Principal Mutual Life Insurance Company Master Individual
Retirement Account Plan And Custody Agreement
This is the Principal Mutual Life Insurance Company's Master Individual
Retirement Account Plan and Custody Agreement for use by individuals who desire
to establish a Traditional Individual Retirement Account (Traditional XXX), as
described in Section 408(a) of the Internal Revenue Code (Code) or a Xxxx
Individual Retirement Account (Xxxx XXX) as described in Section 408A of the
Code. Traditional IRAs include Regular IRAs, Spousal IRAs, SEP IRAs and Rollover
IRAs Principal Mutual Life Insurance Company hereby agrees to act as Custodian
of any Traditional XXX or Xxxx XXX established under the Plan and this
Agreement, subject to the following terms and conditions:
ARTICLE I - Limitations on Contributions
In addition to the initial contribution made at the time the Account is
established, the Custodian may accept additional cash contributions from, or on
behalf of, the Participant for a taxable year of the Participant except as
limited below.
Only cash contributions will be accepted. Contributions to a Traditional XXX
shall not exceed the lesser of $2,000 or 100% of compensation, except in the
case of a rollover contribution as that term is described in Code Sections
402(c), 403(a)(4), 403(b)(8) or 408(d)(3), an employer contribution to a
Simplified Employee Pension as defined in Section 408(k), or any other
contribution as permitted by the Code. For Xxxx IRAs, cash contributions are
limited to the lesser of $2,000 or 100% of compensation, unless the contribution
is a rollover contribution described in Section 408(e) of the Code.
Contributions to a Traditional XXX (except SEP and Rollover IRAs) and Xxxx XXX
are coordinated; contributions to one reduces the amount that may be contributed
to the other so that contributions cannot exceed the 100% of compensation/$2,000
per Participant limitation.
Two applications are necessary if both spouses are establishing an XXX. The
maximum combined contribution in the event of a non-working spouse is the lesser
of 100% of compensation or $4,000. The maximum contribution must be split
between the Participant and the Participant's spouse so no more than $2000 is
contributed for either of them.
Excess Contributions
A retirement savings contribution will not be allowed for a Xxxx XXX or
Traditional XXX in excess of the 100%-$2,000/$4,000 limits, or in the case of a
Simplified Employee Pension, 15%-$30,000 limitation, nor can a contribution be
made to a Traditional XXX during the year in which or after the Participant
reaches 70 1/2 (except in the case of a Simplified Employee Pension). (A spousal
contribution can be made to the Traditional XXX of the non-working spouse as
long as the non-working spouse is under age 70 1/2 and the working spouse has
earned income.) Additionally, a non-deductible federal excise tax penalty in the
amount of 6% of excess contributions will be imposed on any Participant who has
excess contributions in a Traditional XXX or Xxxx XXX. This penalty will be
imposed each year until the excess contributions are removed.
An excess contribution may be removed from a Traditional XXX or Xxxx XXX by
withdrawing the amount of the excess or by applying the excess contribution
toward the contribution of the Participant in a subsequent year. If an excess
contribution is withdrawn from the Account, together with the net income of such
excess contribution, prior to the due date for filing the Participant's income
tax return for the year in which the excess contribution was made (including
extensions of time), the 6% non-deductible excise tax will not be imposed, the
contribution withdrawn will not be included in the Participant's gross income
for the year in which received, and the federal 10% tax on premature
distributions (see Distributions) will not be imposed on the excess withdrawn.
The net income on such excess contribution that is withdrawn will be deemed to
have been earned and is taxable in the taxable year in which such excess
contribution was made.
If an excess contribution is withdrawn after the due date for filing the
Participant's income tax return for the taxable year (including extensions of
time) and no deduction was taken for the excess portion of the contribution, the
excess withdrawn will not be included in the Participant's federal gross income
for the year in which received, and the 10% federal tax on premature
distributions will not be imposed on the excess withdrawn, provided that the
total contributions during the year, including the excess contribution, did not
exceed the applicable limitations. Any earnings of such excess contributions
withdrawn after the due date for filing the Participant's income tax return
(including extensions of time) will be subject to the taxes on premature
distributions and will be included in federal gross income.
If an excess contribution is withdrawn after the due date for filing the
Participant's income tax return for the taxable year (including extensions of
time) and the total contribution for the taxable year exceeded the $2,000/$4,000
limitation, the excess contribution that is withdrawn will be included in the
Participant's federal gross income for the year in which received, the 10%
federal tax on premature distributions will be imposed on the amount withdrawn,
and the 6% non-deductible excise tax will be imposed for each year until the
excess contribution is removed.
ARTICLE II - Nonforfeitability
The Participant's interest in the balance in the Account shall at all times be
nonforfeitable. The Account is established for the exclusive benefit of the
Participant and the Participant's beneficiaries.
ARTICLE III - Prohibited Investments
No part of the custodial funds shall be invested in life insurance contracts,
nor may the assets of any Participant's Account be commingled with other
property except in a common trust fund or common investment fund [within the
meaning of Code Section 408(a)(5)]. All funds shall be invested in shares of
such Mutual Funds as Participant shall designate.
ARTICLE IV - Distributions
Notwithstanding any other provision of this Plan, the Participant or a
Beneficiary may elect to receive distribution in any manner permitted by law
which is approved by the Custodian.
The duty to determine the amount of the distributions hereunder shall be the
Participant's or, when applicable, the designated Beneficiary. The Custodian
shall not be liable to the Participant or any other person for taxes or other
penalties incurred as a result of failure to distribute the minimum amount
required by law.
If the Participant dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional cash
contributions or rollover contributions may be accepted in the account.
