Interests in
American Bank of New Jersey
Employees' Savings and Profit Sharing Plan and Trust
and
Offering of 445,863 Shares of
Common Stock, $.10 par value per share,
of
American Bancorp of New Jersey, Inc.
This Prospectus Supplement relates to the offer and sale to
participants in the American Bank of New Jersey Employees' Savings and Profit
Sharing Plan and Trust of participation interests and shares of American Bancorp
of New Jersey, Inc.
In connection with the initial public offering of common stock of
American Bancorp of New Jersey, Inc., a New Jersey corporation, you may invest
in the stock of American Bancorp of New Jersey, Inc. Your eligibility to
purchase stock utilizing your 401(k) Plan assets is determined based upon your
stock subscription rights as a depositor of American Bank of New Jersey.
Participation in the 401(k) Plan does not give you any special rights to
purchase stock in the initial public offering. You may direct the trustee of the
plan to purchase the stock with plan assets which are attributable to you as a
participant (other than amounts you presently have invested in the Employer
Stock Fund). This prospectus supplement relates to your decision whether or not
to invest all or a portion of your plan funds in American Bancorp of New Jersey,
Inc. common stock.
If you direct the trustee to invest all or a portion of your plan funds
in American Bancorp of New Jersey, Inc. common stock in the initial public
offering (other than amounts you presently have invested in the Employer Stock
Fund), the price paid for such shares will be $10.00 per share. This price is
the price that will be paid by all other persons who purchase shares of American
Bancorp of New Jersey, Inc. stock in the initial public offering.
If you direct the trustee to invest all or a portion of your plan funds
in American Bancorp of New Jersey, Inc. common stock after the initial public
offering, shares purchased for your account in open market transactions, and the
price paid for such shares, will be the market price at the time of the
purchase, which may be more or less than the initial public offering price of
$10.00 per share.
The prospectus of American Bancorp of New Jersey, Inc. dated ________,
2005, which is attached to this prospectus supplement, includes detailed
information regarding American Bancorp of New Jersey, Inc. common stock, and the
financial condition, results of operation, and business of American Bancorp of
New Jersey, Inc. and Subsidiaries. This prospectus supplement provides
information regarding the plan. You should read this prospectus supplement
together with the prospectus and keep both for future reference.
Please refer to Risk Factors beginning on page __ of the prospectus.
These securities have not been approved or disapproved by the
Securities and Exchange Commission, the Office of Thrift Supervision, or any
other federal agency or any state securities commission, nor has such
commission, office, or other agency or any state securities commission passed
upon the accuracy or adequacy of this prospectus supplement. Any representation
to the contrary is a criminal offense.
These securities are not deposits or savings accounts and are not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The date of this prospectus supplement is ___________, 2005.
TABLE OF CONTENTS
The Offering...............................................................................1
Securities Offered................................................................1
Election to Purchase Stock in the Initial Offering................................1
Value of Participation Interests..................................................1
Purchase Price of American Bancorp of New Jersey, Inc. Common Stock...............1
Method of Directing Investments...................................................2
Time for Directing Investment.....................................................2
Irrevocability of Investment Direction............................................2
Direction to Purchase the Stock After the Initial Offering........................2
Nature of Each Participant's Interest in
American Bancorp of New Jersey, Inc. Common Stock........................3
Voting and Tender Rights of the Stock.............................................3
Minimum Investment................................................................3
Description of the Plan....................................................................3
General...........................................................................3
Eligibility and Participation.....................................................4
Contributions and Benefits Under the Plan.........................................4
Limitations on Contributions......................................................4
Investment of Plan Assets.........................................................5
Performance of Previous Funds.....................................................7
Performance of Employer Stock Fund................................................7
Benefits Under the Plan.......................................................... 8
Withdrawals and Distributions From the Plan...................................... 8
Administration of the Plan....................................................... 9
Reports to Plan Participants.....................................................10
Amendment and Termination....................................................... 10
Merger, Consolidation, or Transfer.............................................. 10
Federal Income Tax Consequences..................................................11
Restrictions on Resale...........................................................11
SEC Reporting and Short-Swing Profit Liability...................................11
Additional Information...........................................................12
Legal Opinions............................................................................12
Investment Election Form..........................................................Appendix-A
Change of Investment Allocation Form..............................................Appendix-B
Special Tax Notice Regarding Plan Payments........................................Appendix-C
THE OFFERING
Securities Offered
The securities offered in connection with this prospectus supplement
are participation interests in the plan and shares of American Bancorp of New
Jersey, Inc. common stock. At June 15, 2005, there were sufficient funds in the
Plan to purchase up to 445,863 shares of American Bancorp of New Jersey, Inc.
common stock in the offering. This includes the new shares of American Bancorp
of New Jersey, Inc. which may be received in exchange for all of the shares of
ASB Holding Company common stock presently held in the plan. The shares of
common stock currently held in the plan will be exchanged for shares of American
Bancorp of New Jersey, Inc. pursuant to an exchange ratio, as is more fully
discussed in the "Conversion" section of the prospectus. Only employees of
American who meet the eligibility requirements under the plan may participate.
Information with regard to the plan is contained in this prospectus supplement
and information with regard to the stock offering and the financial condition,
results of operation, and business of American is contained in the attached
prospectus.
Election to Purchase Stock in the Initial Offering
Your eligibility to purchase stock utilizing your 401(k) Plan assets is
determined based upon your stock subscription rights as a depositor of American
Bank of New Jersey. Participation in the 401(k) Plan does not give you any
special rights to purchase stock in the initial public offering. You may direct
the trustee of the plan to invest all or part of the funds in your account in
the Employer Stock Fund. Funds that are presently invested in the Employer Stock
Fund shall be exchanged for shares in the Employer Stock Fund in accordance with
the exchange of shares in the Conversion. Based upon your election, the trustees
of the plan will subscribe for American Bancorp of New Jersey, Inc. shares in
the initial offering. You also will be permitted to direct ongoing purchases of
the stock under the plan after the initial offering. See "Direction to Purchase
Stock After the Initial Offering." The plan's trustee will follow your
investment directions. Amounts not transferred to the Employer Stock Fund will
remain invested in the other investment funds of the plan as directed by you.
See "Investment of Plan Assets."
Value of Participation Interests
As of June 15, 2005, the total market value of the assets of the plan
equaled $4,458,632. The plan administrator has informed each participant of the
value of his or her account in the plan as of ________, 2005. The value of the
plan assets represents your past contributions to the plan, employer matching
contributions, profit-sharing contributions, plus or minus earnings or losses on
contributions, less withdrawals and loans. You may direct up to 100% of the
value of your account assets to invest in the Employer Stock Fund (other than
amounts you presently have invested in the Employer Stock Fund). However, in
connection with the initial offering of the stock, if you elect to purchase the
stock, you will be required to invest a minimum amount of your account assets in
the Employer Stock Fund.
Purchase Price of American Bancorp of New Jersey, Inc. Common Stock
The funds transferred to the Employer Stock Fund for the purchase of
the stock issued in the initial offering will be used by the trustee to purchase
shares of American Bancorp of New Jersey, Inc. common
1
stock. The price paid for such shares of the stock will be $10.00. This price is
the price that will be paid by all other persons who purchase shares of the
stock in the initial offering.
Your account assets directed for investment in the Employer Stock Fund
after the initial offering shall be invested by the trustee to purchase shares
of American Bancorp of New Jersey, Inc. common stock in open market
transactions. The price paid by the trustee for shares of the American Bancorp
of New Jersey, Inc. common stock in the initial offering, or otherwise, will not
exceed "adequate consideration" as defined in Section 3(18) of the Employee
Retirement Income Security Act.
Method of Directing Investments
Appendix A of this prospectus supplement includes an investment
election form for you to direct a transfer to the Employer Stock Fund in the
initial offering of all or a portion of your account under the plan. Appendix B
of this prospectus supplement includes Pentegra's change of investment
allocation form which is to be used to direct future contributions to the
Employer Stock Fund after the initial offering.
