Group 1 Automotive Employee Benefits & Policies 401K Plan 1
401K Retirement Savings Plan
Summary Plan Document
Group 1 Automotive Employee Benefits & Policies 401K Plan 2
Table of Contents
401K Retirement Savings Plan ..................................................................................................................... 1
Table of Contents .......................................................................................................................................... 2
Plan Information ............................................................................................................................................ 3
Plan Highlights .............................................................................................................................................. 4
Summary Plan Description............................................................................................................................ 6
1 What is the Plan, and what is its purpose?................................................................................. 6
2 Am I Eligible to become a member of the Plan? ........................................................................ 6
3 When will I become a member of the Plan? ............................................................................... 6
4 What is my "compensation" for the purposes of the plan?......................................................... 6
5 What is a "before-tax" contribution? ........................................................................................... 7
6 When and by what means may I change my election of before-tax contributions? ................... 7
7 Can the Company change my election?..................................................................................... 7
8 May I make after-tax contributions to the Plan? ......................................................................... 7
9 May I make a Rollover contribution or transfer to the Plan? ...................................................... 7
10 How much does the Company contribute on my behalf? ........................................................ 7
11 What accounts are maintained for me under the Plan?........................................................... 8
12 How and when do my accounts increase?............................................................................... 8
13 How are my accounts invested? .............................................................................................. 8
14 May I make withdrawals while I remain employed?............................................................... 10
15 May I borrow from the plan? .................................................................................................. 11
16 What benefits do I receive when I leave the employ of the Company? ................................. 12
17 How are my benefits paid?..................................................................................................... 13
18 May I sell Group 1 common stock distributed to me from the Plan? ..................................... 13
19 How do I select a beneficiary? ............................................................................................... 14
20 Can I assign any of my benefits? ........................................................................................... 14
21 What is the claims review procedure under the plan? ........................................................... 14
22 What is a top-heavy Plan? ..................................................................................................... 14
23 Can the Plan be amended? ................................................................................................... 15
24 What are my rights upon plan termination? ........................................................................... 15
25 What are my rights under ERISA? ......................................................................................... 15
26 What are the federal income tax aspects of the Plan? .......................................................... 16
Exhibit A ..................................................................................................................................... 17
Group 1 Automotive Employee Benefits & Policies 401K Plan 3
Fiscal Year of Plan
January 1 through December 31
Type of Plan
Defined contribution, individual account plan
Group 1 Automotive, Inc.
950 Echo Lane, Suite 100
Houston, Texas 77024
Employer I.D. No. 76-0506313
Group 1 Automotive, Inc. 401(k) Savings Plan
950 Echo Lane, Suite 100
Houston, Texas 77024
Telephone Number (713) 647-5700
The Plan is administered pursuant to the provisions of the Plan documents
Plan assets are held in a Trust Fund by the Trustee
Merrill Lynch Trust Company, FSB
300 Davidson Avenue (2W)
Somerset, New Jersey 08873
Agent for Service of Legal Process
The Plan Sponsor, the Plan Administrator or the Trustee
Process may be served at the addresses specified above
A complete list of all employers that have adopted the Plan can be obtained upon written request
to the Committee and is available for inspection at the office of the Committee.
Group 1 Automotive Employee Benefits & Policies 401K Plan 4
1 The Group 1 Automotive, Inc. 401(k) Savings Plan is a profit sharing plan sponsored by Group
1 Automotive, designed to assist employees of the Company in providing for their retirement.
Employees become a Member of the Plan after being employed as an Eligible Employee for a
period of six months, or on the date the employee reaches 18 years of age, whichever is later.
3 As a Member of the Plan, you may elect to defer a percentage of your current Compensation,
between 1% to 15%. According to your election, the Company will reduce your Compensation
by that amount, and instead of paying you in cash, will contribute this amount on your behalf to
the Plan. The amount of Compensation that you elect to defer will not be subject to federal
income tax; it is considered a "before-tax contribution."
Your election will remain in effect until you change or cancel it. You may
- change the percentage amount of Compensation that you had previously elected, or
- cancel your election.
The change will become effective as soon as administratively possible.
5 The Company may make “Employer Matching Contributions” on your behalf to the Plan.
The Company may revise the matching percentage, the percentage of your Before-Tax
Contributions to be matched, and the timing of the match, from time to time.
6 You will direct the investment of the amounts held in your Accounts among the investment
options made available. You may give investment instructions or modify your investment
instructions as frequently as daily by contacting a Merrill Lynch Customer Service
Representative at 1-800-228-401K (4015).
7 Merrill Lynch Trust Company, FSB is the Trustee of the Plan and will handle your requests or
answer your questions.
Group 1 Automotive Employee Benefits & Policies 401K Plan 5
SUMMARY PLAN DESCRIPTION
FOR GROUP 1 AUTOMOTIVE, INC.
401(k) SAVINGS PLAN
This document constitutes part of a prospectus covering securities that have been registered under the
Securities Act of 1933, as amended (the “Securities Act”).
Group 1 Automotive, Inc. (the “Company”) has filed a registration statement on Form S-8 (Registration
No. 333-80399) (the “Registration Statement”) with the Securities and Exchange Commission (the
“Commission”) in connection with the offer and sale of the Company’s common stock, par value $.01 per
share (“Group 1 Common Stock”) and the interests in the Group 1 Automotive, Inc. 401(k) Plan (the
“Plan”), pursuant to the Plan. This Summary Plan Description and the documents incorporated by
reference in the Registration Statement, taken together, constitute a prospectus (this “Prospectus”)
covering shares of Group 1 Common Stock and the interests in the Plan that have been registered under
the Securities Act.
The Company has at this time registered only 1,250,000 shares of Group 1 Common Stock with the
Commission pursuant to the Registration Statement. Therefore, unless the Company registers additional
shares, Members will not be allowed to invest any further contributions in the Group 1 Common Stock
Fund at any time after the Plan has purchased 1,250,000 shares of Group 1 Common Stock. The
Company will provide without charge to any person, including any beneficial owner, to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a copy of the Plan and a copy of
any and all documents incorporated by reference in the Registration Statement or this Prospectus (other
than exhibits to such documents that are not incorporated by reference in the Registration Statement or
this Prospectus), as well as any other documents required to be delivered to such persons pursuant to
Rule 428(b) under the Securities Act.
Such requests should be directed to Human Resources Department, Group 1 Automotive, Inc., 950 Echo
Lane, Suite 100, Houston, Texas 77024. Telephone: (713) 647-5700. Facsimile: (713) 647-5800. E-mail:
NOTE: THIS SUMMARY MERELY SUMMARIZES KEY PLAN FEATURES AND DOES NOT REPLACE THE
LEGAL PLAN DOCUMENT WHICH GOVERNS IN THE CASE OF ANY DIFFERENCES.
Group 1 Automotive Employee Benefits & Policies 401K Plan 6
Summary Plan Description
1 What is the Plan, and what is its purpose?
The Group 1 Automotive, Inc. 401(k) Savings Plan (the “Plan”) is a defined contribution profit
sharing plan sponsored by Group 1 Automotive, Inc. (the “Company”). The Plan is designed to
assist employees of the Company in providing for their retirement. The Board of Directors of the
Company has appointed a Plan Administrative Committee (the “Committee”) that is responsible
for the general administration of the Plan. The Plan operates on a “Plan Year” consisting of the
12-consecutive month period commencing on January 1 of each year.
