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Exhibit 14(b)
National Financial Services Corporation Individual Retirement Account
CUSTODIAL AGREEMENT
Under Section 408(a) of the Internal Revenue Code
The Depositor whose name appears on the attached Application is establishing an
individual retirement account (under Section 408(a) of the Internal Revenue
Code) to provide for his or her retirement and for the support of his or her
beneficiaries after death.
The Custodian named on the attached Application has given the Depositor the
Disclosure Statement required under the Income Tax Regulations under Section
408(i) of the Code.
The Depositor has deposited with the Custodian an initial contribution in cash,
as set forth in the attached Application.
The Depositor and the Custodian make the following Agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) of the Code (but only after December
31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a
Simplified Employee Pension plan as described in Section 408(k). Rollover
contributions before January 1, 1993, include rollovers described in Section
402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a Simplified Employee Pension Plan as described in
Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the Custodial Account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial Account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of Section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of Section 408(m) of the Code) except as otherwise permitted by
Section 408(m)(3) which provides an exception for certain gold and silver
coins and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial Account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401 (a)(9)-2, the provisions of which are incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a non-spouse beneficiary may not be recalculated.
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3. The Depositor's entire interest in the Custodial Account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the Custodial 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 of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated Beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated Beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the Beneficiary or Beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated Beneficiary or Beneficiaries
starting by December 31 of the year following the year of the
Depositor's death. If, however, the Beneficiary is the Depositor's
surviving spouse, then this distribution is not required to begin
before December 31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor 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.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial Account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated Beneficiary, or the life
expectancy of the designated Beneficiary, whichever applies). In the case
of distributions under paragraph 3, determine the initial life expectancy
(or joint life and last survivor expectancy) using the attained ages of the
Depositor and designated Beneficiary as of their birthdays in the year the
Depositor reached age 70 1/2. In the case of a distribution in accordance
with paragraph 4(b)(ii), determine life expectancy using the attained age of
the designated Beneficiary as of the Beneficiary's birthday in the year
distributions are required to commence.
6. 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 by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
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ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under Section 408(i) of the
Code and Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Article I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) of the Code and
the related regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the Depositor and the Custodian.
ARTICLE VIII
1. DEFINITIONS. The following definition shall apply to terms used in this
Article VIII:
(a) "Account" or "Custodial Account" means the custodial account established
hereunder for the benefit of the Depositor.
(b) "Agreement" means the National Financial Services Corporation XXX
Custodial Agreement, including the information and provisions set forth
in any Account Application and any designation of Beneficiary filed with
the Custodian, may be proved either by an original copy or by a
reproduced copy thereof including, without limitation copy reproduced by
photocopying facsimile transmission, or electronic imaging.
(c) "Application" shall mean the Application by which this Agreement, as may
be amended from time to time, is established between the Depositor and
the Custodian. The statements contained therein shall be incorporated
into this Agreement.
(d) "Authorized Agent" means the person or persons authorized by the
Depositor, on a signed form acceptable to and filed with the Custodian,
to purchase or sell shares in the Depositor's Account.
(e) "Beneficiary" means the person or persons (including a trust or estate)
designated as such by the Depositor on a signed form acceptable to and
filed with the Custodian pursuant to Article VIII, Section 8 of this
Agreement.
(f) "Broker-Dealer" shall mean the securities broker-dealer registered as
such under the Securities Exchange Act of 1934, which the Depositor has
designated as his or her Broker-Dealer in the Account Application.
(g) "Code" shall mean the internal Revenue Code of 1986, as amended.
(h) "Company" shall mean FMR Corp., a Massachusetts corporation, or any
successor or affiliate thereof to which FMR Corp. may, from time to
time, delegate or assign any or all of its rights or responsibilities
under this Agreement.
(i) "Custodian" shall mean the custodian specified in the Account
Application.
(j) "Depositor" means the person named in the Account Application.
(k) "Funding Vehicles" shall include (i) all marketable securities traded
over the counter or on a recognized securities exchange which are
eligible for registration on the book entry system maintained by
Depository Trust Company ("DTC") or its successor; (ii) if permitted by
the Custodian, interest-bearing accounts of the Custodian, and (iii)
such other non-DTC eligible assets (but not including futures contract)
which are permitted to be acquired under a custodial account pursuant to
Section 408 of the Code and which are acceptable to the Custodian.
Notwithstanding the above, the Custodian reserves the right to refuse to
accept and hold any specific asset.
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(l) "Money Market Shares" shall mean any shares which are issued by a money
market mutual fund.
2. BROKER-DEALER. The Broker-Dealer shall be appointed by the Depositor in the
Application as his or her agent to execute such investment directions as the
Depositor may give under the terms of the Custodial Account including the
execution of purchase and sale orders. All assets of the Custodial Account
shall be registered in the name of the Custodian or its nominee, but such
assets shall generally be held in a brokerage account with the Broker-Dealer
in the name of the Custodian. Any security may be held in bearer from, or
in a central depository (including National Financial Services Corporation)
so long as of the Custodian. Any security may be held in bearer form, or in
a central depository (including National Financial Services Corporation) so
long as
(i) the books and records of the Custodian or its agent show that all such
securities are part of the Custodian Account.
(ii) a separate account thereof is maintained by the party having actual
custody of such securities and
(iii) such securities are held in individual or bulk segregation in such
party's vault or in depositories approved by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
In all cases the Broker-Dealer, and not the Custodian, shall have the
responsibility for delivering to the Depositor all notices and prospectuses
relating to such Securities. To the extent that the Custodian delivers to
the Broker-Dealer confirmations, statements and other notices with respect to
the Account, any such communications delivered to the Broker-Dealer shall be
deemed to have been delivered to the Depositor. The Depositor agrees to hold
the Custodian and the Company harmless from and against any losses, cost or
expenses arising in connection with the delivery or receipt of any such
communication(s), provided the Custodian has acted in accordance with the
above.
