How The Plan Works

The sections below summarize the key features of the IDC Plan.

Contributions

Your IDC Plan Account is comprised of the following...

  • Your tax-deferred payroll contributions,

  • Company matching contributions,

  • Any qualified rollover contributions, plus

  • Investment gains and losses on these contributions.

The three types of contributions are described below.

Tax-Deferred Payroll Contributions

You can contribute from 1% to 50% of your earnings to the IDC Plan. For IDC Plan purposes, earnings consist of your regular base salary. Earnings do not include commissions, bonuses, overtime, and other special pay.

Your contributions are deducted from your pay before Federal and state income taxes (if applicable) are calculated. (For information regarding the impact of tax-deferred contributions on your take-home pay, see The Value Of Tax-Deferred Savings.)

The Internal Revenue Code (IRC) restricts the amount of your annual tax-deferred contributions to all 401(k) plans in which you participate. These restrictions take several different forms, and are adjusted periodically for cost of living increases. As of January 1, 2009, the following restrictions apply...

  • No more than $245,000 of your pay may be counted as "earnings" for the purposes of the Plan.

  • The most you may contribute on a tax-deferred basis during the 2009 Plan Year is $16,500. Each calendar year, the dollar amount may be indexed for inflation.

  • Employees whose pay exceeds $110,000 may not be able to contribute the full amount of their election if, for that Plan Year, the IDC Plan does not pass the IRS's "non-discrimination test" as described below.

  • Federal tax laws also impose a maximum limitation on the total dollar amount that can be contributed to your IDC and PSR Accounts in any one year. The "maximum annual addition" presently allowed under Federal law is limited to...

    • $49,000 (subject to future cost of living adjustments), or

    • 100% of your W-2 earnings for the year, plus your pre-tax contributions to this Plan and any other pre-tax contributions you make for health care, dependent care, or other welfare benefits

... whichever is less.

You will be notified if the amount you seek to contribute to your Account exceeds any of these limitations.

Non-discrimination tests are mandated under Federal tax law to ensure that such plans do not discriminate in favor of highly compensated employees. If the Plan is unable to meet these tests in a given year, the contributions of highly compensated employees must be reduced or refunded. In the event such action must be taken, and such action applies to you, you will be notified.

Catch-Up Contributions

Catch-up contributions may be available to help you save more for retirement. If you will be at least age 50 by the end of a Plan Year and are contributing the maximum amount, you can make a catch-up contribution of up to $5,500 for the Plan Year.

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Changing Your Tax-Deferred Contribution Amount

You may change your IDC Plan contribution percentage at any time. To do so, you must call Fidelity directly at 800-835-5098 or log on to NetBenefitsSM at www.401k.com.  

If you want to suspend your contributions to the IDC Plan, you may do so at any time by completing and submitting the Enrollment/Change Form. Your contributions will be suspended as soon as administratively possible following the receipt of the form by your local Human Resources representative.

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Effect On Benefits

Although you don't pay income taxes today on your contributions to the Plan, these contributions are included in your salary for the purposes of calculating...

  • Social Security withholding taxes and benefits; and

  • Your other A&B benefits, such as life and disability insurance.

You therefore gain the advantage of tax-deferred savings, without reducing your compensation-based benefits.

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Company Matching Contribution

If You Are An Employee of Alexander & Baldwin, Inc. and Its Subsidiaries

(Employees of Matson subsidiaries, please refer to the next section.)

Company matching contributions have been suspended effective August 1, 2009.

Prior to August 1, 2009, if you had completed one year of eligibility service and were enrolled in the IDC Plan, you were eligible to receive a Company matching contribution every pay period. The amount of the Company match was one dollar for every dollar you deferred, up to a maximum of 3% of your eligible earnings. Your Company matching contributions are invested in the same investment funds as your salary deferral contributions. Any catch-up contributions you may have made were not matched.

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If You Are A Former Transamerica Employee
If You Are An Aquitaine Employee
If You Are A Matson America Transportation Services, LLC or Matson Global Distribution Services, Inc. Employee
If You Are Hired By Matson Integrated Logistics On Or After January 1, 2006

Company matching contributions have been reduced effective August 1, 2009.

Prior to August 1, 2009, if you had completed one year of eligibility service, you were eligible to receive a Company matching contribution of up to 4% of your eligible base earnings. After July 31, 2009, the Company matching contribution is now up to 3% of your eligible base earnings.