Certain employers that are affiliated with the Company have adopted the Plan for the purpose of
providing benefits for their employees and their beneficiaries. A complete list of such employers
and their addresses can be obtained from the Committee upon written request. As used in this
Summary Plan Description, the term “Company” also refers to such employers.
2 Am I Eligible to become a member of the Plan?
You are eligible to become a Member of the Plan (an “Eligible Employee”) if you are employed by
the Company and are not (1) a member of a collective bargaining unit unless your collective
bargaining agreement provides for your coverage under the Plan, (2) a leased employee (an
employee of another employer who performs services for the Company under a leasing
arrangement), (3) a non-resident alien with no earned income from the Company that constitutes
income from sources within the United States, or (4) designated, compensated, or otherwise
classified or treated as an independent contractor or other non-common law employee.
3 When will I become a member of the Plan?
If you are an Eligible Employee, you will become a Member of the Plan on the date upon which
you complete six months of Participation Service or the date upon which you reach age 18,
whichever is later. Your Participation Service is determined in the same manner as your Vesting
Service, see Question 16. If you were a Member prior to a termination of your employment, you
will remain a Member upon being reemployed. If you had completed six months of Participation
Service and had reached age 18 but had not become a Member because you were not an
Eligible Employee, then you will become a Member upon becoming an Eligible Employee
because of a change in your employment status. Further, if you had completed six months of
Participation Service but had not reached age 18 prior to a termination of your employment, you
will become a Member upon being reemployed. Finally, if you are a Member who ceases to be an
Eligible Employee but you remain an employee you will continue to be a Member but, on and
after the date you cease to be an Eligible Employee, you will no longer be entitled to make
Before-Tax Contributions to the Plan, see Question 5, or share in allocations of Employer
Contributions, see Question 10, unless and until you again become an Eligible Employee.
4 What is my "compensation" for the purposes of the plan?
All of your compensation from the Company while a Plan Member is considered for purposes of
the Plan other than reimbursements or other expense allowances, fringe benefits, moving
expenses, Company contributions to this or any other deferred compensation program, and
certain types of compensation, such as stock options, subject to special tax treatment. Your
“Before-Tax Contributions” to this Plan as described under Question 5, and other amounts that
you could have received in cash had you not entered into a salary reduction agreement with the
Company, are considered Compensation. However, your annual Compensation taken into
account for purposes of the Plan will not exceed $170,000. This amount will be adjusted
periodically in accordance with statutory limits to reflect increases in the cost-of-living and will be
prorated for a Plan Year of less than twelve months and to the extent otherwise required by
Group 1 Automotive Employee Benefits & Policies 401K Plan 7
5 What is a "before-tax" contribution?
As a Member you may elect to defer the receipt of a whole percentage of from 1% to 15% of your
current Compensation (but not in excess of $10,500 per calendar year including amounts
deferred under this Plan and any other plan permitting elective deferrals in which you participate).
The $10,500 limitation will be adjusted periodically in accordance with statutory limits to reflect
changes in the cost of living. In accordance with your election, the Company will reduce your
Compensation by the amount that you elect to defer and instead of currently paying such
Compensation to you in cash, will contribute this amount on your behalf to the Plan as a “Before-
Tax Contribution.” The amount of Compensation that you elect to defer will not be subject to
federal income tax in the year deferred but will be subject to Social Security taxes.
6 When and by what means may I change my election of before-tax contributions?
Your election will remain in effect until you change or cancel it in accordance with procedures
prescribed by the Committee. You may (1) change the percentage amount of Compensation that
you had previously elected to defer, (2) cancel your election, or (3) following such cancellation,
resume deferrals at any time. The change will become effective as soon as administratively
7 Can the Company change my election?
Current law imposes special nondiscrimination rules regarding the amount of Compensation that
may be deferred by “highly compensated employees” as that term is defined in the Internal
Revenue Code. If you are included within this definition, it is possible that the percentage of your
Compensation that you elect to defer may be reduced by the Committee on a temporary basis in
order to satisfy these nondiscrimination requirements. If such reductions are insufficient to satisfy
the nondiscrimination requirements, a portion of your deferrals (together with income thereon)
may be distributed to you. Any distributions will be subject to income tax. You will be notified by
the Committee if a reduction or distribution is required.
The Committee may also temporarily reduce your election in order to ensure that you do not
exceed the annual limit described in Question 5 and certain other limits set forth in the Internal
8 May I make after-tax contributions to the Plan?
No. All contributions to the Plan will be on a before-tax basis.
9 May I make a Rollover contribution or transfer to the Plan?
If you are a Plan Member and receive a qualifying distribution from an individual retirement
account or annuity or from another qualified plan, you may make a rollover contribution of that
distribution to this Plan in accordance with procedures established by the Committee. If you are a
Plan Member, you may also elect to make a direct rollover of a qualifying distribution from
another qualified plan to this Plan by directing that the distribution be paid directly to the Trustee
of this Plan in accordance with procedures established by the Committee. Any rollover
contribution or transfer will be held in your Rollover Contribution Account, see Question 11. You
will always have a nonforfeitable right to the amounts in your Rollover Contribution Account.
10 How much does the Company contribute on my behalf?
The Company may, in its sole discretion, make “Employer Matching Contributions” on your behalf
based upon the amount of your Before-Tax Contributions, see Question 5. The Company will
determine the matching percentage, the percentage of your Before-Tax Contributions to be
matched, and the timing of the match. Employer Matching Contributions may vary among
operating units of the Company’s business. The Company may make Employer Matching
Contributions in the form of cash or shares of Group 1 Common Stock or a combination of both.
In certain cases, Employer Matching Contributions on behalf of “highly compensated employees”
may be reduced to the extent necessary to comply with limitations imposed by the Internal
Revenue Code similar to those described under Question 7.
Group 1 Automotive Employee Benefits & Policies 401K Plan 8
11 What accounts are maintained for me under the Plan?
A “Before-Tax Account, an “Employer Contribution Account,” and a “Rollover Contribution
Account” are maintained for you.
Before-Tax Account. An individual account maintained for you to which is credited your Before-
Tax Contributions, see Question 5, and certain special Employer Discretionary Contributions, see
Employer Contribution Account. An individual account maintained for you to which is credited
your share of any Employer Matching Contributions see Question 10.
Rollover Contribution Account. An individual account maintained for you to which is credited
your rollover contributions or transfers, see Question 9, if any.
12 How and when do my accounts increase?
Your Accounts increase through (1) your Before-Tax Contributions made by the Company on
your behalf, (2) the Employer Matching Contributions, if any, made on your behalf, (3) your
rollover contributions or transfers, if any, and (4) earnings on such amounts. In addition, in the
discretion of the Company’s Board of Directors, certain special Employer Discretionary
Contributions for a Plan Year may be allocated among the Before-Tax Accounts and/or Employer
Contribution Accounts (as determined by the Board of Directors) of some or all Members who are
not “highly compensated employees,” as that term is defined in the Internal Revenue Code, to the
extent such allocation is necessary to permit the Plan to meet certain nondiscrimination rules
established under the Internal Revenue Code.
Contributions to the Plan are allocated to your Accounts when received by the Trustee. The
assets of the Plan are valued daily. Your Accounts will be divided into subaccounts to reflect your
investment in a particular Investment Fund or Funds as described in Question 13. The balance in
each of your Accounts at any time will be equal to the sum of the balances in each of your
subaccounts maintained within such Account at that time.
