EXHIBIT 10.10
AMENDMENT NO. 1
TO SOUTHWEST AIRLINES CO. 401(k) PLAN
Pursuant to the authority of the Board of Directors of Southwest
Airlines Co., and the provisions of Section 17.1 thereof, the Southwest Airlines
Co. 401(k) Plan (the "Plan") is hereby amended in the following respects only,
effective as of January 1, 2002, except as otherwise specifically provided
herein:
(1) Article IV, Section 4.1 is hereby amended in its entirety,
effective September 1, 2002, to read as follows:
"4.1 Salary Reduction Contributions: Each Member may elect to
have contributed on his behalf to the Trust Fund, on a pre-tax basis,
any whole percentage of his Annual Compensation which is not less than
one percent (1%) and which does not exceed fifty percent (50%);
provided, however, effective January 1, 2002, such amount may not
exceed the applicable dollar amount as set forth in Section
402(g)(1)(B) of the Code, adjusted for taxable years of the Member
beginning after December 31, 2006 for increases in the cost of living
as provided in Section 402(g)(4) of the Code. Salary Reduction
Contributions shall be elected pursuant to a salary deferral election,
in accordance with Section 5.3 hereof. Salary Reduction Contributions
are at all times one hundred percent (100%) vested and nonforfeitable.
Salary Reduction Contributions made on behalf of a Member shall be
added to the Trust Fund as soon as practicable after deduction from a
Member's paycheck and shall be credited to the Individual Account of
the Member as of each Valuation Date, as provided in Section 6.1."
(2) Article IV, Section 4.2 is hereby amended in its entirety,
effective September 1, 2002, to read as follows:
"4.2 Company Matching Contributions. The Company may, as
provided below, contribute to the Trust Fund a Company Matching
Contribution. Company Matching Contributions shall be determined on
behalf of Members whose conditions of employment are governed by a
collective bargaining agreement between the Company and a labor union
in accordance with the terms of such collective bargaining agreement,
as then in effect, and shall be determined on behalf of Members whose
conditions of employment are not so governed, in the sole and absolute
discretion of the board of directors of the Company. If a Company
Matching Contribution is made, such Contribution will equal a specified
percentage of the Member's Salary Reduction Contributions and, if
applicable, Catch-Up Contributions, not to exceed the specific amount
set forth in
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the collective bargaining agreement, if applicable, or otherwise
established by the board of directors of the Company. Company Matching
Contributions shall be added to the Trust Fund as soon as practicable
after deduction of the applicable Salary Reduction Contributions and,
if applicable, Catch-Up Contributions from a Member's paycheck and
credited, as of each Valuation Date, to the Company Matching
Contribution Account of each eligible Member who has elected to have
Salary Reduction Contributions and, if applicable, Catch-Up
Contributions made to the Trust Fund on his behalf during the
applicable period."
(3) Article IV, Section 4.4 is hereby amended in its entirety to read
as follows:
"4.4 Excess Deferrals: If a Member's Salary Reduction
Contributions hereunder should exceed the applicable dollar amount as
set forth in Section 402(g)(1)(B) of the Code, adjusted for taxable
years of the Member beginning after December 31, 2006 for increases in
the cost of living as provided in Section 402(g)(4) of the Code, in any
taxable year of the Member, the excess (with earnings thereon) shall be
distributed to the Member. If the Member also participates in another
elective deferral program (within the meaning of Section 402(g)(3) of
the Code), and if when aggregating his elective deferrals under all
such programs an excess of deferral contributions arises under the
dollar limitation in Code Section 402(g) with respect to such Member,
the Member shall, no later than March 1st following the close of the
Member's taxable year, notify the Committee as to the portion of such
excess deferrals to be allocated to this Plan, and such excess so
allocated to this Plan (with earnings thereon) shall be distributed to
the Member. In the event there is a loss allocable to an excess
deferral, any distribution to a Member as required by this Section
shall be no greater than the lesser of: (a) the value of the Member's
Salary Reduction Contribution Account or (b) the Member's excess
deferrals for the Plan Year. Any distribution under this Section shall
be made to the Member no later than the April 15th immediately
following the close of the Member's taxable year for which such excess
deferrals were made."
(4) The Plan is hereby amended to add Article 21 to read as follows:
"ARTICLE XXI
Amendments Pursuant to the Economic Growth and
Tax Relief Reconciliation Act of 2001
21.1 Preamble:
a. Adoption and Effective Date of Amendments: This
Article 21 reflects certain provisions of the Economic Growth
and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). This
Article is intended as good faith compliance with the
requirements of EGTRRA and is to be construed in accordance
with EGTRRA and guidance issued thereunder.
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Except as otherwise provided, the provisions of this Article
21 shall be effective for Plan Years beginning on or after
January 1, 2002.
b. Inconsistent provisions superseded: The provisions
of this Article 21 shall supersede the provisions of the Plan
to the extent those provisions are inconsistent with the
provisions of this Article.