Pursuant to this Participation Agreement, certain distributions are at the
direction of the Participant as follows:
A. Traditional IRAs
(1) The Participant may begin to take money out of a Traditional XXX
without tax penalty after the age of 59 1/2, but must begin receiving a
distribution from the Account not later than the April 1 following the
calendar year in which the Participant attains age 70 1/2 (required
beginning date). At least 30 days prior to that date the Participant
must elect to have the balance in the Account distributed in:
(a) a single sum payment,
(b) an Annuity Contract that provides equal or substantially equal
monthly, quarterly or annual payments over the life the
Participant or over the joint and last survivor lives of the
Participant and the Participant's beneficiary.
(c) equal, or substantially equal, monthly, quarterly, semiannual or
annual payments (see "Minimum amounts to be distributed" below)
commencing not later than the above date and not extending beyond
the life expectancy of the Participant, or
(d) equal, or substantially equal, monthly, quarterly, semiannual or
annual payments (see "Minimum amounts to be distributed" below)
commencing not later than the above date and not extending beyond
the joint and last survivor expectancy of the lives of the
Participant and the designated Beneficiary.
Minimum amounts to be distributed. If the Participant's entire
interest is to be distributed in other than a lump sum, then the
amount to be distributed each year (commencing with the required
beginning date and each year thereafter) must be at least equal
to the quotient obtained by dividing the Participant's benefit by
the lesser of (1) the applicable life expectancy or (2) if the
Participant's spouse is not the designated beneficiary, the
applicable divisor determined from the table set forth in Q&A-4
of section 1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Distributions after the death of the Participant shall be
distributed using the applicable life expectancy as the relevant
divisor without regard to proposed regulations section
1.401(a)(9)-2. A 50% excise tax will be imposed on the difference
between the minimum payout required and the amount actually paid,
unless the underdistribution was due to reasonable cause.
Notwithstanding that required minimum distributions may have
commenced as described above, the Participant may receive a
larger distribution from the Account upon written request to the
Custodian. If the Participant fails to elect any of the methods
described above on or before April 1 following the year in which
the Participant attains age 70 1/2, distribution will be made in
a single sum payment on or before that date.
(2) If the Participant dies before receiving full distribution from
the Account, the balance in the Account must be distributed in
the following manner:
(a) If the owner dies after distribution of his or her interest
has begun, the remaining portion of such interest will
continue to be distributed at least as rapidly as under the
method of distribution being used prior to the owner's
death.
(b) If the owner dies before distribution of his or her interest
begins, the owner's entire interest will be distributed in
accordance with one of the following four provisions:
(1) The owner's entire interest will be paid by December 31
of the calendar year containing the fifth anniversary
of the owner's death.
(2) If the owner's interest is payable to a Beneficiary
designated by the owner and the owner has not elected
(1) above, then the entire interest will be distributed
over the life or over a period certain not greater than
the life expectancy of the designated Beneficiary
commencing on or before December 31 of the calendar
year immediately following the calendar year in which
the owner died. The designated Beneficiary may elect at
any time to receive greater payments.
(3) If the designated Beneficiary of the owner is the
owner's surviving spouse, the spouse may elect to
receive equal or substantially equal payments over the
life or life expectancy of the surviving spouse
commencing at any date prior to the later of
(1) December 31 of the calendar year immediately
following the calendar year in which the owner
died and
(2) December 31 of the calendar year in which the owner
would have attained age 70 1/2. Such election must
be made no later than the earlier of December 31 of
the calendar year containing the fifth anniversary
of the owner's death or the date distributions are
required to begin pursuant to the preceding
sentence. The surviving spouse may increase the
frequency or amount of such payments at any time.
(4) If the designated Beneficiary is the owner's surviving
spouse, the spouse may treat the account as his or her
own individual retirement arrangement (XXX). This
election will be deemed to have been made if such
surviving spouse makes a regular XXX contribution to
the account, makes a rollover to or from such account,
or fails to elect any of the above three provisions.
(c) For purposes of this requirement, any amount paid to a child
of the owner will be treated as if it had been paid to the
surviving spouse if the remainder of the interest becomes
payable to the surviving spouse when the child reaches the
age of majority.
(3) Life expectancy is computed by use of the expected return
multiples in Tables V and VI of section 1.72-9 of the Income Tax
Regulations. Unless otherwise elected by the Participant by the
time distributions are required to begin, life expectancies shall
be recalculated annually. Such election shall be irrevocable as
to the Participant and shall apply to all subsequent years. The
life expectancy of a non-spouse beneficiary may not be
recalculated; instead, life expectancy will be calculated using
the attained age of such beneficiary during the calendar year in
which distributions are required to begin pursuant to this
section, and payments for subsequent years shall be calculated
based on such life expectancy reduced by one for each calendar
year which has elapsed since the calendar year life expectancy
was first calculated.
The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements be taking from one individual
retirement account the amount required to satisfy the requirement for
another.
X. Xxxx IRAs
No minimum distribution rules apply to Xxxx IRAs during the Participant's
lifetime. Unless IRS rules or regulations require or permit otherwise, if
the Participant dies before his or her entire interest in a Xxxx XXX is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(1) If the Participant dies on or after distribution of his or her
interest has begun, distribution must continue to be made at least as
rapidly as under the method of distribution in effect at the
Participant's death.
(2) If the Participant dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Participant or, if the Participant has not so elected, at the election
of the Beneficiary or Beneficiaries, either (a) Be distributed by the
December 31 of the year containing the fifth anniversary of the
Participant's death, or (b) Be distributed in equal or substantially
equal payments over the life or life expectancy ( computed by use of
the expected return multiples in Tables V and VI of section 1.72-9 of
the Income Tax Regulations) of the designated Beneficiary or
Beneficiaries starting by December 31 of the year following the year
of the Participant's death. If, however, the Beneficiary is the
Participant's surviving spouse, then this distribution is not required
to begin before the later of (A) the December 31 of the year following
the year of the Participant's death, or (B) the December 31 of the
year in which the Participant would have turned age 70 1/2.