If you wish to invest all or part of your account in the Employer Stock
Fund in the initial offering you need to complete Appendix A. Additionally, you
may indicate the directed investment of future contributions under the plan for
investment in the Employer Stock Fund. If you wish to direct investment of
future contributions in the Employer Stock Fund, you need to complete Appendices
A and B. If you do not wish to make an investment election, you do not need to
take any action and your current elections will remain in effect.
Time for Directing Investment
The deadline for submitting your direction to invest funds in the
Employer Stock Fund in order to purchase the stock issued in the initial
offering is noon on _______, 2005. If you want to invest in the Employer Stock
Fund, you must return the attached form to Ms. Josephine Castaldo of American by
noon on __________, 2005.
After the initial offering, you will still be able to direct the
investment of your account under the plan in the Employer Stock Fund and in
other investment alternatives.
Irrevocability of Investment Direction
The direction to invest your plan funds in the Employer Stock Fund in
the initial offering cannot be changed after you have turned in your forms.
However, you will be able to direct your account to purchase the stock after the
initial offering by directing amounts in your account into the Employer Stock
Fund.
Direction to Purchase the Stock After the Stock Offering
Following completion of the stock offering, you will be permitted to
direct that a certain percentage of your interest in the trust fund (up to 100%)
be transferred to the Employer Stock Fund and invested in American Bancorp of
New Jersey, Inc. common stock, or to the other investment funds available under
the plan. Alternatively, you may direct that a certain percentage of your
interest in the Employer Stock Fund be transferred to the trust fund to be
invested in the other investment funds available in accordance
2
with the terms of the plan. You can direct future contributions made to the plan
by you or on your behalf to be invested in the Employer Stock Fund. Following
your initial election, the allocation of your interest in the Employer Stock
Fund may be changed daily by filing a change of investment allocation form with
the plan administrator or by calling Pentegra's voice response unit at (800)
433-4422 and changing your investment allocation by phone or by Internet at
www.Pentegra.com.
Nature of Each Participant's Interest in American Bancorp of New Jersey, Inc.
Common Stock
The trustee will hold American Bancorp of New Jersey, Inc. common stock
in the name of the plan. Each participant has an allocable interest in the
investment funds of the plan but not in any particular assets of the plan.
Accordingly, a specific number of shares of the stock will not be directly
attributable to the account of any individual participant. Dividend rights
associated with the stock held by the Employer Stock Fund will be allocated to
the Employer Stock Fund. Any increase (or decrease) in the value of the fund as
a result of dividend rights will be reflected in each participant's allocable
interest in the Employer Stock Fund.
Voting and Tender Rights of the Stock
You will direct the trustee of the plan about how to vote your American
Bancorp of New Jersey, Inc. shares. If you do not give voting instruction or
tender instruction to the trustee, the trustee will vote or tender those shares
within its discretion as a fiduciary under the plan or as directed by the plan
administrator.
Minimum Investment
The minimum investment of assets directed by a participant for the
purchase of the stock in the initial offering is $250.00, and investments must
be in increments of $10.00. Funds may be directed for the purchase of the stock
attributable to your account regardless of whether your account assets are 100%
vested at the time of your investment election. There is no minimum level of
investment after the initial offering for investment in the Employer Stock Fund.
DESCRIPTION OF THE PLAN
General
American adopted a 401(k) plan effective January 1, 2003. Effective
April 1, 2003, American amended and restated its old plan into the new plan in
order to include the Employee Stock Fund as an investment alternative. The plan
is a deferred compensation arrangement established in accordance with the
requirements under Section 401(a) and Section 401(k) of the Internal Revenue
Code. The plan received a determination letter from the IRS that the plan is
qualified under Section 401(a) of the Internal Revenue Code and that its trust
is qualified under Section 501(a) of the Internal Revenue Code. American intends
for the plan, in operation, to comply with the requirements under Section 401(a)
and Section 401(k) of the Internal Revenue Code. American expects to adopt any
amendments to the plan that may be necessary to ensure the continued qualified
status of the plan under the Internal Revenue Code and other federal
regulations.
3
Employee Retirement Income Security Act. The plan is an "individual
------------------------------------------
account plan" other than a "money purchase pension plan" within the meaning of
the Employee Retirement Income Security Act. As such, the plan is subject to all
of the provisions of Title I (Protection of Employee Benefit Rights) and Title
II (Amendments to the Internal Revenue Code Relating to Retirement Plans) of the
act, except the funding requirements contained in Part 3 of Title I of the act,
which do not apply to an individual account plan (other than a money purchase
plan). The plan is not subject to Title IV (Plan Termination Insurance) of the
act. Neither the funding requirements contained in Part 3 of Title I of the act
nor the plan termination insurance provisions contained in Title IV of the act
will be extended to participants or beneficiaries under the plan.
Federal tax law imposes substantial restrictions on your right to
withdraw amounts held under the plan before your termination of employment with
American. Federal law may also impose a 10% excise tax on withdrawals you make
from the plan before you reach the age of 59 1/2, regardless of whether the
withdrawal occurs during or after your employment with American.
Full Text of Plan. The following portions of this prospectus supplement
-----------------
are summaries of provisions in the plan. They are not complete and are qualified
in their entirety by the full text of the plan. You may obtain copies of the
full plan by sending a request to Ms. Josephine Castaldo at American. You should
carefully read the full text of the plan document to understand your rights and
obligations under the plan.
Eligibility and Participation
You may participate in the plan on the first day of the month after
completing 1,000 hours of service during a 12-month period with American. As of
_________, 2005, there were ___ employees eligible to participate in the plan
and ____ employees had elected to participate. The plan year is January 1 to
December 31.
Contributions and Benefits Under the Plan
Plan Participant Contributions. You can contribute to the plan on a
--------------------------------
pretax basis. Contributions are automatically deducted from your salary each pay
period. When you contribute on a pretax basis, you pay no federal income tax on
your eligible deferrals until you withdraw money from the plan. You are
permitted to contribute amounts of not less than 1% and not more than 50% of
your taxable compensation reported on Form W-2. You may change the amount of
your contributions at any time and your changes will be effective on the first
day of the following pay period.
American Contributions. American may match your contribution to the
-----------------------
plan, but we are not obligated to match your contributions. American currently
matches 50% of your contributions up to 6% of your salary. American
contributions are subject to revision by us.
Limitation on Contributions
Limitation on Employee Salary Deferral. Although you may contribute up
--------------------------------------
to 50% of your pay to the plan, federal tax law limits the dollar amount of your
annual contribution to $14,000 in 2005. If you are age 50 or more you can make
catch-up contributions of $4,000 in 2005. The Internal Revenue Service
periodically adjusts this limit for inflation. Contributions in excess of this
limit and earnings on
4
those contributions generally will be returned to you by April 15 of the year
following your contribution, and they will be subject to regular federal income
taxes.
Limitation on Annual Additions and Benefits. Under federal tax law,
----------------------------------------------
your contributions and our contributions to the plan may not exceed the lesser
of 100% of your annual pay, or $42,000. Contributions that we make to any other
retirement program that we sponsor may also count against these limits.
Special Rules About Highly-Paid Employees. Special provisions of the
------------------------------------------
Internal Revenue Code limit contributions by employees who receive annual pay
greater than $95,000. If you are in this category, some of your contribution may
be returned if your contribution, when measured as a percentage of your pay, is
substantially higher than the contributions made by other employees.
If your annual pay is less than $135,000, we may be required to make a
minimum contribution to the plan of 3% of your annual pay if the plan is
considered to be a "top heavy" plan under federal tax law. The plan is
considered "top heavy" if, in any year, the value of the plan accounts of
employees making more than $135,000 represent more than 60 percent of the value
of all accounts.
Investment of Plan Assets
All amounts credited to your plan account are held in trust. A trustee
appointed by American 's Board of Directors administers the trust and invests
the plan assets. The plan offers the following investment choices:
S&P 500 Stock Fund: Invests in the stocks of a broad array of
established U.S. companies. Its objective is long-term: to earn higher returns
by investing in the largest companies in the U.S. economy.
Stable Value Fund: Invests primarily in Guaranteed Investment Contracts
and Synthetic Guaranteed Investment Contracts. Its objective is
short-to-intermediate term: to achieve a stable return over short to
intermediate periods of time while preserving the value of a participant's
investment.
