Exhibit 99.1
THE PRUDENTIAL EMPLOYEE
SAVINGS PLAN
2001 RESTATEMENT
TABLE OF CONTENTS
ARTICLE I PURPOSE OF PLAN .....................................................1
ARTICLE II DEFINITIONS ........................................................3
2.01 Account or Accounts .................................................3
2.02 Administrative Committee ............................................3
2.03 Affiliate ...........................................................3
2.04 After-Tax Contribution Account ......................................4
2.05 After-Tax Contribution(s) ...........................................4
2.06 Annuity Starting Date ...............................................4
2.07 Average Contribution Percentage .....................................4
2.08 Average Deferral Percentage .........................................4
2.09 Before-Tax Contribution(s) ..........................................5
2.10 Before-Tax Contribution Account .....................................5
2.11 Beneficiary or Beneficiaries ........................................5
2.12 Board of Directors ..................................................5
2.13 Code ................................................................5
2.14 Company Factor ......................................................6
2.15 Company Matching Contribution(s) ....................................6
2.16 Covered Employee ....................................................6
2.17 Disability Benefits Plan ............................................7
2.18 Disability Date .....................................................7
2.19 Earnings ............................................................7
2.20 Eligible Employee ..................................................11
2.21 Employee ...........................................................11
2.22 Employer ...........................................................11
2.23 Employment Commencement Date .......................................12
2.24 ERISA ..............................................................12
2.25 Forfeiture Pending Account .........................................12
2.26 Former Participant .................................................12
2.27 Highly Compensated Employee ........................................13
2.28 Hour of Service ....................................................13
2.29 Investment Oversight Committee .....................................13
2.30 Investment Fund(s) .................................................13
2.31 Leave of Absence ...................................................14
2.32 Participant ........................................................14
2.33 Period of Severance ................................................14
2.34 Period of Service ..................................................14
2.35 Plan ...............................................................15
2.36 Plan Fund ..........................................................15
2.37 Plan Year ..........................................................15
2.38 Post-2000 Company Matching Contribution Account ....................16
2.39 Pre-2001 Company Matching Contribution Account .....................16
2.40 Prudential .........................................................16
2.41 Qualified Domestic Relations Order or QDRO .........................16
2.42 Reemployment Commencement Date .....................................17
2.43 Rollover Account ...................................................17
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2.44 Rollover Contribution(s) ...........................................17
2.45 Severance from Service Date ........................................17
2.46 Termination of Employment ..........................................18
2.47 Trust ..............................................................18
2.48 Trust Fund .........................................................18
2.49 Trustee ............................................................19
2.50 Valuation Date .....................................................19
2.51 Year of Service ....................................................19
ARTICLE III ELIGIBILITY AND PARTICIPATION ....................................20
ARTICLE IV CONTRIBUTIONS .....................................................21
4.01 Before-Tax Contributions. ..........................................21
4.02 After-Tax Contributions. ...........................................23
4.03 Suspension of Before-Tax and After-Tax Contributions. ..............24
4.04 Company Matching Contributions. ....................................25
4.05 Payment of Contributions. ..........................................26
4.06 Rollover Contributions. ............................................27
4.07 Transfers from Another Qualified Plan. .............................28
4.08 Qualified Military Service. ........................................28
ARTICLE V PARTICIPANT ACCOUNTS AND RETURN OF CONTRIBUTIONS ...................31
5.01 Participants' Accounts. ............................................31
5.02 Undivided Interests. ...............................................31
5.03 Return of Contributions. ...........................................31
ARTICLE VI LIMITATIONS ON ADDITIONS ..........................................33
6.01 Limitation on Additions. ...........................................33
6.02 Other Plans. .......................................................34
6.03 Special Discrimination Rule. .......................................35
6.04 Limitations on After-Tax and Company Matching Contributions. .......36
6.05 Return of Excess Contributions. ....................................37
6.06 Aggregate Limits Test. .............................................39
6.07 Reduction of Contributions. ........................................40
6.08 Limitations. .......................................................41
ARTICLE VII VALUATION ........................................................42
7.01 Valuation. .........................................................42
7.02 Allocation of Contributions, Earnings and Expenses. ................42
7.03 Valuation and Allocation Procedures. ...............................42
ARTICLE VIII POST-TERMINATION BENEFITS .......................................43
8.01 Distributions. .....................................................43
8.02 Forms of Benefit. ..................................................44
8.03 Annuity Form of Distribution. ......................................44
8.04 Death Benefit. .....................................................49
8.05 Annuity Contracts. .................................................50
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8.06 Effective Beneficiary Designation...................................50
8.07 Direct Rollovers....................................................51
8.08 Incapacity..........................................................53
ARTICLE IX COMMENCEMENT OF BENEFIT PAYMENTS...................................54
9.01 Commencement of Benefit Payments....................................54
9.02 Distribution Requirements...........................................55
ARTICLE X WITHDRAWALS.........................................................58
10.01 Regular In-Service Withdrawals.....................................58
10.02 Hardship Withdrawals...............................................58
10.03 Administration.....................................................61
ARTICLE XI VESTING AND EARLY TERMINATION......................................62
11.01 Vested Percentage of Certain Contributions.........................62
11.02 Vested Percentage of Company Matching Contribution Accounts........62
11.03 Forfeitures........................................................63
11.04 Vesting Following Reaffiliation....................................63
11.05 Separation from Service............................................64
ARTICLE XII LOANS.............................................................65
12.01 In General.........................................................65
12.02 Loan Limits........................................................65
12.03 Loan Application...................................................66
12.04 Collateralization..................................................66
12.05 Interest Rate......................................................67
12.06 Repayment..........................................................67
12.07 Default............................................................68
12.08 Repayments After Taxable Distribution..............................69
12.09 Additional Rules...................................................69
ARTICLE XIII INALIENABILITY OF BENEFITS.......................................70
ARTICLE XIV ADMINISTRATION AND FIDUCIARIES....................................71
14.01 Plan Sponsor.......................................................71
14.02 Administrative Committee...........................................71
14.03 Investment Oversight Committee.....................................72
14.04 Delegation and Allocation of Fiduciary Responsibilities............74
14.05 Rules and Procedures...............................................75
14.06 Employment of Agents...............................................75
14.07 Meetings...........................................................75
14.08 Claims and Appeals.................................................76
14.09 Indemnification....................................................78
14.10 Plan Expenses......................................................79
14.11 Electronic Administration..........................................79
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ARTICLE XV PLAN INVESTMENTS & TRUSTEE.........................................80
15.01 Funding Policy; Permissible Investment.............................80
15.02 Participant Investments............................................80
15.03 Procedures for Participant Elections and Directions................81
15.04 Trustee............................................................83
15.05 Allocation of Responsibility Regarding Plan Assets.................83
ARTICLE XVI TOP HEAVY.........................................................84
16.01 In General.........................................................84
16.02 Top-Heavy Determination............................................84
16.03 Top-Heavy Contingent Provisions....................................86
ARTICLE XVII AMENDMENT AND TERMINATION........................................88
17.01 Amendment..........................................................88
17.02 Termination........................................................90
17.03 No Reversion; Vesting Upon Termination.............................90
17.04 Right of Participating Affiliate to Cease Participation............91
ARTICLE XVIII MERGER, CONSOLIDATION OR TRANSFER OF PLAN ASSETS................92
ARTICLE XIX MISCELLANEOUS.....................................................93
19.01 Bonding............................................................93
19.02 Insurance and Indemnification......................................93
19.03 Interpretation of Certain Items....................................93
19.04 Miscellaneous......................................................93
19.05 Construction; Applicable Law; Failure to Enforce...................94
19.06 Participating Affiliates...........................................94
19.07 Special Rules Regarding Acquisitions, Dispositions and
Joint Ventures, and Transfers of Assets and Plan Mergers...........95
19.08 Missing Persons....................................................95
19.09 Required Information...............................................96
19.10 Uniform Applicability..............................................96
19.11 Reimbursement to Plan for Certain Payments.........................97
APPENDIX A
Special Exclusions from Earnings..........................................A1
APPENDIX B
Special Rules Regarding Acquisitions, Dispositions and
Joint Ventures, and Transfers of Assets and Plan Mergers..................B1
APPENDIX C
Account Withdrawal Ordering Rules.........................................C1
APPENDIX D
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Transition Rules .........................................................D1
APPENDIX E
Historical Plan Provisions ...............................................E1
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THE PRUDENTIAL EMPLOYEE
SAVINGS PLAN
THIS DOCUMENT amends and restates The Prudential Employee Savings Plan,
effective as of January 1, 2001 (except as otherwise expressly provided herein),
for the benefit of its Eligible Employees, and their Beneficiaries, in
accordance with the following terms and conditions.
ARTICLE I
PURPOSE OF PLAN
The purpose of this Plan is to provide Eligible Employees of
Prudential and its Affiliates participating in this Plan with the opportunity to
make tax-deferred savings and to be credited with Employer contributions. To
provide such benefits, Prudential has established this Plan in accordance with
the requirements of law. Under the Plan, Eligible Employees may elect to
contribute a percentage of their Earnings, as Before-Tax Contributions and/or
After-Tax Contributions; the Employer will also make Company Matching
Contributions on their behalf if they elect to make Before-Tax Contributions.
All contributions, and any income derived therefrom, shall be held for the
exclusive benefit of the Participants and their Beneficiaries and shall not be
used for, or diverted to, any other purpose other than as permitted by law or as
provided in Section 5.03 or 6.05 of this Plan. This Plan is intended to satisfy
the applicable requirements of Code Section 401(a), as a profit-sharing plan
with a salary reduction feature
1
ARTICLE I
PURPOSE OF PLAN
under Code Section 401(k), and ERISA Section 404(c) relating to participant
directed accounts.
The Plan was last restated effective as of November 9, 1999 (the
"1999 Restatement") to (1) incorporate amendments adopted since the last
restatement of the Plan, (2) comply with the Uniformed Services Employment and
Reemployment Rights Act of 1994 ("USERRA"), the Small Business Job Protection
Act of 1996 ("SBJPA"), and the Taxpayer Relief Act of 1997, and (3) to make
other miscellaneous changes. This Plan is now amended and restated (the "2001
Restatement") to make various plan design changes. An Appendix D has been added
to describe certain transition rules that apply as a result of differences
between the 1999 Restatement and the 2001 Restatement. Except as otherwise
expressly provided, the effective date of the amended and restated Plan shall be
January 1, 2001.
2
ARTICLE II
DEFINITIONS
As used in the Plan:
2.01 "Account" or "Accounts" means one or more of the accounts specified in
Section 5.01.
2.02 "Administrative Committee" shall mean the administrative committee
appointed pursuant to Section 14.02, or its delegate as appointed by the
Administrative Committee in accordance with Section 14.02(b) or 14.04.
2.03 "Affiliate" means for any Plan Year Prudential and a corporation which
for any part of such year is a member of a controlled group of corporations (as
defined in Code Section 1563(a), disregarding Sections 1563(a)(4) and
1563(e)(3)(c)) of which Prudential is a member, any trade or business, whether
incorporated or not, which for any part of such year is considered to be under
common control with Prudential under regulations prescribed by the Secretary of
the Treasury pursuant to Code Section 414(c), any organization which for any
part of such year is considered under regulations prescribed by the Secretary of
the Treasury pursuant to Code Section 414(m) to be a member of an affiliated
service group of which Prudential is a member, and any other entity required to
be aggregated with
3
Section 2.01 "Account" or "Accounts"
Prudential under regulations prescribed by the Secretary of the
Treasury pursuant to Code Section 414(o).
2.04 "After-Tax Contribution Account" shall mean the separate Account
maintained for a Participant which contains the value of After-Tax Contributions
made by such Participant under the Plan and the earnings (or losses) thereon.
2.05 "After-Tax Contribution(s)" shall mean a voluntary contribution made
by a Participant to the Plan pursuant to an election under Section 4.02.
2.06 "Annuity Starting Date" shall mean the first day of the first month
for which a benefit is payable as an annuity.
2.07 "Average Contribution Percentage" shall mean, for a specified group of
Eligible Employees for a Plan Year, the average of the ratios (calculated
separately for each Eligible Employee in such group) of (a) the amount of
Company Matching Contributions and After-Tax Contributions paid over to the Plan
on behalf of such Eligible Employee for the Plan Year, excluding any such
contribution made under Section 4.08(a) or 4.08(b), to (b) the Eligible
Employee's Earnings for the Plan Year.
2.08 "Average Deferral Percentage" shall mean, for a specified group of
Eligible Employees for a Plan Year, the average
4
Section 2.04 "After-Tax Contribution Account"
of the ratios (calculated separately for each Eligible Employee in such group)
of (a) the amount of Before-Tax Contributions actually paid over to the Plan on
behalf of each such Eligible Employee for such Plan Year, excluding any such
contribution made under Section 4.08(a), to (b) the Eligible Employee's Earnings
for the Plan Year.
2.09 "Before-Tax Contribution(s)" shall mean a voluntary contribution made
by a Participant to the Plan pursuant to an election (or deemed election) under
Section 4.01.
2.10 "Before-Tax Contribution Account" shall mean the separate Account
maintained for a Participant that contains the value of Before-Tax Contributions
made by such Participant under the Plan and the earnings (or losses) thereon.
2.11 "Beneficiary" or "Beneficiaries" shall mean any person or persons
entitled to receive a benefit under the Plan that is payable upon or after a
Participant's death pursuant to Article VIII of the Plan.
2.12 "Board of Directors" shall mean the Board of Directors of Prudential
or its delegate.
2.13 "Code" shall mean the Internal Revenue Code of 1986, together with its
related rules and regulations, as presently enacted and as they may be amended
from time to time.
5
Section 2.09 "Before-Tax Contribution(s)"
References to any Section of the Code shall include any
successor provision.
2.14 "Company Factor" shall mean the Company Performance Factor as
announced by Prudential as representative of the overall business performance
for the applicable calendar year, for purposes of calculating the additional
Company Matching Contribution under Plan Section 4.04(b).
2.15 "Company Matching Contribution(s)" shall mean a contribution made by
the Employer to the Plan pursuant to Section 4.04.
2.16 "Covered Employee" shall mean any Employee of the Employer except any
Employee: (a) who is included in a collective bargaining unit, unless
participation in the Plan by any such Employee was agreed to in the process of
good faith negotiations between the Employer and the collective bargaining
unit's representative; (b) who is employed by an Affiliate that is not
participating in the Plan; (c) who is a leased employee from another employer as
defined in Code Section 414(n)(2); (d) who is a nonresident alien and receives
no earned income from sources within the United States; (e) who is deemed not to
be an employee under the authority of Section 530 of the Revenue Act of 1978
(including, without limitation, state dental directors and dental
6
Section 2.14 "Company Factor"
consultants); or (f) who performs services for the Employer but is not treated
by the Employer at the time of the performance of services as an employee for
federal tax purposes (regardless of any subsequent recharacterization).
2.17 "Disability Benefits Plan" shall mean the long term disability
benefits coverage under The Prudential Welfare Benefits Plan, as may be amended
from time to time.
2.18 "Disability Date" shall mean the date at which the Employee is first
eligible to receive long term disability benefits under the Disability Benefits
Plan.
2.19 "Earnings"
(a) Subject to (b), (c), and (d) below, an Eligible Employee's
Earnings for any payroll period means:
(1) any compensation for such period received from the Employer
which is subject to federal income tax withholding, before any change in such
compensation made on account of his or her election to receive all or a part of
any salary increase in a single sum;
(2) any short-term disability benefits for such period payable to
him or her under the disability benefits coverage under The Prudential Welfare
Benefits Plan;
7
Section 2.17 "Disability Benefits Plan"
(3) any compensation for such period received by him or her while
a Special Agent which is not subject to federal income tax withholding,
excluding any such compensation received for business placed while covered under
an Agent Emeritus Contract;
(4) any compensation not included in items (1) through (3) above
(excluding allowances for foreign service) received by him or her with respect
to service performed outside the United States or during a leave of absence
granted by the Employer for a temporary assignment to the employ of a foreign
affiliate (as defined in Code Section 3121(l)(6)) or to any other Affiliate
which is eligible to become an Employer but which has not elected to do so, to
the extent that such compensation would be considered as Earnings if received
for such service performed in a similar capacity in the United States for the
Employer, even though all or a portion of such compensation may be exempted from
federal income tax withholding pursuant to Code Section 3401(a)(8);
(5) salary reduction contributions under a plan that is intended
to meet the requirements of Code Section 401(k);
(6) elective contributions pursuant to a salary reduction
agreement under a cafeteria plan that is intended to meet the requirements of
Code Section 125; and
8
Section 2.19 "Earnings"
(7) for statutory employees under Code Section
3121(d)(3)(relating to full time life insurance salesmen other than Senior Life
Representatives), supervisory field staff, and Prudential Preferred Advisors,
all personal lines income on proprietary Prudential Property and Casualty
business, including commissions and incentive payments, but excluding expense
allowance payments; but using for each of items (2) and (3) above the amount
which would have been applicable before any reduction which might be made in
such item on account of the payment of any other benefit or compensation.
(b) "Earnings" shall not include:
(1) recognition or other awards;
(2) imputed income;
(3) allowances and reimbursed expenses, including, but not
limited to, moving expenses, car allowances, travel and entertainment expenses,
and tuition payments and reimbursements;
(4) recruiting bonuses;
(5) any commissions for transfers from the Systematic Investment
Plan to a Financial Security Program annuity or for business placed while the
Participant was not in service with the Employer;
9
Section 2.19 "Earnings"
(6) payments becoming payable after the Participant's Termination
of Employment, or as a result of Termination of Employment;
(7) any compensation which is to be excluded pursuant to the
terms of any applicable collective bargaining agreement or any agreement between
the Employer and the Participant;
(8) any reimbursement by the Employer of contributions made by
the Participant pursuant to a cash sickness law;
(9) employer contributions (other than elective contributions
pursuant to a salary reduction agreement) under a cafeteria plan that is
intended to meet the requirements of Code Section 125;
(10) (i) any other type of variable or other irregular
compensation announced prior to January 1, 2000 which is specifically excluded
by the Employer in its announcement of such other type of compensation,
including, without limitation, types of compensation set out in Appendix A, and
(ii) any other type of variable or other irregular compensation announced on or
after January 1, 2000, unless such other type of compensation is specifically
included by the Employer in its announcement of such other type of compensation;
and
(11) notwithstanding any other provision of the Plan to the
contrary, a Participant's Earnings taken into
10
Section 2.19 "Earnings"
account under the Plan for any Plan Year shall not exceed the annual
compensation limit of $150,000 (as adjusted by the Secretary of the Treasury for
cost of living increases pursuant to Code Section 401(a)(17)). For purposes of
applying this limit, all Earnings received by an Eligible Employee shall be
taken into account, regardless of whether the Eligible Employee is making
Before-Tax Contributions or After-Tax Contributions at the time such Earnings
are received.
