[From IRS Rev. Proc. 97-9; reproduced by BenefitsLink http://benefitslink.com] MODEL AMENDMENT TO ADOPT SIMPLE 401(k) PROVISIONS SECTION I. SIMPLE 401(K) PROVISIONS 1.1 This amendment adds to the plan SIMPLE 401(k) provisions that are intended to satisfy the requirements of §§ 401(k)(11) and 401(m)(10) of the Internal Revenue Code. 1.2 The provisions of sections 3.3, IV, VI, and VII of this amendment apply for a year only if the following conditions are met: (a) The employer adopting this amendment is an eligible employer. An eligible employer means, with respect to any year, an employer that had no more than 100 employees who received at least $5,000 of compensation from the employer for the preceding year. In applying the preceding sentence, all employees of controlled groups of corporations under § 414(b), all employees of trades or businesses (whether incorporated or not) under common control under § 414(c), all employees of affiliated service groups under § 414(m), and leased employees required to be treated as the employer's employees under § 414(n), are taken into account. An eligible employer that adopts this amendment and that fails to be an eligible employer for any subsequent year, is treated as an eligible employer for the two years following the last year the employer was an eligible employer. If the failure is due to any acquisition, disposition, or similar transaction involving an eligible employer, the preceding sentence applies only if the provisions of § 410(b)(6)(C)(i) are satisfied. (b) No contributions are made, or benefits accrued for services during the year, on behalf of any eligible employee under any other plan, contract, pension, or trust described in § 219(g)(5)(A) or (B), maintained by the employer. 1.3 To the extent that any other provision of the plan is inconsistent with the provisions of this amendment, the provisions of this amendment govern. SECTION II. DEFINITIONS 2.1 "Compensation" means, for purposes of sections 1.2(a), 3.1 and 3.2, the sum of the wages, tips, and other compensation from the employer subject to federal income tax withholding (as described in § 6051(a)(3)) and the employee's salary reduction contributions made under this or any other 401(k) plan, and, if applicable, elective deferrals under a § 408(p) SIMPLE plan, a SARSEP, or a § 403(b) annuity contract and compensation deferred under a § 457 plan, required to be reported by the employer on Form W-2 (as described in § 6051(a)(8)). For self-employed individuals, compensation means net earnings from self-employment determined under § 1402(a) prior to subtracting any contributions made under this plan on behalf of the individual. The provisions of the plan implementing the limit on compensation under § 401(a)(17) apply to the compensation under Section III. 2.2 "Eligible employee" means, for purposes of this amendment, any employee who is entitled to make elective deferrals described in § 402(g) under the terms of the plan. 2.3 "Year" means the calendar year. SECTION III. CONTRIBUTIONS 3.1 Salary Reduction Contributions (a) Each eligible employee may make a salary reduction election to have his or her compensation reduced for the year in any amount selected by the employee subject to the limitation in section 3.1(b). The employer will make a salary reduction contribution to the plan, as an elective deferral, in the amount by which the employee's compensation has been reduced. (b) The total salary reduction contribution for the year cannot exceed $6,000 for any employee. To the extent permitted by law, this amount will be adjusted to reflect any annual cost-of-living increases announced by the IRS. 3.2 Other Contributions (a) Matching Contributions - Each year, the employer will contribute a matching contribution to the plan on behalf of each employee who makes a salary reduction election under section 3.1. The amount of the matching contribution will be equal to the employee's salary reduction contribution up to a limit of 3% of the employee's compensation for the full calendar year. (b) Nonelective Contribution - For any year, instead of a matching contribution, the employer may elect to contribute a nonelective contribution of 2% of compensation for the full calendar year for each eligible employee who received at least $5,000 of compensation from the employer for the year. By inserting a number less than $5,000 here _________________, the employer agrees to substitute this lesser amount for the $5,000 amount in the preceding sentence. 3.3 Limitation on Other Contributions (a) General rule - No employer or employee contributions may be made to this plan for the year other than salary reduction contributions described in section 3.1, matching or nonelective contributions described in section 3.2 and rollover contributions described in § 1.402(c)-2, Q&A-1(a) of the Income Tax Regulations. (b) 1997 Transition Rule - If the employer has maintained this plan during 1997 prior to adopting this amendment, then contributions made prior to the amendment are treated as made under sections 3.1 and 3.2 provided that: (i) the employer adopts the 401(k) SIMPLE provisions by July 1, 1997, effective as of January 1, 1997; (ii) the salary reduction contributions for the year made prior to adoption of the amendment do not total more than $6,000 for any employee; (iii) the other contributions set forth in section 3.2 are of inherently equal or greater value than the contributions required under the plan prior to the amendment; and (iv) for 1997, the 60-day election period requirement described in sections 4.1(a) and (b) is deemed satisfied if the employee may make or modify a salary reduction election during a 60-day election period that begins no later than 30 days after the amendment is adopted but in no event later than July 1, 1997. 3.4 The provisions of the plan implementing the limitations of § 415 apply to contributions made pursuant to sections 3.1 and 3.2. SECTION IV. ELECTION AND NOTICE REQUIREMENTS 4.1 Election Period (a) In addition to any other election periods provided under the plan, each eligible employee may make or modify a salary reduction election during the 60-day period immediately preceding each January 1. (b) For the year an employee becomes eligible to make salary reduction contributions under this amendment, the 60-day election period requirement of section 4.1(a) is deemed satisfied if the employee may make or modify a salary reduction election during a 60-day period that includes either the date the employee becomes eligible or the day before. (c) Each employee may terminate a salary reduction election at any time during the year. 4.2 Notice Requirements (a) The employer will notify each eligible employee prior to the 60-day election period described in section 4.1 or 3.3(b)(iv) that he or she can make a salary reduction election or to modify a prior election during that period. (b) The notification described in section 4.2(a) will indicate whether the employer will provide a 3% matching contribution described in section 3.2(a) or a 2% nonelective contribution described in section 3.2(b). SECTION V. VESTING REQUIREMENTS All benefits attributable to contributions made pursuant to this amendment are nonforfeitable at all times. SECTION VI. TOP-HEAVY RULES The plan is not treated as a top-heavy plan under § 416 for any year for which the provisions of this amendment are effective and satisfied. SECTION VII. NONDISCRIMINATION TESTS The plan is treated as meeting the requirements of §§ 401(k)(3)(A)(ii) and 401(m)(2) for any year for which the provisions of this amendment are effective and satisfied. SECTION VIII. EFFECTIVE DATE This amendment is effective on _________________________. ____________________________ Employer Name By:____________________________ Signature ____________________________ Name and Title ____________________________ Date MODEL REVOCATION CLAUSE This amendment is revoked effective as of the first day of the calendar year following _______________ (enter the date the revocation is adopted). ____________________________ Employer Name By:____________________________ Signature ____________________________ Name and Title ____________________________ Date