EX-10.31 4 d350447.txt SIXTH AMENDMENT TO THE EMPLOYEE STOCK OWN PLAN EXHIBIT 10.31 CARVER BANCORP, INC. EMPLOYEE STOCK OWNERSHIP PLAN (EFFECTIVE JANUARY 1, 1994) AMENDMENT 1. Section 10 - Effective March 28, 2005, Section 10.6 shall be amended to read in its entirety as follows: 10.6 Voluntary and Involuntary Cash-outs. (a) Notwithstanding any provision of the Plan to the contrary, a lump sum shall be made in lieu of all vested benefits if the value of the vested portion of the Former Participant's Account $3,500 (or such other amount as may be permitted under section 417(e) of the Code) or less and the distribution is made prior to January 1, 1998 and $5,000 (or such other amount as may be permitted under section 417(e) of the Code) or less and the distribution is made on or after January 1, 1998. Such immediate lump sum payment shall be made in cash (unless the Participant elects to receive such payment in shares of Qualifying Employer Securities) without regard to the Participant's election related to the timing of such payments as soon as administratively practicable following the Participant's termination of employment with all Affiliates. On a form prescribed by the Plan Administrator, the Participant may elect to have this payment made either in a distribution to the Participant directly or in a direct rollover pursuant to Section 10.11, subject to the conditions thereof. (b) If the Participant does not elect to have such distribution paid directly to an Eligible Retirement Plan specified by the Participant in a direct rollover or to receive the distribution directly and such distribution would constitute a Mandatory Distribution, then the Plan Administrator will pay the distribution in a direct rollover to an Individual Retirement Plan designated by the Plan Administrator; provided however, that any Mandatory Distribution not in excess of $1,000 may be distributed directly to the Participant. To the extent necessary to satisfy Section 401(a)(31)(B) of the Code, any such rollover to an Individual Retirement Plan that is maintained by the Employer or any Affiliate shall satisfy the following conditions: (i) The Individual Retirement Plan is established and maintained for the exclusive benefit of the Individual Retirement Plan account holder, his or her spouse or their beneficiaries. (ii) The terms of the Individual Retirement Plan, including the fees and expenses for establishing and maintaining the Individual Retirement Plan, are no less favorable than those available to comparable Individual Retirement Plans established for reasons other than the receipt of a Mandatory Distribution or any other distribution made in accordance with Section 401(a)(31)(B) of the Code. (iii) In connection with the distribution of rolled-over funds to an Individual Retirement Plan, the Plan Administrator or other Named Fiduciary enters into a written agreement with an Individual Retirement Plan provider that provides: (A) The Mandatory Distribution is invested in an Eligible Investment Product. (B) The rate of return or the investment performance of the Individual Retirement Plan investment(s) is no less favorable than the rate of return or investment performance of an identical investment(s) that could have been made at the same time by comparable Individual Retirement Plans established for reasons other than the receipt of a Mandatory Distribution or any other distribution made in accordance with Section 401(a)(31)(B) of the Code. (C) The Individual Retirement Plan does not pay a sales commission in connection with the acquisition of an Eligible Investment Product. (D) The Participant on whose behalf the Plan Administrator or other Named Fiduciary makes an automatic rollover shall have the right to enforce the terms of the contractual agreement establishing the Individual Retirement Plan, with regard to his or her rolled-over funds, against the Individual Retirement Plan Provider. (E) The Individual Retirement Plan account holder may, within a reasonable period of time after his or her request and without penalty to the principal amount of the investment, transfer his Individual Retirement Plan balance to a different investment offered by the Individual Retirement Plan Provider, or transfer his Individual Retirement Plan balance to an Individual Retirement Plan sponsored at a different financial institution. (F) (I) Fees and expenses attendant to the Individual Retirement Plan, including the investment of the assets of such plan, (e.g., establishment charges, maintenance fees, investment expenses, termination costs, and surrender charges) shall not exceed the fees and expenses charged by the Individual Retirement Plan Provider for comparable Individual Retirement Plans established for reasons other than the receipt of a Mandatory Distribution or any other distribution made in accordance with Section 401(a)(31)(B) of the Code; (II) Fees and expenses attendant to the Individual Retirement Plan, with the exception of establishment charges, may be charged only against the income earned by the Individual Retirement Plan; and (III) Fees and expenses are not in excess of reasonable compensation with the meaning of Section 4975(d)(2) of the Code. (iv) Participants have been furnished a summary plan description, or a summary of material modifications, that describes the Plan's automatic rollover provisions effectuating the requirements of Section 401(a)(31)(B) of the Code, including an explanation