensation
limitation. The family aggregation rules of Code Section 414(q)(6) are
incorporated herein by reference. (See also, Section 414 Compensation and
Section 415 Compensation, defined below.)
1.13 "Deferral Percentage" shall means the ratio (expressed as a percentage
calculated to the nearest one-hundredth of one percent) of the sum of the Salary
Deferral Contributions and Qualified Non-Elective Contributions made under the
Plan on behalf of a Participant for a Plan Year to the 414 Compensation of the
Participant for the Plan Year. Provided, however, that in the case of a Highly
Compensated Employee who is eligible to participate in two or more Code Section
401(k) plans of the Employer to which salary reduction contributions or other
elective contributions may be made, all such contributions on behalf of the
Highly Compensated Employee shall be aggregated for purposes of determining the
Highly Compensated Employee's Deferral Percentage.
1.14 "Effective Date" means June 1, 1995.
1.15 "Eligibility Computation Period" means a 12-consecutive-month period during
which an Employee completes not less than 1,000 Hours of Service, measuring the
beginning of the initial 12-month period from the Employee's Employment
Commencement Date. If an Employee does not complete 1,000 Hours Of Service
during his or her initial Eligibility Computation Period, each succeeding
Eligibility Computation Period shall be the 12-consecutive- month period ending
on the last day of each bi-weekly payroll period.
1.16 "Eligible Employment" means employment as an Employee covered by the
collective bargaining agreement between The Price Company and the International
Brotherhood of Teamsters.
1.17 "Employee" means any employee of the Employer, including a Leased
Employee.
PriceCostco 401(k) Plan for California Union Employees Page 3
1.18 "Employee Contribution Account" means the Accounts maintained for a
Participant to record his or her contributions to the Plan, including a
Participant's "Transfer Account" or "Rollover Account" (but excluding accounts
for Salary Deferral Contributions, which are considered employer contributions
under the Act).
1.19 "Employer" means The Price Company, a California corporation, and
any Affiliated Company.
1.20 "Employer Contribution Account" means the Accounts maintained for a
Participant to record his or her share of the Matching Contributions of the
Employer, which are subject to the Plan's vesting schedule.
1.21 "Employer Stock" means the voting common stock of Price/Costco, Inc., and
any other security, debenture or other property convertible into Employer Stock.
The term "Employer Stock" shall also include warrants or rights to purchase
Employer Stock that are received by the Trustee as a result of its holding
Employer Stock.
1.22 "Employment Commencement Date" means the date an Employee first
performs an Hour of Service for the Employer.
1.23 "Entry Date" means January 1 and July 1 of each Plan Year. However, an
Employee who was eligible to enter the Plan on the Effective Date and who
submits an application to participate before June 30, 1995, shall enter the Plan
as soon as administratively feasible after a completed application is submitted.
1.24 "Excess Contributions" means, with respect to any Plan Year:
(a) The aggregate amount of Salary Deferral Contributions and Qualified
NonElective Contributions actually taken into account in computing the Average
Deferral Percentage of Highly-Compensated Employees for such Plan Year, less
(b) The maximum amount of such contributions permitted by the Average
Deferral Percentage test (determined by reducing contributions made on behalf of
Highly-Compensated Employees in order of decreasing Deferral Percentages as
described in Section 4.2(b).
1.25 "Excess Deferrals" means the amount of Salary Deferral Contributions for a
calendar year that a Participant allocates to this Plan which, when added to
amounts deferred under other plans or arrangements described in Sections 401(k),
403(b) or 408(k) of the Code, exceeds the limit imposed on such Participant by
Section 402(g) of the Code for such calendar year.
1.26 "Family Member" means an individual who is the spouse, a lineal descendant,
a lineal ascendant, or the spouse of a lineal descendant or lineal ascendant of
a Five Percent Owner or of a Top-Ten Highly-Compensated Employee.
1.27 "Five Percent Owner"means any person described as a 5% owner within the
meaning of Section 416(i) of the Code.
PriceCostco 401(k) Plan for California Union Employees Page 4
1.28 "Highly-Compensated Employee" means each "highly-compensated active
employee" and each "highly-compensated former employee."
(a) The term "highly-compensated active employee" includes any Employee who
performs services for the Employer during the determination year and who, during
the look-back year:
(1) Received 414 Compensation from the Employer in excess of
$75,000 (as adjusted pursuant to Section 415(d) of the Code),
(2) Received 414 Compensation from the Employer in excess of $50,000
(as adjusted pursuant to Section 415(d) of the Code) and was one of the top 20%
of Employees when ranked on the basis of decreasing 414 Compensation for such
year, or
(3) Was an officer of the Employer and received 414 Compensation from
the Employer during such year in excess of 50% of the dollar limitation in
effect under Section 415(b)(1)(A) of the Code.
The term "highly-compensated active employee" also includes:
(4) An Employee who is described in the preceding sentence if the
term "determination year" is substituted for the term "look-back year" and the
Employee is one of the 100 Employees who received the most 414 Compensation from
the Employer during the determination year, or
(5) An Employee who is a Five Percent Owner at any time during the
determination year or the look-back year. If no officer has satisfied the
compensation requirement of subparagraph (3) above during either a determination
year or a look-back year, the highest paid officer for such year shall be
treated as a Highly-Compensated Employee.
(b) The term "highly-compensated former employee" includes any Employee who
separated (or was deemed to have separated) from service with the Employer prior
to the determination year, performs no services for the Employer during the
determination year, and was a highly-compensated active employee for either the
year of separation or any determination year ending on or after the Employee's
55th birthday.
(c) For purposes of this section, the term "determination year" means the
Plan Year, and the term "look-back year" means the 12-month period immediately
preceding the determination year.
(d) If an Employee is, during a determination year or look-back year, a
Family Member, then the Section 414 Compensation of the Family Member and the
Five Percent Owner or the Top-Ten Highly-Compensated Employee shall be
aggregated and they shall be treated as a single Employee receiving compensation
and plan contributions or benefits equal to the sum of the compensation and
contributions or benefits of the Family Member and the Five Percent Owner or the
Top-Ten Highly-Compensated Employee.
PriceCostco 401(k) Plan for California Union Employees Page 5
(e) The determination of who is a Highly-Compensated Employee, including
the determinations of the number and identity of Employees in the top paid
group, the top 100 Employees, the number of Employees treated as officers, and
the compensation that is considered, shall be made in accordance with Section
414(q) of the Code. In determining the Employees to be included in subparagraph
(a)(2), there shall be excluded all Employees who (i) have not completed six
months of Service with the Employer, (ii) normally work less than 17- 1/2 hours
per week, (iii) normally work during not more than six months during any year,
(iv) have not attained age 21, (v) are included in a unit of employees covered
by a collective bargaining agreement (unless the collective bargaining agreement
requires coverage under this Plan), or (vi) are nonresident aliens receiving no
US source income from the Employer.
1.29 "Hour of Service" means:
(a) Each hour for which the Employer or an Affiliated Company, either
directly or indirectly, pays an Employee or for which the Employee is entitled
to payment for the performance of duties during the Plan Year. These hours shall
be credited to the Employee for the Plan Year in which the Employee performs the
duties, irrespective of when paid;
(b) Each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Employer or an Affiliated Company. Hours
under this subsection shall be credited to the Employee for the Plan Year to
which the award or the agreement pertains rather than to the Plan Year in which
the award, agreement, or payment is made; and
(c) Each hour for which the Employer or an Affiliated Company, either
directly or indirectly, pays an Employee or for which the Employee is entitled
to payment (irrespective of whether the employment relationship is terminated)
for reasons other than for the performance of duties during a Plan Year, such as
leave of absence, vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, or military duty. Hours under this subsection shall be
credited to the Plan Year in which the Employee is paid, the Employee becomes
entitled to payment, or the payment becomes due, whichever occurs first.
Notwithstanding the preceding provisions of this subsection, no credit shall be
given for:
(1) More than 501 hours under this subsection on account of any
single continuous period during which the Employee does not perform any duties
(whether or not such period occurs during a single Plan Year);
(2) Any hour on account of a period during which the Employee does
not perform any duties if the payment is under a plan maintained solely for the
purpose of complying with the applicable workman's compensation law,
unemployment compensation law, or disability insurance law; and
(3) Any hour for a payment that solely reimburses the Employee for
medical or medically related expenses incurred by the Employee.
Credit shall not be given under more than one of the foregoing
subsections (a), (b), and (c). If credit is to be given for the 12-month period
beginning with the Employee's employment
PriceCostco 401(k) Plan for California Union Employees Page 6
commencement date, then the 12-month period beginning with the date an Employee
first completes an Hour of Service for the Employer or an Affiliated Company
shall be substituted for the term "Plan Year" wherever the latter term appears
in this section. Any ambiguity with respect to the crediting of an Hour of
Service shall be resolved in favor of the Employee. Hours of Service shall be
calculated and credited pursuant to Section 2530.200b-2 of the Department of
Labor Regulations, which are specifically incorporated herein by this reference.
1.30 "Inactive Participant" means a Participant (a) whose employment with the
Employer continues but whose participation has been suspended as a result of
making a withdrawal or suspending his or her Salary Deferral Contribution, (b)
who has terminated employment with the Employer and has an interest in the Plan
that has not been distributed, or (c) who has become an Ineligible Employee.
1.31 "Ineligible Employee" means an Employee who is not eligible to participate
in this Plan because the Employee is no longer a member of the collective
bargaining unit under which the Plan is maintained.
1.32 "Investment Funds" means the investment funds established pursuant to the
Plan as the Plan Administrator may authorize from time to time.
1.33 "Leased Employee"means any individual (other than an Employee of the
Employer) who, pursuant to an agreement between the Employer and any other
person (the "leasing organization"), has performed services for the Employer or
for the Employer and related persons on a substantially full-time basis for a
period of at least one year and such services are of a type historically
performed by employees in the business field of the Employer. Contributions or
benefits provided by the leasing organization which are attributable to the
services performed for the Employer shall be treated as provided by the
Employer. The preceding sentence shall not apply to any Leased Employee if (a)
the total of Leased Employees constitute less than 20% of the Employer's
non-highly-compensated workforce within the meaning of Section 414 (n) (5) (C)
(ii) of the Code, and (b) such individual is covered by a money purchase pension
plan providing immediate participation, full and immediate vesting, and a
non-integrated employer contribution of 10% of compensation (as defined in
Section 415(c)(3) of the Code), but including amounts contributed pursuant to a
salary reduction agreement which are excludable from the individual's gross
income under Sections 125, 402(e) (3), 402(h) (1) (B) or 403(b) of the Code.
1.34 "Limitation Year" means the Plan Year.
1.35 "Matching Contribution" means any contribution to the Plan made by the
Employer for the Plan Year and allocated to a Participant's Matching
Contribution Account by reason of the Participant's Salary Deferral
Contributions to the Plan.
1.36 "Matching Contribution Account" means the Account maintained by the Plan
Administrator for each Participant which is to be credited with the Matching
Contributions allocated to the Participant and adjustments related thereto.
PriceCostco 401(k) Plan for California Union Employees Page 7
1.37 "Maternity or Paternity Leave" means an absence from work for any of the
following reasons:
(a) The pregnancy of the Employee;
(b) The birth of a child of the Employee;
(c) The placement of a child with the Employee in connection with the
adoption of such child by the Employee; or
(d) For purposes of the care of a child referred to in subsections (b) or
(c), immediately following the child's birth or placement for adoption.
An Employee must furnish the Plan Administrator with reasonable information
in a timely manner establishing that any absence from work is for one of the
reasons listed above. In such event, the 12 consecutive month period beginning
on the first anniversary of the first date of such absence shall not constitute
a Break in Service. Maternity or Paternity Leave shall be considered only for
purposes of determining whether or not a Break in Service has occurred and not
for any other purpose.