(c) Notwithstanding the foregoing, Earnings for purposes of
Sections 2.07 and 2.08 shall mean compensation within the meaning of Code
Section 414(s) and Treasury Regulation Section 1.414(s)-1.
(d) Any determination which was required for a payroll period
prior to January 1, 2001, shall be governed by the Plan document and other rules
in effect during such period.
2.20 "Eligible Employee" shall mean a Covered Employee who meets the
requirements of Article III of the Plan.
2.21 "Employee" shall mean any individual who is compensated by an
Affiliate for services actually rendered as a common law employee, or as a
statutory employee under Code Section 3121(d)(3) (relating to full time life
insurance salesmen).
2.22 "Employer" shall mean for any Plan Year Prudential
11
Section 2.20 "Eligible Employee"
and each Affiliate participating in this Plan. An Affiliate (other than
Prudential) shall become an Employer in accordance with Section 19.06, and may
cease to participate in the Plan in accordance with Section 17.04.
Notwithstanding anything to the contrary herein, whenever any action is to be
taken by the Employer pursuant to this Plan, it may be taken by Prudential on
behalf of itself and all participating Affiliates hereunder.
2.23 "Employment Commencement Date" shall mean the first date on which an
Employee is entitled to be credited with an Hour of Service.
2.24 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, together with its related rules and regulations, as presently enacted and
as they may be amended from time to time. References to any Section of ERISA
shall include any successor provision.
2.25 "Forfeiture Pending Account" shall mean the separate Account
maintained for a Participant which contains non-vested Company Matching
Contributions pending forfeiture pursuant to Section 11.03.
2.26 "Former Participant" shall mean a Participant who has ceased to be a
Covered Employee for any reason other than death.
12
Section 2.23 "Employment Commencement Date"
2.27 "Highly Compensated Employee" shall mean an Employee described in Code
Section 414(q), and, effective January 1, 1997, generally means an Employee who
performed services for an Affiliate during the determination year and who (a)
during the determination year or the look-back year was at any time a 5% owner
(as defined in Code Section 416(i)(1)) of an Affiliate, or (b) for the look-back
year received compensation (as defined in Code Section 414(q)(4)) from an
Affiliate in excess of $80,000 (as adjusted by the Secretary of the Treasury for
cost of living increases). The determination year shall be the Plan Year, and
the look-back year shall be the 12-month period immediately preceding the
determination year.
2.28 "Hour of Service" shall mean each hour for which an Employee is
directly or indirectly paid or entitled to payment by an Affiliate for the
performance of duties. Each such Hour of Service shall be credited to the
calendar year in which the duties were actually performed.
2.29 "Investment Oversight Committee" shall mean the committee appointed
pursuant to Section 14.03, or its delegate as appointed by the Investment
Oversight Committee in accordance with Section 14.04.
2.30 "Investment Fund(s)" shall mean one or more of the investment options,
selected by the Investment Oversight Committee under Section 14.03, to which
Participants, Beneficiaries, and
13
Section 2.27 "Highly Compensated Employee"
alternate payees under QDROs may direct investment of amounts in their Plan
Accounts.
2.31 "Leave of Absence" shall mean a leave of absence granted to an
Employee in accordance with the personnel policy of an Affiliate by which such
Employee is employed during which he or she is not expected to perform an Hour
of Service.
2.32 "Participant" shall mean an individual who has begun participation in
the Plan pursuant to Article III and shall include any individual for whom an
Account balance is maintained under the Plan. An individual shall cease to be a
Participant upon the later of the date when (a) all amounts are distributed from
his or her Accounts, or (b) the non-vested portion of his or her Company
Matching Contribution Account is forfeited in accordance with Section 11.03.
2.33 "Period of Severance" means the period commencing on the first day
following an Employee's Severance from Service Date and ending on the day
immediately preceding the Employee's Reemployment Commencement Date.
2.34 "Period of Service" means a period beginning on the Employee's
Employment Commencement Date (or Reemployment Commencement Date) and ending on
the Employee's Severance from Service Date. A Period of Service shall include
the period between the Participant's Severance from Service Date and his or her
14
Section 2.31 "Leave of Absence"
Reemployment Commencement Date if such Reemployment Commencement Date occurs
within twelve months after the earlier of:
(a) the Participant's Severance from Service Date which occurred due
to his or her Termination of Employment; or
(b) the inception of the Participant's absence from service of 12
months or less for reasons other than Termination of Employment, if during the
period of absence the Participant Terminates Employment.
2.35 "Plan" shall mean The Prudential Employee Savings Plan as set forth in
this document and as may be amended from time to time.
2.36 "Plan Fund" shall mean the total contributions made by the Employer
and by all Employees pursuant to this Plan, increased by profits, gains, income
and recoveries received, and decreased by losses, depreciation, benefits paid
and expenses incurred but not paid by the Employer in the administration of the
Plan. The term "Plan Fund" shall include all assets acquired by investment and
reinvestment of the assets of the Plan Fund. The assets of the Plan Fund shall
be held in trust or invested in insurance contracts or policies issued by an
insurance company qualified to do business in a state or otherwise held by such
an insurance company.
2.37 "Plan Year" shall mean the calendar year.
15
Section 2.35 "Plan"
2.38 "Post-2000 Company Matching Contribution Account" shall mean the
separate Account maintained for a Participant that contains the value of Company
Matching Contributions made by the Employer under the Plan on or after January
1, 2001 and the earnings (or losses) thereon.
2.39 "Pre-2001 Company Matching Contribution Account" shall mean the
separate Account maintained for a Participant that contains the value of Company
Matching Contributions made by the Employer under the Plan before January 1,
2001 and the earnings (or losses) thereon.
2.40 "Prudential" shall mean The Prudential Insurance Company of America.
2.41 "Qualified Domestic Relations Order" or "QDRO" shall mean a judgment,
decree or order (including an approval of a property settlement agreement)
issued by a court or state administrative agency with appropriate jurisdiction
that relates to the provision of child support, alimony payments or marital
property rights to a spouse, former spouse, child or other dependent of a
Participant, that is made pursuant to a domestic relations law of a state, that
meets the requirements of Code Section 414(p), and that creates or recognizes
the right of an alternate payee to receive all or a portion of the vested
benefit payable to a Participant.
16
Section 2.38 "Post-2000 Company Matching Contribution Account"
2.42 "Reemployment Commencement Date" shall mean the first date following
an Employee's Severance from Service Date upon which the Employee is credited
with an Hour of Service.
2.43 "Rollover Account" shall mean the separate Account maintained for a
Participant that contains the value of Rollover Contributions made by such
Participant to the Plan and the earnings (or losses) thereon.
2.44 "Rollover Contribution(s)" shall mean a voluntary contribution made by
an individual to the Plan pursuant to Section 4.06.
2.45 "Severance from Service Date" means the earlier of:
(a) the date on which an Employee Terminates Employment or dies; or
(b) the first anniversary of the date on which an Employee remains
absent from service (with or without pay) with an Affiliate for any reason other
than Termination of Employment or death, such as holiday, sickness, disability,
vacation, Leave of Absence, or layoff.
Solely for purposes of determining whether an Employee experiences a one
year Period of Severance, the Severance from Service Date of an Employee who is
absent from service beyond the first anniversary of the first day of absence by
reason of a maternity or paternity leave is the second anniversary of the first
day of such absence. An Employee shall be considered to be
17
Section 2.42 "Reemployment Commencement Date"
on maternity or paternity leave if absent from service because of the pregnancy
of such individual, because of the birth of a child of such individual, because
of the placement of a child with the individual in connection with the adoption
of such child by the individual, or for purposes of caring for such child for a
period beginning immediately following such birth or placement, provided the
Employee furnishes to the Administrative Committee such timely information as
may be reasonably required to establish that the Employee's absence qualifies as
a maternity or paternity leave and the length of such qualifying absence.
2.46 "Termination of Employment" including the verb form "Terminates
Employment," shall mean the voluntary or involuntary termination of employment
with all Affiliates for any reason other than death.
2.47 "Trust" shall mean one or more legal entities created by a trust
agreement between Prudential and the Trustee under which the Trustee shall hold
all or a specified portion of the Trust Fund for the benefit of Participants,
Beneficiaries, and alternate payees under QDROs.
2.48 "Trust Fund" shall mean that portion of the Plan Fund that is not
invested in insurance contracts or policies issued by an insurance company
qualified to do business in a state or otherwise held by such an insurance
company.
18
Section 2.46 "Termination of Employment"
2.49 "Trustee" shall mean the parties, individual or corporate, named as
Trustee in the Trust, or any successor thereto.
2.50 "Valuation Date" shall mean the close of business on each business
day, unless otherwise specified by the Administrative Committee. For purposes of
this definition, a business day is a day when the New York Stock Exchange is
open for business, unless otherwise specified by the Administrative Committee.
2.51 "Year of Service" shall mean every 365 days of a Period of Service.
Partial Years of Service shall be expressed in terms of days. Subject to the
provisions of Section 11.04, in determining a Participant's Years of Service,
all non-successive periods of Period of Service shall be aggregated.
Notwithstanding the foregoing, if a Covered Employee is absent from
employment on account of active service in the Armed Forces of the United States
for which the Covered Employee retains reemployment rights under federal
statute, and if the Covered Employee returns to the employ of an Affiliate
within the period provided by applicable law, he or she shall be given credit
for the period of such absence (to the extent provided by applicable law) for
purposes of vesting under Article XI.
19
Section 2.49 "Trustee"
ARTICLE III
ELIGIBILITY AND PARTICIPATION
Each Employee shall be an Eligible Employee and may commence participation
on the later of (1) his or her Employment Commencement Date (or Reemployment
Commencement Date), or (2) the date he or she becomes a Covered Employee.
An Eligible Employee who is eligible to enroll as a Participant in the Plan
pursuant to this Article III may elect to enroll, or not to enroll, pursuant to
procedures established by the Administrative Committee.
20
ARTICLE III
ELIGIBILITY AND PARTICIPATION
ARTICLE IV
CONTRIBUTIONS
4.01 Before-Tax Contributions. Subject to the limitations contained in
Article VI, in lieu of paying cash compensation to the Participant, for each
payroll period the Employer shall contribute on behalf of each Participant,
pursuant to a payroll deferral election made (or deemed made) by the Participant
in a manner prescribed by the Administrative Committee, a whole percentage from
1% to 21% of the Participant's Earnings for the period. A Participant may change
at any time the elected percentage for Before-Tax Contribution payroll deferrals
under this Section 4.01 to any whole number from 0 to 21, and such change shall
become effective as of the payroll period that occurs as soon as
administratively practicable following such election. Before-Tax Contributions
shall include all amounts contributed under this Section in a Plan Year and
shall be credited to the Participant's Before-Tax Contribution Account. The
Before-Tax Contributions of a Participant shall not exceed the lesser of (a) 21%
of the Participant's Earnings, or (b) $7,000 (as adjusted by the Secretary of
the Treasury for cost of living increases pursuant to Code Section 402(g)) for
the Participant's taxable year. The Participant's Before-Tax Contribution
percentage, when combined with the Participant's After-Tax Contribution
percentage under Section 4.02, shall not exceed 21%.
21
Section 4.01 Before-Tax Contributions.
An Eligible Employee whose Employment Commencement Date (or Reemployment
Commencement Date) occurs on or after January 1, 2001, and who has not
affirmatively elected to make, or not to make, Before-Tax Contributions shall be
deemed to have entered into a payroll deferral election to defer 4% of his or
her Earnings, which shall be contributed by the Employer as Before-Tax
Contributions on behalf of the Eligible Employee. Such deemed payroll deferral
election shall become effective as soon as administratively practicable after
the end of the period, as established by the Administrative Committee, during
which the Eligible Employee may first affirmatively elect to make, or not to
make, Before-Tax Contribution payroll deferrals. The Administrative Committee
shall distribute, in accordance with procedures established by the
Administrative Committee, to all Eligible Employees to whom this paragraph may
apply, a notice that explains the automatic Before-Tax Contribution payroll
deferral election and the Eligible Employee's right to elect to have no such
payroll deferrals made or to change the amount of such payroll deferrals,
including the procedure for exercising that right and the timing for
implementation of any such election. Also, each Participant to whom this
paragraph applies shall be notified annually of his or her Before-Tax
Contribution deferral percentage and the Participant's right to change the
percentage, including the procedure for exercising that right and the timing for
implementation of any such election.
22
Section 4.01 Before-Tax Contributions.
If a Participant has made elective deferrals under this Plan and under
other plans and arrangements in excess of the limit applicable under Code
Section 402(g) and if the Participant allocates any part or all of the excess
deferral to the Plan and notifies the Administrative Committee of such
allocation no later than March 1 of the next following year, then the
Administrative Committee may distribute such excess deferral (and any income
allocable thereto) to the Participant from the Participant's Before-Tax
Contribution Account no later than April 15 of such year. The distribution
described in the preceding sentence may be made notwithstanding any other
provisions of this Plan; provided, however, that the amount of such distribution
shall be reduced by any excess Before-Tax Contributions previously distributed
in accordance with Section 6.05 with respect to the Participant for the Plan
Year beginning with or within such Participant's taxable year. Company Matching
Contributions (plus earnings thereon) which correspond to an Employee's excess
deferral shall be forfeited.
4.02 After-Tax Contributions. Subject to the limitations contained in
Article VI, for each payroll period a Participant may contribute on an after-tax
basis, pursuant to a payroll deduction election made by the Participant in a
manner prescribed by the Administrative Committee, a whole percentage from 1% to
21% of his or her Earnings for the period. A Participant may change at any time
the elected percentage for After-Tax Contributions under this
23
Section 4.02 After-Tax Contributions.
Section 4.02 to any whole number from 0 to 21, and such change shall become
effective as of the payroll period that occurs as soon as administratively
practicable following such election. After-Tax Contributions shall be credited
to the Participant's After-Tax Contribution Account. The Participant's After-Tax
Contribution percentage, when combined with the Participant's Before-Tax
Contribution percentage under Section 4.01, shall not exceed 21%.
4.03 Suspension of Before-Tax and After-Tax Contributions. Notwithstanding
Sections 4.01 and 4.02, if a Participant takes a hardship withdrawal from
another qualified plan maintained by an Affiliate that complies with the
safe-harbor provisions under Treasury Regulation Section 1.401(k)-1(d)(2), then
the Participant shall be prohibited from making Before-Tax Contributions and
After-Tax Contributions for 12 months following the receipt of such withdrawal,
and the limitations of Code Section 402(g) shall be reduced for the calendar
year following the calendar year in which such hardship withdrawal occurred by
an amount equal to the amount of the Participant's before-tax contributions made
in the calendar year of the hardship withdrawal.
24
Section 4.03 Suspension of Before-Tax and After-Tax Contributions.
4.04 Company Matching Contributions.
(a) Subject to the limitations contained in Article VI, for each
payroll period the Employer shall contribute a Company Matching Contribution on
behalf of each Participant equal to the Participant's Before-Tax Contributions
for the payroll period up to a maximum of 4% of Earnings. Company Matching
Contributions shall be credited to the Participant's Post-2000 Company Matching
Contribution Account.
(b) The Company Matching Contribution for those Participants included
in the employee classes indicated below will be increased by an amount equal to
one half of a percentage point of Earnings for each tenth of a percentage point
by which the Company Factor for 2000 exceeds one; provided, however, that if the
Company Factor is not denominated in an even tenth of a percentage point, the
additional Company Matching Contribution for such portion of a tenth of a
percentage point will be increased by an amount equal to a corresponding pro
rata portion of one half of a percentage point of Earnings. Except as provided
below in this subsection (b), this additional Company Matching Contribution
shall not exceed 3% of Earnings and shall be treated as a regular Company
Matching Contribution for all purposes under the Plan. The additional Company
Matching Contribution shall commence as of the payroll period in 2001 that
begins as soon as administratively practicable following the date of the
announcement of the 2000 Company Factor, and shall continue through the last
payroll period that ends in 2001. The total amount of the additional Company
25
Section 4.04 Company Matching Contributions.
Matching Contribution that would otherwise have been payable over a 12-month
period shall be payable on an adjusted pro rata basis over the payroll periods
in 2001 during which the contribution is made. The classes of Employees eligible
for the additional Company Matching Contribution described in this Section
4.04(b) are non-management Eligible Employees below the level of Associate
Manager (which, in general, is intended to include Employees whose rank is below
level 20 or such equivalent ranks as determined by the Administrative Committee)
as of the end of the 2000 Plan Year. Regardless of level and management status,
and effective immediately upon transfer to such status, the following Employees
shall not be eligible for the additional Company Matching Contribution:
(1) statutory employees under Code Section 3121(d)(3) (relating to
full time life insurance salesmen);
(2) Individual Financial Services Field Sales Representatives, Sales
Management Employees, Planners, and Prudential Preferred Advisors; and
(3) Employees of nonparticipating Affiliates. No additional Company
Matching Contribution shall be made after December 31, 2001.
4.05 Payment of Contributions. The Employer shall pay, or see to the
payment by a participating Affiliate, to the Plan Fund, the Before-Tax
Contributions, After-Tax Contributions, and
26
Section 4.05 Payment of Contributions.
Company Matching Contributions on behalf of each Participant as soon as
administratively practicable after the end of each payroll period, but in no
event later than 15 days after the end of the month in which such contributions
are made, and shall deliver amounts received for Rollover Contributions to the
Plan Fund as soon as administratively practicable following receipt from the
Participant. Such contribution payments shall be accrued in the fiscal year of
the Employer which ends in the Plan Year.