S&P MidCap Stock Fund: Invests in the stocks of mid-sized U.S.
companies. Its objective is long- term: to earn higher returns which reflect the
growth potential of such companies.
Money Market Fund: Invests in a broad range of high-quality short-term
instruments. Its objective is short-term: to achieve competitive short-term
rates of return while preserving the value of the participant's principal.
Government Bond Fund: Invests in U.S. Treasury bonds with maturities of
20 years or more. Its objective is long-term: to earn a higher level of income
along with the potential for capital appreciation.
Income Plus Asset Allocation Fund: Invests approximately 80% of its
portfolio in a combination of stable value investments and U.S. bonds. The
balance is invested in U.S. and international stocks. Its objective is
intermediate-term: to preserve the value of a participant's investment over
short periods of time and to offer some potential for growth.
5
Growth and Income Asset Allocation Fund: Invests in U.S. domestic and
international stocks, U.S. domestic bonds, and stable value investments. Its
objective is intermediate-term: to provide a balance between the pursuit of
growth and protection from risk.
Growth Asset Allocation Fund: Invests the majority of its assets in
stocks -- domestic as well as international. Its objective is long-term: to
pursue high growth of a participant's investment over time.
International Stock Fund: Invests in over 1,000 foreign stocks in 20
countries. Its objective is long-term: to offer the potential return of
investing in the stocks of established non-U.S. companies, as well as the
potential risk-reduction of broad diversification.
Russell 2000 Stock Fund: Invests in most, or all, of the same stocks
held in the Russell 2000 Index. Its objective is long-term: to earn high returns
in smaller U.S. companies by matching its benchmark, the Russell 2000 Index.
S&P 500/Growth Stock Fund: Invests in most, or all, of the stocks held
in the S&P/BARRA Growth Index which are large-capitalization growth stocks. Its
objective is long-term: to match its benchmark, the S&P/BARRA Growth Index.
S&P 500/Value Stock Fund: Invests in most, or all, of the stocks held
in the S&P/BARRA Value Index which are large-capitalization value stocks. Its
objective is long-term: to match its benchmark, the S&P/BARRA Value Index.
Nasdaq 100 Stock Fund: The fund is intended for long-term investors
seeking to capture the growth potential of the 100 largest and most actively
traded non-financial companies on the Nasdaq Stock Market. The Fund's benchmark
is the Nasdaq 100 Index.
The U.S. REIT Index Fund. The U.S. REIT Index Fund invests in a
portfolio of publicly traded Real Estate Investment Trusts designed to track the
Morgan Stanley REIT Index, which represents over 90% of the total U.S. real
estate equities market. The U.S. REIT Index Fund offers investors exposure to a
diverse set of real estate holdings across property types and geographic
markets. Equity REITs are the most common type of REIT, and generate earnings
from the rental income received on their holdings and capital gains from the
sale of properties.
Employer Stock Fund. The Employer Stock Fund consists primarily of
investments in common stock of ASB Holding Company. ASB Holding Company is a
majority-owned subsidiary of American Savings, MHC, a federally chartered mutual
holding company, along with cash. Following the offering, American Bancorp of
New Jersey, Inc. will be 100% owned by its public shareholders, including
American Bancorp of New Jersey, Inc.'s tax-qualified plans. Shares of ASB
Holding Company which were held in the Employer Stock Fund prior to the offering
will be converted into shares of common stock of American Bancorp of New Jersey,
Inc., in accordance with the exchange ratio. The trustee will use all amounts
reallocated to the Employer Stock Fund in the special election to acquire shares
in the offering. After the offering, the trustee will, to the extent
practicable, use all amounts held by it in the Employer Stock Fund, including
cash dividends paid on common stock held in the Employer Stock Fund, to purchase
shares of common stock of American Bancorp of New Jersey, Inc. It is expected
that all purchases will be made at prevailing market prices. Under certain
circumstances, the trustee may be required to limit
6
the daily volume of shares purchased. Pending investment in common stock,
amounts allocated towards the purchase of shares in the offering will be held in
the Employer Stock Fund in an interest-bearing account. In the event of an
oversubscription, any earnings that result therefrom will be reinvested among
the other funds of the plan in accordance with your then existing investment
election (in proportion to your investment direction allocation percentages).
Performance of Previous Funds
The annual percentage return on these funds for calendar years 2004,
2003 and 2002 was approximately:
Assumes all dividends are re-invested and does not take into effect
fund expenses which would reduce average annual returns.
Fund 2004 2003 2002
---- ---- ---- ----
Money Market Fund 1.0% 0.9% 1.6%
Stable Value Fund 3.6% 4.3% 5.3%
Government Bond Fund 8.4% 1.3% 16.4%
S&P 500 Stock Fund 10.2% 28.0% (22.4%)
S&P MidCap Stock Fund 16.0% 35.1% (15.0%)
International Stock Fund 19.6% 37.1% (18.5%)
Income Plus Asset Allocation Fund 6.6% 11.7% (2.6%)
Growth Asset Allocation Fund 12.7% 28.3% (18.8%)
Growth & Income Asset Allocation Fund 9.8% 19.7% (10.3%)
Russell 2000 Stock Fund 17.7% 46.0% (20.7%)
S&P 500/Growth Stock Fund 5.5% 24.9% (24.0%)
S&P 500/Value Stock Fund 15.1% 30.6% (21.2%)
Nasdaq 100 Stock Fund 9.9% 48.3% (37.6%)
US REIT Index Fund 30.3% N/A N/A
Employer Stock Fund 1.5% 4.4%* N/A
* Employer Stock Fund began trading on October 8, 2003.
Performance of the Employer Stock Fund
Performance of the Employer Stock Fund will be dependent upon a number
of factors, including the financial condition and profitability of American
Bancorp of New Jersey, Inc. and its subsidiaries and
7
market conditions for the common stock generally. An investment in the fund is
not insured or guaranteed by the FDIC or any other government agency. It is
possible to lose money by investing in the fund.
Please note that investment in the Employer Stock Fund is not an
investment in a savings account or certificate of deposit, and such investment
in American Bancorp of New Jersey, Inc. common stock through the Employer Stock
Fund is not insured by the FDIC or any other regulatory agency. Further, no
assurances can be given with respect to the price at which the stock may be sold
in the future.
Investments in the Employer Stock Fund may involve certain special
risks relating to investments in the common stock of American Bancorp of New
Jersey, Inc. For a discussion of these risk factors, see "Risk Factors"
beginning on page __ of the prospectus.
Benefits Under the Plan
Vesting. The contributions that you make in the plan are fully vested
-------
and cannot be forfeited. You vest in our matching contributions according to the
following schedule:
Number of Full Years of Service Vested Percentage
------------------------------- -----------------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
Withdrawals and Distributions From the Plan
Withdrawals Before Termination of Employment. Your plan account
------------------------------------------------
provides you with a source of retirement income. But, while you are employed by
American, if you need funds from your account before retirement, you may be
eligible to receive either an in-service withdrawal, or (from your pre-tax
contributions) a hardship distribution or a loan. You can apply for a hardship
distribution or a loan from the plan by contacting Ms. Josephine Castaldo at
American. In order to qualify for a hardship withdrawal, you must have an
immediate and substantial need to meet certain expenses, like a mortgage payment
or medical bill, and have no other reasonably available resources to meet your
financial need. If you qualify for a hardship distribution, the trustee will
make the distribution proportionately from the investment funds in which you
have invested your account balance. Hardship withdrawals (except for medical
expenses exceeding 7.5% of your adjusted gross income) and in-service
withdrawals are subject to a 10% early distribution penalty. Loans are not
subject to a 10% early distribution penalty.
Distributions Upon Termination for Any Other Reason. If you terminate
----------------------------------------------------
employment with American for any reason other than retirement, disability or
death and your account balance exceeds $500, the trustee will distribute your
benefits to you the later of the April 1 of the calendar year after you turn age
70 1/2 or when you retire, unless you request otherwise. You may elect to
maintain your account balance in the plan for as long as American maintains the
plan or you may elect one or more of the forms of distribution available under
the plan. If your account balance does not exceed $500, the trustee will
8
generally distribute your benefits to you as soon as administratively
practicable following termination of employment.