Keep in mind that if you make contributions at too high a rate, you may reach the IRS limit before the end of the year and have to stop making contributions. Once you stop making contributions, you will stop receiving the Company match. Therefore, if it is possible that you will reach the IRS contribution limit, you should consider spreading out your tax-deferred contributions during the year so that you can receive the maximum Company matching contribution.

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Rollover Contributions

You may "roll over" distributions you receive from an eligible employer plan which includes a plan qualified under section 401(a) of the IRC, including a 401(k) plan, profit sharing plan, defined benefit plan, stock bonus plan, and money purchase plan; a section 403(a) tax-sheltered annuity; a section 403(b) plan for schools and non-profit organizations; an eligible section 457(b) plan maintained by a governmental employer (governmental 457 plan); or a rollover or conduit Individual Retirement Account (IRA). When you make a rollover contribution to your IDC Account, the tax-deferred status of these funds will be retained.

To be eligible for a rollover contribution, you must present satisfactory evidence of the tax-qualified status of the other plan. Also, if the rollover is from a rollover or conduit Individual Retirement Account (IRA), the IRA can only hold funds that you previously contributed to a 401(k) Plan qualified under Section 401(a) or 501(a) of the Internal Revenue Code, or a similar tax-deferred plan. Personal IRAs cannot be rolled over to this plan.

If you want to make a rollover contribution to your IDC Account, you should discuss your options with a qualified tax advisor or financial planner.

You have 60 calendar days from the date of the distribution from the previous eligible employer plan to roll it over into the A&B IDC Plan. In many cases, you can arrange to have your prior plan account transferred directly to your A&B IDC Plan Account.

Once you make a rollover contribution to your Account, such funds become subject to all provisions of this Plan; this Plan may not provide (with respect to rollover contributions) the same optional benefits offered to you under your former employer's plan.

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The Value Of Tax-Deferred Savings

Tax-deferred savings—as opposed to saving on an after-tax basis—can increase your current "spendable" income. When you contribute tax-deferred dollars to the IDC Plan, your savings are deducted from your pay before Federal and state income taxes are withheld from your paycheck (see Effect On Benefits above for more details). As a result, your taxable income is reduced by the amount you save, so you pay less in taxes.

You do not pay income taxes on the money you save until you receive payment from the IDC Plan, typically at retirement when you will likely be in a lower tax bracket or eligible for special tax treatment.

There is an additional advantage to saving in the IDC Plan—your investment earnings are also tax-deferred. Tax-deferred earnings help your Account grow more rapidly than if you were contributing to an after-tax savings plan.

The example in the table below compares tax-deferred savings through the IDC Plan with after-tax savings, such as a bank savings account.

The IDC Plan Tax Advantage

Saving money through the IDC Plan adds to your current "spendable" income when compared to comparable savings on an after-tax basis... Let's assume you earn $40,000 annually and want to save 6% of your salary each year. As illustrated below, you'll have at least $360 in additional "spendable" income if you choose the IDC Plan over a conventional savings account. And, don't forget: The IDC Plan also features tax-deferred investment earnings!

Regular Savings Plan A&B IDC Plan

Annual earnings

$40,000

$40,000

Tax-deferred IDC contribution (6%)

-0

-2,400

Adjusted earnings

$40,000

$37,600

Estimated federal income tax

-2,516

-2,156

Estimated FICA tax (7.65%)

-3,060

-3,060

After-tax saving contribution (6%)

-2,400

-0

Net take-home pay

$32,024

$32,384

Additional "spendable income" with the IDC Plan: $360.00

Note: This is an estimated example based on 2008 tax tables. It does not take into account individual circumstances, other pre-tax payroll deductions, or the effect of state income taxes. It assumes a married employee filing jointly, using the standard deduction and no other income.

Keep in mind that A&B provides eligible employees with a tax-deferred Company match that is in addition to your own tax-deferred contribution.

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Investing Your Savings

In conjunction with Fidelity Investments, Inc.—a nationally recognized 401(k) recordkeeper and money manager—the IDC Plan allows you to choose how your IDC Account balance (including rollover contributions) is invested. Currently, you may invest your Plan Account in a variety of investment options in increments of 1% (as outlined below under Your IDC Investment Options). Your total investment allocation must equal 100%.

As mentioned previously, your investment returns accumulate on a tax-deferred basis. This can help your savings grow faster than if you were saving in a traditional after-tax savings account.

