The Lincoln Electric Company
Employee Savings Plan
401(k)
Summary Plan Description
This date of this Summary Plan Description is June 24, 1999.The Lincoln Electric Company Cleveland, OH 44117-1199 THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
Table of Contents
The Plan at a Glance ... 2
Eligibility and Enrollment ... 3
Eligible Employees ... 3 Enrollment ... 3 Employee Contributions ... 5 Pre-Tax Contributions ... 5 Rollover Contributions ... 8 Company Contributions ... 9 Matching Contributions ... 9
Financial Security Program (FSP) Contributions ... 11 Other Contributions ESOP ... 12 Vesting ... 13 Investments ... 14 Loans ... 19 Distributions ... 22 Distributions on Termination of Employment ... 22 Distributions on Death ... 23 Hardship Distributions ... 24 Miscellaneous ... 25 KeyInvestSM ...25 Income Taxes ... 25 Fees ... 26 Investment Responsibility ... 26
Lincoln Electric Holdings, Inc. Stock ... 27
Thinking About Retirement... 28
Thinking About Investments ... 29
Administration ... 31
Plan Administration ... 31
Filing a Claim for Benefits ... 31
Amendment of the 401(k) Plan 32 Assignment of Benefits, Qualified Domestic Relations Orders ... 32
Type of Plan ... 32 The More You Know
This booklet provides an overview of the provisions of The Lincoln Electric Employee Savings Plan, or 401(k) Plan, and answers many commonly asked questions.
We hope you will find this summary useful and that you will discuss the information with your family. As you read about the 401(k) Plan, you may have questions about the way the plan works. If so, you can contact the Human Resources Department (Retirement Administration) for more information.
To simplify this overview, we have tried to avoid using legal and technical language. In addition, we have not included every provision of the plan, and have only described the more common or typical provisions. If there is any inconsistency between this summary and the official plan document, the plan document will govern.
This description is intended only to help you understand the plan and is not intended to change the 401(k) Plan in any way. All of the details of the 401(k) Plan and its provisions can be found in the official plan document, which is available from Human Resources (Retirement Administration).
This summary plan description and the document entitled Investment Options comprise the Prospectus covering the Lincoln Electric Holdings, Inc. Common Shares, which have been registered for purposes of the 401(k) Plan. You should review both documents. These documents may be
The Plan at a Glance
The Lincoln Electric Company (the Company) wants to help you have a financially secure retirement. That’s why the Company offers several programs to help you meet your retirement goals. One of the easiest tools is The Lincoln Electric Company Employee Savings Plan (the 401(k) Plan). The 401(k) Plan is a simple and tax-effective way to save money for your retirement. Under the 401(k) Plan, you have an account that grows with contributions and earnings. When you retire, the money in your account is available to fund your retirement needs.Here’s how it works:
n You can save your own money without paying taxes on your savings (until you’re ready to use the money). Making these contributions lowers your taxable income each year, which means you pay less in taxes.
n You select how your savings are invested. Currently, the Company offers 14 professionally managed investment options from which you can choose, so you can invest your money in a diverse portfolio. Plus, the earnings in your account are also tax-free until you actually receive the money.
n When you contribute to the 401(k) Plan, the Company puts money into your account as a matching contribution. This increases your account even more, bringing you closer to your retirement savings goal.
n If you’re a participant in the Financial Security Program (FSP), the Company makes another contribution to your 401(k) account, even if you’re not making contributions.
n Finally, if you were a participant in the old Employee Stock Ownership Plan (ESOP), the Company made contributions for you in the past, which are now in your 401(k) account and which can continue to grow tax-free.
Eligibility and Enrollment
Eligible Employees For Pre-Tax and Matching
Contributions — All full-time
employees who have at least one full year of service with the Company are eligible to participate in the 401(k) Plan. This includes the District Offices and the Distribution Centers. Eligibility means you can make pre-tax contributions and receive the Company matching contributions.
For FSP Contributions —
Employees of the Company who complete at least 1,000 hours of service in their first year of employment (or a subsequent plan year) automatically are eligible to participate in the FSP if they:
n were hired November 1, 1997, or later, or
n were hired before November 1, 1997, and elected to participate in the FSP (instead of keeping the Age 60 feature in the Retirement Annuity Program). For a list of employees who are not eligible to participate in the FSP, refer to the summary plan description for the Retirement Annuity Program.
For Employees Who Participated
in the ESOP — All employees
who participated in the ESOP automatically were eligible for and began participating in the 401(k) Plan when their ESOP accounts were transferred into the 401(k) Plan on July 1, 1997.
For Harris & Seal Seat Employees
— All Harris and Seal Seat employees are eligible to participate in the 401(k) Plan if they have at least one year of service and are full-time employees. However, they do not participate in the Company matching contributions, FSP contributions or the ESOP.
For Rollovers — Full-time
employees who do not meet the other eligibility requirements listed above may still roll over contributions from a prior employer’s plan at any time.
A year of service is each 12-month period of employment. More information on service is provided on page 12 (Vesting).
Enrollment
Once you meet the eligibility requirements for making pre-tax contributions, you may enroll in the 401(k) Plan and begin having contributions deducted from your pay.
The base pay deductions you request will be effective as of the first day of the next calendar quarter: January 1, April 1, July 1 or October 1. You will see these deductions reflected in the first pay after that date. Deductions will continue (each month and each year) until you request a change, and will be invested based on your current investment election for new contributions.
You make a separate request to have amounts deducted from your bonus. Forms for bonus deductions must be submitted by the Wednesday before Thanksgiving. A new request must be made each year to have pre-tax contributions taken out of your bonus. Your bonus contributions will be invested based on your current investment election for new contributions.