4.06 Rollover Contributions. Any Covered Employee may make a Rollover
Contribution to the Plan. A Rollover Contribution is a contribution which
satisfies the conditions for income tax-free contributions in accordance with
Code Section 402 or 403 of amounts distributed from other tax-qualified
retirement plans or conduit individual retirement accounts or annuities
described in Code Section 408(d). An individual (whether or not a Covered
Employee) may make a Rollover Contribution to the Plan of an eligible rollover
distribution received from The Prudential Cash Balance Pension Plan Document
component of The Prudential Merged Retirement Plan, provided that such Rollover
Contribution exceeds the dollar limit under Code Section 411(a)(11)(A). The
Administrative Committee may require the Covered Employee, or other individual,
as applicable, to produce such evidence with respect to the taxability of the
Rollover Contribution and its conformity to the foregoing conditions as it deems
necessary prior to receipt of a Rollover Contribution. Rollover Contributions
shall be nonforfeitable, shall be credited to an Account known as
27
Section 4.06 Rollover Contributions.
a Rollover Account and shall be accounted for separately from other amounts
contributed for the Participant hereunder. For the purpose of Article VI,
Rollover Contributions shall be disregarded. All Rollover Contribution
applications shall be made in a manner prescribed by the Administrative
Committee.
4.07 Transfers from Another Qualified Plan. With the consent of the
Administrative Committee, the Plan may accept transferred assets from other Code
Section 401(a) qualified plans for Covered Employees. Such transfers shall be in
cash unless the Administrative Committee approves of the transfer of other
property in which case the Administrative Committee may establish a segregated
fund for such assets, subject to such rules or regulations as the Administrative
Committee may adopt.
4.08 Qualified Military Service.
(a) If a Covered Employee whose employment rights are protected by
USERRA is reemployed by an Affiliate, such Employee may elect to make before-tax
contributions and after-tax contributions as permitted under the Plan for the
period during which the Employee was in "qualified military service" (as defined
under USERRA). The Employee shall designate the Plan Year(s) to which such
contributions relate. Such contributions may be made during the period beginning
on the date of the reemployment of such Employee, and must be made by the end of
the period that is the lesser of (1) the product of 3 and the period of
qualified
28
Section 4.07 Transfers from Another Qualified Plan.
military service, or (2) 5 years following the date of such reemployment.
(b) In the event an Employee makes before-tax contributions or
after-tax contributions in accordance with subsection (a) above, corresponding
company matching contributions shall be made based on the rate of matching
contributions in effect for the Plan Year to which the contributions relate, as
determined by the Employee's election under subsection (a) above.
(c) In the event any contributions are made pursuant to subsections
(a) and (b) above, the Employee shall not be entitled to retroactive earnings on
such contributions.
(d) A Covered Employee whose employment rights are protected by USERRA
and who returns to employment with an Affiliate following a period of qualified
military service shall, for purposes of this Section 4.08, be treated as
receiving Earnings equal to the Earnings the Covered Employee would have
received during such period if the Covered Employee were not in qualified
military service, determined based on the rate of pay the Covered Employee would
have received but for the absence; provided, however, if the amount of Earnings
the Covered Employee would have received during such period is not reasonably
certain, Earnings for this purpose shall equal the Covered Employee's average
Earnings during the 12 months immediately preceding the qualified military
service (or, if shorter, the period of employment immediately preceding the
qualified military service).
(e) Any contributions made pursuant to subsections (a) and (b) above
are not subject to the limits under Code
29
Section 4.08 Qualified Military Service.
Sections 402(g) (as described in Section 4.01) and 415 (as described in Sections
6.01 and 6.02) in the Plan Year(s) in which made; rather, such contributions are
subject to such limits in the Plan Year(s) to which the contributions relate, as
determined by the Employee's election under subsection (a) above. Such
contributions will not be subject to the ADP test described in Section 6.03, the
ACP test described in Section 6.04, or the aggregate limits test described in
Section 6.06 for any Plan Year.
30
4.08 Qualified Military Service.
ARTICLE V
PARTICIPANT ACCOUNTS AND RETURN OF CONTRIBUTIONS
5.01 Participants' Accounts. The Administrative Committee shall establish a
separate Before-Tax Contribution Account, After-Tax Contribution Account,
Pre-2001 Company Matching Contribution Account, Post-2000 Company Matching
Contribution Account, Rollover Account, and Forfeiture Pending Account, as
applicable, in the name of each Participant. Collectively, these accounts
comprise the Participant's Accounts, or, as the case may be, the Accounts of a
Beneficiary or an alternate payee under a QDRO.
5.02 Undivided Interests. An Account represents an undivided interest in
the Plan Fund and no Participant, Beneficiary, or alternate payee under a QDRO
shall have a separate interest in individual securities or other assets which
make up the Plan Fund. No Participant, Beneficiary, or alternate payee under a
QDRO shall have an interest in Employer contributions until allocated.
5.03 Return of Contributions.
(a) Deductibility of Contributions. Contributions made to the Plan
------------------------------
Fund shall be conditioned upon the deductibility of such contributions under
Code Section 404. To the extent such deduction is disallowed, any Employer
contribution to the Plan
31
5.01 Participants' Accounts.
Fund may be returned to the Employer at the discretion of the Employer as soon
as administratively practicable but within 1 year after the disallowance of the
deduction. A returned contribution will not include the earnings attributable to
the contribution but will be reduced by any losses attributable to the
contribution.
(b) Mistake of Fact. Any Employer contribution made because of a
---------------
mistake of fact may be returned to the Employer at the discretion of the
Employer as soon as administratively practicable but within 1 year after the
payment of such contribution. A returned contribution will not include the
earnings attributable to the contribution but will be reduced by any losses
attributable to the contribution.
(c) Correction of Mistaken Employee Contributions. To the extent
---------------------------------------------
consistent with qualified plan correction programs established and maintained by
the Internal Revenue Service (as set forth in Revenue Procedure 2000-16, and any
other applicable guidance issued by the Internal Revenue Service), amounts
contributed or deposited to the Plan by an Employee (as adjusted for earnings
and losses) may be returned to such Employee if the Administrative Committee
determines that such amounts were not authorized to be contributed or deposited
to the Plan by the Employee or were not contributed or deposited in accordance
with the Plan.
32
5.03 Return of Contributions.
ARTICLE VI
LIMITATIONS ON ADDITIONS
6.01 Limitation on Additions. Notwithstanding any provision of this Plan,
if the sum of annual additions (as defined in this Section) allocable to the
Accounts of a Participant exceeds the lesser of (a) $30,000 (as adjusted by the
Secretary of the Treasury for cost of living increases), or (b) 25% of the
Participant's compensation (within the meaning of Code Section 415(c)(3) and
Treasury Regulation Section 1.415-2(d), to the extent consistent therewith), the
Plan, as soon as administratively feasible after the end of the Plan Year,
first, shall return to the Participant any After-Tax Contribution equal to such
excess, and second, if necessary, shall return to the Participant the remaining
Before-Tax Contributions for the Plan Year, to the extent necessary for the
amount returned to equal such excess. Any excess annual additions remaining
after the return of After-Tax Contributions and Before-Tax Contributions shall
be applied to reduce Employer contributions for the next Plan Year (and
succeeding Plan Years, if necessary) for the Participant. If the Participant is
not covered by the Plan at the end of a Plan Year, any unallocated excess shall
be allocable during the next Plan Year among the Accounts of other Participants
(after eliminating Participants to whom allocations are precluded under this
Section) in proportion to the Earnings of such other Participants and repeating
the procedure until the entire amount
33
6.01 Limitation on Additions.
has been allocated; but if the entire amount cannot be so allocated the
unallocated excess shall be credited to a suspense account (which shall not
participate in the allocation of earnings and losses) until the next subsequent
Plan Year in which such unallocated excess can be allocated. No annual additions
shall be made to the extent that their allocation to the Accounts of
Participants would be precluded by this Section.
For the purposes of this Section and Section 6.02 below, annual additions
shall include Before-Tax Contributions, Company Matching Contributions
(including forfeitures), After-Tax Contributions, contributions to an individual
medical account as defined in Code Section 415(l)(2), and (but only for purposes
of (a) above) contributions on behalf of key employees, as defined in Code
Section 416(i), to a separate account for medical benefits after separation from
service. Contributions described in Sections 4.08(a) and (b) made for a period
of military service, shall be considered annual additions only to the extent
provided in Section 4.08(e). If the Administrative Committee determines that
annual additions are projected to exceed the limitations imposed by this Section
6.01, the Administrative Committee may reduce Before-Tax and After-Tax
Contribution percentages to the extent the Administrative Committee determines
to be necessary to avoid excess annual additions.
6.02 Other Plans. For purposes of applying the limitations set forth in
Section 6.01, above, any other defined contribution plan (whether or not
terminated) or welfare benefit
34
6.02 Other Plans.
fund maintained by an Affiliate and subject to Code Section 415(h) shall be
aggregated with this Plan; said limitations shall be applied to this Plan so
that an amount allocated to a Participant under such other plan(s) or welfare
benefit fund(s) shall be counted as if it had been so allocated under this Plan,
thereby reducing the amount actually allocable under this Plan.
6.03 Special Discrimination Rule.
(a) Basic Rule. In order to meet the requirements of Code Section
----------
401(k), the Average Deferral Percentage ("ADP") for Highly Compensated Employees
for a Plan Year shall bear a relationship to the ADP for all other Eligible
Employees for the same Plan Year if such Plan Year begins before 1997, otherwise
for the immediately preceding Plan Year, that meets at least one of the
following tests:
(1) the ADP for the group of Highly Compensated Employees is not more
than the ADP for all other Eligible Employees multiplied by 1.25, or
(2) the excess of the ADP for the group of Highly Compensated
Employees over that of all other Eligible Employees is not more than 2
percentage points, and the ADP for the group of Highly Compensated Employees is
not more than the ADP of all other Eligible Employees multiplied by 2.
The ADP for a Highly Compensated Employee who is participating in two or
more arrangements intended to qualify under Code Section 401(k) maintained by an
Affiliate shall be determined as though all such arrangements were one
arrangement.
35
6.03 Special Discrimination Rule.
(b) Review by Administrative Committee. Before the allocation of
----------------------------------
Before-Tax Contributions to Participants' Accounts during the Plan Year, the
Administrative Committee shall review the contributions elected. If the
Administrative Committee determines that the Average Deferral Percentages of the
Highly Compensated Employees are projected to exceed the Average Deferral
Percentages of other Eligible Employees by a margin greater than that permitted
by Section 6.03(a), the Administrative Committee shall reduce the Before-Tax
Contribution percentages permitted by Highly Compensated Employees to the extent
the Administrative Committee determines to be necessary to avoid such excess, or
may impose such other restrictions as it deems necessary to comply with the
requirements of this Section.
In the event the Before-Tax Contributions of Highly Compensated Employees
exceed the limit of subsection (a), above, the amount of the excess shall be
returned to the Highly Compensated Employees as provided in Section 6.05, below.
The Administrative Committee may impose such limits on Before-Tax
Contributions as it deems necessary or advisable for continued qualification of
the Plan.
6.04 Limitations on After-Tax and Company Matching Contributions. The
Average Contribution Percentage for Highly Compensated Employees shall meet at
least one of the tests set forth in Section 6.03, above, applying such tests to
the Average Contribution Percentage of Employees instead of to the Average
36
6.04 Limitations on After-Tax and Company Matching Contributions.
Deferral Percentage. In the case of a Highly Compensated Employee, matching and
Employee contributions made under any other plan maintained by an Affiliate
shall be taken into account. The Employer may, consistent with Treasury
Regulations, elect to take Before-Tax Contributions into account in computing
the Average Contribution Percentage.
If the Administrative Committee determines that the Average Contribution
Percentages of the Highly Compensated Employees are projected to exceed the
Average Contribution Percentages of other Eligible Employees by a margin greater
than permitted by this Section 6.04, the Administrative Committee shall reduce
the After-Tax Contribution percentages permitted by Highly Compensated Employees
to the extent the Administrative Committee determines to be necessary to avoid
such excess, or may impose such other restrictions as it deems necessary to
comply with the requirements of this Section.
6.05 Return of Excess Contributions. If at the end of a Plan Year the
amount of Before-Tax Contributions made by Highly Compensated Employees causes
the limits of Section 6.03(a) to be exceeded, then the excess Before-Tax
Contributions and any income allocable thereto for the Plan Year shall be
returned, not later than the close of the following Plan Year, to the Highly
Compensated Employees on the basis of the respective portions of the returnable
excess
37
6.05 Return of Excess Contributions.
Before-Tax Contributions attributable to each Highly Compensated Employee.
Effective January 1, 1997, for the purpose of the preceding sentence, the
returnable excess Before-Tax Contributions shall be determined by reducing
Before-Tax Contributions made on behalf of Highly Compensated Employees in the
order of the amount of Before-Tax Contributions beginning with the highest of
such dollar amounts until the maximum permissible amount of Before-Tax
Contributions is reached, or until all of the excess Before-Tax Contributions
(and any income allocable thereto) are distributed. The amount of excess
Before-Tax Contributions to be returned under this Section 6.05 to an Employee
for a Plan Year shall be reduced by any excess deferrals previously distributed
to the Employee in accordance with Section 4.01 for the Employee's taxable year
ending with or within the Plan Year. Company Matching Contributions (plus
earnings thereon) which correspond to an Employee's excess Before-Tax
Contributions shall be forfeited. Effective January 1, 1997, the family
aggregation rules of Code Section 414(q)(6), as in effect prior to enactment of
the SBJPA, shall not affect application of these rules.
If at the end of a Plan Year the amount of After-Tax and Company Matching
Contributions paid under the Plan on behalf of Highly Compensated Employees
exceeds the limits set forth in Section 6.04, above, then the excess of such
contributions (including Before-Tax Contributions, if any, taken into account
under said Section 6.04, above) and any income allocable thereto for such Plan
Year shall be returned, not later than the close of the following Plan Year, to
the Highly Compensated Employees; provided, however, that if the Participant is
not vested in his or her Company Matching Contribution Account, the amount of
such
38
6.05 Return of Excess Contributions.
excess attributable to Company Matching Contributions (plus earnings thereon)
shall be forfeited. Such excess After-Tax and Company Matching Contributions
shall be determined on a basis consistent with the basis used to return excess
Before-Tax Contributions as provided in the preceding paragraph; provided,
however, that such excess contributions shall not be reduced for any previously
distributed excess deferrals.
6.06 Aggregate Limits Test. If either the Average Deferral Percentage test
described in Section 6.03 or the Average Contribution Percentage test described
in Section 6.04 is not satisfied by applying the "1.25" multiple described in
Section 6.03(a)(1), then the Administrative Committee may elect to have the
Plan, with respect to any Plan Year, satisfy the `aggregate limits test', or any
other alternative test permitted by the Internal Revenue Service, as an
alternative to passing either the Average Deferral Percentage test as set forth
in Section 6.03, or the Average Contribution Percentage test as set forth in
Section 6.04, using the 1.25 multiple described in Section 6.03(a)(1).
The aggregate limits test shall be satisfied if the sum of the Average
Deferral Percentages of all Highly Compensated Employees and the Average
Contribution Percentages for all Highly Compensated Employees does not exceed
the aggregate limit. For purposes of this Section 6.06, the aggregate limit is
equal to the greater of:
(a) The sum of:
39
6.06 Aggregate Limits Test.
(1) 125% of the greater of the (i) Average Deferral Percentage of all
Eligible Employees who are not Highly Compensated Employees, or (ii) the Average
Contribution Percentage of all Eligible Employees who are not Highly Compensated
Employees; and
(2) 2 plus the lesser of (i) or (ii) above; provided, that in no event
shall this amount exceed 200% of the lesser of (i) or (ii) above; or
(b) The sum of:
(1) 125% of the lesser of the (i) Average Deferral Percentage of all
Eligible Employees who are not Highly Compensated Employees, or (ii) the Average
Contribution Percentage of all Eligible Employees who are not Highly Compensated
Employees; and
(2) 2 plus the greater of (i) or (ii) above; provided, that in no
event shall this amount exceed 200% of the greater of (i) or (ii) above.
6.07 Reduction of Contributions. If after the close of the Plan Year the
Administrative Committee determines that the Plan may not satisfy the aggregate
limits test described in Section 6.06, then the Administrative Committee shall
reduce the contributions of Highly Compensated Employees, to the extent
necessary to satisfy the aggregate limits test, in accordance with Section 6.05.
40
Section 6.07 Reduction of Contributions.
6.08 Limitations. The Employer shall not make a contribution in excess of
the maximum amount allowable as a deduction for the taxable year under Code
Section 404 unless so directed by the Board of Directors.
41
Section 6.08 Limitations.
ARTICLE VII
VALUATION
7.01 Valuation. The Administrative Committee shall cause the Plan Fund to
be valued at fair market value as of each Valuation Date.
7.02 Allocation of Contributions, Earnings and Expenses. The Administrative
Committee shall allocate Before-Tax Contributions, After-Tax Contributions,
Company Matching Contributions and Rollover Contributions to the Account
balances of Participants, Beneficiaries, and alternate payees under QDROs and
also shall allocate income and expenses and gains and losses among such
Accounts. The Administrative Committee may allocate income and expenses and
gains and losses to one or more Investment Funds and the Accounts invested
therein, or by Participant, Beneficiary, or alternate payee under a QDRO (on a
per capita basis or pro rata by Account balances), or according to such other
method as the Administrative Committee may deem appropriate.
7.03 Valuation and Allocation Procedures. The Administrative Committee may
establish accounting procedures for the purpose of making allocations,
valuations, and adjustments to the Accounts of Participants, Beneficiaries, and
alternate payees under QDROs, and may modify such procedures from time to time.
42
Section 7.01 Valuation.
ARTICLE VIII
POST-TERMINATION BENEFITS
8.01 Distributions.
(a) Full Distributions. Subject to the rules of Article IX, following
Termination of Employment a Participant may elect to receive full distribution
of the nonforfeitable percentage of his or her Accounts. Distributions shall be
made in cash. The value of a Participant's benefit shall be determined as soon
as administratively practicable following receipt by the Administrative
Committee of a request for distribution. Distributions and requests for
distribution shall be made in conformance with rules and regulations as the
Administrative Committee may adopt, and shall not be revocable after
commencement of the distribution.
