Exhibit 14b
Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
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INSTRUCTIONS
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EMPLOYEE INSTRUCTIONS FOR OPENING YOUR XXXXX/EUCLID SIMPLE IRA
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These instructions and the forms and materials with the instructions are
suitable ONLY for establishing a SIMPLE IRA to receive contributions under an
employer SIMPLE IRA plan or a rollover or transfer of assets directly from
another SIMPLE IRA.
A SIMPLE IRA is an individual retirement account established by a participant in
an employer SIMPLE IRA plan. Only two types of contributions to a SIMPLE IRA are
permitted.
o Salary reduction contributions by you under your employer's SIMPLE IRA plan
and matching or nonmatching contributions to your account by your employer.
o A rollover or a direct transfer from another SIMPLE IRA established by you
as part of an employer SIMPLE IRA plan that you want to transfer to this
SIMPLE IRA for investments in funds sponsored by XXXXX OR EUCLID MUTUAL
FUNDS
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PLEASE FOLLOW THESE INSTRUCTIONS IF YOU
WISH TO ESTABLISH A SIMPLE IRA:
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1. Read carefully the SIMPLE IRA Disclosure Statement, the SIMPLE Individual
Retirement Custodial Account document, the Adoption Agreement, and the
prospectus(es) for any Fund(s) you are considering. Consult your lawyer,
accountant, or other tax adviser if you have any questions about how opening a
SIMPLE IRA will affect your financial and tax situation.
In addition to the SIMPLE IRA Disclosure Statement included in these materials,
as part of its SIMPLE IRA plan, your employer should give you a notice
summarizing certain key features of the employer's SIMPLE IRA plan (including
particularly the level of employer contributions) and a summary description
containing more information about the employer's SIMPLE IRA plan. Be sure to
read this information carefully as well.
2. Complete the Adoption Agreement for your SIMPLE IRA
o Complete the participant information in part 1 and 2 of the Adoption
Agreement.
o In Part 3 check the box that shows the type of SIMPLE IRA you are opening.
If you are establishing a SIMPLE IRA account to receive a transfer from
another account under your employer's SIMPLE IRA plan, your employer must
sign in Part 3 to verify the date the first contribution to your other
SIMPLE IRA account was made. This is important for tax reporting purposes.
o Complete Part 4.
o In Part 5, indicate your investment choices. If you have elected as part of
your employer's SIMPLE IRA plan to have contributions to your Xxxxx/Euclid
Mutual Fund's SIMPLE IRA account transferred to another IRA with a different
trustee or custodian, the contributions will be held in the fund specified
in the Adoption Agreement pending transfer.
o Sign and date the Adoption Agreement at the end.
3. If you are transferring assets directly from an existing SIMPLE IRA with
another investment fund to this IRA, complete the SIMPLE IRA Transfer of Assets
Form.
4. Complete and sign the Designation of Beneficiary.
6. Check to be sure you have properly completed all necessary forms. Your SIMPLE
IRA cannot be accepted without the properly completed documents.
7. Enclose your check.
Send the completed forms and check(s) to:
Xxxxx/Euclid Mutual Funds
c/o State Street Bank and Trust Company
P.O. Box 8505
Boston, MA 02266-8505
If by courier send to:
Xxxxx/Euclid Mutual Funds
c/o State Street Bank and Trust Company
0 Xxxxxxxx Xxxxx, Xxxxx Xxxxx
Xxxxxx, XX 00000
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Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
=======================
ADOPTION AGREEMENT
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I, the person signing this Adoption Agreement, establish an Individual
Retirement Account with State Street Bank and Trust Company as custodian, to
operate in conjunction with a SIMPLE IRA plan established by my employer or to
receive a transfer from another SIMPLE IRA. I agree to the terms of my account,
which are contained in the document entitled "State Street Bank and Trust
Company Employee SIMPLE Individual Retirement Custodial Account " and this
Adoption Agreement. My account will be effective upon acceptance by State Street
Bank and Trust Company.
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1. ACCOUNT NAME BFDS Social Code 762
--------------------
________________________________________________________________________
Name ( last, first, middle)
________________________________________________________________________
Social Security Number
________________________________________________________________________
Date of Birth
2. ADDRESS AND SHAREHOLDER INFORMATION
________________________________________________________________________
Street or P.O. Box
________________________________________________________________________
City, State and Zip code
________________________________________________________________________
Daytime Telephone Number
3. TYPE OF SIMPLE IRA ACCOUNT
Check (a) or (b)
|_| Check here if you are establishing this Account in con-nection with a Simple
IRA plan maintained by your employer.
|_| Check here if this is a transfer from another Simple IRA which was part of a
Simple IRA plan maintained by your employer. Complete the SIMPLE IRA Transfer of
Assets Form and reply to the following questions.
o Amount transferred $__________________
o Date of first contribution to your prior simple IRA__________
o Employer's Signature _______________________________
____________________________________________________
Title
4. EMPLOYER INFORMATION
________________________________________________________________________
Name
________________________________________________________________________
Address
________________________________________________________________________
Address
________________________________________________________________________
City, State, Zip Code
________________________________________________________________________
Employer Tax Identification Number
________________________________________________________________________
Name and Telephone Number of Contact Person at Employer
The Xxxxx/Euclid Mutual Fund SIMPLE IRA is a Non-DFI (Designated Financial
Institution) Plan. Under a non-DFI plan, each eligible employee establishes a
SIMPLE IRA with the financial institution of his or her choice. Contributions
are transferred by the employer to each eligible employee's SIMPLE IRA. Plase
contact your employer to be sure that a non-DFI plan has been established.
5. INVESTMENT INFORMATION
The minimum investment is $250 per fund. Checks should be made payable to State
Street Bank and Trust Company. Third party checks will not be accepted. Please
be sure to write the fund name(s) and your social security number on the check.
A. Fund Name: _______________________________________________________
|_| Class A |_| Class B |_| Class C
Investment Amount: $ ___________________
B. Fund Name: _______________________________________________________
|_| Class A |_| Class B |_| Class C
Investment Amount: $ ___________________
C. Fund Name: _______________________________________________________
|_| Class A |_| Class B |_| Class C
Investment Amount: $ ___________________
I acknowledge that I have sole responsibility for my investment choices and that
I have received and read a current Xxxxx Series Trust or Euclid Mutual Funds
prospectus.
(over for signatures please)
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2
Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
=======================
ADOPTION AGREEMENT
Page 2
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6. DEALERS AND ADVISERS ONLY
If certification below is executed, duplicate statements will be sent to the
address indicated below. Please be sure to enter the correct Financial
Professional Number and Branch Number.
________________________________________________________________________
Financial Professional's Name
________________________________________________________________________
Financial Professional's Number
________________________________________________________________________
Dealer/Adviser's Name
________________________________________________________________________
Dealer/Adviser's Telephone Number
________________________________________________________________________
Dealer/Adviser's Address
________________________________________________________________________
Dealer/Adviser's Branch Number
7. CERTIFICATION AND SIGNATURES
Participant has received and read the "Employee IRA Disclosure Statement"
relating to this Account (including the custodian's fee schedule), the Custodial
Account Document, and the "Instructions" pertaining to this Adoption Agreement.
Participant has also received and read the summary description and notice from
the employer relating to the em-ployer's SIMPLE IRA Plan.
Participant acknowledges receipt of the Custodial Account Document and IRA
Disclosure Statement at least 7 days be-fore the date incribed below and
acknowledges that Participant has no right of revocation.
Participant acknowledges that he/she must provide accurate information in the
Adoption Agreement, and that he/she may incur extra taxes and/or penalties if
the information is not accurate. Accordingly, participant certifies the accuracy
of such information (including particularly the date specified in Item 3(b)
above).
________________________________________________________________________
Signature of Participant Date
8. CUSTODIAN ACCEPTANCE
(to be completed by new custodian)
State Street Bank and Trust Company accepts appointment as Custodian of the
Participant's Account. However, this Agreement is not binding upon the Custodian
until the Participant has received a statement of the transaction. Receipt by
the Participant of a confirmation of the purchase of the fund shares indicated
above will serve as notification of State Street Bank and Trust Company's
acceptance of appointment as Custodian of the Participant's Account.
STATE STREET BANK AND TRUST COMPANY,
CUSTODIAN
________________________________________________________________________
By:
________________________________________________________________________
Date:
ooooo
RETAIN A PHOTOCOPY OF THE COMPLETED
ADOPTION AGREEMENT FOR YOUR RECORDS
ooooo
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3
Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
===========================
SIMPLE IRA
TRANSFER OF ASSETS FORM
===========================
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1. ACCOUNT NAME BFDS Social Code 763
--------------------
________________________________________________________________________
Name (last, first, middle)
________________________________________________________________________
Social Security Number
________________________________________________________________________
Date of Birth
2. ADDRESS AND SHAREHOLDER INFORMATION
________________________________________________________________________
Street or P.O. Box
________________________________________________________________________
City, State, and Zip code
________________________________________________________________________
Daytime Telephone Number
3. INFORMATION ABOUT YOUR PRESENT SIMPLE IRA CUSTODIAN OR TRUSTEE
________________________________________________________________________
Name of Institution currently holding your Simple IRA
________________________________________________________________________
Address
________________________________________________________________________
City, State, Zip Code
________________________________________________________________________
Telephone
________________________________________________________________________
Contact person
________________________________________________________________________
Account Number
Please transfer assets of my present SIMPLE IRA to State Street Bank and Trust
Company. All assets should be transferred as cash according to the following
instructions:
|_| Transfer the total amount in my account
|_| Transfer only $________________
4. INVESTMENT INSTRUCTIONS TO STATE STREET
BANK AND TRUST COMPANY (Check one box)
|_| I am opening a new Xxxxx/Euclid SIMPLE IRA. Attached
is my completed Adoption Agreement.
|_| I already maintain a Xxxxx/Euclid Simple IRA.
Please list the names of the Xxxxx or Euclid Mutual Funds into which the
transfer proceeds are to be deposited.
X.Xxxx Name:
|_| Class A |_| Class B |_| Class C
Investment Amount $ ___________________
Fund Acct. No. (if existing) _________________
X.Xxxx Name:
|_| Class A |_| Class B |_| Class C
Investment Amount $ ___________________
Fund Acct. No. (if existing) _________________
X.Xxxx Name:
|_| Class A |_| Class B |_| Class C
Investment Amount $ ___________________
Fund Acct. No. (if existing) _________________
I acknowledge that I have sole responsibility for my investment choices and that
I have received a current prospectus for each Fund I select. Please read the
prospectus(es) of the Fund(s) you select before investing.
5. SIGNATURE OF PARTICIPANT
The undersigned certifies to the present SIMPLE IRA custodian or trustee that
the undersigned has established a successor SIMPLE Individual Retirement
Custodial Account meeting the requirements of Internal Revenue Code Section
408(p) to which assets will be transferred, and certifies to State Street Bank
and Trust Company that the SIMPLE IRA from which assets are being transferred
meets the requirements of Internal Revenue Code Section 408(p).
________________________________________________________________________
Signature of Participant Date
6. SIGNATURE GUARANTEE (only if required by cur-rent SIMPLE IRA Sponsor)
________________________________________________________________________
Signatured guaranteed by:
________________________________________________________________________
Eligible Financial Institution
________________________________________________________________________
Signature of Officer and Title
7. INSTRUCTIONS TO CURRENT CUSTODIAN
Please forward a check as directed in Part 3 made payable to State Street Bank
and Trust company, FBO
________________________________________________________________________
Please include the following reference number on the check:
#________________________________________________________________________
8. ACCEPTANCE BY NEW CUSTODIAN (Completed by State Street Bank and Trust
Company)
State Street Bank and Trust Company agrees to accept transfer of the above
amount for deposit to the Participant's State Street Bank and Trust Company
SIMPLE Individual Retirement Custodial Account, and requests the liquidation and
transfer of assets as indicated above.
