Town of Little Compton, RI BENEFIT LIMITATIONS

[Ord. 6/13/02; Ord. 12/19/02, § 2]

Rules. The following rules limit benefits payable under this Plan:

The annual benefit otherwise payable to a Participant at any time will not exceed the maximum permissible amount.

If the Participant makes nondeductible Employee contributions under the terms of this Plan for any limitation year beginning after December 31, 1986, such contributions which are credited for the limitation year, shall be treated as an annual addition to a qualified defined contribution plan, for purposes of these rules.

(3)

The limitation in Subsection (1) is deemed satisfied if the annual benefit payable to a Participant is not more than $1,000 multiplied by the Participant's number of Years of Service or portions thereof (not to exceed ten (10)) with the Employer, provided the Participant has never participated in a qualified defined contribution plan maintained by the Employer.

(4)

If a Participant is, or has ever been, covered under more than one defined benefit plan maintained by the Employer, the sum of the Participant's annual benefits from all such plans may not exceed the maximum permissible amount. Benefits will be reduced under any other defined benefit plan before under this Plan unless such plans are terminated, in which event benefits will be limited in this Plan.

(5)

If the Employer maintains, or at any time maintained, one or more qualified defined contribution plans covering any Participant in this Plan, the sum of the Participant's defined contribution fraction and defined benefit fraction will not exceed 1.0 in any limitation year. Benefits under a defined benefit plan shall have priority over benefits under a defined contribution plan. The provisions of this Section 9.1(a)(5) shall not apply to limitation years commencing on or after January 1, 2000.

(6)

Notwithstanding anything contained in this Article Nine to the contrary, a Participant's defined benefit fraction (including preservation of his accrued benefit) and/or defined contribution fraction may be adjusted in accordance with transitional rules contained in Section 235 of the Tax Equity and Fiscal Responsibility Act of 1982 and Section 1106 of the Tax Reform Act of 1986.

(7)

In any Plan Year in which the Plan becomes a Super Top-Heavy Plan, the denominators of the defined benefit fraction and defined contribution fraction shall be computed using one hundred percent (100%) of the dollar limitation instead of one hundred and twenty-five percent (125%). In any year which the Plan is a Top-Heavy Plan (but not a Super Top-Heavy Plan), the limitations shall be similarly reduced, subject to the special provisions in Section 11.3 which provide for maintenance of the one hundred and twenty-five percent (125%) limitations subject to added minimum accruals.

(b)

Definitions. The following definitions are applicable to this Section 9.1:

(1)

Annual benefit. A retirement benefit under the Plan which is payable annually in the form of a straight life annuity. Except as provided below, a benefit payable in a form other than a straight life annuity must be adjusted to an actuarial equivalent straight life annuity before applying the limitations of this Section 9.1. For limitation years beginning before January 1, 1995, such actuarially equivalent straight life annuity is equal to the greater of the annuity benefit computed using the interest rate specified in the Plan for adjusting benefits in the same form or five percent (5%). For limitation years beginning after December 31, 1994, the actuarially equivalent straight life annuity is equal to the greater of the annuity benefit computed using the interest rate and mortality table (or other tabular factor) specified in the Plan for adjusting benefits in the same form, and the annuity benefit computed using a five percent (5%) interest rate assumption and the "applicable mortality table", as defined below. In determining the actuarially equivalent straight life annuity for a benefit form other than a nondecreasing annuity payable for a period of not less than the life of the Participant (or, in the case of a qualified pre-retirement survivor annuity, the life of the surviving spouse), or decreases during the life of the Participant merely because of (A) the death of the survivor annuitant (but only if the reduction is not below fifty percent (50%) of the annual benefit payable before the death of the survivor annuitant), or (B) the cessation or reduction of Social Security supplements of qualified disability payments (as defined in Section 401(a)(11) of the Code), "the applicable interest rate", as defined below, will be substituted for "a five percent (5%) interest rate assumption" in the preceding sentence.

