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S&L SAVINGS INVESTMENT PLAN by a699C8

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									        SARGENT & LUNDY
    SAVINGS INVESTMENT PLAN
    ROTH 401(k) & CONVERSION




               September 7, 2012




1
                                       SIP History
       1977   Voluntary Employee Contribution Plan (VECP) started at S&L
               (after-tax contributions only)
       1981   Renamed Savings Investment Plan, employer match added
       1984   401(k) pretax contributions added
       1986   Tax Reform Act of 1986
               (Created after-tax Pre-87 and Post-86 sources, changed withdrawal rules)
       1987   Loan program added
       2000   Changed record keeping from in-house to Fidelity, added daily accounting & processing
       2001   Economic Growth & Tax Relief Reconciliation Act
               (Added catch-up contribution for employees age 50 and older, and rollovers from other 401(k)
               plans)
       2003   Employer Non-Matching Contribution added
       2006   Roth 401(k) added
       2007   Pension Protection Act
               (Allowed SIP to IRA rollovers for non-spouse beneficiaries, direct rollover to Roth IRA for
               those eligible)
       2009   Addition of lower cost share class investments, such as Fidelity “K” shares
       2010   Expanded eligibility for rollovers to Roth IRA (January), allowed Roth In-Plan Conversion
               (December), (Income eligibility removed for rollover to Roth IRA)
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                           Sources of Money
       Assets in the Savings Investment Plan are classified as different “Sources.” Rules for contributions,
        taxes, and distributions vary by the Source designation:

                           401(k)
                           Employer Match
                           Post-86 SIP
                           Pre-87 SIP
                           Employee Pretax Catch-up
                           Employer Non-matching Contribution
                           Rollover (from a pretax IRA or another qualified plan)
                           After-tax Rollover
                           Roth 401(k)
                           Roth Catch-up
                           Roth Rollover
                           Roth In-Plan Conversion

       A list of Sources in your account can be found under the Summary “Sources” tab.




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                                        Roth 401(k)
       Only available through employer-sponsored plans, but not all plans
       Eligible for pretax employer matching contributions
       Available to all employees, regardless of income
       Contributions and earnings withdrawn proportionally for IRS-approved hardship only (if <59-1/2)
       Earnings can be withdrawn tax free five years after the first deposit ONLY if:
                  You are at least age 59-1/2
                  Payment is made to a beneficiary after your death
                  You are disabled
       Can be rolled into a Roth IRA or employer-sponsored retirement plan (but not all plans)




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                                            Roth IRA
       Only available through banks and financial institutions
       Eligibility rules:
                   Single or Head of Household                Wages <$110,000
                   Married Filing Jointly                     Wages <$173,000
                   Married Filing Separately                  Wages $10,000 or less
       Contribution limits (2012) - $5,000 ($6,000 if age 50 or over by year end)
       Contributions are separate from, and in addition to, any Roth 401(k) contributions
       Your contributions can be withdrawn at any time, for any reason
       Earnings can be withdrawn tax free five years after the first deposit ONLY if:
                   You are at least age 59-1/2
                   Payment is made to a beneficiary after your death
                   You are disabled
                   Money is used for a qualified first-time home purchase
       Withdrawals from a Roth IRA that was created from a converted traditional pretax IRA are more
        complicated (see your IRA provider)
       Can accept rollovers from a Roth 401(k), but cannot be rolled into an employer-sponsored retirement plan




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    Benefits of Roth 401(k) & Roth IRA
       Earnings grow tax free, not taxed upon withdrawal if “qualified”
       Roth IRAs are exempt from minimum distribution requirements (MRD) at age 70-1/2. However, SIP Roth
        sources are included in the Plan’s MRD calculations & distributions.
       May be passed to heirs tax free, both SIP Roth and Roth IRAs
       It could be more advantageous to pay taxes now on the Roth 401(k) contributions; tax rates may be lower
        now than in the future, even at retirement
       If withdrawn during retirement, not considered as income when calculating Social Security eligibility
       All employees are eligible for SIP Roth 401(k) contributions; Roth IRA eligibility is determined by wages




