SIXTH AMENDMENT TO THE QUANEX CORPORATION HOURLY BARGAINING UNIT EMPLOYEE SAVINGS PLAN
Exhibit 10.4
SIXTH AMENDMENT TO THE
QUANEX CORPORATION HOURLY BARGAINING UNIT EMPLOYEE SAVINGS PLAN
QUANEX CORPORATION HOURLY BARGAINING UNIT EMPLOYEE SAVINGS PLAN
THIS AGREEMENT by Quanex Corporation, a Delaware corporation (the “Sponsor”),
W I T N E S S E T H:
WHEREAS, the Sponsor maintains the Quanex Corporation Hourly Bargaining Unit Employee Savings
Plan, as amended and restated effective January 1, 1998 (the “Plan”);
WHEREAS, pursuant to Section 12.01 of the Plan, the Sponsor has the right to amend the Plan;
WHEREAS, the Plan is required to be amended to comply with certain provisions of the Final
Regulations under sections 401(k) and 401(m) of the Internal Revenue Code of 1986, as amended, that
were published on December 29, 2004.
NOW THEREFORE, the Plan is hereby amended, effective January 1, 2006, to include all required
regulatory and statutory changes enacted under sections 401(k) and 401(m) of the Code and the
Regulations issued thereunder, as follows:
APPENDIX D
FINAL 401(K)/401(M) REGULATIONS AMENDMENT
FINAL 401(K)/401(M) REGULATIONS AMENDMENT
D.1.1 Preamble
| (a) | Adoption and Effective Date of Amendment. This Amendment of the Plan is
adopted to reflect certain provisions of the Final Regulations under Code sections
401(k) and 401(m) that were published on December 29, 2004 (the “Final 401(k)
Regulations”). This Amendment is intended as good faith compliance with the
requirements of the Final 401(k) Regulations and is to be construed in accordance with
the Final 401(k) Regulations and guidance issued thereunder. Except as otherwise
provided, this Amendment shall be effective as of the first day of the first Plan Year
beginning after December 31, 2005. |
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| (b) | Supersession of Inconsistent Provisions. This Amendment shall supersede the
provisions of the Plan to the extent those provisions are inconsistent with the
provisions of this Amendment. |
D.1.2 General Rules
| (a) | Deferral Elections. A cash or deferred arrangement (“CODA”) is an arrangement
under which eligible Employees may make elective deferral elections. Such elections
cannot relate to compensation that is currently available prior to the adoption or
effective date of the CODA. In addition, except for occasional, bona fide
administrative considerations, contributions made pursuant to such an election cannot precede the earlier of (1) the performance of
services relating to the contribution and (2) when the compensation that is subject
to the election would be currently available to the Employee in the absence of an
election to defer. |
| (b) | Vesting Provisions. Elective contributions are always fully vested and
nonforfeitable. The Plan shall disregard elective contributions in applying the vesting
provisions of the Plan to other contributions or benefits under Code section 411(a)(2).
However, the Plan shall otherwise take a Participant’s elective contributions into
account in determining the Participant’s vested benefits under the Plan. Thus, for
example, the Plan shall take elective contributions into account in determining whether
a Participant has a nonforfeitable right to contributions under the Plan for purposes
of forfeitures, and for applying provisions permitting the repayment of distributions
to have forfeited amounts restored, and the provisions of Code sections
410(a)(5)(D)(iii) and 411(a)(6)(D)(iii) permitting a plan to disregard certain service
completed prior to breaks-in-service (sometimes referred to as “the rule of parity”). |
D.1.3 Hardship Distributions
| (a) | Hardship Events. A distribution under the Plan is hereby deemed to be on
account of an immediate and heavy financial need of an Employee if the distribution is
for one of the following or any other item permitted under Treasury Regulation section
1.401(k)-1(d)(3)(iii)(B): |
| (i) | Expenses for (or necessary to obtain) medical care that would
be deductible under Code section 213(d) (determined without regard to whether
the expenses exceed 7.5 percent of adjusted gross income); |
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| (ii) | Costs directly related to the purchase of a principal residence
for the Employee (excluding mortgage payments); |
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| (iii) | Payment of tuition, related educational fees, and room and
board expenses, for up to the next twelve (12) months of post-secondary
education for the Employee, the Employee’s spouse, children, or dependents (as
defined in Code section 152, and, for taxable years beginning on or after