3. INVESTMENT OF CONTRIBUTIONS. Contributions to the Account may be invested
only in Funding Vehicles and shall be invested as follows:
(a) GENERAL. Contributions will be invested in accordance with the
Depositor's written instructions in the Application, and with subsequent
instructions given by the Depositor or the Authorized Agent appointed by
the Depositor (or, following the death of the Depositor, his or her
Beneficiary) through the Broker-Dealer to the Custodian in a manner
acceptable to the Custodian. By giving such instructions to the
Custodian such person will be deemed to have acknowledged receipt of the
then current prospectus, if any, for any Funding Vehicles in which the
Depositor (or the Authorized Agent appointed by the Depositor), through
the Broker-Dealer directs the Custodian to invest assets in his or her
Account. All charges incidental to carrying out such instructions shall
be charged and collected in accordance with Article VIII, Section 18.
The Depositor may, by delivery of specific instructions to the Broker-Dealer,
purchase an option or direct that covered call options be written on
securities held in his or her Custodial Account. Covered call instructions
must specify the number and identity of shares to which the option applies,
the term of the option, and the option's exercise price.
(b) INITIAL CONTRIBUTION. The Custodian will invest all contributions
promptly after their receipt, as set forth below; provided, however,
that the Custodian shall not be obligated to invest the Depositor's
initial contribution to his Custodial Account as indicated on the
Application, until at least seven (7) calendar days have elapsed from
the date of acceptance of the Application by or on behalf of the
Custodian.
(c) UNCLEAR INSTRUCTIONS. If the Depositor's Custodial Account at any time
contains cash as to which investment instructions in accordance with
this Section 3 have not been received by the Custodian, or if the
Custodian receives instructions as to investment selection or allocation
which are, in the opinion of the Custodian, not clear, the Custodian may
request instructions from the Depositor (or the Depositor's Authorized
Agent, Beneficiary, executor or administrator). Pending receipt of such
instructions any cash may be invested in Money Market Shares, and any
other investment may remain unchanged. The Custodian shall not be
liable to anyone for any loss resulting from delay in investing such
cash or in implementing such instructions. Notwithstanding the above,
the Custodian may, but need not, for administrative convenience,
maintain a balance of up to $100 of uninvested cash in the Depositor's
Custodial Account.
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(d) NO DUTY. The Custodian shall not have any duty to question the
directions of a Depositor (or the Depositor's Broker-Dealer, Authorized
Agent, Beneficiary executor, or administrator) in the investment of his
or her Custodial Account or to advise the Depositor or the Deposit's
Broker-Dealer regarding the purchase retention or sale of assets
credited to the Custodial account. The Custodian, or any of its
affiliates, shall not be liable for any loss which results from the
Depositor's (or the Depositor's Broker-Dealer, Authorized Agent,
Beneficiary, executor, or administrator) exercise of control (whether by
his or her action or inaction) over the Custodial Account.
4. CONTRIBUTIONS BY DIVORCED OR SEPARATED SPOUSES. All alimony and separate
maintenance payments received by a divorced or separated spouse, and taxable
under Section 71 of the code, shall be considered compensation for purposes
of computing the maximum annual contribution to the Custodial Account, and
the limitations for contributions by a divorced or separated spouse shall be
the same as for any other individual.
5. TIMING OF CONTRIBUTIONS. A contribution is deemed to have been made on the
last day of the preceding taxable year if the contribution is made by the
deadline for filing the Depositor's income tax return (not including
extensions), or such later date as may be determined by the Department of
the Treasury or the IRS, provided the Depositor (or the Depositor's
Broker-Dealer or Authorized Agent) designates, in a manner acceptable to the
Custodian, the contribution as a contribution for the preceding taxable
year.
6. ROLLOVER CONTRIBUTIONS. The Custodian will accept for the Custodial Account
all rollover contributions which consist of cash, and it may, but shall be
under no obligation to, accept all or any part of any other rollover
contribution. The Depositor shall designate each rollover contribution as
such to the Custodian through the Broker-Dealer and by such designation
shall confirm to the Custodian that a proposed rollover contribution
qualifies as a rollover contribution within the meaning of Sections
402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), and/or 408(d)(3) of
the Code. Submission by or on behalf of a Depositor of a rollover
contribution consisting of assets other than cash or property permitted as
an investment under this Article VIII shall be deemed to be the instruction
of the Depositor to the Custodian that, if such rollover contribution is
accepted, the Custodian will use its best efforts to sell those assets for
the Depositor's account, and to invest the proceeds of any such sale in
accordance with Section 3. To the extent permitted by law, the Custodian
shall not be liable to anyone for any loss resulting from such sale or delay
in effecting such sale; or for any loss of income or appreciation with
respect to the proceeds thereof after such sale and prior to investment
pursuant to Section 3; or for any failure to effect such sale if such
property proves not readily marketable in the ordinary course of business.
All brokerage and other costs incidental to the sale or attempted sale of
such property will be charged to the Custodial Account in accordance with
Article VIII, Section 18.
7. REINVESTMENT OF EARNINGS: In the absence of other instructions pursuant to
Section 3 distributions of every nature received in respect of the assets in
a Depositor's Custodial Account shall be liquidated to cash, if necessary,
and shall be reinvested in accordance with the Depositor's instructions
pursuant to Section 3.
8. DESIGNATION OF BENEFICIARY: A Depositor may designate a Beneficiary as
follows:
(a) GENERAL. A Depositor may designate a Beneficiary or Beneficiaries at
any time, and any such designation may be changed or revoked at any
time, by written designation signed by the Depositor on a form
acceptable to, and filed with, the Custodian; provided, however that
such designation, or change or revocation of a prior designation, shall
not be effective unless it is received and accepted by the Custodian no
later than thirty (30) days after the death of the Depositor and
provided further that the latest such designation or change or
revocation shall control. If the Depositor had not by the date of his
or her death properly designated a Beneficiary in accordance with the
preceding sentence, or if no designated Beneficiary survives the
Depositor, the Depositor's Beneficiary shall be his or her surviving
spouse, but if he or she has no surviving spouse, his or
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her estate. Unless otherwise specified in the Depositor's designation of
Beneficiary, if a Beneficiary dies before receiving his or her entire
interest in the Custodial Account, his or her remaining interest in the
Custodial Account shall be paid to the Beneficiary's estate.
(b) MINORS. If a distribution upon the death of the Depositor is payable to
a person known by the Custodian to be a minor or otherwise under a legal
disability the Custodian may in its absolute discretion, make all, or
any part of the distribution to (a) a parent of such person, (b) the
guardian, conservator, or other legal representative, wherever
appointed, of such person, (c) a custodial account established under a
Uniform Gifts to Minors Act Uniform Transfers to Minors Act, or similar
act, (d) any person having control or custody of such person, or (e) to
such person directly.
