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Full-Time Hourly Associates

2012BenefitsHANDBOOK

H000100873

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H000100873

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About This Handbook Sears Holdings provides a comprehensive and competitive benefits program designed to meet the needs of associates and their families. This Handbook provides a detailed description of the Sears Holdings benefit plans. Use it as reference when you have specific benefits questions. The information in this Handbook is effective January 1, 2012, except as otherwise noted. This Handbook, the HMO documents incorporated by reference (if applicable) and any summaries of material modifications distributed after January 1, 2012 constitute the most current summary plan description. Nothing in this Handbook should be interpreted as a contract or guarantee of employment. Sears Holdings retains the right to modify, amend, suspend or terminate the benefit plans at any time. If the information provided in this Handbook differs from the terms of the legal documents governing the plans, the legal documents govern.

Important Note The benefits described in this handbook are available to all eligible, full-time hourly associates, except for those businesses or associate groups that do not participate in certain benefits or have different benefit provisions, including but not limited to:

Ayuda La Compañía proveerá ayuda a aquellos empleados que puedan tener dificultad en comprender este folleto en inglés. Si necesita ayuda, consulte con su gerente de unidad o su representante de Recursos Humanos.

© 2012 Sears Holdings Corporation

Business / Associate Group

Benefits that are different from what is described in this booklet

Kmart Distribution Centers •Eligibility for Benefits

•Paid Time Off Associates in California • Paid Time Off

• Short-term Disability Associates in Montana • Paid Time Off Associates in New Jersey, New York and Rhode Island

• Short-term Disability

Associates in Hawaii • Eligibility for Benefits • Starbridge Choices • Short-term Disability

Associates in Guam and the Virgin Islands • Eligibility for Benefits • Starbridge Choices

Associates in Ontario, Canada • Medical • Flexible Spending Accounts • Voluntary Benefits • Commuter Benefits • Starbridge Choices

Associates in Puerto Rico • Medical • Dental • Flexible Spending Accounts • Short-term Disability • Savings Plan

• Paid Time Off • Starbridge Choices • Commuter Benefits • Voluntary Benefits

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1-1 Sears Holdings Benefits Handbook 2012 Introduction Full-Time Hourly

I. Introduction

Overview of Your Benefits ..........................................................................................................................................................1-1 When Are You Eligible? ..............................................................................................................................................................1-1 Who is Eligible for Benefits? ......................................................................................................................................................1-2 Eligible Dependents .........................................................................................................................................................1-2

Eligible Dependent Definitions ................................................................................................................................ 1-2 Company Medical and Dental Plans ....................................................................................................................... 1-2 Associate Discount Program ................................................................................................................................... 1-3 Kmart Pharmacy Prescription Savings Club ........................................................................................................... 1-3 Optional Life Insurance Plan ................................................................................................................................... 1-3

Enrolling in the Plans ..................................................................................................................................................................1-3 Enrollment Period .................................................................................................................................................... 1-3 Annual Enrollment ................................................................................................................................................... 1-3 When Coverage Begins .......................................................................................................................................... 1-3 Dependent Coverage .............................................................................................................................................. 1-3 Paying for Coverage ............................................................................................................................................... 1-4 Qualified Changes in Status.................................................................................................................................... 1-4 Special Enrollment Opportunities for Medical Coverage ........................................................................................ 1-4

For More Information ...................................................................................................................................................................1-4

II. Benefits Plans Medical Plan .....................................................................................................................................................................2-1 Kmart Pharmacy Prescription Savings Club ....................................................................................................................3-1 Dental Plan .......................................................................................................................................................................4-1 Flexible Benefits Plan (Health Care & Dependent Care FSAs) .......................................................................................5-1 Short-Term Disability Program .........................................................................................................................................6-1 Short-Term Disability (Kmart) ...........................................................................................................................................7-1 Long-Term Disability Plan ................................................................................................................................................8-1 Company Paid Life Insurance ..........................................................................................................................................9-1 Optional Life Insurance ..................................................................................................................................................10-1 Savings Plan ..................................................................................................................................................................11-1 Associate Stock Purchase Plan .....................................................................................................................................12-1 Voluntary Benefits Program ...........................................................................................................................................13-1 Starbridge Choices Limited Benefit Plan ........................................................................................................................14-1 Paid Time Off .................................................................................................................................................................15-1 Business Travel ..............................................................................................................................................................16-1 WorkLife Solutions .........................................................................................................................................................17-1 Associate Discounts and Educational Assistance ..........................................................................................................18-1 Commuter Benefits ........................................................................................................................................................19-1 Adoption Assistance Program ........................................................................................................................................20-1

III. Other Information ................................................................................................................ 21-1

Please note:

The Introduction section, the Savings Plan section and the Other Information section, together with the Company’s financial report on Form 10-K, constitute a prospectus covering securities that have been registered under the Securities Act of 1933. The Introduction section, the Associate Stock Purchase Plan section, together with the Company’s financial report on Form 10-K, constitute a prospectus covering securities that have been registered under the Securities Act of 1933.

1-1 Sears Holdings Benefits Handbook 2012 Introduction Full-Time Hourly

INTRODUCTION

OVERVIEW OF YOUR BENEFITS

Sears Holdings Corporation (Sears Holdings or SHC) offers a variety of benefits designed to meet your and your family’s needs. You can take advantage of programs providing health care coverage, disability and survivor protection, savings opportunities, merchandise discounts, time off and educational assistance. The benefits plans and programs described in this Benefits Handbook (Handbook) apply to eligible full-time hourly associates of the Company other than Lands’ End, Inc. In addition to the Handbook, you can also get plan information online through www.88sears.com, anytime, anywhere. You can get personalized information about your benefit options and

contributions, as well as general information about Sears Holdings benefits plans and how they work, through the links provided on www.88sears.com. A variety of online tools are also available to help you take full advantage of the plans. Enrolling in your benefits is easy and convenient. You can enroll through a secure Web site, www.88sears.com. Enrollment information can be found in the chart below and in the Enrolling in

the Plans section.

WHEN ARE YOU ELIGIBLE?

You participate in some benefits right away. For others, you’re generally eligible within about 90 days or one year of your hire date. See the following chart for the eligibility requirement for each benefit plan.

Benefit Plans/Programs Eligibility Date Enrollment

� Associate Discount Program & Educational Assistance Programs

� Voluntary Benefits Program � Holidays � WorkLife Solutions � Business Travel Insurance � Kmart Pharmacy Prescription Savings

Club � Commuter Benefit Program

On date of hire as a full-time hourly associate or the date of transfer to full-time hourly status

You do not need to enroll for the Associate Discount Program (except for your dependent children), Holidays, WorkLife Solutions and Business Travel Insurance. You are automatically enrolled in the Kmart Pharmacy Prescription Savings Club. To enroll for Educational Assistance (ConSern ®), Voluntary Benefits or Commuter Benefits, visit www.88sears.com.

Starbridge Choices � Medical � Dental/Vision � Short-term Disability � Term Life Insurance

On date of hire as a full-time hourly associate or during Annual Enrollment if you don’t enroll when first eligible. Only hourly associates who are subject for a six-month waiting period are eligible for Starbridge. Eligibility ends on the first day of the sixth month after your date of hire when you become eligible for Company benefits (see below)

To enroll in or get information about Starbridge Choices:

• Visit www.starbridge.com/info/sears • call 1-877-646-5609

� Associate Stock Purchase Plan � Sears Holdings Savings Plan

On the first day of the third month after date of hire

Enrollment for the Associate Stock Purchase Plan is held during the last two weeks of each calendar quarter. Although not eligible to participate in the Savings Plan until the first day of the third month after date of hire, you can enroll in the Savings Plan anytime. To enroll in either plan, visit www.88sears.com.

� Short-term Disability Coverage (STD)

After 90 days of employment You do not need to enroll.

� Medical Plan � Dental Plan � Flexible Spending Accounts (FSAs) � Long-term Disability Coverage

(LTD) � Company Paid Life Insurance � Optional Life Insurance

First day of the sixth month after date of hire for most associates. Associates in certain business units or locations may be eligible sooner Note: If you are in your 6-month waiting period for Company health benefits, you may choose to enroll in a limited benefit plan through Starbridge Choices (See above)

You are automatically enrolled in Company Paid Life Insurance. For the other Company benefits listed, you may enroll within 31 days of your eligibility date by visiting www.88sears.com.

Please note: If you do not enroll in Company medical, dental, or flexible dependant accounts within 31 days of becoming eligible, you will have to wait until the next annual enrollment period (held each fall), unless you experience a qualified change in status (described later in this section). If you do not enroll in Long-term Disability or Optional Life Insurance within 31 days of becoming

Sears Holdings Benefits Handbook 2012 1-2 Introduction Full-time Hourly

eligible, you will need to submit a statement of health to the insurance company if you want to enroll at a later date.

� Personal Days After six months of employment You do not need to enroll. � Vacation After one year of employment You do not need to enroll. � Adoption Assistance After completing 12 consecutive months

of full-time service To enroll, visit www.88sears.com or call 1-888-

88sears. WHO IS ELIGIBLE FOR BENEFITS?

Your eligibility for benefits is based on your employment status. The benefit plans and programs described in this Handbook apply to full-time hourly associates who work 30 or more hours a week.

ELIGIBLE DEPENDENTS

Your dependents may be eligible to take advantage of coverage under many of Sears Holdings’ plans. Except as otherwise indicated, your eligible dependents include: � Your legal spouse under federal law (other than common

law spouses).

If you divorce your spouse, your spouse is no longer eligible for benefits, even if you have a court order that states you are responsible for paying for your ex-spouse’s health benefits. You must cancel your ex-spouse’s coverage upon your divorce becoming final. Your spouse will be offered continuation of medical and/or dental coverage under COBRA. For more information on COBRA, refer to the Other Information section of this Handbook.

� Your unmarried children up to age 26.

� A disabled child who is incapable of self-sustaining employment because of a mental or physical disability may continue coverage at age 26 and beyond if the child was covered as an eligible dependent at the time he or she turned age 26.

A disabled dependent age 26 or older may be added to medical or dental coverage if:

- the disabled dependent was covered as an eligible

dependent under another employer-sponsored group health plan at the time he or she turned age 26 and

- the disabled dependent lost that coverage due to termination of employment of you or your spouse

In such cases, the dependent must be added to coverage within 31 days of loss of coverage or loss of COBRA coverage. In the event coverage is requested beyond age 26 due to your child being disabled, you will be required to provide satisfactory proof of disability.

� Your domestic partner whom you have registered through the Sears Holdings Benefits Center. Important note: Because certain benefits are governed by Federal tax law, domestic partners of associates cannot be considered eligible dependents under all Company benefits programs. Benefits governed under Federal tax law include without limitation: - Flexible spending accounts (FSAs) - Health savings accounts (HSA) - Associate Discount

ELIGIBLE DEPENDENT DEFINITIONS

Eligible dependents include your children, spouse or domestic partner (subject to Federal law). Eligible dependents do not include dependents engaged in full-time regular military service. Your “children” are defined to include: � Your natural children; � Children you have legally adopted or children placed with

you for adoption as of the date you are granted legal custody; � Children for whom you are the legal guardian or have legal

custody; � Your step-children; � Your domestic partner’s children who primarily reside with you

and depend on you for more than one half of their support and maintenance; and

� Children who are recognized under a qualified medical child support order (QMCSO) as having a right to enroll in a plan, provided you already are enrolled or enroll in the plan upon receipt of the QMCSO.

“Spouse” refers to your legal spouse under Federal law, as noted above. “Domestic partners” are defined as two adults in a long-term committed relationship who: � Enter into a same sex union if they reside in a state that

recognizes them, � Register as domestic partners, if they reside in a state that has

a domestic partner registry, � Are the same gender, � Have shared a continuous, committed relationship for no less

than six months, intend to do so indefinitely and have no such relationship with any other person,

� Are mutually responsible for each other’s welfare and share financial obligations, e.g. joint home ownership, joint checking account, joint automobile ownership or life insurance policy designating the other as primary beneficiary,

� Reside in the same household and intend to do so indefinitely,

� Are not related by blood to a degree of kinship that would prevent marriage,

� Are not married to others either by law or common law, or legally separated,

� Are both over the age of 18 and of legal age to contract. Domestic partners include same sex spouses who are legally married under state law. Specific rules apply to dependent coverage under the

following benefits:

COMPANY MEDICAL AND DENTAL PLANS

You may elect to cover your spouse, same-sex domestic partner, and/or any or all of your eligible dependent children.


� You cannot be covered as an associate and as a dependent at the same time.

� If both parents of any dependent child are covered as associates, the child is considered a dependent of one parent only.

� Dependents cannot be covered unless the associate is covered, and dependents must be enrolled in the same option as the associate.

ASSOCIATE DISCOUNT PROGRAM

Your spouse and your student dependents between the ages of 16-23 are eligible for a discount card.

KMART PHARMACY PRESCRIPTION SAVINGS CLUB

Your spouse and dependent children who have a Sears Holdings discount card are eligible.

OPTIONAL LIFE INSURANCE PLAN

You can choose to cover your spouse or domestic partner and your eligible dependent children. � Eligible children are those from birth to age 26. � You cannot be covered as an associate and as a dependent at

the same time. � Associates do not need to be enrolled in the Optional Life

Insurance Plan in order to cover their dependents. � If both parents of any dependent child are covered as

associates, the child is considered a dependent of one parent only.

� You and your eligible dependents must be able to perform normal activities on both the date of enrollment and on the effective date of coverage.

� The amount of spouse or domestic partner coverage cannot exceed the amount of your coverage.

� A disabled child’s coverage may continue beyond age 25 as a rider to adult Optional Life coverage. The dependent rider may remain in effect as long as the child remains dependent and disabled and the adult maintains coverage. The children’s portability privilege is not available for a disabled child who continues coverage under this program. You must contact Prudential to request continued coverage for a disabled child.

ENROLLING IN THE PLANS

Enrolling in your benefits is easy and convenient. Subject to the rules of each benefit plan, you can enroll or make changes virtually 24 hours a day, seven days a week (excluding scheduled system maintenance periods) by visiting the Sears Holdings HR Web site, www.88sears.com. Your personal information is protected by requiring you to enter your Social Security number and a password or personal identification number (PIN) before you can access certain types of information or perform certain transactions. Representatives are available at 1-888-88sears

(1-888-887-3277) if additional assistance is needed. ENROLLMENT PERIOD

Newly Eligible Associates and Dependents

See the chart at the beginning of this section for the timing of when you can enroll for benefits.

ANNUAL ENROLLMENT

Before the start of each benefit plan year, eligible associates are offered the opportunity to enroll in, change or cancel medical and/or dental coverage and flexible spending accounts for the upcoming plan year. Unless you experience a qualified change in status (as described later in this section), you may elect to enroll,

change or cancel coverage only during the annual enrollment period. For all other benefits, you may enroll in, change or cancel coverage at any time after you become eligible. Please note that enrollment in vision coverage and legal services (both are offered under the Voluntary Benefits Program) requires a one-year commitment. Annual enrollment for vision coverage and legal services is held each May/June, and the benefit year runs July 1 to June 30.

WHEN COVERAGE BEGINS

Associate Coverage

For medical and dental coverage and flexible spending accounts, the date your coverage begins depends on when you enroll: � If you are a newly eligible associate and enroll :

- before your eligibility date — coverage begins on your eligibility date.

- within 31 days after your eligibility date — coverage begins on the first day of the month on or after the date your enrollment is processed.

� If you enroll during an annual enrollment period, your coverage choices are effective on the next January 1.

� If you enroll within 31 days after a qualified change in

status, coverage begins on the first day of the month on or after the date your enrollment is processed. For medical coverage only: If you enroll within 31 days after the birth, adoption or placement for adoption of a child, coverage is effective on the date of birth, adoption or placement for adoption.

� For Long-term Disability and Life Insurance:

- If you don’t enroll when you are first eligible, you can apply for coverage at a later date. Coverage begins on the first day of the month after the date the insurance company approves your application for coverage.

- If you are not Actively at Work due to a leave of absence or you are receiving disability benefits on the date coverage is supposed to begin, coverage begins on the day you return to Active Work if you return on the first day of the month, or on the first day of the month after your return to Active Work if you return on a day other than the first day of the month.

� For the Savings Plan: Participation begins with the first pay period administratively possible after you enroll, provided you have satisfied the 3-month service requirement for participation. Note: Former associates may be eligible for immediate participation upon rehire. Contact the Savings Plan record keeper through 1-888-88sears (1-888-887-3277).

� For the Associate Stock Purchase Plan: Participation begins on the first day of the following quarter. Payroll deductions will begin as soon as administratively possible.

� For Company Paid Life Insurance: Coverage begins automatically on the date you become eligible, provided you are Actively at Work. If you are not Actively at Work due to a leave of absence or you are receiving disability benefits, coverage begins on the first day of the month following your return to Active Work status.

DEPENDENT COVERAGE

Coverage for your eligible dependents begins on the same date your coverage begins if they are enrolled when you first enroll. Otherwise, the date coverage begins is based on the event causing


the need for coverage (for example, birth or marriage). For Sears Holdings medical and dental coverage, you must enroll new dependents within 31 days of their eligibility date. If you don’t, you won’t be able to add your dependent until the next annual enrollment period or an applicable qualified change in status.

PAYING FOR COVERAGE

As part of the enrollment process, you must authorize the Company to deduct any required contributions from your paycheck. Contributions you make for yourself, your spouse and your eligible dependent children for the following benefits are made on a pre-tax basis: � Medical Coverage � Dental Coverage � Starbridge medical � Flexible spending accounts (FSAs) (includes health care

spending account and/or dependent care spending account) � Health Savings Account (HSA) � Commuter Benefits Program (up to Internal Revenue Service

limits) � Savings Plan (if pre-tax contributions are elected) Contributions attributable to coverage for a domestic partner or domestic partner’s child are not considered pre-tax contributions under the Internal Revenue Code, unless the domestic partner or the domestic partner’s child meets the eligibility criteria for tax dependent status under the Internal Revenue Code (as described above). Contributing on a pre-tax basis allows Sears Holdings to withhold money from your paycheck before taxes are calculated. This means you do not pay federal income tax, Social Security tax (except in regard to the Savings Plan) and, in most cases, state income tax on the amount of your income you contribute. Associates on an unpaid leave of absence, or associates who are not on the payroll but are continuing their benefit plan coverage under COBRA, must make their contributions with after-tax dollars.

QUALIFIED CHANGES IN STATUS

You may only make changes to certain benefits during annual enrollment or when you experience certain events. These events are defined by Federal law and are called qualified changes in status. Changes to your benefit coverage made as a result of a qualified change in status must be made within 31 days of the event (45 days for Optional Life only) and must be consistent with that status change event. See the Other Information section for a list of the events that qualify as a status change and details on each benefit plan.