21.2 Limitations on Contributions: Except to the extent
permitted under Section 21.3 of this Article and section 414(v) of the
Code, if applicable, the Annual Additions that may be contributed or
allocated to a Member's Individual Account under the Plan for any
Limitation Year shall not exceed the lesser of:
a. $40,000, as adjusted for increases in the
cost-of-living under section 415(d) of the Code, or
b. 100% of the Member's compensation, within the
meaning of section 415(c)(3) of the Code, for the Limitation
Year. The compensation limit referred to in this subparagraph
(b) shall not apply to any contribution for medical benefits
after separation from service (within the meaning of section
401(h) or section 419A(f)(2) of the Code) that is otherwise
treated as an Annual Addition.
21.3 Catch-Up Contributions:
a. Eligibility for Catch-Up Contributions: Effective
September 1, 2002, all Members who are eligible to make Salary
Reduction Contributions under this Plan and who have attained
age 50 before the close of the Plan Year shall be eligible to
make Catch-Up Contributions in accordance with, and subject
to, the limitations of section 414(v) of the Code.
b. Effect of Catch-Up Contributions on Plan: Such
Catch-Up Contributions shall not be taken into account for
purposes of the provisions of the Plan implementing the
required limitations of sections 402(g) and 415 of the Code.
The Plan shall not be treated as failing to satisfy the
provisions of the Plan implementing the requirements of
section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of
the Code, as applicable, by reason of the making of such
Catch-Up Contributions."
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IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising Amendment No. 1 to Southwest Airlines Co. 401(k)
Plan, the Company has caused these presents to be duly executed in its name and
behalf by its proper officers thereunto duly authorized this 22 day of July,
2002.
SOUTHWEST AIRLINES CO.
By: /s/ JAMES F. PARKER
-----------------------------------------
James F. Parker, Chief Executive Officer
ATTEST:
/s/ DEBORAH ACKERMAN
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Deborah Ackerman, Assistant Secretary
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STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this 22 day of July, 2002, personally appeared JAMES F. PARKER, to me
known to be the identical person who subscribed the name of SOUTHWEST AIRLINES
CO., as its CHIEF EXECUTIVE OFFICER to the foregoing instrument and acknowledged
to me that he executed the same as his free and voluntary act and deed and as
the free and voluntary act and deed of such organization for the uses and
purposes therein set forth.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, the day and year last above
written
/s/ NOVIE RAE LEACHMAN
---------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires: 05/22/05
----------
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AMENDMENT NO. 2
TO SOUTHWEST AIRLINES CO. 401(k) PLAN
Pursuant to the authority of the Board of Directors of Southwest
Airlines Co., and the provisions of Section 17.1 thereof, the Southwest Airlines
Co. 401(k) Plan (the "Plan") is hereby amended in the following respects only,
effective as of the dates set forth herein:
(1) Item 8.1 of the Table of Contents is hereby amended, effective
January 1, 2002, to read as follows:
"8.1 DEATH OF MEMBER..."
(2) Article II, Paragraph (dd) of Section 2.1, is hereby amended in its
entirety, effective January 1, 2002:
"(dd) Retirement: Separation from service after a Member has
reached his Normal Retirement Date. Retirement shall be considered as
commencing on the day immediately following a Member's last day of
service."
(3) Article IV, Section 4.4, is hereby amended in its entirety,
effective September 1, 2002, to read as follows:
"4.4 Distribution of Excess Deferrals: If a Member's Salary
Reduction Contributions hereunder should exceed the applicable dollar
amount as set forth in Section 402(g) of the Code ($11,000 for the
Member's taxable year beginning 2002), adjusted for taxable years of
the Member beginning after December 31, 2006 for increases in the cost
of living, as set forth in Section 402(g)(4) of the Code, the excess
(with earnings thereon) shall be reduced as follows:
(a) To the extent that such excess Salary Reduction
Contributions do not exceed the applicable dollar limitation
under Section 414(v), reduced by elective deferrals previously
treated as Catch-Up Contributions, whether under this Plan or
another applicable employer plan (as defined in Section
414(v)(6)(A) of the Code), the amount of such excess Salary
Reduction Contributions shall be recharacterized as Catch-Up
Contributions, if such Member is otherwise eligible to make
Catch-Up Contributions in accordance with Section 21.3 hereof
during the Plan Year in which the excess deferral arises.
(b) If the Member is not eligible to make Catch-Up
Contributions, as provided in Section 21.3 hereof, or to the
extent that recharacterization of such excess Salary Reduction
Contributions, together with elective deferrals previously
treated as Catch-Up Contributions, whether under this Plan or
another applicable
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employer plan (as defined in Section 414(v)(6)(A) of the
Code), exceeds the applicable dollar limitation under Section
414(v), the amount of such excess Salary Reduction
Contributions shall be distributed to the Member. Any
distribution under this Section shall be made to the Member no
later than the April 15th immediately following the close of
the Member's taxable year with respect to which such excess
deferrals were made.
