A. DEFERRAL OF TAXES/PENALTIES FOR CERTAIN EARLY WITHDRAWALS.

An advantage of a qualified plan such as this Plan is that pre‑tax dollars accumulate non‑taxed earnings for your retirement. You pay taxes only when you receive your benefits. The amount of taxes you will owe will depend on when and how your benefits are paid to you and on the tax laws in effect at the time of the payment.

Under the Internal Revenue Code, there is generally a 10 % penalty on early lump sum distributions. This penalty does not apply to distributions on account of disability, death, or to distributions occurring either after having attained age 59½ or after you severed employment after having attained age 55. Thus, if you receive a lump sum distribution of a portion or all of your individual account prior to age 55 (or before age 59½ if you severed employment before age 55), the IRS will assess a 10% penalty on the distribution. The California Franchise Tax Board assesses a 2½% penalty for the same reasons. These penalties may be avoided if there is a qualified rollover of the distribution as explained below.