SPECIAL ENROLLMENT OPPORTUNITIES FOR MEDICAL

COVERAGE

If you decline medical coverage because you have other health care coverage, but you later lose that other coverage, you may enroll in the Medical Plan within 31 days after losing the other coverage. In addition, if you decline coverage because you have COBRA continuation coverage with a previous employer, you may enroll in the Medical Plan within 31 days after you complete the COBRA continuation period. If a new dependent is added to your family due to marriage, birth, adoption or placement for adoption, you and your eligible

dependents may enroll in the Medical Plan within 31 days after the event. If you or a dependent is eligible but not enrolled for coverage under the terms of the Medical Plan, you or your dependent may enroll for coverage under the terms of that plan if either of the following conditions are met: (1) you or your dependent is covered under a Medicaid plan or a State child health plan under the Children's Health Insurance Program (“CHIP”) and coverage under the Medicaid or CHIP plan is terminated as a result of a loss of eligibility for such coverage, and you request coverage under the Medical Plan not later than 60 days after termination of the Medicaid or CHIP coverage, or (2) you or your dependent become eligible for a premium assistance program (that could be used toward the Plan costs) under a Medicaid or state child health plan under CHIP (including any waiver or demonstration project conducted under or in relation to such a plan), and you request coverage under the Medical Plan not later than 60 days after the date. FOR MORE INFORMATION

The following details about your benefit coverage are provided in the Other Information section of this handbook: � When you can make changes to your benefits. � When coverage ends. � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers.

Sears Holdings Benefits Handbook 2012 2-i Medical Plan Full-time Hourly

Medical Plan TABLE OF CONTENTS About the Medical Plan Options .................................................................................................................................................2-1

Women's Health and Cancer Rights Act of 1998 .............................................................................................................2-1

Grandfathered Status .......................................................................................................................................................2-1

Inpatient Admissions in Connection with the Birth of a Child ...........................................................................................2-1

Release of Information .....................................................................................................................................................2-1

Contributions ....................................................................................................................................................................2-1

How HMOs Work ..........................................................................................................................................................................2-1

How to Use an HMO ........................................................................................................................................................2-2

How the PPO Options Work ........................................................................................................................................................2-2

PPO Options ....................................................................................................................................................................2-2

Copayments .....................................................................................................................................................................2-2

Coinsurance .....................................................................................................................................................................2-2

Annual Deductible ............................................................................................................................................................2-2

Annual Out-of-Pocket Maximum ......................................................................................................................................2-3

Eligible Expenses .............................................................................................................................................................2-3

Maximum Allowable Amount (MAA) .................................................................................................................................2-3 Identifying Network Providers ..........................................................................................................................................2-3

Multiple Surgical Procedures ...........................................................................................................................................2-3

Medical Management Provisions ...............................................................................................................................................2-3

When You Must Call ........................................................................................................................................................2-4

Preauthorization Penalty ..................................................................................................................................................2-4

What You Must Do ...........................................................................................................................................................2-4

Case Management ...........................................................................................................................................................2-4

Maternity Care Program ...................................................................................................................................................2-4

Speech, Occupational and Physical Therapies ................................................................................................................2-4

Early Risk Management Program ....................................................................................................................................2-5

Informed Care Management Program .............................................................................................................................2-5

Denial of Preauthorization ................................................................................................................................................2-5

Prescription Drug Coverage .......................................................................................................................................................2-5

Retail Pharmacy Program ................................................................................................................................................2-5

Home Delivery Retail Refill Allowance (RRA) Program ...................................................................................................2-5 Additional Services ...........................................................................................................................................................2-6

How to Appeal a Denied Prescription Drug Claim ...........................................................................................................2-6

Mental Health and Substance Abuse Program .........................................................................................................................2-6

Organ/Tissue Transplant Program .............................................................................................................................................2-6

Donor Charges for Organ/Tissue Transplant ...................................................................................................................2-7

Health Savings Account ..............................................................................................................................................................2-7

Eligibility ...........................................................................................................................................................................2-7

Contributions ....................................................................................................................................................................2-7

Using your HSA Contributions .........................................................................................................................................2-7

Rules about Flexible Spending Accounts .........................................................................................................................2-7

Tax Savings .....................................................................................................................................................................2-7 HSA Ownership ................................................................................................................................................................2-8 Portability .........................................................................................................................................................................2-8

Setting Up Your HSA .......................................................................................................................................................2-8

Important Note .................................................................................................................................................................2-8

Plan Features – Select PPO ........................................................................................................................................................2-9

Plan Features – Basic PPO .........................................................................................................................................................2-9

Plan Features – High Deductible Health Plan ...........................................................................................................................2-9

Schedule of Benefits — Select PPO, Basic PPO and High Deductible Health Plan ............................................................2-10

General Exclusions ...................................................................................................................................................................2-14

Sears Holdings Benefits Handbook 2012 2-ii Medical Plan Full-time Hourly

Claims Information ....................................................................................................................................................................2-15

How to File a Claim Under the PPO options ..................................................................................................................2-15

Filing Claims With an HMO ............................................................................................................................................2-15

How and When Claims Are Paid ....................................................................................................................................2-15

Qualified Medical Child Support Orders .........................................................................................................................2-15

How to Appeal a Denied Claim ......................................................................................................................................2-16

Additional Information...............................................................................................................................................................2-16

Some Terms You Should Know................................................................................................................................................2-16

Important Note ...........................................................................................................................................................................2-19

Sears Holdings Benefits Handbook 2012 2-1 Medical Plan Full-time Hourly

ABOUT THE MEDICAL PLAN OPTIONS

Health care is important to all of us. That's why the Sears Holdings Medical Plan offers three group health plan options that are available to all eligible associates (except those in Hawaii, Puerto Rico and Guam) – the Select Preferred Provider Organization (PPO), the Basic PPO, and the High Deductible Health Plan (HDHP). This is a Preferred Provider Organization (PPO) plan for all Members except residents of Georgia; Members residing in Georgia are part of a Point of Service (POS) plan, and must use the appropriate POS Network Provider in their state to receive Network benefits. Additionally, Health Maintenance Organizations (HMOs) are available in some geographic areas. All of the group health plan options are comparable in that they cover routine and preventive care as well as catastrophic care. However, coverage and plan features of the HMOs vary. See How HMOs Work below. The group health plan options available to you depend on where you live. Eligibility is determined by your home zip code. Eligible zip code service areas are subject to change at any time. Throughout this section of the Handbook, several terms are capitalized. Those terms are defined at the back of this section, under Some Terms You Should Know.

WOMEN'S HEALTH AND CANCER RIGHTS ACT OF 1998

Under the Women’s Health and Cancer Rights Act of 1998 federal law, group health plans that provide medical and surgical benefits in connection with a mastectomy must cover the following medical and surgical procedures for breast reconstruction following a covered mastectomy: � Reconstruction of the breast on which the mastectomy was

performed; � Surgery and construction of the other breast to produce a

symmetrical appearance; and � Prostheses and physical complications of all stages of the

mastectomy, including lymphedemas. This coverage is subject to the same Annual Deductible, Coinsurance levels and Preauthorization requirements that apply to other medical and surgical procedures.

GRANDFATHERED STATUS

We believe coverage offered through all medical options offered is considered “non grandfathered” for 2012 under the new Health Care Reform law. Plan designs have been updated to reflect non grandfathered status for 2012. Questions about the grandfathered status for the medical plans offered by Sears Holdings can be submitted in writing to: Plan Administrator Sears Holdings Corporation Department 707BEN 3333 Beverly Road Hoffman Estates, IL 60179 If you have questions regarding the Health Care Reform requirements, you may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-

3272, or www.dol.gov/ebsa/healthreform/. Under the health care reform law, grandfathered coverage can preserve certain basic health coverage that was already in effect when the law was enacted in early 2010. Grandfathered coverage

is not required to include certain consumer protections that do apply to non-grandfathered coverage options, such as providing preventive health services without any cost sharing and in certain cases extra external reviews of claims appeals. Grandfathered coverage, though, is required to provide other protections such as eliminating lifetime limits on certain benefits, and offering coverage to adult children up to age 26 (without regard to student or marital status or other restrictions).

INPATIENT ADMISSIONS IN CONNECTION WITH THE BIRTH OF A

CHILD

Under federal law, group health plans and health insurance issuers generally may not restrict benefits for any hospital length of stay in connection with childbirth for the mother or Newborn Child to less than 48 hours following a vaginal delivery, or less than 96 hours following a cesarean section. However, federal law generally does not prohibit the mother's or newborn's attending provider, after consulting with the mother, from discharging the mother or newborn earlier than 48 hours (or 96 hours, as applicable). In any case, plans and issuers may not, under federal law, require that a provider obtain authorization from the plan issuer for prescribing a length of stay not in excess of 48 hours (or 96 hours). Medical Management must be notified for inpatient care (for either the mother or the child) that continues beyond the 48 or 96 hour limits.

RELEASE OF INFORMATION

Your election to participate in the Medical Plan constitutes your agreement to release medical information for the purposes of administering the plan for compliance with state or federal law.

CONTRIBUTIONS

You are required to pay contributions for your medical coverage. The amount of your contributions will vary depending on the option you elect and the number of dependents you cover. Contribution rates are available online through www.88sears.com at the time you become eligible to enroll and during the Annual Enrollment period. Wellness credits are available in two forms: • Health Assessment Credit. You are eligible to receive a

Health Assessment Credit that will be applied to your medical contributions if you (and your spouse or domestic partner, if covered in the Medical Plan) completes the confidential health assessment questionnaire.

• Tobacco Free Credit. You are eligible to receive a Tobacco Free Credit that will be applied to your medical contributions if you and your covered dependents pledge to be tobacco-free or participate in a smoking cessation program during the coverage period.

Your contributions to your medical coverage are deducted from your paycheck on a pre-tax basis, under the premium conversion feature of the Sears Holdings Flexible Benefits Plan. See the section in the Handbook, Flexible Benefits, for details about that plan.

HOW HMOS WORK

A Health Maintenance Organization (HMO) is an independent health care organization that offers medical services to its members for a set monthly fee. The Company may offer you the option to join an HMO; however the HMO, not Sears Holdings, is responsible for the actual coverage and the medical care it provides or arranges. Sears


Holdings is not responsible for the quality of service provided or arranged by the HMO. The HMO controls: � Processes for filing claims. � Appeal of denied claims. � Collection of benefit overpayments. � Coordination of benefits between the HMO and any other

medical coverage you or a dependent may have. � Coverage of dependents that do not live with you. � Rights to reimbursement when payments are available from

other insurance sources or legal settlements. � Other administrative processes.

HOW TO USE AN HMO

� In most cases, each member of your family chooses a primary care physician to coordinate health care within the HMO.

� Coverage varies from one HMO to another. � Services you receive outside the HMO are not covered, except

in emergencies. Your HMO can provide further details. � You may have to pay a copayment to the HMO at the time

you are treated. The HMO is generally responsible for the remaining cost of eligible expenses.

� You may call the Member Services department of the HMO if you have any questions. Member Services will give you information on providers within the HMO network.

If you are interested in an HMO, you should check with the HMO to see if Pre-existing Conditions limitations or other special provisions apply.

This section of your Handbook does not describe the plan provisions applicable to you if you choose coverage under a Health Maintenance Organization (HMO). Your medical benefits are set forth in the certificate of coverage provided by the HMO in which you choose to participate. The certificates of coverage of the following HMOs are hereby incorporated by reference: AmeriHealth HMO; BlueCross BlueShield of Georgia HMO; Blue Advantage HMO; Blue Care Network of Southeast MI; BlueCross of California HMO, CDPHP HMO, Geisinger Health Plan, Health Alliance Plan –Detroit; Health Net – Southern California; Health Plan of Hawaii HMO; Health Plan of Nevada; HIP of Greater New York HMO; HMSA- Preferred Provider; HP of Upper Ohio Valley; Humana HMO; Kaiser Foundation Health Plan-Washington DC; Kaiser Foundation Health Plan-Georgia; Kaiser Foundation Health Plan-Northern California; Kaiser Foundation Health Plan-Southern California; Kaiser Health Plan of Hawaii; Kaiser Health Plan Ohio HMO; Kaiser Health Plan Colorado HMO; Keystone 1999 Plan HMO; Keystone Health Plan East HMO; Pittsburgh Medical Center Health Plan HMO; Preferred Care; Vista Health Plan-North; Vista Health Plan-South; Triple-S PPO (Puerto Rico). Please refer to your HMO plan materials for further details pertaining to your medical coverage under the HMO plan. You may obtain HMO plan materials directly from your HMO.

HOW THE PPO OPTIONS WORK

The PPO options including the HDHP offered under the Medical Plan are administered by Anthem BlueCross BlueShield, and use the BlueCross BlueShield network of providers. Unlike an HMO, you do not need to select an In-Network primary care physician. Instead, each time care is needed, you have the choice of obtaining medical services inside or outside the network. However, to receive the highest level of benefits from the Plan, an In-Network Provider should be used. In some cases the PPO options do not

cover services when obtained outside the network. In addition, Network providers generally file claims on your behalf. Services provided by Out-of-Network providers are paid at Out-of-Network benefit levels even when In-network physicians refer participants to those providers. Please review the Schedule of Benefits and Plan Features sections for specific benefit levels. You can also contact the PPO for more information about the plan.

Member Services for the PPO Options

1-800-803-2432

www.anthem.com

PPO OPTIONS

You have three choices for PPO coverage. All feature the Blue Cross BlueShield network of providers. • The Select PPO provides the highest level of benefits of the

three PPOs and requires a higher premium. • The Basic PPO provides a lower level of benefits than the

Select PPO and has limits on the amount of benefits paid during the year. Premiums for the Basic PPO are lower than the Select PPO.

• The High Deductible Health Plan (HDHP) also provides a lower level of benefits (than the Select PPO) at a correspondingly lower premium. Those who enroll in the High Deductible Health Plan can contribute to a Health Savings Account (HSA). See page 7 of this section for more information.

COPAYMENTS

Copayments are flat dollar amounts that you pay for specific services. Copayments, where applicable, are in addition to Deductibles and Coinsurance. Services for which a Copayment applies are listed in the Plan Features and Schedule of Benefits sections.

COINSURANCE

Coinsurance is the percentage of Eligible Expenses paid by the plan and you after the Annual Deductible has been satisfied. Services for which Coinsurance applies are listed in the Schedule

of Benefits sections. Specific coinsurance levels are listed in the Plan Features sections.

ANNUAL DEDUCTIBLE

For some services, you must satisfy an Annual Deductible before the plan will begin paying for covered services as outlined in the Plan Features and Schedule of Benefits sections. The Annual Deductible is shown in the Plan Features sections. For the Select PPO and Basic PPO: � The individual Annual Deductible applies separately to each

Covered Person each Plan Year, unless the family Annual Deductible is satisfied. Once a Covered Person has satisfied the individual Annual Deductible, the Plan will begin paying for covered services based on the Plan Features and Schedule

of Benefits sections for that Covered Person. � The family Annual Deductible is the maximum Deductible

that all Covered Persons in a family must satisfy, even if all Covered Persons have not satisfied their individual Annual Deductible. If the sum of all individual Annual Deductible amounts for a covered family equals the family Annual Deductible, no further Annual Deductible need be satisfied by


any covered family member during the remainder of that Plan Year.

� The Annual Deductible does not apply to the first three times for the Select PPO Plan and four times for the Basic PPO Plan each Covered Person sees a primary care network doctor for an office visit. The Annual Deductible does not apply to services covered at 100% (e.g. Preventive care benefits). The Annual Deductible does not apply to the retail and home delivery prescription drug benefit. Amounts you pay for these Expenses are not applied toward satisfaction of the Annual Deductible.

For the High Deductible Health Plan: � The Annual Deductible applies collectively to all Covered

Persons. Once the Annual Deductible has been satisfied, all Covered Persons may begin receiving benefits.

� The Annual Deductible applies to all benefits under the Plan, including prescription drug benefits.

ANNUAL OUT-OF-POCKET MAXIMUM

An Out-of-Pocket Maximum is a cap on the total amount of Eligible Expenses you must pay (1) to satisfy the Annual Deductible and/or (2) as Coinsurance for Eligible Expenses each Plan Year. The annual Out-of-Pocket Maximum is shown in the Plan Features section. When a Covered Person has reached the individual annual Out-of-Pocket Maximum during a Plan Year, all future Eligible Expenses for that Covered Person, excluding Copayments (and excluding Expenses for prescription drugs in the Select PPO and Basic PPO) are paid by the plan at 100% for the remainder of the Plan Year. If the sum of all individual annual Out-of-Pocket amounts for a covered family equals the family Out-of-Pocket Maximum, Eligible Expenses for the covered family, excluding Copayments (and excluding Expenses for prescription drugs in the Select PPO and Basic PPO) are paid by the plan at 100% for the remainder of the Plan Year. As noted above, in the Select PPO and Basic PPO, the amounts you pay for prescription drugs do not apply toward satisfaction of the Out-of-Pocket Maximum. The annual Out-of-Pocket Maximum does not include the amount you are required to pay because of failure to follow Medical Management provisions or any other Expenses excluded by the PPO options. Expenses in excess of the Maximum Allowable Amount are not applied to the Out-of-Pocket Maximum as they are not Eligible Expenses under the Medical Plan.

ELIGIBLE EXPENSES

Eligible Expenses means the Expenses incurred for direct treatment of an Injury or Sickness. To be an Eligible Expense an Expense must be for a service or supply that is performed or prescribed by a Physician and that is Medically Necessary. Eligible Expenses for covered services when you use a Network Provider is the contracted rate. If you use Out-of-Network Providers, any amount of Expense in excess of the Maximum Allowable Amount is not an Eligible Expense and is, therefore, not reimbursable.

MAXIMUM ALLOWABLE AMOUNT (MAA)

If you use Out-of-Network Providers, you are responsible for any charges determined to be in excess of the Maximum Allowable Amount. Any amount of Expense in excess of the Maximum Allowable Amount will not be applied toward satisfaction of any Deductible or Out-of-Pocket Maximum. You can request a pre-

determination of the Maximum Allowed Amount by calling Member Services for the PPO options.

IDENTIFYING NETWORK PROVIDERS

You can ask your doctor if he or she participates in the BlueCross BlueShield network of providers. In California, network providers are identified as participants in BlueCross (not BlueCross BlueShield). You can also identify Network Providers in your area by contacting PPO Member Services. If you have access to the Internet, you can use the Provider Finder tool available online.