Date: ________________________________________________________________________
By: ________________________________________________________________________
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4
Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
==============================
DESIGNATION OF BENEFICIARY
FORM
==============================
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Name of Participant ______________________________________________________
As Participant, I hereby make the following designation of beneficiary in
accordance with the State Street Bank and Trust Company Employee SIMPLE
Individual Retirement Custodial Account:
In the event of my death, pay any interest I may have under my Account to the
following Primary Beneficiary or Beneficiaries that survive me. Make payment in
the proportions specified below (or in equal proportions if no proportions are
specified). If any Primary Beneficiary predeceases me, his share is to be
divided among the Primary Beneficiaries who survive me in the relative
proportions assigned to each such surviving Primary Beneficiary.
Primary Beneficiary or Beneficiaries:
Name Relationship Date of Birth Social Security Number Proportion
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
If none of the Primary Beneficiaries survives me, pay any interest I may have
under my Account to the following Alternate Beneficiary or Beneficiaries that
survive me. Make payment in the proportions specified below (or in equal
proportions if no proportions are specified). If any Alternate Beneficiary
predeceases me, his share is to be divided among the Alternate Beneficiaries who
survive me in the relative proportions assigned to each such surviving Alternate
Beneficiary.
Alternate Beneficiary or Beneficiaries:
Name Relationship Date of Birth Social Security Number Proportion
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
I understand that the beneficiaries named herein may be changed or revoked at
any time by filing a new designation in writing with the Custodian. All forms
must be acceptable to the Custodian and dated and signed by the Participant.
Signature of Participant Date
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IMPORTANT: This Designation of Beneficiary may have important tax or estate
planning effects. Also, if you are married and reside in a community property
state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, or
Washington), you may need to obtain your spouse's consent if you have not
designated your spouse as primary beneficiary for at least half of your Account.
See your lawyer, accountant,or other tax professional for additional information
and advice.
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5
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DISCLOSURE STATEMENT
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IMPORTANT
This disclosure statement describes the rules applicable to SIMPLE Individual
Retirement Accounts. These are IRAs established to operate as part of an
employer SIMPLE IRA plan established by your employer. This disclosure statement
does not describe regular IRAs that you can establish and make contributions to
within IRS limits. State Street Bank and Trust Company, the SIMPLE IRA
Custodian, also has a different kit of materials that may be used to establish a
regular IRA.
Be sure to establish the correct kind of IRA.
SIMPLE IRA PLAN INFORMATION FROM YOUR EMPLOYER
As part of operating a SIMPLE IRA plan, your employer is required to give you
two kinds of information (these may be combined in a single pamphlet or notice).
First, your employer should give you a "summary description" of the main
features of the employer's SIMPLE IRA plan, including information about any
eligibility requirements your employer imposes. This summary description may
include a photocopy of IRS Form 5305-SIMPLE or 5304-SIMPLE as completed by your
employer to establish its SIMPLE IRA plan, or it may be in a different format.
Also, your employer should give you a copy of a notice stating how much the
employer will contribute to participants' SIMPLE IRAs for the plan year.
ESTABLISHING YOUR IRA
This disclosure statement contains information about your SIMPLE Individual
Retirement Custodial Account with State Street Bank and Trust Company as
Custodian. Your IRA gives you several tax benefits. Within IRS limits,
contributions under your employer's SIMPLE IRA plan to your IRA are not taxable
income to you until withdrawn. Earnings on the assets held in your IRA are not
subject to federal income tax until withdrawn by you. State income tax treatment
of your IRA may differ from federal treatment; ask your state tax department or
your personal tax advisor for details.
All IRAs must meet certain requirements. Contributions generally must be made in
cash. The IRA trustee or custodian must be a bank or other person who has been
approved by the Secretary of the Treasury. Your contributions may not be
invested in life insurance or collectibles or be commingled with other property
except in a common trust or investment fund. Your interest in the account must
be nonforfeitable at all times. You may obtain further information on IRAs from
any district office of the Internal Revenue Service.
To the extent required by the IRS under its rules for SIMPLE IRAs, you are
permitted to revoke a newly established IRA at any time within any IRS time
limits. If permitted, to revoke your IRA, mail or deliver a written notice of
revocation to the Custodian at the address which appears at the end of this
Disclosure Statement. Mailed notice will be deemed given on the date that it is
postmarked (or, if sent by certified or registered mail, on the date of
certification or registration). If you revoke your IRA within the seven-day
period, the amount contributed into your IRA will be returned as provided under
the IRS rules.
FEES
A $10.00 annual maintenance fee per account, per investment selection, will be
billed to you or deducted from your account (if not paid properly) by State
Street Bank and Trust Company, as Custodian. The maximum annual maintenance fee
per annum will not exceed $20.00 per social security number.
General Fee Policies
o Fees may be paid by you directly or the Custodian may deduct them from your
IRA.
o Fees may be changed upon 30 days written notice to you.
o The full annual maintenance fee will be charged for any calendar year during
which you have an IRA with us. This fee is not prorated for periods of less
than one full year.
o The Custodian may charge you for its reasonable expenses for services not
covered by its fee schedule.
Other Charges
There may be sales or other charges associated with the purchase or redemption
of shares of a Fund in which your IRA is invested. Be sure to read carefully the
current prospectus of any Fund you are considering as an investment for your IRA
for a description of applicable charges.
ELIGIBILITY
Which employers may have SIMPLE IRA plans?
SIMPLE IRA plans are only for small employers. This is defined as an employer
with 100 or fewer employees in the previous calendar year who had $5,000 or more
in total pay from the employer. (There are certain additional rules; these are
described in the summary description of its SIMPLE IRA plan that your employer
should give you.)
Your employer determines if it is eligible to establish a SIMPLE IRA plan.
6
An employer may have a SIMPLE IRA plan only if it has no other retirement plan
at any time when the SIMPLE IRA plan is in operation. "Retirement plans" for
this purpose include profit sharing, 401(k) retirement and other kinds of plans
that receive tax benefits.
Which employees participate in the SIMPLE IRA?
Generally speaking, all of the employer's employees must participate in the
SIMPLE IRA plan. However, the employer may decide to exclude:
o an employee who did not receive at least $5,000 in pay from the employer in
at least two prior calendar years (not necessarily consecutive);
o an employee who is not reasonably expected to receive at least $5,000 in pay
from the employer for the current calendar year;
o union employees, provided that there was good faith bargaining over the
issue of retirement benefits;
o employees who are non-resident aliens and receive no U.S. source income.
The summary description of its SIMPLE IRA plan that your employer should give
you will indicate whether these groups of employees will be included or excluded
from the employer's SIMPLE IRA plan.
CONTRIBUTIONS
Two kinds of contributions are permitted: (i) employee contributions and (ii)
employer contributions, which may be either matching or nonmatching
contributions.
How Much Can I Contribute to my SIMPLE IRA?
If you are an eligible employee, you may elect to have a percentage of your pay
contributed by the employer to your SIMPLE IRA, as long as the amount does not
exceed $6,000 for a calendar year. The $6,000 limit is indexed for future
cost-of-living increases.
You elect the desired percentage of pay to contribute on a salary reduction
agreement (your employer will have a form for you to use). Salary reductions may
be made only from pay you earn after signing the salary reduction agreement.
Your salary reduction contributions must be transferred to your SIMPLE IRA as
soon as the employer can reasonably do so. The outside deadline is the 30th day
of the month following the month when you would have received the pay amount
except for the salary reduction.
How much will my employer contribute?
For each year that it operates its SIMPLE IRA plan, your employer must make
contributions on behalf of participants. The employer may choose either matching
or nonmatching contributions for a particular calendar year.
If the employer makes matching contributions, you must make salary reduction
contributions from your own pay in order to receive pay matching contribution
from your employer. Your employer will match your contributions, dollar for
dollar, up to a cap of 1% to 3% of your pay for the calendar year. Your employer
decides the cap (subject to certain IRS requirements).
If your employer decides to make nonmatching contributions, it must contribute
2% of your pay for the calendar year (provided that you receive $5,000 or more
in pay from the employer for the calendar year). For this purpose only, the pay
is subject to an IRS limit. The limit is $160,000 for 1997 (this amount is
indexed for future cost-of-living changes).
The employer must notify you of the contribution approach it has elected for a
particular calendar year. Employer contributions must be transferred to your
SIMPLE IRA no later than the due date (including any extension) for the employer
to file its federal income tax return for the year.
TRANSFERS/ROLLOVERS
Can I Transfer my Simple IRA to another IRA?
Yes. The IRS rules for SIMPLE IRAs say that you may transfer to another SIMPLE
IRA, or to a regular IRA you have established. However, during the first two
years after your participation in the SIMPLE IRA plan begins, you may transfer
only to another SIMPLE IRA (not a regular IRA).
The transfer rules depend on whether your employer has established its SIMPLE
IRA plan with a "designated financial institution" or not. The summary
description (or other information) provided to you by your employer should
indicate whether your employer's SIMPLE IRA plan uses a designated financial
institution or not).
With a designated financial institution, all contributions are initially paid to
that institution. However, you have the right to elect to have contributions to
your SIMPLE IRA account with the designated financial institution transferred to
another SIMPLE IRA you have established where the contributions will be invested
in accordance with your directions. If your election is made during the 60-day
period when you elect your salary reduction contributions to the plan for a
calendar year, then contributions for that calendar year will be transferred
without a transfer fee or other cost or penalty. Pending transfer from the
designated financial institution to the SIMPLE IRA you have established to
receive transferred contributions, the contributions for you may be invested in
a specified investment, such as a money market fund or a deposit account, and
you will have no choice of investments. Other transfers may be made to another
SIMPLE IRA or regular IRA, but they will be subject to normal fees of the
Custodian as well as to redemption or other charges imposed by the mutual fund
in which contributions are invested (as described in its prospectus). More
information on this subject is found in the summary description of your
employer's SIMPLE IRA plan.
Your employer may decide to operate its SIMPLE IRA plan without a designated
financial institution. In this case, each eligible employee sets up a SIMPLE IRA
with a financial institution of his or her choice. Contributions on your behalf
will be sent to your SIMPLE IRA account, wherever you have set it up, and
invested according to your instructions.
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Can I Make a Regular Rollover from my SIMPLE IRA to another IRA?
You may make a regular rollover from one IRA (including a SIMPLE IRA) to
another. However, such a rollover may be done only once in any 365-day period.
This rule applies to each individual IRA.
INVESTMENTS
How Are Contributions to my SIMPLE IRA Invested?
You control the investment and reinvestment of contributions to this SIMPLE IRA.
Investments must be in one or more of the Fund(s) available from time to time as
listed in the Adoption Agreement for your SIMPLE IRA or in an investment
selection form included with your SIMPLE IRA Adoption Agreement. You direct the
investment of your SIMPLE IRA by giving your investment instructions to the
Distributor or Service Company for the Fund(s). Since you control the investment
of your SIMPLE IRA, you are responsible for any losses; neither the Custodian,
the Distributor nor the Service Company has any responsibility for any loss or
diminution in value occasioned by your exercise of investment control.
