XXXXXXXX FUNDS, INC.
SECTION 403(B)(7) CUSTODIAL ACCOUNT AGREEMENT
XXXXXXXX FUNDS, INC.
SECTION 403(B)(7) CUSTODIAL ACCOUNT AGREEMENT
Introduction
The Xxxxxxxx Funds, Inc. Section 403(b)(7) Custodial Account
Agreement ("Custodial Account Agreement" or "Agreement") is intended for
use in connection with Section 403(b)(7) arrangements where the parties
desire that all or part of the contributions made to the arrangement be
invested in shares of one or more of the portfolios of the Xxxxxxxx Funds,
Inc. managed by Xxxxxxxx Capital Management, Inc. (the "Investment
Advisor"). The Custodial Account Agreement, and all funds held under the
Agreement, are intended to comply with, and be administered in accordance
with, the provisions of the Internal Revenue Code of 1986 ("Code") and, to
the extent applicable, the Employee Retirement Income Security Act of 1974
("ERISA"), as such laws may be amended and in effect from time to time.
Article I. Eligibility and Participation.
Eligible Employees
Section 403(b)(7) of the Code provides special retirement plan
rules applicable to employees of an Employer that is:
(1) an organization described in Section 501(c)(3) of the Code
and that is exempt from tax under Section 501(a) of the
Code; or
(2) an educational organization as defined in Section
170(b)(1)(A)(ii) of the Code if the education organization
is maintained by a State or a political subdivision of a
State or an agency or instrumentality of either.
Adoption of Custodial Account Agreement
An Employee who performs services for an organization described
in (1) or (2) above may adopt this Custodial Account Agreement. The
Employee adopts the Custodial Account Agreement by completing and signing
the Account Application and by delivering it (via first class mail or
recognized courier service) to the Custodian. The Custodial Account
Agreement will become effective upon written acceptance of the Account
Application by the Custodian (or by its delegate or agent). Although the
Employer is not required to sign the Account Application, the Employer
will be deemed to have established the Custodial Account for the benefit
of the Employee as of the date on which the Employer transmits a
contribution (including, without limitation, a Salary Reduction
contribution) to the Custodian for the benefit of the Employee's account.
Incorporation of Documents
The Account Application and (if contributions will be made on a
salary reduction basis) the Salary Reduction Agreement between the
Employer and the Employee, are incorporated by reference and made a part
of the Custodial Account Agreement.
Article II. Contributions.
In General
Subject to the special limitations described in this Article II,
the Employer may contribute to the Custodial Account (in cash) for any
taxable year, provided that the amount of the contribution does not
represent an "excess contribution" as defined in Section 4973(c) of the
Code.
Limitation on Salary Reduction Contributions.
The amount contributed to an Employee's Custodial Account in any
calendar year as a Salary Reduction Contribution shall not exceed the
greater of $10,000 or the limitation on elective deferrals in effect for
such year under Section 402(g) of the Code ($7,000, indexed for cost-of-
living increases). The limitation determined in accordance with the
foregoing sentence is then reduced by the amount of any Salary Reduction
Contributions made during the calendar year by or on behalf of the
Employee under a qualified cash or deferred arrangement under Section
401(k) of the Code, a simplified employee pension under Section 408(k) of
the Code, an eligible deferred compensation plan under Section 457 of the
Code, or another tax deferred annuity or custodial account under Section
403(b) of the Code.
In the case of an individual who has completed at least fifteen
(15) years of service with an educational institution, hospital, home
health service agency, health and welfare service agency, church or
convention or association of churches, or a tax-exempt organization
controlled by a church or convention or association of churches as
described in Section 414(e)(3)(B)(ii) of the Code (collectively referred
to as a "Qualified Organization"), the limitation on Salary Reduction
Contributions for any year as determined above shall be increased by the
least of the following amounts:
(1) $3,000;
(2) the difference (but not less than zero) between $15,000 and
any amounts excluded from gross income in prior years as a
result of this special "catch up" rule; and
(3) the difference (but not less than zero) between (A) $5,000
multiplied by the number of years of service that the
individual has with the Qualified Organization, and (B) the
amount of Salary Reduction Contributions made by the
Qualified Organization on behalf of the individual for
prior taxable years under a qualified cash or deferred
arrangement under Section 401(k) of the Code, a simplified
employee pension under Section 408(k) of the Code, or
another tax deferred annuity or custodial account under
Section 403(b) of the Code.