1.38 "Military Leave" means service in the United States Uniformed Services or
in commissioned corps of the United States Public Health Service by an Employee
under conditions that entitle such Employee to reemployment rights as provided
in the laws of the United States; provided, however, that:
(a) Such Military Leave shall not exceed 1,825 days;
(b) Such Employee entered such service directly from Service with the
Employer; and
(c) Such Employee makes application for reemployment with the Employer
within the time prescribed for reemployment rights.
If an Employee meets the requirements described above, then the following
shall apply:
(d) The Employee shall be deemed to have earned compensation during the
period of the Military Leave at a rate of pay equal to the Employee's annualized
compensation for the 12- month period immediately preceding the beginning of the
Military Leave;
(e) The Employee shall be entitled to make Salary Deferral Contributions
for the entire period of the Military leave, during the period beginning on his
or her date of reemployment and ending on the date that is the lesser of three
times the length of the Military Leave or five years after the date of
reemployment; and
(f) The Employee shall be entitled, for the Plan Years in which the Salary
Deferral Contributions are made under the foregoing subsection, to an allocation
of Matching Contributions based on the Salary Deferral Contributions.
PriceCostco 401(k) Plan for California Union Employees Page 8
1.39 "Nonforfeitable" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan and Trust, to that portion of a
Participant's Account balance that has become vested in accordance with Article
8.
1.40 "Non-Highly-Compensated Employee" means any Employee who is not a Highly-
Compensated Employee.
1.41 "Normal Retirement Age" means age 65.
1.42 "Participant" means an Employee who is an Eligible Participant or an
Inactive Participant.
1.43 "Period of Severance" means a continuous period of time during which an
Employee is not employed by the Employer. Such period begins on the date the
Employee retires, quits, or is discharged or, if earlier, on the 12 month
anniversary of the date on which the Employee was otherwise first absent from
service. Military Leave, Approved Absence, and Maternity or Paternity Leave
shall not constitute a Period of Severance, provided, however, that (a)
continuation upon a temporary layoff for lack of work for a period in excess of
three months shall be deemed a termination of employment effective as of the end
of the third month of such period, and (b) failure to return to work upon the
expiration of any Military Leave, Approved Absence, Maternity or Paternity
Leave, sick leave, vacation, or within three days after recall from a temporary
layoff for lack of work shall be deemed a termination of employment effective as
of the expiration of such Military Leave, Approved Absence, Maternity or
Paternity Leave, sick leave, vacation or layoff.
1.44 "Plan" means the plan reflected in this document, and any amendments
hereto.
1.45 "Plan Administrator" means Price/Costco, Inc., acting through the
Committee, if such has been appointed and is acting, and otherwise through its
officers and directors.
1.46 "Plan Year" means the fiscal year of the Plan, being the 12 consecutive
month period commencing on January 1 and ending on December 31 of each calendar
year.
1.47 "Qualified Non-Elective Contribution" means a contribution (other than a
Matching Contribution or a Salary Deferral Contribution) made by the Employer
and allocated to Participants' Accounts when such contribution is designated by
the Employer as Nonforfeitable and subject to the limitations on withdrawal for
Salary Deferral Contributions as described in Section 4.11 and Treasury
Regulations ss.l.401(k)-1(b) (5). In order to be considered in calculating a
Participant's Deferral Percentage, the Qualified Non-Elective Contribution must
be made before the last day of the 12 month period following the end of the Plan
Year to which the contributions relate.
1.48 "Required Beginning Date" means the first day of April of the calendar year
following the calendar year in which a Participant attains age 70-1/2.
PriceCostco 401(k) Plan for California Union Employees Page 9
1.49 "Salary Deferral Account" means the Account maintained for a Participant to
record his or her share of the contributions of the Employer that are made
pursuant to Participants' Salary Deferral Agreements.
1.50 "Salary Deferral Agreement" means a written agreement or enrollment form
(or written confirmation of a voice enrollment) in which a Participant elects to
have his or her Compensation reduced by a specified amount (in whole percentages
not less than 1% and not more than 15%). Salary Deferral Agreements shall be
governed by the following:
(a) Effective Time. A Salary Deferral Agreement shall apply to each payroll
period during which an effective Salary Deferral Agreement is in effect with the
Employer and shall be effective as of the beginning of the first payroll period
that includes the effective date of the Salary Deferral Agreement. Salary
Deferral Agreements may be entered into telephonically or by such other method
as the Plan Administrator shall determine from time to time.
(b) Suspension or Amendment. A Salary Deferral Agreement may be suspended
or may be amended by a Participant at any time by giving written notice to the
Employer and the Plan Administrator on or before such reasonable prior deadline
as the Plan Administrator shall establish from time to time.
1.51 "Salary Deferral Contribution" means a contribution made by the Employer to
a Participant's Salary Deferral Account on behalf of the Participant for such
Plan Year in an amount equal to the total amount by which the Participant's
Compensation from the Employer was reduced during the Plan Year pursuant to the
Salary Deferral Agreement. The dollar limitation of Code Section 402(g), as
adjusted, shall apply in the aggregate to Elective Contributions under this Plan
and elective contributions on behalf of the Participant for the same taxable
year under all cash and deferred arrangements described in Code Sections
402(h)(1)(B), 457, 501(c)(18) and 403(b) covering such Participant, regardless
of employer.
1.52 "Section 414 Compensation" is used for calculating the ADP discrimination
tests and for determining whether a Participant is a Highly Compensated Employee
or a Key Employee and means Section 415 Compensation plus any elective
contributions not includable in the gross income of the Participant under Code
Sections 402(a)(8), 403(b), 125, or 402(h)(1)(B), including Salary Deferral
Contributions under this Plan and any before-tax contributions under the
PriceCostco FlexPlan. However, under the Act, the annual Section 414
Compensation of any Participant shall not exceed $150,000, as adjusted in
accordance with Sections 401(a)(17) and 415(d)(1) of the Code. In determining
the Compensation of a Participant for purposes of this limitation, the family
aggregation rules of Code Section 414(q)(6) shall apply to Five Percent Owners
and Top-Ten Highly Compensated Employees.
1.53 "Section 415 Compensation" is used for determining the maximum allowable
Annual Additions to a Participant's Account and means a Participant's wages,
salaries, and fees for professional services, and other amounts received
(without regard to whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment with the Employer (to the
extent that the amounts are includable in gross income) including, but not
limited to, commissions paid salesmen, compensation for services on the basis of
a percentage
PriceCostco 401(k) Plan for California Union Employees Page 10
of profits, commissions on insurance premiums, tips, bonuses, fringe benefits,
and reimbursements or other expense allowances under a nonaccountable plan (as
described in Treasury Regulation 1.62-2(c)), and excluding the following:
(a) Employer contributions to a plan of deferred compensation which are not
includable in the Employee's gross income for the taxable year in which
contributed (such as Salary Deferral Contributions to this Plan), or Employer
contributions under a simplified employee pension plan, or any distributions
from a plan of deferred compensation (other than from an unfunded nonqualified
plan when includible in gross income);
(b) Amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(c) Amounts realized from the sale, exchange, or other disposition of stock
acquired under a qualified stock option; and
(d) Other amounts which received special tax benefits, or contributions
made by the Employer (whether or not under a salary reduction agreement) towards
the purchase of an annuity contract described in Section 403(b) of the Code
(whether or not the amounts are actually excludable from the gross income of the
Employee).
Section 415 Compensation for any Limitation Year is the compensation
actually paid or made available in gross income during such year. However,
Section 415 Compensation for a Participant who is permanently and totally
disabled (as defined in Code Section 22(e)(3)) is the 415 Compensation such
Participant would have received for the Limitation Year if the participant had
been paid at the rate of compensation paid immediately before becoming
permanently and totally disabled. Notwithstanding the foregoing, imputed
compensation may be taken into account only if the Participant is not a Highly
Compensated Employee and only if the contributions made on behalf of such
Participant are nonforfeitable when made. Furthermore, under the Act, the annual
Section 415 Compensation of any Participant shall not exceed $150,000, as
adjusted in accordance with Sections 401(a)(17) and 415(d)(1) of the Code. In
determining the Compensation of a Participant for purposes of this limitation,
the family aggregation rules of Code Section 414(q)(6) shall apply to Five
Percent Owners and Top-Ten Highly Compensated Employees.
1.54 "Service" means an Employee's period or periods of employment with the
Employer or an Affiliated Company, which are counted as Service in accordance
with the following:
Each Employee shall be credited with Service under the Plan for the period
or periods during which such Employee maintains an employment relationship with
the Employer or any Affiliated Company. An Employee's employment relationship
shall be deemed to commence on the date the Employee first renders one Hour of
Service to the Employer or any Affiliated Company and shall be deemed to
continue during the following periods:
PriceCostco 401(k) Plan for California Union Employees Page 11
(a) An Employee shall not be considered to have terminated employment
during a period of Approved Absence unless the Employee fails to return to the
employ of the Employer or any Affiliated Company at or prior to the expiration
date of such Approved Absence, in which case he or she shall be deemed to have
terminated as of the date of commencement of such Approved Absence. (b) In the
case of an Employee who terminates employment and who is subsequently
re-employed by the Employer or any Affiliated Company without having incurred a
Break in Service, the period between the date of termination and date of
reemployment.
All periods of an Employee's Service, whether or not consecutive, shall be
aggregated.
1.55 "Spouse" means the spouse of the Participant who is married to the
Participant on the date distribution of benefits under the Plan commences or who
was married to the Participant on the date of the Participant's death. However,
a former spouse will be treated as the Spouse to the extent provided under a
qualified domestic relations order as described in Section 414(p) of the Code.
1.56 "Top-Ten Highly-Compensated Employee" means a Highly-Compensated Employee
who is one of the top ten Employees when ranked in order of decreasing Section
414 Compensation.
1.57 "Total Disability" means the Participant's inability 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 that has lasted or
can be expected to last for a continuous period of not less than 12 months, or
for a blind Participant age 55 and over, the inability to engage in the
Participant's usual occupation. Total Disability shall be evidenced by the
Participant's eligibility for Social Security disability benefits, and a
disabled Participant must furnish proof satisfactory to the Plan Administrator
of a determination by Social Security that the Participant is entitled to Social
Security disability benefits.
1.58 "Trust" means the trust established to hold and invest the contributions
made to the Plan.
1.59 "Trust Fund" means all property of every kind held or acquired by the
Trustee under the agreement under which the Trust is established.
1.60 "Trustee" means T. Rowe Price Trust Company, named as Trustee in the
agreement under which the Trust is maintained, or any successor in office who in
writing accepts the position of Trustee.
1.61 "Valuation Date" means the Anniversary Date, the last business day of each
calendar month, or such other date on which an interim valuation of the Trust
Fund is made.
PriceCostco 401(k) Plan for California Union Employees Page 12
1.62 "Years of Service" means the length of an Employee's Service determined by
dividing the Employee's days of Service by 365 and rounding any fractional
result down to the nearest whole year.
ARTICLE 2
ELIGIBILITY AND PARTICIPATION
2.1 ELIGIBILITY
Each Employee who is in Eligible Employment and who has completed at least 1,000
Hours of Service with the Employer in an Eligibility Computation Period before
the Effective Date, shall be eligible to participate in the Plan as of the
Effective Date. Each other Employee who is at least 18 years of age and is in
Eligible Employment shall be eligible to participate in the Plan on the Entry
Date following the first Eligibility Computation Period in which the Participant
completes 1,000 Hours of Service with the Employer. An Employee who has met the
requirements described above but who is not in Eligible Employment on the
applicable Entry Date shall become eligible for participation on the date the
Employee enters Eligible Employment.