If the Participant dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
(3) Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the Participant by the time distributions are
required to begin, life expectancies shall be recalculated annually.
Such election shall be irrevocable as to the Participant and shall
apply to all subsequent years. The life expectancy of a non-spouse
beneficiary may not be recalculated; instead, life expectancy will be
calculated using the attained age of such beneficiary during the
calendar year in which distributions are required to begin pursuant to
this section, and payments for subsequent years shall be calculated
based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first
calculated.
ARTICLE V - Declaration of Intention
Except in the case of the Participant's death, Disability [as defined in Section
72(m) of the Code] or attainment of age 59 1/2, the Custodian shall receive from
the Participant a declaration of the Participant's intention as to the
disposition of the amount distributed before distributing an amount from the
Participant's Account.
ARTICLE VI - Notices And Reports
The Participant agrees to provide information to the Custodian at such time and
in such manner and containing such information as may be necessary for the
Custodian to prepare any reports required pursuant to Section 408(i) and
408A(d)(3)E of the Code and the regulations thereunder, and any other applicable
guidance issued by the Internal Revenue Service.
The Custodian agrees to submit reports to the Internal Revenue Service and the
Participant as prescribed by the Internal Revenue Service. Currently, calendar
year reports concerning the status of the account are required to be furnished
annually.
ARTICLE VII - Controlling Article
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence shall be controlling.
Furthermore, any such additional article shall be wholly invalid if it is
inconsistent, in whole or in part, with Section 408(a) or 408A of the Code,
whichever is applicable, and the regulations thereunder.
ARTICLE VIII - Amendments
The Custodian shall have the authority to amend this Agreement from time to time
in order to comply with the provisions of the Code and regulations thereunder.
The Custodian shall have the right to amend its fee structure and amounts. Such
an amendment shall apply to current and/or future years only. The Custodian
shall also have the right to amend this agreement by adding additional
investment alternatives. Furthermore, other amendments may be made upon written
consent of the Custodian and the Participant.
ARTICLE IX - Definitions
Account shall mean the Principal Mutual Life Insurance Company Individual
Retirement Account which has been established in accordance with Section 408 of
the Code and consists of the terms and conditions herein set forth together with
the provisions of the Application.
Annuity Contract shall mean an annuity contract issued by Principal Mutual Life
Insurance Company.
Beneficiary shall mean the person(s) or entity(ies) designated to receive the
balance in the Account upon the death of the Participant or upon the death of a
prior Beneficiary.
ERISA means the Employee Retirement Income Security Act of 1974, as it may be
amended from time to time.
Compensation means wages, salaries, professional fees, and other amounts derived
from or received for personal services actually rendered (including, but not
limited to, commissions-paid salespersons, remuneration for services on the
basis of a percentage of profits, commissions on insurance premiums, tips and
bonuses) and includes earned income, as defined in Section 401(c)(2) of the Code
(reduced by the deduction the self-employed individual takes for contributions
made to a self-employed retirement plan). For purposes of this definition,
Section 401(c)(2) shall be applied as if the term trade or business for purposes
of Section 1402 included service described in subsection (c)(6). Compensation
does not include amounts derived from or received as earnings or profits from
property (including, but not limited to, interest and dividends) or amounts not
includible in gross income. Compensation also does not include any amount
received as a pension or annuity or as deferred compensation. The term
compensation shall include any amount includible in the individual's gross
income under Section 71 with respect to a divorce or separation instrument
described in subparagraph (A) of Section 71(b)(2).
Custodian means Principal Mutual Life Insurance Company or any successor
thereto.
Investment Manager refers to Principal Management Corporation. This term shall
have the same meaning as that in Section 3(38) of ERISA. The Investment Managers
with respect to the Mutual Funds hereby acknowledge that they are fiduciaries
with respect to the Plan. The Investment Managers with respect to the individual
Participant's Account hereby acknowledge that they are fiduciaries with respect
to the funds of the Participant.
Principal Group of Funds, Mutual Fund, Fund, or The Principal Family of Mutual
Funds means the fund or funds managed by Principal Management Corporation which
have been made available for the investment of Traditional XXX or Xxxx XXX
contributions.
Participant means any individual of legal age who shall execute the
Participation Agreement and make contributions to this Plan.
Participation Agreement means the written agreement executed by the Participant
and, where applicable, the Broker, whereby the Participant agrees to participate
in the Plan.
Plan means the terms and conditions of this Principal Mutual Life Insurance
Company XXX Plan and Custody Agreement including any amendments made pursuant to
Article IX of the Plan.
Spousal XXX means two contributory Traditional or Xxxx IRAs established by a
working individual for himself or herself and for the benefit of his or her
non-employed spouse.
All other capitalized words, terms and phrases not specifically defined shall
have and carry the meaning given them under the Code.
ARTICLE X - Investments
All contributions received by the Custodian shall be invested in such Mutual
Funds as the Participant may designate, or shall be used to purchase an Annuity
Contract as directed by the Participant.
At the time the Participant executes the Participation Agreement, the
Participant shall specify the particular Mutual Fund or Funds in which
contributions shall be invested. After the initial contribution, the Participant
may, at any time, direct the Custodian to transfer contributions then invested
in any such Fund into any other such Funds or to an Annuity Contract. Transfers
made pursuant to such direction shall not be considered a distribution of any
Account to the Participant.
No party identified herein shall be required to comply with any direction of the
Participant which in the judgment of such party may subject it to liability or
expense unless such party shall be indemnified in manner and amount satisfactory
to it.
The Participant is 100% vested at all times in all funds attributed to his
Account.