For purposes of this Section 9.1(b)(1), the term "applicable interest rate" means the annual rate of interest on 30-year Treasury securities for the calendar month that is three (3) months preceding the first day of the Plan Year in which the distribution occurs. The "applicable interest rate" shall remain constant for year.

For purposes of this Section 9.1(b)(1), the term "applicable mortality table" means the table prescribed by the Secretary of the Treasury. Such table shall be based on the prevailing commissioner's standard table, as described in Section 807(d)(5)(A) of the Code, used to determine reserves for group annuity contracts issued on the dates as of which the present value is being determined (without regard to any other subparagraphs of Section 807(d)(5) of the Code). The applicable mortality table is based upon a fixed blend of fifty percent (50%) of the male mortality rates and fifty percent (50%) of the female mortality rates from the 1983 Group Annuity Mortality Table, which mortality table is set forth in Internal Revenue Service Revenue Ruling 95-6. Notwithstanding the foregoing, effective December 31, 2002, for purposes of this Section 9.1(b)(1), the term "applicable mortality table" means the mortality table based upon a fixed blend of fifty (50%) percent of the unloaded male mortality rates and fifty (50%) percent of the unloaded female mortality rates underlying the 1994 Group Annuity Reserving Table, projected to 2002, which mortality table is set forth in Internal Revenue Ruling 2001-62.

The annual benefit does not include any benefits attributable to Employee contributions or rollover contributions, or the assets transferred from a qualified plan that was not maintained by the Employer. No actuarial adjustment to the benefit is required for (A) the value of a qualified joint and survivor annuity, (B) benefits that are not directly related to retirement benefits (such as qualified disability benefits, pre-retirement death benefits, and post-retirement medical benefits), and (C) the value of post-retirement cost-of-living increases made in accordance with Section 415(d) of the Code and Section 1.415-3(c)(2)(iii) of the Income Tax Regulations.

(2)

Compensation. For purposes of determining maximum permitted benefits under this Section, all of a Participant's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to, commissions paid to salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following:

(A)

Employer contributions to a plan of deferred compensation which are not included in the Employee's gross income for the taxable year in which contributed or Employer contributions under a simplified employee pension plan (funded with individual retirement accounts or annuities) to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation;

(B)

Amounts realized from the exercise of an unqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture;

(C)

Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and

(D)

Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Employee).

Compensation shall be measured on the basis of compensation paid in the limitation year.

For purposes of applying the limitations of this Section 9.1, compensation paid or made available during such limitation year shall include any elective deferral (as defined in Code Section 402(g)(3)), and any amount which is contributed or deferred by the Employer at the election of the Employee and which is not includible in the gross income of the Employee by reason of Code Section 125 or 457. The provisions of this paragraph are effective for Plan Years beginning after December 31, 1997.

(3)

Defined benefit fraction. A fraction, the numerator of which is the sum of the Participant's projected annual benefits under all the defined benefit plans (whether or not terminated) maintained by the Employer, and the denominator of which is the lesser of one hundred and twenty-five percent (125%) of the dollar limitation determined for the limitation year under Sections 415(b)(1)(A) and 415(d)(1) of the Code or one hundred and forty percent (140%) of the Participant's Highest Average Compensation (as defined in Section 9.1(b)(6)), including any adjustments under Section 415(b) of the Code. Notwithstanding the provisions of Section 9.1(b)(8) relating to reductions to the maximum dollar limitation for years of participation less than ten (10), for purposes of computing the denominator of the defined benefit fraction, such reductions shall be determined based upon Years of Service. Provided, however, if a Participant was a Participant as of the first day of the first limitation year commencing after December 31, 1986, in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than one hundred and twenty-five percent (125%) of the sum of the annual benefits under such Plans which the Participant had accrued as of the end of the last limitation year commencing before January 1, 1987, disregarding any changes in the terms and conditions of the plans after May 5, 1986. These provisions are applicable only if the defined benefit plans, individually and in the aggregate, satisfied the requirements of Code Section 415 for all limitation years beginning before January 1, 1987.

