Section 14. The frozen accrued benefit of each participant in the fresh-start group…

Code § IRC 401(a)(17) participants will be adjusted in accordance with one the following methods, as elected by the employer in the adoption agreement:

(a) Old compensation fraction

The frozen accrued benefit of each participant in the freshstart group, as adjusted in sections 2.1 through 2.3 above, as applicable, will be multiplied by a fraction (not less than 1), the numerator of which is the participant’s compensation for the current plan year, using the same definition and compensation formula used in determining the participant’s frozen accrued benefit, and the denominator of which is the participant’s compensation as of the fresh-start date, determined in the same manner as the numerator.

(b) New compensation fraction

The frozen accrued benefit of each participant in the freshstart group, as adjusted in sections 2.1 through 2.3 above, as applicable, will be multiplied by a fraction (not less than 1), the numerator of which is the participant’s average annual compensation, as defined in section _____ of the plan, for the current plan year, and the denominator is the participant’s average annual compensation as of the fresh-start date, determined in the same manner as the numerator.

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(c) Reconstructed compensation fraction

The frozen accrued benefit of each participant in the freshstart group, as adjusted in sections 2.1 through 2.3 above, as applicable, will be multiplied by a fraction (not less than 1), the numerator of which is the participant’s average annual compensation, as defined in section of the plan, for the current plan year, and the denominator of which is the participant’s reconstructed average annual compensation as of the fresh-start date.

(Note to reviewer: The blank should be filled in with the adoption agreement section number corresponding to LRM #7.)

A participant’s “reconstructed compensation” will be equal to the participant’s average annual compensation, as defined in section ____ of the plan, for the plan year elected by the employer in the adoption agreement multiplied by a fraction, the numerator of which is the participant’s compensation for the plan year ending on the latest fresh-start date determined using the same compensation definition and compensation formula used to determine the participant’s frozen accrued benefit, and the denominator of which is the participant’s compensation for the selected year, determined in the same manner as the numerator.

For purposes of calculating a participant’s “reconstructed compensation,” the selected year will be the plan year elected by the employer in the adoption agreement.

(Note to reviewer: The blank should be filled in with the adoption agreement section number corresponding to LRM #7.)

(d) Alternative adjustment

In lieu of applying the fractions in paragraphs 4(a) and 4(b) above, if the employer elects the Alternative Adjustment in the adoption agreement, a participant’s adjusted accrued benefit will be determined by substituting the participant’s compensation (as defined in section _____ of the plan) for the current plan year determined under the same compensation formula and underlying definition of compensation used to determine the frozen accrued benefit of each participant in the fresh-start group.

Section 15. If the Special Adjustment for Code § IRC 401(a)(17) Participants is elected by the employer in the adoption agreement, the frozen accrued benefit of each Code § IRC 401(a)(17) participant in the fresh-start group will be adjusted in accordance with the following method:

Code §I RC 401(a)(17) participants who are OBRA ‘93 Code § IRC 401(a)(17) participants only:

(1) Determine the frozen accrued benefit of each OBRA ‘93 Code § IRC 401(a)(17) participant as of the last day of the plan year beginning before January 1, 1994.

(2) Adjust the amount in step 1 by multiplying it by the following fraction (not less than 1). The numerator of the fraction is the average compensation of the OBRA ‘93 Code § IRC 401(a)(17) employee determined for the current year (as limited by Code § IRC 401(a)(17)), using the same definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1994. The

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denominator of the fraction is the participant’s average compensation for the last day of the last plan year beginning before January 1, 1994, using the definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1994.

Code §I RC 401(a)(17) participants who are both TRA ‘86 Code §I RC 401(a)(17) participants and OBRA ‘93 Code §I RC 401(a)(17) participants:

(1) Determine each TRA ‘86 Code §I RC 401(a)(17) participant’s frozen accrued benefit as of the last day of the last plan year beginning before January 1, 1989.

(2) Adjust the amount in step 1 up through the last day of the last plan year beginning before the first plan year beginning on or after January 1, 1994, by multiplying it by the following fraction (not less than 1). The numerator of the fraction is the TRA ‘86 Code § IRC 401(a)(17) participant’s average compensation determined for the current year (as limited by Code § IRC 401(a)(17)), using the same definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1989. The denominator of the fraction is the participant’s average compensation for the last day of the plan year beginning before January 1, 1989, using the definition and compensation formula in effect last day of the last plan year beginning before January 1, 1989.

(3) Determine the TRA ‘86 Code § IRC 401(a)(17) participant’s frozen accrued benefit as of the last day of the last plan year beginning before January 1, 1994.

(4) Subtract the amount determined in step 2 from the amount determined in step 3.

(5) Adjust the amount in step 4 by multiplying it by the following fraction (not less than 1). The numerator of the fraction is the TRA ‘86 Code § IRC 401(a)(17) participant’s average compensation determined for the current year (as limited by Code § IRC 401(a)(17)), using the same definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1994. The denominator of the fraction is the participant’s average compensation for the last day of the plan year beginning before January 1, 1994, using the definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1994.

(6) Adjust the amount in step 1 by multiplying it by the following fraction (not less than 1). The numerator of the fraction is the TRA ‘86 Code §I RC 401(a)(17) participant’s average compensation for the current year (as limited by Code § IRC 401(a)(17)), using the same definition of compensation and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1989. The denominator of the fraction is the participant’s average compensation for the last day of the last plan year beginning before January 1, 1989, using the definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1989.

Add the amounts determined in step 5, and the greater of steps 6 or 2.

Sample Adoption Agreement Language:

If, as of the latest fresh-start date, the plan contained a benefit formula under which the

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participant’s accrued benefit could be determined with reference to compensation earned by the participant in years beginning after the latest fresh-start date occurring before the first plan year beginning on or after January 1, 1994 and elected by the employer below

( ) the provisions of sections 1.1 through 5 of _________ apply to adjust the frozen

accrued benefit of each participant in the fresh-start group determined as of the latest fresh-start date under the plan.

(Note to reviewer: Insert plan section that corresponds to this LRM #25.)

If elected by the employer below, each participant’s frozen accrued benefit will be adjusted in accordance with the following fraction:

( ) Old compensation fraction

( ) New compensation fraction

( ) Reconstructed compensation fraction (may be selected only if the latest

freshstart date is before the first day of the first plan year beginning on or after January 1, 1994)

For purposes of calculating a participant’s “reconstructed compensation,” the selected year will be the plan year beginning in (the selected year must begin after the latest fresh-start date):

( ) 1989

( ) 1990

( ) 1991

( ) 1992

( ) 1993

( ) 1994

( ) Alternative Adjustment

( ) Special Adjustment for Code § IRC 401(a)(17) Participants