The Participant may not borrow funds from his Account, nor may he use the funds
as security for any loan or extension of credit.
Except as provided in this Plan, no right, interest or claim in or to any funds
held in the Mutual Fund or Annuity Contract shall be transferable, assignable or
subject to pledge by the Participant or Beneficiary, and any attempt to
transfer, assign or pledge the same shall not be recognized except as required
by law. The right, interest or claim in or to any funds held in the Mutual Fund
or Annuity Contract shall not be subject to garnishment, attachment, execution
or levy except as permitted by law.
Any Participant under the Plan may transfer his or her interest, in whole or in
part, to his or her spouse under a decree of divorce or dissolution of marriage
or a written instrument incident to such divorce or dissolution. At the time of
transfer, such interest shall be deemed an XXX of such spouse. The Participant
shall promptly notify Custodian of any such transfer by delivery to Custodian of
a certified copy of such decree or a true copy of such written instrument. Upon
receipt of the certified copy of such decree or a true copy of such written
instrument from any source, Custodian shall promptly adjust its books and
records to reflect that such Account is for the benefit of such former spouse.
Custodian shall not be required to accept contributions to or make distributions
from an Account established for a former spouse by reason of a transfer of
interest by a Participant to such former spouse hereunder until such former
spouse shall execute a Participation Agreement.
The Plan and the Accounts established hereunder shall be governed by all
applicable laws, rules and regulations of the United States of America and the
State of Iowa.
ARTICLE XI - Contributions
All initial contributions shall be paid to the Custodian at the time the
Participation Agreement is executed. Additional contributions may be paid to the
Custodian in such manner and in such amounts as the Custodian shall specify.
Contributions made by or on behalf of the Participant may be paid at any time
during the calendar year, but in no event later than the last day for the filing
of the Federal Income Tax Return for the calendar year to which they relate, not
to include any extensions thereof (except for contributions to a SEP XXX, which
may be made until the federal income tax filing deadline of the Participant's
employer, including extensions).
Except in the case of a Rollover XXX, Simplified Employee Pension or Xxxx XXX,
contributions made by or on behalf of the Participant shall not be made during
or after the calendar year in which the Participant attains age 70 1/2 years.
All XXX contributions must be in cash. Participant must clearly identify on the
application for the XXX account whether the XXX being established is a
Traditional XXX or a Xxxx XXX. Traditional IRAs and Xxxx IRAs must be maintained
in separate Custodial Accounts.
If an Excess Contribution is made by or on behalf of the Participant for any
calendar year, upon written request for distribution from the Participant
stating the amount of the Excess Contribution to be distributed, Custodian will
distribute such amount of the Excess Contribution to the Participant, together
with the income attributable thereto. The Custodian shall not have any duty to
determine whether an Excess Contribution has been made by or on behalf of the
Participant, and the Custodian shall not be held liable by the Participant or
any other person for failing to determine whether an Excess Contribution was
made or for failing to make distribution of such Excess Contribution without
request of the Participant. The Custodian shall not be liable to the Participant
or any other person for taxes or other penalties incurred as a result of an
Excess Contribution and any income attributable thereto or as a result of a
distribution of an Excess Contribution and any income attributable thereto.
Before the Custodian shall accept a contribution by or on behalf of the
Participant as a Rollover Contribution or Xxxx Conversion Contribution, the
Participant shall deliver to the Custodian a written declaration, in a form
acceptable to the Custodian, that such contribution is eligible for treatment as
a Rollover Contribution or Xxxx Conversion Contribution. Notwithstanding
anything to the contrary in the Plan, once the Custodian has received a
declaration from the Participant that a contribution is a Rollover Contribution
or Xxxx Conversion Contribution, the Custodian may conclusively rely on the
Participant's declaration and may accept and treat the contribution as a
Rollover Contribution or Xxxx Conversion Contribution. All Rollover
Contributions from a qualified employer plan shall be maintained in a separate
Rollover XXX, unless the Participant makes a written request to combine new
contributions and rollover contributions in one XXX. The Custodian shall have no
duty to determine whether combining new contributions and rollover contributions
in the same XXX is in the best interests of the Participant.
ARTICLE XII - Designation of Beneficiary
The Participant may designate the Beneficiary of his or her Account by a written
form acceptable to and filed with Custodian. Community property states and
marital property states require spousal consent if someone other than the spouse
is to be named as Beneficiary.
If the Participant designates more than one Beneficiary, he or she shall
designate the percentage interest that each such Beneficiary shall receive from
his or her Account upon distribution. In the event no such percentage interest
is designated, the interest of each Beneficiary shall be equal.
If the Participant predeceases his or her spouse before his or her entire
Account is distributed in accordance with Article IV(A)(1) of the Plan and the
Participant has designated no Beneficiary for the remaining interest or all such
Beneficiaries predecease the Participant's spouse, then the interest of the
Participant's spouse in the Account shall be fully vested and subject to the
terms and conditions of this Article and the Participant's spouse shall be
entitled to designate the Beneficiary of the Account in accordance with this
Article.
The Participant may, at any time, change or revoke any designation made under
this Article in a written form acceptable to and filed with the Custodian. Upon
the death of the Participant, the designation or designations made hereunder
shall be irrevocable. The designation shall be effective only if received by the
Custodian prior to the death of the Participant.
If the Participant fails to designate any Beneficiary or if the Participant
revokes the designation of Beneficiary or if all Beneficiaries designated
predecease the Participant, then the entire interest of the Participant in his
Account shall pass to the Participant's estate.
ARTICLE XIII - Administrative Duties
This Article shall delineate the responsibilities of the Custodian. The
Custodian shall maintain the Account in the name of the Participant and shall be
responsible only for the contributions of which it receives notice from the
Participant. The Custodian shall make distributions and transfers only in
accordance with the directions of the Participant. The Custodian shall keep
records of all receipts, investments and disbursements relating to the Account.