Enrollment forms are available in the Human Resources Department (Retirement Administration). If you are an FSP participant, the Company automatically will make contributions into your account once you become eligible. However, you must complete an enrollment form to specify how you want these contributions invested. New participants who do not complete enrollment forms will have their contributions invested in a default fund specified by the Company until they make an election.
If you are eligible in your first year of employment, your participation in the FSP is retroactive to the January 1st after your date of hire.
If you don’t have 1,000 hours of service in your first year of employment, you become a participant on the January 1st after
the plan year in which you have 1,000 hours. When you first become an FSP participant, retroactive contributions may be made to your account.
To see how enrollment works, look at the following examples:
n If you were hired on May 1, 1999, as a full-time employee and had 1,000 hours by May 1, 2000, you would be eligible to make pre-tax contributions on May 1, 2000. If you enrolled right away, your deductions would be effective July 1, 2000 (the first day of the next calendar quarter). If you are an FSP participant, you also would be eligible to participate on May 1, 2000, but your participation would be retroactive to January 1, 2000.
Employee Contributions
There are two types of contributions you can make to the 401(k) Plan: pre-tax contributions and rollover contributions.Pre-Tax Contributions
A key advantage of the 401(k) Plan is that you can save a portion of your base pay and bonus on a pre-tax basis (known as pre-tax
contributions). This means you do not pay federal income taxes or most
state income taxes on the money you contribute or its earnings until you withdraw the money.
By saving pre-tax, you end up having more spending money than if you saved the same amount on an after-tax basis, such as in a personal savings account. To see how your spending money is impacted by pre-tax vs. after-tax, take a look at the example below:
Savings Comparison Pre-Tax After-Tax Savings Savings
Regular Pay $ 30,000 $ 30,000
Pre-Tax 401(k) Savings (6%) - 1,800 - 0
Taxable Income $ 28,200 $ 30,000
Federal Income Taxes - 4,226 - 4,496
After-Tax Savings (6%) - 0 - 1,800
Remaining Spending Money $ 23,974 $ 23,704
Extra spending money = $ 270
How much can I contribute on a pre-tax basis?
Base Pay —You can contribute any
percentage of your base pay, but your contributions must be in whole percentages.
Base pay includes your wages,
salaries, vacation pay, shift premiums and overtime (but not bonus, reimbursed expenses or other special payments) from the
In this example, you would keep an extra $270 simply by saving through the 401(k) Plan on a pre-tax basis.
Annual Bonus — You can
contribute any portion of your annual bonus.
Bonus is the annual bonus you
How do I make pre-tax contributions?
You’ll need to complete an enrollment form when you want to make pre-tax contributions to the 401(k) Plan.
Base Pay — On the enrollment
form for base pay, you’ll be asked to specify the percentage you want contributed from each paycheck. For example, if your base pay is $30,000 and you elect to contribute 10%, you will contribute $3,000 annually to your 401(k) account — or $125 from each pay.
Enrollments become effective as of the first day of the next calendar quarter and must be submitted at least two weeks before that date.
Annual Bonus — If you want to
make pre-tax contributions from your bonus, you’ll need to complete a separate enrollment form before each year’s bonus. On that form, you can specify a whole percentage of your bonus or a set dollar amount. You must complete a bonus election form each year in order to have pre-tax contributions taken out of your bonus. Base pay election forms do not affect your bonus election and prior bonus election forms do not carry over to the next year. Enrollment forms are available from Human Resources (Retirement Administration).
What happens if my base pay changes?
Since the contributions made to your account are based on a percentage of your base pay, there is a direct relationship between your pay and your contributions. If your pay rate changes, your contributions will change automatically.
For example, assume you earn $30,000 and contribute 10% ($3,000) to your 401(k) account. If your pay changes to $31,000 a year, your new contribution automatically would be $3,100 a year.
When are my pre-tax contributions made to the Plan?
Your pre-tax contributions are deducted automatically from your regular paycheck, twice each month. Bonus contributions are deducted from your bonus check. Contributions are sent from the Company to the 401(k) Plan as soon as possible after each pay day, usually within five business days.
Can I change my contribution percentage?
You can increase, decrease or resume your pre-tax contributions by completing an Enrollment/ Change Form and submitting it to Human Resources (Retirement Administration).
Change forms are available from Human Resources (Retirement Administration).
Can I contribute to the 401(k) Plan now and stop contributions at a later date?
Yes. You may stop pre-tax contributions to the 401(k) Plan at any time by submitting an Enrollment/Change Form to Human Resources (Retirement Administration). Suspensions are effective as of the next payroll date. Once you suspend contributions, you must wait until the beginning of the next calendar quarter before you can resume contributions.
Can I contribute a different amount from my bonus each year?
Yes. You make a separate election each year for bonus, so you can change the amount from year to year.
Can I make contributions to the 401(k) Plan by writing a separate check?
No. All pre-tax contributions must be deducted from your regular pay and/or bonus.
Are there limits to how much money I can contribute to the 401(k) Plan each year?
When determining how much to contribute to the 401(k) Plan, it is important to note that the IRS sets certain limits on contributions. There are four types of annual limits, which can change each year.
For 1999…
1. The maximum pre-tax contribution you can make to your 401(k) account is $10,000. 2. The maximum total contribution you and the Company can make to your 401(k) account is 25% of your total pay. This includes pre-tax contributions, Company matching contributions and FSP contributions, but does not include earnings or rollover contributions.
3. The maximum total pay that can be considered when calculating contributions under the 401(k) Plan is $160,000.
4. A final limit may be imposed on contributions by employees with pay of $80,000 or more. You will be notified if your contributions need to be adjusted under this limit after the end of the year.
Do my pre-tax contributions reduce my pension benefits?
No. Your benefits under the Lincoln Retirement Annuity Program are calculated from your gross base pay, regardless of the amount you are contributing to the 401(k) Plan.
Do I pay federal income tax on the amounts I contribute?