13 How are my accounts invested?
You are permitted to direct the investment of the amounts held in your Accounts among the
investment alternatives made available by the Committee. You may give investment instructions
or modify your then-current investment instructions as frequently as daily by contacting a Merrill
Lynch Customer Service Representative at 1-800-228-401K . The request will normally be
processed the same day if initiated prior to 3 p.m. eastern time, and the following business day if
initiated thereafter. If you fail to make an investment election for your account, your account will
be invested in a lower-risk, lower-return alternative selected by the Committee. Presently, this
alternative is the Merrill Lynch Retirement Preservation Trust.
Investment Funds: Information pertaining to the specific investment funds provided for under
the Plan can be found in your enrollment and educational brochures. This information includes a
description of the investment funds available under the Plan and, with respect to each fund, a
general description of the investment objectives and risks and potential return characteristics of
such fund, including information relating to the type and diversification of assets comprising the
fund’s portfolio. In addition, detailed or supplemental information on any of the funds can be
obtained by contacting Merrill Lynch at 1-800-228-401K (1-800-228-4015), or by making a
request in writing to Merrill Lynch at the address set forth below.
Group 1 Common Stock Fund: One of the investment funds that the Committee has made
available under the Plan is the Group 1 Common Stock Fund. The Group 1 Common Stock Fund
is not a diversified fund and invests only in Group 1 Common Stock (with a de minimis amount of
cash and cash equivalents). The value of this fund can increase and decrease significantly since
it invests only in one stock. We strongly encourage you to carefully review the Company’s public
filings with the Securities and Exchange Commission, including the Company’s most recent
Annual Report on Form 10-K and each Quarterly Report on Form 10-Q, before electing to invest
in the Group 1 Common Stock Fund.
Transaction Fees and Expenses: Except for purchases and sales of Group 1 Common Stock
there are no transaction fees or expenses (e.g., commissions, sales loads, deferred sales
Group 1 Automotive Employee Benefits & Policies 401K Plan 9
charges, redemption or exchange fees) associated with the purchase or sale of shares of
investment funds offered under the Plan. However, each investment fund contains other fees and
expenses, which are reflected in such fund’s net investment return. A commission of ten cents
per share applies to all purchases and sales of Group 1 Common Stock.
Voting Rights: Except for investments in Group 1 Common Stock, voting or similar rights
associated with shares of the investment funds held in your Account will be exercised by the
Plan’s trustee as directed by the Committee and will not be passed through to Members.
Voting, tender, or similar rights associated with Group 1 Common Stock will be passed through to
Members invested in the Group 1 Common Stock Fund. Any shares of Group 1 Common Stock
not voted by such Members will be voted by the Plan’s trustee in the same ratio as shares with
respect to which voting direction was received.
Procedures have been designed to safeguard the confidentiality of any Member’s or beneficiary’s
rights with respect to the Member’s or beneficiary’s shares of Group 1 Common Stock held under
the Plan, including the right to purchase, sell, hold, or exercise voting, tender, or similar rights.
For example, procedures with ChaseMellon Shareholder Services, L.L.C., the Plan’s transfer
agent for Group 1 Common Stock, have been implemented so that your employer does not have
access to how you voted Group 1 Common Stock, your individual proxy cards, or proxy card
shareholder comments. In addition, your decisions to buy, sell, or hold Group 1 Common Stock
are restricted to those assisting in the administration of the Plan. The Committee is responsible
for ensuring that these procedures are sufficient to safeguard the confidentiality of this information
and that such procedures are being followed. If the Committee determines that a situation has
potential for undue influence by your employer with respect to your rights as a shareholder of the
Company (through your Plan Accounts), the Committee will appoint an independent fiduciary to
perform such activities as are necessary to prevent undue influence. These situations may
include tender offers, exchange offers, or contested Board of Director elections. You will be
notified of such appointment and of the name, address, and phone number of the independent
Information Available Upon Request: Upon request, you may receive (based on the latest
information available to the Plan):
A description of the annual operating expenses of each investment fund available under
the Plan (e.g., investment management fees, administrative fees, transaction costs),
which reduce the rate of return you receive, and the aggregate amount of such expenses
expressed as a percentage of average net assets of the investment fund;
Copies of any prospectuses, financial statements and reports, and of any other materials
relating to the investment funds available under the Plan, to the extent such information is
provided to the Plan;
A list of assets comprising the portfolio of certain investment funds constituting “Plan
assets” (generally collective or common trust funds, but not mutual funds) available under
the Plan, the value of each such asset (or the proportion of the investment alternative
which it comprises) and, with respect to each such asset which is a fixed-rate investment
contract issued by a bank or savings and loan association, the name of the issuer, term
of the contract, and specified rate of return;
Information concerning the value of shares or units in each investment fund offered under
the Plan, as well as the past and current investment performance of each fund
determined net of expenses; and
Information concerning the value of shares or units in each investment fund offered under
the Plan held in your Accounts.
Group 1 Automotive Employee Benefits & Policies 401K Plan 10
If you would like to receive any of the above information, please contact:
Group 1 Automotive, Inc.
Client Service Team
P. O. Box 173852
Denver, CO 80217-3852
Telephone: 1-800-228-401K 
General Information: The Committee is authorized to establish and implement procedures for
the Plan’s Member-directed investment program. The Committee has designated Merrill Lynch,
as detailed above, to assist in the program’s operation. Neither the Committee, Merrill Lynch, the
Company, nor any of their employees or agents may give investment advice regarding the
investment of your Accounts. Any information furnished under the program does not constitute
investment advice or recommendations.
For more complete information about any of the investment funds available under the Plan,
including their special risks, management fees, and other charges and expenses, please consult
a prospectus. Prospectuses may be obtained by calling 1-800-228-401K (1-800-228-4015).
Please read the prospectus carefully before you invest.
The Plan intends to meet the requirements of section 404(c) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) and section 2550.404(c)-1 of Title 29 of the Code of
Federal Regulations. Fiduciaries of the Plan may be relieved of liability for any losses which are
the direct and necessary result of investment instructions given by Members or beneficiaries.
14 May I make withdrawals while I remain employed?
You may withdraw from your Rollover Contribution Account, if any, an amount not exceeding the
balance of that Account at any time.
If you have attained age 59½, you may withdraw an amount not exceeding your Vested Interest,
see Question 16, in all of your Accounts at any time. Such withdrawal will come, first, from your
Rollover Contribution Account, second, from your Vested Interest in your Employer Contribution
Account and, finally, from your Before-Tax Account.
If you are faced with a financial hardship, as determined by the Committee, have made all
permissible withdrawals pursuant to the above paragraphs and pursuant to the terms of any other
retirement plans of the Company and its affiliates in which you are a member, and have obtained
all available loans under the Plan and pursuant to the terms of any other retirement plans of the
Company and its affiliates in which you are a member, you may withdraw from your Employer
Contribution Account and your Before-Tax Account. The amount you may withdraw may not
exceed the sum of (1) your Vested Interest, see Question 16, in the balance of your Employer
Contribution Account and (2) the aggregate amount of Before-Tax Contributions that have been
credited to your Before-Tax Account, less any previous withdrawals or distributions of such
amounts, but not more than the balance of your Before-Tax Account. In any event, you may not
withdraw a total amount in excess of the amount determined by the Committee as being available
for withdrawals due to your financial hardship, including any amount necessary to pay any
income taxes or penalties reasonably anticipated to result from the withdrawal. Such a withdrawal
will come first from your Vested Interest in your Employer Contribution Account and then from
your Before-Tax Account.