(4)

Defined contribution fraction. A fraction, the numerator of which is the sum of the annual additions to the Participant's account under all the defined contribution plans (whether or not terminated) maintained by the Employer for the current and all prior limitation years (including the annual additions attributable to the Participant's nondeductible Employee contributions to this and all other defined benefit plans, whether or not terminated, maintained by the Employer), and the denominator of which is the sum of the maximum aggregate amounts for the current and all prior limitation years with the Employer (regardless of whether a defined contribution plan was maintained by the Employer).

The maximum aggregate amount in any limitation year is the lesser of one hundred and twenty-five percent (125%) of the dollar limitation then in effect under Code Section 415(c)(1)(A) or thirty-five percent (35%) of the Participant's compensation for such year.

(5)

Employer. The Employer that adopts this Plan, and all members of a controlled group of corporations (as defined in Section 414(b) of the Code, as modified by Section 415(h)), commonly controlled trades or businesses (as defined in Section 414(c) as modified by Section 415(h)), or affiliated service groups (as defined in Section 414(m)) of which the adopting employer is a part, and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code.

(6)

Highest Average Compensation. The average compensation for the three (3) consecutive limitation years with the Employer that produces the highest average.

(7)

Limitation year. The twelve (12)-consecutive-month period used to measure compensation in this Plan for benefit purposes shall be the Plan Year.

(8)

Maximum permissible amount. The defined benefit dollar limitation.

(A)

Defined benefit dollar limitation. The "defined benefit dollar limitation" is $160,000 as adjusted, effective January 1 of each year, under Section 415(d) of the Code in such manner as the Secretary shall prescribe, and payable in the form of a straight life annuity. A limitation as adjusted under Section 415(d) will apply to limitation years ending with or within the calendar year for which the adjustment applies.

[Ord. 12/19/02]

(B)

Maximum permissible benefit. The "maximum permissible benefit" is the lesser of the defined benefit dollar limitation or the defined benefit compensation limitation (both adjusted where required, as provided in (1) and, if applicable, in (2) or (3) below).

(1) If the Participant has fewer than 10 years of participation in the Plan, the defined benefit dollar limitation shall be multiplied by a fraction, (i) the numerator of which is the number of years (or part thereof) of participation in the Plan and (ii) the denominator of which is 10. In the case of a Participant who has fewer than 10 years of service with the Employer, the defined benefit compensation limitation shall be multiplied by a fraction, (i) the numerator of which is the number of years (or part thereof) of service with the Employer and (ii) the denominator of which is 10.

(2) If the benefit of a Participant begins prior to age 62, the defined benefit dollar limitation applicable to the Participant at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the earlier age that is the actuarial equivalent of the defined benefit dollar limitation applicable to the Participant at age 62 (adjusted under (1) above, if required). The defined benefit dollar limitation applicable at an age prior to age 62 is determined as the lesser of (i) the actuarial equivalent (at such age) of the defined benefit dollar limitation computed using the interest rate and mortality table (or other tabular factor) specified in Section 1.2 of the Plan and (ii) the actuarial equivalent (at such age) of the defined benefit limitation computed using a 5 percent interest rate and the applicable mortality table as defined in Section 1.2 of the Plan. Any decrease in the defined benefit dollar limitation determined in accordance with this paragraph (2) shall not reflect a mortality decrement if benefits are not forfeited upon the death of the Participant. If any benefits are forfeited upon death, the full mortality decrement is taken into account.