In the event that an Employee determines that the amount
contributed for any calendar year exceeds the limitation on Salary
Reduction Contributions, and if the Employee notifies the Custodian in
writing of such excess amount no later than March 1 of the following
calendar year, the Custodian will distribute such excess amount (plus any
income attributable thereto) to the Employee not later than April 15 of
the year following the year in which the excess Salary Reduction
Contributions were made. Neither the Investment Advisor nor the Custodian
shall have any responsibility for determining whether excess Salary
Reduction Contributions have been made or, if made, for distributing any
excess amount except in accordance with the specific written instructions
of the Employee.
Limitations on Total Contributions (Employer Non-Elective and Employee
Salary Reduction Contributions.
The maximum amount of contributions (including Salary Reduction
Contributions) that may be contributed to an Employee's Custodial Account
for any taxable year shall not exceed the lesser of the Employee's:
(1) Exclusion Allowance computed in accordance with Section
403(b)(2) of the Code, i.e., generally, twenty percent
(20%) of the Employee's "includable compensation"
multiplied by the Employee's years of service, less all
contributions made in prior years; or
(2) Section 415 Limit, i.e., generally, the lesser of twenty
five percent (25%) of the individual's "compensation" for
the limitation year (the calendar year unless the Employer
has designated a different year) or $30,000 (as adjusted
from time to time in accordance with Section 415(d) of the
Code).
Salary Reduction Contributions generally reduce the Employee's
"compensation" and "includable compensation" for purposes of the foregoing
limits.
An Employee who is employed by a Qualified Organization may
elect to calculate his total contribution limit in accordance with one of
the alternative limitations described in Section 415(c)(4) of the Code.
In general, Section 415(c)(4) of the Code permits the Employee to elect:
(1) to insert, in lieu of the Section 415 Limit, on amount
equal to the lesser of (A) $15,000 or (B) twenty five
percent (25%) of the Employee's "includable compensation"
plus $4,000;
(2) to disregard the Section 415 Limit, so that the Employee's
total contribution limit will equal the Employee's
Exclusion Allowance; or
(3) for the year in which the Employee terminates employment,
to replace the Section 415 Limit with an amount equal to
the lesser of (A) $30,000 (as adjusted from time to time in
accordance with Section 415(d) of the Code), or (B) the
amount of contributions which could have been, but were
not, made under Section 403(b) during the ten year period
ending on the date of the Employee's termination,
determined by taking into account only the Employee's
period of employment with the Employer.
The alternate limitation elections described in Paragraphs (1), (2) and
(3) above are mutually exclusive and irrevocable, so that an Employee who
elects one of the alternate limitations may not thereafter utilize another
of the alternate limits. Further, the alternate limitation described in
Paragraph (3) above may be used only once by an Employee, rather than once
with respect to each Employer.
In the case of contributions other than Salary Reduction
Contributions, an Employee's "compensation" or "includable compensation"
shall not exceed $160,000 or such other limit in effect for such year
under Section 401(a)(17) of the Code.
Limitation on Custodian or Investment Advisor Duties and Responsibilities.
Neither the Investment Advisor nor the Custodian shall be
responsible for determining the amount that may be contributed on behalf
of the Employee, unless such obligation is explicitly undertaken by
separate written agreement. In addition, neither the Investment Advisor
nor the Custodian shall be responsible to recommend or compel Employer
contributions to the Custodial Account. The disposition of excess
contributions will be made in accordance with instructions from the
Employer to the extent such instructions are consistent with applicable
law.
Rollover or Transfer Contributions
The Employee or the Employer may transfer or cause to be
transferred to this Custodial Account, by rollover, direct rollover or
direct transfer, assets available from an existing annuity contract or
custodial account established under Section 403(b) of the Code for which
previous contributions were made on the Employee's behalf. In addition, a
rollover, direct rollover or transfer may be made from an individual
retirement account or annuity established pursuant to Section 408 of the
Code, if the assets in the individual retirement account or annuity are
attributable solely to a previous rollover contribution to the account or
annuity from one or more annuity contracts or custodial accounts
established pursuant to Section 403(b) of the Code. Notwithstanding the
foregoing, if the Employer maintains a written Section 403(b) plan for
which this Custodial Account serves as a funding vehicle, any restrictions
imposed by the terms of such plan upon rollovers, direct rollovers, or
transfers shall, to the extent that they are inconsistent with the
provisions of this paragraph, take precedence over this paragraph.