The determination of the existence of a financial hardship and the amount required to be
distributed to meet the need created by the hardship will be made by the Committee pursuant to
the legal requirements imposed upon the Committee from time to time in making such
determination. A withdrawal will be deemed to be made on account of an immediate and heavy
financial need if the withdrawal is on account of:
unreimbursed or unreimbursable medical expenses incurred or to be incurred by you,
your spouse, or your dependents;
your purchase (excluding mortgage payments) of a principal residence;
Group 1 Automotive Employee Benefits & Policies 401K Plan 11
payment of tuition and related educational fees, and room and board expenses, for the
next twelve-months of post-secondary education for you, your spouse, or your
the need to prevent your eviction from your principal residence or the foreclosure on the
mortgage of your principal residence.
If you make a hardship withdrawal, then, for a period of 12 months following such withdrawal, you
may not again make (1) Before-Tax Contributions to the Plan or (2) any other elective
contributions or employee contributions to any other plan of the Company or its affiliates. Further,
you may not make Before-Tax Contributions under the Plan (or under any other plan maintained
by the Company or its affiliates) for the calendar year immediately following the calendar year of
the withdrawal in excess of the limit described in Question 5, which is in effect for such next
calendar year, less the amount of your Before-Tax Contributions for the calendar year of the
All withdrawals may be made from the Plan only in accordance with the procedures established
by the Committee. You may make only one withdrawal (other than a hardship withdrawal) from
the Plan in any one Plan Year and no withdrawals may be made from an Account to the extent
that it has been pledged to secure a loan, see Question 15. If an Account from which a
withdrawal is to be made is invested in more than one Investment Fund described in Question 13,
then you must designate from which fund the withdrawal will be made. In the absence of such
designation, the withdrawal will be made pro rata from each such fund in which the Account is
invested. You may elect to have all or part of the taxable portion of your withdrawal (other than a
hardship withdrawal from your Before-Tax Account) transferred directly to another qualified plan
or annuity plan or an individual retirement account or an individual retirement annuity (other than
an endowment contract) established by you.
15 May I borrow from the plan?
You may apply to the Committee for a loan from the Plan in an amount not to exceed 50% of the
balance of your Accounts. Any loan will come, first, from your Rollover Contribution Account,
second, from your Vested Interest, see Question 16, in your Employer Contribution Account, and,
finally, from your Before-Tax Account. Notwithstanding the foregoing, in no event may you borrow
an amount in excess of $50,000 (reduced by the highest outstanding balance of loans to you from
the Plan in the past year). The Committee may establish a processing fee applicable to loans
from the Plan.
Any loan made will bear interest at one percent above the prime rate of interest as quoted in The
Wall Street Journal (or such other national publication as the Committee may in its discretion
select and uniformly apply for such purposes) for the first business day of the month in which the
loan is made and such loan will be made as an investment of a segregated loan fund to be
established in the Trust Fund for you. Your loan will be secured by the segregated loan fund,
which will be funded by liquidating the portion of your Accounts necessary to fund the loan.
As a condition to authorizing any loan, the Committee will require that you authorize the Company
to make payroll deductions to be transferred to the Trustee in payment of your loan plus interest.
The terms of the loan (1) will require level amortization with payments not less frequently than
quarterly, (2) will require that it be repaid within five years, (3) will permit prepayment in full
without penalty, and (4) will require that the balance of the loan becomes due and payable no
later than the date you are first entitled to a distribution from the Plan following termination of
If you are on an unpaid leave of absence, you may elect to suspend payment on your loan during
such leave for up to one year. Upon your return from the leave or upon the expiration of one year
you may refinance your loan over a period that does not extend beyond the original term of the
If you do not repay your loan (including interest) within the prescribed time, your loan will be
repaid from the segregated loan fund; provided, however, that the portion of your Before-Tax
Account pledged as security for a loan may not be used to satisfy the payment of such loan
(including interest) prior to the time such amounts are otherwise distributable from the Plan. Any
Group 1 Automotive Employee Benefits & Policies 401K Plan 12
such outstanding loan (including interest) will be repaid from the segregated loan fund prior to any
withdrawal or distribution of benefits from such segregated loan fund.
No more than one loan will be made to you in any 12-month period. A loan may not be for an
amount less than $1,000.00. No loan will be made to you if you owe any amount on an
outstanding loan previously made to you from the Plan.
16 What benefits do I receive when I leave the employ of the Company?
Retirement Benefits: If you terminate employment on or after reaching age 65, you will be
entitled to 100% of the amounts in your Accounts.
Disability Benefits: If you terminate employment by reason of total and permanent disability,
you will be entitled to 100% of the amounts in your Accounts. You will be considered totally and
permanently disabled upon certification by the Committee, supported by medical opinion (unless
waived by the Committee), that you are permanently incapable of performing your job for physical
or mental reasons.
Death Benefits: If you die while employed, your beneficiary, see Question 19, will be entitled to
100% of the amounts in your Accounts.
Severance Benefits: If you terminate employment prior to reaching age 65 for a reason other
than total and permanent disability or death, you will be entitled to 100% of the amounts in your
Before-Tax Account and Rollover Contribution Account, if any. You will also be entitled to a
percentage (your “Vested Interest”) of the amounts in your Employer Contribution Account. Your
Vested Interest will be determined by your years of “Vesting Service” in accordance with the
Full Years of Vesting Service Vested Interest
Less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years or more 100%
Vesting Service: You will be credited with Vesting Service based upon your aggregate service
with the Company, whether or not completed consecutively. Service with an employer that is a
member of a controlled group of employers (as defined in the Internal Revenue Code) with the
Company will count as service with the Company.
If you leave the employ of the Company while actively employed (not on authorized leave) and
are reemployed within one year, the period while you were not employed will be considered as a
period of service in determining your Vesting Service. If you leave the employ of the Company
during an authorized leave and are reemployed within one year of the start of the authorized
leave, the period while you were not employed will be considered as a period of service in
determining your Vesting Service.
If you leave the employ of the Company at a time when you do not have any Vested Interest, and
are gone for a period that equals or exceeds the greater of (1) five years or (2) your prior years of
Vesting Service, your prior years of Vesting Service will be disregarded. For this purpose, you will
not be deemed to have terminated your employment if you are absent (but are not on an
authorized leave of absence) due to pregnancy, childbirth, adoption of a child, or the care of a
child after birth or adoption until the second anniversary of the first date of such absence. The
period between the first and second anniversaries of the first date of such absence will neither be
considered to be a period of service with the Company nor a period of severance.
Forfeitures: If you terminate employment with a Vested Interest of less than 100% and receive a
lump sum distribution by the close of the second Plan Year following the Plan Year in which your
employment is terminated, the portion of your Employer Contribution Account in which you do not
have a Vested Interest will become a forfeiture as of the date of your distribution and will be
applied to reduce Company contributions and/or pay Plan administrative expenses. If you are
Group 1 Automotive Employee Benefits & Policies 401K Plan 13
subsequently reemployed by the Company prior to an absence of five consecutive years, the
forfeited amount will be restored to your Employer Contribution Account unadjusted by any gains
or losses of the Trust Fund since such forfeiture; provided, however, that if you received a
distribution as described above, you must repay to the Plan the amount distributed to you within
five years from the date you are reemployed.
