This notice explains how you can continue to defer federal income tax on your retirement benefits from the San Mateo Electrical Construction Industry Retirement Plan (I “Plan”) and contains important information you will need before you decide how to receive your Plan benefits.

This notice is provided to you by the Plan’s Board of Trustees, which is the “Plan Administrator” under federal law, because all or part of the payment that you will soon receive from the Plan may be eligible for rollover by you or the Plan Administrator to a traditional IRA or another plan.

A rollover is a payment by you or the Plan Administrator of all or part of your benefit to an eligible employer plan or IRA that allows you to continue to postpone taxation of that benefit until it is paid to you. Under the Internal Revenue Code, your payment(s) cannot be rolled over to certain types of IRA’ s, such as a Roth IRA, a SIMPLE IRA, or a Coverdell Education Savings Account (formerly known as an education IRA). An “eligible employer plan” includes a plan qualified under section 401(a) of the Internal Revenue Code, including a 401(k) plan, profit-sharing plan, defined benefit plan, stock bonus plan, and money purchase plan; a section 403(a) annuity plan; a section 403(b) tax-sheltered annuity; and an eligible section 457(b) plan maintained by a governmental employer (governmental 457 plan).

An eligible employer plan is not legally required to accept a rollover. Before you decide to roll over your payment to another employer plan, you should find out whether a plan accepts rollovers and, if so, the types of distributions it accepts as a rollover. You should also find out about any documents that are required to be completed before the receiving plan will accept a rollover.

Even if a plan accepts rollovers, it might not accept rollovers of certain types of distributions If this is the case, you may wish instead to roll your distribution over to a traditional IRA or split your rollover amount between the employer plan in which you will participate and a traditional IRA. If an employer plan accepts your rollover, that plan may restrict subsequent distributions of the rollover amount or may require your spouse’s consent for any subsequent distribution. A subsequent distribution from the plan that accepts your rollover may also be subject to different tax treatment than distributions from this Plan. Check with the administrator of the plan that is to receive your rollover prior to making the rollover.

This notice, which is patterned in many parts on an IRS model notice, is required by federal law. The notice is not personal tax advice. You should consult with a personal tax advisor for tax advice upon which you want to rely. If you have additional questions, you may contact the Plan Office at 408-288-4400.

Tax on Distributions. As a general rule, when you receive a distribution directly from a qualified pension plan, such as this Plan, you will pay federal and state taxes on the distribution. (There may be an exception for certain types of payments on account of a disability.) This notice is intended simply to provide you with general information on the tax rules and some of your options.

Potential 10% Additional Tax on Certain Distributions. In the Tax Reform Act of 1986, Congress added section 72(t) to the Internal Revenue Code, which imposes an additional 10% tax on certain early distributions from a qualified plan, unless the distribution meets one of the exceptions listed below. The primary exceptions of the 10% tax penalty include:

1. Eligible Rollover. You roll over the distribution in the manner described below in the Summary.
2. Early Retirement At age 55. A distribution made to you on account of qualifying for early retirement under the Plan on or after age 55.
3. Certain Disabilities. A distribution due to your inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment, which can be, expected to result in death or to be of long-continued and indefinite duration. (Not all disabilities meet this standard.)
4. Periodic Payments-Substantially Equal Payments. Periodic payments which are made in a series of substantially equal periodic installments (at least annually or more often) made for your life or life expectancy or for the joint lives or a term equal to the joint life expectancy of you and a designated beneficiary.
5. Medical Deduction. A distribution to the extent such distribution does not exceed the amount allowable as a medical deduction under Internal Revenue Code Section 213.
6. Death Benefits. A distribution to your beneficiary or your estate on account of your death.
7. Certain Domestic Relations Orders. A distribution to an alternate· payee (spouse, child, or other dependent) pursuant to a qualified domestic relations order.

Warning: You may also be liable for state tax penalties. For example, California assesses a 2.5% penalty.