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                                Types of Contributions
                                   Through Payroll

    Pretax 401(k) & Catch-up                     Roth 401(k) & Catch-up                               Post-86 After-tax

        $1,000        Gross wages                  $1,000        Taxable wages                     $1,000       Taxable wages
         - 60         6% Pretax Contribution         - 60        6% After-tax Contribution           - 60       6% After-tax Contribution
        $ 940         Taxable wages

    Contributions withdrawn - taxable          Contributions withdrawn - tax free*             Contributions withdrawn - tax free
    Earnings withdrawn – taxable               Earnings withdrawn - tax free*                  Earnings withdrawn - taxable

    Receives employer match (if eligible)      Receives employer match (if eligible)           Receives employer match (if eligible)

    Early Withdrawal Requirements:             Early Withdrawal Requirements:                  Withdrawal Requirements:
    • IRS-approved hardship                    • IRS-approved hardship                         • No hardship needed
    • 2 loans outstanding                      • 2 loans outstanding                           • No loans required
    • No contributions or match for 6 months   • No contributions or match for 6 months        • Contributions don’t stop
    • 10% federal penalty before age 59-1/2    • 10% federal penalty before age 59-1/2         • 10% federal penalty before age 59-1/2
                                                                                               (on earnings only)
                                               * Must be age 59-1/2 with 5 years of Roth
                                               participation for a “qualified” distribution.



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                          Catch-up Contributions
                             Through Payroll

       Available to all employees age 50 (by year end) or older. (Not available for the January 10
        paycheck of the year you turn 50.)
       A separate deduction election, up to 35%.
       Eligible for employer matching contribution.
       Limit for 2012: $5,500.
       Can be deducted as either pretax 401(k), Roth 401(k), or any combination of both.
       May be deducted after reaching the initial $17,000 limit, or simultaneously during the year.




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        Employer Contribution Sources
       All full-time employees are eligible for the following types of employer contributions:

        * Non-matching Contribution: 3%** of regular wages, regardless of contribution
         percentage.

        * Matching Contribution: Calculated on regular wages, 50% of the first 6%**
          of payroll contribution (all types of payroll contributions).

       Employer contributions are always pretax .
       Employer contributions are deposited into your account each payday, and are 100% vested
        after one year of full-time employment.
       Employer contributions cannot be invested in the brokerage option until 100% vested.

        **The level of employer contribution is evaluated by management every 6 months.




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                 Annual Contribution Limits
                           2012

        $17,000 – Pretax 401(k), Roth 401(k), or any combination of both.
               (If hired mid-year, limit applies to all employers combined.)

        $ 5,500 – Pretax catch-up, Roth catch-up, or any combination of both.
         Available to employees who are at least age 50 by year end.
                 (If hired mid-year, applies to all employers combined.)

        $50,000 – Maximum total SIP contributions (or 100% of S&L wages,
         whichever is less). Includes all 401(k), Roth 401(k), after-tax, employer
         matching and employer non-matching contributions. Excludes pretax
         and Roth catch-up contributions.




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                       After-tax Contributions
        Taxable wages are not reduced by amount of contribution.
        Pre-87 refers to after-tax contributions made prior to January 1, 1987.
        Post-86 refers to after-tax contributions made after December 31, 1986.
        May be made through payroll contributions or as a lump sum contribution (cashier’s check or money
         order), typically at year end.
        Payroll contributions receive an employer match (if eligible), lump sum contributions do not.
        Money in the after-tax sources (Pre-87 and Post-86) can be withdrawn for any reason.
        All earnings, including capital gains and dividends from mutual fund investments, are reinvested.
        Accumulated earnings are tax-deferred, not reported as income until withdrawn.
        Consider as an option if needing withdrawals prior to retirement.
        Invested in the same funds as other contributions. If you want this money invested in fund options that are
         more conservative than those for long-term retirement, you can change the investments through an
         Exchange or Rebalance of the Post-86 source only.




