Borough of Athens, PA Terminology

For the purpose of implementing the limitations on benefits of IRC § 415, actuarial equivalence shall be determined based on the following mortality and interest assumptions:

Mortality table: UP-1984 (-2).

Interest rate: 5% per annum compounded annually [except as limited under § 91-23E(13)].

COMPENSATION/AVERAGE MONTHLY COMPENSATION

For the purpose of implementing the limitations on benefits of IRC § 415 for limitation years beginning on or after December 31, 2002, the IRC § 417 mortality table is the mortality table prescribed by the Secretary of the United States Treasury under Revenue Ruling 2001-62 or subsequent guidance. Such table shall be based on the prevailing commissioners' standard table used to determine reserves for group annuity contracts issued on the date as of which the present value is being determined.

[Amended 12-15-2003 by Ord. No. 588, approved 12-15-2003]

COMPENSATION:

Definition.

Any earnings reportable as W-2 wages for federal income tax withholding purposes; plus elective contributions, for the applicable period. Elective contributions are amounts excludable from the employee's gross income and contributed by the employer, at the employee's election, to:

[1]

A cafeteria plan (excludable under IRC § 125) and as provided in § 91-23E(3)(c);

[Amended 12-15-2003 by Ord. No. 588, approved 12-15-2003]

[2]

A tax sheltered annuity (excludable under IRC § 403(b); or

[3]

A deferred compensation plan (excludable under IRC § 457).

Any reference in this plan to "compensation" shall be a reference to the definition in this section, unless the plan reference specifies a modification to this definition. The plan administrator shall take into account only compensation actually paid by the employer for the relevant period. A compensation payment includes compensation by the employer through another person under the common paymaster provisions in IRC §§ 3121 and 3306. Compensation from a related employer that is not a participating employer under this plan shall be excluded.

Exclusions from compensation. Notwithstanding the provisions of Subsection A(1) of this definition, the following types of remuneration shall be excluded from the participant's compensation:

Unused vacation, personal day, and sick pay paid on account of termination of employment.

Any lump sum payment made upon termination of, employment.

(3)

Limitations on compensation.

For any plan year beginning after December 31, 2001, the plan administrator shall take into account only the first $200,000 (or beginning January 1, 2003, such larger amount as the Commissioner of Internal Revenue may prescribe) of any participant's compensation for determining all benefits provided under the plan, For any plan year beginning after December 31, 1995, but before January 1, 2002, the plan administrator shall take into account only the first $150,000 (or, for plan years beginning after December 31, 1996, but before January 1, 2002, such larger amount as the Commissioner of Internal Revenue may prescribe) of any participant's compensation for determining all benefits provided under the plan for a determination period. The compensation dollar limitation for a plan year shall be the limitation amount in effect on January 1 of the calendar year in which the plan year begins. If the plan should determine compensation on a period of time that contains less than 12 calendar months (such as for a short plan year), the annual compensation dollar limitation shall be an amount equal to the compensation dollar limitation for the plan year multiplied by the ratio obtained by dividing the number of full months in the period by 12.

Notwithstanding the preceding, in the case of an eligible participant, the annual compensation dollar limitation shall not apply to the extent that the application of the limitation would reduce the amount of compensation that is allowed to be taken into account under the plan below the amount that was allowed to be taken into account under this plan as in effect on July 1, 1993. For this purpose, an eligible participant is an individual who first became a participant in the plan during a plan year prior to the first day of the first plan year beginning after December 31, 1995.

AVERAGE MONTHLY COMPENSATIONThe average of a participant's monthly compensation over the thirty-six-consecutive-month period ending on the date of employment termination. If a participant's entire period of service for the employer is less than the specified period, compensation shall be averaged on a monthly basis over the participant's entire period of service. If compensation for any plan year beginning prior to January 1, 1996, is taken into account in determining average annual compensation for any plan year beginning after December 31, 1993, such compensation shall be subject to the $150,000 compensation dollar limitation, but only to the extent described in Subsection A(3) of this definition.

DATES/YEARS

ACCOUNTING DATEThe last day of the plan year.

EFFECTIVE DATEJanuary 20, 1958.