2.2 CONTINUANCE OF PARTICIPATION
An eligible Employee shall continue to be a Participant as long as the
Participant has an Account balance in the Plan. However, active participation
shall cease when a Participant terminates employment with the Employer. Active
participation shall also cease if a Participant's Eligible Employment ceases,
whether or not the Participant remains an Employee, in accordance with the
provisions of Section 2.4. Such a Participant may become an active Participant
again as of the date he or she returns to Eligible Employment. In addition,
active participation shall cease if a Participant is on an unpaid Approved
Absence. However, if a Participant returns to the Service of the Employer on or
before the end of an Approved Absence, that Participant may become an active
Participant again as of the date he or she returns to Eligible Employment.
2.3 PARTICIPATION UPON RE-EMPLOYMENT
A former Participant whose employment terminates and who is subsequently
re-employed or an Employee who had satisfied the eligibility requirements of the
Plan but had terminated prior to an Entry Date shall re-enter the Plan as a
Participant on the date of re-employment. Any other Employee whose employment
terminates and who is subsequently re-employed shall become a Participant in
accordance with the normal provisions of Section 2.1.
2.4 INELIGIBLE EMPLOYEE STATUS
If a Participant does not terminate employment but becomes an Ineligible
Employee, the Plan Administrator shall limit that Participant's share of the
allocation of Employer contributions and Participant forfeitures, if any, to
relate to the Participant's Compensation paid by the Employer for services while
the Participant was in Eligible Employment. However, during the period that the
Participant is an Ineligible Employee, his or her Account shall continue to
share fully in
PriceCostco 401(k) Plan for California Union Employees Page 13
Trust Fund allocations of net income (or loss). If an Ineligible Employee
becomes eligible to participate by reason of a change to Eligible Employment,
the Employee may participate in the Plan immediately if he or she has satisfied
the requirements of Section 2.1 and would have been a Participant had he or she
been in Eligible Employment during his or her period of Service with the
Employer.
ARTICLE 3
EMPLOYER CONTRIBUTIONS
3.1 DETERMINATION OF CONTRIBUTION
(a) Salary Deferral Contribution. For each payroll period or other similar
period during the Plan Year, the Employer shall contribute an amount to the
Account of each Participant equal to the Salary Deferral Contribution made
pursuant to such Participant's Salary Deferral Agreement for such Plan Year.
(b) Matching Contribution. For each Plan Year, the Employer shall
contribute an amount to the Account of each Participant equal to 50% of the
Salary Deferral Contributions made pursuant to the Participant's Salary Deferral
Agreement for such Plan Year. However, for purposes of determining the amount of
the Employer's Matching Contribution, the Salary Deferral Contribution made by
the Employer on behalf of each Participant in excess of $250 of such
Participant's Compensation in any Plan Year shall be disregarded, so that the
maximum Matching Contribution for any Participant in any Plan Year shall be
$125. The amount of the Matching Contribution may be amended from time to time.
(c) Qualified Non-Elective Contribution. The Employer may, in its
discretion, make a Qualified Non-Elective Contribution in order to help meet the
ADP test described in Section 4.2. Such contribution shall be allocated first to
those Participants with the lowest Deferral Percentage or Contribution
Percentage, as applicable, in the minimum amount necessary to meet the test in
question or to cause such Participants' Deferral Percentages or Contribution
Percentages to equal the Deferral or Contribution Percentages of Participants
with the next lowest percentages, whichever occurs first. Then the remaining
contribution shall be allocated to the group with the next lowest Deferral or
Contribution Percentage, including those Participants brought up to such
percentage by the previous allocation, in the minimum amount necessary to meet
the test in question or to cause such percentages to equal the percentage of
Participants with the next lowest percentage. This process shall be continued
until the applicable test is met and the contribution is allocated in its
entirety. All Qualified Non-Elective Contributions allocated to a Participant's
Account shall be immediately Nonforfeitable and subject to the limitations on
withdrawal for Salary Deferral Contributions as described in Section 4.11 and
Treasury Regulation l.401(k)-1(b)(5).
(d) Form of Contribution. All Matching Contributions, Qualified
Non-Elective Contributions, and Salary Deferral Contributions shall be made in
cash.
(e) Right to Amend. The Plan may be amended at any time to change the
amount of the Matching Contributions or described in this Section 3.1. Such
amendments shall be made in any
PriceCostco 401(k) Plan for California Union Employees Page 14
manner permitted by law by the Employer (acting through its Board of Directors
or through the officers and/or directors to whom the Board of Directors has
delegated authority to amend the plan) or by the Committee, to the extent the
Committee has authority to amend the Plan. The change shall become effective by
announcement of the change to Participants, by an appropriate resolution, or by
authorized signatures on an amendment or an amended and restated document.
Such a change shall be effective at the earliest of the date the change is
communicated to Participants, the date the amendment is adopted, or the date the
amendment is signed.
3.2 RETURN OF CONTRIBUTION
The Trustee, upon written request from the Employer, shall return to the
Employer the amount of the Employer's contribution made by the Employer by
mistake of fact or the amount of the Employer's contribution disallowed as a
deduction under Section 404 of the Code. The Trustee shall not return any
portion of the Employer's contribution under the provisions of this section more
than one year after:
(a) The date of determination that the Employer made the contribution by
mistake of fact; or
(b) The date of disallowance of the contribution as a deduction.
The Trustee shall not increase the amount of the Employer's contribution
returnable under this section for any earnings attributable to the contribution,
but the Trustee shall decrease the Employer's contribution returnable for any
losses attributable to it. The Trustee may require the Employer to furnish it
whatever evidence the Trustee deems necessary to enable the Trustee to confirm
the amount the Employer has requested be returned is properly returnable under
Section 403(c) of the Act.
3.3 TIME OF PAYMENT OF CONTRIBUTION
The Employer shall pay its contribution to the Trustee for each Plan Year within
the time prescribed (including extensions) by the Code for filing its federal
income tax return for the taxable year for which it claims a deduction for its
contribution.
ARTICLE 4
NONDISCRIMINATION TESTS AND
DISTRIBUTION OF EXCESS AMOUNTS
4.1 DISTRIBUTION OF EXCESS DEFERRALS
Excess Deferrals and income allocable thereto shall be distributed no later than
each April 15 to Participants who make a timely claim for such Excess Deferrals
for the preceding calendar year. The income allocable to Excess Deferrals shall
be the sum of (a) the income or loss allocable to the Participant's Salary
Deferral Account for the Plan Year multiplied by a fraction, the numerator of
which is the Participant's Excess Deferral for the preceding Plan Year and the
denominator of which is the Participant's Account balance attributable to Salary
Deferral
PriceCostco 401(k) Plan for California Union Employees Page 15
Contributions determined without regard to any income or loss occurring during
such Plan Year, and (b) 10% of the amount determined under (a) multiplied by the
number of whole calendar months between the end of the Plan Year and the date of
distribution of the Excess Deferral, counting the month of distribution if
distribution occurs after the 15th of the month. Notwithstanding the preceding
sentence, the Plan Administrator may use any other reasonable method that
reflects income or loss on such Excess Deferrals. A Participant's claim for
Excess Deferrals shall be in writing and shall be submitted to the Plan
Administrator no later than March 1 of the year following the calendar year in
which such Excess Deferrals were made.
4.2 DEFERRAL LIMITATIONS
(a) ADP Discrimination Tests for Salary Deferral Contributions. In order for the
discrimination standards of Internal Revenue Code Section 401(k) to be satisfied
in any Plan Year, the Actual Deferral Percentage (ADP) for Participants who are
Highly Compensated Employees and the ADP for Participants who are not Highly
Compensated Employees must satisfy one of the following tests:
(1) The ADP for Participants who are Highly Compensated Employees
is not more than the ADP for Participants who are not Highly Compensated
Employees multiplied by 1.25; or
(2) The excess of the ADP for Participants who are Highly Compensated
Employees over the ADP for Participants who are not Highly Compensated Employees
is not more than two percentage points, and the ADP for Participants who are
Highly Compensated Employees is not more than the ADP for Participants who are
not Highly Compensated Employees multiplied by 2.
Compliance with the discrimination standards set forth above shall be
determined in accordance with Code Section 401(k), as amended from time to time,
and any related laws and regulations as may be in effect from time to time.
Under those rules, if this plan is aggregated with any other plan or plans for
purposes of the nondiscrimination standards of Code Section 401(a)(4) or the
minimum coverage requirements of Code Section 410(b) (other than Section
410(b)(2)(A)(ii)), all elective contributions made under all such plans shall be
treated as if made under a single plan. In addition, if two or more plans are
permissively aggregated for purposes of the nondiscrimination standards of Code
Section 401(k), the aggregated plans must satisfy the nondiscrimination
standards of Section 401(a)(4) and the minimum coverage requirements of Section
410(b) as though they were a single plan.
(b) Abatement of Salary Deferral Contributions. Salary Deferral
Contributions credited to the account of a Participant may be abated to the
extent deemed necessary by the Employer to meet the discrimination standards of
Code Sections 401(a)(4) and 401(k); to insure that the Annual Additions to the
Account of a Participant do not exceed the maximum limitations of Code Section
415, as expressed in Section 5.3 of the Plan; or to insure that the Employer's
contribution does not exceed the maximum amount deductible from the Employer's
income under Code Section 404. Any excess amounts, plus any income and minus any
loss allocable thereto, shall be returned to the Participant as salary if
possible within two and one-half months
PriceCostco 401(k) Plan for California Union Employees Page 16
after the close of the Plan Year and in all events by the end of the following
Plan Year. The income allocable to an excess contribution shall include both
income for the Plan Year for which the excess contributions were made and income
for the period between the end of the Plan Year and the date of distribution.
Such distribution shall be made to Highly Compensated Employees on
the basis of the respective portions of the Excess Contributions attributable to
each. The Excess Contribution of a Highly Compensated Employee for a Plan Year
is to be determined by the following leveling method, under which the Deferral
Percentage of the Highly Compensated Employee with the highest Deferral
Percentage is reduced to the extent required to:
(1) Enable the plan to satisfy the discrimination tests; or
(2) Cause such Highly Compensated Employee's Deferral Percentage to
equal the ratio of the Highly Compensated Employee with the next highest
Deferral Percentage.
This process shall be repeated until the plan satisfies the
discrimination tests. Any salary reduction agreement shall be deemed to direct
and authorize the Employer to abate a Participant's salary reduction account and
to return any abated amounts as specified above.
4.3 FAMILY AGGREGATION RULES
For purposes of determining the Deferral Percentage of a Participant who is a
Five Percent Owner or a Top-Ten Highly-Compensated Employee, the salary
deferrals (and Qualified NonElective Contributions and if treated as elective
deferrals for purposes of the ADP test), and the 414 Compensation of such
Participant shall include the salary deferrals (and, if applicable, the
Qualified Non-Elective Contributions), the and the 414 Compensation of the
Family Members of such Highly Compensated Employee. The affected Family Members
of such Highly Compensated Employees shall otherwise be disregarded as separate
employees both in determining the ADP of Participants who are Highly Compensated
Employees and in determining the ADP of Participants who are not Highly
Compensated Employees.
The determination of the amount of any Excess Contribution for a Participant
subject to these family aggregation rules shall be made as follows, unless
applicable Treasury Regulations provide otherwise:
(1) If the Highly Compensated Employee's Deferral Percentage is
determined by combining the contributions and compensation of only those Family
Members who are Highly Compensated Employees themselves without regard to the
family aggregation rules, then the Deferral Percentage is reduced in accordance
with the leveling method described above, and the Excess Contributions or Excess
Aggregate Contributions for the family unit are allocated among the family
members in proportion to the contributions of each family member that have been
combined.