(b) Partial Distributions. Subject to Article IX, a Former Participant
who has Terminated Employment or has reached his or her Disability Date, the
Beneficiary of such a Former Participant, or an alternate payee under a
Qualified Domestic Relations Order, may make withdrawals from his or her Account
balances. An individual to whom this Section 8.01(b) applies may make no more
than 5 withdrawals per Plan Year and the amount of any such withdrawal must
equal at least $300. Withdrawals made under this Section 8.01(b) shall be made
from the individual's Accounts in the order specified in Appendix C.
43
Section 8.01 Distributions.
8.02 Forms of Benefit. The forms of benefit available with respect to
distributions described in Section 8.01 are:
(a) a lump sum distribution;
(b) a systematic withdrawal method of payment providing monthly,
quarterly, semi-annual or annual installments made over a specified period of
time or made in a specified dollar amount, whichever method is selected by the
Participant, until the Participant's Account is exhausted, with the option to
accelerate the remaining Account balance in a lump sum payment at any time, and
with such withdrawals made from the Participant's Accounts in the order
specified in Appendix C (during the systematic withdrawal period the Participant
may continue to make transfers pursuant to Article XV);
(c) an annuity form selected by the Participant in accordance with
Section 8.03, provided that the cost of the annuity equals or exceeds $3,500; or
(d) any combination of (a), (b), and/or (c).
8.03 Annuity Form of Distribution.
(a) Normal Annuity Form. The "Normal Annuity Form" (as defined below)
-------------------
will be the normal form of payment to a Participant with respect to --
(1) the portion of the Participant's Accounts that consists of a
direct plan to plan transfer from a plan that is subject to the qualified joint
and survivor annuity requirements of Code Sections 401(a)(11) and 417, and
44
Section 8.02 Forms of Benefit.
(2) the portion of the Participant's Accounts that the
Participant elects to receive in the form of an annuity.
A "Normal Annuity Form" with respect to a Participant who is not married on
his or her Annuity Starting Date shall mean a series of equal monthly payments
to continue for the life of the Participant, with no payments made following the
Participant's death.
A "Normal Annuity Form" with respect to a Participant who is married on his
or her Annuity Starting Date shall mean a series of equal monthly payments to
continue for the life of the Participant. Following the Participant's death,
monthly payments will be continued to the Participant's spouse for the remaining
lifetime of such spouse. The monthly payment payable to the spouse prior to the
date 120 monthly payments have been paid under this form will be equal to 100%
of the monthly payment payable to the Participant. The monthly payment payable
to the spouse thereafter will be equal to 50% of the monthly payment payable to
the Participant. If the Participant and the spouse die before 120 monthly
payments have been made to the Participant and the spouse, a monthly payment
equal to 100% of the monthly payment payable to the Participant will be
continued to the Participant's contingent Beneficiary until 120 monthly payments
have been paid under this form, or if no such contingent Beneficiary survives
both the Participant and the spouse, the value of the remaining payments will be
paid to the estate of the last to die of the Participant and the spouse.
45
Section 8.03 Annuity Form of Distribution.
A Participant may elect an optional form of annuity distribution described
in Section 8.03(c) in accordance with the election and consent requirements in
Section 8.03(b). As evidence of any annuity payable under the Plan, a group
annuity certificate describing the terms of payment of the annuity will be
distributed to the annuitant to whom it is payable.
(b) Annuity Election Rules. If the Normal Annuity Form is effective
----------------------
for a Participant, the Administrative Committee will provide to such
Participant, within 90 days and no less than 30 days before his or her
distribution date, a written explanation of:
(1) the terms and conditions of the Normal Annuity Form;
(2) the Participant's right to make, and the effect of, an
election to waive the Normal Annuity Form;
(3) the rights of the Participant's spouse and the need to make a
"Qualified Election" (as defined below) to waive the Normal Annuity Form; and
(4) the right to make, and the effect of, a revocation of a
previous election to waive the Normal Annuity Form.
46
Section 8.03 Annuity Form of Distribution.
"Qualified Election" means an election to waive the Normal Annuity Form.
The waiver will not be effective unless: (i) the Participant's spouse consents
in writing to the election; (ii) the election designates a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent; (iii) the spouse's consent acknowledges
the effect of the election; and (iv) the spouse's consent is witnessed by a
notary public. Additionally, a waiver shall not be effective unless the election
designates a form of benefit payment which may not be changed without spousal
consent. Notwithstanding this consent requirement, if the Participant
establishes to the satisfaction of the Administrative Committee that such
written consent may not be obtained because such spouse cannot be located or
because of such other circumstances as the Secretary of the Treasury may
prescribe, a waiver by the Participant will be deemed a Qualified Election. Any
consent necessary under this Section 8.03(b) will be valid only with respect to
the spouse who signs the consent, or in the event of a deemed Qualified
Election, the designated spouse.
Effective for distributions on or after January 1, 1997, the Annuity
Starting Date for a distribution in a form other than a Normal Annuity Form may
be less than 30 days after receipt of the written explanation described in this
Section 8.03(b) provided: (I) the Participant has been provided with information
that clearly indicates that the Participant has at least 30 days to consider
whether to waive the Normal Annuity Form and elect (with spousal consent) a form
of distribution other than the
47
Section 8.03 Annuity Form of Distribution.
Normal Annuity Form; (II) the Participant is permitted to revoke any affirmative
distribution election at least until the Annuity Starting Date or, if later, at
any time prior to the expiration of the 7-day period that begins the day after
the explanation of the Normal Annuity Form is provided to the Participant; and
(III) the Annuity Starting Date is a date after the date that the written
explanation was provided to the Participant.
Additionally, a revocation of a prior waiver may be made by a Participant
without the spouse's consent at any time before a distribution of the
Participant's Account balance is made. The number of revocations will not be
limited. A revocation of a prior waiver may not be made by the spouse.
(c) Optional Forms of Annuity. In lieu of the Normal Annuity Form, a
-------------------------
Participant may elect --
(1) a fixed dollar annuity which provides for a series of
payments the amount of which is the same each month and is fixed at the date
payments commence; or
(2) a variable annuity form under which monthly payments vary
based on investment experience. Under a variable annuity, the Participant may
elect among investment options as designated from time to time by the Investment
Oversight Committee in accordance with Section 14.03.
Any such annuity shall be provided pursuant to a contract with an annuity
provider, and such annuities shall provide for payment to be made over --
(i) the life of the Participant;
48
Section 8.03 Annuity Form of Distribution.
(ii) the lives of the Participant and his or her spouse if
payments are to be made to the spouse, otherwise his or her designated
Beneficiary;
(iii) a period not extending beyond the life expectancy of
the Participant and his or her spouse, if applicable, otherwise his or her
designated Beneficiary; or
(iv) a period not extending beyond the life expectancy of
the Participant.
8.04 Death Benefit. If a Participant dies with nonforfeitable amounts
credited to his or her Accounts, the benefit will be distributed to his or her
Beneficiary as determined under Section 8.06. The benefit will be distributed as
soon as practical after a claim is made by the Beneficiary in a manner
satisfactory to the Administrative Committee. Notwithstanding any other
provision of this Plan, all nonforfeitable amounts allocated to the
Participant's Accounts must be distributed no later than December 31 of the
calendar year that contains the 5th anniversary of his or her death unless --
(a) the Participant's Beneficiary is his or her surviving spouse and
such spouse elects to receive annuity or installment payments over his or her
life or over a period not exceeding his or her life expectancy, and such
payments begin no later than December 31 of the year in which the Participant
would have attained age 70 1/2 (or December 31 of the year following the year in
which the Participant died, if later); or
49
Section 8.04 Death Benefit.
(b) the Participant's designated, non-spouse Beneficiary elects to
receive annuity or installment payments over his or her life or over a period
not exceeding his or her life expectancy, and such payments begin no later than
December 31 of the year following the year in which the Participant died.
The Participant's Account balance at the time of his or her death will be
distributed as a single sum unless the Beneficiary elects an optional form of
distribution under Section 8.02, or elects to receive a partial distribution
under Section 8.01(b), at the time the claim is submitted.
If distribution of the Participant's interest has begun in accordance with
Section 8.01 or 9.01 prior to the Participant's death, the undistributed portion
shall be distributed at least as rapidly as the method of distribution in effect
on the date of the Participant's death.
8.05 Annuity Contracts. All annuity contracts under this Plan shall be
non-transferable when distributed. Furthermore, to the extent required by law,
the terms of any annuity contract purchased and distributed to a Participant,
Beneficiary, or alternate payee under a QDRO shall comply with the requirements
of the Plan.
8.06 Effective Beneficiary Designation. An effective Beneficiary
designation is a direction, not subsequently revoked, made and delivered to the
Administrative Committee, in accordance with rules and procedures prescribed by
the Administrative
50
Section 8.05 Annuity Contracts.
Committee, during the Participant's lifetime designating a person or persons
(including individuals, partnerships, corporations and trusts) to receive a
distribution to be made when the Participant is not living, if the person or
persons designated is or are living or in existence when the distribution is to
be made, with such order of priority as may be specified.
If the Participant was married at the time of his or her death, the
designation of a person other than the Participant's surviving spouse to receive
any distribution to be made when the Participant is not living, regardless of
when made, shall not be effective and shall be treated as a designation of such
surviving spouse unless (a) such surviving spouse has consented to such
designation in writing and such consent acknowledges the effect of the election
and was witnessed by a notary public, or (b) it is established to the
satisfaction of the Administrative Committee that such consent may not be
obtained because such spouse cannot be located or because of such other
circumstances as the Secretary of the Treasury may prescribe. Such consent shall
be effective only with respect to the spouse who signs the consent, or in the
event of a waiver of such consent under (b) of the preceding sentence, the
designated spouse. If the Participant is not living and has not made an
effective Beneficiary designation, the Participant's Beneficiary shall be the
Participant's surviving spouse, if living, otherwise the Participant's estate.
8.07 Direct Rollovers. An Eligible Rollover Recipient (as defined below)
may elect, at the time and in a manner
51
Section 8.07 Direct Rollovers.
prescribed by the Administrative Committee, to have any portion of an Eligible
Rollover Distribution (as defined below) that is equal to at least $200 paid
directly to an Eligible Retirement Plan (as defined below) specified by the
Eligible Rollover Recipient in a direct rollover. An Eligible Rollover
Distribution is any distribution of all or any portion of the balance to the
credit of the Eligible Rollover Recipient, except that an Eligible Rollover
Distribution does not include: (1) 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 Eligible Rollover Recipient or the
joint lives (or joint life expectancies) of the Eligible Rollover Recipient and
the Eligible Rollover Recipient's designated Beneficiary, or for a specified
period of ten years or more; (2) any distribution to the extent such
distribution is required under Code Section 401(a)(9); (3) any hardship
distribution described in Code Section 401(k)(2)(B)(i)(IV); (4) the portion of
any other distribution(s) that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities); and (5) any other distribution(s) that is reasonably
expected to total less than $200 during a year. 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 plan described in Code Section 401(a)
other than this Plan that accepts the Eligible Rollover Recipient's Eligible
Rollover Distribution. However, in the case
52
8.07 Direct Rollovers.
of an Eligible Rollover Distribution to the surviving spouse, an Eligible
Retirement Plan is such an individual retirement account or individual
retirement annuity. An Eligible Rollover Recipient 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 an
alternate payee under a Qualified Domestic Relations Order are Eligible Rollover
Recipients with regard to the interest of the surviving spouse, spouse, or
former spouse. A non-spouse Beneficiary is not an Eligible Rollover Recipient.
8.08 Incapacity. If any person entitled to a benefit payment under the Plan
is, in the opinion of the Administrative Committee, at any time physically or
mentally incapable of personally receiving and giving a valid receipt for any
payment under the Plan, the Administrative Committee may, unless and until a
claim shall have been made by a duly qualified guardian, conservator, or
committee of such person, direct payment thereof to any person or institution
then, in the opinion of the Administrative Committee, contributing toward or
providing for the care or maintenance of such person, and such payment shall
completely discharge all liability with respect to the amount so paid.
53
8.08 Incapacity.
ARTICLE IX
COMMENCEMENT OF BENEFIT PAYMENTS
9.01 Commencement of Benefit Payments. Unless the Participant elects
otherwise as described in subsection (b)(2) below, payment of benefits shall be
made or commence no later than the 60th day after the close of the Plan Year in
which occurs the later of the Participant's attainment of age 65 or Termination
of Employment, provided that --
(a) Upon advance notice, a Participant may request a distribution of
the amount to which he or she is entitled under Article VIII at any date on or
after the Participant's Termination of Employment, but no later than the
Participant's Required Beginning Date (as defined in Section 9.02).
(b) Any distribution to a Participant prior to his or her attainment
of age 65 shall require such Participant's consent. With regard to this required
consent --
(1) No consent shall be valid unless the Participant has received
a general description of the material features and an explanation of the
relative values of the optional forms of benefit available under the Plan, and
the Participant has been informed of his or her right to defer receipt of the
distribution. If a Participant fails to consent, it shall be deemed an election
to defer the commencement of payment of any benefit. However, any election to
defer the receipt of benefits
54
9.01 Commencement of Benefit Payments.
shall not apply with respect to distributions which are required under Code
Section 401(a)(9).
(2) Notice of the rights specified under this subsection (b)
shall be provided no less than 30 days and no more than 90 days before the date
the distribution commences. However, if the Participant, after having received
this notice, affirmatively elects a distribution, distribution may commence less
than 30 days after the notice was provided if the Participant was provided with
information that clearly indicates that he or she has at least 30 days to
consider whether to consent to the distribution.
(3) Consent of the Participant to the distribution must not be
made before the Participant receives the notice and must not be made more than
90 days before the date the distribution commences.
9.02 Distribution Requirements. The requirements of this Section will apply
to any distribution of a Participant's interest and will take precedence over
any inconsistent provisions of the Plan.
(a) All distributions made under this Plan will comply with Code
Section 401(a)(9), including the minimum distribution incidental death benefit
requirement under proposed Treasury Regulation Section 1.401(a)(9)-2.
(b) "Required Beginning Date." The entire interest of a Participant
-------------------------
must be distributed or begin to be distributed no later than the Participant's
Required Beginning
55
9.02 Distribution Requirements.
Date. The Required Beginning Date is April 1 of the calendar year following the
later of --
(1) the calendar year in which the Participant attains age 70
1/2; or
(2) the calendar year in which the Participant Terminates
Employment; provided, however, that this subsection (b)(2) shall not apply to a
Participant who is a 5% owner (as defined in Code Section 416(i)(1)(B)) of
Prudential.
(c) Limits on Distribution Periods. Distribution, if not made in a
------------------------------
single sum, may only be made over one of the following periods:
(1) the life of the Participant;
(2) the lives of the Participant and his or her spouse if
payments are to be made to the spouse, otherwise his or her designated
Beneficiary;
(3) a period certain not extending beyond the Participant's life
expectancy; or
(4) a period certain not extending beyond the life expectancy of
the Participant and his or her spouse, if applicable, otherwise his or her
designated Beneficiary.
(d) Minimum Distribution -- Annuities. If the Participant's benefit is
---------------------------------
distributed in the form of a purchased annuity, distribution thereunder will be
made in accordance with the requirements of Code Section 401(a)(9)(D).
(e) If distributions must begin pursuant to Code Section 401(a)(9) and
the Participant has not selected an optional form of distribution that complies
with this Article, the
56
9.02 Distribution Requirements.
Administrative Committee will compute a minimum distribution amount and will
distribute it in conformity with Code Section 401(a)(9). The minimum
distribution amount for a Participant will be determined on the basis of the
joint life expectancies of the Participant and the person designated by the
Participant as the Beneficiary for purposes of determining the minimum
distribution amount. If the Participant does not designate a Beneficiary for
purposes of calculating the minimum distribution amount, the minimum
distribution amount will be determined on the basis of the Participant's life
expectancy only. For Participants who turn age 70 1/2 in 2001 or thereafter,
unless the Participant elects otherwise, the life expectancy of the Participant
and, as applicable, the Participant's spouse shall not be subject to
recalculation in accordance with Code Section 401(a)(9)(D). Life expectancy and
joint and last survivor expectancy shall be computed using the return multiples
in Tables V and VI of Treasury Regulation Section 1.72-9. Distributions that
commence under this Section 9.02(e) after 2000 shall be made from the
Participant's Accounts in the order specified in items (1) through (8) of
Appendix C.
57
Section 9.02 Distribution Requirements.
ARTICLE X
WITHDRAWALS
10.01 Regular In-Service Withdrawals. An Employee may make a withdrawal
from the nonforfeitable portion of his or her Accounts described in items (1)
through (4) of Appendix C, and, if the Employee is at least age 59 1/2, from the
nonforfeitable portion of his or her Accounts described in items (1) through (7)
of Appendix C. An Employee may make no more than 5 withdrawals per Plan Year
under this Section 10.01, and the amount of any such withdrawal must equal at
least $300 or, if less, the total amount available for withdrawal by the
Participant. To the extent permitted under this Section 10.01, withdrawals shall
be made from the Participant's Accounts in the order specified in Appendix C.
10.02 Hardship Withdrawals.
(a) An Employee may make a hardship withdrawal from the nonforfeitable
portion of his or her Accounts described in items (1) through (6) of Appendix C,
by submitting a request in the manner required by the Administrative Committee.
The amount of any such withdrawal must equal at least $300 or, if less, the
total amount available for withdrawal by the Participant. An Employee's request
for a withdrawal shall be subject to the following provisions:
(1) The hardship withdrawal must be made on account of an
Employee's immediate and heavy financial need. The
58
10.01 Regular In-Service Withdrawals.
following events or expenses shall be considered immediate and heavy financial
needs under the Plan:
(i) expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, the Participant's spouse or any
dependents of the Participant (as defined in Section 152 of the Code), or
necessary for these persons to obtain medical care described in Code Section
213(d);
(ii) costs directly related to the purchase (excluding mortgage
payments) of a principal residence for the Participant;
(iii) payment of tuition, related educational fees, and room and
board expenses for the next 12 months of post-secondary education for the
Participant, his or her spouse, children or dependents (as defined in Code
Section 152); and
(iv) payments necessary to prevent the eviction of the
Participant from his or her principal residence or foreclosure on the mortgage
of the Participant's principal residence.