No. One of the main advantages of a 401(k) plan is that you don’t pay federal income tax on your
Do I pay state income tax on the amounts I contribute?
Generally, no. Most states do not tax 401(k) contributions until they are received — just like federal income tax. For example, you will not pay income tax on your contributions in Ohio, Georgia or California until you receive the money.
Do I pay FICA tax on the amount I contribute?
Yes. FICA tax is based on your gross pay. However, because you pay FICA tax on your pre-tax contributions, those amounts are included in your Social Security eligible wages.
Do I pay city tax on the amount I contribute?
This varies from city to city, but, generally, most cities require that you pay income tax on your pre-tax contributions.
Rollover Contributions
If you will be receiving a distribution from another employer’s 401(k) plan, you may be able to transfer or “roll over” that amount to the 401(k) Plan. And, you won’t have to pay taxes on the contribution (or earnings) until you take it out of the 401(k) Plan. You also may be able to make a transfer like this with money from another employer’s profit sharing plan, ESOP, or pension plan. If you already transferred money from a previous employer’s plan into an IRA, you may roll over those funds into the 401(k) Plan, provided they represent only the funds and earnings from your previous employer’s plan. You cannot roll over funds from a personal IRA.
You do not have to meet the one-year service requirement to make a rollover contribution. But
remember, you won’t be eligible to start making pre-tax contributions until you have one year of service.
How do I make a rollover contribution?
Company Contributions
There are two types of contributions Lincoln can make to your 401(k) account: matching contributions and FSP contributions. These contributions do not apply to Harris or Seal Seat employees.Matching Contributions
When you make pre-tax
contributions, Lincoln contributes as well. For every dollar you contribute, up to 6% of your pay,
Your Contribution
Your Base Pay $30,000
6% Contribution x .06
Your Pre-Tax Contribution $ 1,800
Company Match
Amount Eligible for Match
(6% of Base Pay) $ 1,800
Match x .25
Lincoln Contribution $ 450
TOTAL CONTRIBUTIONS $ 2,250
Lincoln contributes $.25 as a matching contribution. This means that for every dollar you save, you’re really saving $1.25 — that’s like getting a guaranteed 25% return on your investment. The match is made on both base and bonus pre-tax contributions, up to the 6% limit.
Take a look at the chart below to see how your savings can grow with the Lincoln match:
So, when you contribute 6%, the additional $450 from the Company lets you save more and achieve your retirement goals faster.
How will I receive matching contributions?
Like your pre-tax contributions, the Company match will be contributed automatically to your 401(k) account each pay period. Matching contributions made during the year are based on 6% of your per-pay income.
Since you may vary your pre-tax contributions during the year (for example, you may contribute from
base pay but not from bonus), this 6%-of-per-pay limit may result in you not receiving your full match during the year. In those situations, we will make a match adjustment for you after the end of the year, based on your total compensation. For example, let’s say you’re contributing 10% of your base pay ($30,000), but nothing from bonus ($18,000). Here’s how the matching contributions will be made to your 401(k) account:
As you can see, with the match adjustment, Lincoln contributes an additional $270 to your 401(k) account.
Match adjustments are usually made by the end of January of the following year (after all the bonus calculations have been completed).
Your Contributions During the Year
Your Base Pay $30,000
10% Contribution x .10
Your Pre-Tax Contribution $ 3,000
Company Match During the Year
Amount Eligible for Match
(6% of Base Pay) $ 1,800
Match x .25
Lincoln Contribution $ 450
Match Adjustment After the End of the Year
Total Pay for the Year (Base & Bonus) $48,000
Amount Eligible for Match
(6% of Total Pay) $ 2,880
Match x .25
Total Lincoln Contribution $ 720
Contribution Already Made - $ 450
Financial Security Program (FSP) Contributions
The FSP is a special feature of the 401(k) Plan, available to certain 401(k) participants. Under the FSP, the Company will make an additional contribution equal to 2% of your base pay (not bonus). The Company makes this contribution even if you are not making pre-tax contributions to the 401(k) Plan.
The FSP contribution is made for eligible employees who:
n were hired November 1, 1997, or later, or
n were employed before
November 1, 1997, and elected this option (instead of keeping the “Age 60” feature of the Retirement Annuity Program). Again, like the other contributions, FSP contributions will accumulate tax-free until you take the money out of the 401(k) Plan.
Take a look at how the FSP can increase your savings even further:
Your Contribution
Your Base Pay $30,000
6% Contribution x .06
Your Pre-Tax Contribution $ 1,800
Company Match
Amount Eligible for Match
(6% of Base Pay) $ 1,800
Match x .25
Lincoln Contribution $ 450
FSP Contribution
Your Base Pay $30,000
2% Contribution x .02
Lincoln Contribution $ 600
TOTAL CONTRIBUTIONS $2,850
How will I receive my FSP contributions?
FSP contributions are made monthly and are contributed to your 401(k) account automatically by the Company (whether or not you make pre-tax contributions).
When you first become eligible, the Company will make a retroactive contribution to your account in the month after you become eligible.
This retroactive contribution takes into account your participation back to the first of the year and considers your base pay from November 1 of the prior year (the same starting point for bonus pay). Take a look at the following example of a retroactive contribution, assuming the participant was hired May 1, 1999, and first becomes eligible May 1, 2000:
Retroactive Contributions
Your Base Pay (November 1, 1999, to April 30, 2000) $15,000
2% Contribution x .02
Lincoln Retroactive Contribution $ 300
Regular Monthly FSP Contributions (beginning May 1, 2000)
Base Pay per Month $ 2,500
2% Contribution x .02
Lincoln Contribution $ 50
Other Contributions ESOP
If you were a participant in The Lincoln Electric Company ESOP, your ESOP account was transferred into the 401(k) Plan on July 1, 1997. All of your ESOP assets are now a part of your 401(k) account.