January 1, 2005, without regard to Code section 152(b)(l), (b)(2), and
(d)(l)(B)); |
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| (iv) | Payments necessary to prevent the eviction of the Employee from
the Employee’s principal residence or foreclosure on the mortgage on that
residence; |
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| (v) | Payments for burial or funeral expenses for the Employee’s
deceased parent, spouse, children or dependents (as defined in Code section
152, and, for taxable years beginning on or after January 1, 2005, without
regard to Code section 152(d)(l)(B)); or |
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| (vi) | Expenses for the repair of damage to the Employee’s principal
residence that would qualify for the casualty deduction under Code section 165
(determined without regard to whether the loss exceeds 10 percent of adjusted
gross income). |
| (b) | Reduction of Code Section 402(g) Limit Following Hardship Distribution. If the
Plan provides for hardship distributions upon satisfaction of the safe harbor standards
set forth in Treasury Regulation sections 1.401(k)-1(d)(3)(iii)(B) (deemed immediate
and heavy financial need) and 1.401(k)-1(d)(3)(iv)(E) (deemed necessary to satisfy
immediate need), then there shall be no reduction in the maximum amount of elective
deferrals that a Participant may make pursuant to Code section 402(g)
solely because of
a hardship distribution made by this Plan or any other plan of the Employer. |
D.1.4 Actual Deferral Percentage Test
| (a) | Targeted Contribution Limit. Qualified nonelective contributions (as defined
in Treasury Regulation section 1.401(k)-6) cannot be taken into account in determining
the actual deferral ratio (“ADR”) for a Plan Year for a Non-Highly Compensated Employee
(“NHCE”) to the extent such contributions exceed the product of that NHCE’s Code section 414(s)
compensation and the greater of five percent (5%) or two (2) times the Plan’s
“representative contribution rate.” Any qualified nonelective contribution taken
into account under an actual contribution percentage test under Treasury Regulation
section 1.401(m)-2(a)(6) (including the determination of the representative
contribution rate for purposes of Treasury Regulation section
1.401(m)-2(a)(6)(v)(B)), is not permitted to be taken into account for purposes of
this Section D.1.4(a) (including the determination of the “representative
contribution rate” under this Section D.1.4(a)). For purposes of this Section
D.1.4(a): |
| (i) | The Plan’s “representative contribution rate” is the lowest
“applicable contribution rate” of any eligible NHCE among a group of eligible
NHCEs that consists of half of all eligible NHCEs for the Plan Year (or, if
greater, the lowest “applicable contribution rate” of any eligible NHCE who is
in the group of all eligible NHCEs for the Plan Year and who is employed by the
Employer on the last day of the Plan Year), and |
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| (ii) | The “applicable contribution rate” for an eligible NHCE is the
sum of the qualified matching contributions (as defined in Treasury Regulation
section 1.401(k)-6) taken into account in determining the ADR for the eligible
NHCE for the Plan Year and the qualified nonelective contributions made for the
eligible NHCE for the Plan Year, divided by the eligible NHCE’s Code section
414(s) compensation for the same period. |
Notwithstanding the above, qualified nonelective contributions that are made in
connection with an Employer’s obligation to pay prevailing wages under the
Xxxxx-Xxxxx Act (46 Stat. 1494), Public Law 71-798, Service Contract Act of 1965 (79
Stat. 1965), Public Law 89-286, or similar legislation can be taken into account for
a Plan Year for an NHCE to the extent such contributions do not exceed 10 percent
(10%) of that NHCE’s Code section 414(s) compensation.
Qualified matching contributions may only be used to calculate an ADR to the extent
that such qualified matching contributions are matching contributions that are not
precluded from being taken into account under the actual contribution percentage
test for the Plan Year under the rules of Tresasury Regulation section
1.401(m)-2(a)(5)(ii) and as set forth in Section D.1.6(a).
| (b) | Limitation on QNECs and QMACs. Qualified nonelective contributions and
qualified matching contributions cannot be taken into account to determine an ADR to
the extent such contributions are taken into account for purposes of satisfying any
other actual deferral percentage test, any actual contribution percentage test, or the
requirements of Treasury Regulation sections 1.401(k)-3, 1.401(m)-3, or 1.401(k)-4.