(2) A hardship withdrawal may be for no more than the amount necessary
to relieve the financial need, and the Employee must not be able to satisfy the
need from other resources that are reasonably available to the Employee. For
this purpose, the Employee's resources are deemed to include those assets of the
Employee's spouse and minor children that are reasonably available to the
Employee. The amount of an immediate and heavy financial need may include any
amounts necessary to pay any federal, state,
59
10.02 Hardship Withdrawals.
or local income taxes or penalties reasonably anticipated to result from the
distribution. The Administrative Committee shall determine whether these
criteria are met on the basis of all the relevant facts and circumstances, and,
to the extent that the Administrative Committee may reasonably rely on a
Employee's representations, the Administrative Committee may consider a
withdrawal necessary to satisfy the Employee's financial need if the Employee
represents that the need cannot reasonably be relieved:
(i) through reimbursement or compensation by insurance or
otherwise;
(ii) by liquidation of the Employee's assets;
(iii) by cessation of Before-Tax Contributions or After-Tax
Contributions; and
(iv) by other distributions or nontaxable loans currently
available from plans maintained by the Employer or by any other employer, or by
borrowing from commercial sources on reasonable commercial terms, in an amount
sufficient to satisfy the need.
For purposes of this paragraph, a need cannot reasonably be relieved by one
of the actions listed above if the effect would be to increase the amount of the
need.
(b) To the extent permitted under this Section 10.02, withdrawals
shall be made from the Participant's Accounts in the order specified in
Appendix C.
60
Section 10.02 Hardship Withdrawals.
10.03 Administration. All requests for withdrawal must be made in a manner
satisfactory to the Administrative Committee. To the extent applicable, the
withdrawal amount and origin will be determined based on the most recent
information practically available to the Administrative Committee after receipt
of a withdrawal application in good order. The withdrawal will be distributed as
soon as administratively practicable thereafter.
61
10.03 Administration.
ARTICLE XI
VESTING AND EARLY TERMINATION
11.01 Vested Percentage of Certain Contributions. Each Participant shall at
all times be 100% vested in his or her Before-Tax Contribution Account,
After-Tax Contribution Account and Rollover Account.
11.02 Vested Percentage of Company Matching Contribution Accounts. Each
Participant who was an Employee on both December 31, 2000 and January 1, 2001,
shall at all times on and after January 1, 2001 be 100% vested in his or her
Pre-2001 Company Matching Contribution Account (if applicable) and Post-2000
Company Matching Contribution Account. Each other Participant shall be 100%
vested in the portion of his or her Pre-2001 Company Matching Contribution
Account (if applicable) and Post-2000 Company Matching Contribution Account that
has not been forfeited under Section 11.03 upon the earliest of the
Participant's (a) attainment of age 65 while an Employee, (b) Disability Date,
(c) death occurring while an Employee, (d) completion of 3 Years of Service, or
(e) the Participant's Reemployment Commencement Date if the Participant was an
Employee at any time prior to January 1, 2001. In all other cases, the
Participant shall be 0% vested in his or her Pre-2001 Company Matching
Contribution Account and Post-2000 Company Matching Contribution Account.
62
11.01 Vested Percentage of Certain Contributions.
11.03 Forfeitures. A Participant who ceases to be an Employee before
becoming 100% vested shall have the non-vested portion of his or her Accounts
moved to a Forfeiture Pending Account. Each Participant's Forfeiture Pending
Account shall be invested in an Investment Fund providing a fixed rate of
return, unless otherwise specified by the Investment Oversight Committee. The
Participant's non-vested Account balance will be forfeited when the
Participant's Period of Severance equals 5 years. Forfeited amounts shall be
used to reduce Company Matching Contributions, unless the Employer elects to use
such amounts to pay reasonable Plan administrative expenses.
11.04 Vesting Following Reaffiliation. Except as otherwise provided in
Section 11.02, upon and following a Participant's Reemployment Commencement
Date, the Participant's vested percentage (as determined under Section 11.02(e))
in his or her Post-2000 Company Matching Contribution Account shall be
determined by including the Period of Service accumulated on behalf of the
Participant prior to his or her Reemployment Commencement Date; provided,
however, that such period shall not be included if (1) the Participant had a
vested percentage of 0% at the time of his or her most recent Severance from
Service Date, and (2) the Participant experienced at least a 5-year Period of
Severance prior to his or her Reemployment Commencement Date.
63
11.03 Forfeitures.
11.05 Separation from Service. Notwithstanding any provision in Article XI
to the contrary, if the Employee's Termination of Employment prior to age
59 1/2 --
(a) does not constitute a separation of service, or
(b) is not due to a sale by an Affiliate of substantially all of the
assets used by the Affiliate in a trade or business or a sale by the Affiliate
of its interest in a subsidiary, with respect to which the Administrative
Committee has determined to apply the distribution rules of Code Section
401(k)(10), then no distribution of amounts attributable to the Before-Tax
Contribution Account shall be made prior to the earlier of the date on which the
Employee attains age 59 1/2 or separates from service.
64
Section 11.05 Separation from Service.
ARTICLE XII
LOANS
12.01 In General. Upon the application of a Participant, and subject to the
terms of this Article XII, the Plan may make loans to the Participant. Loans
shall be made from the Participant's Before-Tax Contribution Account and/or
Rollover Account. Loans shall be made first from the Participant's Before-Tax
Contribution Account, and second from the Participant's Rollover Account. Loans
shall be made available to all Participants who are actively employed by an
Affiliate, as well as any Participant or Beneficiary who is a party-in-interest,
as defined in ERISA Section 3(14), and who retains an interest in an Account
under the Plan; provided that such class of Participants and Beneficiaries does
not discriminate in favor of Highly Compensated Employees. For purposes of this
Article XII only, the term "Participant" shall include any Participant or
Beneficiary eligible to request a loan from the Plan.
12.02 Loan Limits. The Participant may have only one loan outstanding at
any time. The Participant must wait (a) 30 calendar days after full repayment of
a loan, and (b) for a loan that defaults on or after January 1, 2001, until
foreclosure of such defaulted loan, before he or she can apply for a new loan.
The amount of a loan to a Participant (when added to the Participant's
outstanding loan balance) shall not exceed the least
65
Section 12.01 In General.
of (a) $50,000, reduced by the excess of the Participant's highest outstanding
loan balance from the Plan during the 1 year period immediately preceding the
date of a new loan over the Participant's outstanding loan balance on such date,
(b) 50% of the Participant's vested Account, or (c) 100% of the value of the sum
of the balance, if any, of the Participant's Before-Tax Contribution Account and
Rollover Account. In determining the maximum loan amount, first the limitations
under the Plan set forth in the previous sentence are applied, then the limit in
(a) above shall be applied, in accordance with the requirements of Code Section
72(p)(2)(A), by taking into account all loans to the Participant from any
qualified plan maintained by an Affiliate. The Participant shall be entitled to
borrow from the Plan the lesser of the two amounts. No loan shall be made for
less than $500.
12.03 Loan Application. Application by a Participant for a loan shall be in
a manner prescribed by the Administrative Committee and shall be submitted for
review and approval or disapproval in a manner prescribed by the Administrative
Committee. Upon receiving the loan proceeds, a Participant shall be obligated to
execute a promissory note and authorize payroll withholding, or to take such
other action(s) as the Administrative Committee may determine.
12.04 Collateralization. If the loan is approved, there shall be
established a special loan account by liquidating a
66
Section 12.03 Loan Application.
portion of the investment of the Participant's Account balance in the amount of
the loan. Each loan shall be secured by an amount in the Participant's Accounts
equal to the amount of the loan, but not greater than 50% of the borrower's
entire right, title and interest in his or her vested Account balances.
12.05 Interest Rate. Each loan agreement shall provide for the payment of
interest at a rate determined by the Administrative Committee as follows. The
loan interest rate for a calendar quarter will be the Prime Rate, as published
in The Wall Street Journal, for the 15th business day of the month preceding the
calendar quarter.
12.06 Repayment. The repayment of any loan granted pursuant to this Article
XII shall be in accordance with the terms and conditions determined by the
Administrative Committee; provided, every loan shall be repaid in substantially
level periodic installments of principal and interest by payroll deduction, or
by an alternative repayment method (if any) specified by the Administrative
Committee in its procedures, payable not less frequently than quarterly over the
term thereof. The Participant has the right at any time to repay the balance of
his or her loan in a lump sum payment. The term of a loan shall not exceed 5
years. Notwithstanding the foregoing, the repayment of an outstanding loan of an
Employee on an approved Leave of Absence without pay shall be suspended for the
period of leave, but not longer than 1 year. Any such suspension, however, shall
67
Section 12.05 Interest Rate.
not extend the term of the loan beyond 5 years, and interest shall not accrue
during the suspension period.
Notwithstanding the foregoing, a Participant who obtains a loan from the
Plan in accordance with this Article XII and subsequently performs service in
the uniformed services (as defined in chapter 43 of title 38, United States
Code) may elect to suspend loan repayments during such period (whether or not
such service constitutes qualified military service, as defined under Code
Section 414(u)(5)). Such election shall be made in accordance with procedures
prescribed by the Administrative Committee and such period of suspension shall
not be taken into account in determining whether the term of the loan exceeds 5
years.
12.07 Default. A loan granted pursuant to this Article XII that is not
repaid shall be deemed to be in default upon the earlier of (a) the 60th day
following the date the Participant ceases to be an Employee, (b) the 60th day
following the Participant's failure to make payment on the loan as due via
payroll deduction (or otherwise), or (c) the 60th day following the loan issue
date if the first scheduled repayment has not be received by such date. If a
loan from the Rollover Account is in default, the Plan shall foreclose on the
loan and deduct any outstanding balance plus accrued interest from the
Participant's Rollover Account immediately upon date of default. If a loan from
the Before-Tax Contribution Account is in default, the loan may not be
foreclosed upon until the earliest to occur of the
68
Section 12.07 Default.
Participant's death, Disability Date, attainment of age 59 1/2, separation from
service, termination of the Plan or disposition described in Code Section
401(k)(10)(A). A Participant shall be permitted to repay in a single sum the
entire outstanding balance (including interest) of a loan after default but
prior to foreclosure.
12.08 Repayments After Taxable Distribution. Any repayment of a loan after
it has been reported as a taxable distribution under Code Section 72(p) shall be
credited to the Before-Tax Contribution Account or Rollover Account that was the
source of the loan, and shall constitute "investment in the contract" for
purposes of Code Section 72.
12.09 Additional Rules. All loans shall be subject to such further rules
and regulations as the Administrative Committee shall from time to time
prescribe and administer in a non-discriminatory manner.
69
Section 12.08 Repayments After Taxable Distribution.
ARTICLE XIII
INALIENABILITY OF BENEFITS
The interest of any person entitled to benefits under the Plan in any
Account shall not be subject to voluntary or involuntary alienation, sale,
pledge, encumbrance, charge, levy, anticipation, assignment, transfer,
attachment, execution, garnishment, sequestration or other legal or equitable
process applied by any creditor of such person, except as provided under a
Qualified Domestic Relations Order or as otherwise allowed under Code Section
401(a)(13) in accordance with procedures adopted by the Administrative
Committee.
Notwithstanding anything contained herein to the contrary that would
otherwise require the delay of the distribution of benefits, to the extent
provided under the provisions of a Qualified Domestic Relations Order, any
amount which becomes payable to an alternate payee of a QDRO may be paid to the
alternate payee at any time after qualification of the QDRO even though the
Participant may not be entitled to payment under the Plan at such time, provided
that the manner of payment is permitted in accordance with applicable law and is
one which is available to Participants under the Plan.
70
ARTICLE XIII
INALIENABILITY OF BENEFITS
ARTICLE XIV
ADMINISTRATION AND FIDUCIARIES
14.01 Plan Sponsor. Prudential is the "plan sponsor" of the Plan, as
described by ERISA Section 3(16)(B).
14.02 Administrative Committee.
(a) General. The Administrative Committee shall mean a committee
-------
composed of three or more Employees, one of whom shall be Chairperson. The
Prudential Executive Vice President of Human Resources (or successor to the
duties of that office) shall designate the individual who shall be the
Chairperson and the Chairperson shall designate the remaining members of the
Administrative Committee.
(b) Administrative Responsibilities. The Administrative Committee
-------------------------------
shall have responsibility, and full and absolute discretion and authority, to
control and manage the operation and administration of the Plan, including
without limitation the specific responsibilities and powers described in the
provisions of this Plan. In addition, the Administrative Committee shall --
(1) be a "named" fiduciary within the meaning of Section
402(a)(2) of ERISA and the Plan Administrator, as described by ERISA Section
3(16)(A), provided that the Administrative Committee may appoint another person
to be the Plan Administrator to carry out some or all of the Administrative
71
Section 14.01 Plan Sponsor.
Committee's responsibilities, or remove such person, by a written notice to such
person; and
(2) upon consultation with the Investment Oversight Committee,
implement and administer the operation of the Investment Funds selected by the
Investment Oversight Committee.
(c) Final Decision Authority. The Administrative Committee or its
------------------------
delegate (including without limitation an Administrator appointed under Section
14.02(b), or any person named by the Administrative Committee under Section
14.04 to carry out some or all of its responsibilities) shall have full
discretionary authority to determine all questions and matters that may arise in
the administration of the Plan or in carrying out its responsibilities or
exercising any authority under the Plan, including without limitation the
resolution of questions of fact, interpretation or application. Benefits under
this Plan shall be paid only if the Administrative Committee decides in its
discretion that the applicant is entitled to them. In all such cases, each
decision of the Administrative Committee or its delegate shall be final and
binding upon all parties.
14.03 Investment Oversight Committee.
(a) General. The Investment Oversight Committee shall consist of three
-------
or more individuals appointed by name or by title by the Investment Committee of
the Board of Directors.
(b) Investment Responsibilities. The Investment Oversight Committee
---------------------------
shall be a "named fiduciary" within the meaning of Section 402(a)(2) of ERISA
and have responsibility for
72
Section 14.03 Investment Oversight Committee.
implementing the Plan's funding policy and method consistent with Section 15.01
and consistent with ERISA, and for establishing the Plan's investment policies.
The Investment Oversight Committee shall select and monitor the Investment Funds
and direct the exercise of voting or similar rights for any security held in the
Plan Fund, unless responsibility for the management of such security is granted
to an investment manager or delegated to another fiduciary by the Investment
Oversight Committee under Section 14.04. The Investment Oversight Committee has
authority to --
(1) appoint and remove a Trustee or Trustees for a portion of or
all of the assets of the Plan Fund, and, upon notice to the Administrative
Committee, to enter into one or more trust agreements with such Trustee(s) on
behalf of Prudential, and direct such Trustee(s) with respect to the management
of the Plan's assets; and
(2) appoint and remove one or more investment manager(s), as
defined in ERISA Section 3(38), to serve as investment manager for any portion
of the Plan Fund.
(c) Discretionary Authority. The Investment Oversight Committee or its
-----------------------
delegate (including, without limitation, any person named by the Investment
Oversight Committee under Section 14.04 to carry out some or all of its
responsibilities) shall have full discretionary authority to determine all
questions and matters that may arise in carrying out its responsibilities or
exercising any authority under the Plan.
73
Section 14.03 Investment Oversight Committee.
14.04 Delegation and Allocation of Fiduciary Responsibilities.
(a) Delegation of Fiduciary Authority. The Administrative Committee
---------------------------------
and the Investment Oversight Committee shall have the power to delegate their
respective fiduciary responsibilities (other than trustee responsibilities) to
Employees or to other individuals or organizations by notifying them as to the
duties and responsibilities delegated. Each person to whom responsibilities are
so delegated shall serve at the pleasure of the committee making the delegation
and, if a full-time Employee, without payment by the Plan of additional
compensation for such services. Any such person may resign by delivering a
written resignation to the committee that made the delegation. Vacancies created
by resignation, death or other cause may be filled by the committee that made
the delegation or the assigned responsibilities may be reassumed or redelegated
by such committee.
(b) Allocation of Fiduciary Responsibilities. The Administrative
----------------------------------------
Committee and the Investment Oversight Committee each may allocate their
fiduciary responsibilities between themselves and among their members according
to such rules and procedures as they each may adopt for such purposes.
(c) Limitations on Fiduciary Responsibility. No fiduciary of the Plan
---------------------------------------
shall be responsible for any acts or failures by another Plan fiduciary, unless
the Plan provides for shared fiduciary responsibility and such shared
responsibility was
74
Section 14.04 Delegation and Allocation of Fiduciary Responsibilities.
not allocated or delegated as described herein. The committees and each of their
members, and any other Plan fiduciaries may serve in more than one fiduciary
capacity with respect to the Plan.
14.05 Rules and Procedures. The Administrative Committee and the Investment
Oversight Committee are authorized to adopt rules to govern their proceedings.
In making determinations or calculations, the committees shall be entitled to
rely on information provided by the Employer, a Participant, a Beneficiary, an
alternate payee under a QDRO, legal counsel, an insurer, an auditor, and any
other service provider rendering investment, accounting, actuarial, legal, or
insurance advice.
14.06 Employment of Agents. The Administrative Committee and the Investment
Oversight Committee may each, at the Plan's expense, (a) employ counsel,
auditors, and other agents and such clerical and other services as it may
require to carry out its duties under the Plan and the provisions of the Plan;
and (b) engage persons to render investment, accounting, actuarial, legal or
insurance advice relating to their fiduciary and other responsibilities under
the Plan and rely on such advice.
14.07 Meetings. The Administrative Committee and the Investment Oversight
Committee shall, from time to time, hold meetings at such place or in such
manner as the committee so chooses. Each committee may also act without a
meeting. Action
75
Section 14.05 Rules and Procedures.
shall be by the majority vote of the members of the committee, or if at a
meeting, by a majority of the members at the meeting. Each committee shall
maintain a record of its actions.
14.08 Claims and Appeals. All inquiries and claims respecting the Plan
shall be in writing directed to the Administrative Committee at such address as
may be specified from time to time. In the case of a claim respecting benefits
paid or payable with respect to a Participant, a written determination allowing
or denying the claim shall be furnished to the claimant within 90 days of the
date on which the claim is filed. If special circumstances (such as for a
hearing) require a longer period, the claimant will be notified in writing,
prior to the expiration of the 90-day period, of the reasons for an extension of
time; provided, however, that no extensions will be permitted beyond 90 days
after expiration of the initial 90-day period. A denial or partial denial of a
claim shall be dated and signed by the Administrative Committee and shall
clearly set forth --
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the
denial is based;
(c) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why such material or
information is necessary; and
(d) an explanation of the procedure for review of the denied or
partially denied claim set forth below.