The effective date of this amendment and restatement is January 1, 2002; provided, however that the plan provisions required to comply with the Tax Reform Act of 1966 (TRA '86), the Omnibus Budget Reconciliation Act of 1956 (OBRA '86), the Omnibus Budget Reconciliation Act of 1987 (OBRA '67), and the Technical and Miscellaneous Revenue Act of 1988 (TAMRA) shall generally be effective on the first day of the plan year beginning after December 31, 1988, except as specified otherwise in this plan or in TRA '86, OBRA '86, OBRA '87 or TAMRA for a government-sponsored plan. The plan provisions required to comply with the 1969 Revenue Reconciliation Act shall generally be effective on the first day of the plan year beginning after December 31, 1989, except as specified otherwise in this plan or in said Act. The plan provisions required to comply with the Unemployment Compensation Amendments of 1992 shall be effective on January 1, 1993, except as specified otherwise for a government-sponsored plan. The plan provisions required to comply with the Omnibus Budget Reconciliation Act of 1993 shall generally be effective on the first day of the plan year beginning after December 31, 1993, except as specified otherwise in said Act.

The plan provision required to comply with the Family and Medical Leave Act shall be effective August 5, 1993, the plan provisions required to comply with the Uniformed Services Employment and Re-Employment Rights Act of 1994 shall be effective December 12, 1994, the plan provisions required to comply with the Retirement Protection Act of 1994 shall generally be effective on the first day of the first limitation year beginning after December 31, 1994, the plan provisions required to comply with the Small Business Job Protection Act of 1996 shall generally be effective on the first day of the plan year beginning after December 31, 1996, the plan provisions required to comply with the Taxpayer Relief Act of 1997 shall generally be effective on the first day of the plan year beginning after August 5, 1997, and the plan provisions required to comply with the Economic Growth and Tax Relief Reconciliation Act of 2001 shall generally be effective on the first day of the plan year beginning after December 31, 2001, except as specified otherwise in this plan or in said Acts for a government-sponsored plan.

PLAN ENTRY DATEThe participation date(s) specified in Article II.

PLAN YEARThe twelve-consecutive-month period beginning on January 1 and ending on December 31.

LIMITATION YEARThe plan year.

EMPLOYEE

EMPLOYEEAny person employed by the employer. The term "employee" shall include any employee of the employer maintaining the plan or of any other employer required to be aggregated with such employer under IRC § 414(b), (c), (m) or (o), as such provisions may be interpreted to apply to a governmental entity by the Internal Revenue Service. The term "employee" shall also include any leased employee deemed to be an employee of any such employer as provided in IRC § 414(n) or (o) and as defined in Subsection B of this definition.

LEASED EMPLOYEEAn individual (who otherwise is not an employee of the employer) who, pursuant to a leasing agreement between the employer and any other person, has performed services for the employer [or for the employer and any persons related to the employer within the meaning of IRC § 414(n)(6)] on a substantially full-time basis for at least one year and such services are performed under the primary direction or control of the employer, if a leased employee is treated as an employee by reason of this Subsection B, compensation from the leasing organization that is attributable to services performed for the employer shall be considered as compensation under the plan. Contributions or benefits provided a leased employee by the leasing organization that are attributable to services performed for the employer shall be treated as provided by the employer.

EMPLOYER

Athens Borough, a political subdivision of the Commonwealth of Pennsylvania, or any successor entity that may assume the obligations of this plan with respect to its employees by becoming a party to this plan.

FIDUCIARIES

CHIEF ADMINISTRATIVE OFFICERThe person appointed by the employer or the pension board as described in § 91-26 who has primary responsibility for the execution of the administrative affairs of the plan.

PLAN ADMINISTRATORThe Chief Administrative Officer.

INVESTMENT MANAGERA person or corporation other than a trustee appointed for the investment of plan assets.

PARTICIPANT/BENEFICIARY

PARTICIPANTAn eligible employee of the employer who becomes a member of the plan pursuant to the provisions of Article II, or a former employee who has an accrued benefit under the plan.

BENEFICIARYA person designated by a participant who is or may become entitled to a benefit under the plan. The beneficiary may be someone other than the participant's spouse, but only to the extent that this plan provides for a benefit to be payable to a non-spouse beneficiary. A beneficiary who becomes entitled to a benefit under the plan remains a beneficiary under the plan until the trustee has fully distributed his benefit to him. A beneficiary's right to (and the plan administrator's, or a trustee's duty to provide to the beneficiary) information or data concerning the plan shall not arise until he first becomes entitled to receive a benefit under the plan.