(c) QTlPs and QDOTs. A Depositor may designate as Beneficiary of his or her
Account a trust for the benefit of his or her surviving spouse that is
intended to satisfy the conditions of Sections 2056(b)(7) or 2056A of
the Code (a "Spousal Trust"). In that event, if the Depositor is
survived by his or her spouse, the following provisions shall apply to
the Account, from and after the death of the Depositor until the death
of the Depositor's surviving spouse: (1) all of the income of the
Account shall be paid to the Spousal Trust annually or at more frequent
intervals, and (2) no person shall have the power to appoint any part of
the Account to any person other than the Spousal Trust. To the extent
permitted by Section 401(a)(9) of the Code, as determined by the
trustee(s) of the Spousal Trust, the surviving spouse of the Depositor
who has designated a Spousal Trust as his or her Beneficiary may be
treated as his or her "designated beneficiary" for purposes of the
distribution requirements of that Code section. The Custodian shall
have no responsibility to determine whether such treatment is
appropriate.
(d) JUDICIAL DETERMINATION. Anything to the contrary herein
notwithstanding, in the event of reasonable doubt respecting the proper
course of action to be taken, the Custodian may in its sole and absolute
discretion resolve such doubt by judicial determination which shall be
binding on all parties claiming any interest in the Account. In such
event all court costs, legal expenses, reasonable compensation of time
expended by the Custodian in the performance of its duties, and other
appropriate and pertinent expenses and costs shall be collected by the
Custodian from the Custodial Account in accordance with Article VIII,
Section 18.
(e) NO DUTY. The Custodian shall not have any duty to question the
directions of a Depositor (or the Depositor's Authorized Agent,
Beneficiary, executor or administrator) as to the time(s) and amount(s)
of distributions from the Custodial Account, or to advise him or her
regarding the compliance of such distributions with Section 401 (a)(9),
Section 2056(b)(7) or Section 2056A of the Code.
9. PAYROLL DEDUCTION. Subject to approval of the Custodian and the
Broker-Dealer, a Depositor may choose to have contributions to his or her
Custodial Account made through payroll deduction if the Account is
maintained as part of a program sponsored by the Depositor's employer. In
order to establish payroll deduction the Depositor must authorize his or her
employer to deduct a fixed amount from each pay period's salary up to a
total amount of $2 000 per year, unless such contributions are being made
pursuant to a Simplified Employee Pension Plan described under Section
408(k) of the Code, in which case, contributions can be made up to 15% of
the Depositor's earned income, up to $30,000 per year. Contributions to the
Custodial Account of the Depositor's spouse may be made through payroll
deduction if the employer authorizes the use of payroll deductions for such
contributions, but such contributions must be made to a separate Account
maintained for the benefit of the Depositor's spouse. The payroll deduction
authorization shall continue in force until such time as written amendment
or revocation is received by the Depositor's employer and the Custodian with
reasonable advance notice.
10. TRANSFERS TO OR FROM THE ACCOUNT. Assets held on behalf of the Depositor
in another XXX may be transferred by the trustee or custodian thereof
directly to the Custodian, in a form and manner acceptable to the
Custodian, to be held in the Custodial Account for the Depositor under
this Agreement. The Custodian will not be responsible for any losses the
Depositor may incur as a result of the timing of any transfer from another
trustee or custodian that are due to circumstances reasonably beyond the
control of the Custodian.
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Assets held on behalf of the Depositor in the Account may be transferred
directly to a trustee of custodian of another XXX established for the
Depositor if so directed by the Depositor in a form and manner acceptable to
the Custodian; provided, however, that it shall be the Depositor's
responsibility to ensure that any minimum distribution required by Section
401 (a)(9) of the Code is made prior to giving the Custodian such transfer
instructions.
11. DISTRIBUTIONS FROM THE ACCOUNT. Subject to Section 13 below distributions
from the Account will be made only upon the request of the Depositor (or
the Depositor's Authorized Agent, Beneficiary, executor, or administrator)
to the Custodian through the Broker-Dealer in such form and in such manner
as is acceptable to the Custodian. For distributions requested pursuant
to Article IV, life expectancy and joint life and last survivor expectancy
are calculated based on information provided by the Depositor (or the
Depositor's Authorized Agent, Beneficiary, executor, or administrator)
using the Expected Return Multiples in Section 1.72-9 of the income Tax
Regulations. The Custodian shall not incur any liability for errors in
such calculations as a result of reliance on information provided by the
Depositor (or the Depositor's Authorized Agent, Beneficiary, executor, or
administrator) or the Depositor's Broker-Dealer. Without limiting the
generality of the foregoing the Custodian is not obligated to make any
distribution, including a minimum required distribution as specified in
Article IV above, absent a specific written direction from the Depositor
(or the Depositor's Authorized Agent, Beneficiary, executor, or
administrator) through the Broker-Dealer to do so.
12. ACTIONS IN THE ABSENCE OF SPECIFIC INSTRUCTIONS. If the Custodian
receives no response to communications sent to the Depositor (or the
Depositor's Authorized Agent, Beneficiary, executor, or administrator) at
the Depositor's (or the Depositor's Authorized Agent, beneficiary,
executor, or administrator's) last known address as shown in the records
of the Custodian, or if the Custodian determines, on the basis of evidence
satisfactory to it, that the Depositor is legally incompetent the
Custodian thereafter may make such determinations with respect to
distributions, investments, and other administrative matters arising under
this Agreement as it considers reasonable, notwithstanding any prior
instructions or directions given by or on behalf of the Depositor. Any
determinations so made shall be binding on all persons having or claiming
any interest under the Custodial Account, and the Custodian shall not
incur any obligation or liability for any such determination made in good
faith, for any action taken in pursuance thereof, or for any fluctuations
in the value of the Account in the event of a delay resulting from the
Custodian's good faith decision to await additional information or
evidence.
13. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS. The Custodian will
not under any circumstances be responsible for the timing, purpose or
propriety of any contribution or of any distribution made hereunder, nor
shall the Custodian incur any liability or responsibility for any tax
imposed on account of any such contribution or distribution.