You may change your IDC Plan investment mix on any business day by...

  • Calling the Fidelity toll-free customer service number at 800-835-5098, or

  • Accessing the Fidelity NetBenefitssm Website at www.401k.com.

For more information about Fidelity's services, see Customer Service.

Your IDC Investment Options

The Plan Administrator, through the A&B Investment Committee, selects several options in which you may invest your contributions. These options—also available for your PSR Plan contributions—may be changed from time to time. The investment options listed in the following tables include brief descriptions of each option. You may also obtain a current copy of the investment options booklet from your Human Resources representative.

Please note that each investment's fund price, yield and total return will fluctuate. There is no guarantee that any fund will be able to achieve its goal. Your investment may be worth more or less than your original cost when you sell your shares (that is, when you trade out of a fund) or receive a distribution or withdrawal from the Plan. Past performance is no guarantee of future results.

The Fund Performance, updated quarterly, is posted on the Company intranet or you may obtain a current copy from your Human Resources representative.

The IDC Plan is made up the following three investment categories:

  • Lifestage Investment Options,

  • Core Investment Options, and

  • Mutual Fund "Window" Investment Options.

You may select investment options from any or all of the three categories. Each grouping represents a particular investment strategy so that you can customize your retirement investments according to your specific goals.

Please note that if you do not select an investment option for your contributions effective February 28, 2008, the Plan must will default them into the Fidelity Freedom Fund that is closest to your retirement date, based on your current age and assuming you retire at age 65. For example, if your birthdate is January 5, 1950, your contributions will be defaulted into the Fidelity Freedom 2015 Fund since that fund comes closest to your expected retirement date at age 65. If your birthdate is not provided or is invalid (e.g., Fidelity has only a partial date), your contributions will default into the Fidelity Freedom Income Fund®.

Here is a brief description of the categories and their applicable funds.

Lifestage Investment Options

The Fidelity Freedom Funds are designed for investors who want a simple approach to investing for retirement that provides appropriate asset allocation. Each Freedom Fund consists of stock, bond, and money market mutual funds. The investment approach for each fund is based on the number of years until your target retirement date. Participants who choose to invest in a Freedom Fund will normally invest 100% of their plan assets in the fund with the closest retirement date to their own.

Lifestage Investment Options
Fund Name, Inception Date, And Description Fund Type

Fidelity Freedom Income Fund®, 10/17/96

Asset Allocation

An asset allocation fund that seeks a high level of current income and, as a secondary objective, some capital appreciation for those already in retirement. Invests in stock mutual funds (20%), bond mutual funds (40%) and money market funds (40%).

Fidelity Freedom 2000 Fund®, 10/17/96

Asset Allocation

An asset allocation fund that seeks a high total return for individuals who retired in 2000. Invests in stock mutual funds (29%), bond mutual funds (43%) and money market funds (28%), with the mix becoming more conservative over time.

Fidelity Freedom 2005 Fund®, 11/06/2003

Asset Allocation

An asset allocation fund that seeks a high return for individuals who retired in 2005 and, as a secondary objective, some capital appreciation for those already in retirement. Invests in domestic equity funds (39%), international equity funds (9%), investment grade fixed income funds (34%), high yield fixed income funds (5%), and Fidelity short-term mutual funds (12%), with the mix becoming more conservative over time.

Fidelity Freedom 2010 Fund®, 10/17/96

Asset Allocation

An asset allocation fund that seeks a high total return for those planning to retire in 2010. Invests in stock mutual funds (49%), bond mutual funds (43%) and money market funds (8%), with the mix becoming more conservative over time.

Fidelity Freedom 2015 Fund®, 11/06/2003

Asset Allocation

An asset allocation fund that seeks a high return for those planning to retire in 2015 and, as a secondary objective, some capital appreciation for those already in retirement. Invests in domestic equity funds (45%), international equity funds (11%), investment grade fixed income funds (32%), high yield fixed income funds (6%), and Fidelity short-term mutual funds (6%), with the mix becoming more conservative over time.

Fidelity Freedom 2020 Fund®, 10/17/96

Asset Allocation

An asset allocation fund that seeks a high total return for those planning to retire in 2020. Invests in stock mutual funds (72%) and bond mutual funds (28%), with the mix becoming more conservative over time.