Thus, for example, matching contributions that are made pursuant to Treasury Regulation
section 1.401(k)-3(c) cannot be taken into account under the actual deferral percentage
test. Similarly, if a plan switches from the current year testing method to the prior
year testing method pursuant to Treasury Regulation section 1.401(k)-2(c), qualified
nonelective contributions that are taken into account under the current year testing
method for a year may not be taken into account under the prior year testing method for
the next year. |
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| (c) | ADR of HCE if Multiple Plans. The actual deferral ratio (“ADR”) of any
Participant who is a highly compensated employee (“HCE”) for the Plan Year and who is
eligible to have elective contributions (as defined in Treasury Regulation
section 1.401(k)-6) (and qualified nonelective contributions and/or qualified matching
contributions, if treated as elective contributions for purposes of the actual deferral
percentage test) allocated to such Participant’s accounts under two (2) or more cash or
deferred arrangements described in Code section 401(k), that are maintained by the same
Employer, shall be determined as if such elective contributions (and, if applicable,
such qualified nonelective contributions and/or qualified matching contributions) were
made under a single arrangement. If an HCE participates in two or more cash or deferred
arrangements of the Employer that have different Plan Years, then all elective
contributions made during the Plan Year being tested under all such cash or deferred
arrangements shall be aggregated, without regard to the plan years of the other plans.
However, for Plan Years beginning before January 1, 2006, if the plans have different
Plan Years, then all such cash or deferred arrangements ending with or within the same
calendar year shall be treated as a single cash or deferred arrangement.
Notwithstanding
the foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under the Regulations of Code section 401(k). |
| (d) | Plans Using Different Testing Methods for the Actual Deferral Percentage and
Actual Contribution Percentage Test. Except as otherwise provided in this Section
D.1.4(d), the Plan may use the current year testing method or prior year testing method
for the actual deferral percentage test for a Plan Year without regard to whether the
current year testing method or prior year testing method is used for the actual
contribution percentage test for that Plan Year. However, if different testing methods
are used, then the Plan cannot use: |
| (i) | The recharacterization method of Treasury Regulation section
1.401(k)-2(b)(3) to correct excess contributions for a Plan Year; |
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| (ii) | The rules of Treasury Regulation section 1.401(m)-2(a)(6)(ii)
to take elective contributions into account under the actual contribution
percentage test (rather than the actual deferral percentage test); or |
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| (iii) | The rules of Treasury Regulation section 1.401(k)-2(a)(6)(v)
to take qualified matching contributions into account under the actual deferral
percentage test (rather than the actual contribution percentage test). |
D.1.5 Adjustment to Actual Deferral Percentage Test
| (a) | Distribution of Income Attributable to Excess Contributions. Distributions of
excess contributions must be adjusted for income (gain or loss), including an
adjustment for income for the period between the end of the Plan Year and the date of
the distribution (the “gap period”). The Plan Administrator has the discretion to
determine and allocate income using any of the methods set forth below: |
| (i) | Reasonable method of allocating income. The Plan
Administrator may use any reasonable method for computing the income allocable
to excess contributions, provided that the method does not violate Code section
401(a)(4), is used consistently for all Participants and for all corrective
distributions under the Plan for the Plan Year, and is used by the Plan for
allocating income to Participants’ accounts. A Plan will not fail to use a
reasonable method for computing the income allocable to excess contributions
merely because the income allocable to excess contributions is determined on a
date that is no more than seven (7) days before the distribution. |
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| (ii) | Alternative method of allocating income. The Plan
Administrator may allocate income to excess contributions for the Plan Year by
multiplying the income for the Plan Year allocable to the elective
contributions and other amounts taken into account under the actual deferral
percentage test (including contributions made for the Plan Year), by a
fraction, the numerator of which is the excess contributions for the Employee
for the Plan Year. and the denominator of which is the sum of the: |
| (1) | Account balance attributable to elective
contributions and other amounts taken into account under the actual
deferral percentage test as of the beginning of the Plan Year, and |
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| (2) | Any additional amount of such contributions
made for the Plan Year. |
| (iii) | Safe harbor method of allocating gap period income.