Vesting
Vesting represents your ownership interest in your 401(k) account. You are always 100% vested (have complete ownership) in the following:
n all of your pre-tax contributions (and earnings)
n all of your ESOP contributions (and earnings)
n all of your rollover contributions (and earnings)
You are vested in your matching and FSP contributions after three years of service. If you retire at age 60 (normal retirement age) or die as an active employee before you have three years of service, you automatically will become vested in your matching and FSP contributions. A year of service is each 12-month period of employment, starting with the date you first perform an hour of service for the Company (date of hire) and ending with the date you stop performing service (termination date). If you are on leave, the period you are gone may be counted in your years of service depending upon the reason for the leave and the length of time of the leave. For example, maternity leaves of less than 24 months are included in years of service. If you are rehired, the period you were gone may be counted in your years of service depending upon the length of the break in service.
An hour of service is each hour for which you are paid or entitled to payment by the Company. If you are not vested and have a break in your service that is less than five years, your prior years of service will be restored upon your rehire. If your break in service is more than five years, your prior years of service will not be restored upon rehire.
If you are vested and leave the Company, your prior years of service will be restored upon your rehire.
Investments
The contributions made to the 401(k) Plan are held in trust by Key Trust Company of Ohio, N.A. Under the 401(k) Plan, you direct the investment of those contributions. Currently, there are 14 investment options.
It is important for you to have a financial plan in place when you determine how you want your contributions invested. We’ve highlighted the fund options in the following section. However, for more information on 401(k) investing or on the specific funds, contact the Human Resources Department (Retirement
Administration), call KeyInvestSM
or refer to the Investment Options materials that supplement this booklet. You should consult the Investment Options document before making any investment decision. The Investment Options document also describes additional information that is available to you upon request.
Once you determine your investment plan, you can select from the investment options available. You may invest your contributions in 5% increments in any combination of the available funds, and your investment selections must total 100%. If we don’t have an investment election on file for you, your account will be invested in the default fund selected by the Company — currently the EB
What are my investment options?
The following is a list of the current investment options. Each fund invests in securities of a specific type, called an asset class, like stocks, bonds and stable value investments — and each has its own risk/return profile. When determining your mix of investments, remember that all investments involve some risk, including the risk of loss of principal (money). The Investment Options materials that supplement this booklet provide more
information about the funds and their relative risk/return profile.
n Victory U.S. Government
Obligations Fund — This fund
invests only in short-term securities issued or guaranteed by the U.S. Treasury and repurchase agreements collateralized by U.S. Treasury securities.
n EB MaGIC® Fund — The
objective of this fund is to seek a reasonable level of income together with stability of principal. The fund invests primarily in insurance
n Bond Fund of America — This fund seeks a high level of current income as is consistent with preservation of capital. The fund emphasizes strong bond market values in the U.S. and abroad.
n Fidelity Advisor Balanced Fund:
Class T — This fund seeks both
income and growth of capital by investing in a diversified portfolio of equity and fixed-income securities with fixed-income, growth of income and capital appreciation potential.
n Income Fund of America —
This fund seeks to provide current income and,
secondarily, growth of capital through a flexible mix of equity and debt instruments.
n American Washington Mutual
Investors Fund — This fund
seeks to provide current income and the opportunity for growth of principal consistent with sound common stock investing.
n Neuberger & Berman Partners
Assets Fund — This fund
invests primarily in stocks of established companies, using the value-oriented investment approach. It seeks capital growth through an investment approach that is designed to increase capital with reasonable risk. Also, it seeks securities believed to be undervalued based on strong fundamentals, such as low price/earnings ratios, consistent cash flow and a
n Victory Stock Index Fund —
The investment objective of this fund is to seek to match the investment performance of the Standard & Poor’s Composite Stock Index (S&P 500).
n Fidelity Advisor Equity Growth
Fund: Class T — This fund
seeks to achieve capital appreciation by investing primarily in the common and preferred stock and securities convertible into common stock of companies with above-average growth characteristics.
n Neuberger & Berman Genesis
Assets Fund — This fund
invests primarily in common stocks of companies with small market capitalization. Market capitalization means the total market value of a company’s outstanding common stock.
n Franklin Small Cap Growth Fund
— This fund seeks long-term capital growth by investing primarily in common stocks of companies having a market capitalization of less than $1.5 billion at the time of investment.
n Templeton Foreign Fund — This fund seeks long-term growth through a flexible policy of investing in stocks and debt obligations of companies and governments outside the United States.
n Lincoln Electric Holdings, Inc.
Stock Fund** —This fund
invests exclusively in common shares of Lincoln Electric Holdings, Inc. and cash equivalents. By investing in this fund, you are purchasing an ownership interest in Lincoln Electric.
**Since this fund will be invested exclusively in Lincoln stock, fluctuation in value could be greater than with a diversified portfolio of stocks. In making your decision, you also may want to consider your exposure to changes in the market value of Lincoln Electric shares in other accounts you may own.
How do I make my investment elections?
When you enroll in the 401(k) Plan, you will be asked to specify how you want your contributions invested on the Enrollment Form. Once you begin participating, you may change your investment elections by calling KeyInvestSM
at 1-800-962-2149.
Investment choices must be made in 5% increments (and must total 100%).
How will I know how my investments are doing?
To find out how your investments are performing, you can call KeyInvestSM to access your account
information, 24 hours a day, 7 days a week. KeyInvestSM will provide
your full account balances on a daily basis.
In addition, you will receive a quarterly statement (as of March 31, June 30, September 30 and December 31), which will provide a summary of the activity during the prior quarter for each investment fund.
Finally, you can request a fund prospectus or a fund fact sheet (a summary of the fund) by calling KeyInvestSM, or you can refer to the
How are my investments reported?