76
Section 14.08 Claims and Appeals.
If no written determination is furnished to the claimant, then the claim
shall be deemed denied and the review procedure described below will become
available to the claimant.
A claimant may obtain review of the denial or partial denial of a claim by
filing a written notice of appeal with the Administrative Committee within 60
days after the determination date or, if later, within 60 days after the receipt
of a written notice denying the claim. A claimant or the claimant's
representative shall have the right to review pertinent documents and submit
issues and comments in writing.
The Administrative Committee shall provide a prompt written decision
clearly setting forth findings of fact and the specific reasons for the decision
written in a manner calculated to be understood by the claimant and containing
specific references to pertinent Plan provisions on which the decision is based.
A decision shall be rendered no more than 60 days after the Administrative
Committee's receipt of the request for review, except that such period may be
extended for an additional 60 days if the Administrative Committee determines
that special circumstances (such as for a hearing) require such extension. If an
extension of time is required, written notice of the extension shall be
furnished to be claimant before the end of the initial 60-day period.
Claimants must follow the claims procedures described by this Section 14.08
before taking action in any other forum regarding a claim for benefits under the
Plan. Any suit or legal action initiated by a claimant under the Plan must be
brought by
77
Section 14.08 Claims and Appeals.
the claimant no later than 1-year following a final decision on the claim for
benefits by the Administrative Committee (including the decision on any appeal
of the claim). The 1-year statute of limitations on suits for benefits shall
apply in any forum where a claimant initiates such suit or legal action.
14.09 Indemnification. Each individual who has been designated to carry out
any fiduciary or administrative responsibility under the Plan, whether an
employee, officer or director of the Employer, to the extent permitted by law,
shall be indemnified by the Employer against all expenses (including costs and
attorney's fees) actually and necessarily incurred or paid by him or her in
connection with the defense of any action, suit or proceeding in any way
relating to or arising from the Plan to which he or she may be made a part by
reason of his
78
Section 14.09 Indemnification.
or her being or having been so designated, or by reason of any action or
omission or alleged action or omission by him or her in such capacity, and
against any amount or amounts which may be paid by him or her (other than to the
Employer) in reasonable settlement of any such action, suit or proceeding, where
it is in the interest of the Employer that such settlement be made. In cases
where such action, suit or proceeding shall proceed to final adjudication, such
indemnification shall not extend to matters as to which it shall be adjudged
that such individual is liable for gross negligence or willful misconduct in the
performance of his or her duties as such. The right of indemnification herein
provided shall not be exclusive of other rights to which any such individual may
now or hereafter be entitled, and shall inure to the benefit of his or her
heirs, executors and administrators.
14.10 Plan Expenses. To the extent permitted by law, the expenses of the
Plan shall be paid from the Plan Fund unless paid by the Employer. The Employer
may elect to pay expenses properly chargeable to the Plan and then obtain
reimbursement from the Plan for advanced payment of expenses. Expenses of the
Plan include, but are not limited to, investment management, custodial, legal,
accounting, actuarial, recordkeeping, reporting and disclosure, insurance and
bonding and consulting expenses, and expenses in administering the Plan.
14.11 Electronic Administration. In its rules and procedures for the
administration of the Plan (including without limitation in procedures covering
any directions, elections or other actions by Participants, Beneficiaries, and
alternate payees under QDROs, and the delivery of statements and other
disclosure materials to such individuals), the Administrative Committee may
provide for the use of electronic communications and other media in accordance
with applicable law.
79
Section 14.10 Plan Expenses.
ARTICLE XV
PLAN INVESTMENTS & TRUSTEE
15.01 Funding Policy; Permissible Investment. The Plan is funded through
Employee and Employer contributions and earnings thereon received by the Plan
Fund. The Plan Fund may be invested through use of trust accounts, mutual funds
or insurance contracts. These trust accounts or mutual funds may include
accounts or funds sponsored by Prudential or an affiliate of Prudential; these
insurance contracts may include contracts issued by Prudential or an affiliate
of Prudential, and may provide for the investment of some or all of the Plan
Fund in one or more separate accounts maintained by Prudential or an affiliate
of Prudential. Amounts invested in insurance contracts or policies issued by an
insurance company qualified to do business in a state or otherwise held by such
an insurance company need not be held in the Trust.
15.02 Participant Investments. It is intended that this Plan constitute a
plan described in ERISA Section 404(c) and title 29 of the Code of Federal
Regulations Section 2550.404c-1. To the extent the requirements of ERISA Section
404(c) are satisfied, the Administrative Committee, the Investment Oversight
Committee, the Trustee, and all other Plan fiduciaries shall not be liable for
any losses which are the direct and necessary result
80
Section 15.01 Funding Policy; Permissible Investment.
of investment directions given by Participants, Beneficiaries, or alternate
payees under QDROs.
(a) Investment Directions. Each Participant, Beneficiary, and
---------------------
alternate payee under a QDRO may direct the investment of his or her Accounts in
one or more of the Investment Funds offered under the Plan. Amounts received in
repayment of a Participant's loan shall be invested according to procedures
developed by the Administrative Committee as in effect from time to time. If a
Participant, Beneficiary, or alternate payee under a QDRO does not provide
directions with respect to any portion of the Plan Fund, the undirected amounts
shall be invested in an Investment Fund providing a fixed rate of return, unless
otherwise specified by the Investment Oversight Committee.
(b) Investment Funds. The Investment Oversight Committee may, upon
----------------
consultation with and advance notice to the Administrative Committee, add,
substitute, or delete any of the Investment Funds. If any existing Investment
Fund is deleted, the Investment Oversight Committee shall provide the
Administrative Committee with instructions regarding the reinvestment of amounts
previously allocated to the deleted Investment Fund.
15.03 Procedures for Participant Elections and Directions. All Participant
elections and directions under the terms of the Plan shall be made in accordance
with rules and procedures prescribed by the Administrative Committee. Subject to
81
Section 15.03 Procedures for Participant Elections and Directions.
the rules and procedures established by the Administrative Committee --
(a) Participants, Beneficiaries, and alternate payees under QDROs may
direct the transfer of accumulated Accounts between Investment Funds and such
transfers shall become effective as of the Valuation Date that occurs as soon as
administratively practicable following such direction, unless otherwise
specified by the Administrative Committee;
(b) Participants may elect to change investment allocations of future
After-Tax Contributions, Before-Tax Contributions, and Company Matching
Contributions and such investment allocations shall become effective as of the
pay period that occurs as soon as administratively practicable following such
election; and
(c) Covered Employees may direct the investment of Rollover
Contributions made in accordance with Section 4.06.
To the extent any individual fails to provide the Administrative Committee
with an election or direction in good order in accordance with the rules and
procedures established by the Administrative Committee, the individual's most
recent election or direction shall remain effective. The Administrative
Committee may decline to implement investment instructions where it deems
appropriate, including without limitation, those that may result in a prohibited
transaction under ERISA Section 406 or Code Section 4975 or generate income that
would be taxable to the Plan or Trust.
82
Section 15.03 Procedures for Participant Elections and Directions.
15.04 Trustee. The Trustee shall have exclusive responsibility for the
custody of assets from and after the receipt of contributions or other additions
to the Trust Fund, and shall have authority and discretion to manage, acquire,
and dispose of the assets of the Trust Fund, subject to (a) the terms of this
Plan and the trust agreement made between the Trustee and Prudential, and (b)
any investment policy directions from the Investment Oversight Committee and the
directions of the Investment Oversight Committee with respect to voting rights
for any security held by the Trustee, except to the extent that responsibility
for management of any assets held in the Trust Fund is granted to an investment
manager or delegated to another fiduciary by the Investment Oversight Committee
under Section 14.04.
15.05 Allocation of Responsibility Regarding Plan Assets. If there is more
than one Trustee with respect to the Trust Fund or with respect to a particular
portion thereof, such Trustees shall each manage and control the assets
entrusted to them, except that with the approval of the Investment Oversight
Committee such Trustees may by agreement allocate any such specific
responsibilities, obligations or duties among themselves as they deem advisable,
including (without limitation) the duties of the Trustees respecting custody and
registration of securities and their duties respecting voting of securities.
83
Section 15.04 Trustee.
ARTICLE XVI
TOP HEAVY
16.01 In General. In any Plan Year in which the Plan is top-heavy the
Employer shall make such additional contributions to the Account of each
Participant who is not a Key Employee and who was employed by the Employer, so
that the sum of Employer contributions equal in the aggregate at least the
lesser of (a) 3% of the Participant's compensation as defined for purposes of
Code Section 415 or (b) the largest percentage of such compensation provided for
a Key Employee during the Plan Year. If a Participant participates in a defined
contribution pension plan maintained by an Affiliate, the minimum contribution
shall be made only if and to the extent such minimum contribution is not made to
such pension plan on behalf of such Participant.
If the Plan should for any Plan Year become top-heavy as defined in
Section 16.02, then, notwithstanding any other provisions of the Plan, the rules
in Section 16.03 shall apply to the Plan.
16.02 Top-Heavy Determination.
(a) Top-Heavy Defined. The Plan is top-heavy for a Plan Year if, as of
-----------------
the Determination Date, the aggregate of the Accounts under the Plan for Key
Employees exceeds 60% of the aggregate of the Accounts for all Employees, as
computed under Code Section 416(g). "Key Employee" shall be defined as in Code
84
Section 16.01 In General.
Sections 416(i) and 318. The "Determination Date" for purposes of Article XVI
shall mean the last day of the Plan Year preceding the Plan Year in question.
The value of the accumulated benefit for any Employee as of a Determination Date
shall include the aggregate distributions, including withdrawals, made with
respect to such Employee under the Plan during the 5-year period ending on the
Determination Date.
(b) Required Aggregation Groups. If the Plan is required to be
---------------------------
aggregated with other plans under the provisions of the following sentences,
then the aggregated plans taken together shall constitute the Plan for purposes
of this Section 16.02. Notwithstanding the foregoing, if the Plan is required to
be aggregated with a group of plans in a required aggregation group then if the
required aggregation group is not top-heavy for a Plan Year, the Plan is not
top-heavy for that Plan Year, and if the required aggregation group is top-heavy
for a Plan Year, then the Plan is top-heavy for that Plan Year. For purposes of
the preceding sentence, a required aggregation group means each plan of an
Affiliate in which a Key Employee participates, and each other such plan which
enables any plan in which a Key Employee participates to meet the coverage and
anti-discrimination requirements of Code Sections 401(a)(4) and 410.
(c) Permissive Aggregation Groups. Notwithstanding the above
-----------------------------
provisions, the Plan will not be top-heavy in any Plan Year in which a
permissive aggregation group to which the Plan belongs is not top-heavy. A
permissive aggregation group consists of plans maintained by the Employer or by
an
85
Section 16.02 Top-Heavy Determination.
Affiliate that are required to be aggregated plus one or more plans that are not
part of a required aggregation group but that satisfy the requirements of Code
Sections 401(a)(4) and 410 when considered together with the required
aggregation group.
(d) Top-Heavy Determination for a Group. A required aggregation group
-----------------------------------
or a permissive aggregation group is top-heavy for a Plan Year if, as of the
Determination Date, the sum of the present value of the cumulative accrued
benefits for Key Employees under all defined benefit plans included in such
group and the aggregate of the accounts of Key Employees under all defined
contribution plans included in such group exceeds 60% of a similar sum
determined for all participants in such plans under Code Section 416(g).
16.03 Top-Heavy Contingent Provisions. If the Plan is top-heavy for a Plan
Year, as defined in Section 16.02, then the combined employer contributions
hereunder and the contributions under any other defined contribution plan of an
Affiliate for the Plan Year for each Participant who is not a Key Employee,
expressed as a percentage of compensation and after adding thereto all Employee
contributions made by each such Participant, shall be not less than the lesser
of 3% or the largest percentage calculated in the same manner for any Key
Employee. "Compensation" for purposes of this Article XVI shall mean all
compensation paid to a Participant as an Employee during the Plan Year for
personal services rendered in the course of employment
86
Section 16.03 Top-Heavy Contingent Provisions.
within the meaning of Treasury Regulation Section 1.415-2(d) or any successor
regulation.
87
Section 16.03 Top-Heavy Contingent Provisions.
ARTICLE XVII
AMENDMENT AND TERMINATION
17.01 Amendment.
(a) Prudential reserves the right to change in whole or in part any or
all of the provisions of the Plan at any time, except as provided in Section
17.03. Any change shall be authorized by any one of the following:
(1) the Board of Directors;
(2) the Compensation Committee of the Board of Directors; or
(3) the Prudential Executive Vice President of Human Resources (or
successor thereto), or, as to items (i) through (iii) below, his or her delegate
who is an officer of Prudential, with respect to (i) minor changes necessary or
advisable for purposes of compliance with ERISA or other applicable laws and
regulation, (ii) ministerial changes that are necessary or appropriate to reduce
complexity or minimize administrative expenses, (iii) changes that do not
increase or decrease the estimated benefit costs of the Plan (or of the Plan,
The Prudential Retirement Plan Document component of the Prudential Merged
Retirement Plan and The Prudential Welfare Benefits Plan in total) by more than
the greater of $500,000 per year and $5,000,000 in terms of present value
subject to a limit of $25,000,000 (net) in terms of present value in any
12-month
88
Section 17.01 Amendment.
period, or (iv) changes to the eligibility provisions and the definition of
eligible earnings under the Plan.
(b) The determination of estimated benefit costs for the changes
described in subsection (a)(3)(iii) above shall be based on advice provided by
the group underwriter, actuary, or contract administration personnel, as
appropriate, based on current costs and shall not include administrative fees,
incurred charge backs, professional fees, or other similar types of ministerial
costs.
(c) The Prudential Executive Vice President of Human Resources (or
successor thereto) ("EVP"), or if so provided pursuant to the EVP's written
delegation, the Vice President of Total Compensation (or successor thereto)
and/or Vice President of Employee Benefits (or successor thereto) of Prudential,
is authorized and directed to: (i) determine whether any amendments to the Plan
are necessary or appropriate in relation to any business acquisition or
divestiture by an Affiliate ("Transaction"); (ii) determine whether the Plan
should receive assets and accept benefit liabilities pursuant to a termination,
spin-off or merger of a plan that is intended to be qualified under Code Section
401(a), and that is maintained by an Affiliate as a result of a Transaction; and
(iii) take any and all actions necessary or appropriate in connection with any
such determination, including, but not limited to, approving any such amendments
and executing any such amendments on behalf of the Company.
89
Section 17.01 Amendment.
(d) Except as otherwise specifically provided in the foregoing
provisions of this Section 17.01, all amendments to the Plan, once authorized,
may be executed by the Prudential Executive Vice President of Human Resources
(or successor thereto), or his or her delegate.
17.02 Termination. Prudential may terminate the Plan established hereunder
at its option at any time by resolution of its Board of Directors. Upon full
termination of the Plan without the establishment of a successor plan, as
described in Code Section 401(k)(10)(A)(i), the Administrative Committee shall
direct distribution of all assets remaining, after payment of any expenses
properly chargeable against the Plan, to Participants, Beneficiaries, and
alternate payees under QDROs in accordance with the Plan Accounts of each such
person at the time of distribution, in cash, and in such manner as Prudential
shall determine.
17.03 No Reversion; Vesting Upon Termination. Notwithstanding any provision
of this Plan except Section 5.03 and Article VI --
(a) No part of the income or principal of the Plan Fund shall be used
for or diverted to purposes other than for the exclusive benefit of
Participants, Beneficiaries, and alternate payees under QDROs, and for defraying
the reasonable expenses of administering the Plan.
(b) Upon any termination or partial termination of the Plan or the
complete discontinuance of contributions thereto
90
Section 17.02 Termination.
(within the meaning of Code Section 411(d)(3)) the interest of each affected
Participant, Beneficiary and alternate payee under a QDRO in his or her
Account(s) at the date of such termination, partial termination, or
discontinuance shall be nonforfeitable.
(c) No such amendment, discontinuance, or termination shall adversely
affect the rights of a Participant, Beneficiary or alternate payee under a QDRO
to amounts credited to his or her Plan Account(s) prior to the date of such
amendment, discontinuance, or termination.
(d) A partial termination of the Plan shall take place on the date on
which the event or the last of a series of events occurs to cause a partial
termination within the meaning of the Code.
17.04 Right of Participating Affiliate to Cease Participation. A
participating Affiliate other than Prudential may cease to participate in the
Plan at any time by appropriate action of its board of directors or other
governing body and written notice to Prudential.
91
Section 17.04 Right of Participating Affiliate to Cease Participation.
ARTICLE XVIII
MERGER, CONSOLIDATION OR
TRANSFER OF PLAN ASSETS
In the event of the merger or consolidation of the Plan with, or the
transfer of the assets and/or liabilities of the Plan to, another plan which is
qualified under Code Section 401(a), each Participant, Beneficiary, or alternate
payee under a QDRO under this Plan shall be entitled to receive a benefit
immediately after the merger, consolidation, or transfer which is equal to or
greater than the benefit he or she would have been entitled to receive
immediately prior to the merger, consolidation, or transfer if the Plan had been
terminated at such time.
92
ARTICLE XVIII
MERGER, CONSOLIDATION OR TRANSFER OF PLAN ASSETS
ARTICLE XIX
MISCELLANEOUS
19.01 Bonding. To the extent permitted by law, the requirement of giving
bond by any Trustee or other fiduciary or of giving surety on any bond shall be
dispensed with.
19.02 Insurance and Indemnification. Plan funds may be applied, in
accordance with ERISA Section 410(b), to the purchase of lawful insurance
covering the fiduciary obligations of persons who are fiduciaries respecting the
Plan and/or the Plan Fund, and such fiduciaries may purchase, with funds other
than Plan funds, waivers of subrogation.
19.03 Interpretation of Certain Items. Words in the masculine gender shall
include the feminine gender, the singular shall include the plural, and vice
versa, unless qualified by the context. Any references herein to "Articles,"
"Sections," "sub-sections," etc. apply to specific portions of the Plan, unless
the context clearly indicates to the contrary. Any headings for such Articles,
Sections, subsections, etc. used herein are included for ease of reference only,
and are not to be construed so as to alter any of the terms hereof.
19.04 Miscellaneous. This Plan shall not constitute an express or implied
contract between an Affiliate and any Employee,
93
Section 19.01 Bonding.