Article III. Investment of Contributions
Employee Investment Election
All contributions made to the Custodial Account shall be used by
the Custodian to purchase shares of one or more of the portfolios of the
regulated investment company known as the Xxxxxxxx Funds, Inc. For
purposes of this Custodial Account, each such portfolio will be referred
to as an "Investment Company," and the shares of each Investment Company
will be referred to as "Investment Company Shares". The Employee (or the
Employee's beneficiary, executor or administrator) may direct the
Custodian to invest his Custodial Account in the shares of the Investment
Companies or other regulated investment companies as may be made available
by the Investment Advisor in the future. The Employee (or the Employee's
beneficiary, executor or administrator) may direct the Custodian to
transfer all or any part of his Custodial Account assets from one
Investment Company to another at any time. In directing the Custodian the
Employee (or the Employee's beneficiary, executor or administrator) shall
designate a percentage allocation to any or all of the then available
Investment Companies, subject to the rules of such Investment Company with
respect to minimum investment or allocation. Any changes in the
allocation of future contributions or current Custodial Account assets
will be effective only when the Custodian receives appropriate
instructions from the Employee (or the Employee's beneficiary, executor or
administrator). Such instructions may be given by the Employee either in
writing and in such form as may be acceptable to the Custodian, or (if
available) by use of the telephone system maintained for such purpose by
the Custodian or its agent. By giving such instructions to the Custodian,
the Employee will be deemed to have acknowledged receipt of the current
prospectus of any Investment Company in which the Employee instructs the
Custodian to invest. In the event no direction is made, or if the opinion
of the Custodian the directions received are not clear, the Custodian will
invest all contributions in such fund as the Investment Advisor may from
time to time designate, until further notice or clarifying written
instructions are received from the Employee. All dividends and capital
gains shall be reinvested in additional Investment Company Shares. All
Investment Company Shares acquired by the Custodian shall be registered in
the name of the Custodian or its nominee.
Custodian Reliance and Duty
The Custodian and its agents may conclusively rely upon and
shall be protected in acting upon any direction, instruction or order from
the Employee or any other written notice, request, or instrument believed
by it to be genuine and to have been properly executed and, so long as the
Custodian acts in good faith, in taking or omitting to take any other
action.
The Custodian shall have no duty to question the directions of
the Employee (or the Employee's beneficiary, executor or administrator),
regarding the investment of the assets in the Custodial Account or to
advise such persons regarding such investments, nor shall the Custodian,
the Investment Advisor, or any affiliates of either, be liable for any
loss that results from the exercise of control (whether by action or
inaction) over the Custodian Account by the Employee (or the Employee's
beneficiary, executor or administrator).
Article IV. Distribution of Custodial Account
Distribution Events
The Custodian shall have no responsibility for making
distribution from the Custodial Account prior to receipt of an executed
distribution election form, which shall be in such form and completed in
such manner as the Custodian may prescribe. Distribution from the
Employee's Custodial Account shall not be made prior to the date on which
one of the following events has occurred:
(1) The Employee has attained age 59 and 1/2;
(2) The Employee has separated from service with the Employer;
(3) The Employee has become disabled; or
(4) The Employee has died.
To the extent that the Employer's Section 403(b) program allows,
distribution of the portion of the Employee's Custodial Account
attributable to Salary Reduction Contributions (but not including any
earnings thereon) also may be made in the event of the Employee's
financial hardship. A substantial financial hardship shall exist if the
Employee incurs an immediate and heavy financial need that cannot be met
by other resources reasonably available to the Employee. The Employee's
financial hardship must be certified to by the Employer in accordance with
the standards for financial hardship promulgated from time to time by the
Internal Revenue Service for application to Section 403(b) arrangements.
In no event shall the Custodian or the Investment Advisor certify to the
Employee's hardship.
Distributions prior to age 59 and 1/2 may be subject to a ten
percent (10%) additional tax under Section 72(t) of the Code.
The Employer, in its Section 403(b) document, may provide for
distribution later than the time of the foregoing events, and to the
extent that the events specified in the Employer's plan are consistent
with the minimum distribution requirements of Section 403(b)(10) of the
Code, the terms of the Employer's plan shall govern. The Employer's plan
may not, however, specify payment prior to the occurrence of one or more
of the events described above.
For purposes of Paragraph (3) above, the Employee shall be
considered disabled if he is disabled within the meaning of Section
72(m)(7) of the Code, meaning that the Employee is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
be of long continued and indefinite duration.