Notwithstanding Section 11 above, the Custodian is empowered to make a
distribution absent such an instruction if directed to do so pursuant to a
court order of any kind and neither the Custodian nor the Company shall in
such event incur any liability for acting in accordance with such court
order.
14. WRITTEN INSTRUCTIONS AND NOTICES. All written notices or communications
required to be given by the Custodian to the Depositor shall be deemed to
have been given when sent by mail to either the Broker-Dealer or to the
last known address of the Depositor in the records of the Custodian. All
written instructions notices, or communications required to be given the
Depositor to the Custodian shall be mailed or delivered to the Custodian
at its designated mailing address as specified on the Application, and no
such instruction, notice, or communication shall be effective until the
Custodian's actual receipt thereof.
15. EFFECT OF WRITTEN INSTRUCTIONS AND NOTICES. The Custodian shall be
entitled to rely conclusively upon, and shall be fully protected in any
action or non-action taken in good faith in reliance upon, any written
instruction, notices, communications or instruments believed to have been
genuine and properly executed. Any such notification may be proved by
original copy or reproduced copy thereof, including, without limitations,
a copy produced by photocopying, facsimile transmission, or electronic
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imaging. For this purpose, the Custodian may (but is not required to) give
the same effect to a telephonic instruction as it gives to a written
instruction, and the Custodian's action in doing so shall be protected to the
same extent as if such telephonic instructions were, in fact, a written
instruction. Any such telephonic instruction may be proved by audio recorded
tape.
16. TAX MATTERS.
(a) GENERAL. The Custodian shall submit required reports to the IRS and the
Depositor (or the Depositor's Authorized Agent, Beneficiary, executor,
or administrator); provided, however, that such individual shall prepare
any return or report required in connection with maintaining the
Account, or as a result of liability incurred by the Account for tax or
unrelated business taxable income, or windfall profits tax.
(b) ANNUAL REPORT. As soon as is practicable after the close of each
taxable year, and whenever required by the Code, the Custodian shall
deliver to the Depositor a written report(s) reflecting receipts,
disbursements and other transactions effected in the Custodial Account
during such period and the fair market value of the assets and
liabilities of the Custodial Account as of the close of such period in a
manner prescribed by the Internal Revenue Service. Unless the Depositor
sends the Custodian written objection to a report within ninety (90)
days of receipt, the Depositor shall be deemed to have approved of such
report, and the Custodian and the Company, and their officers, employees
and agents shall be forever released and discharged from all liability
and accountability to anyone with respect to their acts, transactions,
duties and responsibilities as shown on or reflected by such report(s).
The Company shall not incur any liability in the event the Custodian
does not satisfy is obligations as described herein.
(c) WITHHOLDING. Any distributions from the Custodial Account may be made
by the Custodian net of any required tax withholding.
17. SPENDTHRIFT PROVISION. The interest of a Depositor in the Account shall
not be transferred or assigned by voluntary or involuntary act of the
Depositor or by operation of law; nor shall it be subject to alienation,
assignment, garnishment, attachment, receivership, execution or levy of
any kind. Notwithstanding the foregoing, in the event of a property
settlement between a Depositor and his or her former spouse pursuant to
which the transfer of a Depositor's interest hereunder, or a portion
thereof, is incorporated in a divorce decree or in a written instrument
incident to such divorce or legal separation, then the interest so decreed
by a Court to be the property of such former spouse shall be transferred
to separate Custodial account for the benefit of such former spouse, in
accordance with Section 408(d)(6) of the Code.
18. FEES AND EXPENSES.
(a) GENERAL. The fees of the Custodian for performing its duties hereunder
shall be in such amount as it shall establish from time to time. All
such fees, as well as expenses (such as without limitation brokerage
commissions upon the investment of funds, fees for special legal
services, taxes levied or assessed, or expenses in connection with the
liquidation or retention of all or part of a rollover contribution),
shall be collected by the Custodian from cash available in the Custodial
Account, or if insufficient cash shall be available, by sale of
sufficient assets in the Custodial Account and application of the sales
proceeds to pay such fees and expenses. Alternatively, but only with
the consent of the Custodian, fees and expenses may be paid directly to
the Custodian by the Depositor by separate check.
(b) ADVISOR FEES. The Custodian shall, upon direction from the Depositor,
disburse from the Custodial Account payment to the Depositor's
registered investment advisor of any fees for financial advisory
services rendered with regard to the assets held in the Account. Such
direction must be provided in a form and manner acceptable to the
Custodian, and the Custodian shall not incur any liability for executing
such direction.
(c) SALE OF ASSETS. Whenever it shall be necessary in accordance with this
Section 18 to sell assets in order to pay fees or expenses, the
Custodian shall request the Depositor (Or the Deposit's Authorized
Agent, Beneficiary, executor, or administrator) through the
Broker-Dealer, to provide specific instructions. If such instructions
are not received by the Custodian within ten (10) business
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days of the Custodian's request, the Custodian may sell any or all of the
assets credited to the Custodial Account at that time, and shall invest the
portion of the sales proceeds remaining after collection of the applicable
fees and expenses therefrom in accordance with Section 3. The Custodian
shall not incur any liability on account of its sale or retention of assets
under such circumstances.
19. ESCROW. With the consent of the Custodian, the Custodial Account may
serve as an escrow arrangement to hold restricted distributions from
defined benefit plans pursuant to Section 1.401(a)(4)-5(b) of the Income
Tax Regulations. In such event, the Custodian will act in accordance with
an escrow arrangement acceptable to it and pursuant to which it will only
act upon the direction of the trustee of the distributing plan with
respect to distributions from the Account. Such agreement will remain in
place until the trustee of the distribution plan releases the Custodian
from such escrow agreement.
20. VOTING WITH RESPECT TO SECURITIES. The Custodian shall mail to the
Depositor all prospectuses and proxies that may come into the Custodian's
possession by reason of its holding of Funding Vehicles in the Custodial
Account. A Depositor may direct the Custodian as to the manner in which
any securities held in the Custodial Account shall be voted with respect
to any matters as to which the Custodian as holder of record is entitled
to vote, coming before any meeting of shareholders of the corporation
which issued such securities. All such directions shall be in writing on
a form approved by the Custodian and signed by the Depositor, and
delivered to the Custodian within the time prescribed by it. The
Custodian shall vote only those securities with respect to which it has
received timely written directions from the Depositor; provided, however,
that the Custodian may without such direction vote shares of investment
companies advised by Fidelity Management & Research Company "present" to
the extent such a vote is needed to establish a quorum.