Transactions for your SIMPLE IRA will generally be effected at the applicable
public offering price or net asset value for shares of the Fund(s) involved next
established after the Distributor or the Service Company (whichever may apply)
receives proper investment instructions from you; consult the current prospectus
for the Fund(s) involved for additional information.
Before making any investment, read carefully the current prospectus for any Fund
you are considering as an investment for your SIMPLE IRA. The prospectus will
contain information about the Fund's investment objectives and policies, as well
as any minimum initial investment or minimum balance requirements and any sales,
redemption or other charges.
Because you control the selection of investments for your SIMPLE IRA and because
mutual fund shares fluctuate in value, the growth in value of your SIMPLE IRA
cannot be guaranteed or projected.
Are There Any Restrictions on the Use of my SIMPLE IRA Assets?
The tax-exempt status of your SIMPLE IRA will be revoked if you engage in any of
the prohibited transactions listed in Section 4975 of the tax code. The fair
market value of your SIMPLE IRA will be includible in your taxable income in the
year in which such prohibited transaction takes place. The fair market value of
your SIMPLE IRA may also be subject to a penalty tax as a premature withdrawal
if you have not yet reached the age of 59 1/2.
Any investment in a collectible (for example, rare stamps) by your SIMPLE IRA is
treated as a taxable withdrawal; the only exception involves certain types of
government-sponsored coins.
What Is A Prohibited Transaction?
Generally, a prohibited transaction is any improper use of the assets in your
SIMPLE IRA. Some examples of prohibited transactions are:
o Direct or indirect sale or exchange of property between you and your SIMPLE
IRA.
o Transfer of any property from your SIMPLE IRA to yourself or from yourself
to your SIMPLE IRA.
Your SIMPLE IRA could lose its tax exempt status if you use all or part of your
interest in your SIMPLE IRA as security for a loan or borrow any money from your
SIMPLE IRA. Any portion of your SIMPLE IRA used as security for a loan will be
taxed as ordinary income in the year in which the money is borrowed. If you are
under age 59 1/2, this amount will also be subject to a penalty tax as a
premature distribution.
WITHDRAWALS
When can I make withdrawals from my SIMPLE IRA?
You may withdraw from your SIMPLE IRA at any time. However, withdrawals before
age 59 1/2 may be subject to a penalty tax in addition to regular income taxes
(see below).
When must I start making withdrawals?
If you have not withdrawn your entire SIMPLE IRA by the April 1 following the
year in which you reach 70 1/2, you must make minimum withdrawals in order to
avoid penalty taxes. The rule allowing most employees to postpone distributions
from an employer qualified plan until actual retirement (even if this is after
age 70 1/2) does not apply to SIMPLE IRAs.
The minimum withdrawal amount is determined by dividing the balance in your
SIMPLE IRA (for this purpose all your IRAs -SIMPLE IRAs and regular IRAs - are
added together) by your life expectancy or the combined life expectancy of you
and your designated beneficiary. The minimum withdrawal rules are complex.
Consult your tax advisor for assistance.
The penalty tax is 50% of the difference between the minimum withdrawal amount
and your actual withdrawals during a year. The IRS may waive or reduce the
penalty tax if you can show that your failure to make the required minimum
withdrawals was due to reasonable cause and you are taking reasonable steps to
remedy the problem.
8
How Are Withdrawals From My SIMPLE IRA Taxed?
Amounts withdrawn by you are includible in your gross income in the taxable year
that you receive them, and are taxable as ordinary income. Lump sum withdrawals
from SIMPLE IRAs are not eligible for averaging treatment currently available to
certain lump sum distributions from qualified employer retirement plans.
Since the purpose of the SIMPLE IRA is to accumulate funds for retirement, your
receipt or use of any portion of your SIMPLE IRA before you attain age 59 1/2
generally will be considered as an early withdrawal and subject to a penalty
tax. For withdrawals from your SIMPLE IRA during the first two years after the
date of the first contribution to your SIMPLE IRA account under your employer's
SIMPLE IRA plan, the penalty is 25% of the amount withdrawn. After that, the
penalty is 10% of the amount withdrawn.
The penalty tax for early withdrawal will not apply if:
o The distribution was a result of your death or disability.
o The distribution is one of a scheduled series of substantially equal
periodic payments for your life or life expectancy (or the joint lives or
life expectancies of you and your beneficiary).
o If there is an adjustment to the scheduled series of payments, the penalty
tax will apply. For example, if you begin receiving payments at age 50 under
a withdrawal program providing for substantially equal payments over your
life expectancy, and at age 58 you elect to receive the remaining amount in
your IRA in a lump-sum, the penalty tax will apply to the lump sum and to
the amounts previously paid to you before age 59 1/2.
o The distribution does not exceed the amount of your deductible medical
expenses for the year (generally speaking, medical expenses paid during a
year are deductible if they are greater than 7 1/2% of your adjusted gross
income for that year), or
o The distribution does not exceed the amount you paid for health insurance
coverage for yourself, your spouse and dependents. This exception applies
only if you have been unemployed and received federal or state unemployment
compensation payments for at least twelve weeks; this exception applies to
distributions during the year in which you received the unemployment
compensation and during the following year, but not to any distributions
received after you have been reemployed for at least 60 days.
In addition, certain taxpayers with very large accumulations in tax-favored
arrangements (including SIMPLE and regular IRAs, 403(b) arrangements and
employer qualified plans) may be subject to a 15% penalty tax (in addition to
regular income taxes) if distributions during a year from all such arrangements
exceed a certain amount. This amount is $160,000 for 1997 (and is indexed for
future cost-of-living changes). Distributions from all tax-favored arrangements
during a year are counted in determining whether any distributions are above the
floor amount and are subject to the 15% penalty tax. There are special rules for
grandfathered amounts and for lump sum distributions from qualified plans. Under
current law, this 15% penalty tax will not apply during calendar years 1997,
1998 and 1999 (however, a related estate tax 15% penalty tax on certain excess
amounts remaining in tax-favored arrangements upon your death continues to apply
during these years). Consult your tax advisor for additional information on
these penalty tax rules.
A loss in your IRA investment may be deductible. You should consult your tax
advisor for further details on the appropriate calculation for this deduction if
applicable.
TAX MATTERS
What IRA Reports does the Custodian Issue?
The Custodian will report all withdrawals to the IRS and the recipient on the
appropriate form. For reporting purposes, a direct transfer of assets to a
successor custodian or trustee is not considered a withdrawal. The Custodian
will report to the IRS the year-end value of your account and the amount of any
contributions made or other transactions during a calendar year.
What Tax Information Must I Report to the IRS?
You must file Form 5329 with the IRS for each taxable year for which you take a
premature withdrawal, or you withdraw less than the required minimum amount from
your SIMPLE IRA.
Are SIMPLE IRA Withdrawals subject to Withholding?
Federal income tax will be withheld at a flat rate of 10% from any withdrawal
from your SIMPLE IRA, unless you elect not to have tax withheld. Withdrawals
from a SIMPLE IRA are not subject to the mandatory 20% income tax withholding
that applies to most distributions from qualified plans or 403(b) accounts that
are not directly rolled over to another plan or IRA.
Are the Earnings on my SIMPLE IRA Funds Taxed?
Any earnings on investments held in your SIMPLE IRA are generally exempt from
federal income taxes and will not be taxed until withdrawn by you, unless the
tax exempt status of your SIMPLE IRA is revoked.
9
ACCOUNT TERMINATION
You may terminate your SIMPLE IRA at any time after its establishment by sending
a complete withdrawal form, or a transfer authorization form, to:
STATE STREET BANK AND TRUST COMPANY
P.O. Box 8505
Boston, MA 02266-8505
Your SIMPLE IRA with State Street Bank will terminate upon the first to occur of
the following:
o The date your properly executed withdrawal form (as described above)
withdrawing your total SIMPLE IRA balance is received and accepted by the
Custodian or, if later, the termination date specified in the withdrawal
form.
o The date the SIMPLE IRA ceases to qualify under the tax code. This will be
deemed a termination.
o The transfer of the SIMPLE IRA to another custodian/trustee.
o The rollover of the amounts in the SIMPLE IRA to another custodian/trustee.
Any outstanding fees must be received prior to such a termination of your
account. The amount you receive from your SIMPLE IRA will be treated as a
withdrawal, and thus the rules relating to SIMPLE IRA withdrawals will apply.
For example, if the SIMPLE IRA is terminated before you reach age 59 1/2, the
early withdrawal penalty may apply on the amount you receive.
IRA DOCUMENTS
The terms contained in Articles I to VII of the State Street Bank and Trust
Company Employee SIMPLE Individual Retirement Custodial Account document have
been promulgated by the IRS in Form 5305-SA for use in establishing an IRA
custodial account that meets the requirements of the tax laws for a valid SIMPLE
IRA. This IRS approval relates only to the form of Articles I to VII and is not
an approval of the merits of the SIMPLE IRA or of any investment permitted by
the SIMPLE IRA. See Section 25 of Article VIII of the document for additional
information.
NOTE: The information in this Disclosure Statement reflects the best information
available at the time of preparation. However, SIMPLE IRAs are governed by
new provisions of the Internal Revenue Code and the IRS has not issued
regulations on SIMPLE IRA plans or answered many of the questions about
SIMPLE IRAs. Consult your professional tax adviser or the IRS on any
questions you have about a SIMPLE IRA or about the most recent IRS
developments.
10
================================================================================
STATE STREET BANK AND TRUST COMPANY
EMPLOYEE SIMPLE INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
================================================================================
The following provisions of Articles I to VII are in the form promulgated by
the Internal Revenue Service in Form 5305-SA for use in establishing an
individual retirement custodial account.
Article I.
The custodian will accept cash contributions made on behalf of the
participant by the participant's employer under the terms of a SIMPLE plan
described in section 408(p). In addition, the custodian will accept transfers or
rollovers from other SIMPLE IRAs of the participant. No other contributions will
be accepted by the custodian.
Article II.
The participant'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) 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 participant'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 participant 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 participant
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The participant's entire interest in the custodial account must be, or
begin to be, distributed by the participant's required beginning date, the April
1 following the calendar year end in which the participant reaches age 70 1/2.
By that date, the participant 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 participant.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the participant and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the participant'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 participant and his or her designated beneficiary.
4. If the participant 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 participant 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 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
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the participant'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 participant's death. If, however, the beneficiary is the
participant's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
participant 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
participant's required beginning date, even though payments may actually
have been made before that date.
(d) 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.
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,
11
divide the participant'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 participant (or the joint life and last survivor expectancy of the
participant and the participant'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 participant and designated
beneficiary as of their birthdays in the year the Participant reaches 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.
Article V.
1. The participant agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section 408(i)
and Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the participant as prescribed by the Internal Revenue Service.
3. The Custodian also agrees to provide the participant's employer the
summary description described in section 408(l)(2) unless this SIMPLE IRA is a
transfer SIMPLE IRA.
Article VI.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and 408(p) 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 persons whose signatures appear on the Adoption
Agreement.
Article VIII.
1. As used in this Article VIII the following terms have the following
meanings:
"Custodian" means State Street Bank and Trust Company.
"Fund" means a mutual fund or registered investment company which is
specified in the Adoption Agreement, or which is designated by the Distributor
named in the Adoption Agreement, as being available as an investment for the
custodial account; provided, however, that such a mutual fund or registered
investment company must be legally offered for sale in the state of the
Participant's residence in order to be a Fund hereunder.