Member Services for the PPO Options

1-800-803-2432

www.anthem.com

MULTIPLE SURGICAL PROCEDURES

If you use Out-of-Network Providers, when two or more surgical procedures are performed during the same session through the same incision, natural body orifice or operative field, the amount eligible for consideration is: � The Maximum Allowable Amount for the largest amount

billed for one procedure; plus � 50% of the Maximum Allowable Amount for the next largest

amount billed for one procedure; and � 25% of the Maximum Allowable Amount for all other

procedures performed. You are responsible for the amount greater than the amounts listed above.

MEDICAL MANAGEMENT PROVISIONS

Described below are the Medical Management provisions that must be followed to qualify for maximum benefits under the PPO options. No benefits will be paid by the Medical Plan for any

care under the PPO option or treatment that is not Medically

Necessary.

Medical Management Programs assist participants and their attending Physicians in determining the most appropriate care needed. In all instances, the final decision of what treatment to use rests with patients and their Physicians. Payment of benefits is made according to plan provisions.

Medical Management for the PPO Options

1-800-803-2432

When appropriate, Anthem BlueCross BlueShield’s Medical Management staff members will discuss the planned level of care with the participant and the attending Physician and will advise within the following timeframes whether or not the care will be considered an Eligible Expense: � Requests for preauthorization will be reviewed within 15

days. If Medical Management does not have enough information to make a decision within 15 days, participants will be notified in writing of the additional information needed and will have 45 days to respond. Medical Management will then make a decision within 15 days of receipt of the requested information, or if no response is received, within 15 days after the deadline for a response.

However, if the need for the service is urgent, a decision will be rendered as soon as possible, taking into account the medical circumstances, but in any event within 72 hours. If


the request is urgent and further information is required to make a decision, participants will be notified within 24 hours and will have 48 hours to respond. Medical Management will make a decision within 48 hours of receipt of the requested information, or if no response is received, within 48 hours after the deadline for a response.

� Requests for authorization of continued treatment (concurrent review) will be responded to within 24 hours of receipt of the request.

Medical Management will: � Determine if an inpatient Hospital admission or mental

health/substance abuse course of treatment is Medically Necessary.

� Preauthorize the initial number of days of Hospital confinement or the number of outpatient mental health/substance abuse visits that are Medically Necessary for the care and treatment of the Covered Person.

� If necessary, periodically contact the attending Physician to certify additional days of Medically Necessary Hospital confinement if an extended Hospital stay is recommended by the attending Physician or additional outpatient mental health/substance abuse visits.

� Suggest alternatives to Hospital confinement or surgery or an alternative level of treatment, if appropriate.

WHEN YOU MUST CALL

You must call Medical Management for preauthorization of: � Hospitalization � Private Duty Nursing/Visiting Nurse Services � Home Health Care � Skilled Nursing Facility admissions � Hospice Care � Organ/Tissue Transplants In some cases a penalty will apply if you do not call for preauthorization. In other cases, no benefits will be payable. See below for a description of the preauthorization penalties that apply.

PREAUTHORIZATION PENALTY

Failure to comply with the Preauthorization procedures under the PPO options will result in the following penalties: � No coverage for the following treatments or services:

- Private Duty Nursing/Visiting Nurse Services - Home Health Care - Hospice Care

� A $500 penalty per occurrence will be applied for non-authorized confinements (such as those listed below), provided the Expense is eligible and the stay is determined to be Medically Necessary: - Inpatient hospital - Inpatient hospital for childbirth only if the stay lasts

longer than 48 hours (96 hours for a Cesarean delivery) - Inpatient mental health/substance abuse - Inpatient rehabilitation - Organ/tissue transplants - Skilled nursing facility admissions

The preauthorization penalty you pay will not be applied to your annual Deductible or the annual Out-of-Pocket Maximum.

WHAT YOU MUST DO

� Nonemergency Hospitalization. You must notify Medical Management two weeks prior to the admission so that

Medical Management’s review will be complete by the scheduled admission date.

� Hospitalization Due to Delivery of a Child. If the Hospital confinement is due to delivery of a child, the Hospital authorization should be done within the first trimester of the pregnancy.

� Emergency Hospitalization. You must contact Medical Management within 48 hours of the admission, excluding Saturdays, Sundays and holidays. You must call Medical Management even if you are discharged within the 48-hour period.

� Nonemergency Mental Health/Substance Abuse

Admissions or Outpatient Treatment. You must call Anthem BlueCross BlueShield Medical Management for preauthorization.

� Emergency Mental Health and Substance Abuse

Treatment. You must call Anthem BlueCross BlueShield Medical Management within 48 hours, excluding Saturdays, Sundays and holidays. You must obtain authorization even if you are discharged within the 48-hour period.

� Private Duty Nursing, Visiting Nurse Services, Home

Health Care, Skilled Nursing Facility admissions, and

Hospice Care. You must contact Medical Management prior to receiving services.

� Anthem BlueCross BlueShield Medical Management can be reached at 1-800-803-2432.

CASE MANAGEMENT

Case Management is a program designed to help a participant whose medical condition is caused by a catastrophic Sickness or Injury. Health care professionals can provide information to assist the participant and attending Physician when evaluating options for appropriate alternative care to long-term hospitalization and, in appropriate cases, make benefits available for alternative treatment not normally covered by the plan. Alternative treatments that would generally be excluded will be covered under the PPO options only if they are recommended through the Case Management process and meet the criteria described below. Charges for these services and supplies will be payable if the services and supplies meet all the following criteria: � They are approved by Medical Management. � They are for medical treatment of the patient’s condition if it

is expected to be of an extended duration. � They are in substitution for a greater expenditure that is an

Eligible Expense. � They are not for Custodial Care or personal convenience.

MATERNITY CARE PROGRAM

The Maternity Care Program is a comprehensive voluntary maternity program that promotes prenatal care and identifies members with high-risk pregnancies. Specially trained obstetrical nurses work in conjunction with the expectant mother and her Physician to provide appropriate prenatal care. The program consists of interviews that assist in the identification of high-risk pregnancies. Participants receive educational materials about pregnancy and related issues. Nurses can be reached by calling PPO Member Services.

SPEECH, OCCUPATIONAL AND PHYSICAL THERAPIES

Covered children age 5 and under: Covered children will have up to a combined 200 visits per plan year (i.e. the calendar year) per child for physical, speech and occupational therapies.


Coverage is available through the end of the calendar year in which the child reaches age 5. Covered members (excluding covered children mentioned

immediately above): Covered members will have up to a combined 90 visits per calendar year for physical, speech and occupational therapy. This coverage also includes school age children after the calendar year in which they reach age 5. Note: The Plan will cover additional visits beyond the combined 90-visit limit for covered members, if medical necessity is established. Approved visits beyond the combined 90-visit limit will be capped at an aggregate maximum of 200 visits in a calendar year (inclusive of the first 90 visits). If therapy treatment for a medical condition is not deemed medically necessary, requests for coverage for additional physical, speech, and occupational therapy visits in the current or any future calendar year will be denied (including the annual 90-visit limit) unless it can be established that the treatment for such a condition is again medically necessary (e.g. evolving medical advancements through technology may change the treatment practice).

EARLY RISK MANAGEMENT PROGRAM

Active Health Management uses a special computer program to analyze medical, lab, pharmacy and hospital claims data to identify patients at risk for potentially serious medical conditions. If computer program identifies a potential problem, Active Health Management Physicians and registered nurses review the information and discuss the issue with the patient’s treating Physician to offer suggestions about the best course of treatment. While treatment decisions remain the responsibility of the treating Physician and patient, this program gives participants access to an extra level of medical expertise.

INFORMED CARE MANAGEMENT PROGRAM

The Informed Care Management Program, a voluntary program offered through Active Health Management, takes the Early Risk Management Program a step further and engages both the Physician and patient in the care management process through customized care plans designed to improve a patient’s personal health status. The program is patient-centric, not disease-centric, and focuses on high-risk patients with impactable clinical issues in a broad range of areas. As always, the confidentiality of participants’ medical information is carefully protected at every step of the process for both the Early Risk Management Program and the Informed Care Management Program. Your use of the Plan constitutes your agreement to release medical information for purposes of the Early Risk Management Program and the Informed Care Management Program.

DENIAL OF PREAUTHORIZATION

If you have received a denial for Preauthorization from Medical Management, that denial will be considered a denial of a claim for benefits and will be eligible for the appeals process described in the Other Information section.

PRESCRIPTION DRUG COVERAGE

The Prescription Drug Program for the PPO options is administered by Medco. Prescriptions can be filled at a retail pharmacy that participates in the Medco pharmacy network or through home delivery available through Kmart Pharmacy (90 day

supply) or the Medco Pharmacy TM. If you are a new hire, you will receive an identification card from Medco shortly after you enroll. The PPO options utilize three-tier Coinsurance for prescription drugs. Generic drugs are the least expensive drug category, while brand name drugs are divided into two separate categories—“Preferred” and “Non-Preferred”. These categories are described in the Some Terms You Should Know section. In addition to the Coinsurance shown in the Schedule of Benefits

section, if you choose a brand name drug and there is a generic equivalent available for your prescription, you will also pay the difference in price between the brand name and the generic equivalent, even if your physician prescribes the brand name drug.

RETAIL PHARMACY PROGRAM

To use the Prescription Drug Program for the PPO options, present your Medco identification card, your prescription and Coinsurance payment to any Medco Network pharmacy. The Medco Network includes Kmart Pharmacy as well as most grocery store pharmacy chains, regional drug stores, most hospital and clinic pharmacies and various independent pharmacies across the country. In total there are about 46,000 network pharmacies across the country. Pharmacies located in Wal-Mart, Target, Walgreen’s and CVS are excluded from the Medco Network. To locate a Network pharmacy in your area, contact Medco at 1-800-233-7865 or through their Web site at www.medco.com. If you use a pharmacy that is not in the Medco Network, you will need to pay for your prescription in full at the pharmacy and then submit a paper form to Medco. Forms are available by calling Medco at 1-800-233-7865 or through their Web site at www.medco.com. You will be reimbursed based on the same coinsurance percentage and minimum/maximum coinsurance amounts as prescriptions filled at network pharmacies. However, the coinsurance percentage and minimum/maximums will be applied to the discounted prescription price that the drug would have cost if you had used a network pharmacy. You would be responsible for 100% of any amounts over the discounted prescription price. Through the retail pharmacy service, an equivalent generic drug will automatically be substituted for a brand name drug unless your physician specifies otherwise. No benefit will be paid for Expenses incurred for any portion of a prescription order that exceeds a 30-day supply. If you are enrolled in the High Deductible Health Plan, no benefit will be paid until the annual Deductible has been satisfied.

HOME DELIVERY RETAIL REFILL ALLOWANCE (RRA) PROGRAM

Prescriptions for maintenance medications may be obtained through the Retail Refill Allowance (RRA) Program. The RRA Program was implemented on January 1, 2010. It is designed to encourage associates and their covered dependents to channel long-term maintenance medications through the most cost-effective process offered under the PPO medical plans. Maintenance medications are medications (excluding vitamins or food supplements) that are taken on a regular and continuing basis (generally 90 days or longer). Here is how the program works: After your initial prescription is filled, you can submit your next two refills through a participating


retail pharmacy. After the second refill, the program will continue to provide coverage only if future refills are made through Kmart Pharmacy (90 day supply) or the Medco Pharmacy (Home Delivery). If you continue to have your long-term prescriptions refilled at a retail pharmacy (other than Kmart), you will be responsible for 100% of the cost. To use this benefit, submit your prescription to a local Kmart Pharmacy and request a 90 day supply or to the Medco Pharmacy (Home Delivery). Detailed information and forms may be obtained by calling Medco at 1-800-233-7865 or through their Web site at www.medco.com. The Retail Refill Allowance Program applies to medications taken on a long-term basis only (generally 90 days or longer), and it excludes all controlled substances. You should continue to have your short-term prescriptions such as antibiotics, filled at a participating retail pharmacy. Through the home delivery pharmacy service, an equivalent generic drug will automatically be substituted for a brand name drug unless your physician specifies otherwise. No benefit will be paid for Expenses incurred for any portion of a prescription order that exceeds a 90-day supply. If you are enrolled in the HDHP, no benefit will be paid until the annual Deductible has been satisfied.

ADDITIONAL SERVICES

Additional services may be available to assist you in managing prescription drugs, such as: � Drug Utilization Review. This promotes the safe and

appropriate use of medications through review for drug interactions, appropriate dosage, timing of refills and others.

� Health Management Programs. Medco works with you and your Physician to manage specific diseases. Please contact Medco for more information.

� Preferred Brand Drugs. Commonly prescribed drugs that are selected based on clinical quality, effectiveness and value. You can ask your Physician if these drugs will work for you.

� Preferred Drug Step Therapy. This is a cost savings program requiring a member to try a low cost generic or brand-name alternative drug before higher cost non-preferred drugs, unless certain circumstances exist.

� Prior Authorization Requirements. Some medications are covered only if they are prescribed for certain uses. You can contact Medco to obtain information on the approval process and for a list of medications that require prior authorization.

Requests for prior authorization will be reviewed within 15 days. If there is not enough information to make a decision within 15 days, you will be notified in writing of the additional information needed and will have 45 days to respond. A decision will then be made within 15 days of receipt of the requested information, or if no response is received, within 15 days after the deadline for a response. In the case of a claim for coverage involving urgent care, you will be notified of the benefit determination within 72 hours of receipt of the claim. If the claim does not contain sufficient information to determine whether, or to what extent, benefits are covered, you will be notified within 24 hours after receipt of your claim, of the information necessary to complete the claim. You will then have 48 hours to provide the information and will be notified of the decision within 48 hours of receipt of the information.

HOW TO APPEAL A DENIED PRESCRIPTION DRUG CLAIM

A denial of prescription drug benefits is considered a denial of a claim for benefits. You may appeal a denial by following the appeals process described in the Other Information section of this handbook.

MENTAL HEALTH AND SUBSTANCE ABUSE PROGRAM

The Mental Health and Substance Abuse Program is administered by Anthem BlueCross BlueShield. It is designed to provide confidential referrals and case management for mental health or substance abuse treatment. If you need help or information, call Anthem BlueCross BlueShield using the Member Services number for your PPO option. A customer service representative will gather information from you and help you find the right provider. In an emergency, a clinical case manager will provide immediate assistance and, if necessary, arrange for treatment at an appropriate facility. Professional Mental Health/Substance Abuse Providers include psychiatrists and psychologists, psychiatric nurses, certified social workers, and certified substance abuse and mental health providers.

ORGAN/TISSUE TRANSPLANT PROGRAM

Anthem BlueCross BlueShield has a Centers of Excellence department for participants in need of an organ or tissue transplant. It includes access to the Blue Distinction Centers for Transplant (BDCT) network, which is a network administered by the BlueCross BlueShield Association. The network includes nationally renowned transplant facilities throughout the United States that have demonstrated expertise in performing specific high-risk, high-cost transplants and transplant-related medical/surgical procedures. There are three options available if you need an organ transplant. The first option, for which you receive the highest level of benefits, must be at a Blue Distinction Centers for Transplant (BDCT) facility and the transplant must be preauthorized through Anthem BlueCross Blue Shield’s Centers of Excellence department. Also, if a BDCT facility is used, benefits for travel, hotel and meals are provided. You can contact the Centers of Excellence department with questions about the BDCT through the number provided on your medical ID card. Blue Distinction Centers for Transplant facilities are available for the following types of transplants: � Heart � Lung � Heart/Lung � Multivisceral � Liver � Pancreas � Simultaneous Kidney/Pancreas � Autologous Peripheral Stem Cell Transplant � Allogeneic Peripheral Stem Cell Transplant (including cord

blood) Secondly, you have the option to use a facility that is in the Anthem Blue Cross BlueShield network, but is not a Blue Distinction Center for Transplant facility. The transplant must be preauthorized through Anthem BlueCross BlueShield’s Centers of Excellence department. PPO plan participants will receive a lower level of benefits under this option. Also, no benefit for travel, hotel


or meals is available if a Blue Distinction Center for Transplant facility is not used. The third option is to use a facility that is not a Blue Distinction Center for Transplant facility and is not in the BlueCross Blue Shield network. Under this option, services are not covered and any amount you pay toward the transplant will not be applied to your annual Deductible or Out-of-Pocket Maximum. Benefit levels for transplants are outlined in the Schedule of

Benefits sections.

All transplants require Preauthorization through Anthem

BlueCross BlueShield Medical Management.

Medical care and treatment for organ/tissue transplants includes the following: � Pre-transplant or pre-medical/surgical evaluation and care

including diagnostic tests and x-rays. � Organ procurement/tissue harvest and preparation subject to

the limitations described below. � Surgery and recovery. � Post-discharge follow-up, including services and supplies.

DONOR CHARGES FOR ORGAN/TISSUE TRANSPLANT

In the case of an organ or tissue transplant, donor charges are considered Eligible Expenses (excluding donor search expenses) only if the recipient is a Covered Person under the plan and the donor fees are not covered under the donor’s insurance. If the donor’s insurance covers a portion of the fees, the plan will coordinate benefits with the donor’s plan. If the recipient is not a Covered Person, no benefits are payable for donor charges.

HEALTH SAVINGS ACCOUNT

A Health Savings Account (HSA) is an account that you can contribute money into to save for medical expenses, but only if you are covered under the High Deductible Health Plan (HDHP).

ELIGIBILITY

To be eligible to contribute to an HSA, you must satisfy all of the following conditions, as required by federal law. � You must not be eligible to be claimed as a dependent on

another person’s tax return. � You must not be enrolled in Medicare. � You must be enrolled in a qualified “high deductible health

plan” such as the HDHP. � If you have additional health coverage under another plan,

either as an employee or a dependent, this other health coverage must also be a high deductible health plan or a plan providing specific, limited coverage (such as dental insurance, vision insurance, accident insurance, or long-term care coverage).

� If your spouse is enrolled in a health care spending account through his or her employer, you cannot contribute to an HSA unless your spouse’s spending account excludes coverage for spouses and dependents that are covered by high deductible health plans.

You should consult with your tax advisor as to your eligibility to open an HSA.

CONTRIBUTIONS

The maximum HSA contribution is based IRS guidelines for the coverage category you elect under the High Deductible Health Plan. For instance, if you cover yourself only, you can contribute

up to the amount of the “associate only” deductible. Please review the Plan Features-High Deductible Health Plan section for the different contribution levels. Exception: If you cover a non tax-qualified dependent under the HDHP, your contribution is limited to the next lower coverage category (e.g., if you cover yourself plus your same-sex domestic partner, you may only contribute up to the amount of the “associate only” deductible.) If you are age 55 or older, you can make an additional “catch-up” contribution to your HSA, until you reach age 65. The catch-up contribution allowed by federal law is $1,000 in 2012. You cannot contribute to your HSA if you are receiving Medicare payments. Important: You are responsible for ensuring that you are eligible to open and contribute to an HSA, and that you are not annually contributing more than permitted by law.