If the Member also participates in another elective deferral program
(within the meaning of Section 402(g)(3) of the Code) and if, when
aggregating his elective deferrals under all such programs, an excess
of deferral contributions arises under the dollar limitation in Code
Section 402(g) with respect to such Member, the Member shall, no later
than March 1st following the close of the Member's taxable year, notify
the Committee as to the portion of such excess deferrals to be
allocated to this Plan and such excess so allocated to this Plan (with
earnings thereon) shall be deemed a Catch-Up Contribution in accordance
with subparagraph (a) herein, as the case may be, or distributed to the
Member in accordance with subparagraph (b) herein. In the event there
is a loss allocable to an excess deferral, any distribution to a Member
as required by this Section shall be no greater than the lesser of: (i)
the value of the Member's Salary Reduction Contribution Account or (ii)
the Member's excess deferrals for the Plan Year."
(4) Article IV, Section 4.5, is hereby amended in its entirety,
effective January 1, 2002, to read as follows:
"(a) Determination of Deferral Percentages: As soon as
administratively feasible after the end of each Plan Year (or other
applicable period) the Committee shall determine:
(i) Deferral Percentage. The "deferral percentage"
for each Employee who is then eligible for Salary Reduction
Contributions, which in the case of a Highly Compensated
Employee, shall be the ratio of the amount of such Highly
Compensated Employee's Salary Reduction Contributions for such
Plan Year (less excess Salary Reduction Contributions treated
as Catch-Up Contributions for the Plan Year in accordance with
Section 4.4 above) to the Highly Compensated Employee's
compensation (as defined in Section 2.1(r) hereof) for such
Plan Year and, which in the case of an Employee who is not a
Highly Compensated Employee, shall be the ratio of the amount
of such Employee's Salary Reduction Contributions for the
prior Plan Year (less excess Salary Reduction Contributions
treated as Catch-Up Contributions for the Plan Year in
accordance with Section 4.4 above) to such Employee's
compensation (as defined in Section 2.1(r) hereof) for the
prior Plan Year.
(ii) Highly Compensated Deferral Percentage. The
"highly compensated deferral percentage," which shall be the
average of the "deferral percentages" for all Highly
Compensated Employees then eligible for Salary Reduction
Contributions; and
(iii) Nonhighly Compensated Deferral Percentage. The
"nonhighly compensated deferral percentage," which shall be
the average of the "deferral percentages" for all Employees
then eligible for Salary Reduction Contributions
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who were not included in the "highly compensated deferral
percentage," in (ii) above."
If a Highly Compensated Employee participates in two (2) or more plans
maintained by an Employer or any Affiliate that are subject to the
deferral percentage test, then such Employee's deferral percentage
shall be determined by aggregating his participation in all such plans.
In addition, if an Employer maintains two (2) or more plans subject to
the deferral percentage test and such plans are treated as a single
plan for purposes of the requirements for qualified plans under either
Code Section 410(b) or 401(a)(4), then such plans are treated as a
single plan for purposes of the deferral percentage test. For purposes
of implementing the deferral percentage test, elective deferrals
treated as Catch-Up Contributions shall be disregarded.
(b) Limitation on Highly Compensated Deferral Percentage. In
no event shall the "highly compensated deferral percentage" exceed the
greater of: (1) a deferral percentage equal to one and one-fourth (1
1/4) times the "nonhighly compensated deferral percentage" or (2) a
deferral percentage equal to two (2) times the "nonhighly compensated
deferral percentage," but not more than two (2) percentage points
greater than the "nonhighly compensated deferral percentage."
(c) Recharacterization of Excess Salary Reduction
Contributions. If the above deferral percentage test would otherwise be
violated as of the end of the Plan Year, then, to the extent that the
excess Salary Reduction Contributions of such Highly Compensated
Employees do not exceed the applicable dollar limitation under Section
414(v), reduced by elective deferrals previously treated as Catch-Up
Contributions, whether under this Plan or another elective deferral
program (as defined under Section 402(g)(3)), the amount of the excess
Salary Reduction Contributions of such Highly Compensated Employees
shall be recharacterized as Catch-Up Contributions, if such Member is
otherwise eligible to make Catch-Up Contributions in accordance with
Section 21.3 hereof during the Plan Year in which the excess deferral
arises.