"Distributor" means the entity which has a contract with the Fund(s) to
serve as distributor of the shares of such Fund(s).
In any case where there is no Distributor, the duties assigned hereunder to
the Distributor may be performed by the Fund(s) or by an entity that has a
contract to perform management or investment advisory services for the Fund(s).
"Service Company" means any entity employed by the Custodian or the
Distributor, including the transfer agent for the Fund(s), to perform various
administrative duties of either the Custodian or the Distributor.
In any case where there is no Service Company, the duties assigned hereunder
to the Service Company will be performed by the Distributor (if any) or by an
entity specified in the second preceding paragraph.
2. To the extent required by regulations or rulings pertaining to SIMPLE IRA
accounts under Code Section 408(p), the participant may revoke the custodial
account established hereunder by mailing or delivering a written notice of
revocation to the Custodian within such time limits as may be specified in such
regulations or rulings. Mailed notice is treated as given to the Custodian on
date of the postmark (or on the date of Post Office certification or
registration in the case of notice sent by certified or registered mail). Upon
timely revocation, the participant's initial contribution will be returned as
provided in such regulations or rulings.
3. All contributions to the custodial account shall be invested and
reinvested in full and fractional shares of one or more Funds. Such investments
shall be made in such proportions and/or in such amounts as participant from
time to time in the Adoption Agreement or by other written notice to the Service
Company (in such form as may be acceptable to the Service Company) may direct
(but subject to the provisions of Section 25).
The Service Company shall be responsible for promptly transmitting all
investment directions by the participant for the purchase or sale of shares of
one or more Funds hereunder to the Funds' transfer agent for execution. However,
if investment directions with respect to the investment of any contribution
hereunder are not received from the participant as required or, if received, are
unclear or incomplete in the opinion of the Service Company, the contribution
will be returned to the participant (or the participant's employer) without
liability for interest or for loss of income or appreciation. If any directions
or other orders by the participant with respect to the sale or purchase of
shares of one or more Funds for the custodial account are unclear or incomplete
in the opinion of the Service Company, the Service Company will refrain from
carrying out such investment directions or from executing any such sale or
purchase, without liability for loss of income or for appreciation or
depreciation of any asset, pending receipt of clarification or completion from
the participant.
All investment directions by participant will be subject to any minimum
initial or additional investment or minimum balance rules applicable to a Fund
as described in its prospectus.
All dividends and capital gains or other distributions received on the
shares of any Fund held in the participant's account shall be retained in the
account and (unless received in additional shares) shall be reinvested in full
and fractional shares of such Fund.
4. Subject to the minimum initial or additional investment, minimum balance
and other exchange rules applicable to a Fund, the participant may at any time
12
direct the Service Company to exchange all or a specified portion of the shares
of a Fund in the participant's account for shares and fractional shares of one
or more other Funds. The participant shall give such directions by written,
telephonic or other form of notice acceptable to the Service Company, and the
Service Company will process such directions as soon as practicable after
receipt thereof (subject to the first and second paragraphs of Section 3 of this
Article VIII).
5. Any purchase or redemption of shares of a Fund for or from the
participant's account will be effected at the public offering price or net asset
value of such Fund (as described in the then effective prospectus for such Fund)
next established after the Service Company has transmitted the participant's
investment directions to the transfer agent for the Fund(s).
Any purchase, exchange, transfer or redemption of shares of a Fund for or
from the participant's account will be subject to any applicable sales,
redemption or other charge as described in the then effective prospectus for
such Fund.
6. The Service Company shall maintain adequate records of all purchases or
sales of shares of one or more Funds for the participant's custodial account.
Any account maintained in connection herewith shall be in the name of the
Custodian for the benefit of the participant. All assets of the custodial
account shall be registered in the name of the Custodian or of a suitable
nominee. The books and records of the Custodian shall show that all such
investments are part of the custodial account.
The Custodian shall maintain or cause to be maintained adequate records
reflecting transactions of the custodial account. In the discretion of the
Custodian, records maintained by the Service Company with respect to the account
hereunder will be deemed to satisfy the Custodian's recordkeeping
responsibilities therefor. The Service Company agrees to furnish the Custodian
with any information the Custodian requires to carry out the Custodian's
recordkeeping responsibilities.
7. Neither the Custodian nor any other party providing services to the
custodial account will have any responsibility for rendering advice with respect
to the investment and reinvestment of participant's custodial account, nor shall
such parties be liable for any loss or diminution in value which results from
participant's exercise of investment control over his custodial account.
Participant shall have and exercise exclusive responsibility for and control
over the investment of the assets of his custodial account, and neither
Custodian nor any other such party shall have any duty to question his
directions in that regard or to advise him regarding the purchase, retention or
sale of shares of one or more Funds for the custodial account.
8. The participant may appoint an investment advisor with respect to the
custodial account on a form acceptable to the Custodian and the Service Company.
The investment advisor's appointment will be in effect until written notice to
the contrary is received by the Custodian and the Service Company. While an
investment advisor's appointment is in effect, the investment advisor may issue
investment directions or may issue orders for the sale or purchase of shares of
one or more Funds to the Service Company, and the Service Company will be fully
protected in carrying out such investment directions or orders to the same
extent as if they had been given by the participant.
The participant's appointment of any investment advisor will also be deemed
to be instructions to the Custodian and the Service Company to pay such
investment advisor's fees to the investment advisor from the custodial account
hereunder without additional authorization by the participant or the Custodian.
9. Distribution of the assets of the custodial account shall be made at such
time and in such form as Participant (or the Beneficiary if participant is
deceased) shall elect by written order to the Custodian (or other form of
instructions acceptable to the Custodian). Participant acknowledges that any
distribution (except for distribution on account of participant's disability or
death, return of an "excess contribution" referred to in Code Section 408(d), or
a "rollover" from this custodial account) made earlier than age 59 1/2 may
subject participant to an "additional tax on early distributions" under Code
Section 72(t). For that purpose, participant will be considered disabled if
participant can prove, as provided in Code Section 72(m)(7), that participant is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or be of long-continued and indefinite duration. It is the responsibility
of the participant (or the Beneficiary) by appropriate distribution instructions
to the Custodian to insure that the distribution requirements of Code Section
401(a)(9) and Article IV above are met. If the participant (or Beneficiary) does
not direct the Custodian to make distributions from the custodial account by the
time that such distributions are required to commence in accordance with such
distribution requirements, the Custodian (and Service Company) shall assume that
the Participant (or Beneficiary) is meeting the minimum distribution
requirements from another individual retirement arrangement maintained by the
participant (or Beneficiary) and the Custodian and Service Company shall be
fully protected in so doing. The participant (or the participant's surviving
spouse) may elect to comply with the distribution requirements in Article IV
using the recalculation of life expectancy method, or may elect that the life
expectancy of the Participant (and/or the participant's surviving spouse) will
not be recalculated; any such election may be in such form as the participant
(or surviving spouse) provides (including the calculation of minimum
distribution amounts in accordance with a method that does not provide for
recalculation of the life expectancy of one or both of the participant and
surviving spouse and instructions to the Custodian in accordance with such
method). Neither Custodian nor any other party providing services to the
custodial account assumes any responsibility for the tax treatment of any
distribution from the custodial account; such responsibility rests solely with
the person ordering the distribution.
10. Custodian assumes (and shall have) no responsibility to make any
distribution except upon the written order (or other acceptable form of
instructions) of participant (or Beneficiary if participant is deceased)
containing such information as the Custodian may reasonably request. Also,
before making any distribution or honoring any assignment of the custodial
account, Custodian shall be furnished with any and all applications,
certificates, tax waivers, signature guarantees and other documents (including
proof of any legal representative's authority) deemed necessary or advisable by
Custodian, but Custodian shall not be responsible for complying with an order
which appears on its face to be genuine, or for refusing to comply if not
satisfied it is genuine, and Custodian has no duty of further inquiry. Any
distributions from the account may be mailed, first-class postage prepaid, to
the last known address of the person who is to receive such distribution, as
shown on the Custodian's records, and such distribuion shall to the extent
thereof completely discharge the Custodian's liability for such payment.
11. (a) The term "Beneficiary" means the person or persons designated as
such by the "designating person" (as defined below) on a form
acceptable to the Custodian for use in connection with the custodial
account, signed by the designating person, and filed with the
Custodian. The form may name individuals, trusts, estates, or other
entities as either primary or contingent beneficiaries. However, if
the designation does not effectively dispose of the entire custodial
account as of the time distribution is to commence, the term
"Beneficiary" shall then mean the designating person's estate with
respect to the assets of the custodial account not disposed of by
the designation form. The form last accepted by the Custodian before
such distribution is to commence, provided it was received by the
Custodian (or deposited in the U.S. Mail or with a delivery service)
during the designating person's lifetime, shall be controlling and,
whether or not fully dispositive of the custodial account, thereupon
shall revoke all such forms previously filed by that person. The
term "designating person" means participant during his/her lifetime;
after participant's death, it also means participant's spouse if the
spouse begins to receive a portion of the custodial account
(pursuant to such a designation by participant) under a form of
distribution permitted by Article IV. A designation by participant's
spouse shall relate solely to the balance remaining in the spouse's
portion of the custodial account after the death of the spouse.
13
(b) When and after distributions from the custodial account to
participant's Beneficiary commence, all rights and obligations
assigned to participant hereunder shall inure to, and be enjoyed and
exercised by, Beneficiary instead of participant.
12. (a) The participant agrees to provide information to the Custodian at
such time and in such manner as may be necessary for the Custodian
to prepare any reports required under Section 408(i) of the Code and
the regulations thereunder or otherwise.
(b) The Custodian or the Service Company will submit reports to the
Internal Revenue Service and the participant at such time and manner
and containing such information as is prescribed by the Internal
Revenue Service.
(c) The participant, Custodian and Service Company shall furnish to each
other such information relevant to the custodial account as may be
required under the Code and any regulations issued or forms adopted
by the Treasury Department thereunder or as may otherwise be
necessary for the administration of the custodial account.
(d) The participant shall file any reports to the Internal Revenue
Service which are required of him by law (including Form 5329), and
neither the Custodian nor Service Company shall have any duty to
advise participant concerning or monitor participant's compliance
with such requirement.
13. (a) Participant retains the right to amend this custodial account
document in any respect at any time, effective on a stated date
which shall be at least 60 days after giving written notice of the
amendment (including its exact terms) to Custodian by registered or
certified mail, unless Custodian waives notice as to such amendment.
If the Custodian does not wish to continue serving as such under
this custodial account document as so amended, it may resign in
accordance with Section 17 below.
(b) Participant delegates to the Custodian the participant's right so to
amend, provided the Custodian amends in the same manner all
agreements comparable to this one, having the same Custodian,
permitting comparable investments, and under which such power has
been delegated to it; this includes the power to amend retroactively
if necessary or appropriate in the opinion of the Custodian in order
to conform this custodial account to pertinent provisions of the
Code and other laws or successor provisions of law, or to obtain a
governmental ruling that such requirements are met, to adopt a
prototype or master form of agreement in substitution for this
Agreement, or as otherwise may be advisable in the opinion of the
Custodian. Such an amendment by the Custodian shall be communicated
in writing to participant, and participant shall be deemed to have
consented thereto unless, within 30 days after such communication to
participant is mailed, participant either (i) gives Custodian a
written order for a complete distribution or transfer of the
custodial account, or (ii) removes the Custodian and appoints a
successor under Section 17 below.