PLAN

Athens Borough Police Pension Plan as set forth herein and as it may be amended from time to time.

SERVICE

Any period of time the employee is in the employ of the employer, including any period the employee is absent due to vacation, holidays, or sickness or on an unpaid leave of absence authorized by the employer. "Separation from service" means that the employee no longer has an employment relationship with the employer.

HOUR OF SERVICEEach hour for which an employee is paid or entitled to payment for the performance of duties for the employer.

BREAK IN SERVICEAny period of severance.

PERIOD OF SEVERANCEA continuous period of time during which the employee is not employed by the employer and is not credited with an hour of service. Such period begins on the date the employee retires, terminates service or, if earlier, the date on which the employee was otherwise first absent from service.

Credit for service.

Credit for military service.

Any employee employed as a member of the police force who has been a regularly appointed employee for a period of at least six months and who thereafter enters into the military service of the United States shall receive credit for all such military service, if he returns to employment with the employer within six months after his separation from military service.

Further, any employee who entered into the military service of the United States before employment with the employer shall receive credit for each year of military service or fraction thereof for a period not to exceed five years. Such service shall not be credited if the employee fails to make the required payment. The required payment for such crediting shall be computed by:

[1]

Applying the lesser of 10% or the average normal cost rate for Borough and township police pension plans as certified by the Public Employee Retirement Study Commission to the employee's average annual rate of compensation over the first three years of service; and

[2]

Multiplying the result by the number of years and fractional parts of years of creditable nonintervening military service being purchased together with interest at the rate of 4.75% compounded annually from the date of employment to the date of payment, as provided under Act 600, 53 P.S. 770(b).

(c)

No service shall be credited under this Subsection D(1) if the employee is entitled to receive retirement benefits for such service under a retirement system administered and wholly or partly paid for by any other governmental agency with the exception of an employee eligible to receive military retirement pay earned by a combination of active duty and non-active-duty with a reserve or national guard component of the armed forces, which retirement pay is payable only upon attainment of a specified age and period of service under 10 U.S.C. Ch. 67 (relating to retired pay for non-regular service).

(d)

Notwithstanding the preceding, effective December 12, 1994, contributions, benefits, and service credit with respect to qualified military service will be provided in accordance with IRC § 414(u).

(e)

No service shall be credited under this Subsection D(1) if the employee is entitled to receive retirement benefits for such service under a retirement system administered and wholly or partially paid for by any other governmental agency, with the exception of an employee eligible to receive military retirement pay earned by a combination of active duty and non-active-duty with a reserve or national guard component of the armed forces, which retirement pay is payable only upon attainment of a specified age and period of service under 10 U.S.C. Ch. 67 (relating to retired pay for nonregular service).

[Added 12-15-2003 by Ord. No. 588, approved 12-15-2003]

Other service credited. If the employer is a member of an affiliated service group under IRC § 414(m) or a controlled group of corporations under IRC § 414(b), or any other entity required to be aggregated with the employer pursuant to IRC § 414(o) as these Internal Revenue Code provisions are applied to a governmental entity, service shall be credited for any employment for any period of time for any other member of such group. Service shall also be credited for any leased employee who is considered an employee for purposes of this plan under IRC § 414(n) or (o).

YEAR OF SERVICETwelve months of service, excluding any breaks in service. For purposes of determining an employee's initial year of service upon his employment, the initial year of service shall commence on the employee's first day of employment. The first day of employment is the first day the employee performs an hour of service. The first day of reemployment is the first day the employee performs an hour a service following a break in service. An initial year of service shall end on the day immediately preceding the first anniversary of the employee's date of hire or rehire. Any subsequent year of service shall commence on the day following the completion of the immediately preceding year of service.

Crediting years of service. Service may be credited for the purpose of eligibility to participate, vesting, benefit accrual, or determining the benefit payable under the normal retirement benefit formula. Generally, no service shall be credited for periods during which the employee performs no services for the employer. Further, no more than one year of service will be credited for any twelve-consecutive-month period.