(d) Application of Qualified Nonelective Contributions. If,
after recharacterization of the excess Salary Reduction Contributions
of such Highly Compensated Employees, the deferral percentage test
would still be violated as of the end of the Plan Year, then, subject
to satisfaction of the conditions described in Section 1.401(k)-1(b)(5)
of the Treasury Regulations, the "deferral percentage," as defined in
(a)(i) above, shall instead be the ratio of the sum of the Employee's
Salary Reduction Contributions (less excess Salary Reduction
Contributions treated as Catch-Up Contributions for the Plan Year),
Qualified Nonelective Contributions, if any, and, to the extent
necessary to satisfy the deferral percentage test, Company Matching
Contributions for such Plan Year to the Employee's compensation (as
defined in Section 2.1(r) hereof) for such Plan Year. Any Company
Matching Contributions so utilized to satisfy the deferral percentage
test shall at all times be one hundred percent (100%) vested and
nonforfeitable and shall be excluded from consideration for purposes of
the contribution percentage test described in Section 4.6.
(e) Distribution of Excess Contributions. If, after
consideration of Qualified Nonelective Contributions, if any, and
applicable Company Matching Contributions, as
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described above, the deferral percentage test would still be violated
as of the end of the Plan Year, then notwithstanding any other
provision hereof, every Salary Reduction Contribution (other than
excess Salary Reduction Contributions treated as Catch-Up Contributions
for the Plan Year) included in the "highly compensated deferral
percentage" for a Member whose deferral percentage is greater than the
permitted maximum shall be revoked to the extent necessary to comply
with such deferral percentage test and the amount of such Salary
Reduction Contribution (other than excess Salary Reduction
Contributions treated as Catch-Up Contributions for the Plan Year), to
the extent revoked, shall constitute an "excess contribution" to be
distributed (with earnings thereon) no later than the last day of the
Plan Year following the Plan Year with respect to which such
contribution was made. Excess contributions are allocated to the Highly
Compensated Employees with the largest amounts of Employer
contributions taken into account in calculating the deferral percentage
test for the Plan Year in which the excess arose, beginning with the
Highly Compensated Employee with the largest amount of such Employer
contributions and continuing in descending order until all excess
contributions have been allocated. For purposes of the preceding
sentence, the "largest" amount is determined after distribution of any
amounts distributed hereunder pursuant to Section 4.4 hereof. In the
event there is a loss allocable to an excess contribution, any
distribution to a Member as required by this Section shall be no
greater than the lesser of: (a) the value of the Member's Salary
Reduction Contribution Account or (b) the Member's excess contribution
for the Plan Year. If an excess contribution is distributed to a Member
in accordance with the foregoing, any Company Matching Contribution
relating to such excess contribution shall be forfeited and then
utilized as described in Section 6.3 hereof, and shall not be taken
into account in determining the Member's contribution percentage under
Section 4.6."
(5) Article IV, Paragraph (a) of Section 4.7, is hereby amended in its
entirety, effective January 1, 2002, to read as follows:
"The transfer occurs on or before the 60th day following his
receipt of such distribution, or such later date as permitted by the
Internal Revenue Service for distributions on and after January 1,
2002; or if such distribution has previously been deposited in an
individual retirement account (as defined in Section 408 of the Code),
such distribution has been so deposited no earlier than July 1, 1987,
and the transfer occurs on or before the 60th day following his receipt
of such distribution from the individual retirement account, or such
later date as permitted by the Internal Revenue Service for
distributions on and after January 1, 2002;"
(6) Article VI, the second sentence of Section 5.1, is hereby amended
in its entirety, effective September 1, 2002, to read as follows:
"The Individual Account of each Member shall be composed of a
Company Matching Contribution Account, to which Company Matching
Contributions, if any, shall be credited; a Salary Reduction
Contribution Account, to which Salary Reduction Contributions, if any,
and Catch-Up Contributions, if any, together with Qualified Nonelective
Contributions and Company Matching Contributions, if any, utilized to
satisfy the deferral percentage test or the contribution percentage
test, as set forth in
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Sections 4.5 and 4.6 hereof, if any, shall be credited; and, if
applicable, a Rollover Contribution Account."
(7) Article V, the first paragraph of Section 5.3, is hereby amended in
its entirety, effective September 1, 2002, to read as follows:
"Each Member who desires to make Salary Reduction
Contributions shall indicate such intent by making an election to be
effective as of the Entry Date on which such Member first satisfies the
eligibility requirements of Article III hereof, or as of any subsequent
Entry Date. Such election must be made prior to such Entry Date, and
shall be effective for each payroll period thereafter until modified or
amended. Each Member who is eligible to make Catch-Up Contributions
under Section 21.3 hereof and who desires to make such contributions
for the Plan Year shall indicate such intent by making an election in
the manner prescribed by the Committee; provided, however, that a
separate election to make Catch-Up Contributions shall remain effective
no later than the end of the Member's taxable year for which such
separate Catch-Up Contribution election is effective."