Form of Distribution
The Employee may elect a form of distribution from among the
following alternatives:
(1) A single sum payment in cash;
(2) A specified dollar amount as directed by the Employee from
time to time;
(3) Monthly, quarterly, or annual installment payments over a
period not extending beyond the life expectancy of the
Employee; or
(4) Monthly, quarterly, or annual installment payments over a
period not extending beyond the joint and last survivor
life expectancy of the Employee and his beneficiary.
Such election shall be made in writing in such form as shall be
acceptable to the Custodian. After attaining age 702, certain
restrictions may apply to the Employee's ability to change the period over
which payments are made. In no event shall the Custodian or the Investment
Advisor have any responsibility for determining, or giving advice with
respect to, the form of benefit, life expectancies or minimum distribution
requirements.
If the Employee fails to elect any of the methods of
distribution described above within the time specified for such election,
the Custodian may distribute the Employee's Custodial Account in the form
of a single sum cash payment by the April 1 following the calendar year in
which the Employee attains age 702. Except as otherwise required by
Section 403(b)(10) of the Code, the amount of the monthly, quarterly or
annual installment payments shall be determined by dividing the entire
interest of the Employee in the Custodial Account at the close of the
prior year by the number of years remaining in the period specified by the
Employee's election.
Minimum Distribution Requirements
The Employee must receive distributions from the Custodial
Account in accordance with Regulations prescribed by the Secretary of the
Treasury pursuant to Section 403(b)(10) of the Code which are hereby
incorporated by reference, or in the absence of such regulations, in
accordance with Section 401(a)(9) of the Code. In general, these
provisions require that certain minimum distributions must commence not
later than the April 1 of the calendar following the calendar year in
which the Employee has both retired and attained age 702 (the "required
beginning date"). For any Employee who attained age 702 prior to January
1, 1988, the Employee's "required beginning date" is the April 1 of the
calendar year following the calendar year of the Employee's retirement or
attainment of age 702, whichever occurs later. Certain accounts in
existence prior to January 1, 1987 may be subject to special treatment.
Life expectancies are computed by use of Tables V and VI of
Section 1.72-9 of the Income Tax Regulations, or any updated tables
published by the Internal Revenue Service for this purpose. Unless the
Employee (or his spouse) elects not to have life expectancy recalculated,
the Employee's life expectancy (and the life expectancy of the Employee's
spouse, if applicable) will be recalculated annually using their attained
ages as of their birthdays in the year for which the minimum annual
payment is being determined. The life expectancy of the designated
beneficiary (other than the spouse) will not be recalculated. Any such
election to recalculate or not to recalculate life expectancies shall be
irrevocable as to the Employee and spouse as of the required beginning
date, and may not thereafter be changed. The minimum annual payment may
be made in a series of installments (e.g., monthly, quarterly, etc.) as
long as the total payments for the year made by the date required are not
less than the minimum amounts required.
If the Employee dies before his entire interest in the Custodial
Account is distributed to him, the remaining undistributed balance of such
interest shall be distributed to the beneficiary or beneficiaries, if any,
designated by the Employee. If no valid designation of a beneficiary
shall have been made, distribution shall be made to the Employee's
surviving spouse, or the Employee's estate, in that order.
If the Employee dies on or after the required beginning date,
the beneficiary must continue to receive distributions at least as rapidly
as under the payment method in effect at the Employee's death.
If the Employee dies prior to the required beginning date, the
beneficiary may elect, in writing, to receive the distribution in one of
the following forms:
(a) A single sum payment in cash made by the
December 31 of the year containing the fifth
anniversary of the Employee's death; or
(b) Monthly, quarterly, or annual payments
commencing not later than the December 31
following the year of the Employee's death
over a period not to exceed the life
expectancy of the beneficiary.
Notwithstanding the foregoing, if the beneficiary is the Employee's
spouse, distributions may be delayed until the December 31 of the year in
which the Employee would have attained age 702. A beneficiary must
receive distributions from the Custodial Account in accordance with the
regulations prescribed by the Secretary of the Treasury pursuant to
Section 403(b)(10) of the Code, including the incidental death benefit
requirements, which are hereby incorporated by reference, or in the
absence of such Regulations, in accordance with Section 401(a)(9) of the
Code and the regulations thereunder.