21. LIMITATIONS ON CUSTODIAL LIABILITY AND INDEMNIFICATION. The Depositor,
the Depositor's Broker-Dealer, and the Custodian intend that the Custodian
shall have and exercise no discretion, authority, or responsibility as to
any investment in connection with the Account and the Custodian or of any
distribution or any other action or nonaction taken pursuant to the
Depositor's direction (or that of the Depositor's Authorized Agent,
Beneficiary, executor, or administrator) through the Broker-Dealer. The
Depositor who directs the investment of his or her Account shall bear sole
responsibility for the suitability of any directed investment and for any
adverse consequences arising from such an investment including, without
limitation, the inability of the Custodian to value or to sell an illiquid
investment, or the generation of unrelated business taxable income with
respect to an investment. To the fullest extent permitted by law, the
Depositor (or the Depositor's Authorized Agent, Beneficiary,, executor, or
administrator, as appropriate) shall at all times fully indemnify and save
harmless the Custodian, the Company and their agents, affiliates,
successors and assigns and their officers, directors and employees, from
any and all liability arising from the Depositor's investment direction
under this Account, or from the Broker-Dealer's execution of such
direction, and from any and all other liability whatsoever which may arise
in connection with this Agreement except liability arising under
applicable law or liability arising from gross negligence or willful
misconduct on the part of the indemnified person. Although the Custodian
shall have no responsibility to give effect to a direction from anyone
other than the Depositor (or the Depositor's Authorized Agent,
Beneficiary, executor, or administrator) the Custodian may, in its
discretion, establish procedures pursuant to which the Depositor may
delegate to a third party any or all of the Depositor's powers and duties
hereunder, provided, however, that in no event may anyone other than the
Depositor execute the application by which this Agreement is adopted or
the form by which the Beneficiary is appointed, and provided, further,
that any such third party to whom the Depositor has so delegated powers
and duties shall be treated as the Depositor for purposes of applying the
preceding sentences of this paragraph and the provision of Article VIII,
Section 3.
22. DELEGATION TO AGENTS. The Custodian may delegate to one or more
corporations affiliated with the Custodian the performance of record
keeping and other ministerial serviced in connection with the Custodial
Account, for a reasonable fee to be borne by the Custodian and not by the
Custodial Account. Any such
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agent's duties and responsibilities shall be confined solely to the
performance of such services, and shall continue only for so long as the
Custodian named in the Application serves as Custodian.
23. AMENDMENT OF AGREEMENT. The Depositor the Broker-Dealer and Custodian
authorize and direct the Company to amend this Agreement in any respect at
any time (including retroactively), so that it may conform with applicable
provisions of the Internal Revenue Code, or with any other applicable law
as in effect from time to time, or to make such other changes to this
Agreement as the Company deems advisable. Any such amendment shall be
effected by delivery to the Custodian and mailing to the Depositor at his
or her last known address as shown in the records of the Custodian a copy
of such amendment, or a restatement of this Custodial Agreement including
any such amendment. The Depositor shall be deemed to consent to any such
amendment(s) if he or she fails to object thereto by written notice
received by the Custodian within fifteen (15) calendar days from the date
of the Company's mailing to the Depositor a copy of such amendment(s) or
restatement.
24. RESIGNATION OR REMOVAL OF CUSTODIAN. The Company may remove the Custodian
at any time, and the Custodian may resign at any time, upon thirty (30)
days' written notice to the Depositor and the Broker-Dealer. Upon the
removal or resignation of the Custodian, the Company may, but shall not be
required to, appoint a successor custodian under this Custodial Agreement;
provided that any successor custodian shall satisfy the requirements of
Section 408(a)(2) of the Code. Upon any such successor's acceptance of
appointment, the Custodian shall transfer the assets of the Custodial
Account, together with copies of relevant books and records, to such
successor custodian; provided, however, that the Custodian is authorized
to reserve such sum of money or property as it may deem advisable for
payment of any liabilities constituting a charge on or against the assets
of the Custodial Account, or on or against the Custodian or the Company.
The Custodian shall not be liable for the acts or omissions of any
successor to it. If no successor custodian is appointed by the Company,
the Custodial account shall be terminated and the assets of the Account,
reduced by the amount of any unpaid fees or expenses, will be distributed
to the Depositor.
25. TERMINATION OF THE CUSTODIAL ACCOUNT. The Depositor may terminate the
Custodial Account at any time upon notice to the Custodian in a manner and
form acceptable to the Custodian. Upon such termination the Custodian
shall transfer the assets of the Custodial account, reduced by the amount
of any unpaid fees or expenses, to the custodial or trustee of another
individual retirement account (within the meaning of Section 408 of the
Code) or other retirement plan designated by the Depositor, as described
in Article VIII, Section 10. The Custodian shall not be liable for losses
arising from the acts, omissions, delays or other inaction of any such
transferee custodian or trustee. If notice of the Depositor's intention
to terminate the Custodial account is received by the Custodian and the
Depositor had not designated a transferee custodian or trustee for the
assets in the Account, then the Account, reduced by any unpaid fees or
expenses, will be distributed to the Depositor.
26. GOVERNING LAW. THIS AGREEMENT, AND THE DUTIES AND OBLIGATIONS OF THE
COMPANY AND THE CUSTODIAN UNDER THE AGREEMENT, SHALL BE CONSTRUED,
ADMINISTERED AND ENFORCED ACCORDING TO THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS, EXCEPT AS SUPERSEDED BY FEDERAL LAW OR STATUTE.
27. WHEN EFFECTIVE. This Agreement shall not become effective until
acceptance of the Application by or on behalf of the Custodian at its
principal office, as evidenced by a written notice to the Depositor.
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NATIONAL FINANCIAL SERVICES CORPORATION
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
The following information is provided to you in accordance with the
requirements of the Internal Revenue Code (the "Code") and should be reviewed
in conjunction with both the Custodial Agreement and the Application for your
Individual Retirement Account ("XXX"). This information reflects the
provisions of the Internal Revenue Code as are effective January 1, 1987 and
therefore applies to contributions for years after, and to distributions taken
after 1986.