If your Vested Interest is less than 100% and you make a withdrawal while employed, or receive
a distribution other than a lump sum distribution, or receive a lump sum distribution after the close
of the second Plan Year following the Plan Year in which you terminated your employment, a
separate account will be established for the amounts remaining in your Employer Contribution
Account at the time of the withdrawal or distribution, and your Vested Interest in that separate
account will be determined under a special formula provided in the Plan. After an absence of five
consecutive years, or upon your death, if earlier and if you are not employed by the Company on
the date of your death, the forfeitable portion of your separate account and Employer Contribution
Account, if any, will be forfeited and will be applied to reduce Company contributions.
17 How are my benefits paid?
If you terminate your employment for any reason, your benefit will be paid in one lump sum cash
payment, except that, to the extent your Accounts are invested in Group 1 Common Stock, you
may elect payment in whole shares of Group 1 Common Stock with any balance of your Accounts
(including fractional shares of Group 1 Common Stock) paid in cash. In the event of your death,
your benefit will be paid to your designated beneficiary see Question 19.
Your benefit will generally be paid to you as soon as administratively feasible after the date you
terminate employment. However, if your Vested Interest in your Accounts exceeds $5,000 and
you have not reached age 65, died, or consented to the payment, the payment of your benefit will
be deferred to the date that is as soon as administratively feasible after the date you reach age
65 or die (or as soon as administratively feasible after any earlier date you may elect by prior
written notice to the Committee).
If your Vested Interest in your Accounts does not exceed $5,000, your benefit will always be
distributed to you as soon as administratively feasible after the date you terminate employment.
Your benefit will be eligible for direct rollover treatment. You will have the option to request that all
or a portion of your benefit be transferred directly to another qualified plan or annuity plan or an
individual retirement account or individual retirement annuity (other than an endowment contract)
established by you, with any remainder paid directly to you. Prior to any transfer, the Committee
may request that you furnish a statement from the plan or account to which the transfer is to be
made that it is, or is intended to be, an individual retirement account, an individual retirement
annuity, a qualified plan described in section 401(a) of the Internal Revenue Code, or a qualified
annuity plan described in section 403(a) of the Internal Revenue Code, as applicable, and that it
will accept the transfer. Any portion of your benefit you elect to have paid directly to you will have
20% withheld for federal income tax by the Plan. The withholding requirement imposed on the
Plan is mandatory and you will not be allowed to waive it. Only the benefit amount received
directly by you will be subject to withholding. No withholding will be imposed on the portion of
your benefit you elect to have transferred directly to another plan or account.
If your benefit is payable to your spouse in the event of your death, your spouse will have the
same direct rollover rights and withholding requirements as are described above except that the
direct rollover may only be made to an individual retirement account or individual retirement
annuity. A beneficiary other than your spouse will not have direct rollover rights, but, in this case,
mandatory income tax withholding will not apply.
18 May I sell Group 1 common stock distributed to me from the Plan?
Generally, Members or beneficiaries who are not “affiliates” of the Company (as defined in Rule
405 of the Securities Act) may sell or transfer shares of Group 1 Common Stock distributed to
them from the Plan. An affiliate is any person who controls or is a part of a group that controls the
Company. Executive officers and directors of the Company will generally be considered to be
The Company has not filed a registration statement, and no prospectus is available, regarding
Group 1 Automotive Employee Benefits & Policies 401K Plan 14
reoffers or resales by affiliates of the Company of securities distributed from the Plan. Reoffers or
resales by affiliates of the Company may be made only with an effective registration statement
under the Securities Act or in accordance with Rule 144 or another exemption from applicable
Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) generally provides
that any profit realized by an officer or director of the Company, or a beneficial owner of more
than 10% of the Group 1 Common Stock who purchases and sells, or sells and purchases, any
equity security of the Company within any period of less than six months (a “short-swing sale”)
shall inure to and be recoverable by the Company.
An election to have Before-Tax Contributions invested in the Group 1 Common Stock Fund is
exempt from Section 16(b); however, an election to transfer funds from the Group 1 Common
Stock Fund to another fund may be deemed to be a sale of Group 1 Common Stock and an
election to transfer funds to the Group 1 Common Stock Fund from another fund may be deemed
to be a purchase of Group 1 Common Stock for purposes of Section 16(b).
The foregoing discussion is a summary of Section 16 of the Exchange Act and the rules
thereunder as they relate to certain transactions by officers and directors of the Company. The
discussion does not purport to be a complete analysis. Accordingly, officers and directors are
strongly advised to consult legal counsel before effecting any transaction in Group 1 Common
19 How do I select a beneficiary?
You may designate a beneficiary or beneficiaries to receive any Plan benefit owing upon your
death by executing and filing the prescribed form with the Committee. Any such designation may
be changed at any time by executing and filing a new form with the Committee. If you are
married, your spouse must consent in writing if you designate someone other than your spouse
as your primary beneficiary. If you die with no designation in effect, your benefit will be paid to
your surviving spouse, if any, or otherwise to the executor or administrator of your estate or to
your heirs at law.
20 Can I assign any of my benefits?
Neither you nor your beneficiary may assign, pledge, encumber, or otherwise transfer any of your
right or interest of any kind in your benefits. However, the Committee will comply with the terms of
any “qualified domestic relations order” as required under applicable law.
21 What is the claims review procedure under the plan?
In the event the Committee denies or modifies your claim for benefits under the Plan, you will be
notified in writing of the following:
the specific reason for the denial or modification;
the Plan provisions upon which the denial or modification is based;
any additional material or information necessary to perfect your claim and the reasons
why such material or information is necessary;
the Plan’s claim review procedure.
In the event your claim is denied or modified, you may, within 60 days following receipt of the
denial or modification, submit a written request to the Committee for review of its initial decision.
Within 60 days following the request for review, the Committee must, after providing you with a
full and fair review, render its final decision in writing to you stating specific reasons for its
decision. If special circumstances require an extension of such 60-day period, the Committee’s
decision will be rendered as soon as possible, but not later than 120 days after receipt of your
request for review. If an extension of time for review is required, you will receive written notice of
the extension prior to the commencement of the extension period.
22 What is a top-heavy Plan?
Certain provisions of the Plan are required by law to take effect automatically if the Plan is
Group 1 Automotive Employee Benefits & Policies 401K Plan 15
classified as “top-heavy.” A top-heavy plan is one in which the sum of the Account balances of
certain “key employees” exceeds 60% of the sum of the Account balances of all employees. If the
Plan is determined to be top-heavy for a Plan Year, the Company will be required to make a
minimum contribution to the Plan on your behalf if you are not a key employee and if you are
employed by the Company on the last day of the Plan Year to which the top-heavy determination
applies. The minimum contribution will be the lesser of (1) 3% of your Compensation or (2) a
percentage equal to the largest percentage of Compensation contributed on behalf of any key
The Committee will notify you if the Plan becomes “top-heavy.”
23 Can the Plan be amended?
Subject to special statutory rules regarding qualified plan amendments, the Company reserves
the right to amend the Plan at any time by action of its Board of Directors or by action of the
24 What are my rights upon plan termination?
Plan termination insurance under Title IV of the Employee Retirement Income Security Act of
1974 (“ERISA”) does not apply to this Plan since your interests are maintained in individual
The Company has established the Plan with the intention and expectation that from year to year it
will be able to, and will deem it advisable to, make its contributions as described in Question 10.