The Custodian shall furnish the Participant or the Beneficiary, where
applicable, with a written statement of transactions relating to the Account.
Unless the Participant shall have filed with the Custodian Agent written
exceptions or objections to such statement within thirty (30) days after it is
furnished, the custodian shall be forever released and discharged from liability
or accountability to the Participant or the Beneficiary, with respect to the
acts and transactions shown in the statement. No Beneficiary shall be entitled
to statements hereunder until the Participant is deceased and distribution shall
have commenced to such Beneficiary.
The duties and responsibilities of all parties to this Agreement are limited to
those specifically stated herein and no other or further duties or
responsibilities shall be implied.
ARTICLE XIV - Revocation Of Participation in Plan
The Participant may terminate participation in the Plan at any time by notifying
the Custodian in writing of the intention to terminate and instructing the
Custodian in writing to whom and by what means the funds on deposit in his
Account shall be transferred. Withdrawal of all funds invested in the Mutual
Fund shall terminate participation in the Plan. Although termination of this
Account could have an adverse effect on a Simplified Employee Pension in which
the Participant is participating, the Custodian has no liability to the
Participant, the employer, or to any other employees of that employer with
respect to such termination.
The Participant may revoke participation in the Plan within seven (7) business
days from the date the Participant executes the Participation Agreement by
notice to the Custodian in writing.
The Custodian may be required to withhold 10% from any taxable distribution from
an XXX unless the Participant elects no withholding at the time distributions
begin. Whether or not the Participant allows the Custodian to withhold, he or
she may be required to make quarterly estimated tax payments. In addition,
unless the Participant indicates at the time he or she closes an XXX account
that it is being transferred to another tax qualified plan, the Custodian will
be required to withhold at least 10% of the distribution.
ARTICLE XV - Miscellaneous
All instructions to the Custodian shall be in writing. The Participant may
authorize an agent to give instructions hereunder. Any such agent, including any
Broker authorized to direct the investment of a Participant's Account, must be
authorized in writing by the Participant in such form which is approved by and
filed with the Custodian. Any instruction by an agent so authorized shall be
binding on the Participant. Any authorization hereunder shall remain in effect
until revoked by the Participant in writing filed with the Custodian.
Principal Mutual Life Insurance Company shall substitute another Trustee or
Custodian upon notification by the Internal Revenue Service that such
substitution is required because it has failed to comply with the requirements
of Section 1.401-12(n) of the Treasury Regulations, or is not keeping such
records, or mailing such returns or sending such statements as are required by
forms or regulations.
In no event shall the Custodian be liable or responsible for the payment of any
tax or any penalty attributable to Excess Contributions, retention of Excess
Contributions, failure to make the minimum distribution from the Account, or
withdrawals or distributions made from the Account. Custodian shall not be
required to make any distribution which, in the judgment of Custodian, will
render Custodian directly liable for any such tax or penalty.
In the event Custodian shall receive any claim to the funds held under the Plan
which claim is adverse to the interest of the Participant or the Beneficiary and
which claim Custodian, in its absolute discretion, deems meritorious, Custodian
may withhold distribution under the Plan until the claim is resolved or until
instructed by a court of competent jurisdiction or Custodian may pay all or any
portion of the funds then invested in the Mutual Fund into such court. Payment
to a court under the Plan shall relieve Custodian of any further obligation to
anyone for the amount so paid.
In the event any question arises or ambiguity exists as to the meaning,
interpretation or construction of any provisions of the Plan, the Custodian is
authorized to construe or interpret any such provision and such construction and
interpretation shall be binding upon the Participant and the Beneficiary.
As compensation for its service hereunder, the Custodian shall be paid an annual
maintenance fee of $15 per XXX Plan Participant Account on the first business
day of December each year. Such fees shall be deducted from the Accounts as
applicable and paid to the Custodian unless the participant elects, in a writing
filed with the Custodian, to pay such fee directly. Any fee not paid directly
when due may be deducted from the Account and paid to the Custodian.
Any notices required or permitted to be given to Custodian under the Plan shall
be given to Custodian at the office of Custodian or any of its offices, and any
notices required or permitted to be given to the Participant under the Plan
shall be given to the Participant at the address for notice the Participant may
file with Custodian from time to time. Notices hereunder may be personally
served or sent by United States mail, first class, with postage prepaid and
properly addressed.
Any provision of the Plan which disqualifies it as a Traditional XXX or Xxxx XXX
shall be disregarded to the extent necessary to continue to qualify it as such
under the code.
Titles to Articles in this Plan are for convenience only and, in the event of
any conflict, the text of the Plan rather than the titles shall control.
Individual Retirement Custody
Account Disclosure Statement
Right To Revoke
AN INDIVIDUAL MAY REVOKE HIS OR HER TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNT
(TRADITIONAL XXX) OR XXXX XXX AND HIS OR HER PARTICIPATION IN THE PLAN AT ANY
TIME WITHIN SEVEN (7) BUSINESS DAYS AFTER HIS OR HER ADOPTION OF THE PLAN. In
the event of such a revocation, the entire amount contributed by the individual
will be returned.
Individuals wishing to revoke their Traditional XXX or Xxxx XXX are required to
mail or deliver a written notice of revocation to the custodian not later than
the seventh business day after the establishment of the Account. The notice
shall be deemed delivered on the date of the postmark.