USING YOUR HSA CONTRIBUTIONS

You can use the funds in your account to pay for qualified medical expenses as defined under Section 213(d) of the Internal Revenue Code, which are incurred by you, your spouse and dependents. Qualified medical expenses include deductibles and coinsurance under the HDHP as well as other expenses that the Plan does not cover, such as over-the-counter medication, dental expenses, and vision expenses. You can pay for medical expenses of your spouse and dependent children even if you do not cover them in the HDHP. You cannot pay for medical expenses of your domestic partner unless your partner qualifies as a dependent for tax purposes. Or, you can save the money in your account for future needs, such as retiree medical expenses. Once you reach age 65, your HSA can be used to pay insurance premiums like Medicare Part A and B. Money cannot be used to purchase a Medigap policy. You can also request a distribution of funds for other reasons; however, the amount distributed for other reasons will be subject to regular income taxes and, if you are not disabled or over age 65, a 20% penalty tax.

RULES ABOUT FLEXIBLE SPENDING ACCOUNTS

While you are contributing to an HSA, there are restrictions on coverage that you can have under a health care spending account. If you enroll in both the Health Care Flexible Spending Account (FSA) under the Sears Holdings Flexible Benefits Plan and the HSA, you will only be able to submit certain expenses to the Health Care FSA: � Expenses that are not covered by the HDHP, such as dental or

vision expenses and � Expenses you have incurred after you have satisfied the

HDHP deductible. If you participate in the Health Care FSA, claims will only be paid if they meet one of the above conditions. If your spouse has a health care spending account through his or her employer, you cannot contribute to an HSA unless your spouse’s health care FSA excludes coverage for spouses and dependents that are covered by high deductible health plans. You cannot claim the same expense under both an HSA and a health care FSA. TAX SAVINGS

The potential tax savings associated with your HSA contributions include:


1. Tax deductions when you contribute to your account 2. Tax-free earnings through investment 3. Tax-free withdrawals for qualified medical expenses HSA OWNERSHIP Funds remain in the account from year-to-year. There are no “use it or lose it” rules for HSAs.

PORTABILITY

HSAs are completely portable. You can keep your HSA even if you leave Sears Holdings or change your medical coverage. (However, you can only make contributions to your HSA while you are covered by a high deductible health plan.)

SETTING UP YOUR HSA

The Medical Plan HSA is offered by Anthem BlueCross BlueShield through ACS|BNY Mellon. You may elect to establish your HSA at any time during the plan year, provided you are enrolled in the HDHP. Once you make an election to establish an HSA, you will receive a welcome kit from Anthem with instructions on how to activate your account at Mellon and information on how to make the most of your HSA. You cannot use your HSA account until you activate your account at Mellon.

IMPORTANT NOTE

The HSA feature is not intended to be an employer sponsored welfare benefit plan for purposes of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.


PLAN FEATURES – SELECT PPO

In-Network* Out-of-Network**

Annual Deductible (does not apply to eligible preventive care services, prescription drugs or first three primary care Network doctors’ office visits) Individual

Family

$630 each plan year $1,840 each plan year

$1,550 each plan year $4,655 each plan year

Prescription Drug Deductible None None Annual Out-of-Pocket Maximum

Individual

Family



Primary Care Doctors’ Office Visits $30 copayment for each of the first three times you see your in-network

doctor for an office visit; thereafter 20%

40%

Coinsurance paid by you 20% 40% Hospital Copayment***

(applies toward Out-of-Pocket Maximum) $285 per admission $575 per admission

Emergency Room Copayment***

(applies toward Out-of-Pocket Maximum) $115 (waived if admitted) $115 (waived if admitted)

Maximum Annual Benefits No limit No limit Maximum Lifetime Benefits No limit No limit Preauthorization Failure to preauthorize results in reduced or no benefits (see Exclusions section)

PLAN FEATURES – BASIC PPO


Annual Deductible (does not apply to eligible preventive care services, prescription drugs or first four primary care Network doctors’ office visits)

Individual

Family



Prescription Drug Deductible None None Annual Out-of-Pocket Maximum

Individual

Family



Primary Care Doctors’ Office Visits $30 copayment for each of the first four times you see your in-network doctor

for an office visit; thereafter 20%

40%

Coinsurance paid by you 20% 40% Emergency Room Copayment***

(applies toward Out-of-Pocket Maximum) $115 (waived if admitted) $115 (waived if admitted)

Maximum Annual Benefits No limit Maximum Lifetime Benefits No limit Preauthorization Failure to preauthorize results in reduced or no benefits (see Exclusions section)

PLAN FEATURES – HIGH DEDUCTIBLE HEALTH PLAN


Annual Deductible (does not apply to eligible preventive care services, but does apply to all other in-network and out-of network benefits combined, including prescription drugs)

$1,500 associate only $3,000 associate + spouse, associate + child(ren) or associate + family

Annual Out-of-Pocket Maximum (includes annual deductible and prescription drugs)

Individual

Family


No limit

Coinsurance paid by you 20% 50% Preauthorization Failure to preauthorize results in reduced or no benefits (see next section) Maximum Annual Benefits No limit No limit Maximum Lifetime Benefits No limit No limit Maximum HSA Contribution

$3,100 associate only $ 6,250 associate + spouse, associate + child(ren) or associate + family

Catch-up Contribution limit $1,000 (applies to associates who will be age 55 by December 31, 2012) * In-Network charges have negotiated discounts applied. ** Out-of-Network benefits are Maximum Allowed Amount limitations. *** In addition to Coinsurance.


SCHEDULE OF BENEFITS — SELECT PPO, BASIC PPO AND HIGH DEDUCTIBLE HEALTH PLAN

Benefits are payable, as described below, for Eligible Expenses incurred while covered because of Injury or Sickness. No benefits will be paid if services are not Medically Necessary.

Preventive Care Services

Eligible Expenses In-Network Benefits Out-of-Network Benefits Routine Physicals Including routine lab, immunizations, vision and hearing screening

100% Coinsurance

Routine Mammogram 100% Coinsurance Routine Pap Smears 100% Coinsurance Well Baby/Well Child

Physical exam, medical history, developmental assessment, anticipatory guidance, lab tests performed in office or lab, and immunizations

100% Coinsurance

Immunizations

(per recommended guidelines, includes HPV) 100% Coinsurance

Sigmoidoscopy 100% Coinsurance Colonoscopy 100% Coinsurance Hypercholesterolemia Screening 100% Coinsurance Fecal Occult Blood Test Screening 100% Coinsurance Human Immunodeficiency Virus Screening 100% Coinsurance Prostate Cancer Screening

Annual diagnostic exam, prostatic specific antigen test (PSA) and lab tests

Digital rectal exam

100% Coinsurance

Bone Density 100% Coinsurance SCHEDULE OF BENEFITS — SELECT PPO, BASIC PPO AND HIGH DEDUCTIBLE HEALTH PLAN

Medical Services

Eligible Expenses In-Network Benefits Out-of-Network Benefits Physician Office Visit

Emergency Room (for emergencies only)

Surgical Center

Ambulatory Care Center

Urgent Care Center

Physician Office Surgery

Coinsurance Coinsurance

Speech, Occupational or Physical Therapy (when required for rehabilitation following a Sickness or Injury or for children age 5 and under)

Coinsurance Coinsurance Subject to plan deductible and coinsurance. There is a combined limit of up to 90-visits per year per person for speech, occupational and for physical therapies. Medically necessary visits beyond 90 requires pre-certification. There is a combined limit for speech, occupational and physical therapies of up to 200 visits per year per child up to the end of the calendar year in which the child reaches age 5. Please see Speech, Occupational and Physical Therapies in this section for detailed

information about this coverage.

Private Duty Nurse or Visiting Nurse Services—Must be either a R.N. or L.P.N. Covered in-home only

Coinsurance Coinsurance Maximum of $25,000 per Plan Year, combined In-

and Out-of-Network. Preauthorization required.

No coverage if not preauthorized. Diagnostic testing, X-ray or lab services

(excluding services performed as part of a

routine physical)


Casts, splints, surgical dressings or other

Medically Necessary supplies


Crutches, wheelchairs, hospital beds or

Therapeutic Equipment

Coinsurance Coinsurance Lesser of the purchase price or rental cost of such item.

Prosthetic or Orthopedic Devices such as

artificial limbs, eyes or braces including the

replacement of these devices (when Medically Necessary)


Refer to the Plan Features section for coinsurance levels under the PPO Options.



Medical Services, continued

Eligible Expenses In-Network Benefits Out-of-Network Benefits Blood transfusions including the cost of whole blood or

plasma not donated or replaced, and autologous blood

donations


Non-routine eye exam by a Physician Coinsurance Coinsurance The first pair of glasses or contact lenses,

but not both, needed after cataract surgery, cornea

transplantation or cornea grafting


Wig or toupee, due to hair loss resulting from

chemotherapy or radiation treatments

Out-of-Network coinsurance level In- or Out-of-Network.

Transgender reassignment hormonal therapy and/or

surgical transformational measures for members who

are at least 18 years old; and have met medical

necessity criteria for the diagnosis of transsexualism.

Coinsurance Coinsurance Pre-certification is required. Call Customer Service for more information.

Chiropractic care for musculoskeletal condition only.

(X-rays and physical therapy performed by a chiropractor are not covered.)

Coinsurance Coinsurance Maximum 26 visits per Plan Year, combined In- and Out-of-Network.

Anesthesia, oxygen, or other gases and the rental of

equipment to administer them


Ground transportation by a licensed professional

ambulance service to and from a local hospital


Air ambulance where Medically Necessary Coinsurance Coinsurance Transplants performed in Blue Distinction Center for

Transplant Not covered outside of Blue

Distinction Center for Transplant or the Blue Cross and Blue Shield network

� Medical expenses 100% (a $500 penalty will apply if not preauthorized)

� Hotel accommodations for one companion who accompanies the patient (price range in area near the facility); up to a maximum of 21 days per plan Year

Lifetime maximum $10,000 combined with meals and travel

� Meals and other necessary expenses for a companion (maximum $50 per day)

Lifetime maximum $10,000 combined with hotel and travel

� Travel to and from the site of the transplant, procedure, surgery, or necessary follow-up for the patient and companion traveling on the same day(s) (limited to coach class)

Lifetime maximum $10,000 combined with hotel and meals

Transplants performed in the Blue Cross and Blue

Shield Network (outside of Blue Distinction Center for Transplant)

Not covered outside of Blue Distinction Center for Transplant or the Blue Cross BlueShield network � Medical expenses Coinsurance (a $500 penalty will

apply if not preauthorized) � Meals, Hotel Accommodations and Travel Not covered Note: Kidney and cornea transplants are subject to the same provisions as other surgical procedures.

Travel, hotel, and meal expenses in connection with a kidney or cornea transplant are not covered. Inpatient Hospital Services

Eligible Expenses In-Network Benefits Out-of-Network Benefits Charges made by a Hospital for: Coinsurance Coinsurance � Room and Board—up to the Hospital semi-private room

rate � Private room, if Medically Necessary � A stay in an intensive care or isolation unit � Miscellaneous Services, as defined � Pre-Admission Tests, as defined � Emergency Room, within 48 hours of onset and only if

Medically Necessary

You must preauthorize prior to entering a Hospital or

within 48 hours of an emergency admission. A $500

penalty per occurrence will apply to Hospital

confinements that have not been preauthorized.

Services of a Physician for inpatient surgery Coinsurance Coinsurance Services of a Physician for Hospital visits Coinsurance Coinsurance Gastric bypass $1,500 Copayment plus Coinsurance $1,500 Copayment plus Coinsurance




Outpatient Services

Eligible Expenses In-Network Benefits Out-of-Network Benefits X-ray, diagnostic testing or laboratory services Coinsurance Coinsurance

Out-of-Hospital Care

Eligible Expenses In-Network Benefits Out-of-Network Benefits Room and Board and Miscellaneous Services for an eligible stay in a Skilled Nursing Facility. A stay in a Skilled Nursing Facility is eligible only if: � The stay is due to the same or related causes as

the Hospital stay; and � A Hospital stay would otherwise be needed

$285 Copayment plus Coinsurance $575 Copayment plus Coinsurance Maximum of 120 days confinement per Plan Year, combined

In- and Out-of-Network. No coverage if not preauthorized.

Eligibility qualifications must be met in each

Plan Year for benefits to be payable Charges for care by a Home Health Care Agency Coinsurance Coinsurance

Maximum of 120 visits per Plan Year, combined

In- and Out-of-Network. Four hours equals one visit.

No coverage if not preauthorized.

Charges for Hospice Care program � Room and Board and Miscellaneous Services for a stay

in a Hospice. Skilled nursing care, home health aide care, and Miscellaneous Services when the Hospice Care program is provided in the patient’s or family’s home.

� Counseling for the patient and/or the patient’s family, if recommended by a Physician. Family counseling will be a covered expense up to six months after the patient’s death

All treatment and services must be rendered and billed by the Hospice Care program


Maximum 210 days per lifetime (combined In- and Out-of-Network). No

coverage if not preauthorized.

Maternity Benefits

Eligible Expenses In-Network Benefits Out-of-Network Benefits Prenatal maternity care Coinsurance Coinsurance Charges made by a Birthing Center or Hospital for

medical care and treatment received in connection

with a birth

Also included are the services of a Nurse-Midwife if: � The Nurse-Midwife is acting under the direction of a

Physician; and � The services are provided in a Birthing Center


Routine care or treatment of a Newborn Child while

the child is necessarily confined in a Hospital





Prescription Drug Coverage

Eligible Expenses In-Network Benefits Out-of-Network Benefits Retail Pharmacy Program

Generic medication (up to a 30-day supply) 20% Coinsurance per prescription ($13 minimum, $55 maximum)

If you use a pharmacy that is not in the Medco Network, you will need to pay for your prescription in full at the pharmacy and then submit a paper form to Medco. Forms are available by calling Medco Health at 1-800-233-7865 or through their Web site at www.medco.com. You will be reimbursed based on the same coinsurance percentage and minimum/maximum coinsurance amounts as prescriptions filled at network pharmacies. However, the coinsurance percentage and minimum/maximums will be applied to the discounted prescription price that the drug would have cost if you had used a network pharmacy. You would be responsible for 100% of any amounts over the discounted prescription price.

Preferred brand name medication (up to a 30-day supply)

20% Coinsurance per prescription ($34 minimum, $85 maximum), plus the difference between generic and brand name, at a network pharmacy

Non-preferred brand name medication (up to a 30-day supply)

40% Coinsurance per prescription ($55 minimum, $140 maximum), plus the difference between generic and brand name, at a network pharmacy

If a network pharmacy fills your prescription, it will be covered even if the prescribing

physician is not in the provider network. Home Delivery Retail Refill Allowance (RRA) Program (90-day supply)

Generic medication (up to a 90-day supply) 20% Coinsurance per prescription ($34 minimum, $140 maximum)

No benefits if not obtained through Kmart Pharmacy or Medco Pharmacy (Home Delivery)

Preferred brand name medication (up to a 90-day supply)

20% Coinsurance per prescription (minimum $65, maximum $200), plus the difference between generic and brand name


Non-preferred brand name medication (up to a 90-day supply)

40% Coinsurance per prescription (minimum $140, maximum $285), plus the difference between generic and brand name


Important: If a drug’s actual cost is less than the applicable minimum amount, you’ll pay the actual cost of the drug rather

than the Coinsurance.



GENERAL EXCLUSIONS

No benefit will be paid under the PPO options for Expenses incurred for or in connection with: � Charges in excess of the Maximum Allowable Amount for

services and supplies. � Charges for care or treatment that is not Medically Necessary. � Non-emergency or follow-up care rendered in an Emergency

Room on an outpatient basis. � Acupuncture unless performed by a Physician. � X-rays and physical therapy performed by a chiropractor. � Chiropractic care for other than a Musculoskeletal condition. � Charges for which no payment would be required if there were

no health coverage. � Charges for which you or a dependent has no legal obligation

to pay. � Services for medical care for which no charge is made. � Drugs and treatments that are Experimental or Investigational.

Note: In cases of a life-threatening Sickness or Injury for

which no other conventional treatment is available, the plans

may consider certain Investigational treatments to be an

Eligible Expense. You must call Medical Management before

receiving such treatments or procedures.

� The improvement of educational skills or correction of learning disturbances.

� Modifications made to a home, property or automobile, such as ramps, elevators, spas, air conditioners or car hand controls.

� The treatment of a work-related Sickness or Injury. � Services or supplies furnished by or reimbursable through a

government plan or government-sponsored agency or program (except Medicare).

� Care provided in any government Hospital or facility when the individual is eligible for government benefits.

� Examinations to determine the need for, and fitting of, eyeglasses. (The first pair of either glasses or contact lenses needed after cataract surgery, cornea transplantation or cornea grafting is covered.)

� Hearing aids or exams for their prescription or fitting. � Custodial Care. � Hospital confinement primarily for diagnostic testing. � Treatment received before coverage under a PPO option began

or after it is terminated. � Separate charges by interns, residents, house Physicians or

other health care professionals who are employed by the covered facility that makes their services available.

� Routine foot care, unless to treat diabetes. � Radial keratonomy or other surgical procedures to correct

refractions of the eye, including any confinement, treatment, services or supplies given in connection with or related to the surgery.

� Genetic counseling and genetic testing performed by a genetic counselor.

� Cosmetic surgery on any part of the body except reconstructive surgery following a mastectomy or when Medically Necessary to correct damage caused by an accident, an Injury, or to correct a congenital defect.

� Dental Care or Treatment, unless the Expense is for: - Oral surgery to treat diseases or Injuries of the jaw, to

extract impacted teeth, or when related to an accident to sound natural teeth that occurred while covered, provided the repair or replacement is performed within one year of the Injury or damage; or

- Removal of tumors or cysts resulting from a medical condition.

� Doctor’s services or x-ray examinations in conjunction with mouth conditions due to a periodontal or perspical disease, or

any condition (other than a malignant tumor) involving teeth, surrounding tissue or structure, the alveolar process or the gingival tissue, except for Dental Treatment described above.

� Any loss caused or contributed to by an act of war, declared or undeclared, or by Sickness or Injury sustained while in the armed forces.

� Programs or medications for weight reduction or obesity, except when Medically Necessary to treat morbid obesity.

� Smoking cessation programs, services and supplies. � Hypnosis. � Recreational therapy. � Private Duty Nursing services when the patient is confined in a

Hospital, Skilled Nursing Facility or other health care institution; or when the registered nurse or licensed practical nurse lives in the Covered Person’s home or is a member of the Covered Person’s family, or is not approved by Medical Management.