However, the Company realizes that circumstances not now foreseen, or circumstances beyond
its control, may make it either impossible or inadvisable to continue to make its contributions.
Therefore, the Company has the power to terminate the Plan at any time.
If contributions to the Plan are discontinued or if the Plan is terminated or partially terminated with
respect to your interest, you will be entitled to 100% of the amounts in your Accounts. Your
Accounts will continue to be invested as described in Question 13 until the balance of your
Accounts is distributed. In the case of discontinuance, distribution will occur as otherwise
provided in the Plan. In the case of termination, distribution will occur as soon as practicable
following Internal Revenue Service approval.
25 What are my rights under ERISA?
As a Member of the Group 1 Automotive, Inc. 401(k) Savings Plan, you are entitled to certain
rights and protections under ERISA, which provides that all Plan participants shall be entitled to:
Examine without charge, at the Plan Administrator’s office and at other specified locations such
as worksites, all Plan documents, including copies of all documents filed by the Plan with the U.S.
Department of Labor, such as detailed annual reports and Plan descriptions.
Obtain copies of all Plan documents and other Plan information upon written request to the Plan
Administrator. The Plan Administrator may make a reasonable charge for the copies.
Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by
law to furnish each participant with a copy of this summary annual report.
Obtain a statement telling you of your vested rights under the Plan. If you do not have such
vested rights, the statement will tell you how many more years you have to work to get vested
rights. This statement must be requested in writing and is not required to be given more than
once a year. The Plan must provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes obligations upon the people
who are responsible for the operation of employee benefit plans.
The people who operate your Plan, called “fiduciaries” of the Plan, have a duty to do so prudently
and in the interest of you and other Plan participants and beneficiaries. No one, including your
employer, may fire you or otherwise discriminate against you in any way to prevent you from
obtaining benefits or exercising your rights under ERISA.
If your claim for a benefit is denied in whole or in part, you must receive a written explanation of
Group 1 Automotive Employee Benefits & Policies 401K Plan 16
the reason for the denial. You have the right to have your claim reviewed and reconsidered.
Under ERISA, there are steps you can take to enforce the above rights. For instance, if you
request materials from the Plan Administrator and do not receive them within 30 days, you may
file suit in a federal court. In such a case, the court may require the Plan Administrator to provide
the materials and pay you up to $100 a day until you receive the materials, unless the materials
were not sent because of reasons beyond the control of the Plan Administrator. If you have a
claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or
federal court. If it should happen that Plan fiduciaries misuse the Plan’s money, or if you are
discriminated against for asserting your rights, you may seek assistance from the U. S.
Department of Labor, or you may file suit in a federal court. The court will decide who should pay
court costs and legal fees. If you are successful, the court may order the person you have sued to
pay these costs and fees. If you lose, the court may order you to pay these costs and fees (for
example, if it finds that your claim is frivolous).
If you have any questions about your Plan, you should contact the Plan Administrator. If you have
any questions about this statement or about your rights under ERISA, you should contact the
nearest office of the Pension and Welfare Benefits Administration, U.S. Department of Labor,
listed in your telephone directory or the Division of Technical Assistance and Inquiries, Pension
and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Avenue N.W.,
Washington D.C. 20210.
26 What are the federal income tax aspects of the Plan?
It is the intent of the Company that the Plan and its related trust, as presently constituted, be
“qualified” within the meaning of sections 401(a) and 501(a) of the Internal Revenue Code. The
Company intends to apply for a determination letter from the Internal Revenue Service that the
Plan is qualified. Depending on changes to the Internal Revenue Code or applicable Treasury
Regulations, however, the Company may need to amend the Plan from time to time in order for
the Plan to maintain its qualified status. Assuming the Plan is operated in accordance with the
Plan document and applicable regulations:
The Company is permitted to deduct for federal income tax purposes the amount of the
Company’s contributions to the Plan, within specified limits;
Your Before-Tax Contributions and any Employer Contributions made to the Plan on
your behalf will not be currently taxable to you; and
Neither such contributions to the Plan nor the income and/or growth of the Investment
Funds under the Plan will be taxable to you prior to the time that you receive a
distribution from the Plan.
The federal income tax treatment applicable to distributions of Plan benefits is governed by
complex rules set forth in the Internal Revenue Code and the Treasury Regulations promulgated
thereunder. You are urged to carefully consider the tax consequences associated with receiving a
distribution from the Plan in advance of the request or receipt of such distribution, and to refer
specific questions to your own tax advisors. In order to provide you with a general description of
the federal income tax rules applicable to Plan distributions, you or your beneficiary will
automatically receive, prior to your receipt of a distribution from the Plan, a copy of a “Special Tax
Notice Regarding Plan Payments” which summarizes these rules. A copy of this notice, as
presently constituted, is attached as Exhibit A.
The foregoing does not purport to be a complete statement of the federal income tax aspects of
the Plan and is based on federal income tax laws currently in effect and is not intended as a
substitute for careful tax planning by each Member. In addition to the federal income tax
consequences discussed above, participation in the Plan may have significant state and local
income tax consequences, which are not discussed in this summary. Accordingly, participants are
urged to consult their tax advisors with respect to the effect on their own particular circumstances
of the matters discussed in this summary.
Group 1 Automotive Employee Benefits & Policies 401K Plan 17
GROUP 1 AUTOMOTIVE, INC.
401(k) SAVINGS PLAN
SPECIAL TAX NOTICE REGARDING PLAN PAYMENTS
This notice contains important information you will need before you decide how to receive your benefits
from the GROUP 1 AUTOMOTIVE, INC. 401(k) SAVINGS PLAN (the “Plan”).
This notice is provided to you by the Plan Administrative Committee (your “Plan Administrator”) because
all or part of the payment that you will soon receive from the Plan may be eligible for rollover by you or
your Plan Administrator to a traditional IRA or another qualified employer plan. A “traditional IRA” does
not include a Roth IRA, SIMPLE IRA, or education IRA.
If you have additional questions after reading this notice, you can contact your Plan Administrator at 1-
Group 1 Automotive Employee Benefits & Policies 401K Plan 18
There are two ways you may be able to receive a Plan payment that is eligible for rollover:
certain payments can be made directly to a traditional IRA or, if you choose, another
qualified employer plan that will accept it (“DIRECT ROLLOVER”), or
the payment can be PAID TO YOU.
If you choose a DIRECT ROLLOVER
Your payment will not be taxed in the current year and no income tax will be withheld.
Your payment will be made directly to your traditional IRA or, if you choose, to another
qualified employer plan that accepts your rollover. Your Plan payment cannot be rolled
over to a Roth IRA, a SIMPLE IRA, or an education IRA because these are not traditional
Your payment will be taxed later when you take it out of the traditional IRA or the qualified
If you choose to have a Plan payment that is eligible for rollover PAID TO YOU
You will receive only 80% of the payment, because the Plan administrator is required to
withhold 20% of the payment and send it to the IRS as income tax withholding to be
credited against your taxes.
Your payment will be taxed in the current year unless you roll it over. Under limited
circumstances, you may be able to use special tax rules that could reduce the tax you
owe. However, if you receive the payment before age 59½, you also may have to pay an
additional 10% tax.
You can roll over the payment by paying it to your traditional IRA or to another qualified employer plan
that accepts your rollover within 60 days after you receive the payment. The amount rolled over will not
be taxed until you take it out of the traditional IRA or the qualified employer plan.