Your interest in each fund is expressed in units. When you call KeyInvestSM, you will hear the
number of units you hold in each fund, the price per unit and the total dollar value of each fund. This is the same way your funds will be reported on your quarterly statements.
Your account and each investment is valued on a daily basis.
How do I decide how to invest my money?
When you decide to participate in the 401(k) Plan, you will receive information about each investment fund. You are responsible for selecting the mix of funds that is appropriate for your personal retirement goals.
When thinking about how to invest your account, there are tools available to help you during your decision-making process. First, you may request additional information on each fund by calling KeyInvestSM. When you call, you
can request information on each investment option such as:
n a copy of the prospectus issued by the fund (which includes a description of the annual operating expenses)
n a listing of the assets held in the fund
n information concerning the rate of return
n the value of each account in
Second, you can request information on 401(k) investing from the Human Resources Department (Retirement Administration). This information helps you assess your investment risk tolerance and sets out guide-lines for structuring your investment portfolio.
How do I change my investments?
There are two ways to change the investments in your account: you may change your existing account balance or you may change your future contributions. You also may change both, but you must make two separate elections.
Investment changes can be made once each business day by calling KeyInvestSM. You can make your
change either by using the KeyInvestSM automated system or
by speaking directly to a customer service representative.
When do my investments actually change?
If you request a change in your investments before 4:00 p.m. (EST) on any business day, generally, your investment request will be executed that day and you will receive that day’s closing price. If your request is made after the market closes or on weekends or holidays, you will receive the next business day’s closing price. In unusual cases, there may be a delay in settling Lincoln Stock Fund trades.
How are my matching and ESOP contributions invested?
Previously, matching and ESOP contributions were invested only in Lincoln stock. Since January 1, 1998, you may invest those amounts in any of the available funds. Matching and ESOP contributions will remain invested in Lincoln stock until you request an investment change. Remember, if you want to change both your existing account balance and future contributions, you must make two separate elections.
Loans
The 401(k) Plan is designed to assist you in saving for retirement. However, there are times when you need to access your money while you are still working. You can do this by taking a 401(k) loan. You may take a loan from your rollover, pre-tax, vested matching, and ESOP contributions (in that order). If you choose to take a loan, there is a $25 processing fee when your loan is activated. You must be a current employee to take a loan or to consolidate an existing loan.
You may borrow up to 50% of your vested account balance, or $50,000, whichever is less. However, if you had an outstanding loan during the 12 months before your loan, you cannot borrow more than $50,000 minus the highest outstanding loan balance during the last 12 months.
The minimum loan amount is $1,000.
The money for your loan will be taken out of your account, meaning your investments will be sold to cover the amount of the loan. Money is taken out of your investment funds in proportion to your balances in each fund. You will repay the loan, with interest, using after-tax dollars. Loan repayments automatically are deducted from your paycheck.
Repayments are deposited back into your 401(k) account, based on your then-current investment elections for new contributions. You may repay the entire remaining balance of your loan at any time, without penalty.
Loans must be repaid within five years. If the loan is for the purchase of a primary residence, the repayment period may be up to 15 years.
How do I request a loan from my account?
You may request a Loan Application by calling KeyInvestSM. The
application will be mailed to your home the following business day. You then must complete the Loan Application, authorizing us to use your 401(k) account as security for your loan, and return the application to the Human Resources Department (Retirement Admini-stration) for approval. If you are married, your spouse must consent to your loan and his/her signature must be notarized.
How long will it take to get my loan?
After the Company approves your loan, it will take approximately 14 days to receive your funds.
How many loans can I have at one time?
You may have only one loan outstanding at a time. You may, however, request a consolidation loan if you use a portion of that consolidation to pay off the original loan. Under a consolidation loan, the repayment period cannot extend beyond five years from the date of your original loan (other than a home loan).
Do I pay interest on the loan?
Yes. The interest rate is 1% above the current prime rate. The interest you pay, like the loan principal, is returned to your account — thus, you are paying the interest to yourself.
How can I determine what my loan payments will be?
If you want to see how a new loan will affect your paycheck, you may call KeyInvestSM to go over different
repayment alternatives. KeyInvestSM
cannot provide this information for consolidation loans.
If I take vacation in advance, will loan repayments be taken out?
Yes. Since vacation is a part of your base pay, loan repayments must be taken out of that check. But, no more than two loan repayments should be made in any one month.
What happens if I go on an unpaid leave of absence?
If you take an unpaid leave of absence while you have an outstanding loan, you will have two options:
1. You may continue to make payments on your loan while you are on a leave of absence by mailing a check each month to the Payroll Department. This will allow you to stay current on your loan and will not require you to double up on payments when you return to work. Include your Social Security number and the statement “401(k) Loan Repayment” on your check.
What happens to my loan if I leave Lincoln?
If you leave or retire from Lincoln and have an outstanding loan balance, you have three options: 1. Repay the outstanding loan in
full.
2. Request a distribution from the 401(k) Plan. The amount of your distribution will be reduced by your outstanding loan balance (but you will be taxed on the entire amount). 3. Continue making repayments to
the Payroll Department. Include your Social Security number and the statement “401(k) Loan Repayment” on your check.
What happens if I default on my loan?
Distributions
There are two types of distributions — those you receive after you leave Lincoln and those you receive while you are still an employee of Lincoln. When you leave Lincoln — by retirement, termination or death — you have several options on how and when to take the money in your 401(k) account. If you are still an employee of Lincoln, the only distribution you can receive is as a result of a severe financial hardship (see below).
Distributions on Termination of Employment
You are eligible for a distribution of your vested account balance after you retire or terminate your employment with the Company. When you are ready to receive a distribution of your account, you can select to receive it in one of two ways:
1. You may have the entire amount paid to you in one lump sum. 2. You may have your account paid
to you in annual installments for up to 10 years.
If the value of your account is less than $5,000, the Company automatically will pay your benefits in one lump sum.