(2) If the Highly Compensated Employee's Deferral Percentage is
determined by combining the contributions and compensation of Family Members,
some of whom are not themselves Highly Compensated Employees, then the Deferral
Percentage is reduced in
PriceCostco 401(k) Plan for California Union Employees Page 17
accordance with the leveling method but not below the Deferral Percentage of
eligible Family Members who are not Highly Compensated Employees. Excess
Contributions are determined by taking into account the contributions of the
eligible family members who are Highly Compensated Employees without regard to
the family aggregation rules and are allocated among such family members in
proportion to their contributions. If further reduction of the Deferral
Percentage is required, Excess Contributions resulting from this reduction are
determined by taking into account the contributions of all eligible family
members and are allocated among such family members in proportion to their
contributions.
4.4 EXCISE TAXES
Under current law, the Employer shall be liable for an excise tax in an amount
equal to 10% of the amount of Excess Contributions that have not been either
distributed to the Participants or forfeited within two and one-half months
following the end of the Plan Year.
4.5 LIMITED DISTRIBUTIONS OF SALARY DEFERRAL AND QUALIFIED
NON-ELECTIVE CONTRIBUTIONS
Salary Deferral Contributions, Qualified Non-Elective Contributions, and income
allocable thereto are not normally distributable to a Participant or Beneficiary
earlier than upon termination of employment, death, or Total Disability.
However, such amounts may also be distributed upon:
(a) Termination of the Plan without the establishment of another defined
contribution plan, other than an employee stock ownership plan within the
meaning of Sections 409 or 4975(e) of the Code or a simplified employee pension
plan as defined in Section 408(k) of the Code;
(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Section 409(d)(2) of the
Code) used in a trade or business of such corporation if the transferor
corporation continues to maintain this Plan after the disposition, but only with
respect to Employees who continue employment with the corporation acquiring such
assets;
(c) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary (within the meaning of Section 409(d)(3)
of the Code) if the transferor corporation continues to maintain this Plan after
the disposition, but only with respect to Employees who continue employment with
such subsidiary;
(d) The attainment of age 59-1/2 ; or
(e) The hardship of the Participant as described in Section 9.8.
PriceCostco 401(k) Plan for California Union Employees Page 18
ARTICLE 5
ALLOCATION TO ACCOUNTS
5.1 CONTRIBUTION ALLOCATION
(a) The Salary Deferral Contribution of the Employer for a Plan Year shall
be allocated to each Participant's Salary Deferral Account in accordance with
the Salary Deferral Agreement entered into by the Participant so that each
Account shall be credited with the amount by which that Participant's salary was
reduced.
(b) The Employer's Matching Contribution payable on behalf of a Participant
for a Plan Year shall be allocated to the Participant's Employer Contribution
Account in the amount payable under Section 3.1(b).
(c) The Qualified Non-Elective Contributions, if any contributions are
designated as such by the Employer, shall be allocated as soon as
administratively possible to the Employer Qualified Non-Elective Contribution
Account of those Participants who are entitled to an allocation of such
Qualified Non-Elective Contributions for that Plan Year under Section 3.1(c).
(d) In no event shall the Employer make a contribution to a Participant's
Account if the contribution would cause the Participant's Annual Addition for
that Plan Year to exceed the maximum annual limitations described in Sections
5.3 and 5.4.
5.2 ALLOCATION OF INVESTMENT INCOME (OR LOSS)
All contributions to the Accounts of each Participant in the Plan shall be
reflected in units of each Investment Fund and in shares of Employer Stock,
according to the investments elected by the Participant. The net income (or
loss) of each Investment Fund, including the increase (or decrease) in the fair
market value of the assets of the Investment Fund and of the Shares of Employer
Stock and from any administrative expenses charged to the Trust Fund, shall be
determined as of each Valuation Date and shall determine the value of the units
of each Investment Fund and the value of the shares of Employer Stock.
5.3 LIMITATION ON ANNUAL ADDITIONS
The Annual Addition to the Account of any Participant for a Plan Year under this
Plan and all other defined contribution plans maintained by the Employer may not
exceed the "Maximum Permissible Amount" described below, in accordance with Code
Section 415 and the regulations thereunder, which are incorporated herein by
this reference. The term Maximum Permissible Amount means the lesser of:
(a) 25% of the Section 415 Compensation of that Participant for the
Limitation Year, or
(b) $30,000 or, if greater, 25% of the dollar limitation in effect under
Section 415(b)(1)(A) of the Code for the Limitation Year.
PriceCostco 401(k) Plan for California Union Employees Page 19
In the event that any Participant is a participant in any other defined
contribution plan maintained by the Employer, the total amount of Annual
Additions to such Participant's accounts under all such defined contribution
plans shall not exceed the limitations set forth in this Paragraph. Each new
adjusted dollar limitation shall be effective for the Plan Year ending during
the calendar year for which the new adjusted dollar limitation is first
effective. The limitation of subsection (b) shall not apply to any contribution
for medical benefits (within the meaning of Sections 401(h) or 419(f)(2) of the
Code), which is otherwise treated as an Annual Addition under Sections 415(l)(1)
or 419(d)(2) of the Code.
5.4 LIMITATION FOR MULTIPLE PLANS
If the Employer maintains one or more defined benefit plans (as defined in
Section 414(j) of the Code), or if the Employer maintains a welfare benefit fund
(as defined in Section 419(e) of the Code) in addition to this Plan (and any
other defined contribution plans), the contributions made under this Plan shall
not exceed the limitations contained in this Section. The limitation of this
Section is that the sum of the "defined benefit plan fraction" and the "defined
contribution plan fraction" for any Plan Year may not exceed 1.0.
The "defined benefit plan fraction" is a fraction, the numerator of which is the
sum of the projected annual benefit of the Participant under all defined benefit
plans (whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of (i) 125% of the dollar limitation
determined for the Limitation Year under Sections 415(b) and 415(d) of the Code,
or (ii) 140% of the highest average compensation, including any adjustments
under Section 415(b) of the Code.
The "defined contribution plan fraction" is a fraction, the numerator of which
is the sum of the Annual Additions to the Participant's employer contribution
account or employee contribution account under all defined contribution plans
(whether or not terminated) maintained by the Employer for the current and all
prior Limitation Years, and the denominator of which is the sum of the lesser of
the following amounts determined for such Plan Year and for each prior Plan Year
of Service with the Employer: (i) 125% of the dollar limitation determined under
Sections 415(b) and 415(d) of the Code in effect under Section 415(c)(1)(A) of
the Code for such Plan Year (determined without regard to Section 415(c)(6) of
the Code), or (ii) 35% of the Participant's Section 415 Compensation for such
Plan Year. If the Participant was a participant as of the end of the first day
of the first Limitation Year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in existence on
May 6, 1986, the numerator of the defined contribution fraction shall be
adjusted if the sum of the defined contribution fraction and the defined benefit
fraction would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of the excess of the sum of the
fractions over 1.0 times the denominator of this fraction shall be permanently
subtracted from the numerator of this fraction. The adjustment shall be
calculated using the fractions as they would be computed as of the end of the
last Limitation Year commencing prior to January 1, 1987, and disregarding any
changes in the terms and conditions of Plan made after May 6, 1986, but using
the Section 415 limitation applicable to the first Limitation Year commencing on
or after January 1, 1987. The Annual Addition for any Limitation Year commencing
before January 1, 1987, shall not be recomputed to treat all
PriceCostco 401(k) Plan for California Union Employees Page 20
employee contributions as Annual Additions. If a Participant in this Plan is
also a participant in a defined benefit plan maintained by the Employer, the
limitations of this Section shall be effected by favoring this Plan and then the
defined benefit plan.
5.5 ADJUSTMENTS FOR EXCESS ANNUAL ADDITIONS
If, as a result of a reasonable error in estimating a Participant's Section 415
Compensation or other facts and circumstances to which Regulation 1.415-6(b)(6)
shall be applicable, the Annual Addition under this Plan would cause the maximum
Annual Addition to be exceeded for any Participant, the Administrator shall
proceed as follows. If the Annual Addition allocated to the Participant under
other defined contribution plans and welfare benefit funds is less than the
maximum allowable, and the contributions that otherwise would be allocated to
the Participant's Account under this Plan would cause the Annual Addition for
the Plan Year to exceed the limitations, the amount allocated under this Plan
shall be reduced so that the Annual Additions under all such plans and welfare
benefit funds for the year will equal the maximum allowable Annual Addition. If
the Annual Addition allocated under such other defined contribution plans and
welfare benefit funds in the aggregate are equal to or greater than the maximum
allowable addition to the Participant's account for the year in question, no
amount shall be contributed or allocated under this Plan for that Plan Year. If
a Participant's Annual Addition under this Plan and such other plans results in
an excess Annual Addition for the Plan Year, the excess amount shall be disposed
of as follows:
(a) First, any nondeductible voluntary contributions by a Participant shall
be returned to the Participant to the extent that the return would reduce the
excess Annual Addition;
(b) Second, if there remains an excess Annual Addition resulting from
Employer contributions or forfeitures, such excess Annual Addition shall be
deducted first from the Matching Contribution Account, to the extent thereof,
and then, if necessary, from the Salary Deferral Account. Such amounts shall be
applied to reduce future Employer contributions for such Participant in the next
Plan Year and each Plan Year thereafter until disposed of.
(c) Third, if there remains an excess Annual Addition resulting from
Employer contributions or forfeitures, and the Participant is not covered by the
Plan at the end of the Plan Year, the excess Annual Addition shall be held
unallocated in a suspense account. The suspense account shall be applied to
reduce future Employer contributions for all remaining Participants in the next
Plan Year and each Plan Year thereafter until disposed of. If a suspense account
is in existence at any time during the Plan Year pursuant to this section, such
suspense account shall not participate in the allocation of the trust's
investment gains and losses.
(d) Fourth, if upon termination of the Plan there remain unallocated
contributions or forfeitures, such remaining balance may be repaid to the
Employer upon termination of the Plan.
For purposes of this section, "excess amount" for any Participant for a
Limitation Year means the excess, if any, of the Annual Addition which would
otherwise be credited to the Participant's account under the terms of the Plan
without regard to the limitations of Code Section 415 over the maximum Annual
Addition allowed.
PriceCostco 401(k) Plan for California Union Employees Page 21
ARTICLE 6
PARTICIPANT CONTRIBUTIONS
6.1 PARTICIPANT ROLLOVER AND TRANSFER CONTRIBUTIONS
Any Participant, with the Plan Administrator's written consent and after filing
with the Trustee the form prescribed by the Plan Administrator, may contribute
cash or other property to the Trust other than as a voluntary contribution if
the contribution is a qualified "rollover contribution" which the Code permits
an Employee to transfer either directly or indirectly from one qualified plan to
another qualified plan ("Rollover Contribution"), as long as the Rollover
Contribution will not require any changes to the operation and administration of
this Plan or the provision of any form of distribution other than a lump sum
distribution. Before accepting a Rollover Contribution, the Trustee may require
an Employee to furnish satisfactory evidence that the proposed transfer is in
fact a qualified Rollover Contribution. In addition, if the Plan Administrator
determines to accept accounts transferred from other qualified plans, there may
be transferred to the Trustee all or any of the assets held for the benefit of a
Participant in any other plan that satisfies the applicable requirements as a
qualified plan under Sections 401(a) and 403(a) of the Code ("Transfer
Contribution"). If a contribution is made to the Trust under this section, the
Trustee shall hold the amount contributed in a segregated Account for the
Participant's sole benefit. The interest of each Participant in all such
Employee Contribution Accounts shall be 100% vested and Nonforfeitable at all
times.