RIGHT TO CANCEL
You may revoke this Account, but only if you had not received this Disclosure
Statement within Seven (7) calendar days prior to the establishment of this
XXX. In such as instance, revocation of the IRS is permitted only if your
request for revocation is made in writing and is received by the Custodian
within seven (7) calendar days of the establishment date of your Account.
To revoke this account, send your written revocation request to the Custodian
of your XXX at the address below:
Fidelity Management Trust Company
c/o National Financial Services Corporation
New Accounts Department
One World Financial Center, Tower A
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Upon revocation you will receive a full refund of your initial contribution
including sales commissions (if any) and/or administrative fees. To determine
where to send a revocation request, or if you have any questions relative to
this procedure, please call your Broker-Dealer.
TYPES OF IRAS.
REGULAR XXX. You may make a Regular XXX contribution of $2,000 or 100% of your
compensation, whichever is less. (To determine the amount of your income tax
deduction for your XXX contribution, see "limits on Deductible contributions"
below.)
SPOUSAL XXX. If you and your spouse file a joint federal income tax return,
you may make a Spousal XXX contribution even if your spouse has received
compensation during the tax year. Your contribution to a Spousal XXX must not
exceed the lesser of (1) $2,000 or (2) the excess of $2,250 (or if less, 100%
of your compensation) over your contribution to your Regular XXX. Note: if
your spouse has more than $250 in compensation for the tax year, the two of you
may make a larger total contribution if you each contribute to a Regular XXX.
ROLLOVER XXX. If you retire or change jobs, you may be eligible for a
distribution from your employer's retirement plan. To avoid mandatory
withholding of 20% of your distribution for federal income tax, and to preserve
the tax-deferred status of this distribution, you can transfer it directly to a
Rollover XXX. If you choose to have the distribution paid directly to you, you
will be subject to the 20% withholding rules. You may still reinvest up to
100% of the total amount of your distribution which is eligible for rollover in
a Rollover XXX by replacing the 20% which was withheld for taxes with other
assets you own. You must reinvest in a Rollover XXX within 60 days of receipt
of your distribution. The amount invested in a Rollover XXX will not be
included in your taxable income for the year in which you receive the qualified
plan distribution.
DESCRIPTION OF ACCOUNT
Your XXX is a custodial account created for your exclusive benefit. Your
interest in the account is nonforfeitable.
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ELIGIBILITY
Employees and self-employed individual are eligible to contribute to an XXX
even if they are already covered under another tax-qualified plan. Employers
may contribute to IRAs established by their employees, and employers may
contribute to IRAs used as part of a Simplified Employee Pension plan ("SEP,"
described below).
CONTRIBUTIONS
GENERAL. You may make annual cash contributions to an XXX in any amount up to
100% of your compensation for the year or $2,000 whichever is less. Your
employer may make contributions to your account, but, except as noted below
under a SEP, the total contributions from you and your employer may not exceed
this limitation Contributions (other than rollover contributions described
below) must be made in "cash" and not in "kind". Therefore, securities or
other assets already owned cannot be contributed to an XXX but can be converted
to cash and then contributed. No part of your contribution may be invested in
life insurance or be commingled with other property, except in a common trust
or common investment fund.
SPOUSAL ACCOUNTS. If you are married and file a joint tax return, you may make
cash contributions to a "spousal" XXX in addition to your own XXX (even if your
spouse has compensation). The total amounts contributed to your own and to
your spouse's XXX may not exceed 100% of your combined compensation or $2,250,
whichever is less. In no event, however, may the annual contribution to either
your account or your spouse's account exceed $2,000.
COMPENSATION means wages, salaries, professional fees, or other amounts derived
from or received for personal service actually rendered and includes the earned
income of a self-employed individual, and any alimony or separate maintenance
payment includable in the individual's gross income.
ADJUSTED GROSS INCOME is determined prior to adjustments for personal
exemptions and itemized deductions. For purposes of determining the XXX
deduction (see below), adjusted gross income is modified to take into account
deductions for XXX contributions, taxable benefits under the Social Security
Act and the Railroad Retirement Act, and passive loss limitations under Code
Section 86.
TIME OF CONTRIBUTION. You may make contributions to your XXX any time up to
and including the due date for filing your tax return for the year. You may
continue to make annual contributions to your XXX up to (but not including) the
calendar year in which you reach age 70 1/2. You may continue to make annual
contributions to your spouse's XXX up to (but not including) the calendar year
in which your spouse reaches age 70 1/2.
ROLLOVER XXX CONTRIBUTIONS. Qualifying distributions from tax-qualified plans
(for example, pension, profit-sharing, and Xxxxx plans) may be eligible for
rollover into your XXX. However, strict limitations apply to such rollovers
and you should seek competent tax advice regarding these restrictions.
SIMPLIFIED EMPLOYEE PENSION PLAN CONTRIBUTIONS. A separate XXX may be
established for use by your employer as part of a SEP arrangement. Your
employer may contribute to your SEP-XXX up to a maximum of 15% of your
compensation or $30,000, whichever is less. If your SEP-XXX is used as part of
a salary reduction SEP, you may elect to reduce your annual compensation, up to
a maximum of 15% of your compensation or $7,000 (indexed to reflect
cost-of-living adjustments), whichever is less, and have your employer
contribute that amount to your SEP-XXX. If your employer maintains both a
salary reduction SEP and a regular SEP, the annual contribution limit to both
SEPs together is 15% of your compensation or $30,000, whichever is less. You
may contribute, in addition to the amount contributed by your employer to your
SEP-XXX, an amount not in excess of the limits referred to under "General"
above. It is your and your employer's responsibility to see that contributions
in excess of normal XXX limits are made under a valid SEP and are, therefore,
proper.
EXCESS CONTRIBUTIONS. Contributions which exceed the allowable maximum per
year are considered excess contributions. A nondeductible penalty tax of 6% of
the excess amount contributed will be incurred for each year in which the
excess contribution remains in your XXX. If you make a contribution (or your
employer makes a SEP contribution, including a salary reduction contribution,
on your behalf) in excess of your allowable maximum for
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any taxable year, you may correct the excess contribution and avoid the 6%
penalty tax for that year by withdrawing the excess contribution and its
earnings on or before the date, including extensions, for filing your tax
return for that year. The amount of the excess contribution withdrawn will not
be considered a premature distribution nor (except in the case of a salary
reduction contribution) be taxed as ordinary income but the earnings withdrawn
will be taxed as ordinary income to you. Alternatively excess contributions
for one year may be carried forward and reported in the next year to the extent
that the excess, when aggregated with your XXX contribution (if any) for the
subsequent year, does not exceed the maximum amount for that year. The 6%
excise tax will be imposed on excess contributions in each year they are
neither returned nor carried forward.