Custodian: Principal Mutual Life Insurance Company
Princor Financial Services Corporation
Attn: XXX Section
XX Xxx 00000
Xxx Xxxxxx, Xxxx 00000
Telephone Number: 0-000-000-0000
Sponsor: Principal Group of Funds
General Description Of The Plan
A Traditional XXX may be established under the Plan by any working individual
who will not reach the age of 70 1/2 before the end of the year. The age
limitation does not apply to rollover contributions, Simplified Employee Pension
contributions and Xxxx XXX contributions. See the Plan for a more detailed
description of the restrictions on participation.
Contributions may be invested in any of the Mutual Funds named in the
application and instructions. All dividends and capital gains distributions will
be reinvested in the Funds selected and will accumulate in the account on a
tax-deferred basis. The individual (or the named beneficiary who survives the
individual) may request the Custodian to exchange shares of one fund for any
other eligible fund. Investments may be split among any of the funds named in
the application.
Traditional XXX(s) must be maintained in separate Custodial Account(s) from Xxxx
XXX(s).
The Participant may begin receiving distributions from a Traditional XXX without
incurring a 10% penalty tax on premature distributions at any time after a
Participant reaches age 59 1/2. The 10% penalty tax does not apply to
distributions made
o Due to the Participant's death
o Due to the Participant's disability as defined in the Plan o In
substantially equal periodic payments (at least annually) for the life
expectancy of the Participant or joint life expectancies of the Participant
and the Participant's beneficiary
o For medical expenses which are deductible on the Participant's income tax
return
o To pay health insurance premiums for a Participant who has been unemployed
for at least 12 weeks in the current or preceding tax year
o For qualified education expenses
o For a first-time home purchase for distributions of up to $10,000
The Participant must begin receiving distributions from a Traditional XXX before
April 1 following the year in which he or she attains age 70 1/2. He or she may
elect to receive their distribution in a lump sum or in installments over any
number of years selected by the Participant, but not exceeding their life
expectancy or the joint and survivor expectancy of the Participant and his or
her designated Beneficiary. Each payment is calculated by dividing the net asset
value of the shares in the account, and any dividends held, by the number of
payments remaining until the end of the period selected.
Income Tax Considerations
1997 Tax Year
Single persons who are not covered by an employer retirement plan can deduct
amounts contributed to a Regular XXX up to the lesser of $2,000 or 100% of
compensation. Persons who are covered by an employer retirement plan will be
able to make tax-deductible contributions to Regular IRAs only if their incomes
are below certain levels. For married persons filing separate tax returns, the
fact that the spouse is covered by an employer retirement plan does not affect
the non-covered spouse's ability to make deductible contributions. For married
persons filing jointly where either spouse has an employer retirement plan, the
full Traditional XXX deduction may be taken if adjusted gross income (AGI) is
$40,000 or less ($25,000 or less for single taxpayers.) However, as the joint
AGI exceeds $40,000 ($25,000 for singles), the deduction is phased down at 20
cents (22.5 cents for spousal IRAs) per dollar of AGI and is eventually
phased-out when joint AGI reaches $50,000 ($35,000 for singles). The phaseout is
based on AGI before it is reduced for deductible XXX contributions. The
deduction is rounded down to the next lowest multiple of $10 when not already a
multiple of $10. There is a $200 minimum deduction for anyone without phaseout
limits. The amount of a contribution that is deductible is determined by the
Participant. To the extent allowable contributions are not eligible for
deduction due to the AGI limits, non-deductible contributions are permitted.
Employer retirement plans include pension and profit sharing plans, 401(k)
plans, 403(b) plans, SEP and SIMPLE IRAs, government plans and just about every
other type of employer-maintained retirement plan. One exception: unfunded
deferred compensation plans including plans of state and local government and
tax-exempt organizations. A person will be considered a participant in an
employer retirement plan even if not vested. However, a person who works for an
employer that has a plan, but who has not yet met the plan's eligibility
requirements, can make deductible XXX contributions. A person's Form W-2 for the
year should indicate whether that person is covered by an employer retirement
plan.
1998 Tax Year and Later
Regular IRAs. For tax years beginning in 1998, any single person or any married
person where neither spouse is covered by an employer retirement plan (as
defined in the preceding paragraph) can deduct contributions of up to the lesser
of $2,000 or 100% of compensation to a Regular XXX. Persons covered by an
employer retirement plan may make deductible contributions to a Regular XXX, but
deductions are phased out based upon the person's AGI as described in the table
below:
Tax Year Joint Returns (AGI) Individual Returns (AGI)
-----------------------------------------------------------------
1998 $50,000-$60,000 $30,000-$40,000
1999 $51,000-$61,000 $31,000-$41,000
2000 $52,000-$62,000 $32,000-$42,000
2001 $53,000-$63,000 $33,000-$43,000
2002 $54,000-$64,000 $34,000-$44,000
2003 $60,000-$70,000 $40,000-$50,000
2004 $65,000-$75,000 $45,000-$55,000
2005 $70,000-$80,000 $50,000-$60,000
2006 $75,000-$85,000 $50,000-$60,000
2007+ $80,000-$100,000 $50,000-$60,000
A married person who is not covered by an employer retirement plan, but whose
spouse is covered may deduct XXX contributions if AGI on a joint return is less
than $150,000. The deduction is phased out as previously discussed between
$150,000 and $160,000. The foregoing does not apply to Rollover IRAs or SEP
IRAs.
The amount of the contribution that is deductible is determined by the
Participant. To the extent allowable contributions are not eligible for
deductions due to the AGI limits, non-deductible contributions are permitted.
Xxxx IRAs. For tax years beginning in 1998, any person whose AGI is less than
$95,000 ($150,000 if filing a joint return) can contribute the lesser of 100% of
compensation or $2,000 to a Xxxx XXX. Contributions to a Xxxx XXX are not
deductible. Eligibility to contribute to a Xxxx XXX is phased out for AGI
between $95,000 - $110,000 for individuals and $150,000 - $160,000 for married
persons filing joint returns. Contributions to a Xxxx XXX are coordinated with
contributions to a Regular XXX; contribution to one reduces the amount that may
be contributed to the other so that total contributions cannot exceed the 100%
of compensation/$2,000 per Participant limitation. Participation in an employer
retirement plan does not affect eligibility for Xxxx XXX contributions.