For those amounts invested in the Lincoln Electric Holdings, Inc. Stock Fund, you may receive your distribution in whole shares (with fractional shares paid in cash) or all in cash.
When you request a distribution, you will be given the option of receiving it directly or rolling it over to another employer’s plan or to an IRA.
n If you receive the money directly, you will have to pay tax on the distribution. The money you receive will be subject to mandatory 20% federal income tax withholding. In addition, if you separate from service and are under age 55, you may be subject to a 10% penalty on your distribution.
n If you elect to roll over your distribution, you will not pay tax on the distribution (until you receive it from the other plan or IRA), there will be no income tax withholding and you will not be subject to the 10% penalty. In addition, your earnings on your account will continue to grow tax-free until you ultimately take a distribution.
How do I request a distribution from my account?
You can obtain a Distribution Request Form by calling
KeyInvestSM. This form, along with
the required tax notice explaining the tax consequences of a distribution, will be mailed to your home the following business day. You also may request a distribution form from Human Resources (Retirement Administration).
Once you complete the Distribution Request Form, return it to the Human Resources Department (Retirement Administration) for approval. The distribution will be issued as soon as administratively feasible.
Can I leave my money in the account after I leave Lincoln?
Yes. If the value of your account is $5,000 or more, you may leave the money in your 401(k) account. You will continue to be able to transfer from one fund to another through KeyInvestSM.
By law, you must begin to withdraw your account balance when you reach age 70½, but only if you no longer are employed by the Company.
When I retire, will the money I withdraw from my 401(k) account reduce the amount of my Social Security income?
No. Currently, the amount you withdraw from the 401(k) Plan does not reduce your Social Security income.
If I request annual payments and later want to take the remaining balance in a lump sum, may I do so?
Yes. Contact KeyInvestSM to
request another distribution form.
Distributions on Death
If you die before taking a distribution from the 401(k) Plan, your beneficiary will be eligible to receive a lump sum distribution of your vested account.
You can select your beneficiary by completing a Beneficiary Designation Form. If you are married, your spouse automatically will be your beneficiary, unless he/ she consents to your selection of another beneficiary. If you are not married and have not completed a Beneficiary Designation Form, your beneficiary will be your estate. A spousal beneficiary may roll over his/her distribution to an IRA. Non-spousal beneficiaries may not roll over distributions to an IRA.
How do I select my beneficiary?
To identify your beneficiary, you need to complete a Beneficiary Designation Form, which is available from Human Resources (Retirement Administration). If you are naming someone other than your spouse as your beneficiary, your spouse must agree and his/her signature must be notarized.
How will Lincoln Electric know if I get married or divorced?
All employees are responsible for keeping their Beneficiary Designation Forms current. These forms are kept on file in the Human Resources Department. If your marital status should change, please contact the Human Resources Department for a new form.
When must my beneficiary take a distribution?
If payments have not yet com-menced and the beneficiary is your spouse, payments can begin at any time by completing a Distribution Request Form. However, distribu-tions to your surviving spouse must commence by the time you would have reached age 70½ (had you continued living).
If payments have not yet commenced and the beneficiary is not your spouse, payments must begin within a year of your death.
Hardship Distributions
The only time you are able to take a distribution while you are still employed by the Company is on account of a financial hardship. Hardship distributions may be taken from your rollover, pre-tax, vested matching and ESOP contributions (in that order). Current IRS regulations define financial hardship as an immediate and heavy financial need for which resources are not otherwise available. Financial hardships are limited to:
n purchase of a principal residence (excluding mortgage payments)
n college tuition and related educational fees for you, your spouse or your dependents for the next 12 months
n payments to prevent eviction from or foreclosure on your principal residence (but not simply to pay overdue amounts)
n medical expenses for you, your spouse or your dependents, that are not reimbursed by insurance or otherwise
In order to take a hardship distribution, you first must have tried to satisfy your hardship by taking out a loan from the 401(k) Plan. Only if that amount is not sufficient can you receive a hardship distribution.
If you take a hardship distribution, you will not be able to make pre-tax contributions (or receive the Company match) for one year after the hardship distribution. When you resume making pre-tax contri-butions there may be an additional limit on the amount you are able to contribute.
To apply for a hardship distribution, contact Human Resources
(Retirement Administration) for the paperwork. You also may request the paperwork through KeyInvestSM.
You will need to provide evidence of the existence of the hardship and of the amount of the hardship. Hardship withdrawals are subject to IRS regulations, which may change from time to time. The 401(k) Plan will adhere to all IRS rules in administering the hardship withdrawal provisions.
Will I owe taxes if I take a hardship distribution?
Miscellaneous
KeyInvestSM
KeyInvestSM is the Key Bank
Participant Account Information System, which provides fast and easy access to your account information, 24 hours a day, 7 days a week, from any touch-tone phone. By dialing 1-800-962-2149, KeyInvestSM will:
n Provide you with personal account information such as account balances and amounts available for loans or withdrawal.
n Assist you in changing the mix of your investments.
n Provide loan information and modeling.
n Confirm all verbal directions in writing to your home address within five business days.
n Provide a mutual fund prospectus at your request.
n Provide customer service representatives to answer questions between the hours of 8:00 a.m. and 10:00 p.m. (EST).
n Mail confirmation of Personal Identification Numbers (PIN’s) to be used with your Social Security number to access your account.
What is my Personal Identification Number (PIN)?
Your PIN is a Personal
Identification Number assigned to you. It is mailed to you after your account is set up. You must know your PIN to access your account information from KeyInvestSM.
What if I lose or want to change my PIN?
If you lose or want to change your PIN, you may call KeyInvestSM
between the hours of 8:00 a.m. and 10:00 p.m. (EST) and speak with a customer service representative. A letter then will be sent to the address on file confirming your existing PIN. This information will be communicated only in writing. You also may request your PIN from Human Resources (Retirement Administration).