Beneficiary
The Employee may designate a beneficiary or beneficiaries (which
may include a trust or the Employee's estate), and may, in addition, name
a contingent beneficiary. Such designation shall be made in writing in a
form acceptable to the Custodian. The Employee may, at any time, revoke
his or her designation of a beneficiary or change the beneficiary by
filing notice of such revocation or change with the Custodian, provided
that no such designation or change in designation executed by the Employee
prior to death may be filed with the Custodian more than thirty (30) days
following the Employee's death. Notwithstanding the foregoing, in the
event the Employee is married at the time of his death, the beneficiary
shall be the Employee's surviving spouse unless such spouse has consented
in writing to the designation of an alternative beneficiary after notice
of the spouse's rights and such consent was witnessed by a notary public
or representative of the Employer. In the event no valid designation of
beneficiary is on file with the Employer or the Custodian at the date of
death or no designated beneficiary survives the Employee, the Employee's
spouse shall be deemed the beneficiary; in the further event the Employee
is unmarried or his spouse does not survive him, the Employee's estate
shall be deemed to be his beneficiary.
Direct Rollover Option
In the case of any distribution from this Custodial Account that
constitutes an "eligible rollover distribution" as defined in Section
402(c)(4) of the Code, the Custodian shall provide the Employee or
beneficiary with the option of (A) receiving the distribution directly,
(B) having the distribution transferred to an individual retirement
account or eligible 403(b) program that accepts such "direct rollovers",
or (C) to the extent required under regulations issued by the Secretary of
the Treasury, a combination of (A) and (B).
If the Employee or beneficiary timely elects the transfer option
and provides the Custodian with such information as the Custodian may
prescribe regarding the transferee plan or account, including the name of
the transferee plan or account and identity of the trustee or custodian,
the distribution amount shall be transferred to the successor trustee or
custodian in a "direct rollover" in accordance with Sections 403(b)(10)
and 401(a)(31) of the Code. The Custodian may elect to accomplish the
"direct rollover" by delivering to the Employee or beneficiary a check,
for the full amount of the distribution, but made payable to the trustee
or custodian of the transferee plan or account. The Employee or
beneficiary shall then be responsible for delivering the check to the
trustee or custodian or the transferee plan.
If the Employee or beneficiary elects payments made directly to
the Employee or beneficiary, distribution shall be accomplished by
delivering to the Employee or beneficiary a check, for the amount of the
distribution less applicable required withholding, made payable to the
Employee or beneficiary.
If the Employee or beneficiary fails to make a timely election,
or if the participant or beneficiary elects the transfer option but fails
to provide the Custodian with appropriate information to enable the
Custodian to implement the transfer, the Custodian shall, subject to
applicable consent requirements, cause the Employee's or beneficiary's
distribution to be paid directly to the Employee or beneficiary, less
applicable required withholding.
The Custodian need not offer the "direct rollover" option in the
case of any distribution that has been exempted from the "direct rollover"
requirements under rules and regulations issued (whether in proposed,
temporary or final form) by the Secretary of the Treasury. In addition,
the Custodian may promulgate additional rules and regulations, including
rules and regulations governing the time by which elections must be made,
that it determines to be necessary or desirable to the administer this
provision.
The Custodian shall not be responsible for the tax consequences
resulting from an Employee's election between receiving a distribution
directly or having the distribution transferred to an individual
retirement account or eligible 403(b) program in a "direct rollover."
Responsibilities of Custodian
The Custodian does not assume and shall not have any
responsibility to make any distribution except in accordance with written
instructions received by the Custodian. In addition, no distribution
shall be made unless and until the Custodian shall have been furnished
with all certificates, signature guarantees and other documents (including
proof of any legal representative's authority) that the Custodian may have
requested.
Tax Withholding
Any distribution made by the Custodian from the Custodial
Account shall be subject to withholding in accordance with applicable law.
Article V. Administration
In General
The Custodian shall perform solely the duties assigned to the
Custodian hereunder; provided that the Custodian may contract with
affiliates of the Custodian or other parties for the performance of
certain services. The Custodian shall not be deemed to be a fiduciary in
carrying out the following duties:
(a) Receiving contributions pursuant to the
provisions of the Custodial Account.
(b) Holding, investing and reinvesting the
contributions in Investment Company Shares.
(c) Registering any property held by the
Custodian in its own name, or in nominee or
bearer form that will pass delivery.
(d) Making distributions from the Custodial
Account in cash.
Voting
The Custodian shall mail to the Employee all proxies, proxy
soliciting materials, and periodic reports or other communications that
may come into the Custodian's possession by reason of its custody of
Investment Company Shares. The Employee shall vote the proxy,
notwithstanding the fact that the Custodian may be the registered owner of
the Investment Company Shares, and the Custodian shall have no further
liability or responsibility with respect to the voting of such shares.