Pending the adoption of any amendment necessary or desirable to
conform this custodial account document to the requirements of any
amendment to the Internal Revenue Code or regulations or rulings
thereunder, the Custodian and the Service Company may operate the
participant's custodial account in accordance with such requirements
to the extent that the Custodian and/or the Service Company deem
necessary to preserve the tax benefits of the account.
(c) Notwithstanding the provisions of subsections(a) and (b) above, no
amendment shall increase the responsibilities or duties of Custodian
without its prior written consent.
(d) This Section 13 shall not be construed to restrict the Custodian's
right to substitute fee schedules in the manner provided by Section
16 below, and no such substitution shall be deemed to be an
amendment of this Agreement.
14. (a) Custodian shall terminate the custodial account if this
Agreement is terminated or if, within 30 days (or such longer time
as Custodian may agree) after resignation or removal of Custodian
under Section 17, Participant has not appointed a successor which
has accepted such appointment. Termination of the custodial account
shall be effected by distributing all assets thereof in a single
payment in cash or in kind to participant, subject to Custodian's
right to reserve funds as provided in Section 17.
(b) Upon termination of the custodial account, this custodial account
document shall have no further force and effect, and Custodian shall
be relieved from all further liability hereunder or with respect to
the custodial account and all assets thereof so distributed.
15. (a) In its discretion, the Custodian may appoint one or more
contractors or service providers to carry out any of its functions
and may compensate them from the custodial account for expenses
attendant to those functions.
(b) The Service Company shall be responsible for receiving all
instructions, notices, forms and remittances from participant and
for dealing with or forwarding the same to the transfer agent for
the Fund(s).
(c) The parties do not intend to confer any fiduciary duties on
Custodian or Service Company (or any other party providing services
to the custodial account), and none shall be implied. Neither shall
be liable (or assumes any responsibility) for the collection of
contributions, the proper amount, time or deductibility of any
contribution to the custodial account or the propriety of any
contributions under this Agreement, or the purpose, time, amount
(including any minimum distribution amounts) or propriety of any
distribution hereunder, which matters are the responsibility of
participant and participant's Beneficiary.
(d) Not later than 60 days after the close of each calendar year (or
after the Custodian's resignation or removal), or such shorter time
as may be required under applicable regulations or rulings, the
Custodian and Service Company shall each file with participant a
written report or reports reflecting the transactions effected by it
during such period and the assets of the custodial account at its
close. Upon the expiration of 60 days after such a report is sent to
participant (or Beneficiary), the Custodian and Service Company
shall be forever released and discharged from all liability and
accountability to anyone with respect to transactions shown in or
reflected by such report except with respect to any such acts or
transactions as to which Participant shall have filed written
objections with the Custodian or Service Company within such 60 day
period.
(e) The Service Company shall deliver, or cause to be delivered, to
participant all notices, prospectuses, financial statements and
other reports to shareholders, proxies and proxy soliciting
materials relating to the shares of the Funds(s) credited to the
custodial account. No shares shall be voted, and no other action
shall be taken pursuant to such documents, except upon receipt of
adequate written instructions from Participant.
14
(f) Participant shall always fully indemnify Service Company,
Distributor, the Fund(s) and Custodian and save them harmless from
any and all liability whatsoever which may arise either (i) in
connection with this Agreement and the matters which it
contemplates, except that which arises directly out of the Service
Company's, Distributor's or Custodian's negligence or willful
misconduct, or (ii) with respect to making or failing to make any
distribution, other than for failure to make distribution in
accordance with an order therefor which is in full compliance with
Section 10. Neither Service Company nor Custodian shall be obligated
or expected to commence or defend any legal action or proceeding in
connection with this Agreement or such matters unless agreed upon by
that party and participant, and unless fully indemnified for so
doing to that party's satisfaction.
(g) The Custodian and Service Company shall each be responsible solely
for performance of those duties expressly assigned to it in this
Agreement, and neither assumes any responsibility as to duties
assigned to anyone else hereunder or by operation of law.
(h) Custodian and Service Company may each conclusively rely upon and
shall be protected in acting upon any written order from participant
or Beneficiary, or any investment advisor appointed under Section 8,
or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed, and so long as it acts in good faith, in taking
or omitting to take any other action in reliance thereon. In
addition, Custodian will carry out the requirements of any
apparently valid court order relating to the custodial account and
will incur no liability or responsibility for so doing.
16. (a) The Custodian, in consideration of its services under this
Agreement, shall receive the fees specified on the applicable fee
schedule. The fee schedule originally applicable shall be the one
specified in the Disclosure Statement furnished to the participant.
The Custodian may substitute a different fee schedule at any time
upon 30 days' written notice to participant. The Custodian shall
also receive reasonable fees for any services not contemplated by
any applicable fee schedule and either deemed by it to be necessary
or desirable or requested by participant.
(b) Any income, gift, estate and inheritance taxes and other taxes of
any kind whatsoever, including transfer taxes incurred in connection
with the investment or reinvestment of the assets of the custodial
account, that may be levied or assessed in respect to such assets,
and all other administrative expenses incurred by the Custodian in
the performance of its duties (including fees for legal services
rendered to it in connection with the custodial account) shall be
charged to the custodial account.
(c) All such fees and taxes and other administrative expenses charged to
the custodial account shall be collected either from the amount of
any contribution or distribution to or from the account, or (at the
option of the person entitled to collect such amounts) to the extent
possible under the circumstances by the conversion into cash of
sufficient shares of one or more Funds held in the custodial account
(without liability for any loss incurred thereby). Notwithstanding
the foregoing, the Custodian or Service Company may make demand upon
the Participant for payment of the amount of such fees, taxes and
other administrative expenses. Fees which remain outstanding after
60 days may be subject to a collection charge.
17. (a) Upon 30 days' prior written notice to the Custodian, participant
may remove it from its office hereunder. Such notice, to be
effective, shall designate a successor custodian and shall be
accompanied by the successor's written acceptance. The Custodian
also may at any time resign upon 30 days' prior written notice to
participant, whereupon the participant shall appoint a successor to
the Custodian (provided that, in connection with its resignation,
the Custodian may designate a successor custodian and so notify the
participant, and participant will be deemed to have consented
thereto unless, within 30 days after the date of such notice, the
participant establishes another individual retirement account and
transfers the amount in his account hereunder to such other
individual retirement account).
(b) The successor custodian shall be a bank, insured credit union, or
other person satisfactory to the Secretary of the Treasury under
Code Section 408(a)(2). Upon receipt by Custodian of written
acceptance by its successor of such successor's appointment,
Custodian shall transfer and pay over to such successor the assets
of the custodial account and all records (or copies thereof) of
Custodian pertaining thereto, provided that the successor custodian
agrees not to dispose of any such records without the Custodian's
consent. Custodian is authorized, however, to reserve such sum of
money or property as it may deem advisable for payment of all its
fees, compensation, costs, and expenses, or for payment of any other
liabilities constituting a charge on or against the assets of the
custodial account or on or against the Custodian, with any balance
of such reserve remaining after the payment of all such items to be
paid over to the successor custodian.
(c) Any Custodian shall not be liable for the acts or omissions of its
predecessor or its successor.
18. References herein to the "Internal Revenue Code" or "Code" and sections
thereof shall mean the same as amended from time to time, including successors
to such sections.
19. Except where otherwise specifically required in this Agreement, any
notice from Custodian to any person provided for in this Agreement shall be
effective if sent by first-class mail to such person at that person's last
address on the Custodian's records.
20. Participant or Participant's Beneficiary shall not have the right or
power to anticipate any part of the custodial account or to sell, assign,
transfer, pledge or hypothecate any part thereof. The custodial account shall
not be liable for the debts of participant or participant's Beneficiary or
subject to any seizure, attachment, execution or other legal process in respect
thereof. At no time shall it be possible for any part of the assets of the
custodial account to be used for or diverted to purposes other than for the
exclusive benefit of the participant or his/her Beneficiary.
21. When accepted by the Custodian, this agreement is accepted in and shall
be construed and administered in accordance with the laws of the Commonwealth of
Massachusetts. Any action involving the Custodian brought by any other party
must be brought in a state or federal court in such Commonwealth.
This Agreement is intended to qualify under Code Section 408(a) as an
individual retirement custodial account and to meet the applicable requirements
of Code Section 408(p), and if any provision hereof is subject to more than one
interpretation or any term used herein is subject to more than one construction,
such ambiguity shall be resolved in favor of that interpretation or construction
which is consistent with that intent.
However, Custodian shall not be responsible for whether or not such
intentions are achieved through use of this Agreement, and Participant is
referred to participant's attorney for any such assurances.
22. Participant should seek advice from participant's attorney regarding the
legal consequences (including but not limited to federal and state tax matters)
of entering
15
into this Agreement, contributions to the custodial account, and ordering
Custodian to make distributions from the account. Participant acknowledges that
Custodian and Service Company (and any company associated therewith) are
prohibited by law from rendering such advice.
23. Articles I through VII of this Agreement are in the form promulgated by
the Internal Revenue Service as Form 5305-SA. It is anticipated that if and when
the Internal Revenue Service promulgates changes to Form 5305-SA, the Custodian
will amend this Agreement correspondingly.
24. The participant acknowledges that he or she has received and read the
current prospectus for each Fund in which his or her account is invested and the
Individual Retirement Account Disclosure Statement related to the Account. The
participant represents under penalties of perjury that his or her Social
Security number (or other Taxpayer Identification Number) as stated in the
Adoption Agreement is correct.
25. (a) At the direction of the participant, the Custodian will transfer
contributions to the participant's custodial account to another individual
retirement account designated by the participant, the custodian or trustee of
which agrees to accept such transfer, or to an individual retirement annuity
contract, the issuer of which agrees to accept such transfer. If such transfer
is made within two years after the date of the first contribution by the
employer to the participant's SIMPLE IRA account under the employer's SIMPLE IRA
plan, the Custodian will have the right to a representation from the successor
custodian or trustee that the successor IRA is a SIMPLE IRA if required under
applicable law.
If the participant's SIMPLE IRA account operates under an employer SIMPLE
IRA plan that uses the "designated financial institution" rules of Code Section
408(p), the rules in this paragraph will apply. Any transfer instructions by the
participant must be filed with and received by the Custodian during the
following 60-day period. For contributions for the calendar year in which the
employer first establishes its SIMPLE IRA plan, the 60-day period designated by
the employer during which eligible employees (including the participant) may
make salary reduction elections with respect to such calendar year; for
contributions for subsequent calendar years, the period November 2 through
December 31 of the preceding year. Such instructions may be limited to
contributions to the participant's SIMPLE IRA account of the calendar year, or
may be effective with respect to all future contributions to the participant's
SIMPLE IRA account until revoked. Contributions to the electing participant's
SIMPLE IRA account will be transferred to the other IRA specified by the
participant with reasonable frequency (but not less frequently than monthly).
Pending transfer to the other IRA, contributions will be held in the investment
fund specified in the Adoption Agreement for the participant's SIMPLE IRA
account. Any such transfer will be made without cost of penalty to the
participant imposed by the Custodian (other than any annual maintenance fee
charged to all SIMPLE IRA accounts maintained by the Custodian, and any other
fee or costs specifically allowed under regulations or rulings of the Internal
Revenue Service.)