The Plan Administrator may use the safe harbor method in this paragraph to
determine income on excess contributions for the gap period. Under this safe
harbor method, income on excess contributions for the gap period is equal to
ten percent (10%) of the income allocable to excess contributions for the Plan
Year that would be determined under paragraph (ii) above, multiplied by the
number of calendar months that have elapsed since the end of the Plan Year. For
purposes of calculating the number of calendar months that have elapsed under
the safe harbor method, a corrective distribution that is made on or before the
fifteenth (15th) day of a month is treated as made on the last day of the
preceding month and a distribution made after the fifteenth day of a month
is treated as made on the last day of the month. |
| (iv) | Alternative method of allocating Plan Year and gap period
income. The Plan Administrator may determine the income for the aggregate
of the Plan Year and the gap period, by applying the alternative method
provided by paragraph (ii) above to this aggregate period. This is accomplished
by (1) substituting the income for the Plan Year and the gap period, for the
income for the Plan Year, and (2) substituting the amounts taken into account
under the actual deferral percentage test for the Plan Year and the gap period,
for the amounts taken into account under the actual deferral percentage test
for the Plan Year in determining the fraction that is multiplied by that
income. |
| (b) | Corrective Contributions. If a failed actual deferral percentage test is to be
corrected by making an Employer contribution, then the provisions of the Plan for the
corrective contributions shall be applied by limiting the contribution made on behalf
of any NHCE pursuant to such provisions to an amount that does not exceed the targeted
contribution limits of Section D.1.4(a), above, or in the case of a corrective
contribution that is a qualified matching contribution, the targeted contribution limit
of Section D.1.6(a), below. |
D.1.6 Actual Contribution Percentage Test
| (a) | Targeted Matching Contribution Limit. A matching contribution with respect to
an elective contribution for a Plan Year is not taken into account under the actual
contribution percentage test for an NHCE to the extent it exceeds the greatest of: |
| (i) | five percent (5%) of the NHCE’s Code section 414(s)
compensation for the Plan Year; |
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| (ii) | the NHCE’s elective contributions for the Plan Year; and |
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| (iii) | the product of two (2) times the Plan’s “representative
matching rate” and the NHCE’s elective contributions for the Plan Year. |
For purposes of this Section D.1.6(a), the Plan’s “representative matching rate” is
the lowest “matching rate” for any eligible NHCE among a group of NHCEs that
consists of half of all eligible NHCEs in the Plan for the Plan Year who make
elective contributions for the Plan Year (or, if greater, the lowest “matching rate”
for all eligible NHCEs in the Plan who are employed by the Employer on the last day
of the Plan Year and who make elective contributions for the Plan Year).
For purposes of this Section D.1.6(a), the “matching rate” for an Employee generally
is the matching contributions made for such Employee divided by the Employee’s
elective contributions for the Plan Year. If the matching rate is not the same for
all levels of elective contributions for an Employee, then the Employee’s “matching
rate” is determined assuming that an Employee’s elective contributions are equal to
six percent (6%) of Code section 414(s) compensation.
If the Plan provides a match with respect to the sum of the Employee’s after-tax
Employee contributions and elective contributions, then for purposes of this Section
D.1.6(a), that sum is substituted for the amount of the Employee’s elective
contributions in subsections (ii) & (iii) above and in determining the “matching
rate,” and Employees who make either after-tax Employee contributions or elective
contributions are taken into account in determining the Plan’s “representative
matching rate.” Similarly, if the Plan provides a match with respect to the
Employee’s after-tax Employee contributions, but not elective contributions, then
for purposes of this subsection, the Employee’s after-tax Employee contributions are
substituted for the amount of the Employee’s elective contributions in subsections
(ii) & (iii) above and in determining the “matching rate,” and Employees who make
after-tax Employee contributions are taken into account in determining the Plan’s
“representative matching rate.”