6.2 WITHDRAWAL OF ROLLOVER AND TRANSFER CONTRIBUTIONS
A Participant, upon 30 days' prior written notice to the Trustee, may request
withdrawal of all or any part of the Participant's Rollover Contribution or
Transfer Contribution. The Trustee shall comply with a request to withdraw as
soon as reasonable and practicable given the time required to convert a
sufficient portion of a Participant's Employee Contribution Account to cash and
the availability of an accounting as of the applicable Valuation Date.
ARTICLE 7
INVESTMENT OF ACCOUNTS
7.1 INVESTMENT OF ACCOUNTS
A Participant shall elect in which Investment Fund or Funds his or her Accounts
shall be invested in accordance with this section.
(a) Investment of Account Balance and Future Contributions. A Participant's
Account balance and a Participant's future contributions shall be invested in
the Investment Fund or Funds elected by the Participant, as the Participant may
direct from time to time. Such elections shall be subject to the limitations in
amount or increment and to such other requirements as the Plan Administrator
from time to time shall announce. Investment elections may be made
telephonically or by such other method as the Plan Administrator shall determine
from time to time.
PriceCostco 401(k) Plan for California Union Employees Page 22
(b) Direction of Investment by Beneficiary of Participant. After the death
of a Participant, the Participant's Beneficiary entitled to a distribution of
benefits under the Plan shall be entitled to make all elections under this
section as if such Beneficiary were the Participant.
7.2 OPTIONAL PASS-THROUGH VOTING OF NON-EMPLOYER STOCK
The Plan Administrator may direct the Trustee, in all cases or from time to
time, to allow Participants to direct the Trustee as to the manner in which the
securities, other that Employer Stock, allocated to each Participant's Account
shall be voted or how the Trustee should respond to a tender offer or similar
ownership right. In such event, the Trustee shall deliver to each Participant a
copy of any proxy solicitation materials, tender offer, or other information
given to shareholders of the securities, together with a form by which the
Participant may instruct the Trustee how to vote or whether to tender the
securities. The Trustee shall vote such securities through proxy in accordance
with the instructions received from the Participant entitled to vote the
securities and shall tender or exercise other ownership rights in accordance
with the instructions of the Participant. The Trustee shall not vote, tender, or
otherwise exercise ownership rights for any such securities for which
instructions are not received from the Participant.
7.3 PASS-THROUGH VOTING OF EMPLOYER STOCK
(a) Information and Procedures. Participants who have investments in
Employer Stock shall be provided with the same information as that which is
provided to other shareholders, including all proxies, and the Participant shall
have the right to direct the Trustee as to the voting, tender, and other similar
rights of the Employer Stock allocated to the Participant's Account. Information
regarding a Participant's exercise of such rights shall be maintained in
accordance with procedures designed to safeguard the confidentiality of the
purchase, holding, or sale of Employer Securities and the exercise of voting,
tender, and other ownership rights, except to the extent necessary to comply
with federal or state laws that are not preempted by ERISA (such as the
reporting requirement for "insiders" under Section 16 of the Securities Exchange
Act of 1934).
(b) Appointment of Special Fiduciaries. The Plan Administrator shall
designate a company fiduciary to be responsible for ensuring that the procedures
requiring the safeguarding of confidential information as to the ownership and
exercise of ownership rights are adequate and utilized. In addition, the company
fiduciary shall appoint an independent fiduciary (who may not be affiliated with
the Employer or any Affiliated Company) to carry out any activities that the
company fiduciary determines involve a potential for undue employer influence on
Participants with regard to the direct or indirect exercise of shareholder
rights. Examples of activities that may have the potential for undue influence
are: tender offers, exchange offers, and contested board elections. At the time
of the adoption of this instrument, the Plan Administrator has designated the
individual acting as Executive Vice President and Chief Financial Officer of
Price/Costco, Inc., as the company fiduciary and has granted the company
fiduciary the authority to delegate some or all of such fiduciary duties to the
individual acting as Senior Vice President of Human Resources of Price/Costco,
Inc.
PriceCostco 401(k) Plan for California Union Employees Page 23
(c) Voting of Employer Stock. A Participant may direct the Trustee as to
the manner in which Employer Stock allocated to the Participant's Account shall
be voted. Before each meeting of the shareholders, the company fiduciary or the
independent fiduciary shall have delivered to each Participant a copy of any
proxy solicitation materials together with a form by which the Participant may
instruct the Trustee how to vote the Employer Stock. The Trustee shall vote
Employer Stock through proxy in accordance with instructions received from the
Participant entitled to vote such Employer Stock. The Trustee shall not vote
Employer Stock for which voting instructions are not received from the
Participant entitled to vote such Employer Stock. The Trustee, the Employer, the
company fiduciary, and the independent fiduciary shall not express any opinion
or recommendation to any Participant concerning the voting of Employer Stock.
(d) Tender Offers. In the event of a tender offer for shares of Employer
Stock, the Trustee shall sell, convey or transfer Employer Stock only in
accordance with the written instructions of the Participant. The independent
fiduciary appointed by the company fiduciary shall have delivered to each
Participant all information provided to other shareholders, including (a) a copy
of the description of the terms and conditions of the tender offer filed with
the Securities and Exchange Commission on Schedule 14D-1, (b) if requested , a
copy of the statement from management setting forth its position with respect to
the Tender Offer filed with the Securities and Exchange Commission on Schedule
14D-9, (c) an instruction form to be used by any Participant who wishes to
instruct the Trustee to tender Employer Stock in response to the tender offer
which states that Employer Stock allocated to the Participant will not be
tendered if no instruction form is returned to the Trustee by the indicated
deadline, and (d) such other materials or information as the independent
fiduciary may deem necessary or appropriate. The Trustee shall sell, convey, or
transfer shares of Employer Stock pursuant to the terms of the tender offer as
directed by the Participants on the instruction forms. The Trustee, the
Employer, the company fiduciary, and the independent fiduciary shall not express
any opinion or recommendation to any Participant concerning the tender offer.
ARTICLE 8
VESTING AND FORFEITURES
8.1 FULL VESTING
The interest of each Participant in that Participant's Matching Account shall
become fully vested and Nonforfeitable upon the first to occur of any one of the
following events while the Participant is employed by the Employer:
(a) Upon the attainment of Normal Retirement Age;
(b) Upon the death or onset of Total Disability of the Participant;
(c) Upon the attainment of 100% vesting under the Vesting Schedule set
forth in this Article;
(d) Upon the complete termination of the Plan; and
PriceCostco 401(k) Plan for California Union Employees Page 24
(e) With respect to affected Participants, upon the partial termination of
the Plan.
Any of the foregoing events that occur after a Participant has terminated
employment with the Employer shall not result in accelerated vesting, and the
vested percentage of a terminated Participant shall be determined under the
vesting schedule set out below. A Participant's Salary Deferral Account,
Employer Qualified Non-Elective Contribution Account, and Employee Contribution
Account shall be 100% vested and Nonforfeitable at all times.
8.2 NORMAL VESTING SCHEDULE
In the event that the employment of a Participant with the Employer
terminates and none of the events resulting in full vesting under Section 8.1 or
alternative vesting under Section 8.3 have occurred, such Participant shall be
vested with a percentage portion of that Participant's Matching Contribution
Account in accordance with the following Vesting Schedule:
- ----------------------------------------------------------------------------------------------
Years of Service Percent Vested
- ----------------------------------------------------------------------------------------------
Less than 2 0%
- ----------------------------------------------------------------------------------------------
2 but less than 3 10%
- ----------------------------------------------------------------------------------------------
3 but less than 4 25%
- ----------------------------------------------------------------------------------------------
4 but less than 5 50%
- ----------------------------------------------------------------------------------------------
5 or more 100%
- ----------------------------------------------------------------------------------------------
8.3 ALTERNATIVE VESTING SCHEDULE FOR MISCONDUCT
Notwithstanding the foregoing, if a Participant is discharged or resigns and the
Plan Administrator determines that such Participant committed an act of
dishonesty, disclosed confidential information, or engaged in misconduct that
resulted in or might result in material loss or detriment to the Employer or an
Affiliated Company, such Participant shall be vested with a percentage portion
of that Participant's Matching Contribution Account in accordance with the
following Vesting Schedule:
- ----------------------------------------------------------------------------------------------
Years of Service Percent Vested
- ----------------------------------------------------------------------------------------------
Less than 5 0%
- ----------------------------------------------------------------------------------------------
5 or more 100%
- ----------------------------------------------------------------------------------------------
This alternative vesting schedule shall apply only if the Plan Administrator
makes a specific determination that the Participant engaged in one of the
specific acts described above. If no such determination is made by the Plan
Administrator, then the normal vesting schedule set forth in the foregoing
section shall apply.
PriceCostco 401(k) Plan for California Union Employees Page 25
8.4 INCLUDED YEARS OF SERVICE - VESTING
For purposes of determining Years of Service under this Article, the Plan shall
take into account all Years of Service an Employee completes with the Employer
or any Affiliated Company, including Years of Service as an Ineligible Employee.
8.5 FORFEITURES
The Plan Administrator shall administer Forfeitures by forfeiting the non-vested
portion of a terminated Participant's Employer Contribution Account on the
earlier of (a) the date of distribution of the Participant's Nonforfeitable
Account balance, or (b) the date the Participant has five consecutive Breaks in
Service. For purposes of this section, if the value of the Participant's
Nonforfeitable Account balance is zero, the Participant shall be deemed to have
received a distribution of such Nonforfeitable Account balance as of the date of
the Participant's termination of employment with the Employer. Such Forfeitures
shall be used to pay administrative expenses of the Plan and to reduce Employer
Contributions to the Plan.
8.6 RESTORATION OF FORFEITURES
If a terminated Participant who has forfeited some portion of his or her account
is subsequently reemployed by the Employer prior to the expiration of five
consecutive Breaks in Service, the amount forfeited (without benefit of
investment gains or losses) shall be restored to the account if the Participant
repays to the Trust Fund the full dollar amount distributed on account of the
termination within five years of the reemployment date. Any such amounts shall
be restored to the account of the reemployed Participant as of the last day of
the Plan Year in which the repayment was made. The restoration shall be made
from any forfeitures available before such forfeitures are allocated among the
accounts of other Participants. If no forfeitures are available, the Employer
shall make a special contribution for this purpose. Within 30 days of rehiring
any former Participant who had forfeited a portion of his or her account, the
Administrator shall notify the Participant of any right the Participant has to
make repayment of the account and of the effect of such repayment.
ARTICLE 9
DISTRIBUTION OF BENEFITS
9.1 DISTRIBUTION AFTER AGE 59 1/2
A Participant may apply for a distribution of all or a portion of the
Participant's Nonforfeitable Account balance at any time after attaining age 59
1/2.
9.2 DISTRIBUTION UPON SEPARATION FROM SERVICE
The Participant's benefit upon separation from Service with the Employer for any
reason shall be the total of the Participant's Nonforfeitable Account balances
as of the semi-monthly date that termination distributions are posted
immediately following the date on which the Participant's completed application
for distribution of benefits and consent to distribution is received by the
PriceCostco 401(k) Plan for California Union Employees Page 26
Plan Administrator. If the value of a Participant's Nonforfeitable Account
balance (derived from combined Employer and Employee contributions, other than
any accumulated deductible employee contributions, if the Plan is hereafter
amended to allow such deductible employee contributions) exceeds, or has ever
exceeded, $3,500, distribution may not be made before Normal Retirement Age
without the consent of the Participant. If the Participant's Nonforfeitable
Account balance (derived from combined Employer and Employee contributions,
other than any accumulated deductible Employee contributions)has never exceeded
$3,500, no consent to a distribution of the Participant's benefit shall be
required, and the Participant shall be deemed to have submitted an application
for distribution of benefits as of the date on which he or she separated from
Service. Distribution of a Participant's Nonforfeitable Account balance shall be
made within a reasonable period of time after the termination distribution is
posted.