that the mandatory distribution will be invested in an investment product designed to preserve principal and provide a reasonable rate of return and liquidity, a statement indicating how fees and expenses attendant to the Individual Retirement Plan will be allocated (I.E., the extent to which expense will be borne by the account holder alone or shared with the distributing plan or plan sponsor), and the name, address and phone number of a plan contact (to the extent not otherwise provided in the summary plan description or summary of material modifications) for further information concerning the plan's automatic rollover provisions, the Individual Retirement Plan provider and the fees and expenses attendant to the Individual Retirement Plan; and (v) The Individual Retirement Plan Provider shall maintain or cause to be maintained for a period of six (6) years from the date of each Mandatory Distribution the records necessary to enable the persons described in Section 10.6(vi) to determine whether the applicable conditions of this exemption have been met. Such records must be readily available to assure accessibility by the persons identified in Section 10.6(vi). (vi) The records referred to in Section 10.6(v) are unconditionally available at their customary location for examination during normal business hours by -- (A) Any duly authorized employee or representative of the Department of Labor or the Internal Revenue Service; and (B) Any account holder of an Individual Retirement Plan established pursuant to this exemption, or any duly authorized representative of such account holder. (vii) The term "Eligible Investment Product" means an investment product designed to preserve principal and provide a reasonable rate of return, whether or not such return is guaranteed, consistent with liquidity. For this purpose, the product must be offered by a Regulated Financial Institution and shall seek to maintain, over the term of the investment, the dollar value that is equal to the amount invested in the product by the Individual Retirement Plan. Such term includes money market funds maintained by registered investment companies, and interest-bearing savings accounts and certificates of deposit of a bank or similar financial institution. In addition, the term includes "stable value products" issued by a financial institution that are fully benefit-responsive to the Individual Retirement Plan account holder, I.E., that provide a liquidity guarantee by a financially responsible third party of principal and previously accrued interest for liquidations or transfers initiated by the Individual Retirement Plan account holder exercising his or her right to withdraw or transfer funds under the terms of an arrangement that does not include substantial restrictions to the account holder's access to the Individual Retirement Plan's assets. (viii) The term "Individual Retirement Plan" means any Eligible Retirement Plan that is an individual retirement account or individual retirement annuity described in Sections 408(a) and (b) of the Code. (ix) The term "Mandatory Distribution" means any cash-out pursuant to Section 10.6(a) that is to be made on or after March 28, 2005 and before the Participant has attained the Normal Retirement Age (or age 62, if later) in accordance with Section 401(a)(31)(B) of the Code. (x) The term "Regulated Financial Institution" means an entity that: (A) Is subject to state or federal regulation, and (B) is a bank or savings association, the deposits of which are insured by the Federal Deposit Insurance Corporation; a credit union, the member accounts of which are insured within the meaning of section 101(7) of the Federal Credit Union Act; an insurance company, the products of which are protected by state guaranty associations; or an investment company registered under the Investment Company Act of 1940. (c) If the Participant, upon termination of Service for any reason other than retirement, death, or Total Disability, does not consent to the payment of the vested portion of the Participant's Account, and if the value of such Account exceeds $3,500 (or such other amount as may be permitted under section 417(e) of the Code) and the distribution is made prior to January 1, 1998 and $5,000 (or such other amount as may be permitted under section 417(e) of the Code) on the Valuation Date immediately following the Employees termination of Service (or as of any prior Valuation Date) and the distribution is made on or after January 1, 1998, the Committee shall direct the Trustee to place the then value of such Account in one (1) or more investment accounts permitted under the Plan in trust for the named Employee for distribution commencing on the Valuation Date immediately following his attainment of age 65 (or death, if earlier). The Account and all accumulated interest shall be paid to the Employee at the time he attains his Normal Retirement Age. In the event the Employee dies before reaching retirement age, the Account balance shall be paid to any beneficiary the Employee has named in a written designation filed with the Committee or, in the absence of such designation, to the Employee's estate subject to the terms of Section 9 of the Plan. The Trustee shall have no other responsibilities with respect to such accounts except that, if the balance of any such account shall approach the amount of federal insurance, the Trustee shall split the account into two (2) or more accounts.