Fidelity Freedom 2025 Fund®, 11/06/2003

Asset Allocation

An asset allocation fund that seeks a high return for those planning to retire in 2025 and, as a secondary objective, some capital appreciation for those already in retirement. Invests in domestic equity funds (57%), international equity funds (14%), investment grade fixed income funds (22%), and high yield fixed income funds (8%), with the mix becoming more conservative over time.

Fidelity Freedom 2030 Fund®, 10/17/96

Asset Allocation

An asset allocation fund that seeks a high total return for those planning to retire in 2030. Invests in stock mutual funds (83%) and bond mutual funds (17%), with the mix becoming more conservative over time.

Fidelity Freedom 2035 Fund®, 11/06/2003

Asset Allocation

An asset allocation fund that seeks a high return for those planning to retire in 2035 and, as a secondary objective, some capital appreciation for those already in retirement. Invests in domestic equity funds (66%), international equity funds (17%), investment grade fixed income funds (10%), and high yield fixed income funds (8%), with the mix becoming more conservative over time.

Fidelity Freedom 2040 FundSM, 09/06/00

Asset Allocation

An asset allocation fund that seeks a high total return for those planning to retire in 2040. Invests in stock mutual funds (90%) and bond mutual funds (10%), with the mix becoming more conservative over time.

Fidelity Freedom 2045 Fund®, 06/01/2006

Asset Allocation

An asset allocation fund that seeks a high return for those planning to retire in 2045 and, as a secondary objective, some capital appreciation for those already in retirement. Invests in domestic equity funds (68%), international equity funds (18%), investment grade fixed income funds (4%), and high yield fixed income funds (10%), with the mix becoming more conservative over time.

Fidelity Freedom 2050 Fund®, 06/01/2006

Asset Allocation

An asset allocation fund that seeks a high return for those planning to retire in 2050 and, as a secondary objective, some capital appreciation for those already in retirement. Invests in domestic equity funds (70%), international equity funds (20%), and investment grade fixed income funds (10%), with the mix becoming more conservative over time.
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Core Investment Options

The following investment options comprise the "Core" Investment lineup. The lineup is designed to provide a broad choice of investment options from which to formulate a retirement savings strategy.

Core Investment Options
Fund Name, Inception Date, And Description Fund Type

Fidelity Retirement Money Market Portfolio, 12/02/88

Money Market

A money market fund that seeks to provide a high level of current income that is consistent with the preservation of capital and liquidity. Invests in U.S. dollar denominated money market securities and repurchase agreements, with 25% of total assets invested in the financial services industry. Strives to maintain a stable share price.

PIMCO Total Return Fund, 09/08/94

Income

An income fund that seeks a high total return exceeding general bond market indices. Invests in all types of bonds, including government, corporate, mortgage, and foreign. Investments average three to six years, but may also include short- and long-maturity bonds.

Fidelity U.S. Bond Index Fund, 03/08/90

Income

An income mutual fund that seeks to provide investment results similar to the total return of the Lehman Brothers Aggregate Bond Index. Invests at least 80% of total assets in bonds included in the Lehman Brothers Aggregate Bond Index.

Fidelity Asset Manager SM, 12/28/88

Asset Allocation

An asset allocation fund that seeks a high total return with reduced risk over the long-term. Invests in stocks, bonds and short-term instruments whose mix gradually becomes more conservative over time.

Fidelity Equity-Income Fund, 05/16/66

Growth and Income

A growth and income fund that seeks to provide a reasonable income whose yield exceeds the composite yield of the Standard & Poor's 500 IndexSM (S&P 500®). Invests at least 65% of total assets in income-producing equity securities. The fund may potentially invest in other types of equity and debt securities, including lower-quality debt securities. The fund may invest in securities of domestic and foreign issuers.

Neuberger Berman Genesis Fund, 08/26/93

Small-Cap Growth

A growth fund that seeks capital appreciation. Invests primarily in stocks of small-cap companies with market capitalizations of up to $1.5 billion. The fund diversifies among many companies and industries to help reduce risk.

Fidelity Magellan ® Fund, 05/02/63

Growth

A growth fund that seeks capital appreciation. Invests primarily in common stocks of domestic and foreign issuers. No more than 40% of assets are invested in companies operating exclusively in any one foreign country.

Fidelity Independence Fund, 03/25/83

Growth

A growth fund that seeks to provide capital appreciation. Invests primarily in common stocks of domestic and foreign issuers. May realize capital gains without considering the tax consequences to shareholders.