Transfers from the participant's SIMPLE IRA account that are not described
in the preceding paragraphs (including situations where the participant's SIMPLE
IRA operates under an employer SIMPLE IRA plan that does not use the "designated
financial institution" rules) will be made to a successor individual retirement
account or annuity designated by the participant in a written transfer of IRA
assets form or other acceptable written instructions to the Custodian. Any such
other transfer will be subject to normal Custodian fees (including any transfer
or account termination fee) and to normal redemption charges or other fees or
charges imposed by a Fund as described in its then effective prospectus.
The Custodian, the Service Company, the Distributor and the Fund(s) will
have no responsibility for compliance with the requirements of Code Section
408(p) and any other applicable requirements (including whether such transferee
individual retirement account or annuity meets the requirements to be a SIMPLE
IRA or whether the transferee financial institution properly carries out the
participant's investment directions) in connection with such transfer have been
satisfied, or for any penalty taxes that may be payable in connection therewith,
which matters shall be the sole responsibility of the Participant.
(b) This Agreement is intended to establish a valid SIMPLE individual
retirement account operating in conjunction with a SIMPLE IRA plan operated by
the participant's employer, and to meet all applicable requirements of Code
Section 408(p) (and other applicable legal requirements for SIMPLE IRAs). This
Agreement will be interpreted and the custodial account hereunder administered
in a manner that carries out such intent. In addition, if future regulations or
rulings provide guidance concerning the requirements for a valid SIMPLE IRA,
this Agreement will be interpreted and the custodial account hereunder will be
administered in a manner that complies with such regulations or rulings pending
the adoption of any required amendment to this Agreement.
16
Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
==================
INSTRUCTIONS
==================
--------------------------------------------------------------------------------
EMPLOYER INSTRUCTIONS FOR ESTABLISHING A XXXXX/EUCLID SIMPLE IRA PLAN
--------------------------------------------------------------------------------
o Read carefully the enclosed materials about SIMPLE IRA plans, including the
Form 5304-SIMPLE used to establish your SIMPLE IRA plan and the instructions
and information included with the form. Establishing a SIMPLE IRA plan
involves certain legal and financial obligations for the employer. Consult
your lawyer or other tax advisor if you have any questions about the nature
of these obligations or about how maintaining a SIMPLE IRA plan will affect
your business or your tax situation.
o Complete pages 1 and 2 of the Form 5304-SIMPLE ( at the back of this
brochure) to select eligibility provisions for your SIMPLE IRA plan. The
instructions for the Form explain your options concerning eligibility and
contributions.
Article VI of the Form requires that you provide each employee with information
about the procedures for withdrawals of contributions received by the financial
institution that he or she has selected, and the financial institution's name
and address. However, this is not required if the financial institution's
procedures are not available, or if the financial institution provides the
procedures directly to the employee. Normally, the financial institution will
give in-formation directly to the employee about its withdrawal procedures.
Designate the effective date and complete the signature block in Article VII of
the Form. For SIMPLE IRA plans started during 1997, the effective date cannot be
earlier than the date you sign the completed Form 5304-SIMPLE. Also for 1997 you
must start your SIMPLE IRA plan no later than October 1, otherwise you must wait
until 1998. For 1998 and later years, you may start a new SIMPLE IRA plan
effective on any date from January 1 to October 1.
NOTE: If you want to change any of your selections, you must complete and sign a
new Form 5304-SIMPLE and designate the effective date of the changed form. After
you have started a SIMPLE IRA plan, the new Form 5304-SIMPLE containing the
changes must be effective as of January 1.
BE SURE to send a copy of the completed form to State Street Bank and Trust
Company at the address given on the next page.
Part of the process for establishing a SIMPLE IRA plan involves giving all
eligible employees a notice. Complete the model Notification to Eligible
Employees with the correct information for your plan (from your completed Form
5304-SIMPLE). Distribute a copy of the completed notice to each eligible
employee. Generally (except for new SIMPLE IRA plans) the notice must be
distributed at least 60 days before the start of the calendar year.
In addition to the notice, you must give each eligible employee a summary
description of the plan. To do so, photo-copy the first two pages of the
completed and signed Form 5304-SIMPLE; attach these two pages to the back of the
document entitled "FOR EMPLOYEES -- YOUR SIMPLE IRA" to make a summary
description. Make enough copies of the summary description to give a copy to
each eligible employee along with the Notification to Eligible Employees.
You must repeat this process each year by distributing a notice and summary
description to each eligible employee at least 60 days before the start of a
calendar year.
o Each eligible employee who wishes to make salary reduction contributions to
his or her SIMPLE IRA should complete a Salary Reduction Agreement. This
form indicates how much the employee wants to contribute out of his or her
pay to his or her SIMPLE IRA account. Use the Model Salary Reduction
Agreement for Eligible Employees included in the materials for this purpose.
o Each eligible employee who elects to participate must also complete the
Adoption Agreement and the Designation of Beneficiary Form to establish a
Xxxxx or Euclid Mutual Fund SIMPLE Individual Retirement Custodial Account,
or the appropriate adoption, beneficiary and/or other forms for the SIMPLE
IRA of his/her choice. If an eligible employee establishes a SIMPLE IRA with
another financial institution, the employee will have to give you the
necessary information so that you can send contributions on the employee's
behalf to the trustee, custodian or other issuer of the employee's IRA along
with any identifying account information needed in order for contributions
to be properly credited to the employee's account.
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17
Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
==================
INSTRUCTIONS
(page 2)
==================
--------------------------------------------------------------------------------
If you will make nonmatching employer contributions under the SIMPLE IRA plan,
an Individual Retirement Ac-count must be established by each eligible employee,
even those who do not choose to make salary reduction contributions. If the
employee does not complete the necessary paperwork, you are entitled to complete
the forms to open a SIMPLE IRA for the employee.
o As employer, you have certain important responsibilities relating to the
operation of your SIMPLE IRA plan. These include the following:
a) Determining whether you meet the requirements to be an eligible employer
to make contributions to a SIMPLE IRA plan for any particular calendar year.
b) Determining which employees are eligible employees to participate in your
SIMPLE IRA plan for any calendar year and insuring that all required
notices, summary descriptions and other information are provided to such
eligible employees within the time frames provided under the SIMPLE IRA plan
rules.
c) Determining that salary reduction contributions by eligible employees are
within all limitations applicable to such contributions, transferring such
contributions to each participant's SIMPLE IRA within the time limits
provided by law, and determining and making employer contributions in the
amounts and by the times required by applicable legal rules.
d) Properly reporting salary reduction contributions by eligible employees
to the IRS on Form W-2.
These requirements (and other responsibilities of the employer) are described in
more detail in the document entitled "For Employers -- SIMPLE Answers to Small
Business Retirement Plan Needs" and in IRS Form 5304-SIMPLE
and its accompanying instructions.
By establishing a SIMPLE IRA plan and executing the Form 5304-SIMPLE or other
document for your SIMPLE IRA plan, you, the employer, agree to indemnify and
hold harmless State Street Bank and Trust Company as custodian from and against
any losses, costs or liabilities arising out of your failure to carry out your
responsibilities as employer or otherwise arising out of the operation of your
SIMPLE IRA plan, except for losses, costs or liabilities arising directly out of
the negligence or willful misconduct of State Street Bank and Trust Company.
Check to be sure that all forms have been
properly completed. Send completed forms to:
Xxxxx/Euclid Mutual Funds
c/o State Street Bank and Trust Company
P.O. Box 8505
Boston, MA 02266-8505
If by courier send to:
Xxxxx/Euclid Mutual Funds
c/o State Street Bank and Trust Company
0 Xxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
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18
Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
======================
FOR EMPLOYERS ONLY
======================
--------------------------------------------------------------------------------
SIMPLE ANSWERS TO SMALL BUSINESS RETIREMENT PLAN NEEDS
--------------------------------------------------------------------------------
Saving for retirement -- it's not easy, but we all need to take it seriously.
For small business owners, taking on a retirement plan can be costly and
time-consuming. That is why there is tremendous interest in a new kind of
retirement plan, the SIMPLE IRA, designed for small businesses.
The following will answer your questions about SIMPLE IRAs and help you decide
whether a Xxxxx Mutual Fund SIMPLE IRA is right for your business.
What is a SIMPLE?
A SIMPLE IRA is basically an employer plan and a series of individual retirement
accounts to receive contributions by or for employees.
The employer plan part of the SIMPLE IRA is set up by your completing and
signing a short IRS form (Form 5304-SIMPLE). We have arranged with State Street
Bank and Trust Company of Boston, MA to provide certain services for your SIMPLE
plan, including acting as custodian of the SIMPLE IRA for employees who choose
to open their SIMPLE IRAs through Xxxxx or Euclid Mutual Funds.
SIMPLE IRA plans operate on the calendar year. This means that eligibility and
contribution limits are applied on a calendar year basis (these requirements are
described below).
The employee SIMPLE IRAs are very much like any other IRAs, except with higher
contribution limits. The employee SIMPLE IRAs can be established using the
Xxxxx/Euclid Mutual Fund's SIMPLE IRA materials. Alternatively, employees must
be allowed to open a SIMPLE IRA with a different financial institution, in which
case the employee will complete the material for the SIMPLE IRA that the
employee chooses.
Which employers may have SIMPLE IRA plans?
SIMPLE IRA plans are only for small employers. This is defined as an employer
with 100 or fewer employees in the previous calendar year who had $5,000 or more
in total pay from the employer. Related employers are grouped together when
testing whether the 100 employee limit is satisfied. All employees must be
counted against this limit, even employees that are not eligible to participate
in the employer's SIMPLE IRA plan. Also, certain "leased employees" (these are
employees of another business who provide services to the employer) must be
treated as employees of the employer for SIMPLE IRA plan purposes.
If you go over the 100 employee limit, you may continue to operate your SIMPLE
IRA plan for two years. After that, you must discontinue SIMPLE IRA plan
contributions unless you go back below the 100 employee level.
An employer may have a SIMPLE IRA plan only if it has no other retirement plan
at any time when the SIMPLE IRA plan is in operation. "Retirement plans" for
this purpose include profit sharing, 401(k), retirement and other kinds of plans
that receive special tax benefits.
Which employees participate in the SIMPLE IRA?
Generally speaking, all of the employer's employees must participate in the
SIMPLE IRA plan. If related employers are grouped together when deciding whether
the employers are eligible to have a SIMPLE IRA plan (see above), then all
employees of all the related employers must participate. However, you may
exclude:
o an employee who did not receive at least $5,000 in pay from you in at least
two prior calendar years (not necessarily consecutive);
o an employee who is not reasonably expected to receive at least $5,000 in pay
from you for the current calendar year;
o union employees, provided that there was good faith bargaining over the
issue of retirement benefits;
o employees who are non-resident aliens and receive no U.S. source income.
The Form 5304-SIMPLE has places to indicate whether these groups of employees
will be included or excluded from your SIMPLE IRA plan.
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19
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How do contributions to the SIMPLE IRA work?
Two kinds of contributions are permitted: a) employee contributions
and b) employer contributions, which may be either matching or non-matching
contributions.
Employee Contributions: Each eligible employee may elect to have a percentage of
his/her pay contributed by the employer to the employee's IRA, as long as the
amount does not exceed $6,000 for a calendar year. The $6,000 limit is indexed
for future cost-of-living increases.
Eligible employees elect the desired percentage of pay to contribute on a salary
reduction agreement. A model agreement is included with your SIMPLE IRA plan
materials. Salary reductions may be made only from pay the employee earns after
signing the salary reduction agreement.