DEDUCTIBLE XXX CONTRIBUTIONS
If you are not married and are not an active participant in an
employer-maintained retirement plan, you may make a fully deductible XXX
contribution in any amount up to 100% of your compensation for the year or
$2,000, whichever is less. The same limits apply if you are married and you
file a joint return with your spouse, and neither of you is an active
participant in an employer-maintained retirement plan. An "employer-maintained
retirement plan" includes any of the following types of retirement plans:
- a qualified pension, profit-sharing, or stock bonus plan established in
accordance with IRC Section 401(a) or 401(k).
- a Simplified Employee Pension Plan (SEP) (IRC Section 408(k)).
- a deferred compensation plan maintained by a governmental unit or agency.
- tax sheltered annuities and custodial accounts (IRC Section 403(b) and
403(b)(7)).
- a qualified annuity plan under IRC Section 403(a).
You are an active participant in an employer maintained retirement plan even if
you do not have a vested right to any benefits under your employer's plan.
Whether you are an "active participant" depends on the type of plan maintained
by your employer. Generally, you are considered an active participant in a
defined contribution plan if an employer contribution or forfeiture was
credited to your account under the plan during the year. You are considered an
active participant in a defined benefit plan if you are eligible to participate
in the plan, even though you elect not to participate. You are also treated as
an active participant for a year during which you make a voluntary or mandatory
contribution to any type of plan, even though your employer makes no
contribution to the plan.
If you, (or your spouse, if your filing a joint tax return) are covered by an
employer-maintained retirement plan, your XXX contribution is tax deductible
only to the extent that your adjusted gross income does not exceed the
deductibility limits discussed below.
LIMITS ON DEDUCTIBLE CONTRIBUTIONS
The deduction of your XXX contribution is reduced proportionately for adjusted
gross income which exceeds the applicable dollar amount. The applicable dollar
amount for an individual is $25,000 and $40,000 for married couples filing a
joint tax return. The applicable dollar limit for married individuals filing
separate returns is $0. If your adjusted gross income exceeds the applicable
dollar amount by not more than $10,000, you may make a deductible XXX
contribution (but the deductible amount will be less than $2,000). To
determine the amount of your deductible contribution, use the following
calculation:
1. Subtract the applicable dollar amount from your adjusted gross income. If
the result is $10,000 or more, stop; you can only make a nondeductible
contribution.
2. Subtract the above figure from $10,000.
3. Divide the above figure by $10,000.
4. Multiply $2,000 by the fraction resulting from the above steps. This is
your maximum deductible contribution limit.
If the deduction limit is not a multiple of $10, then it is to be rounded up to
the next highest $10. There is a $200 minimum floor on the deduction limit if
your adjusted gross income does not exceed $35,000 (for a single taxpayer) $50
000 (for married taxpayers filing jointly) or $10,000 (for a married taxpayer
filing separately).
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Adjusted gross income for married couples filing a joint tax return is
calculated by aggregating the compensation of both spouses. The deduction
limitations on XXX contributions, as determined above, then apply to each
spouse.
NONDEDUCTIBLE XXX CONTRIBUTIONS
Even if your income exceeds the limits described above, you may make a
contribution to your XXX up to the lesser of $2,000 or 100% of your
compensation. To the extent that your contribution exceeds the deductible
limits, it will be nondeductible. Earnings on all XXX contributions are tax
deferred until distribution. You are required to designate on your tax return
the extent to which your XXX contributions is nondeductible. Therefore, your
designation must be made by the due date (including extensions) for filing your
tax return. If you overstate the amount of nondeductible contributions for a
taxable year, a penalty of $100 will be assessed for each overstatement unless
you can show that the overstatement was due to a reasonable cause.
INVESTMENT OF ACCOUNT
The assets in your XXX will be invested in accordance with your instructions.
As with any investment, you should read any publicly available information
(e.g., prospectuses, annual reports, the terms and conditions of any insurance
annuity contract, etc.) which would enable you to make an informed investment
decision. If no investment instructions are received from you or if the
instructions received are in the opinion of the Custodian unclear you may be
requested to provide instructions. In the absence of such instructions, your
investment may be invested in Money Market Shares, which strive to maintain a
stable $1 per share balance. Keep in mind that with respect to investments in
regulated investment company shares (i.e., mutual funds) or other securities
held in your account, growth in the value of your account cannot be guaranteed
or projected.
DISTRIBUTIONS
GENERAL. Distributions from your XXX should begin no earlier than the date you
reach age 59 1/2 (except in cases of your earlier disability or death) and no
later than the April 1 following the year in which you reach age 70 1/2.
Distributions from your account will be included in your gross income for
federal income tax purposes for the year in which you receive them.
PREMATURE DISTRIBUTIONS. To the extent they are included in income,
distributions from your XXX made before you reach age 59 1/2 will be subject to
a 10% nondeductible penalty tax (in addition to being taxable as ordinary
income) unless the distribution is an exempt withdrawal of an excess
contribution, or the distribution is rolled over to another qualified
retirement plan, or the distribution is one of a scheduled series of payments
over your life or life expectancy or the joint life expectancies of yourself
and your Beneficiary.
LATEST TIME TO WITHDRAW. You must begin receiving distributions of the assets
in your account by April 1 of the calendar year following the calendar year in
which you reach age 70 1/2. Subsequent distributions must be made by December
31 of each year. If you maintain more than one XXX, you may take from any of
your IRAs the aggregate amount to be withdrawn.
MINIMUM DISTRIBUTIONS. Once distributions are required to begin, they must not
be less than the amount each year (determined by actuarial tables) which would
exhaust the value of the account over the required distribution period, which
is generally your life expectancy or the joint life and last survivor
expectancy of you and an individual you have designated as your Beneficiary.
You will be subject to a 50% excise tax on the amount by which the distribution
you actually received in any year falls short of the minimum distribution
required for the year.