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         Withdrawals From After-tax Sources

        Withdrawals from the Pre-87 source come from employee contributions first. Those contributions are tax
         free at the time of withdrawal.
        Withdrawals from the Post-86 source must be taken proportionally between tax free employee
         contributions and taxable earnings.

         For example:          $4,000 Contributions (80% of source)
                                1,000 Earnings (20% of source)
                               $5,000 Total

         Based on the example above, for every dollar withdrawn 80 cents would come from the after-tax
         contributions and 20 cents would come from the earnings.
        You have the option of taking the earnings as additional income. Fidelity is required to withhold 20% for
         federal tax; the 10% penalty for those under age 59-1/2 will be included on your federal tax return for that
         year.
        OR, you can defer taxes on the taxable earnings. Fidelity would issue two distributions: one to you for the
         after-tax contributions, and a second check for the taxable earnings which can be payable to an IRA
         rollover. This would be a pretax (traditional) IRA at a bank or financial institution of your choice. The
         rollover check would be mailed to your home (if not a Fidelity IRA) payable to the bank/financial institution.



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     Withdrawal of Employer Sources
        Employees with >5 years of plan participation may withdraw from the two employer contribution sources (accounts) for any
         reason.
        Employees with <5 years of plan participation may withdraw for one of the following hardships:
                     * Expenses arising out of a financial emergency due to accident, sickness,
                       disability or death within your immediate family, or resulting from a natural disaster
                     * Significant medical expenses (not reimbursed by insurance) incurred by you, your
                       spouse, your qualified dependents, or a named SIP beneficiary.
                     * The purchase (excluding mortgage payments) or your principal residence.
                     * Payment of tuition and related educational fees for the next 12 months of post-
                       secondary education for you, your spouse, your qualified dependents, or a named
                       SIP beneficiary.
                     * To prevent foreclosure of or eviction from your principal residence.
                     * Burial or funeral expenses for your parent, spouse, children, qualified dependent or
                       named SIP beneficiary.
                     * To meet expenses for the repair of your principal residence that would qualify as
                       deductible casualty expenses.
        Documentation supporting the hardship need must be provided with the withdrawal request.
        If not rolled over into a IRA or another qualified employer-sponsored plan, the withdrawal will be subject to federal and state
         taxes (depending on the state). A 10% federal early withdrawal penalty may apply for those under age 59-1/2. At the time of
         distribution, 20% will be withheld for federal tax.




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                             Hardship Withdrawals
                              401(k) & Roth 401(k)

        Employees age 59-1/2 or over may withdraw for any reason, no hardship needed.
        Employees under age 59-1/2 must withdraw all other available funds in the Plan first and have 2 loans
         outstanding. Then a withdrawal may be requested for one of the following hardships:
                   * Significant medical expenses (not reimbursed by insurance) incurred by you, your
                     spouse, your qualified dependents, or a named SIP beneficiary.
                   * The purchase (excluding mortgage payments) of your principal residence.
                   * Payment of tuition and related educational fees for the next 12 months of post-
                     secondary education for you, your spouse, your qualified dependents, or a named
                     SIP beneficiary.
                   * To prevent foreclosure of or eviction from your principal residence.
                   * Burial or funeral expenses for your parent, spouse, children, qualified dependent or
                     named SIP beneficiary.
                   * To meet expenses for the repair of your principal residence that would qualify as
                     deductible casualty expenses.
        Documentation of the need must be provided at the time of withdrawal.
        Payroll contributions (and employer match) will stop for 6 months.
        The withdrawal of pretax money (including any non-qualified earnings on Roth 401(k) contributions) will be
         subject to federal and state taxes (depending on the state). 10% will be withheld for federal tax at the time
         of distribution. A 10% penalty may apply to any taxable funds withdrawn if under age 59-1/2.
        Hardship requirements DO NOT apply to the Rollover and Roth Conversion sources.