American Funds® Growth Fund of America®, 05/28/02

Growth

A growth fund that seeks long-term capital growth. Invests primarily in common stocks. The fund may also invest in convertible securities, nonconvertible preferred stocks, and stocks of issuers outside of the United States. The fund has the flexibility to invest wherever the best growth opportunities appear to be. Share price and return will vary.

Vanguard Total Stock Market Index Fund, 07/07/97

Index

A stock index mutual fund that seeks long-term capital growth. Invests primarily in stocks similar to the Wilshire 5000 Equity Index, with matching characteristics such as industry weightings, market capitalization and dividend yield.

Spartan® Total Market Index Fund, 11/05/97

Index

An index fund that seeks to provide investment results corresponding to the total return of a broad range of stocks. Invests at least 80% of assets in common stocks included in the Wilshire 5000. The fund carries a short-term trading fee to discourage short-term buying and selling of fund shares.

MAS Mid Cap Growth Portfolio, 01/31/97

Mid-Cap Growth

A growth fund that seeks long-term capital appreciation. Invests primarily in common stocks of rapidly growing small- to mid-sized companies believed to have the potential to grow.

Morgan Stanley Institutional Fund, Inc. Small Company Growth Portfolio, 01/02/96

Mid-Cap Growth

A growth fund that seeks long-term capital appreciation. Invests primarily in common stocks of small- to medium-sized domestic companies and, to a limited extent, foreign companies.

Fidelity Diversified International Fund, 12/27/91

International Growth

An international growth fund that seeks capital appreciation. Invests at least 65% of total assets in common stocks of foreign companies. Foreign investments, especially those in emerging markets, involve greater risks and may offer greater potential returns than domestic investments. The fund carries a short-term trading fee to discourage short-term buying and selling of fund shares.

Vanguard Total International Stock Index Fund, 04/29/96

Index

An international index fund that seeks long-term growth. Invests in the three portfolios of the Vanguard International Equity Index Fund (European, Pacific and Emerging Markets).
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Mutual Fund "Window" Investment Options

The following investment options comprise the Mutual Fund "Window" Investment lineup. This window provides a more extensive selection of investment options from which to choose, and may be appropriate for more experienced investors.

Mutual Fund "Window" Investment Options
Fund Name, Inception Date, And Description Fund Type

PIMCO High Yield Fund, 01/16/95

Income

An income fund that seeks to provide a high current income and capital growth. Invests in U.S. dollar-denominated bonds of domestic and foreign issuers with at least a grade B investment rating.

Fidelity Convertible Securities Fund, 01/05/87

Growth and Income

A growth income fund that seeks a high total return through a combination of current income and capital appreciation. Invests at least 65% of total assets in convertible securities, which are often lower-quality debt securities.

Fidelity Real Estate Investment Portfolio, 11/17/86

Growth and Income

A growth and income fund that seeks to provide above average income and long-term capital growth, with a yield that exceeds the composite yield of the S&P 500®. Invests at least 65% of total assets in equity securities of companies in the real estate industry. The fund carries a short-term trading fee to discourage short-term buying and selling of fund shares.

Fidelity Low-Priced Stock Fund, 12/27/89

Growth

A growth fund that seeks capital appreciation. Invests at least 65% of total assets in low-priced common stocks (priced at or below $35 per share), which can lead to investments in small- and medium-sized companies.

Fidelity Dividend Growth Fund, 04/27/93

Growth

A growth fund that seeks capital appreciation. Invests primarily in common stocks of domestic and foreign issuers, with at least 65% of total assets in companies believed to have potential for dividend growth. The fund does not invest for income.

Cohen & Steers Realty Shares, 07/01/91

Growth and Income

A growth and income fund that seeks a maximum total return through a combination of capital growth and current income. Invested in stocks of domestic and foreign real estate companies.

Ariel Appreciation Fund, 12/01/89

Mid-Cap Growth

A mid-cap value fund that seeks long-term capital growth. Invests in stocks of widely ignored or misunderstood companies that provide quality goods and services. The fund targets medium-sized companies with market capitalizations under $5 billion.

Fidelity Growth Company Fund, 01/17/83

Growth

A growth fund that seeks to provide capital appreciation. Invests in stocks of domestic and foreign companies believed to have above-average growth potential.

Fidelity Mid-Cap Stock Fund, 03/29/94

Mid-Cap Growth

A growth fund that seeks long-term capital appreciation. Invests at least 65% of total assets in stocks of domestic and foreign companies similar to those in the S&P MidCap 400. The fund carries a short-term trading fee to discourage short-term buying and selling of fund shares.