(8) Article V, Section 5.3(c), is hereby amended in its entirety,
effective September 1, 2002, to read as follows:
"The Company may unilaterally amend or revoke a salary
deferral election with any Member at any time, including an amendment
to recharacterize an election of Salary Reduction Contributions as an
election of Catch-Up Contributions, if the Company determines that such
revocation or amendment is necessary to ensure that a Member's Annual
Additions, as defined in subsection 6.5(b) hereof, for any Plan Year
will not exceed the limitations of Article VI or to ensure that the
requirements of Section 401(k) of the Code and Sections 4.1 and 21.3
hereof have been satisfied with respect to the amount that may be
withheld and contributed on behalf of a Member."
(9) Article VII, Section 7.1, is hereby amended in its entirety,
effective January 1, 2002, to read as follows:
"7.1 Normal or Late Retirement: A Member, upon reaching his
Normal Retirement Date for the purposes of this Plan, shall be one
hundred percent (100%) vested in his Individual Account, and such
amount contained therein shall be nonforfeitable. If a Member continues
in the service of the Company beyond his Normal Retirement Date, he
shall continue to participate in the Plan."
(10) Article VIII, Section 8.1, is hereby amended in its entirety,
effective January 1, 2002, to read as follows:
"8.1 Death of Member: Upon the death of a Member while
employed by the Company, such Member's Individual Account shall
thereupon become one hundred percent (100%) vested, and the amount
contained therein shall be nonforfeitable."
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(11) Article IX, Section 9.1, is hereby amended, effective January 1,
2002, to read as follows:
"9.1 Disability: If a Member's employment with the Company
terminates as a result of his Disability, such Member's Individual
Account shall thereupon become one hundred percent (100%) vested, and
the amount contained therein shall be nonforfeitable."
(12) Article X, Section 10.3, is hereby amended, effective January 1,
2002, to read as follows:
"10.3 Forfeitures: A Member to whom Section 10.1 is applicable
shall forfeit that portion of the amount in his Individual Account to
which he is not entitled under Section 10.1, and the amount thus
forfeited shall be used to reduce Company Matching Contributions
pursuant to the provisions of Section 6.3. A Member who does not have
any nonforfeitable right to his Individual Account shall be deemed to
have received a cashout distribution pursuant to Section 15.3 hereof,
and shall forfeit the amount in such Individual Account in the Plan
Year in which his separation from service occurs. A Member who receives
a cashout distribution in accordance with the provisions of Section
15.3 hereunder shall forfeit that portion of his Individual Account to
which he is not entitled under Section 10.1 in the Plan Year in which
the cashout distribution occurs. A Member who is entitled to a portion
of his Individual Account but who is not one hundred percent (100%)
vested in such Individual Account and who does not receive a cashout
distribution under Section 15.3, shall forfeit that portion of his
Individual Account to which he is not entitled under Section 10.1 in
the Plan Year in which he incurs five (5) consecutive Breaks in
Service."
(13) Article XI, the last sentence of the third paragraph of Section
11.2, is hereby deleted in its entirety, effective January 1, 2002.
(14) Article XV, Section 15.1, is hereby amended in its entirety,
effective January 1, 2002, to read as follows:
"15.1. Method of Payment: As soon as practicable after the
separation from service of a Member, former Member, or Beneficiary who
is entitled to receive benefits hereunder, as provided in Articles VII,
VIII, IX or X and this Article XV, the Committee shall give written
notice to the Trustee. Such benefits shall be paid to the Member,
former Member, or his Beneficiary in a lump sum.
Any benefit payable hereunder will be paid in cash."
(15) Article XV, Section 15.2, is hereby amended in its entirety,
effective January 1, 2002, except as otherwise specified herein, to read as
follows:
"15.2. Time of Payment: Distribution shall be made as soon as
administratively practicable, but in no event later than one (1) year
after the Valuation Date coincident with or immediately following the
separation from service of a Member, former Member, or Beneficiary who
is entitled to receive a benefit hereunder. Notwithstanding the
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foregoing, if the nonforfeitable portion of a Member's or former
Member's Individual Account exceeds Five Thousand and No/100 Dollars
($5,000.00), no distributions, other than distributions upon the death
of such Member or former Member, may commence without the consent of
the Member or former Member until he attains age sixty-two (62), at
which time distribution shall be made. Such consent must be obtained
within the ninety (90) day period ending on the date of distribution.