Distributions Upon Disability. If you can no longer work because of a
------------------------------
disability, as defined in the plan, you may withdraw your total account balance
under the plan and have that amount paid to you in accordance with the terms of
the plan. If you later become reemployed after you have withdrawn some or all of
your account balance, you may not repay to the plan any withdrawn amounts.
Distributions Upon Death. If you die before your benefits are paid from
------------------------
the plan, your benefits will be paid to your surviving spouse or designated
beneficiary.
Form of Benefits. Payment of your benefits upon your retirement,
-----------------
disability, or other termination of employment will be made in a lump sum
payment, installments, or an annuity.
If you die before receiving benefits pursuant to your retirement,
disability, or termination of employment, your beneficiary will receive a lump
sum payment, unless the payment would exceed $500 and an election is made for
annual installments up to 5 years. Your spouse can receive payments for up to 10
years.
Nonalienation of Benefits. Except with respect to federal income tax
--------------------------
withholding and as provided with respect to a qualified domestic relations
order, as defined in the Internal Revenue Code, benefits payable under the plan
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any
rights to benefits payable under the plan shall be void.
Plan Loans. You may borrow money from the vested portion of your
-----------
account. The minimum amount you may borrow is $1,000. The maximum amount is 50%
of your vested account balance. You may never borrow more than $50,000 minus the
highest outstanding balance on any individual loan during the last 12 months.
You may take up to five years to repay a general purpose loan. If you
are using the loan to purchase your primary residence, a repayment period of 15
years is permissible. You must repay the loan through payroll deductions.
If you fail to make any loan repayment when due, your loan will be in
default. The full amount of the loan will be due and payable by the last day of
the calendar quarter following the calendar quarter which contains the due date
of the last monthly installment payment. If the outstanding balance of the loan
is in default and is not repaid in the aforementioned time period, you will be
considered to have received a distribution of said amount.
Administration of the Plan
American is the plan administrator. The Bank of New York will serve as
trustee and custodian for all investment funds under the plan except the
Employer Stock Fund. Joseph Kliminski, Richard Bzdek, and Josephine Castaldo,
will serve as trustees with respect to the Employer Stock Fund during the
9
initial public offering by American Bancorp of New Jersey, Inc. After
the stock of American Bancorp of New Jersey, Inc. begins trading, the Bank of
New York also will be the trustee for the Employer Stock Fund. The plan
administrator is responsible for the administration of the plan, interpretation
of the provisions of the plan, prescribing procedures for filing applications
for benefits, preparation and distribution of information explaining the plan,
maintenance of plan records, books of account and all other data necessary for
the proper administration of the plan, and preparation and filing of all returns
and reports relating to the plan which are required to be filed with the U.S.
Department of Labor and the IRS, and for all disclosures required to be made to
participants, beneficiaries and others under the Employee Retirement Income
Security Act.
The trustee receives and holds the contributions to the plan in trust
and distributes them to participants and beneficiaries in accordance with the
terms of the plan and the directions of the plan administrator. The trustee is
responsible for investment of the assets of the trust. The address of the plan
administrator and the trustee for the Employer Stock Fund is 365 Broad Street,
Bloomfield, New Jersey 07003. The address of the Bank of New York is One Wall
Street, New York, New York, 10286.
Reports to Plan Participants
The plan administrator will furnish to each participant a statement at
least quarterly showing:
o the balance in your account as of the end of that period;
o the amount of contributions allocated to your account for that period; and
o the adjustments to your account to reflect earnings or losses (if any).
If you invest in the Employer Stock Fund, you will also receive a copy
of American Bancorp of New Jersey, Inc.'s Annual Report to Stockholders and a
proxy statement related to stockholder meetings.
Amendment and Termination
It is the intention of American to continue the plan indefinitely.
Nevertheless, American, within its sole discretion, may terminate the plan at
any time. If the plan is terminated in whole or in part, then regardless of
other provisions in the plan, you will have a fully vested interest in your
accounts. American reserves the right to make, from time to time, any amendment
or amendments to the plan that do not cause any part of the trust to be used
for, or diverted to, any purpose other than the exclusive benefit of
participants or their beneficiaries; provided, however, that American may make
any amendment it determines necessary or desirable, with or without retroactive
effect, to comply with the Employee Retirement Income Security Act.
Merger, Consolidation, or Transfer
In the event of the merger or consolidation of the plan with another
plan, or the transfer of the trust assets to another plan, the plan requires
that each participant would (if either the plan or the other plan then be
terminated) receive a benefit immediately after the merger, consolidation, or
transfer that is equal to
10
or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the plan had then
terminated).
Federal Income Tax Consequences
The following discussion is only a brief summary of certain federal
income tax aspects of the plan. You should not rely on this summary as a
complete or definitive description of the material federal income tax
consequences relating to the plan. At the time you receive a distribution from
the plan, you will receive a tax notice which conforms to the IRS safe harbor
explanation of the distribution in accordance with IRS Notice 2002-3. The tax
rules that affect your benefits under the plan change frequently and may vary
based on your individual situation. This summary also does not discuss how state
or local tax laws affect your plan benefits. We urge you to consult your tax
advisor with respect to any distribution from the plan and transactions
involving the plan.
Federal tax law provides the participants under the plan with a number
of special benefits:
(1) you pay no current income tax on your contributions or American
contributions; and
(2) the earnings on your plan accounts are not taxable until you
receive a distribution.
These benefits are conditioned on the plan's compliance with special
requirements of federal tax law. We intend to satisfy all of the rules that
apply to the plan. However, if the rules are not satisfied, the special tax
benefits available to the plan may be lost.
Special Distribution Rules. If you turned 50 before 1986, you may be
eligible to spread the taxes on the distribution over as much as 10 years. You
should consult with your tax advisor to determine if you are eligible for this
special tax benefit and whether it is appropriate to your financial needs.
Distributions: Rollovers and Direct Transfers to Another Qualified Plan
or to an IRA. You may roll over virtually all distributions from the plan to
retirement programs sponsored by other employers or to an individual retirement
account. We will provide you with detailed information on how to roll over a
distribution when you are eligible to receive benefits under the plan.
Restrictions on Resale
If you are an "affiliate" of American Bancorp of New Jersey, Inc. or
American Bank of New Jersey, you may be subject to special rules under federal
securities laws that affect your ability to sell shares you hold in the Employer
Stock Fund. Directors, officers and substantial shareholders of American Bancorp
of New Jersey, Inc. are generally considered "affiliates." Any person who may be
an "affiliate" of American may wish to consult with counsel before transferring
any common stock they own. If you are not considered an "affiliate" of American
you may freely sell any shares of American Bancorp of New Jersey, Inc. common
stock distributed to you under the plan, either publicly or privately.
11
SEC Reporting and Short-Swing Profit Liability
If you are an officer, director or more than 10% owner of American
Bancorp of New Jersey, Inc., you may be required to report purchases and sales
of American Bancorp of New Jersey, Inc. common stock through the plan to the
Securities and Exchange Commission. In addition, you may be subject to special
rules that provide for the recovery by American Bancorp of New Jersey, Inc. of
profits realized by an officer, director or a more than 10% owner from the
purchase and sale or sale and purchase of the common stock within any six-month
period. However, the rules except many transactions involving the plan from the
reporting and profit recovery rules. You should consult with us regarding the
impact of these rules on your transactions involving American Bancorp of New
Jersey, Inc. common stock.
Additional Information
This prospectus supplement dated _______, 2005 is part of the
prospectus of American Bancorp of New Jersey, Inc. dated ________, 2005. This
prospectus supplement shall be delivered to plan participants together with the
prospectus and is not complete unless it is accompanied by the prospectus.
LEGAL OPINIONS
The validity of the issuance of the common stock will be passed upon by
Malizia Spidi & Fisch, PC, Washington, D.C., which acted as special counsel for
American Bancorp of New Jersey, Inc. in connection with the initial public
offering by American Bancorp of New Jersey, Inc.