Templeton Foreign Fund, 10/05/82

International Growth

An international growth fund that seeks long-term capital appreciation. Invests in stocks of any foreign country, developed or developing.

Fidelity Pacific Basin Fund, 10/01/86

International Growth

An international growth fund that seeks long-term capital appreciation. Invests at least 65% of total assets in common stocks of Pacific Basin issuers. The fund carries a short-term trading fee to discourage short-term buying and selling of fund shares.

Morgan Stanley Institutional Fund, Inc. Emerging Markets Portfolio, 01/02/96

Growth

A growth fund that seeks long-term capital appreciation. Invests at least 65% of its assets in stocks of emerging markets. The portfolio focuses on emerging market countries with developing economies whose markets are becoming more sophisticated.
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Your Investment Rights And Responsibilities

The A&B IDC Plan qualifies as a Section 404(c) Plan under the Employee Retirement Income Security Act (ERISA). As a participant in the IDC Plan, you are guaranteed certain rights regarding your investments. Similarly, you are given certain responsibilities.

As required by Section 404(c), you will regularly receive information regarding the investment performance of the funds in which you invest, as well as certain other financial information about the funds. You may also request additional information, including...

  • A description of the annual operating expenses of each designated investment option, expressed both in total and as a percentage of average net assets;

  • Copies of financial information, or prospectuses, relating to the investment alternatives;

  • The value of the units or shares in each of the Plan's investment alternatives, as well as past and current investment performance; and

  • Other information pertinent to the Plan.

To request such information, you should contact Fidelity directly at 800-835-5098, or access Fidelity's Website at www.401k.com.

Section 404(c) also states that you are responsible for the overall investment performance of your IDC Account, including any losses you may incur. The plan fiduciaries are not liable for any losses that result from your investment decisions.

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Vesting

The term "vesting" refers to your right of ownership to the funds in your IDC (and PSR) Account. You are 100% vested in your Account balance the day you begin participating.

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Your Plan Account Value

By law, all assets in the IDC Plan must be valued at least once a year at fair market value—Fidelity values the IDC Plan's assets daily. The value of your IDC Account will vary on a daily basis according to the value of the investments you have elected.

Your Accounts will be adjusted for the earnings, expenses, gains, and losses of the Trust Fund attributable to your investment selections as determined by the Fund Manager.

Account Statements

Each quarter, you will receive an account statement summarizing the activity of your IDC Plan Account on a quarterly and year-to-date basis. This statement will indicate the...

  • Amount of your contributions,

  • Amount of the Company matching contributions,

  • Status of any outstanding loans, and

  • Investment performance.

Your account information is available online and updated daily at www.401k.com.

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Loan Provisions

If you need access to the funds in your IDC Account for any reason, you may borrow against the balance of your Account. Certain rules apply to borrowing money from your Account. Specifically, you...

  • Must have completed at least two years of participation in the IDC Plan,

  • May borrow up to 50% of the balance in your Account, up to a maximum of $50,000 less your highest outstanding loan balance in the previous 12 months,

  • May not borrow against any accumulated Company matching contributions or any earnings attributable to those contributions (unless you are a former Transamerica employee),

  • Must borrow at least $1,000, and

  • May have only one loan outstanding at any time, excluding any loans transferred to the Plan from a prior trustee.

In general, you will have up to five years to repay the loan. The only exception is if the loan is for the purchase of a primary residence, in which case you may have 15 years to repay the loan.

Loan repayments will occur at scheduled installments through automatic payroll deductions. In addition, you may prepay your loan (in part or in full) at any time without penalty. You will be charged a reasonable rate of interest, as determined by the Plan Administrator. This interest payment will be deposited to your Account. The interest rate is the prime lending rate as determined by First Hawaiian Bank, plus 1%. The interest rate established at the time the loan is initiated will remain in effect throughout the term of the loan.

Applying For An IDC Loan...

Borrowing from your IDC Plan Account may make sense in some cases since the interest you pay on the loan is directed to your account. However, taking out a loan generally reduces the long-term growth potential of your Account. To maximize the benefits of this Plan, you should generally only borrow from your Account if you need to resolve a financial emergency.

If you decide you do want to borrow from your IDC Account, you may call Fidelity at 800-835-5098 to initiate the loan process or access the Fidelity NetBenefits Website at www.401k.com.