If you want to roll over 100% of the payment to a traditional IRA or another qualified employer plan, you
must find other money to replace the 20% that was withheld. If you roll over only the 80% that you
received, you will be taxed on the 20% that was withheld and that is not rolled over.
Group 1 Automotive Employee Benefits & Policies 401K Plan 19
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER
Payments from the Plan may be “eligible rollover distributions.” This means that they can be rolled over
to an IRA or to another employer plan that accepts rollovers. Payments from a plan cannot be rolled over
to a Roth IRA, a SIMPLE IRA, or an education IRA. Your Plan Administrator should be able to tell you
what portion of your payment is an eligible rollover distribution. The following types of payments cannot
be rolled over:
Nontaxable Payments. In general, only the “taxable portion” of your payment can be rolled over. If you
have made “after-tax” employee contributions to the Plan, these contributions will be nontaxable when
they are paid to you, and they cannot be rolled over. (After-tax employee contributions generally are
contributions you made from your own pay that were already taxed.) Your Plan Administrator should be
able to tell you how much of your payment is the taxable portion and how much is the after-tax employee
Payments Spread Over Long Periods. You cannot roll over a payment if it is part of a series of equal (or
almost equal) payments that are made at least once a year and that will last for
your lifetime (or your life expectancy), or
your lifetime and your beneficiary’s lifetime (or life expectancies), or
a period of ten years or more.
Required Minimum Payments. Beginning when you reach age 70½ or retire, whichever is later, a
certain portion of your payment cannot be rolled over because it is a “required minimum payment” that
must be paid to you. Special rules apply if you own 5% or more of your employer.
Hardship Withdrawals of Before-Tax Contributions. You cannot roll over hardship withdrawals of
before-tax employee contributions to the Plan. Your Plan Administrator should be able to tell you if your
hardship withdrawal includes amounts which cannot be rolled over.
II. DIRECT ROLLOVER
A direct rollover is a direct payment of the amount of your Plan benefits to a traditional IRA or another
qualified employer plan that will accept it. You can choose a direct rollover of all or any portion of your
payment that is an eligible rollover distribution, as described in Part I above. You are not taxed on any
portion of your payment for which you choose a direct rollover until you later take it out of the traditional
IRA or qualified employer plan. In addition, no income tax withholding is required for any portion of your
Plan benefits for which you choose a direct rollover.
Direct Rollover to a Traditional IRA. You can open a traditional IRA to receive the direct rollover. If you
choose to have your payment made directly to a traditional IRA, contact an IRA sponsor (usually a
financial institution) to find out how to have your payment made in a direct rollover to an IRA at that
institution. If you are unsure of how to invest your money, you can temporarily establish a traditional IRA
to receive the payment. However, in choosing a traditional IRA, you may wish to consider whether the
traditional IRA you choose will allow you to move all or a part of your payment to another traditional IRA
at a later date, without penalties or other limitations. See IRS Publication 590, Individual Retirement
Arrangements, for more information on traditional IRAs (including limits on how often you can roll over
Direct Rollover to a Plan. If you are employed by a new employer that has a qualified employer plan,
and you want a direct rollover to that plan, ask the plan administrator of that plan whether it will accept
your rollover. A qualified employer plan is not legally required to accept a rollover. If your new employer’s
plan does not accept a rollover, you can choose a direct rollover to a traditional IRA.
Direct Rollover of a Series of Payments. If you receive a payment that can be rolled over to a
traditional IRA or another qualified employer plan that will accept it, and it is paid in a series for less than
ten years, your choice to make or not make a direct rollover for a payment will apply to all later payments
in the series until you change your election. You are free to change your election for any later payment in
Group 1 Automotive Employee Benefits & Policies 401K Plan 20
III. PAYMENT PAID TO YOU
If your payment can be rolled over under Part I above and the payment is made to you in cash, it is
subject to 20% income tax withholding. The payment is taxed in the year you receive it unless, within 60
days, you roll it over to a traditional IRA or another qualified employer plan that accepts rollovers. If you
do not roll it over, special tax rules may apply.
Income Tax Withholding:
Mandatory Withholding. If any portion of your payment can be rolled over under Part I above and you
do not elect to make a direct rollover, the Plan is required by law to withhold 20% of that amount. This
amount is sent to the IRS as income tax withholding. For example, if you can roll over a payment of
$10,000, only $8,000 will be paid to you because the Plan must withhold $2,000 as income tax. However,
when you prepare your income tax return for the year, you will report the full $10,000 as a payment from
the Plan. You will report the $2,000 as tax withheld, and it will be credited against any income tax you
owe for the year.
Voluntary Withholding. If any portion of your payment is taxable but cannot be rolled over under Part I
above, the mandatory withholding rules described above do not apply. In this case, you may elect not to
have withholding apply to that portion. To elect out of withholding, ask the Plan Administrator for the
election form and related information.
Sixty-Day Rollover Option. If you receive a payment that can be rolled over under Part I above, you can
still decide to roll over all or part of it to a traditional IRA or another qualified employer plan that accepts
rollovers. If you decide to roll over, you must contribute the amount of the payment you received to a
traditional IRA or another qualified plan within 60 days after you receive the payment. The portion of your
payment that is rolled over will not be taxed until you take it out of the traditional IRA or the qualified
You can roll over up to 100% of your payment that can be rolled over under Part I above, including an
amount equal to the 20% that was withheld. If you choose to roll over 100%, you must find other money
within the 60-day period to contribute to the traditional IRA or the qualified employer plan to replace the
20% that was withheld. On the other hand, if you roll over only the 80% that you received, you will be
taxed on the 20% that was withheld.
Example: The portion of your payment that can be rolled over under Part I above is $10,000,
and you choose to have it paid to you. You will receive $8,000, and $2,000 will be sent to the IRS
as income tax withholding. Within 60 days after receiving the $8,000, you may roll over the entire
$10,000 to a traditional IRA or a qualified employer plan. To do this, you roll over the $8,000 you
received from the Plan, and you will have to find $2,000 from other sources (your savings, a loan,
etc.). In this case, the entire $10,000 is not taxed until you take it out of the traditional IRA or the
qualified employer plan. If you roll over the entire $10,000, when you file your income tax return
you may get a refund or part or all of the $2,000 withheld.
If, on the other hand, you roll over only $8,000, the $2,000 you did not roll over is taxed in the
year it was withheld. When you file your income tax return, you may get a refund of part of the
$2,000 withheld. (However, any refund is likely to be larger if you roll over the entire $10,000.)
Additional 10% Tax if You are Under Age 59½. If you receive a payment before you reach age 59½
and you do not roll it over, then, in addition to the regular income tax, you may have to pay an extra tax
equal to 10% of the taxable portion of the payment. The additional 10% tax generally does not apply to
(1) payments that are paid after you separate from service with your employer during or after the year you
reach age 55, (2) payments that are paid because you retire due to disability, (3) payments that are paid
to you as equal (or almost equal) payments over your life or life expectancy (or your and your
beneficiary’s lives or life expectancies), (4) payments that are paid directly to the government to satisfy a
federal tax levy, (5) payments that are paid to an alternate payee under a qualified domestic relations
order, or (6) payments that do not exceed the amount of your deductible medical expenses. See IRS
Form 5329 for more information on the additional 10% tax.