Reports
The Custodian shall keep accurate and detailed account of its
receipts, investments and disbursements. As soon as practicable after
December 31st each year, and whenever required by Regulations adopted by
the Internal Revenue Service under the Act or the Code, the Custodian
shall file with the Employee a written report of the Custodian's
transactions relating to the Custodial Account during the period from the
last previous accounting, and shall file such other reports with the
Internal Revenue Service as may be required by its Regulations (but not
including any reports that may be required to be filed by the Employer).
Unless the Employee sends the Custodian written objection to a
report within sixty (60) days after its receipt, the Employee shall be
deemed to have approved such report, and, in such case the Custodian shall
be forever released and discharged with respect to all matters and things
included therein. The Custodian may seek a judicial settlement of its
accounts. In any such proceeding the only necessary party thereto in
addition to the Custodian shall be the Employee.
Written Notices
All written notices or communications to the Employee or the
Employer shall be effective when sent by first class mail to the last
known address of the Employee or the Employer on the Custodian's records.
All written notices or communications to the Custodian shall be mailed or
delivered to the Custodian at its designated mailing address, and no such
written notice of communications shall be effective until the Custodian's
actual receipt thereof. The Custodian shall be entitled to rely
conclusively upon, and shall be fully protected in any action taken by it
in good faith in reliance upon the authenticity of signatures contained in
all written notices or other communications which it receives and which
appear to have been sent by the Employee, the Employer, or any other
person.
Indemnification and Limitation on Liability
The Employee, Employer, and Custodian intend that the Custodian
shall have and exercise no discretion, authority or responsibility as to
any investment in connection with the Custodial Account, and the Custodian
shall not be responsible in any way for the tax treatment of any
contribution or distribution, or for any other action or nonaction taken
pursuant to the Employee's or Employer's direction or that of the
Employee's beneficiary, executor or administrator. The Employee who
directs the investment of his or her Custodial Account shall bear sole
responsibility for the suitability of any directed investment and for any
adverse consequences arising from such an investment.
The Custodian shall have no responsibilities other than those
provided for herein or in ERISA or Code and shall not be liable for a
mistake in judgment, for any action taken (or not taken) in good faith, or
for any loss that is not a result of its gross negligence, except as
provided in ERISA or the Code.
The Employee (and the Employee's beneficiary, executor or
administrator) shall indemnify and hold the Custodian harmless from and
against any liability that the Custodian, the Investment Advisor, their
agents, affiliates, successors, assigns, officers, directors and employees
may incur in connection with the Custodial Account, unless arising from
the Custodian's own gross negligence or willful misconduct or from a
violation of the provisions of ERISA or Regulations promulgated
thereunder.
The Custodian shall be under no duty to question any direction
of the Employee with respect to the investment of contributions, or to
make suggestions to the Employee with respect to the investment, retention
or disposition of any contributions or assets held in the Custodial
Account. The Custodian and Investment Advisor shall have no duty to give
effect to an investment direction from anyone other than the Employee (or
the Employee's beneficiary, executor or administrator). However, the
Custodian and Investment Advisor may, in their discretion, establish
procedures pursuant to which the Employee (or the Employee's beneficiary,
executor or administrator) may delegate to a third party any or all of the
Employee's power and duties hereunder, not including the authority to
execute the Account Application or a beneficiary designation form.
Expenses
The Custodian shall be paid out of the Custodial Account for
expenses of administration, including the fees of counsel employed by the
Custodian relating directly to administration of or claims against or on
behalf of the Custodial Account, taxes, and its fees for maintaining the
Custodial Account which are set forth in the Application or in accordance
with any schedule of fees subsequently adopted by the Custodian. The
Custodian may sell Investment Company Shares and use the proceeds of sale
to pay the foregoing expenses.
Resignation and Removal
The Investment Advisor may remove the Custodian at any time.
The Custodian may resign as Custodian of any Employee's Custodial Account
upon sixty (60) days' prior notice to the Investment Advisor.
Upon the removal or resignation of the Custodian, the Investment
Advisor may, but shall not be required to, appoint a successor custodian
under this Custodial Agreement, provided that the successor custodian
satisfies the requirements of Section 401(f)(2) of the Code. The
Custodian shall transfer the assets of the Custodial Account, together
with copies of relevant books and records, to the successor custodian,
provided that the Custodian is authorized to reserve such sum of money or
property as it may deem advisable for payment of any fees or other
liabilities constituting a charge on or against the assets of the
Custodial Account. The Custodian shall not be liable for the acts or
omissions of any successor to it. If no successor custodian is appointed
by the Investment Advisor, the Custodial Account shall be terminated in
accordance with Article VII.