Your loan will be approved if, in addition to meeting other requirements, the loan will not...

  • Constitute a taxable distribution from the Plan, or

  • Cause the IRS to disqualify the Plan.

In addition, your loan may be denied if you defaulted on any previous loan.

If you do obtain a loan...

  • You will be required to sign a promissory note,

  • The portion of your account from which your loan is taken will be the collateral for your loan, and

  • Your account will be charged a one-time loan origination fee of $35 and a quarterly maintenance fee of $3.75 (these fees, which went into effect July 15, 2000, are subject to change in future years).

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Loan Defaults

Your loan will be in default if you are 90 days late in making a payment. In the event of a default, the total amount of the outstanding loan balance (including interest due) will be immediately due and payable. Such amount will be treated as a taxable distribution to you from the Plan ("deemed distribution"), subject to Federal income tax and applicable penalty taxes.

Your Plan Account balance will also be decreased by the amount of your deemed distribution, but not until such time as a distribution could otherwise be made under the Plan. Interest will continue to accrue on the amount of the "deemed distribution" until a permissible distribution event occurs.

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If You Leave A&B

If you take an unpaid leave of absence, loan payments may be suspended for up to one year before the loan is considered to be in default (and the provisions outlined above apply). If you return within the year, the loan payment amount may be adjusted for the remaining term of the original loan agreement.

In general, if you end your employment with the Company for any reason, including retirement, death, disability, or other termination of employment, any outstanding loan balance becomes immediately due unless you make arrangements to continue making payments. If you do not pay off the loan or arrange to continue making payments, your distribution from the Plan will be reduced by the amount you owe the Plan.

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Hardship Withdrawals

While it is generally not expected that you will withdraw the funds from your IDC Account before you leave A&B, you may be allowed to make a withdrawal in the event of an extreme financial hardship.

If you suffer an immediate and "extreme financial hardship" as defined below and you do not have money available from any other source (including taking out an IDC Plan loan), you may make a hardship withdrawal. Such a withdrawal will be subject to Federal and state taxes, and/or penalties. Each hardship withdrawal may not be less than a minimum of $500.

In such situations, you may withdraw all or a portion of your tax-deferred contributions, but not the investment earnings on those contributions or any portion attributable to your Company matching contributions. (You also may not withdraw the PSR contributions the Company makes to your PSR Account; however, you may withdraw all or a portion of your IDC Rollover Account, including any earnings on this Account.) You may not withdraw more than the amount necessary to satisfy the financial need.

The IRS defines extreme financial hardships to include the...

  • Payment of medical expenses for you or your dependents that are deductible under Federal tax laws and are not covered by your medical plan(s)

  • Purchase of your primary residence (not including mortgage payments)

  • Tuition payments and related educational fees for the next 12 months of post-secondary education for you or your dependents; and,

  • Cost of preventing your eviction from, or foreclosure of the mortgage for, your primary residence.

Your hardship withdrawal will be subject to a 10% (on IDC account) Federal tax withholding, which will automatically be deducted from your distribution check. You may also waive tax withholding. For example, if you request a hardship withdrawal of $1,000 and you do not waive tax withholding, you will receive a check for $900 and the remainder ($100) will be sent to the IRS as income tax withholding to be credited against your taxes. When determining your withdrawal amount, you should factor in this withholding.

In addition, any withdrawal you make from your IDC Account before reaching age 59 1/2 may be subject to a 10% Federal penalty tax unless the withdrawn funds are used toward the payment of medical expenses that are deductible under Federal tax laws. Note, too, that state taxes may also apply.

Keep in mind that you may only be granted one hardship withdrawal during any 12-month period; also, your participation in the IDC Plan will be suspended for 6 months.

Age 59 1/2 Withdrawal For Former Paragon Employees

If you are a former Paragon employee, you may elect to withdraw, after you attain age 59 1/2, all or part of the dollar amount transferred from the Paragon 401(k) plan to this Plan on May 1, 2004. Investment earnings after April 30, 2004, however, will not be subject to withdrawal.

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Distributions From The Plan

Plan distributions are generally made when you retire or otherwise end your A&B employment, or if you become disabled or die. Distributions will be made as soon as possible as of the most current valuation date.

The following provisions apply to distributions, depending on the circumstances...

  • When you retire, you receive the full value of your Account balance (the normal retirement date is at age 65).