Set-up charges and annual fees are considered miscellaneous deductions and,
therefore, are not deductible unless miscellaneous deductions are in excess of
2% of the Participant's adjusted gross income.
Rollover Contributions
Rollovers to Traditional IRAs from other retirement plans. Certain distributions
from qualified employee benefit plans and 403(b) plans (tax-sheltered annuities)
are eligible to be paid to a Traditional XXX. Such a payment is referred to as a
rollover of an eligible rollover distribution. The administrator or custodian
for the employee benefit plan or 403(b) plan from which the distribution is made
can indicate which portion of a distribution is an eligible rollover
distribution. Non-taxable distributions, distributions that are part of a series
of substantially equal payments made at least once a year over long periods of
time and distributions that are required after a participant attains age 70 1/2
are not eligible rollover distributions.
A rollover can be completed as a direct rollover to a Traditional XXX (which
avoids the application of a 20% income tax withholding requirement) or by
reinvesting distribution proceeds paid to the plan participant in a Traditional
XXX within 60 days of the date the participant receives the distribution. If the
distribution is not reinvested within 60 days of its receipt, the payment is
taxed in the year in which the participant received it. Distributions from a
qualified employee benefit plan may be eligible for special tax treatment such
as 10-year averaging and capital gain tax treatment. This special tax treatment
is not available if an individual previously rolled over a payment from the
employee benefit plan or certain other similar plans of the employer. The
special tax treatment is also not available for distributions rolled over to an
XXX when distributions are subsequently made from that XXX. Also, if only part
of a distribution from an employee benefit plan is rolled over to an XXX, this
special tax treatment is not available for the part of the distribution that was
not so rolled over. Additional restrictions are described in IRS Form 4972,
which has more information on lump sum distributions and how an individual may
elect the special tax treatment. The Plan provides that Rollover contributions
from a qualified employer plan shall be held in a separate XXX (called a Conduit
XXX) at all times, unless the Participant instructs the Custodian, in writing,
to the contrary. The Custodian shall be entitled to rely upon all written
instructions it reasonably believes to be genuine.
Rollovers to Traditional IRAs from other Traditional IRAs. Amounts distributed
from another Traditional XXX may be rolled over to the Princor Traditional XXX.
Rollovers between Traditional IRAs may occur no more than once a year; however,
direct transfers of Traditional XXX assets to another Traditional XXX may occur
at any time.
Under the Plan, Rollover Contributions may only be made in cash. If an
individual receives a distribution from a qualified employee benefit plan of
property other than cash, the individual may sell such property and invest the
proceeds of the sale in a Traditional Rollover XXX under the Plan within 60 days
after distribution.
Rollover from a Traditional XXX to a Xxxx XXX. An individual whose AGI is less
than $100,000 (regardless of whether filing an individual or joint return) may
rollover amounts from a Traditional XXX to a Xxxx XXX. Any income resulting from
the rollover is not taken into account when determining whether the AGI cap has
been exceeded. The 10% penalty tax does not apply to amounts rolled over to the
Xxxx XXX. The income resulting from a rollover from a Traditional XXX to a Xxxx
XXX completed during 1998 is spread evenly over four years (1998-2001). Amounts
rolled over to a Xxxx XXX must remain in the Xxxx XXX for a period of five years
from the year of the rollover in order to receive favorable tax treatment. The
Participant shall provide the Custodian with information necessary to ensure
compliance with holding period and IRS reporting requirements.
Simplified Employee Pension Contribution
If an Individual Retirement Account is being used as a receptacle for employer
contributions made under a Simplified Employee Pension (SEP) Plan, the limit on
employer contributions in a taxable year is the lesser of $30,000 or 15% of a
Participant's compensation.
Contributions must bear a uniform relationship to the total compensation [not in
excess of the first $160,000 beginning in 1997, as indexed in future years under
Code Section 401(a)(17)] of each employee maintaining a SEP. The employer's
contribution is excluded from the Participant's current taxable income.
Please see your Registered Representative for additional information about
Simplified Employee Pension plans.
Excess Contributions
Contributions for an individual during a taxable year are considered excess
contributions if they exceed 100% of compensation or $2,000, or such other limit
as may be prescribed by law. Contributions to Traditional IRAs and Xxxx IRAs are
coordinated; contributions to one reduces the amount that may be contributed to
the other so that total contributions cannot exceed the 100% of
compensation/$2,000 limitation. Contributions to individual accounts for a
person and that person's spouse are considered excess contributions if
contributions exceed the lesser of: (1) $4,000; (b) 100% of the compensation
includable in gross income for the taxable year; or (c) more than $2,000 paid to
a single individual retirement account for the individual or the individual's
spouse. If excess contributions are made, the individual must pay a cumulative,
non-deductible 6% excise tax on the portion of the contribution that exceeds the
amounts permitted by law. An individual can avoid this excise tax by withdrawing
the excess contribution prior to filing the tax return. Any income earned by the
excess contribution must also be withdrawn at the time the excess contribution
is withdrawn. Since the excess contribution was not deductible when made, it is
not included in the individual's income when returned, nor is it subject to the
10% tax on premature distributions. Income earned by the excess contribution,
however, must be included in the individual's income tax return for the tax year
in which it was earned. If the 6% excise tax is imposed for the taxable year,
its cumulative effect can be avoided by making reduced contributions in a future
year. Excess rollover contributions can also be corrected (with regard to dollar
limitations) if the excess contribution was due to reasonable cause.