14
                           Roth IRA Rollovers
        Since January 2010, all participants have the option of rolling non-Roth plan assets into a Roth IRA
         (outside the plan).
        A “qualified rollover contribution” is a distribution from a qualified retirement plan (SIP) to a Roth IRA.
        When selecting which of the following options is best for you, consider the amount of earnings that
         would be taxable income and any amount you want to remain in the Plan for a future withdrawal.
        Pretax money rolled into a traditional IRA can subsequently be rolled back into the Plan.
        This type of distribution is requested through Kathy Davis, NOT Fidelity.
        A rollover of after-tax money from the Plan can be done two ways:
                  1. Split the rollover between two types of IRAs. The after-tax contributions
                     can be directed to a Roth IRA, with the associated taxable earnings on those
                     contributions directed to a pretax traditional IRA. This would defer the
                     taxes on those pretax earnings until a later date.
                  2. Roll over the after-tax contributions and associated taxable earnings to a Roth
                     IRA. By paying taxes now on those pretax earnings, they will grow tax-free.




15
                   Roth In-Plan Conversions
        Became available through the Small Business Jobs Act of 2010.
        Eligible money sources may be converted to Roth without leaving the Plan or selling investments.
        Converted pretax amounts are considered taxable income, but 10% penalty does not apply.
        Federal tax is not withheld from any converted pretax amount.
        Converted pretax amounts are taxed as income in the year of conversion.
        There is no minimum or maximum amount for conversion, nor are you required to convert an entire money
         source. Smaller amounts may be converted each year.
        The 5-year period needed for a qualified distribution starts with the year of first Roth 401(k) contribution or
         the year of conversion, whichever is earlier.
        Conversion forms are available from Kathy Davis, and returned to her for processing.
        Hardship requirements do not apply to the Roth Conversion sources, but any “unqualified” earnings
         withdrawn will be subject to federal and state taxes (depending on the state). A 10% federal early
         withdrawal penalty may apply for those under age 59-1/2. At the time of distribution, 20% of any taxable
         portion will be withheld for federal tax.




16
     Roth Conversion-Eligible Sources
     Employees with <5 years participation:
                Post-86 SIP After-tax (contributions and earnings, proportionally)
                Pretax and After-tax Rollovers

     Employees with >5 years participation:
                Pre-87 SIP After-tax (contributions only can be converted, earnings optional)
                Post-86 SIP After-tax (contributions and earnings, proportionally)
                Pretax and After-Tax Rollovers
                Employer Match
                Employer Non-Match


     Employees age 59-1/2 & older, regardless of participation:
                Pre-87 SIP After-tax (contributions only can be converted, earnings optional)
                Post-86 SIP After-tax (contributions and earnings, proportionally)
                Pretax and After-tax Rollovers
                Employer Match
                Employer Non-Match
                Pretax 401(k)
                Pretax Catch-up


17
     Changing Contribution Percentage
        You can change your contribution percentage at any time, up to the maximums below:
                * 401(k) – up to 65%
                * Roth 401(k) – up to 65%
                * 401(k) and Roth 401(k) combined – up to a total of 65%

                 * Pretax catch-up – up to 35%
                 * Roth catch-up – up to 35%
                 * Pretax and Roth catch-up combined – up to a total of 35%

                   * After-tax – up to 45%
         Note: When selecting a combination of contribution percentages, it is the employee’s responsibility to
         ensure enough money is available in each paycheck to cover other payroll deductions such as FICA,
         transit, or after-tax insurance deductions.
        After you log into your account at 401k.com, go to Contribution Amount.
        The deadlines are the 12th and 27th of each month (NOT the end of our pay periods), or the previous
         business day if on a weekend or holiday.




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                   S&L Contact Information
        Sargent & Lundy:   Kathy Davis, Plan Administrator
                            Phone: 312-269-2130
                            Fax: 312-269-1943
                            kathleen.a.davis@sargentlundy.com
                            Lotus Notes SIP Discussion Group
                            Website www.sargentlundy.com/sip
                            * all SIP newsletters, since 1996
                            * Rates of Return, updated monthly
                            * Deadlines of payroll changes
                            * Plan announcements & related articles
                            * Summary Plan Description
                            * Plan Documents
                            * Fidelity Excessive Trading Policy




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