� Services or care not recommended, approved and provided by a person who is licensed under a state medical practices act or similar state law or by a Nurse-Midwife who is licensed by a board of nursing as a Registered Graduate Nurse (RN) and has completed a program approved by the state for the preparation of Nurse-Midwives.

� Charges for personal convenience items, including but not limited to telephone charges, television rental, guest meals, wheelchair/van lifts, exercise equipment, special toilet seats, grab bars or any other services or items determined by the plan to be for personal convenience.

� Fees or charges made by an individual, agency or facility operating beyond the scope of its license.

� Expenses incurred for services, supplies, medical care or treatment relating to, arising out of, or given in connection with procedures which facilitate a pregnancy but do not treat the cause of infertility such as in vitro fertilization, artificial insemination, embryo transfer, gamete intrafallopian transfer, zygote intrafallopian transfer and tubal ovum transfer.

� Reversal of a previous surgery for sterilization. � Completing claim forms, reports or medical records. � Telephone consultations or giving information concerning a

claim. � Failure to keep a scheduled office visit. � Services or supplies provided by a member of your family or

household. � Prescription drug coverage under the Prescription Drug

Program: - For non-Federal Legend Drugs. - When prescriptions exceed a 30-day supply at a retail

pharmacy. - When a 90-day supply of maintenance medication is not

filled in compliance with the Retail Refill Allowance (RRA) Program.

- For the difference in cost between a brand name drug and generic equivalent (in excess of the Coinsurance).

- When prescriptions are for over-the-counter medications or food supplements (excluding vitamins).

- When prescriptions are for drugs and supplies relating to, arising out of, or given in connection with procedures which facilitate a pregnancy, but do not treat the cause of infertility.

- When prescriptions are for drugs that are excluded from coverage by the Plan Administrator. (A list may be obtained from Medco Health.)

Note: All PPO option exclusions also apply to the Prescription

Drug Program. Receipt of benefits under the Prescription

Drug Program does not waive any of the exclusions that apply


to the PPO options and will not affect payment of other

benefits under the PPO options.

� Mental Health and Substance Abuse excluded services listed below: - Therapies that do not meet national standards for mental

health professional practice, including, but not limited to, Erhard/The Forum seminar training or similar motivational service, primal therapy, rolfing, sensitivity training, bioenergetic therapy, guided imagery or crystal healing therapy.

- The following types of therapies: aversion, bioenergetics, carbon dioxide, confrontation, expressive (art, poetry, movement and psychodrama) as separately billed services, hyperbaric or normobaric oxygen, marathon, megavitamin, sedative action electrostimulation, sexual (without a DSM IV diagnosis), and Z therapy, also known as “holding therapy.”

- Therapy for personal growth or professional training. - Treatment or consultations provided via telephone. - Treatment of congenital and/or organic disorders, except

for the associated treatable and acute behavioral manifestations.

- Experimental or Investigational therapies. - Marital counseling. - Treatment for caffeine or nicotine intoxication,

withdrawal or dependence. - Administrative psychiatric services when these are the

only services rendered (such as expert testimony, medical records review and maintenance, etc.).

- Chart review. - Consultation with a mental health professional for

adjudication of marital, child support and custody cases and adoptive home study or related services.

- Court ordered treatment, unless determined to be Medically Necessary.

- Cult deprogramming. - Custodial Care. - Discharge summaries. - Eating disorder and gambling programs based solely on

the 12-step model. - Educational evaluation, rehabilitation or treatment of

learning disabilities. - Environmental ecology treatments. - Halfway houses. - Hemodialysis for schizophrenia. - L-tryptophan and vitamins, except thiamine injections on

admission for alcoholism when there is a diagnosed nutritional deficiency.

- Non-abstinence based or nutritionally based treatment for Substance Abuse.

- Private Duty Nursing, except when preauthorized as Medically Necessary.

- Private rooms, except when required for infection control. - Services to treat conditions that are identified by the DSM

IV as not being attributable to a mental disorder (i.e., V-codes) or are not identified in the DSM IV (e.g., sexual addiction, codependency, etc.).

- Supervision of clinical treatment practitioners or team. - Training analysis (tuitional, orthodox). - Transcendental meditation. - Vocational assessment. - Wilderness programs or therapeutic camps.

CLAIMS INFORMATION

HOW TO FILE A CLAIM UNDER THE PPO OPTIONS

Providers who participate in Blue Cross and Blue Shield networks have agreed to submit claims directly; so, if In-network Hospitals and Physicians are used, claims for their services generally will not have to be filed by the plan participant. In addition, many Out-of-Network Hospitals and Physicians will also file claims if the information on the Blue Cross and Blue Shield ID card is provided to them. If the provider requests a claim form to file a claim, a claim form can be obtained by calling Anthem BlueCross BlueShield at 1-800-803-2432. When filing a claim, attach all itemized bills to the claim form. Make copies of all bills and claim forms. It is important to keep records for each covered family member. Mail the original claim form and itemized bills to:

Anthem BlueCross BlueShield P.O. Box 105187 Atlanta, GA 30348

File claims as soon as possible. Only claims submitted within twelve (12) months following the date of service will be accepted. For pharmacy claims, mail the original claim form and itemized bills to:

Medco Health P.O. Box 14711 Lee’s Summit, MO 40512

FILING CLAIMS WITH AN HMO

Generally, you do not need to file claims for services provided under the terms of your HMO. However, the HMO controls the process for filing claims, appeal of denied claims and coordination of benefits between the HMO and any other medical coverage you have. If you need information about coverage or claims, call the HMO’s Member Services department.

HOW AND WHEN CLAIMS ARE PAID

All benefits will be paid after the claims administrator receives complete claim information. Claims administrators are listed in the Other Information section of this handbook. If a PPO participant assigned benefits or received services from a Network Provider, the Medical Plan will make payment directly to that provider. Benefits will be paid directly to participants who obtain services from Out-of-Network Providers. If benefits are payable after your death, the benefits may be paid to your estate or to any of the following of your surviving relatives: spouse, children, parents, or brothers and sisters. Post-service claims will be reviewed and responded to within 30 days of receipt. If there is not enough information to make a decision within 30 days, participants will be notified in writing of the additional information needed, and will have 45 days to respond. Anthem BlueCross BlueShield will make a decision within 15 days of receipt of the requested information, or if no response is received, within 15 days after the deadline for a response.

QUALIFIED MEDICAL CHILD SUPPORT ORDERS

If a Qualified Medical Child Support Order (QMCSO) has been received by the Plan Administrator, benefits will be paid to an Alternate Recipient, or the Alternate Recipient’s custodial parent or legal guardian, or to the provider if so directed by the Alternate


Recipient, custodial parent or legal guardian. A copy of the QMCSO procedures for the PPO options can be obtained, without charge from the Health and Group Benefits Service Center.

HOW TO APPEAL A DENIED CLAIM

If you feel your claim for benefits has been improperly denied, you have the right to appeal the decision. See the Other Information

section of this handbook for more information.

ADDITIONAL INFORMATION

The following details about your benefit coverage are provided in the Other Information section of this handbook: � When you can make changes to your benefits. � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers.

SOME TERMS YOU SHOULD KNOW

Ambulatory Care Center means a specialized facility that is established, equipped, operated and staffed primarily for the purpose of performing surgical procedures and that fully meets one of the following two tests: � Is licensed as an Ambulatory Care Center by the regulatory

authority having responsibility for the licensing under the laws of the jurisdiction in which it is located; or

� Where licensing is not required, it meets all of the following requirements: - Is operated under the supervision of a licensed Doctor of

Medicine (M.D.) or Doctor of Osteopathy (D.O.) who is devoted full time to supervision and who permits a surgical procedure to be performed only by a duly qualified Physician who, at the time the procedure is performed, is privileged to perform the procedure in at least one Hospital in the area;

- Requires in all cases, except those requiring only local infiltration anesthetics, that a licensed anesthesiologist administer the anesthetic or supervise an anesthetist who is administering the anesthetic and that the anesthesiologist or anesthetist remain present throughout the surgical procedure;

- Provides at least one operating room and at least one post-anesthesia recovery room;

- Is equipped to perform diagnostic x-ray and laboratory examinations or has an arrangement to obtain these services;

- Has trained personnel and necessary equipment to handle emergency situations;

- Has immediate access to a blood bank or blood supplies; - Provides the full-time services of one or more Registered

Graduate Nurses (RNs) for patient care in the operating rooms and in the post-anesthesia recovery room; and

- Maintains an adequate medical record for each patient, the record to contain an admitting diagnosis including, for all patients except those undergoing a procedure under local anesthesia, a preoperative examination report, medical history and laboratory test and/or x-rays, an operative report and a discharge summary.

Birthing Center means a specialized facility that is primarily a place for delivery of children following a normal uncomplicated pregnancy and that fully meets one of the following two tests: � Is licensed by the regulatory authority having responsibility for

the licensing under the laws of the jurisdiction in which it is located; or

� Meets all of the following requirements: - Is operated and equipped in accordance with any

applicable state law; - Is equipped to perform routine diagnostic and laboratory

examinations such as hematocrit and urinalysis for glucose, protein, bacteria and specific gravity;

- Is available to handle foreseeable emergencies, with trained personnel and necessary equipment including, but not limited to, oxygen, positive pressure mask, suction, intravenous equipment, equipment for maintaining infant temperature and ventilation, and blood expanders;

- Operates under the full-time supervision of a licensed Doctor of Medicine (M.D.) or Registered Graduate Nurse (RN);

- Maintains a written agreement with at least one Hospital in the area for immediate acceptance of patients who develop complications; and

- Maintains an adequate medical record for each patient, the record to contain prenatal history, prenatal examination, any laboratory or diagnostic test and a postpartum summary.

Blue Distinction Centers for Transplant (BDCT) means facilities designated by Anthem BlueCross BlueShield to render Medically Necessary covered services and supplies for certain organ and tissue transplants under the PPO options.

Coinsurance is described in the How the PPO Options Work

section.

Copayment is described in the How the PPO Options Work

section.

Covered Person or participant means an eligible associate or dependent who is covered under a PPO option in accordance with the terms and conditions of the Medical Plan and applicable PPO option.

Custodial Care means care consisting of services and supplies that are furnished mainly to train or assist the individual in personal hygiene and other activities of daily living, that do not assist such person in recovering from an Injury or Sickness or can be provided by persons without the technical skills of a provider of health care covered by the PPO options. Such care is considered custodial regardless of where the care is provided or who recommends, directs or provides the care.

This is care that can be provided by a lay person who does not have professional qualifications, skills or training. Custodial Care includes: help in walking and getting into or out of bed; help in bathing, dressing and eating; help in other functions of daily living of a similar nature; administration of or help in using or applying medications, creams and ointment; routine administration of medical gas after a regimen of therapy has been set up; routine care of a patient, including functions such as changes of dressings, diapers and protective sheets and periodic turning and positioning in bed; routine care and maintenance in connection with casts, braces and other similar devices, or other equipment and supplies used in treatment of a patient, such as colostomy and ileostomy bags and in-dwelling catheters; routine tracheostomy care; and general supervision of exercise programs including carrying out of maintenance programs of repetitive exercises that do not need the skills of a therapist and are not skilled rehabilitation services.

Custodial Care also means services determined as primarily providing: � A protected, monitored and controlled environment whether in

an institution or in the home; � Assistance to support the essentials of daily living; and


� Treatment that is unlikely to reduce the disability to the extent necessary to enable the patient to function outside the protected, monitored or controlled environment.

Annual Deductible is described in the How the PPO Options Work

section.

Dental Care or Treatment means services or supplies for the teeth, natural or otherwise, and their supporting tissues and structures, including but not limited to orthodontic services.

Educational means that the primary purpose of a service or supply is to provide the Covered Person with training in the activities of daily living; instructions in scholastic skills such as reading or writing; treatment of learning disabilities; or preparation for an occupation; or that the service or supply is being provided to promote development beyond any level of function previously demonstrated.

Eligible Expense is described in the How the PPO Plans Work

section.

Emergency (Medical) means the sudden onset of a medical condition manifesting itself by acute symptoms, including severe pain, which are severe enough that the lack of immediate medical attention could reasonably be expected to result in any of the following: � The patient’s health would be placed in serious jeopardy; or � Bodily functions would be seriously impaired; or � There would be serious dysfunction of a bodily organ or part;

or � Death.

Emergency (Psychiatric) means a sudden, serious condition for which the failure to receive immediate mental health or substance abuse care could result in an individual being a real and present danger to himself/herself or others. Some examples are attempted suicide and violent and aggressive behavior toward others.

Expense means a charge a person is legally obligated to pay. An Expense is deemed to be incurred on the date the service or supply is furnished and is applied in the order received.

Experimental or Investigational means the procedures, services or supplies (including drugs) that the claims administrator determines to be Experimental or Investigational using one or more of the following criteria: � The medical or health care procedure or supply is under study

or in a clinical trial to evaluate its toxicity, safety or efficacy for a particular diagnosis or set of indications. Clinical trials include but are not limited to Phase I, II and III clinical trials.

� The prevailing opinion within the appropriate specialty of the U.S. medical profession is that the medical or health care procedure or supply needs further evaluation for the particular diagnosis or set of indications before it is used outside clinical trials or other research settings. The claims administrator will determine if this item is true based on:

- Published reports in authoritative medical literature; and - Regulations, reports, publications and evaluations issued by

government agencies, such as the Agency for Health Care Policy and Research, the National Institutes of Health and the FDA.

A drug, medical supply or medical device that is subject to FDA approval may be determined Experimental or Investigational if: � It does not have FDA approval; or � It has FDA approval only under its Treatment of

Investigational New Drug regulation or a similar regulation; or � It has FDA approval, but it is being used for an indication or at

a dosage that is not an accepted off-label use. The claims

administrator will determine if a use is an accepted off-label use based on published reports in authoritative medical literature and entries in the following drug compendia: The

American Medical Association Drug Evaluations, The

American Hospital Formulary Service Drug Information, and

The U.S. Pharmacopoeia Dispensing Information.

The claims administrator has the discretionary authority to interpret and apply the definition of Experimental and Investigational in determining whether medical or dental services and supplies are Eligible Expenses.

Generic Drugs must pass the Food and Drug Administration’s (FDA) same strict standards for safety and produce the same clinical effect as brand name drugs. To gain FDA approval, generic drugs are required to meet certain criteria, such as having the same active ingredients and bioequivalency as brand name drugs. Generics are typically sold at substantial discounts from the branded price.

Health Care Provider means a licensed or certified provider whose services are given within the scope of that provider’s license or certification.

Home Health Care means the services and supplies shown below. The Home Health Care must replace a needed Hospital stay or a stay in a Skilled Nursing Facility. Also, it must be for the care or treatment of sick or injured persons and must be ordered in writing by the Covered Person’s Physician and provided in the home by a Home Health Care Agency team.

Home Health Care consists of these services and supplies: � Part-time or intermittent home nursing care from, or

supervised by, a registered nurse; � Part-time or intermittent home health aide services; � Physical therapy, occupational therapy and speech therapy; � Medical supplies, drugs and medications prescribed by a

Physician, and laboratory services, but only to the extent that they would have been covered in a Hospital or Skilled Nursing Facility.

Each visit from a Home Health Care Agency team of four hours or less is considered a single visit.

Home Health Care Agency means a public or private agency that specializes in giving nursing or therapeutic services in the home. It also must be licensed as a Home Health Care Agency and operate within the scope of its license.

Hospice means a facility, or a part of one, which is licensed as such and operates within the scope of its license. It also provides inpatient Hospice Care, maintains medical records on each patient and provides an ongoing quality assurance program, has full-time supervision by at least one Physician and provides 24-hour nursing service by registered nurses.

Hospice Care means a coordinated program of home or inpatient care for the special physical, psychological and social needs of terminally ill persons and their families. A terminally ill person is one who has been diagnosed by a Physician as having a life expectancy of six months or less. The program must be accredited by the National Hospice Organization.

Hospital means a licensed institution, other than a Skilled Nursing Facility, that provides inpatient medical care and treatment of sick and injured persons. Services provided by a Hospital also include: � Diagnosis of Injury and Sickness; � Full-time supervision by at least one Physician; � 24-hour nursing service by registered nurses; � Surgical facility or formal arrangements for available surgical

facilities; and


� Therapeutic care of patients who are convalescing from Injury or Sickness.

The surgery requirement will be waived if treatment or services are provided for rehabilitation from a Sickness or Injury and the institution would otherwise qualify as a Hospital. Hospital also includes: � Any hospital, psychiatric hospital, or tuberculosis hospital that

meets the Medicare definition, if the patient is eligible for Medicare;

� Any institution accredited by the Joint Commission on Accreditation of HealthCare Organizations, licensed by the state and used primarily for the treatment of alcoholism, narcotism or mental illness; and

� Any institution licensed by the state as a Residential Treatment Center for the sole treatment of Mental Health and Substance Abuse Disorders.

Injury means accidental bodily Injury.

In-Network means benefits provided under the PPO options if covered medical services are obtained from In-Network Providers.

In-network or Network Provider means a Hospital, Physician, Health Care Provider, or pharmacy that has contracted to participate in either the BlueCross BlueShield or Medco Health network.

Intensive Outpatient Program means a non-residential mental health/substance abuse treatment program in which attendance ranges from one to four hours per day, three to five days per week. Maximum Allowed Amount means, as to charges for services rendered by or on behalf of an Out-of-Network Provider, the amount measured and determined by Anthem BlueCross BlueShield by comparing the actual charge for the service or supply with the prevailing charges made for it. Anthem BlueCross BlueShield determines the Maximum Allowed Amount. It takes into account pertinent factors including the complexity of the service, the range of services provided and the prevailing charge level in the geographic area where the provider is located and other geographic areas having similar medical cost experience.

In no event will the Maximum Allowed Amount exceed the provider’s actual charge for the service. If the provider’s charge is more than the Maximum Allowed Amount, the Covered Person is responsible for payment of the difference.

Medical Case Manager means an experienced professional (e.g., nurse, doctor or social worker) who works with patients and providers to coordinate certain services deemed necessary to provide the patient with a plan of Medically Necessary and appropriate health care.

Medical Management means the entity responsible for assessing the Medical Necessity of proposed care under the terms of the PPO options.