  • If you continue to work for A&B after you reach age 65, you may elect to defer receipt of your Plan distributions until you retire. However, in accordance with IRS regulations, if you are a "5% owner" of A&B, your Plan Account balance will begin to be paid to you on January 1 following your attainment of age 70 1/2, and every January 1 thereafter, even if you are still working. Please note that individuals who are not 5% owners who began receiving the distributions described above under prior IRS requirements and transition rules will continue to receive such distributions while still employed with the Company.

  • If you leave the Company before retiring and your Account balance is...

    • more than $5,000, you may choose to leave your money in the Plan until a later date, or you may request to have your Account balance distributed.

    • over $1,000 but less than $5,000 at the time your employment with A&B ends, your Account balance will be rolled over into an IRA account unless you wish to roll it over to another IRA account that you specify.

    • less than $1,000 at the time your employment with A&B ends, you are required to take a distribution from the Plan.

    If you go to work for another employer and your new employer has a 401(k) or similar plan, you may roll your IDC Account directly over to your new employer's plan and thereby retain the tax-deferred status of your funds. Alternately, you may roll your IDC Account directly over to an IRA.

  • If you die, your beneficiary will receive 100% of your Account balance.

  • If you become "totally disabled", you may receive all or part of your Account balance. "Totally disabled" for the purposes of this Plan provision means, under the terms of the A&B Long-Term Disability (LTD) Plan, you are ill or injured and cannot carry out the usual duties of your job with A&B for an indefinite period of time.

How Plan Distributions Are Made

When you (or your beneficiary) become eligible to receive a plan distribution, you may request to have your Account balance paid, either in...

  • A one-time "lump sum" payment, or

  • Approximately equal installments (monthly, quarterly or annually) over a period of time you elect—but no longer than your life expectancy or the joint life expectancy of you and your beneficiary.

If you end your employment with A&B for any reason before reaching the normal retirement age, and the value of your Account is greater than $5,000, you may elect to leave the funds in your Account. However, you must take out the funds when you reach normal retirement age.

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An Important Note Regarding TCESOP Accounts and A&B Stock Holdings

If you were a member of the Tax Credit Employee Stock Ownership Plan (TCESOP), your account under that plan was transferred to the PSR Plan. Distribution from this account will be made after you end your employment or retire. You may elect to receive the balance in your account in A&B common stock, or have the Trustee sell all of your shares at the fair market value and receive your entire distribution in cash.

If any part of your PSR Account balance is invested in the A&B Common Stock Fund, distribution will be made in A&B common stock unless you have made prior arrangements with the Plan Administrator for another form of distribution.

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Tax Consequences

Your contributions (payroll, Company match, and rollover contributions) to the IDC Plan are tax-deferred, not tax-free—you must pay taxes when you receive a distribution from the Plan. When you obtain information regarding distributions, it will include an IRS Tax Notice. This Notice summarizes the rules related to your distribution, including whether it is eligible to be rolled over ("eligible rollover distribution").

If after receiving an eligible rollover distribution, you roll over all or part of the distribution directly into an IRA or another eligible employer plan, you may...

  • Continue to defer taxes on this money, and

  • Avoid penalties on all or part of your distribution.

The portion, if any, of your distribution that you do not roll over will be recognized as taxable income in the year of distribution and subject to a 20% Federal income tax withholding. In addition, if you are under age 59 1/2, you will pay an additional 10% penalty tax, and some state taxes may apply, depending on your situation.

There are instances, however, in which you may receive a distribution and the 10% penalty tax will not apply. Specifically, the penalty will not apply if the distribution...

  • Is deemed a hardship withdrawal and used exclusively for tax-deductible medical expenses not covered by your medical plan(s);

  • Follows your death or is attributable to your total and permanent disability;

  • Is made to comply with a qualified domestic relations order (QDRO) as described below;

  • Is part of a series of substantially equal periodic payments made for your life (or life expectancy), or the joint lives (or life expectancies) of you and your beneficiary;

  • Is for separation from service after age 55; or

  • Is rolled over within 60 days to an IRA or another eligible employer plan.

In addition, if you receive a full payout from your IDC and PSR Plan Accounts in one taxable year after you reach age 59 1/2, you participated in both Plans for at least five years and you were born before 1936, your distribution may be eligible for special tax treatment.

Please keep in mind that the tax rules are complex and frequently change. You should consult a qualified tax advisor or financial planner before taking a distribution from the Plans.

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