Participant, Beneficiary, or alternate payee under a QDRO, and nothing contained
herein shall give to any such person the right to be retained in the employ of
an Affiliate or to interfere with the management of an Affiliate's business or,
except as otherwise provided by law, to interfere with the right of an Affiliate
to discharge any Employee at any time, nor shall it give an Affiliate the right
to require any Employee to remain in its employ, nor shall it interfere with the
right of any Employee to terminate his or her employment at any time.
19.05 Construction; Applicable Law; Failure to Enforce. It is intended that
the Plan and Trust be organized and operated in conformity with ERISA and with
the Code. This instrument shall be construed accordingly. The Plan and Trust
shall also be subject to the laws of the State of New Jersey to the extent
applicable, but without giving effect to the principles of conflict of laws
thereof. Failure to enforce any provision of the Plan shall not affect the right
thereafter to enforce such a provision, nor shall such a failure affect the
right to enforce any other provision of the Plan.
19.06 Participating Affiliates. Any Affiliate that was participating in the
Plan as of January 1, 2001 shall continue to participate in this Plan as of such
date. Any other Affiliate (other than Prudential) shall adopt the Plan by
executing a written instrument to such effect subject to the approval of
Prudential. Such instrument shall state any exceptions or
94
Section 19.05 Construction; Applicable Law; Failure to Enforce.
reservations subject to which an Affiliate adopts the Plan. Absent the express
consent of Prudential, the participation of an Affiliate shall terminate
automatically on the date it ceases to be (a) a member of a controlled group of
corporations (as defined in Code Section 1563(a), disregarding Sections
1563(a)(4) and 1563(e)(3)(c)) of which Prudential is a member, (b) any trade or
business, whether incorporated or not, which for any part of such year is
considered to be under common control with Prudential under regulations
prescribed by the Secretary of the Treasury pursuant to Code Section 414(c), (c)
any organization which for any part of such year is considered under regulations
prescribed by the Secretary of the Treasury pursuant to Code Section 414(m) to
be a member of an affiliated service group of which Prudential is a member, and
(d) any other entity required to be aggregated with Prudential under regulations
prescribed by the Secretary of the Treasury pursuant to Code Section 414(o).
19.07 Special Rules Regarding Acquisitions, Dispositions and Joint
Ventures, and Transfers of Assets and Plan Mergers. To the extent set out in
Appendix B, special rules shall apply to Participants, Beneficiaries, and
alternate payees under QDROs in connection with acquisitions, dispositions, and
joint ventures, and transfers of assets into the Plan and mergers of other
qualified plans into the Plan.
19.08 Missing Persons. If a Participant, Beneficiary,
95
Section 19.07 Special Rules Regarding Acquisitions, Dispositions and Joint
Ventures, and Transfers of Assets and Plan Mergers.
or alternate payee under a QDRO to whom a distribution is due cannot be located
despite reasonable efforts by the Administrative Committee, the interest of such
individual under the Plan shall be forfeited and used to reduce the Company
Matching Contribution, unless the Employer elects to use such amounts to pay
reasonable Plan administrative expenses, for the Plan Year in which the
forfeiture occurs; provided that such interest, without adjustment for gains or
losses, shall be restored to such individual out of forfeitures or, if
necessary, an additional Employer contribution if a claim is made by such
individual for his or her benefits.
19.09 Required Information. Participants and their spouses, Beneficiaries,
and alternate payees under QDROs shall furnish the Administrative Committee with
all proofs of dates of birth and death and proofs of continued existence
necessary for the administration of the Plan and any other information which the
Administrative Committee may reasonably require, and no person shall be liable
for the fulfillment of any obligations in any way dependent upon such
information unless and until the same shall have been received by the
Administrative Committee in form satisfactory to it.
19.10 Uniform Applicability. Any action taken that is required under the
provisions of the Plan shall be on a basis uniformly applicable to all persons
similarly situated, and no discretionary act shall be taken which is construed
by the
96
Section 19.09 Required Information.
Administrative Committee to be discriminatory under Code Section 401(a).
19.11 Reimbursement to Plan for Certain Payments. The Administrative
Committee reserves the right to recover on behalf of the Plan payments made to a
Participant, Beneficiary, or alternate payee under a QDRO in excess of the
benefits payable under the Plan. The Administrative Committee also reserves the
right to withhold the amount of such excess payment from future benefits payable
to such person.
Pursuant to delegation of authority from the Compensation Committee of the
Board of Directors of Prudential, the undersigned officer hereby executes this
document this day of December, 2000.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
----------------------------------------
Victor Sim
Vice President of Total
Compensation
97
Section 19.11 Reimbursement to Plan for Certain Payments.
APPENDIX A
TO
THE PRUDENTIAL EMPLOYEE SAVINGS PLAN
Special Exclusions from Earnings
The following types of variable or other irregular compensation are excluded
from Earnings under the Plan:
1. Compensation under the Annual Incentive Plan (formerly known as the
Variable Compensation Plan)
2. Annual Incentive Compensation (IC)
3. Management Incentive Compensation (ICP)
4. Compensation under the Capital Accumulation Plan for Investment
Professionals (CAPS)
5. Long Term Compensation (LT)
6. Compensation under the Incentive Compensation Plan for Investment
Professionals
7. PB&T Long Term Awards
8. Compensation under the Performance Share Appreciation Plan (PSAP --
Enterprise Plan)
9. Compensation under the Long Term Incentive Plan (LTIP)
10. Compensation under the Capital Agricultural Services Management
Compensation Plan
11. Compensation under the PIAC Incentive Compensation Plan
12. Compensation under the JRO Incentive Compensation Plan
13. Compensation under the PIA Long Term Plan
14. Single Bonus Payment Awards
15. Compensation payable to Participants affiliated with the former Prudential
Preferred Financial Services (which has become part of Individual Financial
Services) based on:
. Sale of Prudential Bank and Trust products
. Sale of Paul Revere Disability Income
. USA Brokerage Sales
. PRUSEL I, II, and III products
. Discovery Life Sales
. Discovery Annuity Sales
. Sale of PSI Mutual Funds sold jointly with a PSI FSA
. Management Compensation paid to Agents for performing limited
management duties under the Functional Agent Plan
. Referral fees on home mortgage origination
A-1
. Prudential Preferred Advisors and Financial Planners seminar fees
. Service Support Plus
16. Compensation payable to Participants affiliated with the former Prudential
Insurance & Financial Services (now part of Individual Financial Services)
based on:
. Commissions and referral fees related to Prudential Bank and Trust
products
. Extra Compensation
. Temporary Agency Adjustments
. PIBI finders fees for referrals from Prudential Representatives
. Sale of Paul Revere products
. Management Overall Effective Payments (MOEP)
. Commissions shared on sales by an Account Executive
. Payments under minimum weekly compensation
17. Compensation payable to Participants affiliated with the Group Department
based on:
. CGO Non-Exempt Incentive Compensation
. SGO Performance Bonus
. WGO Incentive Compensation for Non-Exempt Associates of STEAM
. SWGO Incentive Compensation
. NGO Incentive plans
. NAO Non-Management Incentive Compensation
. GLDO TTRIP
. Pharmacy Compensation & Evaluation
. HCCORP Contract Technicians, Contract Support Team or Atlanta
Incentive programs
. SBO Non-Exempt Incentive Compensation
. GSO Group Human Resources Non-Management Incentive Plan or Incentive
Compensation Plan for Non-Management Associates in Group Marketing &
Communications
A-2
APPENDIX B
TO
THE PRUDENTIAL EMPLOYEE SAVINGS PLAN
Special Rules Regarding
-----------------------
Acquisitions, Dispositions and Joint Ventures,
----------------------------------------------
and Transfers of Assets and Plan Mergers.
----------------------------------------
1. Prudential Reinsurance Holdings, Inc. Transaction
-------------------------------------------------
Each Eligible Employee who, immediately prior to the date Prudential
Reinsurance Company ("PruRe") ceases to be a member of a controlled group of
corporations (within the meaning of Code Section 414(b)) with Prudential in
connection with the sale by Pruco, Inc. of a portion of its interest in
Prudential Reinsurance Holdings, Inc. (the "PruRe IPO Date"), is (i) a Covered
Employee, and (ii) employed by PruRe, shall be fully vested in such Eligible
Employee's Company Matching Contribution Account as of the PruRe IPO Date.
In addition, each loan granted pursuant to Article XII to an Eligible
Employee who is employed by PruRe on the PruRe IPO Date, that is outstanding on
the PruRe IPO Date shall not be deemed to be in default on the PruRe IPO Date
pursuant to the terms of the first sentence of Section 12.07, but instead shall
be deemed to be in default upon the earliest to occur of:
B-1
(i) the date on which such Eligible Employee ceases to be employed with
PruRe and all of its affiliates (other than on account of death),
(ii) the end of the 90-day period commencing on the last date a loan
repayment under the Plan is due and paid,
(iii) the date 90 days after the PruRe IPO Date, and
(iv) in the case of death while employed by PruRe or any of its affiliates,
within a reasonable time established by the Administrative Committee.
2. Merit Behavioral Care Corporation Transaction
---------------------------------------------
(a) Loan Default. Each loan granted pursuant to Article XII to a
Participant who commences employment with Merit Behavioral Care Corporation
("MBC") in connection with Prudential's sale of assets to MBC contemplated in
the Agreement between Prudential and MBC dated July 31, 1996 (a "Transitioned
Participant") shall not be deemed to be in default on the date the Transitioned
Participant Terminates Employment in connection with such sale of assets,
pursuant to the first sentence of Section 12.07; provided, however, that,
notwithstanding the above, in the event that the transfer of Participant
Accounts from the Plan to the Merit Behavioral Care Corporation 401(k) Plan (the
"MBC 401(k) Plan") as contemplated in the Agreement between Prudential and MBC
dated July 31, 1996 does not occur by December 2, 1996, such Transitioned
Participant shall be deemed to be in default on
B-2
December 31, 1996, in the event such Transitioned Participant has not repaid the
outstanding balance of his or her loan in full by December 31, 1996.
(b) Loan Repayment. Effective with respect to loan repayments due from
--------------
Transitioned Participants on and after July 31, 1996, loan repayments need not
be made by payroll deductions. Such loan repayments may instead be made by the
Transitioned Participant's remitting checks to the Plan.
(c) Vesting. Each Houston Center Employee (as defined in Section 3.06 of
-------
the asset purchase agreement between Merit Behavioral Care Corporation and
Prudential dated as of July 31, 1996) whose Account balance under the Plan is
transferred to the MBC 401(k) Plan shall be fully vested in his or her Company
Matching Contribution Account as of day immediately prior to such transfer to
the MBC 401(k) Plan.
3. Integrated Pharmacy Solutions Inc. Transaction
----------------------------------------------
On December 22, 1996 (the "IPS Transfer Date"), in anticipation of the
intended purchase by Prudential or one of its subsidiaries of Integrated
Pharmacy Solutions Inc. ("IPS"), certain services previously provided by IPS
shall be transferred to, and assumed by, Prudential or one of its subsidiaries.
IPS employees providing such services will be transferred to Prudential on the
IPS Transfer Date (the "Transferred IPS Employees"). Each IPS Transferred
Employee who is a participant
B-3
in the Integrated Pharmacy Solutions, Inc. Code Section 401(k) Profit Sharing
Plan immediately prior to the IPS Transfer Date shall be an Eligible Employee.
In addition, an IPS Transferred Employee's service for IPS, Beekman Drug
Corporation, and Garrett-Mayes Pharmacy Corporation that precedes the IPS
Transfer Date shall be treated as service for the Employer for purposes of
determining eligibility to participate in the Plan and vesting in benefits under
the Plan.
4. International Business Machines Transaction
(a) Loan Default. Each loan granted pursuant to Article XII to a
------------
Participant who commences employment with International Business Machines
Corporation or a subsidiary thereof ("IBM") in connection with either of the
Information Technology Services Agreements between Prudential and International
Business Machines Corporation dated September 6, 1996 shall not be deemed to be
in default, pursuant to the first sentence of Section 12.07, on the date such
Participant Terminates Employment in connection with either such Information
Technology Services Agreements between Prudential and International Business
Machines Corporation dated September 6, 1996 (the "1996 Agreements"); provided,
however, that, notwithstanding the above, such Participant shall be deemed to be
in default on the 90th day after such Participant Terminates Employment in
connection with either of the 1996 Agreements in the event such Participant has
B-4
not repaid the outstanding balance of his or her loan in full by such 90th day.
(b) Vesting. Each Participant who commences employment with IBM in
-------
connection with either of the 1996 Agreements or the Information Technology
Services Agreement between Prudential and International Business Machines
Corporation dated April 28, 1997 (collectively, the "1996 and 1997 Agreements")
shall be fully vested in his or her Company Matching Contribution Account as of
the day upon which he/she commences employment with IBM in connection with one
of the 1996 and 1997 Agreements.
5. AARP/Prudential Operations Transaction
--------------------------------------
Each Eligible Employee who (i) is identified as a "Scheduled Prudential
Employee" who will be offered employment by one of the Successor Companies (as
defined below) in a transfer agreement dated April 11, 1997 by and among
Prudential, the American Association of Retired Persons, Trustees of the AARP
Insurance Plan, Metropolitan Life Insurance Company, United HealthCare Insurance
Company, Hartford Fire Insurance Company, and Seabury & Smith, Inc. (the last
three entities are referred to as the "Successor Companies") (the "AARP Transfer
Agreement"), (ii) is an Eligible Employee under the Plan on the day before he or
she commences employment with one of the Successor Companies as provided under
the AARP Transfer Agreement (the "Employee Hire Date," as defined in the AARP
Transfer Agreement), (iii) remains a
B-5
Prudential employee on the day before the Employee Hire Date, and (iv) accepts
employment with a Successor Company on the Employee Hire Date (an Eligible
Employee who satisfies each of these four requirements is referred to as a
"Transferred AARP Employee") shall be fully vested in his or her Company
Matching Contribution Account within the Plan, determined as of such Transferred
AARP Employee's termination of employment from Prudential.
In addition, each Transferred AARP Employee who: (i) has an outstanding
loan under the Plan on his or her Employee Hire Date, (ii) elects to receive a
complete distribution of all of his or her Accounts under the Plan, (iii) files
an election not later than 60 days after he or she terminates employment with
Prudential to directly roll over the entire amount of such distribution that is
eligible for a direct rollover pursuant to Section 8.07, and (iv) is employed by
the Successor Company at the time he or she elects to receive (and directly roll
over) such distribution, shall be permitted to elect to make a direct rollover
of such employee's outstanding loan note to a tax-qualified plan of the
Successor Company that employs the Transferred AARP Employee; provided that this
election shall be available only if the Successor Company's tax-qualified plan
permits such a direct rollover of an outstanding loan note.
B-6
6. Residential Services Corporation of America Transaction
-------------------------------------------------------
(a) Notwithstanding any other provision of the Plan to the contrary, any
individual who was employed during 1997 by Residential Services Corporation of
America or by any of its current or former direct or indirect subsidiaries,
including, but not limited to, The Prudential Home Mortgage Company, Inc. and
Lender's Services Inc., and who was a participant in The Prudential Home
Mortgage Company 401(k) Retirement Plan during 1997, shall not be an Eligible
Employee or Participant under the Plan during 1998.
(b) Amounts credited to the accounts of participants in The Prudential Home
Mortgage Company 401(k) Retirement Plan ("Transferred Amounts") shall be
transferred to the Plan as soon as administratively practicable after October 1,
2000.
(c) Transferred Amounts shall be subject to the following procedures:
(1) Allocating and Accounting for Transferred Amounts: The portion of
-------------------------------------------------
the Transferred Amounts representing a Participant's before-tax contributions
(plus the earnings thereon) shall be allocated to the Participant's Before-Tax
Contribution Account; qualified non-elective contributions (plus the earnings
thereon) shall be allocated to the Participant's Before-Tax Contribution Account
as earnings; after-tax contributions (plus the earnings thereon) shall be
allocated to the Participant's After-Tax Contribution Account; rollover
contributions (plus the
B-7
earnings thereon) shall be allocated to the Participant's Rollover Account; and
the remaining portion, if any, shall be allocated to the Participant's Company
Matching Contribution Account.
(2) Vesting in Transferred Amounts: A Participant shall be 100%
------------------------------
vested in his or her Transferred Amounts.
(3) In-Service Withdrawal of Transferred Amounts: The
--------------------------------------------
requirements of Article X shall govern the withdrawal of Transferred Amounts in
the same manner as if such amounts were originally contributed to the Plan,
except that the 2 year waiting period under Appendix C(4) does not apply.
(4) Minimum Required Distributions: A Participant who has
------------------------------
attained age 70 1/2and is subject to the mandatory distribution requirements of
Code Section 401(a)(9), may elect to withdraw additional amounts at any time,
not in excess of his or her Transferred Amounts.
7. GTE Management Development Center Transaction
---------------------------------------------
On January 16, 1998, Prudential entered into an agreement (the "Purchase
Agreement") relating to the intended purchase of the GTE Management Development
Center (the "Center") located in Norwalk, Connecticut. Pursuant to Schedule M of
the Purchase Agreement, and subject to and effective upon the closing of such
purchase of the Center by Prudential (the "Center Closing Date"), the Management
Personnel of the Center who become employed by Prudential on the Center Closing
Date shall have their service
B-8
with GTE Service Corporation up to and including the Center Closing Date treated
as service with the Employer only for purposes of determining eligibility to
participate in the Plan and vesting in benefits under the Plan, notwithstanding
any other provision of the Plan to the contrary.
8. Merastar Corporation Transaction
--------------------------------
As of March 11, 1998, Prudential entered into an agreement (the "Stock
Purchase Agreement") relating to the intended purchase of all the issued and
outstanding capital stock of Merastar Corporation ("Merastar"). Pursuant to the
Stock Purchase Agreement, and subject to and effective upon the closing of such
purchase of Merastar by Prudential (the "Merastar Closing Date"), the employees
of the Acquired Companies (as defined in the Stock Purchase Agreement)
immediately prior to the Merastar Closing Date who become employed by Prudential
on the Merastar Closing Date shall have their prior service with such Acquired
Companies from June 1991 up to and including the Merastar Closing Date treated
as service with the Employer only for purposes of determining eligibility to
participate in the Plan and vesting in benefits under the Plan, notwithstanding
any other provision of the Plan to the contrary.