Income Taxes
The 401(k) Plan offers you tax savings, but, as we all know, taxes cannot be avoided forever. Under the current tax law, you can postpone taxes and, in some cases, reduce your taxes.
Your contributions and all earnings grow on a tax-deferred basis while they remain in the 401(k) Plan. When you or your beneficiary receives any money from the 401(k) Plan (other than for a plan loan), taxes will be due at that time. 401(k) Plan distribution rules provide, at your election, for a single lump sum payment. Such single lump sum payment may be subject to favorable tax treatment. For example, to the extent that you elect to receive payment in the form of Lincoln shares, you may be able to exclude from gross income the net unrealized appreciation on those shares.
You also may be able to “roll over” your distribution if you receive a single lump sum payment or less than 10 annual installment payments. If all or a portion of your distribution is rolled over into a special rollover IRA or another employer’s plan, you can postpone paying taxes until you take the money out.
Before you receive a distribution or withdrawal, you will receive information regarding the tax treatment and an opportunity to elect a direct rollover to an IRA or another employer’s plan. If you do not elect a direct rollover, the taxable amount of your distribution will be subject to a mandatory 20% federal income tax withholding.
The portion of any taxable payment that you receive from the 401(k) Plan (including hardship with-drawals) that is not rolled over into an IRA or other employer’s plan may be subject to an additional 10% federal income tax if the payment is made before you reach age 59½. In general, this
additional tax will not apply if the payment is made on account of your death or disability or your termination of employment after age 55.
We suggest that you consult a qualified tax advisor before you receive money from the 401(k) Plan in order to determine what is best for you and the impact of current tax law on your particular situation.
Fees
The Company will be responsible for the general administrative fees associated with the 401(k) Plan. The investment funds, however, have management and admini-strative fees that are taken out at the fund level (prior to any returns credited to your account). Informa-tion on these fees is available in the prospectus for the fund.
Investment Responsibility
Because you are given this opportunity, the committee that selects investments for the plan and all other plan fiduciaries are relieved of any liability for any losses to your account that are the direct and necessary result of your investment direction. Your invest-ment elections are kept confidential by the Trustee and a limited number of Company employees. The investment committee is responsible for monitoring compliance with the established confidentiality procedures. If you have any questions regarding the 401(k) Plan’s confidentiality pro-cedures, contact Human Resources (Retirement Administration).
Lincoln Electric Holdings, Inc. Stock
Before each annual or special meeting of its shareholders, the Company will cause to be sent to each participant or beneficiary under the 401(k) Plan who has an interest in the Lincoln Electric Holdings, Inc. Stock Fund a copy of the proxy solicitation materials and a form requesting confidential instructions to the Trustee on how to vote the Lincoln stock allocated to such participant’s or beneficiary’s account. The Trustee will vote the shares as instructed. If instructions are not received for any portion of the shares held in the Lincoln Electric Holdings, Inc. Stock Fund, those shares will not be voted.
Except to the extent necessary to satisfy requests for distributions, withdrawals or investment changes, the Trustee will not sell any shares held by it under the 401(k) Plan. However, in the event of a tender offer (as determined by the investment committee), the
administrative committee will cause to be sent to each participant or beneficiary under the 401(k) Plan who has an interest in the Lincoln Electric Holdings, Inc. Stock Fund all pertinent information in respect to such offer, including all the terms and conditions thereof, together with a form pursuant to which each such participant or beneficiary may direct the Trustee to tender or sell pursuant to the offer all or part of his or her share of stock held in the Lincoln Electric Holdings, Inc, Stock Fund. The Trustee will tender or sell only those shares to which valid and timely directions are received. Your instructions regarding the voting or tender of shares will be received by the Trustee, not the Company. Your individual instruc-tions will be kept confidential by the Trustee.
The 401(k) Plan is an excellent enhancement to your existing retirement benefits. When you dream about retirement, you probably think of travel, tee times and long lazy days of doing what you want when you want. But — did you know:
n Most people require 70% to 85% of their current income to live comfortably once they reach retirement.
n The average retired American receives less than 38% of his or her income from Social Security — and has to make up the rest from his or her personal savings or other sources.
While it is easy to dream about retirement, it is vitally important to save for it, too. That is why the Company offers one of the most tax-favored retirement savings programs available today.
When should I start to save?
The sooner you start saving, the better. Even if retirement seems a very long time away, the plans you make today can have a significant impact on the quality of life you will lead in the future.
Let’s look at the difference between investing earlier as opposed to later.
n The “Early Bird” invested $2,000 a year for the first 10 years of a 40-year employment period. Assuming an annual compounding rate of 8%, the $20,000 invested would be worth almost $315,000 at retirement.
n The “Late Saver” waited until the eleventh year of employment to begin investing $2,000 a year. This individual continued to invest for the next 30 years, putting away a total of $60,000. But, again assuming an annual compounding of 8%, the $60,000 invested would be worth a little less than $245,000 at retirement.
How much should I save?
Since you make the investment elections for your account, you should think about what type of portfolio best meets your individual goals.
First, understand each fund’s goals,
content and risk/return character-istics. You’ll find that information in the Fund Fact Sheets; review them carefully. It’s important that you know where your money is going. And, please feel free to call the KeyInvestSM 800 number if you
have questions or want more information about the funds.