The Committee shall notify the Member or former Member of the right to
defer any distribution until the date on which he attains age sixty-two
(62). Such notification shall include a general description of the
material features, and an explanation of the relative values of, the
optional forms of benefit available under the Plan in a manner that
would satisfy the notice requirements of Section 417(a)(3) of the Code,
and shall be provided no less than thirty (30) days and no more than
ninety (90) days prior to the date of distribution. Notwithstanding the
foregoing, the consent of the Member or former Member shall not be
required to the extent that a distribution is required to satisfy
Section 415 or Sections 401(k)(8) or 401(m)(6) of the Code. In
addition, upon termination of this Plan, if the Plan does not then
offer an annuity option, the Member's or former Member's Individual
Account may, without his consent, be distributed to the Member or
former Member or transferred to another defined contribution plan
maintained by an Affiliate. Furthermore, if a distribution is one to
which Sections 401(a)(11) and 417 of the Code do not apply, such
distribution may commence less than thirty (30) days after the notice
required under Section 1.411(a)-11(c) of the Treasury Regulations is
given, provided that: (i) the Committee clearly informs the Member or
former Member that he has a right to a period of at least thirty (30)
days after receiving the notice to consider the decision of whether or
not to elect a distribution (and, if applicable, a particular
distribution option), and (ii) the Member or former Member, after
receiving the notice, affirmatively elects a distribution.
Distribution shall be made no later than the required
beginning date, which is April 1st of the calendar year following the
later of: (a) the calendar year in which a Member attains age 70 1/2 or
(b) the calendar year in which the Member retires; provided that if a
Member is a Five Percent (5%) Owner (as defined in Section 19.1(f)
hereof), then the required beginning date is April 1st of the calendar
year following the calendar year in which such Member attains age 70
1/2. Effective as of November 16, 2001, distribution of a Member's
entire Individual Account shall be made in a single lump sum on or
before such Member's required beginning date. In the case of a Member
who attained age 70 1/2 prior to November 16, 2001, or in the case of a
Member who is a five percent (5%) owner, the minimum distribution
required for the calendar year immediately preceding the Member's
required beginning date must be made on or before his required
beginning date. The minimum distribution for other calendar years,
including the minimum distribution for the calendar year in which the
Member's required beginning date occurs, must be made on or before
December 31 of such calendar year. All minimum distributions required
under this Article XV shall be determined and made in accordance with
the applicable Treasury Regulations under Section 401(a)(9) of the
Code, and the requirements of this Article will take precedence over
any inconsistent provisions of the Plan. Required minimum distributions
will be determined beginning with the first distribution calendar year
and up to and including the distribution calendar year that includes
the Member's date of death. Effective January 1, 2003, during such
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Member's lifetime, the minimum amount that will be distributed for each
distribution calendar year is the lesser of:
(a) the quotient obtained by dividing the Member's
Individual Account balance by the distribution period in the
Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of
the Treasury Regulations, using the Member's age as of the
Member's birthday in the distribution calendar year; or
(b) if the Member's sole designated beneficiary for
the distribution calendar year is the Member's spouse, the
quotient obtained by dividing the Member's Individual Account
balance by the number in the Joint and Last Survivor Table set
forth in section 1.401(a)(9)-9 of the Treasury Regulations,
using the Member's and spouse's attained ages as of the
Member's and spouse's birthdays in the distribution calendar
year.
Notwithstanding any provision herein to the contrary, any
Member who attains age 70 1/2 in a calendar year after 1995 and prior
to November 16, 2001, may irrevocably elect, in the manner established
by the Committee, by April 1 of the calendar year following the year in
which the Member attains age 70 1/2 (or by December 31, 1997 in the
case of a Member who attains age 70 1/2 in 1996) to defer distributions
until April 1 of the calendar year following the calendar year in which
the Member retires. If no such election is made, the Member will begin
receiving distributions by the April 1 of the calendar year following
the year in which the Member attains age 70 1/2 (or by December 31,
1997 in the case of a Member who attains age 70 1/2 in 1996), and any
such distributions shall comply with the provisions of the preceding
paragraph. Furthermore, any Member who attains age 70 1/2 in a calendar
year prior to 1996, may irrevocably elect, in the manner established by
the Committee, to stop distributions and recommence distributions as of
the April 1 of the calendar year following the calendar year in which
such Member retires.
If distributions have commenced so that payments are being
made over the life of the Member, and he dies before his entire
interest has been distributed, then the remaining portion of such
interest shall be distributed at least as rapidly as under the method
of distribution being used as of the date of his death, but in no event
later than one year after the Valuation Date coincident with or
immediately following his death. On the other hand, if a Member dies
before the distribution of any of his benefits has begun, then his
entire interest will be distributed no later than one year after the
Valuation Date coincident with or immediately following his death. If
the designated Beneficiary is the Member's surviving spouse and such
surviving spouse dies after the Member, but before payment to such
surviving spouse is made, then the provisions of the preceding sentence
shall be applied as if the surviving spouse were the Member.
Furthermore, if the designated Beneficiary is the surviving spouse of
the Member, then distribution to such surviving spouse will not be
required earlier than the later of: (a) December 31 of the calendar
year immediately following the calendar year of the Member's death and
(b) December 31 of the calendar year in which the Member would have
attained age 70 1/2. Distribution of benefits is considered to have
begun, for purposes of this paragraph, on the required beginning date;
provided that if a Member's designated Beneficiary is his
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surviving spouse, and such surviving spouse dies after the Member but
before payments to such surviving spouse have begun, then distribution
of benefits is considered to have begun on the date distribution to the
surviving spouse is required to begin pursuant to the provisions of
this paragraph.