Article VI. The Investment Advisor
The Employee and the Employer delegate to the Investment Advisor
the following powers with respect to the Custodial Account: to remove the
Custodian and select a successor Custodian; and to amend the Custodial
Account as provided in Article VII hereof.
The powers herein delegated to the Investment Advisor shall be
exercised by such officer thereof as the Investment Advisor may designate
from time to time.
Neither an Investment Company, the Investment Advisor, nor any
officer, director, board, committee, employee or member of any Investment
Company or of the Investment Advisor shall have any responsibility with
regard to the administration of this Custodial Account (or any Employer
plan that utilizes this Custodial Account as a funding vehicle) except as
provided in this Article VI, and none of them shall incur any liability of
any nature to the Employee or beneficiary or other person in connection
with any act done or omitted to be done in good faith in the exercise of
any power or authority herein delegated to the Investment Advisor.
The Employee and the Employer agree to indemnify and hold the
Investment Companies and the Investment Advisor harmless from and against
any and all liabilities and expenses, including attorneys' and
accountants' fees, incurred in connection with the exercise of, or
omission to exercise, any of the powers delegated to it under this
Article, except such liabilities and expense as may arise from the
Investment Advisor's and/or Investment Company's willful gross negligence
or misconduct.
If the Investment Advisor shall hereafter determine that it is
no longer desirable for it to continue to exercise any of the powers
hereby delegated to it, it may relieve itself of any further
responsibilities hereunder by notice in writing to the Employee at least
sixty (60) days prior to the date on which it proposes to discontinue the
exercise of the powers delegated to it.
Article VII. Amendment and Termination
The Employee, the Employer and the Custodian delegate to the
Investment Advisor the power to amend this Custodian Account (including
retroactive amendments).
The Employee or the Employer may amend the Account Application
by submitting to the Custodian a copy of such amended Account Application,
and evidence satisfactory to the Custodian that the Employer's Section
403(b)(7) program, as amended by such amended Application, will continue
to qualify under the provisions of Section 403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit:
(a) any part of the Custodial Account to be diverted to any purpose that
is not for the exclusive benefit of the Employee and his beneficiaries;
(b) the Employee to be deprived of any portion of his interest in the
Custodial Account; or (c) the imposition of an additional duty on the
Custodian without its consent.
The Employer reserves the right to terminate further
contributions to this Custodial Account. The Employee may terminate or
change the rate of further Salary Reduction Contributions to the Custodial
Account by entering into a revised agreement with his or her Employer, so
long as the form and the timing of the revised agreement is in accordance
with the rules applicable to Section 403(b) arrangements. The Employee
also reserves the right to transfer the assets of his Custodial Account to
such other form of Section 403(b) retirement plan as he or she may
determine, upon written instructions to the Custodian in such form as the
Custodian may reasonably require. The appointment of the successor
custodian in accordance with Article VI shall not be a termination of the
Custodial Account, nor shall the amendment of the Custodial Account by the
Investment Advisor be a termination of the Account.
Following termination of the Custodial Account, the Custodian
shall distribute all assets of the Custodial Account to the Employee.
There shall be no liability on the part of the Custodian or the Investment
Advisor for any tax consequences to the Employee (or the Employee's
beneficiary, executor or administrator) resulting from such termination
distribution.
Article VIII. Discrimination Requirements
Non-Discrimination Requirements
Section 403(b) of the Code generally requires that tax sheltered
annuity and custodial account arrangements (other than arrangements
maintained by a church or convention or association of churches) satisfy
certain participation and non-discrimination requirements.
In general, Salary Reduction Contributions made pursuant to an
Employee's election are eligible for exclusion from income only if the
Employer has established a program that provides all employees the
opportunity to make Salary Reduction Contributions of at least $200 per
year. For this purpose, the Employer may exclude from consideration (1)
employees who fail to satisfy minimum age and service requirements (to the
extent such requirements are adopted by the Employer in accordance with
Section 403(b)(12) and 410(b) of the Code for use in its plan); (2)
employees who are participants in an eligible deferred compensation plan
under Section 457 of the Code, qualified cash or deferred arrangement
under Section 401(k) of the Code (to the extent the Employer may maintain
such a plan) or another Section 403(b) plan or arrangement; (3) employees
normally working less than 20 hours per week; (4) employees who are non-
resident aliens; (5) certain student employees performing services
described in Section 3121(w)(3)(A) of the Code; and (6) any other
employees that may be excluded in accordance with rules and regulations
promulgated by the Secretary of the Treasury.