(3) If the benefit of a Participant begins after the Participant attains age 65, the defined benefit dollar limitation applicable to the Participant at the later age is the annual benefit payable in the form of a straight life annuity beginning at the later age that is actuarially equivalent to the defined benefit dollar limitation applicable to the Participant at age 65 (adjusted under (1) above, if required). The actuarial equivalent of the defined benefit dollar limitation applicable at an age after age 65 is determined as (i) the lesser of the actuarial equivalent (at such age) of the defined benefit dollar limitation computed using the interest rate and mortality table (or other tabular factor) specified in Section 1.2 of the Plan and (ii) the actuarial equivalent (at such age) of the defined benefit dollar limitation computed using a 5 percent interest rate assumption and the applicable mortality table as defined in Section 1.2 of the Plan. For these purposes, mortality between age 65 and the age of which benefits commence shall be ignored.

[Ord. 12/19/02]

(C)

If the benefit of a Participant commences prior to age sixty-two (62), the defined benefit dollar limitation shall be an annual benefit that is the actuarial equivalent of the defined benefit dollar limitation for age sixty-two (62), as determined above, reduced for each month by which benefits commence before the month in which the Participant attains age sixty-two (62). The annual benefit beginning prior to age sixty-two (62) shall be determined as the lesser of the equivalent annual benefit computed using the interest rate and mortality table (or other tabular factor) equivalence for early retirement benefits, and the equivalent annual benefit computed using a five percent (5%) interest rate and applicable mortality table as defined in Section 1.2 of the Plan. Any decrease in the adjusted defined benefit dollar limitation determined in accordance with this provision (C) shall not reflect any mortality decrement to the extent the benefits will not be forfeited upon the death of the Participant.

(D)

If the annual benefit of a Participant commences after the Participant's social security retirement age, the defined benefit dollar limitation as reduced in (A) above, if necessary, shall be adjusted so that it is the actuarial equivalent of an annual benefit of such dollar limitation beginning at the Participant's social security retirement age. The equivalent annual benefit beginning after social security retirement age shall be determined as the lesser of the equivalent annual benefit computed using the interest rate and mortality table (or other tabular factor) specified in the Plan for purposes of determining actuarial equivalence for delayed retirement benefits, and the equivalent annual benefit computed using a five percent (5%) interest rate assumption and the applicable mortality table as defined in Section 1.2 of the Plan.

(E)

Notwithstanding anything else in this Section 9.1 to the contrary, the benefit otherwise accrued or payable to a Participant under this Plan shall be deemed not to exceed the defined benefit dollar limitation if:

(1) the retirement benefits payable for a Plan Year under any form of benefit with respect to such Participant under this Plan and under all other defined benefit plans (regardless of whether terminated) ever maintained by the Employer do not exceed $1,000 multiplied by the Participant's number of Years of Service or parts thereof (not to exceed ten (10)) with the Employer; and

(2) the Employer has not at any time maintained a defined contribution plan, a welfare benefit plan, or an individual medical account in which the Participant participated.

(9)

Projected annual benefit. The annual benefit as defined in Subsection (b)(1) to which the Participant would be entitled under the terms of the Plan assuming:

(A)

The Participant will continue employment until normal retirement age under the Plan (or current age, if later), and

(B)

The Participant's compensation for the current limitation year and all other relevant factors used to determine benefits under the Plan will remain constant for all future limitation years.

(10)

Annual additions. The sum of the following amounts credited to a Participant's account for the limitation year:

(A)

Employer contributions; and

(B)

Forfeitures; and

(C)

Employee contributions made after December 31, 1986; and

(D)

Amounts allocated, after March 31, 1984, to an individual medical account, as defined in Section 415(1)(2) of the Code, which is part of a pension or annuity plan maintained by the Employer are treated as annual additions to a defined contribution plan. Also, amounts derived from contributions paid or accrued after December 31, 1985, intaxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a Key Employee, as defined in Section 419A(d)(3), under a welfare benefit fund, as defined in Section 419(e), maintained by the Employer, are treated as annual additions to a defined contribution plan.

(11)

Annual additions shall be limited to the lesser of (A) $30,000, as adjusted under Code Section 415(d), or (B) twenty-five percent (25%) of the Participant's compensation (as defined in Code Section 415(c)(3)) for the limitation year.