9.3 FORM OF DISTRIBUTION
The normal form of benefit shall be a single-sum distribution of the
Participant's Nonforfeitable Account balance, which shall be made to the
Participant, if living, or if not, to the Participant's surviving Spouse, but if
there is no surviving Spouse or if the Spouse has consented in a manner
conforming to Section 12.1, then to the Participant's designated Beneficiary.
The distribution shall be made in cash, or in property, or partly in each, at
the discretion of the Trustee, at its fair market value as determined by the
Trustee. There shall be no installment or annuity forms of distribution.
9.4 LATEST DATE FOR COMMENCEMENT OF BENEFITS
Under the Act, unless a Participant elects otherwise, in writing, distribution
of the Participant's vested Account shall begin no later than the 60th day after
the latest of the following:
(a) The close of the Plan Year in which the Participant attains age 65 or
Normal Retirement Age, if earlier;
(b) The close of the Plan Year in which occurs the 10th anniversary of the
year in which the Participant commenced participation in the Plan; or
(c) The close of the Plan Year in which the Participant terminates Service
with the Employer.
Notwithstanding the foregoing, the failure of a Participant to consent to a
distribution while the Participant's account balance is immediately
distributable shall be deemed to be an election to defer commencement of
distribution of any benefit sufficient to satisfy this section.
9.5 REQUIRED DISTRIBUTION AT AGE 70 1/2
Notwithstanding any provisions of this Plan to the contrary, distribution of a
Participant's Account shall commence no later than April 1 of the calendar year
following the calendar year in which the Participant attains the age of 70 1/2,
even if the Participant has not yet retired. The amount of the distribution to
be made shall be determined in accordance with Internal Revenue
PriceCostco 401(k) Plan for California Union Employees Page 27
Code Section 401(a)(9), and the regulations thereunder. Under those regulations,
the amount of the distribution shall be the greater of the amount determined
under Proposed Regulation Section 1.401(a)(9)-1 or the minimum incidental
benefit requirement of Proposed Regulation Section 1.401(a)(9)-2. In calculating
the amount of the minimum distributions required, life expectancies may be
recalculated annually if the Beneficiary is the Participant's Spouse.
9.6 DEATH DISTRIBUTION PROVISIONS
If the Participant dies before distribution of the Participant's entire interest
has been made, distribution of the Participant's remaining interest shall be
made to the Participant's Beneficiary in a single sum as soon as
administratively feasible, and in no event later than December 31 of the
calendar year containing the fifth anniversary of the Participant's death.
However, if the Participant's Beneficiary is the Participant's Spouse, and if
the Participant's Account balance at the time of the Participant's death exceeds
$3500, the Spouse may elect to defer distribution until a time designated by the
Spouse but no later than December 31 of the calendar year in which the
Participant would have attained age 70 1/2.
9.7 DISTRIBUTION UNDER QUALIFIED DOMESTIC RELATIONS ORDER
Distribution if all or a portion of a Participant's Nonforfeitable Accounts will
be made according to the terms of a "qualified domestic relations order" to the
child, spouse, or former spouse of a Participant, even though the Participant is
not otherwise eligible for a distribution under the Plan. A qualified domestic
relations order is a domestic relations order, judgment, or decree (including
the approval of a property settlement agreement) that (a) relates to the
provision of child support, alimony, or property rights to a spouse, former
spouse, child, or other dependent of a Participant and (b) is made pursuant to
the domestic relations law of any state; provided that the Plan Administrator
determines that such order meets the requirements of Code Section 414 (p) and
related regulations.
9.8 HARDSHIP WITHDRAWALS
A Participant shall be eligible to make a hardship withdrawal only from the
Participant's Salary Deferral Account in the event of certain financial
hardships, if the requirements of this section are met. The amount of such a
distribution shall not exceed the amount of the financial need, and the
distribution may be made only from actual Salary Deferral Contributions,
excluding any earnings. No amounts may be withdrawn unless the Participant is
able to demonstrate financial hardship. For purposes of this section, hardship
is defined as certain specified immediate and heavy financial needs of the
Participant where such Participant lacks other available resources.
The financial need must satisfy both the "hardship" requirements of Treasury
Regulation 1.401(k)-1(d)(2)(iii) and any additional requirements that may be
adopted by the Plan Administrator on a uniform and nondiscriminatory basis. At
present, the Plan Administrator will authorize hardship withdrawals only for the
following financial needs:
(a) Unreimbursable expenses incurred or necessary for medical care
(described in Code Section 213(d))of the Participant, the Participant's Spouse,
or the Participant's dependents (as defined in Code Section 152);
PriceCostco 401(k) Plan for California Union Employees Page 28
(b) Costs directly related to the purchase of a principal residence for the
Participant (excluding payments on a note secured by a mortgage or deed of trust
on such principal residence);
(c) Payment of tuition and related educational fees for the next 12 months
of post-secondary education for the Participant, the Participant's Spouse, or
the Participant's minor children or dependents (as defined in Code Section 152);
(d) Payments to prevent the eviction of the Participant from (or the
foreclosure on the mortgage or deed of trust secured by) the Participant's
principal residence; or
(e) Any other event specified by the Commissioner of Internal Revenue as a
"safe harbor" constituting an immediate and heavy financial hardship.
The Participant must supply written evidence of the financial need, including
any supporting documentation requested by the Plan Administrator. A distribution
will be considered as necessary to satisfy the need only if all of the following
conditions are satisfied:
(f) The Participant has no other resources available to meet the need,
including the resources of the Participant's Spouse and minor children that are
reasonably available to the Participant;
(g) The Participant has obtained all distributions, other than hardship
distributions, and all non-taxable loans under all plans maintained by the
Employer;
(h) The Participant declares, under penalty of perjury, that the need
cannot be relieved by any of the following:
(1) Reimbursement or compensation by insurance or otherwise;
(2) Reasonable liquidation of the Participant's assets (or the assets
of the Spouse or minor children of the Participant) to the extent such
liquidation will not itself increase the amount of the need;
(3) Suspending all of the Participant's contributions to this Plan
and to any other plan (and the Spouse's contributions to any plan);
(4) Applying for distributions or loans from any other plans in
which the Participant or the Participant's Spouse participate; or
(5) Borrowing from commercial sources on reasonable commercial
terms in an amount sufficient to satisfy the need; and
(i) The distribution is not in excess of the amount of the immediate and
heavy financial need (including amounts necessary to pay any federal, state, or
local income taxes or penalties reasonably anticipated to result from the
hardship distribution).
PriceCostco 401(k) Plan for California Union Employees Page 29
In the event that a Participant receives a hardship distribution, the
Participant may make no further Salary Deferral Contributions, (or any other
employee contributions that may be allowed by the Plan in the future) to this
Plan or to any other plan maintained by the Employer for a period of 12 months
from the date the hardship distribution is posted to the Participant's Account
by the Trustee. For this purpose the phrase "any other plan maintained by the
Employer" includes all qualified and non-qualified plans of deferred
compensation maintained by the Employer, including the PriceCostco Deferred
Compensation Plan for Employees of Costco Wholesale Corporation and the
PriceCostco Deferred Compensation Plan for Employees of The Price Company. The
phrase also includes Participant contributions to any stock option, stock
purchase, or similar plans and any cash or deferred arrangement that is part of
a cafeteria plan within the meaning of Code Section 125. However, the phrase
does not include contributions to health or welfare benefit plans, such as the
PriceCostco FlexPlan, including health and welfare plans that are part of a
cafeteria plan within the meaning of Code Section 125. In addition, a
Participant who receives a hardship distribution may not make Salary Deferral
Contributions to this Plan for the Participant's taxable year immediately
following the taxable year of the hardship distribution in excess of the
applicable limit under Section 401(g) of the Code for such taxable year, reduced
by the amount of the Participant's Salary Deferral Contributions for the taxable
year of the hardship distribution.
9.9 DIRECT ROLLOVER FOR ELIGIBLE DISTRIBUTIONS
Notwithstanding any other provision of the Plan to the contrary, a distributee
may elect, at the time and in the manner prescribed by the Administrator, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
The following definitions shall apply to the foregoing:
(a) Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
(b) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in Code Section 408(a), an individual retirement
annuity described in Code Section 408(b), an annuity plan described in Code
Section 403(a), or a qualified trust described in Code Section 401(a), that
accepts the distributee's eligible rollover distribution. However, in the case
of an eligible rollover distribution to the surviving Spouse, an eligible
retirement plan is an individual retirement account or individual retirement
annuity.
PriceCostco 401(k) Plan for California Union Employees Page 30
(c) Distributee: A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving Spouse and the
Employee's or former Employee's Spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code Section
414(p), are distributees with regard to the interest of the Spouse or former
spouse.
(d) Direct rollover: A direct rollover is a payment by the plan to the
eligible retirement plan specified by the distributee.
ARTICLE 10
RIGHTS AND REMEDIES OF PARTICIPANTS
10.1 ANNUAL STATEMENTS
As soon as practicable after the Anniversary Date of each Plan Year but within
the time prescribed by the Act and the regulations under the Act, the Plan
Administrator shall deliver to each Participant (and to any Beneficiary of a
deceased Participant) a written statement showing as of that Anniversary Date
the following:
(a) The balance of the Participant's Accounts as of that Anniversary Date;
(b) The amount and source of allocations to the Participant's Accounts for
the Plan Year;
(c) The adjustments to the Participant's Accounts reflecting the
Participant's share of the income and expenses of the Trust for the Plan Year;
(d) The Nonforfeitable portion of the new balances in each of the
Participant's Accounts; and
(e) A summary of the annual report filed by the Plan Administrator with the
United States Department of labor containing the statement of assets and
liabilities of the Trust, statement of receipts and disbursements, and any other
information the Act requires to be furnished to the participant.
No Participant, except a member of the Committee, shall have the right to
inspect the records reflecting the Account of any other Participant.
10.2 ASSIGNMENT OR ALIENATION
Except with respect to federal income tax withholding, neither a Participant nor
a Beneficiary shall assign or alienate any benefit provided under the Plan, and
the Trustee shall not recognize any such assignment or alienation. The preceding
sentence shall also apply to the creation, assignment, or recognition of a right
to any benefit payable with respect to a Participant pursuant to a domestic
relations order, unless such order is determined to be a qualified domestic
relations order, as defined in Section 414(p) of the Code and Section 9.7 of the
Plan.
PriceCostco 401(k) Plan for California Union Employees Page 31
10.3 NOTICE OF CHANGE IN TERMS
The Plan Administrator, within the time prescribed by the Act and the applicable
regulations, shall furnish all Participants and Beneficiaries a summary
description of any material amendment to the Plan or notice of discontinuance of
the Plan and all other information required by the Act to be furnished without
charge.
10.4 INFORMATION AVAILABLE
Any Participant in the Plan and any Beneficiary of a deceased Participant may
examine copies of the "summary plan description," the latest annual report, any
bargaining agreement, this Plan, the Trust, and any contract or any other
instrument under which the Plan was established or is operated. The Plan
Administrator will maintain all of the items listed in the Plan Administrator's
office, or in such other place or places as the Plan Administrator may designate
from time to time in order to comply with the regulations issued under the Act,
for examination during reasonable business hours. Upon the written request of a
Participant or Beneficiary, the Plan Administrator shall within 30 days furnish
a copy of any item listed in this section. The Plan Administrator may make a
reasonable charge to the requesting person for the copy so furnished.