Form 5329
Form 5329 (Return for Individual Retirement Savings Arrangement) must accompany
an individual's tax return (Form 1040) only if the individual owes excess
contribution taxes, premature distribution taxes, or taxes on certain
accumulations.
Distributions/Transfers
Traditional IRAs. Distributions from Traditional IRAs are taxed as ordinary
income when received. Ten-year averaging is not permissible.
If non-deductible contributions are made, the portion of the Traditional XXX
contribution consisting of non-deductible contributions will not be taxed again
when distributed. A distribution of a non-deductible contribution will generally
consist of a non-taxable portion (the return of non-deductible contributions)
and a taxable portion (the return of deductible contributions, if any, and
account earnings).
Thus, an individual may not take a distribution from a Traditional XXX which is
entirely tax free. The following formula is used to determine the non-taxable
portion of distributions for a taxable year:
[Remaining Non-Deductible Contributions Year-End / Total Traditional XXX
Account Balances] X Total Distributions (for the year) =
Non-Taxable Distributions (for the year)
All of an individual's Traditional IRAs are treated as a single XXX to figure
the year-end total XXX account balance. This includes all regular IRAs, as well
as Simplified Employer Pension (SEP) IRAs, SIMPLE IRAs and Rollover IRAs.
Distributions taken during the year must also be added back in. Calculation of
the taxable portion of any XXX distribution as well as recordkeeping of the
non-deductible contributions made to an XXX are the Participant's
responsibility.
Xxxx IRAs. Distributions from Xxxx IRAs are not subject to federal income tax
if:
(1) made after the Participant attains age 59 1/2, or due to the
Participant's death or disability, or for a first-time home purchase
(up to $10,000), and
(2) made more than five tax years after the tax year of the initial
contribution to any Xxxx XXX.
Distributions from a Xxxx XXX that do not qualify for tax-exempt treatment (e.g.
because taken before the Participant attains age 59 1/2 or before five years
have passed since the initial contribution was made) are treated first as a
return of the Participant's contribution and after that amount is distributed,
additional distributions would be taxed as ordinary income and would be subject
to the 10% penalty tax if none of the previously described exceptions to the
penalty tax apply. Calculation of the taxable portion of any distribution as
well as recordkeeping of the undistributed balance of Xxxx XXX contributions are
the Participant's responsibility.
The IRS has not issued regulations governing distributions from Xxxx IRAs, so
there are some unanswered questions regarding distributions subsequent to the
Participant's death. Distributions will be subject to such regulations when and
as adopted.
Financial Disclosure
Information about the Funds and the method by which the annual earnings are
computed and allocated to each shareholder's account is described in the
prospectus accompanying this disclosure statement.
An annual administration fee of $15.00 is also required. This fee will be
deducted from the account as a separate item on the first business day of
December each year. You will be notified of this fee by invoice and may pay by
separate check before November 15. There is also a sales charge deducted on the
purchase of Class A shares of most of the Funds amounting to 4.75% (3.75% for
SEP IRAs and certain "listbill" plans) or less of the amount of the transaction
at offering price. These sales charges are reduced under various circumstances
described in detail in the Fund's prospectus. A contingent deferred sales charge
of up to 4% (3% for SEP IRAs and certain "listbill" plans) applies to Class B
shares of each of the Funds. A complete description of Class A shares and Class
B shares is provided in the prospectus. You must have received a prospectus
prior to submitting your application to create a Traditional or Xxxx XXX. The
annual earnings on your Account will depend upon the investment income received
by the Fund or Funds which you select. Growth in value of this Account is
neither guaranteed nor projected. All certificates shall be held by the
Custodian. The Custodian has the right to change its fees in the current and/or
future years.
Prohibited Transactions
If the Participant borrows money by use of the Traditional or Xxxx XXX or uses
any portion of it as security for a loan (which the plan prohibits), the portion
so used will be treated for tax purposes as having been distributed to the
Participant. In addition, if a Participant or a Beneficiary engages in a
prohibited transaction (as defined in Section 4975 of the Internal Revenue Code)
with respect to the Traditional or Xxxx XXX, the Account will be disqualified
and the entire amount in the Account will be treated as having been distributed
to the Participant. Examples of prohibited transactions for both Traditional and
Xxxx IRAs are: the borrowing of the income or principal from the XXX, selling
property to or buying property from the XXX, or receiving more than reasonable
compensation for services performed for the XXX. When all or a portion of an XXX
is treated as having been distributed, such amounts will be taxed as previously
described as a distribution for that taxable year and will generally be subject
to the 10% federal tax on premature distributions (unless an exemption applies).
Estate And Gift Tax Considerations
Transfers of Traditional and Xxxx IRAs are generally subject to taxation under
federal estate and gift tax laws. To the extent that benefits are distributed to
the spouse of the Participant, the amount of the benefits may be eligible for
the estate tax marital deduction.
In community property states, if a person other than a spouse is designated as
the plan beneficiary, the spouse might be considered to have made a gift on
one-half of the value of the benefit conveyed when the conveyance is complete.
IRS Approval Letter
An IRS approval letter has not been obtained for the XXX Plan and Custodial
Agreement contained in this booklet but the Custodian is of the opinion that the
form of the Plan and Custodial Agreement complies with applicable federal income
tax rules and regulations.
Further Information
Further information regarding Individual Retirement Accounts and the retirement
savings deduction may be obtained from any district office of the Internal
Revenue Service.
BECAUSE LEGAL AND TAX CONSEQUENCES OF THE USE OF THE PLAN MAY VARY IN PARTICULAR
CASES, INDEPENDENT ADVICE SHOULD BE SOUGHT FROM YOUR ATTORNEY OR TAX ADVISOR.