Medically Necessary or Medical Necessity means that a service or supply: � Must be provided by a Physician, Hospital or other covered

provider under the PPO options; and � Must be commonly and customarily recognized with respect to

the standards of good medical practice as appropriate and effective in the identification or treatment of a patient’s diagnosed Injury or Sickness; and

� Must be consistent with the symptoms on which the diagnosis and treatment of the Sickness or Injury is based; and

� Must be the appropriate supply or level of service that can safely be provided to a patient; and with regard to a person who is an inpatient, it must mean that the patient’s Sickness or Injury requires that the service or supply cannot be safely provided to that person on an outpatient basis; and

� Must not be primarily for the convenience of the patient, Physician, Hospital or other covered provider under the PPO plans; and

� Must not be scholastic, vocational training, Educational or developmental in nature, or Experimental or Investigational; and

� Must not be provided primarily for the purpose of medical or other research.

The Plan Administrator has delegated the discretionary authority to determine Medical Necessity under the PPO options to the claims administrator. The fact that a patient’s Physician has ordered a particular treatment or supply does not make it Medically Necessary under the PPO options.

Among the factors the claims administrator may consider in determining Medical Necessity are approval by the U.S. Food and Drug Administration, if applicable, or whether a service or supply is commonly and customarily recognized by Physicians in a particular medical specialty as appropriate for the diagnosis or treatment of the Sickness or Injury.

The presence of these or other factors will not automatically result in a determination of Medical Necessity if the claims administrator determines one or more of the seven requirements listed have not been met.

Mental Health Disorder means an illness, condition or disorder defined or described as a mental disorder in the Diagnostic and

Statistical Manual of Mental Disorders (DSM IV-Fourth Edition), or its successor volume, published by the American Psychiatric Association, and includes, but is not limited to, psychosis, neurosis and personality disorders.

Mental Health/Substance Abuse Provider means a person who specializes in the treatment of Mental Health Disorders or Substance Abuse.

Miscellaneous Services means Medically Necessary services or supplies, other than Room and Board and professional services. These services or supplies must be provided by a Hospital, Hospice or Skilled Nursing Facility or other provider of service such as laboratories, pharmacies and rehabilitation centers.

Musculoskeletal condition means the delay or impedence of neural impulse to and/or from the brain.

Newborn Child means a child who has been confined in a Hospital since birth. As of discharge, the child is no longer considered a Newborn Child.

Non-Preferred Brand drugs are brand name drugs not on the preferred list.

Nurse-Midwife means a person who is licensed or certified to practice as a Nurse-Midwife. A Nurse-Midwife must also be licensed by the board of nursing as a Registered Graduate Nurse (RN) and have completed a program approved by the state for the preparation of Nurse-Midwives.

Orthopedic Device means a device that is Medically Necessary for the correction of locomotor disorders, particularly as it pertains to the skeleton, joints, muscles and fascia.

Out-of-Network means services furnished by Out-of-Network Providers, Out-of-Network hospitals and Out-of-Network pharmacies.


Out-of-Network Provider means a Hospital, Physician or Health Care Provider that has not contracted with Blue Cross and Blue Shield to participate in the PPO Network.

Out-of-Pocket Maximum is described in the How the PPO

Options Work section.

Outpatient Treatment (Mental Health/Substance Abuse) means treatment for a Mental Health or Substance Abuse Disorder that generally occurs at the provider’s office.

Partial Hospitalization (Mental Health/Substance Abuse) means non-residential mental health or substance abuse treatment that provides the range of psychiatric services found in an inpatient setting.

Physician means a person who is licensed to practice medicine or surgery and acts within the scope of the license.

Physician also means a social worker who is licensed or certified by the state, working within the scope of the license or certification and who provides care or treatment of a Mental Health or Substance Abuse Disorder.

Plan Year means January 1 through December 31.

Pre-Admission Tests means those tests prescribed by a Physician that are to be performed on the Covered Person in a Hospital within seven days prior to scheduled confinement in the Hospital as an inpatient, provided that: � Such tests are related to the performance of scheduled surgery;

and � Such tests have been ordered by a duly qualified Physician

after a condition requiring such surgery has been diagnosed and Hospital admission for such surgery has been requested by the Physician and confirmed by the Hospital; and

� The Covered Person is subsequently admitted to the Hospital, or the confinement is cancelled or postponed because a Hospital bed is unavailable or because a change sufficiently significant to preclude surgery has occurred in the Covered Person’s medical condition.

Preauthorization means PPO members must preauthorize care with Medical Management to receive coverage.

Preferred Brand Drugs are commonly prescribed brand name drugs that appear on the list of “preferred” medications. The drugs are selected based on their clinical quality, effectiveness and value and are approved by an independent committee made up of doctors and pharmacists. The “preferred” list encourages doctors to consider cost when prescribing medications by alerting them to lower cost drugs that are just as effective as higher cost drugs.

Private Duty Nursing or Visiting Nurse Services means the services of a registered nurse or licensed practical nurse if such care is furnished when: � Intensive nursing care, requiring the skill level and training of

a registered nurse or licensed practical nurse, is needed in the treatment of a Sickness or Injury; and

� The care could not be properly provided by an individual who does not have the professional qualifications of a registered nurse or licensed practical nurse.

Prosthetic Device means an item that replaces a permanently missing, functional part of the body.

Psychologist means a person who specializes in clinical psychology and is licensed or certified as a Psychologist or is a Member or Fellow of the American Psychological Association, if there is no government licensure or certification required.

Residential Treatment Center means a program providing active treatment and specialized programming for children and adolescents on a 24-hour residential basis.

Room and Board means the following charges to inpatients by a Hospital, Hospice or Skilled Nursing Facility: a bed, meals and the general services essential to daily medical care.

Sickness means these conditions: when the body’s organs do not function normally; when a temporary ailment reduces the body’s ability to function normally; or pregnancy.

Skilled Nursing Facility means a facility approved by Medicare as a Skilled Nursing Facility. If not approved by Medicare, it must meet all of the following tests: � Is operated under the applicable licensing and other laws of the

jurisdiction in which it operates; � Is under the supervision of a licensed Physician or Registered

Graduate Nurse (RN) who is devoted full time to supervision; � Is regularly engaged in providing Room and Board and

continuously provides 24 hour-a-day skilled nursing care of sick and injured persons at the patient’s expense during the convalescent state of an Injury or Sickness;

� Maintains a daily medical record of each patient who is under the care of a duly licensed Physician;

� Is authorized to administer medication to patients on the order of a duly licensed Physician; and

� Is not, other than incidentally, a home for the aged, the blind or the deaf, a hotel, a domiciliary care home, a maternity home, or a home for alcoholics or drug addicts or the mentally ill.

Substance Abuse means a condition of psychological and/or physiological dependence or addiction to alcohol or psychoactive drugs or medications, which results in functional (physical, cognitive, mental, affective, social or behavioral) impairment.

Therapeutic Equipment means a device that: � Is prescribed or recommended by a Physician; � Is durable in nature and is not disposable; � Is primarily used as a medical device and is not generally used

in the absence of a Sickness or Injury; � Must be necessary for the treatment of Sickness or Injury; and � Cannot be used by anyone other than the patient.

Treatment Center means a facility that meets all the following requirements: � Is established and operated in accordance with any applicable

state law; � Provides a program of treatment approved by a Physician and

Anthem BlueCross BlueShield; � Has or maintains a written, specific and detailed regimen

requiring full-time residence and full-time participation by the patient; and

� Provides all of the following basic services: Room and Board, evaluation and diagnosis, counseling, referral and orientation to specialized community resources.

Urgent Care Center means a licensed medical center operating within the scope of its license to provide immediate medical care that is required because of the sudden and acute nature of an Injury or Sickness on an outpatient basis.

IMPORTANT NOTE

The Medical Plan is a welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). This section of the Handbook, together with the applicable provisions of the Introduction and Other Information sections are intended to constitute a summary plan description in accordance with ERISA.

Sears Holdings Benefits Handbook 2012 3-i Prescription Drug Savings Program Full-time Hourly

Kmart Pharmacy Prescription Savings Club for SHC Associates TABLE OF CONTENTS Kmart Pharmacy Prescription Savings Club for SHC Associates ..........................................................................................3-1

Eligibility ...........................................................................................................................................................................3-1 Program Benefits .............................................................................................................................................................3-1

How The Program Works .................................................................................................................................................3-1

Sears Holdings Benefits Handbook 2012 3-1 Prescription Drug Savings Program Full-time Hourly

KMART PHARMACY PRESCRIPTION SAVINGS CLUB FOR SHC ASSOCIATES

The Prescription Savings Club Program (PSC) for SHC Associates is available exclusively at Kmart Pharmacies to eligible associates and their family members.

ELIGIBILITY

This program is only available to Sears Holdings associates, their spouses and their dependents upon date of hire. PROGRAM BENEFITS

There is no annual enrollment fee. The following benefits are available upon date of hire.

• 500 Kmart preferred generic medications at prices starting as low as $5 for a 30-day supply* and $10 for a 90-day supply**

• Up to 85% savings on all Kmart non-preferred generic medications***

• Up to 20% savings on all brand medications**** • 20% savings on flu shots. Includes high-dose vaccines for

those 65 and older. • 10% savings on all other vaccines offered (e.g. Shingles,

Pneumonia, Whooping Cough, Hepatitis A&B, etc.)

*Prices range from $5 to $25 for a 30-day supply. **Prices range from $10 to $75 for a 90-day supply. ***Savings range from 5% to 85% on all Kmart non-preferred generic medications. ****Savings range from 5% to 20% for all brand medications.

HOW THE PROGRAM WORKS

Present your SHC Associate Discount ID Card for identification purposes at your Kmart Pharmacy and the pharmacist will fill your prescription under the program. This program is not an insurance plan. Consult a Kmart pharmacist or visit www.kmart.com/pharmacy for full program details. The Prescription Savings Club for SHC Associates at Kmart Pharmacy is intended to be a welfare benefit plan under ERISA.

Sears Holdings Benefits Handbook 2012 4-i Dental Plan Full-time Hourly

Dental Plan TABLE OF CONTENTS

About the Dental Plan .................................................................................................................................................................4-1 Contributions ....................................................................................................................................................................4-1

How the Plan Works ....................................................................................................................................................................4-1 Locating a Dentist ............................................................................................................................................................4-1 Alternate Benefit ...............................................................................................................................................................4-1 Predetermination of Benefits ............................................................................................................................................4-1 How Benefits are Determined ..........................................................................................................................................4-2 In-Network vs. Out-of-Network .........................................................................................................................................4-2

Plan Features ...............................................................................................................................................................................4-3 General Exclusions .....................................................................................................................................................................4-4 Claims Information ......................................................................................................................................................................4-4

How to File a Claim ..........................................................................................................................................................4-4 How to Appeal a Denied Claim ........................................................................................................................................4-5

For More Information ...................................................................................................................................................................4-5 Some Terms You Should Know..................................................................................................................................................4-5 Important Note .............................................................................................................................................................................4-5

Sears Holdings Benefits Handbook 2012 4-1 Dental Plan Full-time Hourly

ABOUT THE DENTAL PLAN

Sears Holdings offers dental coverage designed to help you financially when you or your covered dependents need dental care. The Sears Holdings Dental Plan is a PPO administered by MetLife and utilizes their network of providers. Most dental care is covered whether it is received in or outside the PPO network. However, you receive a higher level of benefits when you use an in-network provider. In Puerto Rico, associates can choose between the Sears Holdings Dental Plan and Triple S. Triple S can provide detailed information about the benefits provided by that option. The Sears Holdings Dental Plan is offered to associates in Guam. Associates in Guam can elect coverage under a dental maintenance organization (DMO). The DMO administrator will provide detailed information about these options. Throughout this section of the Handbook, several terms are capitalized. These terms are defined under Some Terms You

Should Know, at the end of this section.

CONTRIBUTIONS

You are required to pay contributions for your dental coverage. The amount of your contributions will vary depending on the number of family members you cover. Contribution rates are provided to you at the time you become eligible to enroll and during each annual enrollment period. Note: Contributions attributable to coverage for a domestic partner or domestic partner’s child are not considered pre-tax contributions under the Internal Revenue Code unless the domestic partner or domestic partner’s child meets the eligibility criteria for tax dependent status under the Internal Revenue Code.

HOW THE PLAN WORKS

If you are covered by a PPO under the Dental Plan, you can receive services from any Dentist you want, but you receive higher benefit levels when you use a Dentist in the PPO network. � There is an annual Deductible of $75 per person (limited to

$200 per family) regardless of whether you choose to see an In-Network Dentist or Out-of-Network Dentist.

� The Deductible does not apply to cleaning of teeth (oral prophlaxis), oral exams, fluoride treatments, certain diagnostic tests, sealants, bitewing x-rays or full-mouth x-rays. For other covered services, the plan pays a portion of the cost after you meet the Deductible. See the Schedule of

Benefits for more information. � The plan pays a maximum annual benefit of $1,250. � Orthodontia is covered for children under the age of 19 only.

There is a $50 orthodontia Deductible. There is a lifetime In-Network maximum orthodontia benefit of $1,000 per child. The lifetime Out-of-Network maximum orthodontia benefit is $250 per child. Exception: In Texas, Mississippi, Louisiana and Montana, Out-of-Network orthodontia benefits are paid according to the In-Network schedule, but In-Network benefits are based on the fee schedule approved by MetLife and Out-of-Network benefits are limited to the Usual and Prevailing (Reasonable and Customary) Charge limits.

If you are covered by a DMO under the Dental Plan, you must receive coverage from a Dentist that participates in the DMO.

LOCATING A DENTIST

You can find out which Dentists participate in MetLife's PPO network by accessing their web site at www.metlife.com. On the tab for individuals, select the Dental Insurance Center, then the link to “Find a participating dentist.” Select the plan type: Dental Preferred Provider Organization (DPPO), enter your ZIP code and search radius, and select Search. Guam associates can find out which Dentists participate in their DMO by contacting their DMO administrator. Puerto Rico associates who participate in the Triple S dental plan can find out which Dentists participate in their plan by contacting Triple S.

ALTERNATE BENEFIT

If MetLife determines that a less costly service could have been performed to treat a dental condition, benefits will be paid based upon the less costly service if such service: � would produce a professionally acceptable result under generally

accepted dental standards; and � would qualify as a covered service. For example: - when an amalgam filling and a composite filling are both

professionally acceptable methods for filling a molar, MetLife may base its benefit determination upon the amalgam filling which is the less costly service;

- when a filling and an inlay are both professionally acceptable methods for treating tooth decay or breakdown, MetLife may base its benefit determination upon the filling which is the less costly service;

- when a filling and a crown are both professionally acceptable methods for treating tooth decay or breakdown, MetLife may base its benefit determination upon the filling which is the less costly service; and

- when a partial denture and fixed bridgework are both professionally acceptable methods for replacing multiple missing teeth in an arch, MetLife may base its benefit determination upon the partial denture which is the less costly service.

If benefits are paid based upon a less costly service in accordance with this subsection, the Dentist may charge you or your dependent for the difference in cost between the service that was performed and the less costly service. This is the case even if a network Dentist performs the service. Certain comprehensive dental services have multiple steps associated with them. These steps can be completed at one time or during multiple sessions. For benefit purposes, these separate steps of one service are considered to be part of the more comprehensive service. Even if the Dentist submits separate bills, the total benefit payable for all related charges will be limited by the maximum benefit payable for the more comprehensive service. For example, root canal therapy includes x-rays, opening of the pulp chamber, additional x-rays, and filling of the chamber. Although these services maybe performed in multiple sessions, they all constitute root canal therapy. Therefore, the Dental Plan will only pay benefits for the root canal therapy.

PREDETERMINATION OF BENEFITS

You should obtain a pre-treatment estimate of benefits if your necessary dental treatment is expected to be more than $300. A predetermination of benefits is designed to avoid any misunderstandings between you, your Dentist, and the claims


administrator regarding how much the plan will pay for a particular covered service. Confirm with your Dentist that he/she will submit a claim detailing the services to be performed and the amount to be charged by the Dentist. After receiving this information, MetLife will provide you with an estimate of the dental insurance benefits available for the service. The estimate is not a guarantee of the final amount MetLife will pay. Benefits paid may vary from the pre-treatment estimate based on such factors as: the actual services performed, and any service charge changes that occur in the time between when the pre-treatment estimate was made and the actual service was performed. Under the Alternate Benefit provision above, the pre-treatment estimate may be based on the cost of a service other than the service that you choose. MetLife must receive proof on or after the date the dental service is completed in order for benefits to be considered for such service.

The pre-treatment estimate of benefits is only an estimate of benefits available for proposed dental services. You are not required to obtain a pre-treatment estimate of benefits. As always, you or your dependent and the Dentist are responsible for choosing the services to be performed.

HOW BENEFITS ARE DETERMINED

Benefits are paid as shown in the Schedule of Benefits on the next page, subject to the annual and lifetime maximums shown. MetLife may ask for X-rays and other diagnostic and evaluative materials to help determine the amount of covered dental expenses. If they are not provided, MetLife will determine covered dental expenses on the basis of the information that is available. This may reduce the amount of benefits that would otherwise have been payable. IN-NETWORK VS. OUT-OF-NETWORK

If you are covered by a PPO, benefits payable when services are provided by a PPO In-Network Dentist are based on the fee schedule approved by MetLife. When services are provided by an Out-of-Network Dentist, the benefits payable are limited to the Usual and Prevailing (Reasonable and Customary) Charge limits, as determined by MetLife. If you are covered by a DMO, the DMO administrator will provide detailed information about the benefits provided by those plans.

Sears Holdings Benefits Handbook 2012 4-3 Dental Plan Full-Time Hourly

PLAN FEATURES

In-Network Out-of-Network Annual Deductible* Individual $75 $75 Individual and One Dependent $150 $150 Family $200 $200 Annual Benefit Maximum $1,250 $1,250 Office Visit Copayment None None

*The annual Deductible does not apply to cleaning of teeth (oral prophylaxis), oral exams, fluoride treatments, certain diagnostic tests, sealants, bitewing x-rays or full mouth x-rays.