12
Appendix-A: Investment Election Form
------------------------------------
American Bank of New Jersey Employees' Savings and Profit Sharing Plan and Trust
--------------------------
Participant Voluntary Investment Election Form
--------------------------
Name of Plan Participant:
------------------------------------------
Social Security Number:
------------------------------------------
1. Instructions.
------------
In connection with the initial public offering of American Bancorp of
New Jersey, Inc., American has adopted the American Bank of New Jersey
Employees' Savings and Profit Sharing Plan and Trust to permit plan participants
to direct all, or a portion, of the assets attributable to their participant
accounts into a new fund: the Employer Stock Fund. The assets attributable to a
participant's account that are transferred at the direction of the participant
into the Employer Stock Fund will be used to purchase shares of common stock of
American Bancorp of New Jersey, Inc. to be issued in the initial stock offering
of American Bancorp of New Jersey, Inc.
To direct a transfer of all or a part of the funds credited to your
account to the Employer Stock Fund, you should complete this form and return it
to Josephine Castaldo, at 365 Broad Street, Bloomfield, New Jersey 07003 who
will retain this form and return a copy to you. If you need any assistance in
completing this form, please contact Josephine Castaldo at (973) 748-3600. If
you do not complete and return this form by __________, 2005, at noon, the funds
credited to your account under the plan will continue to be invested in
accordance with your prior investment direction, or in accordance with the terms
of the plan if no investment direction has been provided.
2. Investment Directions.
---------------------
As a participant in the plan, I hereby voluntarily elect to direct the
trustee of the plan to invest the below indicated dollar sum of my participant
account balance under the plan as indicated below.
I hereby voluntarily elect and request to direct investment of the
below indicated dollar amount of my participant account funds for the purchase
of the common stock to be issued in American Bancorp of New Jersey, Inc.'s
initial offering (minimum investment of $250.00; rounded to the nearest $10.00
increment; maximum investment permissible is 150,000 shares of common stock or
$1,500,000 when combined with exchange shares of ASB Holding Company):
$___________. Enter your $ level of requested purchase through the plan. Such
amount may not exceed the vested portion of assets held under the plan for you.
Please note that the actual number of shares of common stock purchased on your
behalf under the plan may be limited or reduced in accordance with the plan of
stock issuance of American Bancorp of New Jersey, Inc. based upon the total
number of shares of common stock subscribed for by other parties. On the
attached Appendix-B, please indicate from which funds such investments should be
transferred. Only available funds may be used for purchase.
All other funds in my participant account will remain invested as
previously requested. All future contributions under the plan will continue to
be invested as previously requested or as revised by me at a later date.
3. Acknowledgment.
--------------
I fully understand that this self-directed portion of my participant
account does not share in the overall net earnings, gains, losses, and
appreciation or depreciation in the value of assets held by the plan's other
investment funds, but only in my account's allocable portion of such items from
the directed investment account invested in the common stock. I understand that
the plan's trustee, in complying with this election and in following my
directions for the investment of my account, is not responsible or liable in any
way for the expenses or losses that may be incurred by my account assets
invested in common stock under the Employer Stock Fund.
I further understand that this one time election shall become
irrevocable by me upon execution and submission of this Investment Form. Only
----
properly signed forms delivered to the plan trustee on or before __________,
- --------------------------------------------------------------------------------
2005, at noon, will be honored.
- -------------------------------
The undersigned participant acknowledges that he or she has received
the prospectus of American Bancorp of New Jersey, Inc., dated _________, 2005,
the prospectus supplement dated _________, 2005, regarding the American Bank of
New Jersey Employees' Savings and Profit Sharing Plan and Trust as adopted by
American Bank of New Jersey and this Investment Form. The undersigned hereby
acknowledges that the shares of common stock to be purchased with the funds
noted above are not savings accounts or deposits and are not insured by the
Federal Deposit Insurance Corporation, Bank Insurance Fund, the Savings
Association Insurance Fund, or any other governmental agency. Investment in the
common stock will expose the undersigned to the investment risks and potential
fluctuations in the market price of the common stock. Investment in the common
stock does not offer any guarantees regarding maintenance of the principal value
of such investment or any projections or guarantees associated with future value
or dividend payments with respect to the common stock. The undersigned hereby
voluntarily makes and consents to this investment election and voluntarily
signed his (her) name as of the date listed below. If you so elect, you may
choose not to make any investment decision at this time.
I UNDERSTAND THAT BY EXECUTING THIS ORDER I DO NOT WAIVE ANY RIGHTS AFFORDED TO
ME BY THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934.
- ----------------- ---------- ------------------------ ---------
Witness Date Participant Date
For the Trustee For the Plan Administrator
- ----------------- ---------- ------------------------ ---------
Date Date
2
Appendix-B Change of Investment Allocation Form
-----------------------------------------------
American Bank of New Jersey
CHANGE OF INVESTMENT ALLOCATION
- -------------------------------
1. Member Data
- --------------------------------------------------------------------------------
Print your full name above (Last, first, middle initial) Social Security Number
- --------------------------------------------------------------------------------
Street Address City State Zip
2. Instructions
American Bank of New Jersey Employees' Savings and Profit Sharing Plan and Trust
is giving members a special opportunity to invest their 401(k) account balances
in a new investment fund - the Employer Stock Fund - which is comprised
primarily of common stock issued by American Bancorp of New Jersey, Inc. in
connection with the initial stock offering of American Bancorp of New Jersey,
Inc. The percentage of a member's account transferred at the direction of the
member into the Employer Stock Fund will be used to purchase shares of the
common stock during the initial offering of American Bancorp of New Jersey, Inc.
Please review the prospectus and the prospectus supplement before making any
decision.
In the event of an oversubscription in the offering so that the total amount you
allocate to the Employer Stock Fund can not be used by the trustee to purchase
the common stock, your account will be reinvested in the other funds of the plan
as previously directed in your last investment election. If no investment
election is provided, your account will be invested in the Money Market Fund.
Investing in the common stock entails some risks, and we encourage you to
discuss this investment decision with your spouse and investment advisor. The
plan trustee and the plan administrator are not authorized to make any
representations about this investment other than what appears in the prospectus
and prospectus supplement, and you should not rely on any information other than
what is contained in the prospectus and prospectus supplement. For a discussion
of certain factors that should be considered by each member in deciding whether
to invest in the common stock, see "Risk Factors" beginning on page __ of the
prospectus. Any shares purchased by the plan pursuant to your election will be
subject to the conditions or restrictions otherwise applicable to the common
stock, as discussed in the prospectus and prospectus supplement.
3. Investment Directions (Applicable to Accumulated Balances Only)
To direct a transfer of all or part of the funds credited to your accounts to
the Employer Stock Fund, you should complete and file this form with Josephine
Castaldo, Vice President of American Bank of New Jersey no later than
__________, 2005 at noon. If you need any assistance in completing this form,
please contact Ms. Castaldo at (973) 748-3600. If you do not complete and return
this form to Ms. Castaldo by __________, 2005 at noon, the funds credited to
your account under the plan will continue to be invested in accordance with your
prior investment direction, or in accordance with the terms of the plan if no
investment direction has been provided by you.
notwithstanding the election made in Appendix-A for purchases of the Employer
Stock Fund, your purchase of American Bancorp of New Jersey, Inc. Stock will be
limited to the amounts available in the following funds. No purchases of the
Employer Stock Fund will be made with insufficient funds in any funds.
I hereby revoke any previous investment direction and now direct that the market
value of the units that I have invested in the following funds, to the extent
permissible, be transferred out of the specified fund and invested in the
Employer Stock Fund as follows:
Percentage
to be
Fund transferred
---- -----------
S&P 500 Stock Fund.................................... ____ %
Russell 2000 Stock Fund............................... ____ %
S&P 500/Growth Stock Fund............................. ____ %
S&P 500/Value Stock Fund.............................. ____ %
Stable Value Fund..................................... ____ %
S&P MidCap Stock Fund................................. ____ %
Money Market Fund..................................... ____ %
Government Bond Fund.................................. ____ %
International Stock Fund.............................. ____ %
Income Plus Fund...................................... ____ %
Growth & Income Fund.................................. ____ %
Growth Fund........................................... ____ %
Nasdaq 100 Stock Fund................................. ____ %
U.S. REIT Index Fund.................................. ____ %
Total (Important!).......................... 100 %
Note:The total amount transferred may not exceed the total value of your
accounts.