METHODS OF DISTRIBUTION. Assets may be distributed from your account according
to one or more of the following methods selected by you:
(a) total distribution
(b) distribution over a certain period
(c) purchase of an annuity contract (See Article IV of the XXX Custodial
Agreement for a full description of these distribution methods.)
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DISTRIBUTION UPON DEATH. The assets remaining in your Account will be
distributed upon your death to the beneficiary(ies) named by you on record with
the Custodian. If there is no beneficiary designated for your Account in the
Custodian's records, or if the beneficiary you had designated dies before you
do, your Account will be paid to your surviving spouse, or in none, to your
estate.
If your spouse was your primary beneficiary and you had started to receive
distributions from your account, but die before receiving the balance of your
account, your spouse has several options. Your spouse can either keep
receiving distributions from your account at least as rapidly, or roll over all
or part of your account into an XXX in his or her name. If distributions from
your account had not yet begun, your spouse may defer taking distributions over
his or her life expectancy, or roll over the account into an XXX in their name,
and treat the XXX as his or her own.
If your beneficiary is not your spouse, and distributions had begun from you
account, your beneficiary may continue to receive them at least as rapidly as
the payment schedule you had established. If distributions had not yet begun,
your beneficiary must deplete your account within 5 years of your death, or
start taking distributions from your account within one year of your death over
their own life expectancy.
DISTRIBUTION OF NONDEDUCTIBLE CONTRIBUTIONS. To the extent that a distribution
constitutes a return of your nondeductible contributions, it will not be
included in your income. The amount of any distribution excludable from income
is the portion that bears the same ratio to the total distribution that your
aggregate nondeductible contributions bear to the balance at the end of the
year (calculated after adding back distributions during the year) of your XXX
For this purpose, all of your IRAs are treated as a single XXX. Furthermore,
all distributions from an XXX during a taxable year are to be treated as one
distribution. The aggregate amount of distributions excludable from income for
all years is not to exceed the aggregate nondeductible contributions for all
calendar years. There is a 10% additional income tax assessed against
premature distributions to the extent such distributions are includible in
income (See "Premature Distributions" above).
EXCESS DISTRIBUTIONS. There is a 15% excise tax assessed against annual
distributions from tax-favored retirement plans, including IRAs, which exceed
the greater of $150,000 or $112,500 (indexed to reflect cost-of-living
increases). To determine whether you have distributions in excess of this
limit, you must aggregate the amounts of all distributions received by you
during the calendar year from all retirement plans, including IRAs. Please
consult with your tax advisor for more complete information, including the
availability of favorable elections.
ROLLOVER TREATMENT. Distributions from your XXX representing all or any part
of the assets in your XXX account are also eligible for rollover treatment You
may roll over all or any part of the same property from this distribution of
assets, within 60 days of receipt, into another XXX or individual retirement
annuity, and maintain the tax-deferred status of these assets. A 60-day
rollover can be made once every twelve months per XXX.
DIVORCE OR LEGAL SEPARATION
If all or any part of your XXX is awarded to a former spouse pursuant to
divorce or legal separation, such portion can be transferred to an XXX in the
receiving spouse's name. This transaction can be processed without any tax
implication to you provided a written instrument executed by a court incident
to the divorce or legal separation in accordance with Section 408(d)(6) of the
Code is received by the Custodian, and specifically directs such transfer. In
addition, you must also provide the Custodian with a letter of instruction and
an XXX application executed by the receiving spouse, if she or he doesn't
already maintain an NFSC XXX through your broker-dealer.
FEES AND EXPENSES
Fees and other expenses of maintaining your XXX account are described in the
Application and may be changed from time to time, as provided in the Custodial
Agreement.
PROHIBITED TRANSACTIONS
If any of the events prohibited by Section 4975 of the Code (such as any sale
exchange or leasing of any property between you and your XXX) occurs during the
existence of your XXX, your account will be disqualified and the entire balance
in your account will be treated as if distributed to you as of the first day of
the year in which the prohibited
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event occurs. This "distribution" would be subject to ordinary income tax and,
if you were under age 59 1/2 at the time, to the 10% penalty tax on premature
distributions.
If you or your Beneficiary use (pledge) all or any part of your XXX as security
for a loan, then the portion so pledged will be treated as if distributed to
you, and will be taxable to you as ordinary income and subject to the 10%
penalty during the year in which you make such a pledge.
OTHER TAX CONSIDERATIONS
NO SPECIAL TAX TREATMENT. No distribution to you or anyone else from your
account can qualify for capital gain treatment under the federal income tax
law. It is taxed to the person receiving the distribution as ordinary income.
(Similarly, you are not entitled to the five-year averaging rule for lump sum
distributions available to persons receiving distributions from certain other
types of retirement plans.)
GIFT TAX. If you elect during your lifetime to have all or any part of your
account payable to a Beneficiary at or after your death, the election will not
subject you to any gift tax liability.
TAX WITHHOLDING. Federal income tax will be withheld from distributions you
receive from an XXX unless you elect not to have tax withheld. However, if XXX
distributions are to be delivered outside of the United States, this tax is
mandatory and you may not elect otherwise unless you certify to the Custodian
that you are not a U.S. citizen residing overseas or a "tax avoidance
expatriate" as described in Code section 877. Federal income tax will be
withheld at the rate of 10%.
REPORTING FOR TAX PURPOSES. Contributions to your XXX must be reported on your
tax Form 1040 or 1040A for the taxable year contributed. You will be required
to designate your XXX contribution as deductible or nondeductible. You are
also required to attach a Form 8606 to your 1040 or 1040A form. Form 8606 is
used to report nondeductible XXX contributions and to calculate the basis
(nontaxable part) of your XXX. Other reporting will be required by you in the
event that special taxes or penalties described herein are due. You must also
file Treasury Form 5329 with the IRS for each taxable year in which the
contribution limits are exceeded a premature distribution takes place or less
than the required minimum amount is distributed from your XXX. The Tax Reform
Act of 1986 also required you to report the amount of all distributions you
received from your XXX and the aggregate account balance of all IRAs as of the
end of the calendar year.
IRS APPROVAL. The form of your individual Retirement Account has been approved
by the Internal Revenue Service. The Internal Revenue Service approval is a
determination only as to the form and does not represent a determination of the
merits of the Account. You may obtain further information with respect to your
XXX from any district office of the Internal Revenue Service.
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