Non-elective contributions made by the Eligible Employer must
satisfy the participation and nondiscrimination requirements of Section
403(b)(12)(A)(i) of the Code.
Responsibility for Compliance With Discrimination Standards
Neither the Custodian nor the Investment Advisor shall have any
responsibility for determining whether contributions that are or may be
made to this Custodial Account are being made pursuant to a plan that
satisfies applicable non-discrimination requirements under the Code or any
other law, or for advising the Employee, the Employer, or any other person
with respect to such requirements. Further, neither the Custodian nor the
Investment Advisor shall have any responsibility or liability for adverse
tax consequences or any other consequences that may result from
contributions being made to this Custodial Account where the underlying
Employer plan or program fails to satisfy applicable legal requirements.
Article IX. Miscellaneous Provisions
Qualified Domestic Relations Order
In the case of a Custodial Account that is part of an "employee
pension benefit plan" under ERISA, the Custodian shall make distributions
in accordance with the terms of a "qualified domestic relations order" as
defined in Section 206(d) of ERISA, provided that the Employer (or its
duly appointed plan administrator) shall be responsible for determining
the qualified status of the order and distribution shall be made by the
Custodian only upon receipt of written direction from the Employer (or its
duly appointed plan administrator) that the order is a "qualified domestic
relations order" for purposes of ERISA.
Assignment and Alteration
The interest of the Employee in the Custodial Account shall be
held for the exclusive benefit of the Employee or his or her beneficiary,
and shall not be assigned or transferred by the Employee, nor shall it be
subject to alienation, assignment, garnishment, attachment, execution or
levy of any kind, except as described above in connection with "qualified
domestic relations orders", except with regard to payment of the expenses
of the Custodian or its agent as authorized by the provisions of this
Custodial Agreement, and except as otherwise required by law.
Governing Law
This Custodial Agreement shall be governed by the laws of the
state in which the Custodian is incorporated, except to the extent that
such laws are superseded by federal laws or regulations.
Effect on Other 403(b) Arrangements
This Custodial Account shall not prevent the Employee or the
Employer from making contributions toward another Section 403(b) annuity
contract or Section 403(b)(7) custodial account, provided that the
aggregate contributions to or under such annuity contracts or custodial
accounts and under this Custodial Account shall not exceed the maximum
permissible amounts as determined pursuant to Article III hereof. Neither
the Custodian nor the Investment Advisor shall have any responsibility for
monitoring compliance with the maximum contribution limitations.
Establishment of Custodial Account by Former Employee
To the extent authorized by the Internal Revenue Service as
being permissible under Section 403(b) of the Code, a former Employee who
is eligible for a distribution from his or her Employer's Section 403(b)
program may, without the consent of his or her former Employer, adopt this
Custodial Account for the purpose of receiving a rollover contribution
from the prior Employer's Section 403(b) Plan, or from the Custodial
Account through which such plan is funded. In any such event, however, no
additional Salary Reduction Contributions or Employer non-elective
contributions shall be made to this Custodial Account unless a subsequent
employer consents to the former Employee's adoption of the Custodial
Account.
Definitions
As used in this Custodial Account Agreement, the following terms
have the meaning set forth below, unless a different meaning is clearly
required by the context.
(1) "Code" means the Internal Revenue Code of 1986, as amended.
(2) "Custodial Account" means the custodial account established
hereunder for the benefit of the Employee.
(3) "Custodian" shall mean the designated custodian, or its
successors.
(4) "Employee" means the person named in the Account
Application.
(5) "Employer" means the employer organization named in the
Account Application.
(6) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(7) "Investment Advisor" shall mean Xxxxxxxx Capital
Management, Inc., or any successor or affiliate thereto.
(8) "Investment Company" means the portfolios of the Xxxxxxxx
Funds, Inc. or such other regulated investment companies
whose investment advisor is Xxxxxxxx Capital Management,
Inc., or its successors or affiliates, and whose shares are
authorized (under the terms of the prospectus of the
investment company, and subject to any limitations imposed
by the Employer's plan) for purchase under this Agreement.
(9) "Salary Reduction Contributions" means contributions made
pursuant to a written agreement between the Employee and
the Employer, and by which the Employee's salary for future
services is reduced and the amount of such reduction is
contributed by the Employer to the Custodial Account.