| (b) | Targeted QNEC Limit. Qualified nonelective contributions (as defined in
Treasury Regulation section 1.401(k)-6) cannot be taken into account under the actual
contribution percentage test for a Plan Year for an NHCE to the extent such
contributions exceed the product of that NHCE’s Code section 414(s) compensation and
the greater of five percent (5%) or two (2) times the Plan’s “representative
contribution rate.” Any qualified nonelective contribution taken into account under an
actual deferral percentage test under Treasury Regulation section 1.401(k)-2(a)(6)
(including the determination of the “representative contribution rate” for purposes of
Treasury Regulation section 1.401(k)-2(a)(6)(iv)(B)) is not permitted to be taken into
account for purposes of this Section D.1.6(b) (including the determination of the
“representative contribution rate” for purposes of subsection (i) below). For purposes
of this Section D.1.6(b): |
| (i) | The Plan’s “representative contribution rate” is the lowest
“applicable contribution rate” of any eligible NHCE among a group of eligible
NHCEs that consists of half of all eligible NHCEs for the Plan Year (or, if
greater, the lowest “applicable contribution rate” of any eligible NHCE who is
in the group of all eligible NHCEs for the Plan Year and who is employed by the
Employer on the last day of the Plan Year), and |
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| (ii) | The “applicable contribution rate” for an eligible NHCE is the
sum of the matching contributions (as defined in Treasury Regulation section
1.401(m)-1(a)(2)) taken into account in determining the ACR for the eligible
NHCE for the Plan Year and the qualified nonelective contributions made for
that NHCE for the Plan Year, divided by that NHCE’s Code section 414(s)
compensation for the Plan Year. |
Notwithstanding the above, qualified nonelective contributions that are made in
connection with an Employer’s obligation to pay prevailing wages under the
Xxxxx-Xxxxx Act (46 Stat. 1494), Public Law 71-798, Service Contract Act of 1965 (79
Stat. 1965), Public Law 89-286, or similar legislation can be taken into account for
a Plan Year for an NHCE to the extent such contributions do not exceed 10 percent
(10%) of that NHCE’s Code section 414(s) compensation.
| (c) | ACR of HCE if Multiple Plans. The actual contribution ratio (“ACR”) for any
Participant who is a highly compensated employee (“HCE”) and who is eligible to have
matching contributions or after-tax Employee contributions allocated to his or her
account under two (2) or more plans described in Code section 401(a), or arrangements
described in Code section 401(k) that are maintained by the same Employer, shall be
determined as if the total of such contributions was made under each plan and
arrangement. If an HCE participates in two (2) or more such plans or arrangements that
have different plan years, then all matching contributions and after-tax Employee
contributions made during the Plan Year being tested under all such plans and
arrangements shall be aggregated, without regard to the plan years of the other plans.
For plan years beginning before January 1, 2006, all such plans and arrangements ending
with or within the same calendar year shall be treated as a single plan or arrangement.
Notwithstanding the foregoing, certain plans shall be treated as separate if
mandatorily disaggregated under the Regulations of Code section 401(m). |
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| (d) | Plans Using Different Testing Methods for the Actual Contribution Percentage
and Actual Deferral Percentage Test. Except as otherwise provided in this Section
D.1.6(d), the Plan may use the current year testing method or prior year testing method
for the actual contribution percentage test for a Plan Year without regard to whether
the current year testing method or prior year testing method is used for the actual
deferral percentage test for that Plan Year. However, if different testing methods are
used, then the Plan cannot use: |
| (i) | The recharacterization method of Treasury Regulation section
1.401(k)-2(b)(3) to correct excess contributions for a Plan Year; |
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| (ii) | The rules of Treasury Regulation section 1.401(m)-2(a)(6)(ii)
to take elective contributions into account under the actual contribution
percentage test (rather than the actual deferral percentage test); or |
| (iii) | The rules of Treasury Regulation section 1.401(k)-2(a)(6) to
take qualified matching contributions into account under the actual deferral
percentage test (rather than the actual contribution percentage test). |
D.1.7 Adjustment to Actual Contribution Percentage Test
| (a) | Distribution of Income Attributable to Excess Aggregate Contributions.
Distributions of excess aggregate contributions must be adjusted for income (gain or
loss), including an adjustment for income for the period between the end of the Plan
Year and the date of the distribution (the “gap period”). For purposes of this Section
D.1.7(a), “income” shall be determined and allocated in accordance with the provisions
of Section D.1.5(a), above, except that such Section D.1.5(a) shall be applied by
substituting “excess contributions” with “excess aggregate contributions” and by
substituting amounts taken into account under the actual contribution percentage test
for amounts taken into account under the actual deferral percentage test. |
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| (b) | Corrective Contributions. If a failed actual contribution percentage test is
to be corrected by making an Employer contribution, then the provisions of the Plan for
the corrective contributions shall be applied by limiting the contribution made on
behalf of any NHCE pursuant to such provisions to an amount that does not exceed the
targeted contribution limits of Sections D.1.6(a) and D.1.6(b). |
IN WITNESS WHEREOF, the Sponsor has caused this Agreement to be executed on the
26th day of October, 2006.
QUANEX CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
Title: Senior Vice President –General Counsel
and Secretary
By: /s/ Xxxxx X. Xxxxxxx
Title: Senior Vice President –General Counsel
and Secretary