Notwithstanding any provision herein to the contrary, unless a
Member or former Member elects otherwise, in writing, no distribution
hereunder shall start later than 60 days after the close of the Plan
Year in which the last to occur of the following occurs:
(a) the Member or former Member attains Normal Retirement Age,
(b) the 10th anniversary of the year in which the Member or
former Member commenced participation in the Plan, or
(c) the Member or former Member terminates service with the
Company."
(16) Article XV, Section 15.3, is hereby amended, effective January 1,
2002, to read as follows:
"15.3. Cash Out Distribution: If a Member or former Member who
has received a distribution of his benefits hereunder on or before the
last day of the second Plan Year following the year in which his
separation from service occurs, has forfeited a portion of his
Individual Account, then in the event such Member or former Member is
subsequently rehired by the Company prior to the date on which he
incurs five (5) consecutive Breaks in Service, he shall be entitled to
repay, at any time prior to the earlier of: (i) the date which is five
(5) years after the first date on which he is subsequently reemployed
by the Company and (ii) the date on which he incurs five (5)
consecutive Breaks in Service, the amount of the distribution to him
from his Individual Account. Upon such repayment, the rehired Member's
or former Member's Individual Account shall be credited with the exact
amount that was nonvested at the time of termination. In the event a
rehired Member or former Member who has received a distribution
hereunder does not timely repay such distribution from his Individual
Account, as provided above, then the amount he forfeited at the time of
his distribution pursuant to the terms of Section 10.3 hereof shall
remain forfeited. His prior years of Vesting Service shall be taken
into account, however, for purposes of determining his vested interest
in contributions following reemployment. If a Member or former Member
who does not have any nonforfeitable right to his Individual Account
and thus is deemed to have received a cashout distribution, pursuant to
the provisions of Section 10.3 hereof, is subsequently reemployed by
the Company and five (5) consecutive Breaks in Service have not
occurred, then upon such reemployment, the rehired Member's or former
Member's Individual Account shall be credited with the exact amount
that was nonvested at the time of separation from service."
(17) Article XXI is hereby amended to add Section 21.4, effective
January 1, 2002, to read as follows:
"21.4 Increase in Annual Compensation Limit: The Annual
Compensation of each Member taken into account in determining
allocations shall not exceed $200,000, as adjusted for cost-of-living
increases in accordance with section 401(a)(17)(B) of the Code. Annual
Compensation means compensation during the Plan Year. The
cost-of-
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living adjustment in effect for a calendar year applies to Annual
Compensation for the Plan Year that begins with or within such calendar
year."
(18) Article XXI is hereby amended to add Section 21.5, effective
January 1, 2002, to read as follows:
"21.5 Modification of Top-Heavy Rules:
a. Determination of top-heavy status.
(i) Key Employee. Key Employee means any
Employee or former Employee (including any deceased
Employee) who, at any time during the Plan Year that
includes the Determination Date, was an officer of
the Company having Annual Compensation greater than
$130,000 (as adjusted under section 416(i)(1) of the
Code for Plan Years beginning on or after January 1,
2003), a 5-percent owner of the Company, or a
1-percent owner of the Company having Annual
Compensation of more than $150,000. For this purpose,
Annual Compensation means compensation within the
meaning of Section 2.1(c) of the Plan. The
determination of who is a Key Employee will be made
in accordance with section 416(i)(1) of the Code and
the applicable regulations and other guidance of
general applicability issued thereunder.
(ii) Determination of present values and
amounts. This subsection (ii) shall apply for
purposes of determining the present values of accrued
benefits and the amounts of Individual Account
balances of Employees as of the Determination Date.
(1) Distributions during year ending
on the Determination Date. The present
values of accrued benefits and the amounts
of Individual Account balances of an
Employee as of the Determination Date shall
be increased by the distributions made with
respect to the Employee under the Plan and
any plan aggregated with the Plan under
section 416(g)(2) of the Code during the
1-year period ending on the Determination
Date. The preceding sentence shall also
apply to distributions under a terminated
plan which, had it not been terminated,
would have been aggregated with the Plan
under section 416(g)(2)(A)(i) of the Code.
In the case of a distribution made for a
reason other than separation from service,
death, or disability, this provision shall
be applied by substituting "5-year period"
for "1-year period."
(2) Employees not performing
services during year ending on the
Determination Date. The accrued benefits and
Individual Accounts of any individual who
has not performed services for the Employer
during the 1-year period ending on the
Determination Date shall not be taken into
account.