Employee salary reduction contributions must be transferred to the trustee,
custodian or other issuer of each participating employee's IRA as soon as you
can reasonably do so. The outside deadline is the 30th day of the month
following the month when the employee would have received the pay amount except
for the salary reduction. However, if you can transfer the amount to the
participant's IRA earlier, you must do so under Department of Labor rules.
Employer Contributions: One of the big benefits of a SIMPLE IRA plan is that
you, the employer, have a great deal of flexibility on contributions to the
SIMPLE IRA plan.
First, you may make matching contributions, so that only employees who actually
participate by contributing from their own pay receive an employer contribution.
With a SIMPLE IRA plan, there are no high-low tests as there are with 401(k)
plans or salary reduction SEP plans, so the fact that low paid employees decide
not to participate does not limit savings and matching opportunities for other
employees.
Alternatively, you may make a non-matching contribution for each employee who
meets your plan's eligibility requirements, whether the employee is contributing
from his/her own pay or not.
Matching Contributions: If you choose matching contributions, you must
contribute $1 for each $1 the employee contributes, up to a cap of 3% of the
employee's pay for the calendar year.
You may elect a lower percentage (not lower than 1% of pay) for the cap, but
only in two years out of any five-year period. In other words, if you have
already elected a lower cap in two years out of the five years ending with the
current calendar year, the matching contribution cap for the current year must
be 3% of pay. If you have used a lower cap in only one year or in no years in
the five years ending with the current year, you may elect a lower cap for the
current calendar year. However, employees must be notified of the lower cap
before the start of the year (see "What do I have to tell employees about the
plan?" below).
Non-matching Contributions: Instead of matching contributions, you may make a
non-matching contribution for each employee who meets your plan's eligibility
requirements and who actually receives at least $5,000 in pay for the calendar
year. The non-matching contribution must be 2% of each eligible employee's pay
for the year. For this purpose only, pay is subject to an IRS limit. The limit
is $160,000 for 1997; this amount is indexed for future cost-of-living changes.
If you want to use the non-matching contributions approach, you must notify
eligible employees before the start of the year) see "What do I have to tell
employees about the plan?" below).
Employer matching or non-matching contributions for an employee must be
transferred to the employee's SIMPLE IRA no later than the due date (including
any extensions) for filing the employer's federal income tax return for the
year.
How are Contributions to SIMPLE IRAs Invested?
As part of the enrollment process, each eligible employee establishes a SIMPLE
IRA using the Xxxxx/Euclid Mutual Funds SIMPLE IRA materials, or the material
provided by the SIMPLE IRA vendor of the employee's choosing. Contributions on
behalf of each employee participating in the SIMPLE IRA plan are added to
his/her SIMPLE IRA.
If the employee has chosen to open a Xxxxx/Euclid Mutual Funds SIMPLE IRA,
contributions are invested in the Xxxxx/Euclid Mutual Funds available for SIMPLE
IRA investments. If the employee has opened his/her SIMPLE IRA through another
financial institution, contributions will be invested in the investment options
available to that SIMPLE IRA. Investment options available through any SIMPLE
IRA are described in the materials given to each employee upon opening his/her
IRA.
For Xxxxx/Euclid Mutual Funds SIMPLE IRAs, the prospectus for each fund gives
important information about its investment objectives and policies and the sales
charges or other expenses. Employees should read the fund's prospectus, as well
as the other information about the Xxxxx/Euclid Mutual Fund's IRA, before
investing. These materials also give the information about procedures for
exchanging from one fund to another. Each employee is responsible for deciding
how to in-vest contributions to his/her IRA from among the available funds.
One advantage of a SIMPLE IRA plan is that interest, divi-
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20
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dends, and other earnings on mutual fund shares held in an employee's SIMPLE IRA
compound without federal income tax. This can mean greater returns than with a
taxable investment earning the same, even after income taxes on withdrawals are
paid.
Of course, with mutual funds and most other investments there is the possibility
of fluctuation in rate of return or in the value of underlying assets.
Therefore, no particular rate of return can be predicted or guaranteed.
Can employees transfer to another IRA or withdraw amounts in their SIMPLE IRA?
Yes, under the SIMPLE IRA rules an employee may elect to transfer to another IRA
account. For two years after the first contribution to his/ her SIMPLE IRA under
the SIMPLE IRA plan, the employee may transfer only to another SIMPLE IRA. After
this two year period, the employee may transfer to another SIMPLE IRA or to a
regular IRA.
In order to transfer, the employee must set up a SIMPLE IRA (or, after two
years, a regular IRA) with the desired IRA sponsor, and notify the existing
trustee or custodian in writing of the employee's election.
Normal fees and charges (including any redemption charges, contingent deferred
sales charges or loads charged by a mutual fund investment, as described in its
prospectus, or custodian account termination fees) may be charged.
Employees may withdraw amounts from their SIMPLE IRAs at any time. Withdrawals
are discussed in the disclosure statement distributed with the Xxxxx/Euclid
Mutual Funds SIMPLE IRA materials given to each employee. If the employee chose
to establish a SIMPLE IRA with a different financial institution, the withdrawal
rules should be summarized in the materials distributed by that financial
institution.
There is one important difference between SIMPLE IRAs and regular IRAs.
Withdrawals from any IRA before age 59 1/2 are subject to a penalty tax in
addition to regular income taxes unless an exception to the penalty applies. For
withdrawals from a SIMPLE IRA during the first two years after the employee
started participating in the employer's SIMPLE plan, the penalty is 25% of the
amount withdrawn rather than the normal penalty of 10%.
What do I have to tell employees about the plan?
Each year that you operate a SIMPLE IRA plan, you must give all eligible
employees a) a notice of the plan's terms and b) the opportunity to choose to
make salary reduction contributions. The notice must state which contribution
option the employer is choosing for the calendar year, including if you choose
matching contributions the percent-age of pay cap for that calendar year (3% of
pay as the cap or, if allowed a lower percentage). The notice also must inform
eligible employees that they are required to select and open a SIMPLE IRA with
the financial institution of their choice, or else the employer will establish a
SIMPLE IRA for them. The notice must be given at least 60 days before the start
of the calendar year (in other words, on or before November 2 preceding the
start of the year). At the same time, you must give each eligible employee a
copy of a summary description of the SIMPLE plan. This is done by giving each
eligible employee a copy of the short pamphlet entitled "For Employees -- Your
SIMPLE IRA" to which is attached a photocopy of pages one and two of the Form
5304-SIMPLE as completed by you to establish your SIMPLE plan.
Failure to meet these notice requirements makes you liable for a penalty of $50
per day for each day during which the failure continues. The IRS can waive the
penalty if you can demonstrate that the failure was due to reasonable cause.
What are the advantages of a SIMPLE IRA for a small business?
SIMPLE IRA plans were designed to be easy for small employers to operate. The
Xxxxx/Euclid Mutual Funds SIMPLE IRA package contains all the forms and material
you will need to start your SIMPLE IRA plan.
There are no complex IRS tests or rules that you must follow when operating your
SIMPLE IRA plan. For example, the high-low tests normally applicable to salary
reduction contributions by employees in a 401(k) plan or salary reduction SEP do
not apply. Also, the top-heavy plan rules do not apply.
Since contributions are held in SIMPLE IRAs established by the participating
employees, there is no Form 5500 Annual Report to file. All that you, the
employer, must do is indicate on the employee's Form W-2 whether the employee
was a participant in your SIMPLE IRA plan during the year and the amount of the
employee's salary reduction contributions for the year.
How do I set up a SIMPLE IRA?
In general, to set up a SIMPLE IRA plan, merely follow the sheet of "Employer
Instructions for Establishing a SIMPLE IRA Plan" included in your Xxxxx/Euclid
Mutual Funds SIMPLE IRA materials.
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21
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You may choose the effective date for your new SIMPLE IRA plan, which may be any
day up to October 1.
The SIMPLE IRA plan must be in effect the first date on which a contribution is
deposited into an employee's IRA.
Usually the notice to eligible employees about the SIMPLE IRA plan must be given
by November 2 of the preceding calendar year. However, for the first year in
which the employer establishes its SIMPLE IRA plan, the 60 day period may be any
60 days as long as the effective date of the SIMPLE IRA plan or the day before
that is included. For example, if you establish a SIMPLE IRA plan effective July
1, 1997, the 60 day period must include either June 30 or July 1, 1997, and you
must give the eligible employees their notices in advance of the start of the 60
day period.
Where Can I Get Additional Information?
Please read the instructions to Form 5304-SIMPLE for more information. Also, the
IRS has issued some questions and answers in Notice 97-6 (available by
contacting the IRS). For answers to specific questions about a SIMPLE IRA plan
for your business, consult your professional tax adviser or the IRS.
For answers to general questions about SIMPLE IRA plans, please call:
Xxxxx/Euclid Mutual Funds
Shareholder Servicing Department at
0-000-000-0000.
Note: The information in this pamphlet reflects the best in-formation available
at the time of preparation. How-ever, SIMPLE IRA plans are governed by new
provisions of the Internal Revenue Code and the IRS has not issued
regulations on SIMPLE IRA plans or answered many of the questions about
SIMPLE IRA plans. Consult your professional tax adviser or the IRS on any
questions you have about a SIMPLE IRA plan or about the most recent IRS
developments.
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22
Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
============================
EMPLOYER MODEL
NOTIFICATION TO ELIGIBLE
EMPLOYEES
============================
--------------------------------------------------------------------------------
Opportunity to Participate in the SIMPLE Plan
You are eligible to make salary reduction contributions to the
__________________________ SIMPLE plan. This notice and the attached summary
description provide you with information that you should consider before you
decide whether to start, continue, or change your salary reduction agree-ment.
Employer Contribution Election
For the _________ calendar year, the employer elects to contribute to your
SIMPLE IRA (employer must select either (1), (2), or (3)):
(1) A matching contribution equal to your salary reduction contributions up
to a limit of 3% of your compensation for the year;
(2) A matching contribution equal to your salary reduction contributions up
to a limit of _____% (employer must insert a number from 1 to 3 and is
subject to certain restrictions) of your compensation for the year; or
(3) A nonelective contribution equal to 2% of your compensation for the year
(limited to $160,000*) if you are an employee who makes at least
$_____________ (employer must insert an amount that is $5,000 or less) in
compensation for the year.
Administrative Procedures
If you decide to start or change your salary reduction agreement, you must
complete the salary reduction agreement and return it to
___________________________________ (employer should designate a place or
individual) by _________________________ (employer should insert a date that is
not less than 60 days after notice is given).
Employee Selection of Financial Institution
You must select the financial institution that will serve as the trustee,
custodian, or issuer of your SIMPLE IRA and notify your employer of your
selection.
* This amount will be adjusted to reflect any annual cost-of-living increases
announced by the IRS.
NOTE: The preceding Employer Model Notification to Eligible Employees uses the
form promulgated by the Internal Revenue Ser-vice in Form 5304-SIMPLE.
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23
Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
============================
EMPLOYER MODEL
SALARY REDUCTION
AGREEMENT FOR ELIGIBLE
EMPLOYEES
============================
--------------------------------------------------------------------------------
Salary Reduction Election
Subject to the requirements of the SIMPLE plan of ________________________ (name
of employer), I authorize _____% or $ __________________ (which equals _____% of
my current rate of pay) to be withheld from my pay for each pay period and
contributed to my SIMPLE IRA as a salary reduction contribution.
Maximum Salary Reduction
I understand that the total amount of my salary contributions in any calendar
year cannot exceed $6,000.*
Date Salary Reduction Begins
I understand that my salary reduction contributions will start as soon as
permitted under the SIMPLE plan and as soon as administratively feasible or, if
later, ____________________. (Fill in the date you want the salary reduction
contributions to begin. The date must be after you sign this agreement.)