There are two ways you may be able to receive a Plan payment that is eligible for rollover:

1. Certain payments can be made directly to a traditional IRA that you establish or to an eligible employer plan that will accept it and hold it for your benefit (“DIRECT ROLLOVER”); or
2. 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.
• You choose whether your payment will be made directly to your traditional IRA or to an eligible employer plan that accepts your rollover. Your payment cannot be rolled over to a Roth IRA, a SIMPLE IRA, or a Coverdell Education Savings Account because these are not traditional IRAs.
• The taxable portion of your payment will be taxed later when you take it out of the traditional IRA or the eligible employer plan. Depending on the type of plan, the later distribution may be subject to different tax treatment than it would be if you received a taxable distribution from this Plan.

If you choose to have a Plan payment that is eligible for rollover PAID TO YOU:

• You will receive only 80% of the taxable amount of the payment, because the Plan Administrator is required to withhold 20% of that amount and send it to the IRS as income tax withholding to be credited against your taxes.
• The taxable amount of 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 the plan’s early retirement age of 55, you may have to pay an additional 10% tax.
• You can roll over all or part of the payment by paying it to your traditional IRA or to an eligible 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 eligible employer plan.
• If you want to roll over 100% of the payment to a traditional IRA or an eligible employer plan, you must find other money to replace the 20% of the taxable portion 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.

Your Right to Waive the 30-Day Notice Period.
Generally, neither a direct rollover nor a payment can be made from the plan until at least 30 days after your receipt of this notice. Thus, after receiving this notice, you have at least 30 days to consider whether or not to have your withdrawal directly rolled over. If you do not wish to wait until this 30-day notice period ends before your election is processed, you may waive the notice period by making an affirmative election indicating whether or not you wish to make a direct rollover. Your withdrawal will then be processed in accordance with your election as soon as practical after it is received by the Plan Administrator.

Congress recently changed the rules to permit a non-spouse beneficiary to rollover benefits but only to an Inherited IRA. Any such rollover has to be a direct transfer to that inherited IRA. Non-spouse beneficiaries cannot rollover benefits to another qualified pension plan or to a regular IRA. If, however, a non-spouse beneficiary chooses to take a distribution from the Plan, rather than having a rollover, the beneficiary is not subject to mandatory 20% withholding. Ordinary income tax would apply. You may want to consult with a tax advisor regarding your options.

If you are a surviving spouse or an alternate payee, 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 to an eligible employer plan 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 or to an eligible employer plan. Thus, you have the same choices as the employee.

If you a re a surviving spouse, an alternate payee, or another beneficiary, your payment is generally not subject to the additional 10% tax described in Part III above, even if you are younger than age 59-1/2.

If you are a beneficiary other than a surviving spouse or an alternate payee, the Plan may permit you to choose to have a payment that can be rolled over, as described in Part 1 above, paid in a Direct Rollover to a Traditional IRA or have the benefit paid to you. You may not roll over the payment that is made directly to you, nor may you choose to roll over the payment to an eligible employer plan. The IRA accepting the transfer is treated like a non-spouse Inherited IRA, under which benefits must be distributed in accordance with the required minimum distribution rules. In general, distributions from the Inherited IRA must either be paid to you in full within 5 years of the employee’ s death or must commence within 12 months of the employee’s death and be paid over your life expectancy. The benefits cannot be rolled over from the Inherited IRA to any other IRA.

As explained above, surviving spouses and alternate payees have the same choices as the employee. However, unlike surviving spouses and alternate payees, non-spouse beneficiaries do not have the same choices as the employee. Because of this difference, the mandatory withholding rules described in Number 4 above, that typically apply to payments that are not rolled over, do not apply to payments made to non-spouse designated beneficiaries. If you are a surviving spouse, an alternate payee, or another beneficiary, your payment is generally not subject to the additional 10% tax, 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 as described in Part 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.

State or Local Income Tax
Please note that state or local income tax is withheld only for those states where such withholding is mandatory. If you reside in a state that has a state income tax, and the state does not have a mandatory withholding rule, you will be responsible for any state income taxes due on the taxable portion of your distribution. You should also be aware that some states have not yet changed their laws to take into account the expanded rollover· rules that became effective January 1, 2002. In certain cases, a rollover now permitted under federal law may be subject to taxation under state law. However, once the rollover is taxed under state law, the state would not tax this amount again when later you receive it as a distribution.