9. Prudential Home Building Investors, Inc. Transaction
----------------------------------------------------
Prudential Home Building Investors, Inc. ("PHBI") is negotiating a
Subadvisory Operating Agreement among PHBI, Institutional Housing Partners, Inc.
("IHP, Inc."), IHP Investment
B-9
Advisors LLC, and Prudential Home Building Investment Advisers, LP (when
executed, the "IHP Agreement"), which is scheduled to be executed on or about
August 14, 1998. Pursuant to, and subject to and effective upon the closing date
of the final provisions of the IHP Agreement (the "IHP Closing Date"), each of
the employees of PHBI (as listed in an exhibit to the IHP Agreement) who is so
employed on the day before the IHP Closing Date and who becomes employed by IHP,
Inc. on the IHP Closing Date pursuant to the IHP Agreement shall be fully vested
in his or her Company Matching Contribution Account under the Plan as of the day
upon which his or her employment with PHBI terminates.
10. Prudential HealthCare ("PHC") Transaction
-----------------------------------------
(a) Vesting. The following Participants shall be fully vested in their
-------
Company Matching Contribution Account.
(i) Each Eligible Employee who (I) commences employment with Aetna
Inc. or a subsidiary thereof ("Aetna") in connection with the Asset Transfer and
Acquisition Agreement (the "Aetna Agreement") between Prudential and Aetna dated
as of December 9, 1998 and effective as of the "Aetna Closing Date" (as such
term is defined in the Aetna Agreement) (a "Transferred PHC Employee"), and (II)
who is employed by the Employer on the day before the Aetna Closing Date.
(ii) Each Participant who terminated employment from Prudential and
all Affiliates on or after January 1, 1999 and before the Aetna Closing Date,
terminated employment from the PHC
B-10
business, and terminated employment other than on account of death.
(iii) Each Participant who terminated employment from Prudential and
all Affiliates on or after January 1, 1998 and before January 1, 1999,
terminated employment from the PHC business, and terminated employment other
than on account of voluntary termination or death.
(iv) Each Participant who terminated employment from Prudential and
all Affiliates on or after January 1, 1999 and before January 1, 2000, and
terminated employment other than on account of voluntary termination or death.
(b) Distributions From the Plan - General Rules: With respect to any
-------------------------------------------
Transferred PHC Employee, distributions from such employee's Plan Accounts shall
be permitted under the following circumstances:
(i) Before-Tax Contribution Account: Each Transferred PHC Employee may
-------------------------------
take a distribution of his or her Before-Tax Contribution Account balance on or
after the Aetna Closing Date (including, but not limited to, any direct rollover
to a tax-qualified plan sponsored by Aetna) while employees of Aetna at the time
of such election, at any time on or prior to the last day of the second calendar
year after the calendar year of the Aetna Closing Date, in accordance with the
applicable provisions of the Code. If a Transferred PHC Employee elects a
Before-Tax Contribution Account distribution (either a direct rollover to a
qualified retirement plan sponsored by Aetna or any
B-11
other distribution permitted under the terms of the Plan) in accordance with
this section, such Transferred PHC Employee shall receive (either by election or
automatically, absent such election), a distribution of all remaining Plan
Account balances of such Transferred PHC Employee by the end of the Plan Year in
which such Before-Tax Contribution Account distribution is taken. In the event
that a Transferred PHC Employee either (A) fails to elect to take a distribution
of his or her Before-Tax Contribution Account balance within the time frames set
forth above, or (B) takes a distribution from any other Plan Account during such
time frames set forth above without electing to distribute such Transferred PHC
Employee's Before-Tax Contribution Account balance in such Plan Year, such
Transferred PHC Employee shall be unable to take a distribution of his or her
Before-Tax Contribution Account balance until the earlier of (I) such
Transferred PHC Employee's attainment of age 59 1/2, or (II) such Transferred
PHC Employee's separation from service with Aetna.
(ii) All Other Plan Accounts: Except as modified in (b)(i) above, each
-----------------------
Transferred PHC Employee may take a distribution from his or her Plan Accounts
in accordance with the general requirements of the Plan in effect as of the date
of the election of such distribution.
(iii) Distributions from the Plan - Loans. In addition to the
-----------------------------------
requirements noted in (b) above, each Transferred PHC Employee who: (i) has an
outstanding loan under the Plan on the
B-12
day before the Aetna Closing Date; (ii) elects to receive a complete
distribution of all of his or her Accounts under the Plan; (iii) files an
election not later than 60 days after he or she terminates employment with the
Employer to directly roll over the entire amount of such distribution that is
eligible for a direct rollover pursuant to Section 8.07; and (iv) is employed by
Aetna at the time he or she elects to receive (and directly roll over) such
distribution, shall be permitted to elect to make a direct rollover of such
employee's outstanding loan to a tax-qualified plan of Aetna along with the
transfer, in cash, of such Transferred PHC Employee's entire Plan Accounts that
are eligible for a direct rollover; provided that this election shall be
available only if Aetna's tax-qualified plan permits such a direct rollover of
an outstanding loan.
If such a Transferred PHC Employee makes such an election, then loan
repayments shall be suspended pending the direct rollover of the Transferred PHC
Employee's entire eligible Plan Accounts (including such loan obligation) to an
tax-qualified plan sponsored by Aetna. Any such suspension, however, shall not
extend beyond the last day of the calendar quarter following the calendar
quarter in which such Transferred PHC Employee terminated employment with the
Employer and shall not extend the term of the loan beyond 5 years, and interest
shall continue to accrue during the suspension period.
B-13
If a Transferred PHC Employee with an outstanding loan balance as of the
day before the Aetna Closing Date does not make such an election, then the
status of such loan shall be determined in accordance with the Plan's general
procedures governing loan defaults under Section 12.07.
11. PruCare/Rush Presbyterian Joint Venture
---------------------------------------
Effective on the creation of the PruCare/Rush Presbyterian joint venture,
Employees who are transferred to the new joint venture will have their service
with the joint venture credited as service for the Employer for purposes of
vesting under Article XI.
12. Hochman & Baker Transaction
---------------------------
As of December 20, 1999, Prudential entered into an agreement (the "H&B
Purchase Agreement") relating to the intended purchase of 80 percent of the
outstanding shares of capital stock of Hochman & Baker, Inc. ("Hochman &
Baker"). Pursuant to the H&B Purchase Agreement, and effective as of August 1,
2000, the employees of Hochman & Baker and any of the Subsidiaries of Hochman &
Baker, as defined and identified in the H&B Purchase Agreement, shall have their
prior service with such companies treated as service with the Employer only for
purposes of determining eligibility to participate in the Plan and vesting in
benefits under the Plan, notwithstanding any other provision of the Plan to the
contrary.
B-14
13. The WMF Group, Inc. Transaction
-------------------------------
As of May 10, 2000, affiliates of Prudential entered into an agreement and
plan of merger (the "WMF Agreement") relating to the intended acquisition of The
WMF Group, Ltd. ("WMF") and its affiliates, which merger closed on June 23,
2000. WMF is now known as Prudential Mortgage Capital Holdings Corporation
("PMCHC"). Pursuant to the WMF Agreement, and effective as of January 1, 2001,
the employees of PMCHC and of its following affiliates:
Prudential Carbon Mesa, Inc.
Prudential Multifamily Mortgage, Inc.
Prudential Huntoon Paige Associates
(the "PMCHC Affiliates") as of the close of business on June 22, 2000 or any
time thereafter shall have their prior service with PMCHC and the PMCHC
Affiliates treated as service with the Employer only for purposes of determining
eligibility to participate in the Plan and vesting in benefits under the Plan,
notwithstanding any other provision of the Plan to the contrary.
B-15
APPENDIX C
TO
THE PRUDENTIAL EMPLOYEE SAVINGS PLAN
Account Withdrawal Ordering Rules
---------------------------------
To the extent permitted in accordance with Articles VIII and X, or as may
be required under Section 9.2(e), withdrawals shall be made from a Participant's
Accounts in the following order:
(1) first, from After-Tax Contributions made before January 1, 1987;
(2) second, from After-Tax Contributions made after 1986 plus a pro-rata
portion of the earnings on all After-Tax Contributions;
(3) third, from the Rollover Account;
(4) fourth, from the Pre-2001 Company Matching Contribution Account
(excluding contributions, but not earnings thereon, made not more than 2 years
before the beginning of the calendar quarter in which the withdrawal is made);
(5) fifth, from the remaining balance of the Pre-2001 Company Matching
Contribution Account;
(6) sixth, from Before-Tax Contributions;
(7) seventh, from earnings on Before-Tax Contributions; and
(8) eighth, from the vested Post-2000 Company Matching Contribution
Account.
C-1
For purposes of determining the recovery of tax basis with respect to a
withdrawal, all of a Participant's After-Tax Contributions (and earnings
thereon) shall be treated as a separate contract under Code Section 72, and the
Participant's After-Tax Contributions made prior to January 1, 1987 shall be
treated as being received by the Participant before all other Account balances
in accordance with the rules of Code Section 72(e)(8)(D).
The amount distributed in each step above will be taken proportionately
from each investment option in the Account from which the withdrawal is made.
C-2
APPENDIX D
TO
THE PRUDENTIAL EMPLOYEE SAVINGS PLAN
Transition Rules
----------------
This Appendix D sets forth special rules that may apply to Participants who
(1) for purposes of items 1 - 3 below, were Employees as of December 31, 2000,
or (2) for purposes of item 4 below, elect a distribution in 2001. These rules
describe the transition from certain provisions of the 1999 Restatement of the
Plan to revised provisions of the 2001 Restatement of the Plan.
1. For a Participant employed by an Employer on December 31, 2000, the
aggregate of the deferral rate for his or her "Basic After-Tax
Contributions" and "Supplemental After-Tax Contributions" (as such terms
are defined in the 1999 Restatement of the Plan) as of such date shall be
used as his or her After-Tax Contribution deferral rate beginning January
1, 2001, unless otherwise elected by the Participant; provided, however,
that if such After-Tax Contribution deferral rate, when added to the
Participant's Before-Tax Contribution deferral rate in effect on December
31, 2000, exceeds 21%, the Participant's After-tax Contribution deferral
rate as of January 1, 2001 will be reduced until the sum equals 21%.
D-1
2. All suspensions of Company Matching Contributions in effect on December 31,
2000 under Section 3.03 of the 1999 Restatement of the Plan shall end
effective January 1, 2001.
3. Investment elections for each applicable contribution source (other than
Rollover Contributions) in effect for a Participant as of December 31, 2000
("Existing Elections") shall continue to apply to subsequent contributions
(other than Rollover Contributions) made by or on behalf of such
Participant (until changed by the Participant in accordance with Sections
15.02 and 15.03) in accordance with the table below:
2001 Restatement December 31, 2000 Elections
Contribution Source Under 1999 Restatement
---------------------------------------------------------------------------
After-Tax Contributions Basic After-Tax Contributions
(if none, use Supplemental
After-Tax)
Before-Tax Contributions Before-Tax Contributions
Pre-2001 Company Matching Company Matching Contributions
Post-2000 Company Matching Company Matching Contributions
Loan Repayments to Rollover Before-Tax Contributions
Account (if none, the Investment Fund
providing a fixed rate of return)
D-2
APPENDIX E
TO
THE PRUDENTIAL EMPLOYEE SAVINGS PLAN
Historical Plan Provisions
--------------------------
The following are selected Plan provisions from the 1999 Restatement of the
Plan. The provisions of this Appendix E are for historical and reference
purposes only and are to be construed accordingly so as not to override or
negate contrary provisions contained in the 2001 Restatement or any later
amendments to the Plan.
1. Prior Eligibility Rules (Section 3.01 of 1999 Restatement).
----------------------------------------------------------
(a) 12 months after his or her Employment Commencement Date each Employee
who is employed on a full-time basis and affiliated with the former Prudential
Insurance and Financial Services (which has become part of Individual Financial
Services) and who is covered by, or deemed by the Employer to be covered by (for
purposes of this Plan), a collective bargaining agreement (including, without
limitation, any such Employee who is (1) a Senior Life Representative, (2) a
Representative covered by an 18 1/2F or 17 Agreement, (3) covered by a
Pre-Production Training Program Agreement, or (4) an Insurance Associate covered
by a Career Foundation Program agreement), shall be an Eligible Employee and may
immediately commence participation provided he or she is a Covered Employee, or
if not a Covered Employee on such
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date, on the first date thereafter on which he or she is a Covered Employee.
Notwithstanding the foregoing, if an Employee who is subject to this
subsection (a) Terminates Employment at a time when he or she is 0% vested in
his or her Company Matching Contribution Account, he or she will be treated as a
new Employee for eligibility purposes if he or she is rehired after experiencing
5 or more consecutive Breaks in Service; otherwise, such an Employee shall be an
Eligible Employee and may commence participation on the latest of (i) his or her
Reemployment Commencement Date, (ii) 12 months after his or her original
Employment Commencement Date, or (iii) the first date on which he or she is a
Covered Employee. An Employee who Terminates Employment at a time when he or she
has a vested percentage of greater than 0% in his or her Company Matching
Contribution Account, shall be an Eligible Employee and may immediately commence
participation on his or her Reemployment Commencement Date provided he or she is
a Covered Employee, or if not a Covered Employee on such date, on the first date
thereafter on which he or she is a Covered Employee.
(b) Each other Employee not described in subsection (a) above shall be an
Eligible Employee and may commence participation on the latest of (1) his or her
Employment Commencement Date, (2) the date he or she becomes a Covered Employee,
or (3) January 1, 1999.
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(c) Notwithstanding the foregoing, Employees who were Participants in The
Prudential Investment Plan or The Prudential 401(k) Plan became Participants in
this Plan effective July 1, 1992. Employees who were eligible to become
Participants in The Prudential Investment Plan or The Prudential 401(k) Plan
were Eligible Employees effective July 1, 1992.
2. Earnings (Section 2.22 of 1999 Restatement). The 1999 Restatement contained
-------------------------------------------
the following additional exclusions from the definition of Earnings:
(a) payments becoming payable after the Participant's Termination of
Employment, or as a result of Termination of Employment, except that severance
payments made in the form of salary continuation are not excluded for purposes
of a Participant's election to make After-Tax Contributions;
(b) for statutory employees under Code Section 3121(d)(3)(relating to full
time life insurance salesmen other than Senior Life Representatives),
supervisory field staff, and Prudential Preferred Advisors, commissions on
property and casualty products in excess of $7,800 and, effective September 1,
1994 for all such employees other than supervisory field staff affiliated with
the former Prudential Insurance and Financial Services (which has become part of
Individual Financial Services), all property and casualty commissions; provided,
however, that all property and
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casualty commissions described in this subsection (b) shall cease to be excluded
effective as of November 12, 1999, such that all personal lines income on
proprietary Prudential Property and Casualty business, including commissions and
incentive payments, but excluding expense allowance payments, will be included
in the definition of Earnings;
(c) effective from January 1, 1998 to August 1, 1999, with respect to
Participants designated by the Employer as Prudential Investments Sales
Representatives in Mutual Funds and Annuities, Retirement Services, and
Institutional Asset Management:
(i) bonuses, commissions, and other sales incentive compensation paid
during any calendar year after such Participant's annual Earnings (determined
without regard to this subsection (c)) exceed the Code Section 401(a)(17)
compensation limit set out in Section 2.19(b)(11); and
(ii) salary paid during any calendar year after such Participant's
annual Earnings (determined without regard to this subsection (c)) exceed the
compensation limit set out in Section 2.19(b)(11)(but not excluding from
Earnings such salary paid after the Participant's annual Earnings, consisting
only of salary, exceed the compensation limit set out in Section 2.19(b)(11).
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3. Additional Company Matching Contributions (Section 4.04(b) of 1999
------------------------------------------------------------------
Restatement). The Company Matching Contribution for those Participants included
- ------------
in the employee classes indicated below will be increased by an amount equal to
one half of a percentage point of Earnings for each tenth of a percentage point
by which the Company Factor for the previous calendar year exceeds one;
provided, however, that if a Company Factor is not denominated in an even tenth
of a percentage point, the additional Company Matching Contribution for such
portion of a tenth of a percentage point will be increased by an amount equal to
a corresponding pro rata portion of one half of a percentage point of Earnings.
This additional Company Matching Contribution shall never exceed 3% of Earnings
and shall be treated as a regular Company Matching Contribution for all purposes
under the Plan. Except as otherwise provided below, the additional Company
Matching Contribution shall continue for a continuous 12-month period as
determined by the Administrative Committee following the date of the
announcement of the Company Factor; provided, however, that as to the Company
Factor for 1999, the total amount of the additional Company Matching
Contribution that would otherwise have been payable over a 12-month period,
shall be payable for the remainder of calendar year 2000 following the end of
the 12-month period for the Company Factor for 1998, which ended on March 24,
2000. The classes of Employees eligible for the additional Company Matching
Contribution described herein are non-management Eligible Employees below the
level of Associate Manager (which, in general, is intended to include Employees
whose rank is below level 20) as
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of the end of the Plan Year on which the Company Factor was based. Regardless of
level and management status, and effective immediately upon transfer to such
status, the following Employees shall not be eligible for the additional Company
Matching Contribution:
(1) statutory employees under Code Section 3121(d)(3) (relating to
full time life insurance salesmen);
(2) Individual Financial Services Field Sales Representatives, Sales
Management Employees, Planners, and Prudential Preferred Advisors; and
(3) Employees of nonparticipating Affiliates.
4. Minimum Required Distributions (excerpts from Section 9.02 of 1999
------------------------------------------------------------------
Restatement).
------------
(a) The Required Beginning Date of a Participant who attains age 70 1/2 on
or before December 31, 1998, is April 1 of the calendar year following the
calendar year in which the Participant attains age 70 1/2. Notwithstanding the
foregoing, if a Participant attains age 70 1/2 in 1996 or 1997, he or she shall
be given an election of using either the Required Beginning Date effective for
those attaining age 70 1/2 after December 31, 1998, or those attaining age 70
1/2 on or before such date.
(b) Unless the Participant elected otherwise, the life expectancy of the
Participant and, as applicable, the
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Participant's spouse shall be subject to recalculation in accordance with Code
Section 401(a)(9)(D).
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