10.5 DENIAL OF BENEFITS
The Plan Administrator shall provide adequate notice in writing to any
Participant and to any Beneficiary of a deceased Participant ("Claimant") whose
claim for benefits under the Plan has been denied. The Plan Administrator's
notice to the Claimant shall set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the Plan
Administrator based its denial;
(c) A description of any additional material and information needed for the
Claimant to perfect the claim and an explanation of why the material or
information is needed;
(d) A statement that the Claimant has a right to appeal and that any appeal
the Claimant wishes to make of the adverse determination must be in writing to
the Plan Administrator within 60 days after receipt of the Plan Administrator's
notice of denial of benefits;
(e) A statement that the failure of the Claimant to appeal the action to
the Plan Administrator in writing within the 60 day period will render the Plan
Administrator's determination final, binding and conclusive; and
(f) The name of each member of the Committee and the name and address of
the committee member to whom the Claimant may forward his appeal.
10.6 APPEAL PROCEDURE
PriceCostco 401(k) Plan for California Union Employees Page 32
A Claimant or his or her duly authorized representative may submit written
comments and arguments to the Plan Administrator in connection with an appeal
and may review pertinent Plan documents. The Plan Administrator shall reexamine
all facts related to the appeal and may consult with counsel regarding the
appeal. The Plan Administrator shall then make a final determination as to
whether the denial of benefits is justified under the circumstances. The Plan
Administrator shall advise the Claimant of its decision within 60 days of the
Claimant's written request for review, unless special circumstances (such as a
hearing) would make the rendering of a decision within the 60 day limit
impractical. However, in no event shall the Plan Administrator render a decision
respecting a denial for a claim for benefits later than 120 days after its
receipt of a request for review.
10.7 LITIGATION AGAINST THE TRUST
If any legal action filed against the Trustee, the Plan Administrator, or any
member or members of the Committee, by or on behalf of any Participant or
Beneficiary, results adversely to the Participant or to the Beneficiary, the
Trustee shall reimburse itself, the Plan Administrator, or any member or members
of the Committee for all costs and fees expended by it or them by surcharging
all costs and fees against the sums payable under the Plan to the Participant or
to the Beneficiary, but only to the extent a court of competent jurisdiction
specifically authorizes and directs any such surcharges.
10.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the Administrator may
direct that such distribution be paid to the legal guardian, or if none, to a
parent of such Beneficiary or a responsible adult with whom the Beneficiary
maintains his or her residence, or to the custodian for such Beneficiary under
the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted by
the laws of the state in which said Beneficiary resides. Such a payment to the
legal guardian, custodian or parent of a minor Beneficiary shall fully discharge
the Trustee, Employer, and Plan from further liability on account thereof.
ARTICLE 11
EMPLOYER ADMINISTRATIVE PROVISIONS
11.1 INFORMATION TO PLAN ADMINISTRATOR
The Employer shall supply current information to the Plan Administrator as to
the name, Social Security number, date of birth, date of employment, annual
Compensation, leaves of absence, Years of Service and date of termination of
employment of each Employee who is, or who will be eligible to become, a
Participant under the Plan, together with any other information which the Plan
Administrator considers necessary. The Employer's records as to the current
information the Employer furnishes to the Plan Administrator shall be conclusive
as to all persons.
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11.2 NO LIABILITY
The Employer assumes no obligation or responsibility to any of its Employees,
Participants, or Beneficiaries for any act, or failure to act, on the part of
the Trustee or the Plan Administrator.
11.3 INDEMNITY OF TRUSTEE AND COMMITTEE
The Employer indemnifies and holds harmless the Trustee and the members of the
Committee, and each of them, from and against any and all loss resulting from
liability to which the Trustee or the members of the Committee may be subjected
by reason of any act or conduct (except willful misconduct or gross negligence)
in their official capacities in the administration of the Trust or Plan, or
both, including all expenses reasonably incurred in their defense, in case the
Employer fails to provide such defense. The indemnification provisions of this
section shall not relieve the Trustee or any Committee member from any liability
such may have under the Act for breach of a fiduciary duty.
ARTICLE 12
PARTICIPANT ADMINISTRATIVE PROVISIONS
12.1 BENEFICIARY DESIGNATION
Any Participant may from time to time designate, in writing, any person or
persons contingently or successively, to whom the Trustee shall distribute the
Participant's Account balance in the event of the Participant's death. The Plan
Administrator shall prescribe the form for the written designation of
Beneficiary. When the Participant files a form with the Plan Administrator, the
latest form filed shall revoke all designations filed prior to that date by the
same Participant.
In the event the Participant is married and not legally separated and the
Participant seeks to name a Beneficiary other than the Spouse of that
Participant, that Beneficiary designation shall not be effective unless that
designation contains the written consent of the Spouse of the Participant. The
writing must acknowledge the effect of the consent, and the signature of the
Spouse must be witnessed by a notary public or, if permitted by the Plan
Administrator, by a representative of the Plan Administrator. Such consent may
not be required, however, if it is established to the satisfaction of the Plan
Administrator that the consent of the Participant's Spouse may not be obtained
because there is no Spouse, because the Spouse cannot be located or because of
such other circumstances as may be permitted under Section 417(a)(2) of the
Code. The written consent of a Participant's Spouse must state the specific
beneficiary (including any class of beneficiaries or any contingent
beneficiaries) who will receive the benefit and the form of payment from any
optional methods of payment available to the Participant, if the Plan is
hereafter amended to provide optional forms of payment. In lieu of this, the
Participant's Spouse may give a general consent, permitting the Participant to
change the designated Beneficiary without requiring any further consent by the
Spouse, or a limited general consent, permitting the Participant to change the
Beneficiary among a specified group of beneficiaries, without any further
consent by the Spouse. A general consent or a limited general consent shall be
invalid unless the consent acknowledges that the Spouse has the right to limit
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consent to a specific Beneficiary or group of Beneficiaries and that the Spouse
voluntarily elects to relinquish such right.
A designation of Beneficiary inconsistent with the preceding paragraph shall not
be binding on the Plan Administrator, and the Plan Administrator shall
distribute benefits first to the Participant's surviving Spouse. A designation
of Beneficiary other than the Spouse shall be automatically revoked on the
marriage or remarriage (other than a common-law marriage) of a Participant and
any designation of the Spouse as Beneficiary shall be automatically revoked on
any finalized dissolution of marriage of a Participant subsequent to the date of
filing of the designation of the Beneficiary. Except as specifically provided in
Section 414(p) of the Code or any qualified domestic relations order issued with
respect thereto, nothing contained in the Retirement Equity Act of 1984 or the
Code shall give the Spouse the power to designate a beneficiary of the Spouse's
interest in the Plan if the Spouse predeceases the Participant.
12.2 NO BENEFICIARY DESIGNATION
If a Participant fails to name a Beneficiary, or if the Beneficiary named by a
Participant predeceases the Participant or dies before complete distribution of
the Participant's Account balance, then the Trustee shall pay the Participant's
Account balance in the following order of priority to the following:
(a) The Participant's surviving Spouse; then
(b) The Participant's surviving issue, including adopted persons, in equal
shares, on the principle of representation; then
(c) The Participant's estate, provided, however, that if the Plan
Administrator cannot locate a qualified representative of the deceased
Participant's estate or if no such representative has been appointed by an
appropriate court, then the Participant's heirs-at-law as determined in the
reasonable judgment of the Plan Administrator; then
(d) The Plan.
The Plan Administrator shall direct the Trustee as to the method and to whom the
Trustee shall make payment under this section.
12.3 PERSONAL DATA TO PLAN ADMINISTRATOR
Each Participant and each Beneficiary of a deceased Participant must furnish to
the Plan Administrator current information as to that person's Social Security
number, date of birth, current employment, current compensation, current marital
status, and the names of the members of that person's immediate family including
Spouse, children, and parents, and such evidence as is reasonably necessary to
substantiate any of that information. The provisions of this Plan are effective
for the benefit of each Participant upon the condition precedent that each
Participant will furnish promptly full, true, and complete evidence, data, and
information when requested
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by the Plan Administrator. The Plan Administrator shall advise each Participant
of the effect of any failure to comply with its request for information.
12.4 ADDRESS FOR NOTIFICATION
Each Participant and each Beneficiary of a deceased Participant shall file with
the Plan Administrator from time to time, in writing, his or her current post
office address and any change of post office address. Any communication,
statement, or notice addressed to a Participant or Beneficiary at the last post
office address filed with the Plan Administrator, or as shown on the records of
the Employer, shall bind the Participant, or Beneficiary, for all purposes of
this Plan.
12.5 NO RIGHT TO CONTINUED EMPLOYMENT
Nothing contained in this Plan, or with respect to the establishment of the
Trust, or in the creation of any Account, or the payment of any benefit, shall
give any Employee, Participant, or Beneficiary any right to continued
employment, any legal or equitable right against the Employer or any officer or
Employee of the Employer, or against the Trustee, or its agents or employees, or
against the Plan Administrator, except as expressly provided by the Plan, the
Trust, the Act, or a separate written agreement.
ARTICLE 13
POWERS AND DUTIES OF PLAN ADMINISTRATOR
13.1 COMMITTEE MEMBERS' EXPENSES
The Employer may appoint a Committee to administer the Plan, the members of
which may or may not be Participants in the Plan. The members of the Committee
who are employees of the Employer or any Affiliated Company shall serve without
compensation for services as such, but the Employer shall pay all expenses of
the Committee and the members of the Committee, including the expense for any
bond required under the Act.
13.2 VACANCY
In case of a vacancy in the membership of the Committee, the remaining members
of the Committee may exercise any and all of the powers, authority, duties, and
discretion conferred upon the Committee until the vacancy is filled.
13.3 POWERS OF PLAN ADMINISTRATOR
The Committee, as Plan Administrator, shall have full and exclusive authority to
administer and interpret the Plan, including the following powers and duties,
which shall be exercised in its sole discretion by the decision of a majority of
the members appointed and qualified:
PriceCostco 401(k) Plan for California Union Employees Page 36
(a) To determine the eligibility of an Employee to participate in the Plan,
the value of a Participant's Account balance, and the Nonforfeitable percentage
of each Participant's Account balance;
(b) To interpret the terms of the Plan and all provisions thereof;
(c) To adopt rules of procedure and regulations necessary for the proper
and efficient administration of the Plan;
(d) To enforce the terms of the Plan and the rules and regulations it
adopts;
(e) To direct the Trustee as to the crediting and distribution of the
Trust;
(f) To review and render decisions respecting a claim for (or denial of a
claim for) a benefit under the Plan; (g) To furnish the Employer with
information which the Employer may require for tax or other purposes;
(h) To engage the service of agents as it may deem advisable to assist it
with the performance of its duties;
(i) To engage the services of an investment manager or managers (as defined
in Section 3(38) of the Act), each of whom shall have full power and authority
to manage, acquire or dispose (or direct the Trustee with respect to acquisition
or disposition) of any Plan asset under its control; (j) To make determinations
and grant hardship distributions (and plan loans if the plan is hereafter
amended to allow loans);
(k) To establish, amend, or terminate the Plan and Trust and to change the
Trustee of the Trust in its sole discretion without written authorization from
the Employer or plan sponsor;
(l) To execute, by signature of any three members, on behalf of the
Employer, the Plan and Trust documents and any amendments thereto; and
(m) To prepare and transmit any summary plan description, summary of
material modification, employee notice, enrollment and distribution form, and
all forms, schedules, certifications or other communications with the Internal
Revenue Service, the Department of Labor, or any other state or federal agency
regulating the Plan.
If the Plan Administrator is not the Committee, the Plan Administrator shall
have the powers and duties listed above, with the exception of the following
powers which shall not be given to such a Plan Administrator except by the
express action of the Employer: the power to establish, amend or terminate the
Plan and Trust; the power to change the Trustee; and the power to execute Plan
and Trust documents without written authorization from the Employer or plan
sponsor. However, the Plan Administrator may have such powers if the Plan
Administrator is the Employer or if the Employer specifically delegates such
powers to the Plan Administrator.
