NATIONAL PENN BANCSHARES, INC. CAPITAL ACCUMULATION PLAN
(Amended and Restated Effective January 1, 1997)
(Revised 2001)
Amendment No. 3
National Penn Bancshares, Inc. (the "Company") adopted the National
Penn Bancshares, Inc. Capital Accumulation Plan (Amended and Restated Effective
January 1, 1997) (Revised 2001)(the "Plan") for the benefit of certain of its
Employees (as defined in the Plan) and its subsidiaries' Employees. The Company
subsequently amended the Plan by Amendment Nos. 1 and 2 thereto. The Company
hereby further amends the Plan to adopt certain "model amendments" prepared by
the Internal Revenue Service to establish good faith compliance with certain
provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 and
to make conforming changes to the Plan in reflection thereof.
1. Limitations on Maximum Annual Additions.
----------------------------------------
(a) Effective Date. This section shall be effective for
Limitation Years beginning after December 31, 2001.
(b) Maximum Annual Addition. Except to the extent permitted
under Section 8 of this Amendment and section 414(v) of the Code, the Annual
Addition that may be contributed or allocated to a Member's Accrued Benefit
under the Plan for any Limitation Year shall not exceed the lesser of:
(i) $40,000, as adjusted for increases in the cost of
living under section 415(d) of the Code, or
(ii) 100 percent 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 (ii) 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) which is otherwise treated as
an Annual Addition.
2. Increase in Compensation Limit. The annual compensation of each
Member taken into account in determining allocations for any Plan Year beginning
after December 31, 2001, 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-living
adjustment in effect for a calendar year applies to annual compensation for the
Plan Year that begins with such calendar year.
3. Modification of Top-Heavy Rules.
1
(a) Effective Date. This section shall apply for purposes of
determining whether the Plan is a top-heavy plan under section 416(g) of the
Code for Plan Years beginning after December 31, 2001, and whether the Plan
satisfies the minimum benefits requirements of section 416(c) of the Code for
such years. This section amends section 17 of the Plan.
(b) 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 a Participating Company
or Related Entity having annual compensation greater than $130,000 (as adjusted
under section 416(i)(1) of the Code for Plan Years beginning after December 31,
2002), a 5-percent owner of a Participating Company or Related Entity, or a
1-percent owner of a Participating Company or Related Entity having annual
compensation of more than $150,000. For this purpose, annual compensation means
compensation within the meaning of section 415(c)(3) of the Code. 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
section (b)(ii) shall apply for purposes of determining the present values of
accrued benefits and the amounts of account balances as of the determination
date.
(A) Distributions During Year Ending on the
Determination Date. The present values of accrued benefits and the amounts of
account balances of a Member as of the determination date shall be increased by
the distributions made with respect to the Member 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".
(B) Employees Not Performing Services During Year Ending
on the Determination Date. The accrued benefits and accounts of any individual
who has not performed services for a Participating Company or Related Entity
during the 1-year period ending on the determination date shall not be taken
into account.
(c) Minimum Benefits -- Matching Contributions. Participating
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. The preceding sentence shall apply with respect to matching
contributions under the Plan or, if the Plan provides that the minimum
contribution requirement shall be met in
2
another plan, such other plan. Participating Company 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. Notwithstanding the
foregoing, the last sentence of subsection 17(f) of the Plan shall continue to
apply.
4. Direct Rollovers of Plan Distributions.
(a) Effective Date. This section shall apply to distributions
made after December 31, 2001.
(b) Modification of Definition of Eligible Retirement Plan.
For purposes of the direct rollover provisions in subsection 9(i) of the Plan,
an eligible retirement plan shall also mean an annuity contract described in
section 403(b) of the Code and 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.
(c) Modification of Definition of Eligible Rollover
Distribution to Exclude Hardship Distributions. For purposes of the direct
rollover provisions in subsection 9(i) of the Plan, any amount that is
distributed on account of hardship shall not be an eligible rollover
distribution and the distributee may not elect to have any portion of such a
distribution paid directly to an eligible retirement plan.