Employee Selection of Financial Institution
I select the following financial institution to serve as the trustee, custodian,
or issuer of my SIMPLE IRA.
_________________________________________________________
Name of financial institution
_________________________________________________________
Address of financial institution
_________________________________________________________
SIMPLE IRA account name and number
I understand that I must establish a SIMPLE IRA to receive any contributions
made on my behalf under this SIMPLE plan. If the information regarding my
SIMPLE IRA is incomplete when I first submit my salary reduction agreement,
I realize that it must be completed by the date contributions must be made
under the SIMPLE plan. If I fail to update my agreement to provide this
information by that date, I understand that my employer may select a
financial institution for my SIMPLE IRA.
Duration of Election
This salary reduction agreement replaces any earlier agreement and will remain
in effect as long as I remain an eligible employee under the SIMPLE plan or
until I pro-vide my employer with a request to end my salary reduction
contributions or provide a new salary reduction agreement as permitted under
this SIMPLE plan.
Signature of employee _________________________________
Date _________________________________
* This amount will be adjusted to reflect any annual cost-of-living increases
announced by the IRS.
NOTE: The preceding Employer Model Salary Reduction Agreement uses the form
promulgated by the Internal Revenue Service in Form 5304-SIMPLE.
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Xxxxx EUCLID
Mutual Funds MUTUAL FUNDS
======================
-FOR EMPLOYEES-
YOUR SIMPLE IRA
======================
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A SUMMARY DESCRIPTION OF YOUR EMPLOYER'S SIMPLE IRA PLAN
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Your employer offers you a Savings Incentive Match Plan for Employees (SIMPLE)
as a tax-favored method of saving for your retirement. Under the SIMPLE Plan,
your employer will make certain contributions, which may be either matching
contributions (matching your own savings under the Plan up to a limit) or
non-matching, mandatory contributions. Savings contributions by you, plus
employer contributions on your be-half, are added to an individual retirement
account established in your name for purposes of the SIMPLE Plan.
The following information is a notification of your plan participation options
and a description of the SIMPLE plan. This notification is in two parts. The
first part consists of several pages of information about SIMPLE plans and the
related SIMPLE IRAs. The last two pages consist of a copy of the IRS Form
5304-SIMPLE as completed by your employer to choose certain optional provisions
for the employer's SIMPLE Plan. This form is provided to you in order to
indicate the particular provisions that apply to your employer's plan.
Which Employers May Establish and Maintain a SIMPLE Plan?
To establish and maintain a SIMPLE plan for a particular calendar year, an
employer must meet both of the following requirements:
1. In the preceding calendar year, the employer had no more than 100 employees
(including self-employed individuals) who earned $5,000 or more in
compensation from the employer during the year. If the employer has a SIMPLE
plan but later exceeds this 100-employee limit, the employer will be treated
as meeting the limit for the two calendar years following the calendar year
in which the employer last satisfied the limit. If the failure to continue
to satisfy the 100-employee limit is due to an acquisition or similar
transaction involving the business, special rules apply.
2. The employer does not maintain during any part of the calendar year another
qualified plan with respect to which contributions are made, or benefits are
accrued, for service in the calendar year. For this purpose, a qualified
plan includes a qualified 401(k) plan, a pension plan, a profit-sharing
plan, a stock bonus plan, a qualified annuity plan, a tax-sheltered annuity
plan, and a simplified employee pension (SEP) plan.
Certain related employers (trades or businesses under common control) must be
treated as a single employer for purposes of the SIMPLE requirements. In
addition, certain leased employees are required to be treated as employees of
the business and must be counted for the requirements listed above.
What is a SIMPLE Plan?
A SIMPLE plan is a written arrangement that provides employers with a simplified
way to make contributions to provide retirement income for their employees.
Under a SIMPLE plan, employees may choose whether to make salary reduction
contributions to the SIMPLE plan rather than receiving these amounts as part of
their regular compensation. In addition, your employer will contribute matching
or non-matching contributions on behalf of eligible employees (see Employee
Eligibility Requirements and Contributions below ). All contributions under this
plan will be deposited into a SIMPLE individual retirement account established
by each eligible employee with a financial institution selected by the employee.
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Employee Eligibility Requirements (Article I)
Each year for which this SIMPLE plan is effective, your employer must permit
salary reduction contributions to be made by all employees who are reasonably
expected to receive at least $5,000 in compensation during the year, and who
received at least $5,000 in compensation in any 2 preceding years. Your employer
can expand the group of employees who are eligible to participate in this SIMPLE
Plan to include some or all of those earning under $5,000. In addition, your
employer may elect to exclude union employees if there was collective bargaining
over retirement benefits between the employer and the union representing the
employees. To determine which eligibility options your employer has chosen,
consult Article I of the attached Form 5304-SIMPLE.
Salary Reduction Agreements (Article II)
A salary reduction agreement permits you to make a salary reduction election to
have your compensation for each pay period reduced by a percentage (expressed as
a percentage or dollar amount). The total amount of the reduction in your
compensation cannot exceed $6,000(1) for any calendar year.
To make a salary reduction election, simply complete the form of salary
reduction agreement provided by your employer. Also, you use the salary
reduction agreement to specify the name and address of the financial institution
maintaining your SIMPLE IRA account and account identifying information so that
contributions to your account may be forwarded and credited to your IRA
correctly. The salary reduction agreement must be completed and returned to your
employer within the required time frames.
Timing of Salary Reduction Elections
For a calendar year, you may make or modify a salary reduction election during
the 60-day period immediately preceding January 1 of that year. However, for the
year in which you become eligible to make salary reduction contributions, the
period during which you may make or modify the election is a 60-day period that
includes either the date you become eligible or the day before. For example, if
your employer starts its SIMPLE IRA plan effective July 1 of a year and you
become eligible on that day, your 60-day salary reduction election period must
include either June 30 or July 1. In this example, the earliest possible 60-day
period would be May 2 to June 30, and the latest possible 60-day period would be
July 1 to August 29. Your employer may enlarge the 60-day election period or
provide additional opportunities during the year for you to make, cancel, or
change your salary reduction election. Refer to Article II, Item 2b of the
attached Form 5304-SIMPLE to determine any additional modification periods
available to you.
You may terminate your salary reduction election at any time. However, if you
terminate your election outside of the normal election cycle, your employer has
the option to prohibit you from resuming salary reduction elections during the
remainder of the calendar year. Consult Article II, item 2d of the attached Form
5304-SIMPLE to determine if your employer has chosen this option.
Contributions (Article III)
Only contributions described below may be made to this SIMPLE plan. No
additional contributions may be made.
Salary Reduction Contributions
Salary reduction contributions consist of the amount by which you agree to
reduce your compensation. Your employer must contribute the salary reduction
contributions to the financial institution that you have selected for your
SIMPLE IRA.
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Other Contributions
Matching Contributions
In general, your employer must make a matching contribution to your SIMPLE IRA
equal to your salary reduction contributions. However, this matching
contribution cannot exceed 3% of your compensation. See Definition of
Compensation below.
Your employer may elect to reduce the 3% limit to a lower percentage, but not
lower than 1%. This reduction cannot be made for more than two out of five
years, and you must be notified of any reduced limit within a reasonable period
of time before the 60-day election period for the year.
Non-matching Contributions
Instead of making a matching contribution, your employer may, for any year, make
a non-matching, mandatory contribution equal to 2% of compensation for each
eligible employee who has at least $5,000 in compensation for the year.
Non-matching contributions may not be based on more than $160,000(2) of
compensation.
Again, your employer must notify you within a reasonable period of time before
the applicable 60-day election period for such year.
Other Important Information About Your SIMPLE Plan
Timing of Salary Reduction Contributions
Under the Internal Revenue Code, your employer must make the salary reduction
contributions to the financial institution selected by each eligible employee
for his/her SIMPLE IRA no later than the 30th day of the month following the
month in which the amounts would otherwise have been payable to the employee in
cash. The Department of Labor has an additional rule under which salary
reduction contributions must be made to the financial institution maintaining an
employee's SIMPLE IRA by the earliest date on which those contributions can
reasonably be segregated from the employer's general assets, but in no event
later than the 30-day deadline described above.
Definition of Compensation
"Compensation" means total compensation (the amount of total wages, tips, and
other compensation from the employer subject to federal income tax withholding).
Usually, this is the amount shown in box 1 of Form W-2, Wage and Tax Statement.
Compensation also includes the salary reduction contributions made under this
plan, and, if applicable, compensation deferred under a section 457 plan. In
determining an employee's compensation for prior years, the employee's elective
deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity
contract or custodial account are also included in the employee's compensation.
For self-employed individuals, compensation means the net earnings from
self-employment determined under section 1402(a) prior to subtracting any
contributions made pursuant to this SIMPLE plan on behalf of the individual.
Employee Notification
Your employer must notify you prior to the 60-day election period described
above that you can make or change salary reduction elections. In this
notification, your employer must indicate whether it will provide:
1. A matching contribution equal to your salary reduction contributions up to a
limit of 3% of your compensation;
2. A matching contribution equal to your salary reduction contributions subject
to a percentage limit that is between 1 and 3% of your compensation; or
3. A nonelective contribution equal to 2% of your compensation.
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Reporting Requirements
You are not required to file any annual information returns for your SIMPLE
plan, such as Forms 5500, 5500-C/R, or 5500-EZ. However, the Employer must
report to the IRS which eligible employees are active participants in the SIMPLE
plan and the amount of your salary reduction contributions to the SIMPLE plan on
Form W-2. These contributions are subject to social security, medicare, railroad
retirement, and federal unemployment tax.
Establishing Your SIMPLE IRA
As part of your participation in this SIMPLE plan, you must set up an individual
retirement account (IRA) with the financial institution of your choice. Simply
complete the SIMPLE IRA adoption agreement or application (and any other
required documents) provided by the financial institution that you have chosen
to establish your SIMPLE IRA.
All contributions are sent to your SIMPLE IRA. Investments are selected by you
from the investment options available under your chosen SIMPLE IRA. Please read
the disclosure statement provided by the financial institution for important
information about your SIMPLE IRA, and before investing read a copy of the
prospectus or other explanatory information for each investment option you are
interested in for a description of the investment objectives and policies, and
applicable fees and charges.
Transfers
You may transfer all or part of the balance in your SIMPLE IRA with your current
financial institution to another IRA at any time. You simply have to give proper
directions to the current financial institution, including the name and address
of the successor IRA and transfer instructions. Normal fees (such as termination
or transfer fees) and any redemption or other charges applicable to the mutual
fund shares (as described in the applicable prospectus) will be charged.
For the first two years after your SIMPLE IRA is established, you may transfer
only to another SIMPLE IRA. The two year period commences on the day a
contribution is first made to your SIMPLE IRA by your employer. After the end of
this two year period, you may transfer amounts from a SIMPLE IRA to another
SIMPLE IRA or to a regular IRA.
NOTE: The information in this pamphlet reflects the best information available
at the time of preparation. However, SIMPLE IRAs are governed by new
provisions of the Internal Revenue Code and the IRS has not issued
regulations on SIMPLE IRA plans or answered many of the questions about
SIMPLE IRAs. Consult your professional tax adviser or the IRS on any
questions you have about a SIMPLE IRA or about the most recent IRS
developments.
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1 / This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
2 / This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
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