PriceCostco 401(k) Plan for California Union Employees Page 37
The Plan Administrator shall have responsibility for compliance with the
reporting and disclosure rules applicable to this Plan under the Act or
otherwise. All determinations made by the Plan Administrator with respect to
eligibility for benefits and the terms of this Plan shall be based on a
reasonable interpretation of this Plan and shall be made by the Plan
Administrator, in its sole discretion. The Plan Administrator shall maintain
records of its activities.
13.4 FUNDING POLICY
The Plan Administrator shall review, not less often than annually, all pertinent
Employee information and Plan data in order to establish the funding policy of
the Plan and to determine the appropriate methods of carrying out the Plan's
objectives. The Plan Administrator shall communicate annually to the Trustee and
to any Plan investment manager the Plan's short-term and long-term financial
needs so that investment policy can be coordinated with the financial
requirements of the Plan.
13.5 AUTHORIZED REPRESENTATIVE
Unless the Employer gives directions to the contrary, the Committee may
authorize any one or more of its members to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters,
or other documents. At the request of the Trustee, the Committee will evidence
this authority by an instrument signed by all members and filed with the
Trustee.
13.6 INTERESTED MEMBER
No member of the Committee may decide or determine any matter concerning the
distribution, nature, or method of settlement of his or her own benefits under
the Plan.
13.7 INDIVIDUAL ACCOUNTS
The Plan Administrator shall maintain, or direct the Trustee to maintain, a
separate Account in the name of each Participant to reflect the Participant's
Account balance under the Plan.
13.8 VALUE OF PARTICIPANT'S ACCOUNTS
The Plan Administrator shall value the Participants' Accounts as of each
Anniversary Date to determine their fair market value and shall value the
Participants' Accounts on such other dates as may be necessary.
13.9 ACCOUNT CHARGED
The Plan Administrator shall charge all distributions made to a Participant or
to his or her Beneficiary against the Account of that Participant when made.
13.10 UNCLAIMED ACCOUNT PROCEDURE
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Neither the Trustee nor the Plan Administrator shall be obliged to search for,
or ascertain the whereabouts of, any Participant or Beneficiary. The Plan
Administrator, by certified or registered mail addressed to the last known
address of record with the Plan Administrator or the Employer, shall notify any
Participant, or Beneficiary, that he or she is entitled to a distribution under
this Plan. If the Participant, or Beneficiary, fails to claim his or her
distributive share or make his or her whereabouts known in writing to the Plan
Administrator within six months from the date of mailing of the notice, or
before this Plan is terminated or discontinued, whichever should first occur,
the Plan Administrator shall direct the Trustee to transfer the Participant's
entire Account balance (the "Unclaimed Account") into the lowest risk investment
fund provided by the Plan as an investment option at the time in question, or if
no such fund is available into a segregated interest-bearing Account in the name
of the Participant or Beneficiary. The Plan Administrator shall request the
Social Security Administration to notify the Participant (or Beneficiary) of the
existence of the Unclaimed Account in accordance with the procedures it has
established for this purpose. The Unclaimed Account shall be entitled to all
income it earns and shall bear all expenses or losses it incurs. In the event
the Unclaimed Account remains unclaimed for one year after the end of the Plan
Year during which the notice was mailed, the Unclaimed Account shall be
forfeited. The amount so forfeited shall be treated as a forfeiture in
accordance with the normal provisions of this Plan. However, if the Participant
or Beneficiary thereafter makes a claim for benefits prior to termination of the
Plan, the amount forfeited shall be reinstated (without benefit of investment
gains or losses) to the account of the Participant or Beneficiary. The Employer
may use any available forfeitures for the purpose of such reinstatement. If no
forfeitures are available, the Employer shall make an additional contribution
for this purpose.
ARTICLE 14
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
14.1 EXCLUSIVE BENEFIT
Except as provided in Section 3.2, the Employer shall have no beneficial
interest in any assets of the Trust, and no part of any asset in the Trust shall
ever revert to or be repaid to the Employer, either directly or indirectly.
Until the satisfaction of all liabilities to the Participants and their
Beneficiaries under the Plan, no part of the principal or income of the Trust
Fund, or any asset of the Trust, shall be used for, or diverted to, purposes
other than the exclusive benefit of the Participants or their Beneficiaries.
14.2 AMENDMENT BY EMPLOYER
The Employer, through action of its board of directors (or other governing board
if it is not governed by a board of directors), shall have the right at any time
to amend this Agreement in any manner it deems necessary or advisable; provided,
however, no amendment shall authorize or permit any of the Trust Fund (other
than the part which is required to pay taxes and administration expenses) to be
used for or diverted to purposes other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; no amendment shall cause or
permit any portion of the Trust Fund to revert to or become property of the
Employer; and no amendment which affects the rights, duties or responsibilities
of the Trustee, the Plan
PriceCostco 401(k) Plan for California Union Employees Page 39
Administrator, or the Committee may be made without the written consent of the
affected Trustee, the Plan Administrator, or the affected member of the
Committee. The Employer may delegate the authority to amend or terminate the
Plan and Trust to the Committee or other Plan Administrator from time to time.
At the Effective Date, the Employer has delegated this authority to the
Committee, which shall act in accordance with the resolution by which the
Committee was appointed and in accordance with the provisions of Article 13.
14.3 AMENDMENT TO VESTING SCHEDULE
Though the Employer reserves the right to amend the Vesting Schedule at any
time, the Employer shall not amend the Vesting Schedule (and no amendment shall
be effective) unless the amendment provides that the Nonforfeitable percentage
of any Participant's Account balance derived from Employer contributions
(determined as of the later of the date the Employer adopts the amendment, or
the date the amendment becomes effective) shall not be less than the
Nonforfeitable percentage of that Account balance computed under the Plan
without regard to the amendment. No amendment to the Plan shall decrease a
Participant's Account balance or eliminate an optional form of distribution.
Notwithstanding the preceding sentence, a Participant's Account balance may be
reduced to the extent permitted under Section 412(c)(8) of the Code. No
amendment to the Plan shall have the effect of decreasing a Participant's
Nonforfeitable Account balance determined without regard to such amendment as of
the later of the date such amendment is adopted or the date it becomes
effective. If the Employer makes a permissible amendment to the Vesting
Schedule, each Participant having at least three Years of Service with the
Employer may elect to have the percentage of his Nonforfeitable Account balance
computed under the Plan without regard to the amendment. The Participant must
file his election with the Plan Administrator within 60 days of the latest of
(a) the Employer's adoption of the amendment; (b) the effective date of the
amendment; or (c) his receipt of a copy of the amendment. The Plan
Administrator, as soon as practicable, shall forward a true copy of any
amendment to the Vesting Schedule to each affected Participant, together with an
explanation of the effect of the amendment, the appropriate form upon which the
Participant may make an election to remain under the Vesting Schedule provided
under the Plan prior to the amendment, and notice of the time within which the
Participant must make an election to remain under the prior Vesting Schedule.
14.4 DISCONTINUANCE
The Employer shall have the right, at any time, to suspend or discontinue its
contributions under the Plan, and to terminate this Plan and the Trust created
under this Agreement. The Plan shall terminate upon the first to occur of the
following:
(a) The date terminated by action of the Employer or the Committee;
(b) The date the Employer shall be judicially declared bankrupt or
insolvent; or
(c) The dissolution, merger, consolidation, or reorganization of the
Employer or the sale by the Employer of all or substantially all of its assets,
unless the successor or purchaser
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makes provision to continue the Plan, in which event the successor or purchaser
shall substitute itself as the Employer under this Plan.
14.5 FULL VESTING ON TERMINATION
Notwithstanding any other provision of this Plan to the contrary, upon the date
of either full or partial termination of the Plan, or, if applicable, upon the
date of a complete discontinuance of contributions to the Plan, an affected
Participant's right to his or her Account balance shall be 100% Nonforfeitable.
The Plan Administrator shall interpret and administer this Paragraph in accord
with the extent and scope of the Treasury Regulations issued under Section
411(d)(3) of the Code.
14.6 MERGER
The Trustee shall not consent to, or be a party to, any merger or consolidation
with another plan, or to a transfer of assets or liabilities to another plan,
unless immediately after the merger, consolidation, or transfer, the surviving
Plan provides each Participant a benefit equal to or greater than the benefit
each Participant would have received had the Plan terminated immediately before
the merger, consolidation, or transfer.
14.7 TERMINATION
Upon termination of the Plan, the provisions of the Article entitled
"Distribution of Benefits," shall remain operative, and the Trust shall continue
until the Trustee has distributed all of the benefits under the Plan. On each
Anniversary Date, the Plan Administrator shall credit any part of a
Participant's Account balance retained in the Trust with its proportionate share
of the Trust's income, expenses, gains, and losses, both realized and
unrealized.
ARTICLE 15
GENERAL PROVISIONS
15.1 EVIDENCE
Anyone required to give evidence under the terms of the Plan may do so by
certificate, affidavit, document, or other information that the Plan
Administrator may consider pertinent, reliable, and genuine, and to have been
signed, made, or presented by the proper party or parties. Any action required
of the Employer shall be by resolution of the Employer, or by resolution or
action of a person or entity authorized by resolution of the Employer. Both the
Plan Administrator and the Trustee shall be fully protected in acting and
relying upon any evidence described in this section.
15.2 NO RESPONSIBILITY FOR EMPLOYER ACTION
The Trustee and the Plan Administrator shall have no obligation or
responsibility with respect to (a) any action required by the Plan to be taken
by the Employer, any Participant, or eligible Employee, (b) the failure of any
of the above persons to act or make any payment or
PriceCostco 401(k) Plan for California Union Employees Page 41
contribution, or to otherwise provide any benefit contemplated under this Plan,
or (c) the collection of any contribution required under the Plan or the
determination of the correctness of the amount of any Employer contribution.
15.3 RESTRICTIONS OF THE ACT
The Trustee and the Plan Administrator and any other person who has any
fiduciary responsibility with respect to the Plan shall discharge its duties and
responsibilities with respect to the Plan in accordance with the standards set
forth in Section 404 (a)(1) of the Act, which provides:
"Subject to sections 403(c) and (d), 4042, and 4044, a fiduciary
shall discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries and--
(A) for the exclusive purpose of:
(i) providing benefits to participants and their
beneficiaries; and
(ii) defraying reasonable expenses of administering
the plan:
(B) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims;
(C) by diversifying the investments of the plan so as to minimize
the risk of large losses, unless under the circumstances it is clearly prudent
not to do so; and
(D) in accordance with the documents and instruments governing the
plan insofar as such documents and instruments are consistent with the
provisions of this title and title IV."
15.4 FIDUCIARIES NOT INSURERS
The Trustee, the Plan Administrator, and the Employer in no way guarantee the
Trust Fund from loss or depreciation. The Employer does not guarantee the
payment of any money which may be or become due to any person from the Trust
Fund. The liability of the Plan Administrator and the Trustee to make any
payment from the Trust Fund at any time and all times is limited to the
then-available assets of the Trust.
15.5 WAIVER OF NOTICE
Any person entitled to notice under the Plan may waive the notice.
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15.6 SUCCESSORS
The Plan shall be binding upon all persons entitled to benefits under the Plan,
their respective heirs and legal representatives, upon the Employer, its
successors and assigns, and upon the Trustee, the Plan Administrator, and their
successors.
ARTICLE 16
EXECUTION
By the authorized signatures below, the Committee hereby adopts this amended and
restated Plan effective as of June 1, 1995.
Dated: 11/13/95 PriceCostco Benefits Committee
By: /s/ J.C. Matthews
By: /s/ Jay L. Tihinen
By: /s/ Monica D. Smith
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