(d) Acceptance of Rollover Contributions. Subsection 4(i)(i)
of the Plan is amended to provide that the Plan will accept rollover
contributions and direct rollovers of distributions made after December 31, 2001
(including rollover distributions received by the Member as a surviving spouse
or alternate payee under a qualified domestic relations order) from a qualified
plan described in section 401(a) or 403(a) of the Code (excluding after-tax
employee contributions), an annuity contract described in section 403(b) of the
Code (excluding after-tax employee contributions), an eligible plan under
section 457(b) of the Code maintained by a state, political subdivision of a
state, or any agency or instrumentality of a state or political subdivision of
state or from rollover contributions of a portion of a distribution from an
individual retirement account or annuity described in section 408(a) or 408(b)
of the Code that is eligible to be rolled over and would otherwise be included
in gross income.
5. Rollovers Disregarded in Involuntary Cash-outs.
(a) Applicability and Effective Date. This section shall apply
with respect to Members who separated from service after December 31, 2001.
3
(b) Rollovers Disregarded in Determining Value of Account
Balance for Involuntary Distributions. For purposes of subsection 9(a)(i) of the
Plan, the value of a Member's nonforfeitable account balance shall be determined
without regard to that portion of the account balance that is attributable to
rollover contributions (and earnings allocable thereto) within the meaning of
sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the
Code. If the value of the Member's nonforfeitable account balance as so
determined is $5,000 or less, the Plan shall distribute the Member's entire
nonforfeitable account balance
6. Repeal of Multiple Use Test. The multiple use test described in
Treasury Regulation section 1.401(m)-2 and subsection 4(g)(vii) of the Plan
shall not apply for Plan Years beginning after December 31, 2001.
7. Elective Deferrals - Contribution Limitation. No Member shall be
permitted to have elective deferrals made under this Plan, or any other
qualified plan maintained by any Participating Company or Related Entity during
any calendar year, in excess of the dollar limitation contained in section
402(g) of the Code in effect for such calendar year, except to the extent
permitted under section 8(a) of this amendment and section 414(v) of the Code,
if applicable. Subject to the foregoing limitation and the limitation of section
415(c) of the Code, a Member may contribute any percentage of his Compensation,
but not in excess of the Member's pay after reduction for applicable taxes and
other fringe benefit contributions. The first sentence of subsection 4(a) of the
Plan is amended to delete the phrase "...,not to exceed 15%,..."
8. Catch-Up Contributions.
(a) Additional Permitted Elective Contributions. This section
shall apply to contributions made after December 31, 2001. All Members who are
eligible to make elective deferrals 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. 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.
(b) Match. Additional permitted elective contributions made
under section 8(a) of this amendment shall be considered elective contributions
under subsection 4(a) of the Plan for purposes of the matching contributions
provisions of subsection 4(d) of the Plan.
9. Suspension Period following Hardship Distribution. A Member who
receives a distribution of elective deferrals after December 31, 2001, on
account of a hardship shall be prohibited from making elective deferrals and
employee contributions
4
under this and all other plans of a Participating Company
or a Related Entity for 6 months after receipt of the distribution. This
provision amends subsection 10(d)(ii) of the Plan.
10. Distribution Upon Severance from Employment.
(a) Effective Date. This section shall apply for distributions
made after December 31, 2001 regardless of the date the severance from
employment occurred.
(b) New Distributable Event. A Member's elective deferrals,
qualified nonelective contributions, qualified matching contributions, and
earnings attributable to these contributions shall be distributed on account of
the Member's severance from employment. However, such a distribution shall be
subject to the other provisions of the Plan regarding distributions, other than
provisions that require a separation from service before such amounts may be
distributed.
Executed this 18th day of December, 2002.
----
Attest: NATIONAL PENN BANCSHARES, INC.
By: /s/ Sandra L. Spayd By: /s/ Wayne R. Weidner
----------------- ------------------
(Corporate Seal)
5