4. Investment Directions (Applicable to Future Contributions Only) I hereby
revoke any previous investment instructions and now direct that any future
contributions and/or loan repayments, if any, made by me or on my behalf by
American Bancorp of New Jersey, Inc. including those contributions and/or
repayments received by American Bank of New Jersey Employees' Savings and Profit
Sharing Plan and Trust during the same reporting period as this form, be
invested in the following funds (in whole percentages). If I elect to invest in
the common stock of American Bancorp of New Jersey, Inc., such future
contributions or loan repayments, if any, will be invested in the Employer Stock
Fund the month
2
following the conclusion of the stock offering. Please read "Notes" on the
following page before completing.
------
Fund Percentage
---- ----------
S&P 500 Stock Fund................................... ____ %
Russell 2000 Stock Fund.............................. ____ %
S&P 500/Growth Stock Fund............................ ____ %
S&P 500/Value Stock Fund............................. ____ %
Stable Value Fund.................................... ____ %
S&P MidCap Stock Fund................................ ____ %
Money Market Fund.................................... ____ %
Government Bond Fund................................. ____ %
International Stock Fund............................. ____ %
Income Plus Fund..................................... ____ %
Growth & Income Fund................................. ____ %
Growth Fund.......................................... ____ %
Employer Stock Fund.................................. ____ %
Nasdaq 100 Stock Fund................................ ____ %
U.S. REIT Index Fund................................. ____ %
Total (Important!)............................ 100 %
Notes: No amounts invested in the Stable Value Fund may be transferred
directly to the Money Market Fund. Stable Value Fund amounts invested in
the S&P 500 Stock Fund, Russell 2000 Stock Fund, S&P 500/Growth Stock Fund,
S&P 500/Value Stock Fund, S&P MidCap Stock Fund, Government Bond Fund,
International Stock Fund, Income Plus Fund, Growth & Income Fund, Growth
Fund, Nasdaq 100 Stock Fund and/or Employer Stock Fund, for a period of
three months may be transferred to the Money Market Fund upon the
submission of a separate Change of Investment Allocation Form. The
percentage that can be transferred to the Money Market Fund may be limited
by any amounts previously transferred from the Stable Value Fund that have
not satisfied the equity wash requirement. Such amounts will remain in
either the S&P 500 Stock Fund, Russell 2000 Stock Fund, S&P 500/Growth
Stock Fund, S&P 500/Value Stock Fund, S&P MidCap Stock Fund, Government
Bond Fund, International Stock Fund, Income Plus Fund, Growth & Income
Fund, Growth Fund, Nasdaq 100 Stock Fund and/or Employer Stock Fund and a
separate direction to transfer them to the Money Market Fund will be
required when they become available.
3
5. Participant Signature and Acknowledgment - Required
By signing this Change of Investment Allocation form, I authorize and direct the
plan administrator and trustee to carry out my instructions. If investing in the
Employer Stock Fund, I acknowledge that I have been provided with and read a
copy of the prospectus and prospectus supplement relating to the issuance of the
common stock. I am aware of the risks involved in the investment in the common
stock, and understand that the trustee and plan administrator are not
responsible for my choice of investment.
4
MEMBER'S SIGNATURE
I understand that the above directed change(s) will be processed within one to
five days of the form being received by Pentegra. I further understand that if I
do not complete either Section 3 or Section 4, no change will be made to my
current directions for future contributions or accumulated balances,
respectively.
- --------------------------------------- --------------
Signature of Member Date
Pentegra Services, Inc. is hereby authorized to make the above listed change(s)
to this member's record.
On behalf of the above named member, I certify that the signature above is that
of the participant making this request.
- --------------------------------------- --------------
Signature of American Bank of New Jersey Date
Authorized Representative
Please complete and return by noon on __________, 2005.
5
Appendix-C: Special Tax Notice Regarding Plan Payments
------------------------------------------------------
SPECIAL TAX NOTICE REGARDING PLAN PAYMENTS
This notice explains how you can continue to defer federal income tax
on your retirement savings in the American Bank of New Jersey Employees' Savings
and Profit Sharing Plan and Trust (the "Plan") and contains important
information you will need before you decide how to receive your Plan benefits.
This notice is provided to you by American Bank of New Jersey (your
"Plan Administrator") because all or part of the payment that you will soon
receive from the Plan may be eligible for rollover by you or your Plan
Administrator to a traditional IRA or an eligible employer plan. A rollover is a
payment by you or the Plan Administrator of all or part of your benefit to
another plan or IRA that allows you to continue to postpone taxation of that
benefit until it is paid to you. Your payment cannot be rolled over to a Roth
IRA, a SIMPLE IRA, or a Coverdell Education Savings Account (formerly known as
an education IRA). An "eligible employer plan" includes a plan qualified under
section 401(a) of the Internal Revenue Code, including a 401(k) plan,
profit-sharing plan, defined benefit plan, stock bonus plan, and money purchase
plan; a section 403(a) annuity plan; a section 403(b) tax-sheltered annuity; and
an eligible section 457(b) plan maintained by a governmental employer
(governmental 457 plan).
An eligible employer plan is not legally required to accept a rollover.
Before you decide to roll over your payment to another employer plan, you should
find out whether the plan accepts rollovers and, if so, the types of
distributions it accepts as a rollover. You should also find out about any
documents that are required to be completed before the receiving plan will
accept a rollover. Even if a plan accepts rollovers, it might not accept
rollovers of certain types of distributions, such as after-tax amounts. If this
is the case, and your distribution includes after-tax amounts, you may wish
instead to roll your distribution over to a traditional IRA or split your
rollover amount between the employer plan in which you will participate and a
traditional IRA. If an employer plan accepts your rollover, the plan may
restrict subsequent distributions of the rollover amount or may require your
spouse's consent for any subsequent distribution. A subsequent distribution from
the plan that accepts your rollover may also be subject to different tax
treatment than distributions from this Plan. Check with the administrator of the
plan that is to receive your rollover prior to making the rollover.
If you have additional questions after reading this notice, you can
contact your plan administrator at (973) 748-3600.
SUMMARY
There are two ways you may be able to receive a Plan payment that is
eligible for rollover:
(1) Certain payments can be made directly to a traditional IRA that you
establish or to an eligible employer plan that will accept it and hold it for
your benefit ("DIRECT ROLLOVER"); or
(2) The payment can be PAID TO YOU.
If you choose a DIRECT ROLLOVER:
* Your payment will not be taxed in the current year and no income
tax will be withheld.
1
* You choose whether your payment will be made directly to your
traditional IRA or to an eligible employer plan that accepts your
rollover. Your payment cannot be rolled over to a Roth IRA, a
SIMPLE IRA, or a Coverdell Education Savings Account because
these are not traditional IRAs.
* The taxable portion of your payment will be taxed later when you
take it out of the traditional IRA or the eligible employer plan.
Depending on the type of plan, the later distribution may be
subject to different tax treatment than it would be if you
received a taxable distribution from this Plan.
If you choose to have a Plan payment that is eligible for rollover PAID
TO YOU:
* You will receive only 80% of the taxable amount of the payment,
because the Plan Administrator is required to withhold 20% of
that amount and send it to the IRS as income tax withholding to
be credited against your taxes.
* The taxable amount of your payment will be taxed in the current
year unless you roll it over. Under limited circumstances, you
may be able to use special tax rules that could reduce the tax
you owe. However, if you receive the payment before age 59 1/2,
you may have to pay an additional 10% tax.
* You can roll over all or part of the payment by paying it to your
traditional IRA or to an eligible employer plan that accepts your
rollover within 60 days after you receive the payment. The amount
rolled over will not be taxed until you take it out of the
traditional IRA or the eligible employer plan.
* If you want to roll over 100% of the payment to a traditional IRA
or an eligible employer plan, you must find other money to
replace the 20% of the taxable portion that was withheld. If you
roll over only the 80% that you received, you will be taxed on
the 20% that was withheld and that is not rolled over.