In-Network Out-of-Network2

Exams Oral examination1 90% 80% Prophylaxis, including scaling and polishing1 90% 80% Fluoride (children under age 18)1 90% 80% Oral hygiene instruction Not covered Not covered Sealants (children under age 19)1 90% 80% X-Rays Bitewing x-rays1 90% 80% Full mouth series1 90% 80% Periapical x-rays 70% 60% Endodontics Pulpotomy 70% 60% Root canal therapy, anterior or bicuspid tooth, with x-rays

and cultures 70% 60%

Apicoectomy 70% 60% Root canal therapy, molar teeth, with x-rays and

cultures 70% 60%

Minor Restorations Amalgam (silver) fillings 70% 60% Composite fillings (molar teeth excluded) 70% 60% Periodontics Scaling and root planing1 70% 60% Gingivectomy 70% 60% Osseous surgery 70% 60% Oral Surgery Incision and drainage of abscess 70% 60% Uncomplicated extractions 70% 60% Surgical removal of erupted tooth 70% 60% Surgical removal of impacted tooth (soft tissue) 70% 60% Surgical removal of impacted tooth (full or partial

bony) 70% 60%

Prosthodontics/

Major Restorations

Inlays/onlays1 50% 40% Crowns1 50% 40% Full and partial dentures1 50% 40%

Implants1 50% 40% Implant repairs1 50% 40% Implant supported prosthetics1 50% 40% Denture repairs 70% 60% Pontics 50% 40% Anesthesia General anesthesia/IV sedation 70% 60% Space Maintainers Space maintainers are limited to children under age 19 70% 60% Orthodontia Coverage Child only

(age 19 or less) Child only

(age 19 or less) Coinsurance 50% 50% Orthodontia Deductible $50 $50 Lifetime maximum $1,000 $250

1 Frequency and/or age limitations apply to these services. 2 Benefits under the out-of-network dental option are subject to Usual and Prevailing (Reasonable and Customary) Charge limits. Note: In the states of Texas, Mississippi, Louisiana and Montana, the PPO benefit is the In-Network benefit whether services are obtained in- or out-of-network, but In-Network benefits are based on the fee schedule approved by MetLife and Out-of-Network benefits are limited to the Usual and Prevailing (Reasonable and Customary) Charge limits.


GENERAL EXCLUSIONS

The PPO option under the Dental Plan does not pay benefits for: � Services or supplies received by you or your dependent before

the dental insurance starts for that person. � A charge for a service not reasonably necessary or not

customarily performed. � A charge for a service furnished by a government plan. � A charge for replacement or modification of a denture or a

bridge, or for adding teeth to either, or for a replacement or modification of a crown or gold restoration within five years after that denture, bridge, crown or gold restoration was installed.

� A charge for a denture or bridge if it includes replacement of one or more natural teeth missing before the person became covered under the plan. This does not apply if the denture or bridge also includes replacement of a natural tooth that is removed while the person is covered and was not an abutment to a partial denture or removable or fixed bridge installed during the prior five years. The missing tooth exclusion does not apply to congenitally missing teeth.

� A charge for any of the following services: - An appliance, or modification of one, if an impression of

it was made before the person became covered. - A crown, bridge or gold restoration, if a tooth was

prepared for it before the person became covered. - Root canal therapy, if the pulp chamber for it was opened

before the person became covered. � A charge in connection with a service furnished for cosmetic

purposes, unless otherwise required by law. Facings on molar crowns or pontics will always be considered cosmetic.

� A charge in connection with: - Injury arising out of, or in the course of, any work for

wage or profit; or - Disease covered, with respect to such work, by any

workers compensation law, occupational disease law or similar law.

� A charge in connection with: - Replacement of lost or stolen appliances; or - Appliances or restorations needed to alter vertical

dimension or restore occlusion, or for the purpose of splinting or correcting attrition; or

- Treatment for problems of the jaw joint. � A charge for a service to the extent that it is more than the

usual charge made by the provider for the service when there is no insurance.

� A charge for a service to the extent that it is above the Usual and Prevailing Fee in the area for dental care of a comparable nature, as determined by MetLife.

� Those charges for or in connection with services or supplies that are Experimental or Investigational. A drug, device, procedure or treatment will be determined to be experimental or investigational when MetLife determines that: - There are insufficient outcomes data available from

controlled clinical trials published in the peer reviewed literature to substantiate its safety and effectiveness for the disease or injury involved; or

- If required by the FDA, approval has not been granted for marketing; or

- A recognized national medical or dental society or regulatory agency has determined, in writing, that it is experimental, investigational or for research purposes; or the written protocol or protocols used by the treatment facility, or the protocol or protocols of any other facility studying substantially the same drug, device, procedure or treatment, or the written informed consent used by the

treating facility or by another facility studying the same drug, device, procedure or treatment states that it is experimental, investigational or for research purposes.

� To the extent payment is unlawful where the person resides when the expenses are incurred.

� For charges that the person is not legally required to pay. � Charges that are covered in whole or in part by another plan.

(Refer to the Coordination of Benefits in the Other

Information section of this Handbook.) � Instruction for plaque control, oral hygiene and diet. � Dental services that do not meet common dental standards. � Charges incurred due to an accident, including anesthesia � Temporization � Separate charges for infection control � Protective athletic mouthguards � Bite registrations, precision or semi-precision attachments � Services and supplies received from a hospital � Charges for missed dental appointments � Completion of claim forms or record processing � Nitrous oxide analgesia � Drugs or their administration � Fixed and removable appliances for correction of harmful

habits � Caries susceptibility tests � Intra and extraoral photographic images � Appliances or treatment for bruxism (grinding teeth)

including but not limited to occlusal guards and night guards � Repair or replacement of an orthodontic device � Restoration of tooth structure damaged by attrition, abrasion

or erosion unless caused by disease � Decoration or inscription of any tooth, devise appliance,

crown or other dental work � Services for which the submitted documentation indicates a

poor prognosis � Personal supplies or devices, including but not limited to:

water piks, toothbrushes or dental floss � Consultations Note: Benefits under the Dental Plan will be reduced so that the total payment a participant receives will not be more than 100% of the charge for the dental services, taking into account coverage under this plan and any medical expense plan or prepaid treatment program. (Refer to the Coordination of Benefits in the Other

Information section of this Handbook.)

CLAIMS INFORMATION

HOW TO FILE A CLAIM

You must file a claim whether you use an In-Network Dentist or not. Many Dentists will file the claim on your behalf. Should you need to submit a claim, you can obtain a claim form by calling customer service at 1-888-251-0932. Generic and electronically submitted forms from your provider will also be accepted. Mail the original claim form and itemized bills to:

MetLife Dental Claims P. O. Box 981282 El Paso, TX 79998-1282

You should file your claims as soon as possible after services are received.


Post-service claims will be reviewed and responded to within 30 days of receipt. If there is not enough information to make a decision within 30 days, you will be notified in writing of the additional information needed, and will have 45 days to respond. MetLife will make a decision within 15 days of receipt of the requested information, or if no response is received, within 15 days after the deadline for a response.


If you feel your claim for benefits has been improperly denied, you have the right to appeal the decision. You must appeal in writing to MetLife at the address indicated on the claim form after receiving MetLife’s decision.

FOR MORE INFORMATION

The following details about your benefit coverage, including claims appeals, are provided in the Other Information section of this Handbook: � When you can make changes to your benefits. � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers. � Coordination of Benefits provisions.


Coinsurance is the amount payable by the covered person to the Dentist for specific services, as described earlier in this section.

Deductible is the amount of covered dental expenses that each person must incur in a Plan Year before benefits are payable for those services in that year. A person’s Deductible for a Plan Year will be met when those eligible charges equal to the Deductible amount have been incurred for the person’s dental care in that year.

The Deductible amount is shown earlier in Plan Features section.

Dentist means: � A person licensed to practice dentistry in the jurisdiction

where such services are performed or � Any other person whose services, according to applicable law,

must be treated as Dentist's services. Each such person must be licensed in the jurisdiction where the services are performed and must act within the scope of that license. The person must also be certified and/or registered if required by such jurisdiction.

The term includes a physician who performs a covered service. The term does not include you, your spouse, or any member of your immediate family including your and/or your spouse’s parents, children (natural, step or adopted), siblings, grandparents or grandchildren.

In-Network or Participating Dentist is a Dentist who participates in the MetLife PPO and has an agreement with MetLife to accept payment based on the fee scheduled established by MetLife.

Out-of-Network or Non-Participating Dentist means a Dentist who does not participate in the MetLife PPO.

Plan Year is January 1 through December 31.

Usual and Prevailing Fee (Reasonable and Customary Charge)

is: � a charge for a service to the extent that it is more than the

usual charge made by the provider for the service when there is no insurance, as determined by MetLife; or

� a charge for a service to the extent that it is above the prevailing charge in the area for dental care of a comparable nature. A charge is above the prevailing charge to the extent that it is above the range of charges generally made in the area for dental care of a comparable nature. The area and that range are as determined by MetLife.

IMPORTANT NOTE

The Dental Plan is a welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended (ERISA). This section of ERISA, together with the applicable provisions of the Introduction and Other Information sections, are intended to constitute a summary plan description (SPD) for the Dental Plan in accordance with ERISA.

Sears Holdings Benefits Handbook 2012 5-i Flexible Benefits Full-time Hourly

Flexible Benefits Plan (Premium Conversion, Health Care FSA and Dependent Care FSA) TABLE OF CONTENTS How the Plan Works ....................................................................................................................................................................5-1

In General ........................................................................................................................................................................5-1 Highly Compensated Associates .....................................................................................................................................5-1 Contribution Levels ..........................................................................................................................................................5-1 Forfeiture of Contributions ................................................................................................................................................5-1

Health Care Flexible Spending Account ....................................................................................................................................5-1 Eligible Expenses .............................................................................................................................................................5-1 Ineligible Expenses ..........................................................................................................................................................5-2

Dependent Care Flexible Spending Account ............................................................................................................................5-2 Qualifying Dependents .....................................................................................................................................................5-2 Dependent Care Tax Credit .............................................................................................................................................5-3 Eligible Expenses .............................................................................................................................................................5-3 Ineligible Expenses ..........................................................................................................................................................5-3

Claims Information ......................................................................................................................................................................5-3 Health Care Claims ..........................................................................................................................................................5-3 Dependent Care Claims ...................................................................................................................................................5-3 Claim Submission ............................................................................................................................................................5-3 Filing Deadline .................................................................................................................................................................5-4 How to Appeal a Denied Health Care Claim ....................................................................................................................5-4

Important Note .............................................................................................................................................................................5-4 For More Information ...................................................................................................................................................................5-4

Sears Holdings Benefits Handbook 2012 5-1 Flexible Benefits Full-time Hourly

HOW THE PLAN WORKS

IN GENERAL

Sears Holdings sponsors the Flexible Benefits Plan, which provides two ways for you to save money. The first way is by paying your premiums for your group medical and dental benefits on a pre-tax basis through payroll deduction. This is known as “premium conversion.” You must be enrolled in the Company’s group Medical and/or Dental Plan to be eligible for premium conversion. The second way is by paying eligible health care and dependent care expenses through flexible spending accounts (FSAs). FSAs allow you to pay eligible expenses with pre-tax dollars by electing to contribute a certain amount of your pay to one or both (if eligible) FSAs: � The Health Care FSA and/or � The Dependent Care FSA. At the time you enroll in one or both (if eligible) of the FSAs, you select an amount to be withheld from your paycheck on a pre-tax basis for the calendar year. You can be reimbursed for eligible expenses with pre-tax dollars by submitting a claim to your FSA. If you are enrolled in one of the Company’s PPO Medical Plans and/or Dental Plan, you can avoid having to file claims by electing to have your eligible expenses automatically reimbursed. Both premium conversion and FSA deductions reduce your taxable income. Because the amount you pay in pre-tax premiums and your FSA deductions are not considered taxable, you save by paying less income tax. The pre-tax pay you contribute to the FSA is available to reimburse you for eligible health care and dependent day care expenses. Pre-tax deductions are withheld from your paycheck. The amount of your deduction is recorded in your FSA, which is administered by Anthem Blue Cross Blue Shield. When you incur eligible health care or dependent care expenses that are not paid by other sources, you send the bill and/or explanation of benefits with a claim form to Anthem Blue Cross Blue Shield. Reimbursement will be made from your FSA.

HIGHLY COMPENSATED ASSOCIATES

Because of certain IRS restrictions, an associate who is considered a “highly compensated employee” is not eligible to participate in the Dependent Care FSA. The term “highly compensated employee” is defined by the IRS. You will be informed if you are not eligible to establish a Dependent Care FSA because you are a highly compensated employee.

CONTRIBUTION LEVELS

The following are the minimum and maximum contribution levels, as defined in IRS regulations.

Health Care FSA

Minimum contribution $120 per year Maximum contribution $5,000 per year

Dependent Care FSA

Minimum contribution $120 per year Maximum contribution $5,000 per year

If your pay is not sufficient to cover your FSA contribution during a particular pay period, future paycheck deductions will increase to account for the missed deductions. Note regarding Dependent Care FSA contributions: If your spouse

also contributes to a dependent care spending account through his

or her employer, your combined contributions cannot exceed

$5,000 per year. Individuals who are married and file separate tax

returns are limited to $2,500 per year.

FORFEITURE OF CONTRIBUTIONS

IRS regulations require that any money remaining in your FSAs must be forfeited if unused for expenses that occur during the applicable Plan Year. You may submit claims through the following June 30 for expenses incurred during the previous FSA Plan Year. The Plan Year is defined as a calendar year. Forfeitures of Health Care FSA contributions will be used by the Company first to make up any deficits incurred with respect to medical claims, and second to pay administrative expenses of the Health Care FSA. Forfeitures of Dependent Care FSA contributions will be used to pay administrative expenses of the Dependent Care FSA. Any remaining forfeitures of FSA contributions may revert to the Company.

HEALTH CARE FLEXIBLE SPENDING ACCOUNT

ELIGIBLE EXPENSES

Eligible health care expenses are those incurred by you, your spouse or an eligible dependent during the FSA Plan Year. The expenses must be for health care and must not be payable from another source. Your dependents are those who qualify in the current calendar year for tax-qualified dependent status, as defined by the Internal Revenue Code. Generally, your dependents are your children (meaning your natural, adopted, foster and stepchildren) who have not yet turned 26, along with certain other relatives (such as a parent or grandparent, or a child 26 or older) if they receive over half of their support from you. Dependents also include other persons who receive over half of their support from you if they live with you. You cannot pay for medical expenses of your domestic partner unless your partner qualifies as a tax-qualified dependent under federal law and the Internal Revenue Code. Eligible expenses cannot be reimbursed by your FSA if: � Payment has been or can be made under any other benefit

plan or other insurance; or � Expenses were incurred before your participation in the FSA

began or after your participation ended; or � Expenses were incurred after the end of the Plan Year for

which contributions were made; or � Expenses were incurred prior to a change in contribution level

(due to a qualified change in status) and are submitted for reimbursement against the new contribution amount.

If you are covered by the High Deductible Health Plan (HDHP) and contribute to a Health Savings Account (HSA), there are restrictions on coverage that you can have under a Health Care FSA. If you establish a Health Care FSA under the Flexible Benefits Plan and a Health Savings Account (HSA) under the


Medical Plan, you will only be able to submit certain expenses to your Health Care FSA. � Expenses that are not covered by the HDHP in which you

participate, such as dental or vision expenses, and � Expenses you have incurred after you have satisfied the

HDHP deductible. If you enroll in a Health Care FSA, claims will only be paid if they meet one of the above conditions. You cannot claim the same expense under both an HSA and an FSA. The following items are examples of eligible expenses under the Health Care FSA. � Alcoholism or drug dependency treatment � Birth control pills, if prescribed by a physician � Chiropractor services � Christian Science practitioner services, provided they are

medical services � Contact lenses, cleaning solution and supplies � Deductibles and coinsurance � Dental/doctor fees � Drugs and medicines for medical care, if prescribed by a

doctor � Eyeglasses and eye exams � Hearing aids � Hospitalization � Physicals � Smoking cessation aids, if prescribed by a doctor � Vaccinations and immunizations There may be other expenses that qualify for reimbursement under the Internal Revenue Code. You cannot claim these expenses on your federal income tax return if you are claiming reimbursement from your Health Care FSA. Note: You cannot use contributions to the Health Care FSA to pay for any dependent day care expenses. For more information or a complete list of eligible expenses, consult the Internal Revenue Code or other tax publications.

INELIGIBLE EXPENSES

Only medically necessary expenses can be reimbursed. Effective January 1, 2011, due to a change in the law, over-the-counter drug expenses, except for insulin, are ineligible expenses under the Health Care FSA. The following items are examples of expenses that are ineligible under the FSA. There may be other expenses that do not qualify for reimbursement. � Medical/dental contributions or premiums (payments for other

health plan coverage) � Drugs and medicines purchased over-the-counter, except for

insulin � Vitamins � Marriage or family counseling � Dance lessons, swimming lessons, etc. (even though

recommended by your doctor for general improvement of your health)

� The cost of weight-loss or smoking cessation programs for general health purposes, unless prescribed by a doctor as being medically necessary for the treatment of a specific disease or condition

� Maternity clothes, diaper services, etc. � Uniforms

� Care in a nursing home, if the reason for being there is other than to get medical care (for instance, custodial care)

� Household help (even if recommended by your doctor because you are unable to do housework)

� Health club dues, YMCA dues, steam bath, etc. � Costs for sending a child to a special school for benefits the

child may receive from the course of study and disciplinary methods

� Automobile insurance premiums, including the part of the premiums providing medical insurance coverage for persons injured in or by your car.

� Premiums paid for life insurance policies or policies providing payment for loss of earnings or for accidental loss of life, limb, sight, etc.

� Trips or vacations taken for relief of a specific condition, a change in environment, improvement of morale or general health purposes, even if you make the trip on the advice of a doctor

� Transportation expenses to and from work, even if your condition requires a special means of transportation

� Cosmetic surgery, unless necessary to correct a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease

� Electrolysis As noted above, medical expenses of your domestic partner are in-eligible expenses unless your partner qualifies as a tax-qualified dependent under federal law and the Internal Revenue Code.

DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT

Dependent care expenses may be reimbursed through your Dependent Care FSA if they are necessary for you or your spouse to work. If you are single, the expenses reimbursed cannot be greater than your earned income (wages, salary and bonus). If you are married, the expenses reimbursed cannot be greater than your earned income or your spouse’s earned income, whichever is less. Generally, if you are married, both you and your spouse must work to receive reimbursement from a Dependent Care FSA. However, you may be reimbursed for dependent care expenses if your spouse is not employed but is: � A full-time student, or � Mentally or physically incapable of self-care. For each month that your spouse is a full-time student or is disabled, earned income for your spouse will be considered to be: � $200 if you have one dependent, or � $400 if you have two or more dependents.

QUALIFYING DEPENDENTS

You may claim dependent care expenses for qualifying dependents. The Dependent Care FSA has a special definition for qualifying dependents. This definition applies to the Dependent Care FSA only. Qualifying dependents include: � Children under age 13 whom you claim as dependents on

your federal income tax (as defined under the Introduction section of this Handbook)

� Any qualifying relative (as defined in the Internal Revenue Code) who is physically or mentally incapable of caring for himself or herself, who lives with you at your residence for more than half of the taxable year, and whom you either claim as a dependent or whom you could claim as a dependent but for the fact that 1) you were yourself claimed as a dependent


on another person’s income tax return, or 2) the family member receiving care was married and filed a joint tax return, or 3) the family member receiving care had gross income that equaled or exceeded the dependent exemption amount for the year

� Your spouse who is mentally or physically disabled and incapable of self-care and who lives with you at your residence for more than half the year

� Domestic partners who are tax-qualified dependents under federal law and the Internal Revenue Code

If you are divorced or separated, your child may qualify if you have custody of the child, even if you do not claim him or her as a dependent on your tax return. If you are unsure whether your child qualifies, consult your tax advisor.