(b) Minimum benefits. Company Matching Contributions
shall be taken into account for purposes of satisfying the
minimum contribution requirements of section 416(c)(2) of the
Code and the Plan and any Company
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Matching Contributions that are used to satisfy the minimum
contribution requirements shall be treated as matching
contributions for purposes of the actual contribution
percentage test and other requirements of section 401(m) of
the Code."
(19) Article XXI is hereby amended to add Section 21.6, effective
January 1, 2002, to read as follows:
"21.6 Direct Rollovers of Plan Distributions: For purposes of
the direct rollover provisions in Section 15.6 of the Plan, for plan
distributions on or after January 1, 2002, the term "eligible
retirement plan" shall mean (i) an individual retirement account
described in Section 408(a) of the Code, (ii) an individual retirement
annuity described in Section 408(b) of the Code (other than an
endowment contract), (iii) a qualified trust described under Section
401(a) of the Code, (iv) an annuity plan described in Section 403(a) of
the Code, (v) an annuity contract described in section 403(b) of the
Code, and (vi) an eligible plan under section 457(b) of the Code which
is maintained by a state, political subdivision of a state, or any
agency or instrumentality of a state or political subdivision of a
state and which agrees to separately account for amounts transferred
into such plan from this Plan. The definition of eligible retirement
plan shall also apply in the case of a distribution to a surviving
spouse, or to a spouse or former spouse who is the alternate payee
under a qualified domestic relation order, as defined in section 414(p)
of the Code. Furthermore, the term "eligible rollover distribution"
shall not include any hardship withdrawal."
(20) Article XXI is hereby amended to add Section 21.7, effective
January 1, 2002, to read as follows:
"21.7 Rollovers from Other Plans:
a. Direct Rollovers: For purposes of the rollover
contribution provisions of Section 4.7 of the Plan, a Member
who is entitled to receive an eligible rollover distribution
from (i) a qualified plan described in section 401(a) or
403(a) of the Code, (ii) an annuity contract described in
section 403(b) of the Code, or (iii) an eligible plan under
section 457(b) of the Code that is maintained by a state,
political subdivision of a state, or any agency or
instrumentality of a state or political subdivision of a
state, may, in accordance with procedures approved by the
Committee, elect to transfer directly to the Trustee, as a
trustee-to-trustee transfer, in cash only, an amount equal to
all or a portion of such distribution; provided, however, that
the maximum amount of such transfer shall be the fair market
value of that portion of the distribution that would be
includable in gross income if not so transferred (determined
without regard to Section 402(c) of the Code).
b. Member Rollover Contributions from Other Plans:
For purposes of the rollover contribution provisions of
Section 4.7 of the Plan, any Member who has distributed to him
an amount that qualifies as an eligible rollover distribution
from (i) a qualified plan described in section 401(a) or
403(a) of the Code, (ii) an annuity contract described in
section 403(b) of the Code, (iii) an eligible plan under
section 457(b) of the Code that is maintained by a state,
political subdivision of a state, or any agency or
instrumentality of a state or political
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subdivision of a state, or (iv) any portion of a distribution
from an individual retirement account annuity described in
section 408(a) or 408(b) of the Code, may, in accordance with
procedures approved by the Committee, contribute, in cash
only, an amount equal to all or any portion of such
distribution that is eligible to be rolled over and that would
otherwise be includible in gross income if not so transferred
(determined without regard to Section 402(c) of the Code)."
(21) Article XXI is hereby amended to add Section 21.8, effective
January 1, 2002, to read as follows:
"21.8 Repeal of Multiple-Use Test: The multiple use test
described in Treasury Regulation section 1.401(m)-2 and Section 4.6 of
the Plan shall not apply for Plan Years beginning on or after January
1, 2002. Any references made throughout the Plan to the multiple use
test shall hereafter be disregarded."
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising Amendment No. 2 to the Southwest Airlines Co.
401(k) Plan, the Company has caused its corporate seal to be affixed hereto and
these presents to be duly executed in its name and behalf by its proper officers
thereunto duly authorized this 21 day of November, 2002.
SOUTHWEST AIRLINES CO.
By: /s/ JAMES F. PARKER
-----------------------------------------
James F. Parker, Chief Executive Officer
ATTEST:
/s/ DEBORAH ACKERMAN
- ---------------------------------
Deborah Ackerman, Assistant Secretary
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STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this 21 day of November, 2002, personally appeared JAMES F. PARKER, to
me known to be the identical person who subscribed the name of SOUTHWEST
AIRLINES CO., as its CHIEF EXECUTIVE OFFICER to the foregoing instrument and
acknowledged to me that he executed the same as his free and voluntary act and
deed and as the free and voluntary act and deed of such organization for the
uses and purposes therein set forth.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, the day and year last above
written
/s/ MARILYN STRICKLAND
--------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires: 05/31/05
-----------
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