YOUR RIGHT TO WAIVE THE 30-DAY NOTICE PERIOD. Generally, neither a
direct rollover nor a payment can be made from the Plan until at least 30 days
after your receipt of this notice. Thus, after receiving this notice, you have
at least 30 days to consider whether or not to have your withdrawal directly
rolled over. If you do not wish to wait until this 30-day notice period ends
before your election is processed, you may waive the notice period by making an
affirmative election indicating whether or not you wish to make a direct
rollover. Your withdrawal will then be processed in accordance with your
election as soon as practical after it is received by the Plan Administrator.
MORE INFORMATION
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER
II. DIRECT ROLLOVER
III. PAYMENT PAID TO YOU
IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND OTHER BENEFICIARIES
2
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER
Payments from the Plan may be "eligible rollover distributions." This
means that they can be rolled over to a traditional IRA or to an eligible
employer plan that accepts rollovers. Payments from a plan cannot be rolled over
to a Roth IRA, a SIMPLE IRA, or a Coverdell Education Savings Account. Your Plan
Administrator should be able to tell you what portion of your payment is an
eligible rollover distribution.
The following types of payments cannot be rolled over:
PAYMENTS SPREAD OVER LONG PERIODS. You cannot roll over a payment if it
is part of a series of equal (or almost equal) payments that are made at least
once a year and that will last for:
* your lifetime (or a period measured by your life expectancy), or
* your lifetime and your beneficiary's lifetime (or a period
measured by your joint life expectancies), or
* a period of 10 years or more.
REQUIRED MINIMUM PAYMENTS. Beginning when you reach age 70 1/2 or
retire, whichever is later, a certain portion of your payment cannot be rolled
over because it is a "required minimum payment" that must be paid to you.
Special rules apply if you own more than 5% of your employer.
HARDSHIP DISTRIBUTIONS. A hardship distribution cannot be rolled over.
CORRECTIVE DISTRIBUTIONS. A distribution that is made to correct a
failed nondiscrimination test or because legal limits on certain contributions
were exceeded cannot be rolled over.
LOANS TREATED AS DISTRIBUTIONS. The amount of a plan loan that becomes
a taxable deemed distribution because of a default cannot be rolled over.
However, a loan offset amount is eligible for rollover, as discussed in Part III
below. Ask the Plan Administrator of this Plan if distribution of your loan
qualifies for rollover treatment.
The Plan Administrator of this Plan should be able to tell you if your
payment includes amounts which cannot be rolled over.
II. DIRECT ROLLOVER
A DIRECT ROLLOVER is a direct payment of the amount of your Plan
benefits to a traditional IRA or an eligible employer plan that will accept it.
You can choose a DIRECT ROLLOVER of all or any portion of your payment that is
an eligible rollover distribution, as described in Part I above. You are not
taxed on any taxable portion of your payment for which you choose a DIRECT
ROLLOVER until you later take it out of the traditional IRA or eligible employer
plan. In addition, no income tax withholding is required for any taxable portion
of your Plan benefits for which you choose a DIRECT ROLLOVER. This Plan might
not let you choose a DIRECT ROLLOVER if your distributions for the year are less
than $200.
3
DIRECT ROLLOVER to a Traditional IRA. You can open a traditional IRA to
receive the direct rollover. If you choose to have your payment made directly to
a traditional IRA, contact an IRA sponsor (usually a financial institution) to
find out how to have your payment made in a direct rollover to a traditional IRA
at that institution. If you are unsure of how to invest your money, you can
temporarily establish a traditional IRA to receive the payment. However, in
choosing a traditional IRA, you may wish to make sure that the traditional IRA
you choose will allow you to move all or a part of your payment to another
traditional IRA at a later date, without penalties or other limitations. See IRS
Publication 590, Individual Retirement Arrangements, for more information on
traditional IRAs (including limits on how often you can roll over between IRAs).
DIRECT ROLLOVER to a Plan. If you are employed by a new employer that
has an eligible employer plan, and you want a direct rollover to that plan, ask
the plan administrator of that plan whether it will accept your rollover. An
eligible employer plan is not legally required to accept a rollover. Even if
your new employer's plan does not accept a rollover, you can choose a DIRECT
ROLLOVER to a traditional IRA. If the employer plan accepts your rollover, the
plan may provide restrictions on the circumstances under which you may later
receive a distribution of the rollover amount or may require spousal consent to
any subsequent distribution. Check with the plan administrator of that plan
before making your decision.
DIRECT ROLLOVER of a Series of Payments. If you receive a payment that
can be rolled over to a traditional IRA or an eligible employer plan that will
accept it, and it is paid in a series of payments for less than 10 years, your
choice to make or not make a DIRECT ROLLOVER for a payment will apply to all
later payments in the series until you change your election. You are free to
change your election for any later payment in the series.
CHANGE IN TAX TREATMENT RESULTING FROM A DIRECT ROLLOVER. The tax
treatment of any payment from the eligible employer plan or traditional IRA
receiving your DIRECT ROLLOVER might be different than if you received your
benefit in a taxable distribution directly from the Plan. For example, if you
were born before January 1, 1936, you might be entitled to ten-year averaging or
capital gain treatment, as explained below. However, if you have your benefit
rolled over to a section 403(b) tax-sheltered annuity, a governmental 457 plan,
or a traditional IRA in a DIRECT ROLLOVER, your benefit will no longer be
eligible for that special treatment. See the sections below entitled "Additional
10% Tax if You Are under Age 59 1/2" and "Special Tax Treatment if You Were Born
before January 1, 1936."
III. PAYMENT PAID TO YOU
If your payment can be rolled over (see Part I above) and the payment
is made to you in cash, it is subject to 20% federal income tax withholding on
the taxable portion (state tax withholding may also apply). The payment is taxed
in the year you receive it unless, within 60 days, you roll it over to a
traditional IRA or an eligible employer plan that accepts rollovers. If you do
not roll it over, special tax rules may apply.
4
Income Tax Withholding:
MANDATORY WITHHOLDING. If any portion of your payment can be rolled
over under Part I above and you do not elect to make a DIRECT ROLLOVER, the Plan
is required by law to withhold 20% of the taxable amount. This amount is sent to
the IRS as federal income tax withholding. For example, if you can roll over a
taxable payment of $10,000, only $8,000 will be paid to you because the Plan
must withhold $2,000 as income tax. However, when you prepare your income tax
return for the year, unless you make a rollover within 60 days (see "Sixty-Day
Rollover Option" below), you must report the full $10,000 as a taxable payment
from the Plan. You must report the $2,000 as tax withheld, and it will be
credited against any income tax you owe for the year. There will be no income
tax withholding if your payments for the year are less than $200.
VOLUNTARY WITHHOLDING. If any portion of your payment is taxable but
cannot be rolled over under Part I above, the mandatory withholding rules
described above do not apply. In this case, you may elect not to have
withholding apply to that portion. If you do nothing, an amount will be taken
out of this portion of your payment for federal income tax withholding. To elect
out of withholding, ask the Plan Administrator for the election form and related
information.
SIXTY-DAY ROLLOVER OPTION. If you receive a payment that can be rolled
over under Part I above, you can still decide to roll over all or part of it to
a traditional IRA or to an eligible employer plan that accepts rollovers. If you
decide to roll over, you must contribute the amount of the payment you received
to a traditional IRA or eligible employer plan within 60 days after you receive
the payment. The portion of your payment that is rolled over will not be taxed
until you take it out of the traditional IRA or the eligible employer plan.
You can roll over up to 100% of your payment that can be rolled over
under Part I above, including an amount equal to the 20% of the taxable portion
that was withheld. If you choose to roll over 100%, you must find other money
within the 60-day period to contribute to the traditional IRA or the eligible
employer plan, to replace the 20% that was withheld. On the other hand, if you
roll over only the 80% of the taxable portion that you received, you will be
taxed on the 20% that was withheld.
EXAMPLE: The taxable portion of your payment that can be rolled over
under Part I above is $10,000, and you choose to have it paid to you. You will
receive $8,000, and $2,000 will be sent to the IRS as income tax withholding.
Within 60 days after receiving the $8,000, you may roll over the entire $10,000
to a traditional IRA or an eligible employer plan. To do this, you roll over the
$8,000 you received from the Plan, and you will have to find $2,000 from other
sources (your savings, a loan, etc.). In this case, the entire $10,000 is not
taxed until you take it out of the traditional IRA or an eligible employer plan.