Special Tax Treatment if You Were Born Before January 1, 1936. If you receive a payment that can
be rolled over under Part I and you do not roll it over to a traditional IRA or other qualified employer plan
that will accept it, the payment will be taxed in the year you receive it. However, if the payment qualifies
as a “lump sum distribution,” it may be eligible for special tax treatment. (See also “Employer Stock or
Securities,” below.) A lump sum distribution is a payment, within one year, of your entire balance under
Group 1 Automotive Employee Benefits & Policies 401K Plan 21
the Plan (and certain other similar plans of the employer) that is payable to you after you have reached
age 59½ or because you have separated from service with your employer (or, in the case of a self-
employed individual, after you have reached age 59½ or have become disabled). For a payment to be
treated as a lump sum distribution, you must have been a participant in the Plan for at least 5 years
before the year in which you received the distribution. The special tax treatment for lump sum
distributions is described below:
Ten-Year Averaging. If you receive a lump sum distribution and you were born before January 1, 1936,
you can make a one-time election to figure the tax on the payment by using “10-year averaging” (using
1986 tax rates). Ten-year averaging often reduces the tax you owe.
Capital Gain Treatment. If you receive a lump sum distribution and you were born before January 1,
1936, and if you were a participant in the Plan before 1974, you may elect to have the part of your
payment that is attributable to your pre-1974 participation in a plan that was merged into the Plan taxed
as long-term capital gain at a rate of 20%.
There are other limits on the special tax treatment for lump sum distributions. For example, you can
generally elect this special tax treatment only once in your lifetime, and the election applies to all lump
sum distributions that you receive in that same year. If you have previously rolled over a distribution from
the Plan (or certain other similar plans of the employer), you cannot use this special averaging treatment
for later payments from the Plan. If you roll over your payment to a traditional IRA, you will not be able to
use special tax treatment for later payments from the traditional IRA. Also, if you roll over only a portion of
your payment to a traditional IRA, this special tax treatment is not available for the rest of the payment.
See IRS Form 4972 for additional information on lump sum distributions and how you elect the special tax
Employer Stock or Securities. There is a special rule for a payment from the Plan that includes
employer stock (or other employer securities). To use this special rule, (1) the payment must qualify as a
lump sum distribution, as described above (or would qualify except that you do not yet have 5 years of
participation in the Plan), or (2) the employer stock included in the payment must be attributable to “after-
tax” employee contributions, if any. Under this special rule, you may have the option of not paying tax on
the “net unrealized appreciation” of the stock until you sell the stock. Net unrealized appreciation
generally is the increase in the value of the employer stock while it was held by the Plan. For example, if
employer stock was contributed to your Plan account when the stock was worth $1,000 but the stock was
worth $1,200 when you received it, you would not have to pay tax on the $200 increase in value until you
later sold the stock.
You may instead elect not to have the special rule apply to the net unrealized appreciation. In this case,
your net unrealized appreciation will be taxed in the year you receive the stock, unless you roll over the
stock. The stock (including any net unrealized appreciation) can be rolled over to a traditional IRA or
another qualified employer plan, either in a direct rollover or a rollover that you make yourself.
If you receive only employer stock in a payment that can be rolled over, no amount will be withheld from
the payment. If you receive cash or property other than employer stock, as well as employer stock, in a
payment that can be rolled over, the 20% withholding amount will be based on the entire amount paid to
you (including the employer stock but excluding the net unrealized appreciation). However, the amount
withheld will be limited to the cash or property (excluding employer stock) paid to you.
If you receive employer stock in a payment that qualifies as a lump sum distribution, the special tax
treatment for lump sum distributions described above (such as 10-year averaging) also may apply. See
IRS Form 4972 for additional information on these rules.
Repayment of Plan Loans. If you end your employment and have an outstanding loan from your Plan,
your employer may reduce (or “offset”) your balance in the Plan by the amount of the loan you have not
repaid. The amount of your loan offset is treated as a distribution to you at the time of the offset and will
be taxed unless you roll over an amount equal to the amount of your loan offset to another qualified
employer plan or a traditional IRA within 60 days of the date of the offset. If the amount of your loan offset
is the only amount you receive or are treated as having received, no amount will be withheld from it. If you
receive other payments of cash or property from the Plan, the 20% withholding amount will be based on
the entire amount paid to you, including the amount of the loan repayment. The amount withheld will be
limited to the amount of other cash or property paid to you (other than any employer securities).
Group 1 Automotive Employee Benefits & Policies 401K Plan 22
IV. SURVIVING SPOUSES, ALTERNATIVE PAYEES, AND OTHER BENEFICIARIES
In general, the rules summarized above that apply to payments to employees also apply to payments to
surviving spouses of employees and to spouses or former spouses who are “alternate payees.” You are
an alternate payee if your interest in the Plan results from a “qualified domestic relations order,” which is
an order issued by a court, usually in connection with a divorce or legal separation. Some of the rules
summarized above also apply to a deceased employee’s beneficiary who is not a spouse. However, there
are some exceptions for payments to surviving spouses, alternate payees, and other beneficiaries that
should be mentioned.
If you are a surviving spouse, you may choose to have a payment that can be rolled over, as described in
Part I above, paid in a direct rollover to a traditional IRA or paid to you. If you have the payment paid to
you, you can keep it or roll it over yourself to a traditional IRA but you cannot roll it over to a qualified
employer plan. If you are an alternate payee, you have the same choices as the employee. Thus, you can
have the payment paid as a direct rollover or paid to you. If you have it paid to you, you can keep it or roll
it over yourself to a traditional IRA or to another qualified employer plan that accepts rollovers. If you are
a beneficiary other than the surviving spouse, you cannot choose a direct rollover, and you cannot roll
over the payment yourself.
If you are a surviving spouse, an alternate payee, or another beneficiary, your payment is generally not
subject to the additional 10% tax described in Section III above, even if you are younger than age 59½.
If you are a surviving spouse, an alternate payee, or another beneficiary, you may be able to use the
special tax treatment for lump sum distributions and the special rule for payments that include employer
stock, as described in Section III above. If you receive a payment because of the employee’s death, you
may be able to treat the payment as a lump sum distribution if the employee met the appropriate age
requirements, whether or not the employee had 5 years of participation in the Plan.
V. TIMING OF PAYMENT AND ELECTION
If your balance under the Plan is in excess of $5,000, you have the right to defer your payment from the
Plan until you attain age 65 or until a date that you may select prior to age 65. You will have a period of at
least 30 days from the date this notice is provided to you (1) to decide whether to receive your payment
currently or to defer it (if applicable) and (2) to decide whether to have all or a portion of your payment
made in the form of a direct rollover. However, you may waive this 30-day period by making an affirmative
election to receive your payment currently and electing the percentage to be paid as a direct rollover and
the percentage to be paid to you.
Group 1 Automotive Employee Benefits & Policies 401K Plan 23
HOW TO OBTAIN ADDITIONAL INFORMATION
This notice summarizes only the federal (not state or local) tax rules that might apply to your payment.
The rules described above are complex and contain many conditions and exceptions that are not
included in this notice. Therefore, you may want to consult with the Plan Administrator or a professional
tax advisor before you take a payment of your benefits from your Plan. Also, you can find more specific
information on the tax treatment of payments from qualified retirement plans in IRS Publication 575,
Pension and Annuity Income and IRS Publication 590, Individual Retirement Arrangements. These
publications are available from your local IRS office, on the IRS’s Internet Web Site, or by calling