Second, understand how the funds
relate to each other. Each can be ranked in terms of potential risk and return. Risk is defined as short-term fluctuation in principal value and return is defined as compound annual growth rate. Short-term risk also can be defined as volatility, the variability of return from period to period. You may request a ranking of the funds from Human Resources (Retirement Administration) or refer to the Investment Options materials that supplement this booklet.
n Remember, less risky investments generally offer less long-term opportunity. This means investments with less short-term volatility have a greater exposure to falling behind inflation in the long run. So, investments with low short-term risk usually have greater long-term risk of under performing against inflation or your goals.
n An aggressive mix is one that uses a greater proportion of higher risk/return funds like the equity funds. A conservative mix is one that uses a greater proportion of lower risk/return funds like the Victory U.S. Government Obligations Fund.
n Keep in mind that no asset class (or investment option) is good for all seasons. Diversification is key to sound investment management, so it might be wise to use several funds in your mix, even some portion of more conservative funds in an aggressive mix, and vice versa.
Third, understand your financial
Fourth, be aware of when you’ll
need the money for retirement or to take a loan. If you are by nature an aggressive investor, but know you’ll need the money for a loan soon, you may wish to move an appropriate portion of your assets to more conservative funds.
Administration
Plan Administration
The Lincoln Electric Company is the administrator of the 401(k) Plan. However, the Company has delegated most of the administra-tive duties to an administraadministra-tive committee selected by the Board of Directors. The committee also can employ attorneys, agents, admini-strators and/or accountants to assist in carrying out these duties. The committee makes the rules and regulations necessary for the day-to-day operation of the 401(k) Plan. The committee has the sole authority and discretion to interpret and construe the terms of the 401(k) Plan. The committee is required to ensure that the 401(k) Plan provisions are administered in a uniform and nondiscriminatory way.
Filing a Claim for Benefits
If you wish to file a claim for benefits under the 401(k) Plan, you need to submit your request in writing to Human Resources (Retirement Administration). If you are requesting a distribution, you will need to complete a Distribution Request Form.
Appealing a Denied Claim
If you make a claim for benefits under the 401(k) Plan, and all or part of your claim is denied, the administrative committee will notify you of the reasons for the denial with specific reference to the appropriate plan provisions. The committee also will tell you how you can appeal this decision. The appeal process is stated below for your information.
1. Within six months of the mailing of the committee’s notice of denial of your claim, you may appeal that denial by filing a written request for a review of your claim with the committee. 2. Upon receipt of your appeal, the
committee will conduct a full and fair review of your claim. During this review, you or your representative may review documents that are pertinent to your claim and submit issues and comments in writing. 3. Within 60 days (or if special
Amendment of the 401(k) Plan
The Lincoln Electric Company reserves the right to change, modify or discontinue the 401(k) Plan in whole or in part at any time. However, The Lincoln Electric Company has established the 401(k) Plan for the exclusive benefit of its employees and hopes and expects to continue it. In the event of a termination of the 401(k) Plan, the rights of all employees to benefits earned and funded at the date of the 401(k) Plan termination shall be nonforfeitable.
Assignment of Benefits, Qualified Domestic Relations Orders (QDROs)
The 401(k) Plan’s purpose is to provide benefits to you (and your beneficiaries). Assets held by the 401(k) Plan cannot be used for any other purpose while the plan continues. This applies to both Lincoln and you, because you cannot assign, transfer or attach your benefits nor use them as collateral for a loan (other than a plan loan).
However, the 401(k) Plan must obey a “Qualified Domestic Relations Order” (QDRO), such as a divorce decree, issued by a court of law. A QDRO requires that a percentage of your benefits be paid to your spouse, former spouse, child
or dependent. In order to be “qualified,” the court order has to meet certain standards set forth in the law and by the 401(k) Plan administrator. Once your account is split under a QDRO, your former spouse will be entitled to receive a distribution of his/her portion, even though you may not yet eligible to receive a distribution.
You should understand that the 401(k) Plan has no choice in these matters. The 401(k) must obey the order of the court. You may obtain, without charge, a copy of the 401(k) Plan’s QDRO procedures by contacting Human Resources (Retirement Administration).
Type of Plan
The 401(k) Plan is a defined contribution plan with a cash or deferred arrangement (401(k)). It is intended to be a qualified profit sharing plan under sections 401(a) and 401(k) of the Internal Revenue Code, although the Company, the administrative committee, the investment committee and the Trustee do not guarantee its qualified status. Benefits under the 401(k) Plan are not insured by the Pension Benefit Guaranty
Your ERISA Rights
The Employee Retirement Income Security Act of 1974 (ERISA)
As a participant in the 401(k) Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all plan participants shall be entitled to:
n Examine without charge, at the plan administrator’s office and at other specified locations, such as worksites, all documents governing the plan, including a copy of the latest annual report (Form 5500 series) filed by the plan with the U.S. Department of Labor.
n Obtain, upon written request to the plan administrator, copies of documents governing the operation of the plan, including copies of the latest annual report (Form 5500 series) and updated summary plan description. The administrator may make a reasonable charge for the copies.
n Receive a summary of the plan’s annual financial report. The plan administrator is required by law to furnish each partici-pant with a copy of this summary annual report.
If your claim for a pension benefit is denied in whole or in part, you must receive a written explanation of the reason for the denial. You have the right to have the plan review and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the plan and do not receive them within 30 days, you may file a suit in federal court. In such a case, the court may require the plan administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or federal court. In addition, if you disagree with the plan’s decision or lack thereof concerning the quali-fied status of a domestic relations order, you may file suit in 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.
Other Information
Plan Name The Lincoln Electric Company
Employee Savings Plan (401(k))
Plan Sponsor The Lincoln Electric Company
22801 St. Clair Avenue Cleveland, Ohio 44117-1199 (216) 481-8100
IRS Employer Identification
Number (EIN) 34-0359955
Plan Number 005
Trustee Key Trust Company of Ohio, N.A.
127 Public Square Cleveland, Ohio 44101
Plan Administrator The Lincoln Electric Company
22801 St. Clair Avenue Cleveland, Ohio 44117-1199 (216) 481-8100
Type of Administration Third Party-Administered
Agent for Legal Process Legal process may be served on
Plan Administrator or the Trustee.
Plan Year January 1 to December 31