If you roll over the entire $10,000, when you file your income tax return you
may get a refund of part or all of the $2,000 withheld.
If, on the other hand, you roll over only $8,000, the $2,000 you did
not roll over is taxed in the year it was withheld. When you file your income
tax return, you may get a refund of part of the $2,000 withheld. (However, any
refund is likely to be larger if you roll over the entire $10,000.)
ADDITIONAL 10% TAX IF YOU ARE UNDER AGE 59 1/2. If you receive a
payment before you reach age 59 1/2 and you do not roll it over, then, in
addition to the regular income tax, you may have to pay an extra tax equal to
10% of the taxable portion of the payment. The additional 10% tax generally does
not apply to (1) payments that are paid after you separate from service with
your employer during or after
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the year you reach age 55, (2) payments that are paid because you retire due to
disability, (3) payments that are paid as equal (or almost equal) payments over
your life or life expectancy (or your and your beneficiary's lives or life
expectancies), (4) dividends paid with respect to stock by an employee stock
ownership plan (ESOP) as described in Code section 404(k), (5) payments that are
paid directly to the government to satisfy a federal tax levy, (6) payments that
are paid to an alternate payee under a qualified domestic relations order, or
(7) payments that do not exceed the amount of your deductible medical expenses.
See IRS Form 5329 for more information on the additional 10% tax.
SPECIAL TAX TREATMENT IF YOU WERE BORN BEFORE JANUARY 1, 1936. If you
receive a payment from a plan qualified under section 401(a) or a section 403(a)
annuity plan that can be rolled over under Part I and you do not roll it over to
a traditional IRA or an eligible employer plan, the payment will be taxed in the
year you receive it. However, if the payment qualifies as a "lump sum
distribution," it may be eligible for special tax treatment. (See also "Employer
Stock or Securities", below.) A lump sum distribution is a payment, within one
year, of your entire balance under the Plan (and certain other similar plans of
the employer) that is payable to you after you have reached age 59 1/2 or
because you have separated from service with your employer (or, in the case of a
self-employed individual, after you have reached age 59 1/2 or have become
disabled). For a payment to be treated as a lump sum distribution, you must have
been a participant in the Plan for at least five years before the year in which
you received the distribution. The special tax treatment for lump sum
distributions that may be available to you is described below.
TEN-YEAR AVERAGING. If you receive a lump sum distribution and you were
born before January 1, 1936, you can make a one-time election to figure the tax
on the payment by using "10-year averaging" (using 1986 tax rates). Ten-year
averaging often reduces the tax you owe.
There are other limits on the special tax treatment for lump sum
distributions. For example, you can generally elect this special tax treatment
only once in your lifetime, and the election applies to all lump sum
distributions that you receive in that same year. You may not elect this special
tax treatment if you rolled amounts into this Plan from a 403(b) tax-sheltered
annuity contract, a governmental 457 plan, or from an IRA not originally
attributable to a qualified employer plan. If you have previously rolled over a
distribution from this Plan (or certain other similar plans of the employer),
you cannot use this special averaging treatment for later payments from the
Plan. If you roll over your payment to a traditional IRA, governmental 457 plan,
or 403(b) tax-sheltered annuity, you will not be able to use special tax
treatment for later payments from that IRA, plan, or annuity. Also, if you roll
over only a portion of your payment to a traditional IRA, governmental 457 plan,
or 403(b) tax-sheltered annuity, this special tax treatment is not available for
the rest of the payment. See IRS Form 4972 for additional information on lump
sum distributions and how you elect the special tax treatment.
EMPLOYER STOCK OR SECURITIES. There is a special rule for a payment
from the Plan that includes employer stock (or other employer securities). To
use this special rule, 1) the payment must qualify as a lump sum distribution,
as described above, except that you do not need five years of plan
participation, or 2) the employer stock included in the payment must be
attributable to "after-tax" employee contributions, if any. Under this special
rule, you may have the option of not paying tax on the "net unrealized
appreciation" of the stock until you sell the stock. Net unrealized appreciation
generally is the increase in the value of the employer stock while it was held
by the Plan. For example, if employer stock was contributed to your Plan account
when the stock was worth $1,000 but the stock was worth $1,200 when you received
it, you would not have to pay tax on the $200 increase in value until you later
sold the stock.
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You may instead elect not to have the special rule apply to the net
unrealized appreciation. In this case, your net unrealized appreciation will be
taxed in the year you receive the stock, unless you roll over the stock. The
stock can be rolled over to a traditional IRA or another eligible employer plan,
either in a direct rollover or a rollover that you make yourself. Generally, you
will no longer be able to use the special rule for net unrealized appreciation
if you roll the stock over to a traditional IRA or another eligible employer
plan.
If you receive only employer stock in a payment that can be rolled
over, no amount will be withheld from the payment. If you receive cash or
property other than employer stock, as well as employer stock, in a payment that
can be rolled over, the 20% withholding amount will be based on the entire
taxable amount paid to you (including the value of the employer stock determined
by excluding the net unrealized appreciation). However, the amount withheld will
be limited to the cash or property (excluding employer stock) paid to you.
If you receive employer stock in a payment that qualifies as a lump sum
distribution, the special tax treatment for lump sum distributions described
above (such as 10-year averaging) also may apply. See IRS Form 4972 for
additional information on these rules.
REPAYMENT OF PLAN LOANS. If your employment ends and you have an
outstanding loan from your Plan, your employer may reduce (or "offset") your
balance in the Plan by the amount of the loan you have not repaid. The amount of
your loan offset is treated as a distribution to you at the time of the offset
and will be taxed unless you roll over an amount equal to the amount of your
loan offset to another qualified employer plan or a traditional IRA within 60
days of the date of the offset. If the amount of your loan offset is the only
amount you receive or is treated as having received, no amount will be withheld
from it. If you receive other payments of cash or property from the Plan, the
20% withholding amount will be based on the entire amount paid to you, including
the amount of the loan offset. The amount withheld will be limited to the amount
of other cash or property paid to you (other than any employer securities). The
amount of a defaulted plan loan that is a taxable deemed distribution cannot be
rolled over.
IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND OTHER BENEFICIARIES
In general, the rules summarized above that apply to payments to
employees also apply to payments to surviving spouses of employees and to
spouses or former spouses who are "alternate payees." You are an alternate payee
if your interest in the Plan results from a "qualified domestic relations
order," which is an order issued by a court, usually in connection with a
divorce or legal separation.
If you are a surviving spouse or an alternate payee, you may choose to
have a payment that can be rolled over, as described in Part I above, paid in a
DIRECT ROLLOVER to a traditional IRA or to an eligible employer plan or paid to
you. If you have the payment paid to you, you can keep it or roll it over
yourself to a traditional IRA or to an eligible employer plan. Thus, you have
the same choices as the employee.
If you are a beneficiary other than a surviving spouse or an alternate
payee, you cannot choose a direct rollover, and you cannot roll over the payment
yourself.
If you are a surviving spouse, an alternate payee, or another
beneficiary, your payment is generally not subject to the additional 10% tax
described in Part III above, even if you are younger than age 59 1/2.
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If you are a surviving spouse, an alternate payee, or another
beneficiary, you may be able to use the special tax treatment for lump sum
distributions and the special rule for payments that include employer stock, as
described in Part III above. If you receive a payment because of the employee's
death, you may be able to treat the payment as a lump sum distribution if the
employee met the appropriate age requirements, whether or not the employee had 5
years of participation in the Plan.
HOW TO OBTAIN ADDITIONAL INFORMATION
This notice summarizes only the federal (not state or local) tax rules
that might apply to your payment. The rules described above are complex and
contain many conditions and exceptions that are not included in this notice.
Therefore, you may want to consult with the Plan Administrator or a professional
tax advisor before you take a payment of your benefits from your Plan. Also, you
can find more specific information on the tax treatment of payments from
qualified employer plans in IRS Publication 575, Pension and Annuity Income, and
IRS Publication 590, Individual Retirement Arrangements. These publications are
available from your local IRS office, on the IRS's Internet Web Site at
www.irs.gov, or by calling 1-800-TAX-FORMS.
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