DEPENDENT CARE TAX CREDIT

You may elect to take a dependent care tax credit on your taxes, or you may participate in the Dependent Care FSA if you are eligible. You may not apply dependent day care expenses toward both. You should choose carefully between the tax credit and the Dependent Care FSA. Consult with your tax advisor to determine which option is better for you.

ELIGIBLE EXPENSES

Dependent care expenses must meet certain guidelines to qualify for reimbursement from the Dependent Care FSA. � The services must be necessary to enable you and your

spouse, if you are married, to work or attend school full-time. � The service may be provided in your home or elsewhere, but

not by anyone you declare as a dependent on your income tax return.

� If you use a day care facility that cares for more than six individuals who do not reside at the facility, it must comply with all applicable state and local laws and regulations and must receive a fee, payment or grant for its services.

Day care is an eligible expense until a child enters kindergarten and includes the cost of pre-school or private school attended before kindergarten. Before- and after-school care is eligible until a child reaches age 13. Dependent care for an elderly or incapacitated dependent residing in your home is also an eligible expense. The following are examples of eligible dependent/day care providers: � A qualified day care center, nursery school, summer day

camp or pre-school. � A baby-sitter inside or outside the home. � A housekeeper whose duties include day care. � A person who cares for an elderly or incapacitated dependent. � A relative who cares for your children or elderly or

incapacitated dependent, as long as that relative is over 19 and is not claimed as a dependent on your federal income tax return.

Note: Your dependent care provider must supply a tax

identification number or his or her Social Security number for you

to receive reimbursement.

INELIGIBLE EXPENSES

The following are dependent care expenses that are not eligible expenses under the Dependent Care FSA: � Expenses for your dependent attending school (except

expenses before the child reaches kindergarten)

� Expenses for services rendered by an individual you claim as a dependent and for whom you are entitled to a personal exemption on your tax return

� Expenses for services rendered by a child of yours under age 19 (even if you do not claim that person as a dependent on your income tax return)

� Any expenses that are claimed as tax credits on your income tax return

� Any expenses that, in the absence of this plan, could not be claimed as credits on your federal income tax return, including educational expenses incurred for a child in kindergarten or higher grade level

� Any expenses incurred for a dependent attending an overnight camp

� Any expenses for day care or before- and after-school care not necessary for you and your spouse to work

CLAIMS INFORMATION

Reimbursement from your FSA is available only after the service for which you are seeking reimbursement has been performed and you have received reimbursement from all other sources. To be reimbursed for your health care or dependent day care expenses, you must file a claim.

HEALTH CARE CLAIMS

Expenses eligible for reimbursement by another medical or dental plan must be submitted to that plan first. After a determination or payment has been made by that plan, the unreimbursed expense can be submitted for reimbursement to your FSA. The full annual amount you elect to contribute to your FSA (less any previous reimbursements for the year) will be available for reimbursement of eligible health care expenses, regardless of the amount contributed to date. Contributions will continue to be taken to cover any claims already fully reimbursed from the Health Care FSA.

Note: Special provisions apply if you terminate coverage. Please

refer to the Other Information section for more detail.

DEPENDENT CARE CLAIMS

A dependent care claim may be submitted up to one month in advance of the time service will be performed if the provider of service: � Signs the claim form and � Indicates that payment is not refundable. The name, address, signature and taxpayer ID number or Social Security number of the provider are also required. Only your current Dependent Care FSA balance is available to reimburse claims. If the dependent day care services exceed your account balance, a partial payment will be made. The unreimbursed portion of the claim will be paid as you make additional contributions to your Dependent Care FSA.

CLAIM SUBMISSION

You may submit claims throughout the year as you incur expenses. If you submit a claim at the end of the year (or by the filing deadline) that exceeds your account balance for that year, the claim will be reimbursed only up to the amount remaining in your account. Claim forms can be obtained from Anthem BlueCross BlueShield at 1-800-803-2432 or via the Web site at www.88sears.com.


Submit the completed claim form with copies of supporting documentation by fax to 1-888-347-5212. Alternatively, the completed claim form and copies of supporting documentation can be mailed to:

Anthem BlueCross BlueShield P. O. Box 660165 Dallas, TX 75266-0165

Keep all original supporting documentation of your expenses, including receipts.

FILING DEADLINE

The Plan Year for the Flexible Benefits Plan is January 1 to December 31. Claims under the FSAs may be submitted at any time after the expense is incurred but not later than June 30 of the next year. Any amount remaining in your account after June 30 will be forfeited. Claims will be reviewed and responded to within 30 days of receipt. If there is not enough information to make a decision within 30 days, you will be notified in writing of the additional information needed, and will have 45 days to respond. Anthem BlueCross BlueShield will make a decision within 15 days of receipt of the requested information, or if no response is received, within 15 days after the deadline for a response.

HOW TO APPEAL A DENIED HEALTH CARE CLAIM

If you feel your claim for health care benefits has been improperly denied, you have the right to appeal the decision. See the Other

Information section of this handbook for more information.

IMPORTANT NOTE

The Health Care FSA is governed by Internal Revenue Code Section 125 and the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended. This section of the Handbook, together with the applicable provisions of the Introduction and Other Information sections are intended to constitute a summary plan description in accordance with ERISA. The Dependent Care FSA is governed by Internal Revenue Code Section 125 but is not governed by ERISA.


The following details about your benefit coverage are provided in the Other Information section of this handbook: � When you can make changes to your benefits � Coverage continuation for certain benefits � Contact information for benefit claims administrators and

insurance carriers

Sears Holdings Benefits Handbook 2012 6-i Short-Term Disability Program Full-time Hourly

Short-Term Disability Program TABLE OF CONTENTS

Short-Term Disability Program (Sears Associates) ...................................................................................................... 6-1

How the Program Works ................................................................................................................................................... 6-1

Eligibility ...........................................................................................................................................................................6-1

Benefit Amount and Duration ........................................................................................................................................... 6-1

State Laws .......................................................................................................................................................................6-2

Exclusions and Limitations ............................................................................................................................................... 6-2

How STD Benefits are Paid ............................................................................................................................................... 6-2

When Disability Benefits End ........................................................................................................................................... 6-3

Waiver of Waiting Period ................................................................................................................................................... 6-3

Alternate Assignments / Reduced Hours Schedules ..................................................................................................... 6-3

Accidents at Another Company........................................................................................................................................ 6-3

Your Rights and Responsibilities ..................................................................................................................................... 6-3

Other Benefits..................................................................................................................................................................... 6-3

Important Note .................................................................................................................................................................... 6-3

For More Information ......................................................................................................................................................... 6-3

Some Terms You Should Know ........................................................................................................................................ 6-3

Sears Holdings Benefits Handbook 2012 6-1 Short-Term Disability Program Full-time Hourly

SHORT-TERM DISABILITY PROGRAM (SEARS ASSOCIATES)

The Sears Holdings Short-Term Disability Program (“STD Program”) is designed to help you cope with an off-the-job Illness or Injury, including pregnancy and childbirth, by providing benefits when you are unable to work. These benefits are provided at no cost to you, except in states that have disability laws as explained below. The STD Program is administered by Life Insurance Company of North America (referred to as “Cigna” in this section). Field and Distribution Center associates of Kmart Corporation are not eligible for the Sears Holdings STD Program, and should instead refer to the next section of the Handbook entitled Kmart

Disability Income Plan (Kmart Associates) for short-term disability benefit information. Full-time Kmart Resource Center hourly associates working in a Support Center in Hoffman Estates, IL, Tucker, GA, Dallas, TX, SHIPS, Longwood, FL, New York Design Center Facilities, San Francisco Apparel Office, Troy, MI, and corporate associates working in Puerto Rico are covered under the Sears Holdings STD Program. An Illness covered by the STD Program is an Illness, including for this purpose pregnancy and childbirth, that disables you to the extent you are unable to perform your regular duties. An Injury covered by the STD Program is an Injury sustained in an accident, incurred away from work, that disables you to the extent you are unable to perform your regular duties. This includes injuries resulting from employment with another company. Throughout this section of the Handbook, several terms are capitalized. Those terms are defined at the back of this section, under Some Terms You Should Know.


ELIGIBILITY

Eligibility for the STD Program is based on your employment status and your length of employment. The following associates are eligible for the STD Program: � Full-time hourly associates working in the field for Sears,

Roebuck and Co. or a subsidiary, except associates working in New Jersey and Rhode Island

� Full-time hourly associates working for Sears, Roebuck and Co. or a subsidiary in a corporate Support Center at the following locations: Hoffman Estates, IL, Tucker, GA, Dallas, TX, SHIPS, Longwood, FL, New York Design Center Facilities, San Francisco Apparel Office and Troy, MI

� Full-time Kmart Resource Center hourly associates working in a Support Center locations (as listed above) and Corporate store hourly associates that work in Puerto Rico

These associates are automatically covered by the STD Program after 90 days of continuous employment with the Company. To remain eligible for the STD Program, you must continue to work an average of at least 30 hours per week. If your employment with the Company ends and you are rehired as a full-time associate within 90 days of your date of termination, your STD coverage will be reinstated effective the date of your full-time rehire, provided you were covered by the STD Program at the time of your termination.

A determination of STD eligibility and STD coverage does not begin until you have been away from work, as a result of a covered Illness or Injury, for a certain number of days. Your manager has responsibility for managing your pre-STD time off, which is the 3 calendar days following the 4 work day Waiting Period. After such time, Cigna will begin making the determination for your eligibility for STD benefits. To be entitled to benefits beyond the 7th calendar day, you must call the Cigna at 1-800-828-6352. Cigna will provide case management services during your absence and will advise you of the time period for which you are eligible for STD benefits based upon your medical condition and the objective medical documentation that Cigna receives from your Physician(s) that supports your Disability. If you don’t contact Cigna, STD benefits may not be paid. If you call and request a return phone call, a case manager from Cigna will confidentially discuss your Illness or Injury with you and advise you regarding what is needed to process your claim. During the first days of an absence (7 calendar days), local management may request that you provide a written statement from your Physician to support the need for your absence. You are responsible for making sure your Physician submits medical documentation to Cigna that supports your inability to work. Your Physician may have you sign a form allowing him/her to release your medical records to Cigna, so be sure to ask your Physician about this when you see him/her. A Cigna case manager may also work with your manager, or HR representative to look at ways you can return to work—perhaps with modified job activities. If it’s not possible for you to return to work after your STD benefits cease, your case manager can help you transition to the Sears Holdings Long-Term Disability Plan (“LTD Plan”) if you participate in the LTD plan or to community services that can help you with your Illness or Injury.

BENEFIT AMOUNT AND DURATION

As a full-time hourly associate, you receive a percentage of your pay, depending on your length of continuous service. Your STD benefit amount during a continuous 52-week period and the Waiting Period required prior to receiving these benefits is provided in the following table:

Continuous Service

Waiting Period

Maximum Benefit During Any 52-Week

Period

90 days but less than 2 years 4 work days 70% for 6 weeks

50% for 14 weeks 2 years but less than 5 years 4 work days 70% for 10 weeks

50% for 10 weeks 5 years or more 4 work days 70% for 20 weeks

� A Waiting Period "work day" consists of 8 hours for

associates classified as FT40 and 7 hours for associates classified as FT30.

� The Waiting Period is unpaid. � You may use vacation or personal days during the Waiting

Period. � At your request, STD benefits may be supplemented with

vacation hours to bring your pay up to 100% of pay.


� If you pass your second or fifth continuous service anniversary while absent and are receiving disability benefits, you are immediately eligible for the increased disability benefits based on length of service.

� If you pass the 90-day continuous service anniversary while absent due to Illness or Injury, you are not eligible to begin receiving STD benefits for that period of disability.

� Associates who leave work early due to a covered Illness are paid for hours worked. Any scheduled hours not worked are applied to the Waiting Period.

� The Waiting Period requires you to be off work for 4 full work days. However, if you return to work for less than a full work day during the Waiting Period and your absence is due to the same cause, you will not have to begin a new Waiting Period. You must be out for 7 continuous calendar days prior to contacting Cigna.

Once 20 weeks of STD benefits are exhausted within any 52-week period, no additional STD benefits are payable for the 6-month period following the exhaustion of the payment of STD benefits. Associates must return to full-time work for 6 or more consecutive months before they are again eligible to receive STD benefits for a covered Illness or Injury. STD is only payable if you are taking time off pursuant to applicable Company leave of absence policies or if the time off is approved by your manager for your covered Illness or Injury. Any such approval requires a showing of a satisfactory work and attendance record and must be consistent with current business needs.

STATE LAWS

In states that have mandatory disability coverage laws, any applicable payroll deductions are made and benefits are paid in accordance with the applicable state law. In those states, benefits are different than described in this section. States with mandatory disability programs at the time the Handbook was issued include California, Hawaii, New Jersey, New York, Rhode Island and the Commonwealth of Puerto Rico. If you work in one of these locations, your manager, or HR representative can provide you with information regarding the specific state disability benefits. Associates who work in Hawaii, New York and the Commonwealth of Puerto Rico are paid STD and statutory disability benefits through payroll. All others must apply to the states or commonwealth for any statutory benefits.

EXCLUSIONS AND LIMITATIONS

Except if otherwise required by state law, STD benefits are not paid for: � Time off for doctor’s or dentist’s appointments if you are not

Disabled. � Time off for non-medically necessary cosmetic procedures. � Conditions involving your remaining at home because of

appearance or neglect of bodily hygiene. � Illness/Injury resulting from the use of alcohol or drugs.

(However, if you are receiving medical care and treatment for alcoholism or drug addiction, the absence is eligible for STD benefits while you are Disabled and unable to work.)

� Self-inflicted injuries or those that result from participation in riots, fights or other criminal acts.

� Emotional problems, nervousness or mental conditions, unless you are under the care of a Physician or supervision of a psychiatrist, or you are confined to a hospital or institution for treatment of such conditions.

� Work-related Injuries and Illnesses incurred during your assigned work with the Company.

� Situations where you or your Physicians refuse to cooperate with the Company or the Cigna case manager.

� Illness/Injury occurring while on leave of absence or while receiving LTD benefits from a Company-sponsored LTD plan.

STD benefit payments are not necessarily payable for absences due to operations and/or hospital confinements. If the condition for which the operation is performed or the hospital confinement that is required is not a covered Illness or Injury, no disability benefits will be paid for the absence. Illness and Injuries cease being fully covered if alternate assignments or reduced hours schedules are available that you are able to perform. Should you refuse such assignments, STD benefits will cease. Dental work should be performed on your own time. Should extensive dental work disable you to the extent that you are unable to perform your job, STD benefits may be paid if your Physician submits documentation to Cigna that supports your inability to work. Disability benefits will not be paid if appearance is the only disabling factor. STD benefits are paid entirely by the Company and can be withheld or terminated by the Company at any time. It is not the intent of the Company to indefinitely subsidize associates’ pay when they are repeatedly absent due to Illness or Injury. Associates who are unable to maintain regular attendance on the job may be terminated, as permitted by law. You may not work elsewhere while receiving STD benefits without the advance approval of your manager.

HOW STD BENEFITS ARE PAID

STD benefits under this program are paid though Payroll according to the associates’ normal payroll schedule. Eligible associates who become ill or injured while on vacation are paid STD benefits instead of vacation pay if they: � have a covered Illness or Injury, � are under the care of a Physician, � present a statement from the Physician stating the diagnosis

and the date they were first treated, and � satisfy the Waiting Period, if applicable. STD benefits, or the tracking of the Waiting Period, will begin the date the associate was absent from scheduled work due to a Disability that is supported by medical documentation from the associate’s Physician. The benefit duration is measured using a 7-day calendar week, not a work week schedule. The STD benefit will not be converted to hours to adjust for a partial day worked or intermittent absences. For example, assume that Cigna has determined that Pat’s disabling medical condition is payable for 4 weeks beginning on March 1. Pat’s STD benefit will begin on March 1 and end on March 29 (4 calendar weeks). If during week 4, Pat is released by the Physician to return to work for 3 days or 24 hours, week 4 remains a week of disability, not 24 hours worked. Pat’s disability remains compensable through March 29.


WHEN DISABILITY BENEFITS END

Benefits under the STD Program will end upon the earliest of the following to occur: � you are able to return to work full-time with or without

medical restrictions; � you have received the Maximum Benefit; � your employment terminates; � you retire from Sears Holdings; � you die; � you fail to provide proof of disability; or � you no longer meet the definition of Disabled.

WAIVER OF WAITING PERIOD

The Waiting Period for hourly associates is waived for a subsequent absence, for the same Illness or Injury, within four weeks from the date of return from the original absence if the Waiting Period was satisfied during the initial absence. Subsequent absences due to chronic conditions, such as migraine headaches or asthma, are not considered absences for the same Illness or Injury. For example, each migraine headache is a new Illness, not a continuation of the previous Illness.

ALTERNATE ASSIGNMENTS / REDUCED HOURS SCHEDULES

Illnesses and Injuries cease being fully covered under the STD Program if alternate assignments or reduced hours schedules are available that you are able to perform. Should you refuse such assignments, STD benefits will cease. Associates who can return to work on reduced hours schedules are paid regular pay for hours worked and are paid STD benefits for the balance of their normal weekly work schedule.

ACCIDENTS AT ANOTHER COMPANY

If you are absent from work due to Illness or Injury resulting from employment with another company, you may be eligible, based on state law, to receive Workers Compensation benefits through the other company for time lost from Sears Holdings. In these cases, disability benefits are adjusted or eliminated, as applicable. If you do not receive Workers Compensation benefits in such a case, you will be compensated according to the STD Program.

YOUR RIGHTS AND RESPONSIBILITIES

It is Company policy to manage STD benefits concurrently with applicable Company Leave of Absence policies. The rights and responsibilities that apply to you while on an FMLA-related absence apply to you whether or not you are eligible for STD. For information about FMLA, Extended Care Leave, and your rights and responsibilities, visit www.88sears.com or contact your manager, or HR representative. If you are not eligible for time off under the FMLA but you are eligible for STD, you have many of the same responsibilities as would apply to you if you were eligible for FMLA leave. These responsibilities include: � You must give 30 days advance notice of your need for the

absence if your need is foreseeable. If it is not foreseeable, you must give the Company notice as soon as possible.

� You must provide medical certification when asked by your manager.

� You must file a claim with Cigna when your absence exceeds 7 calendar days and you must provide the requested medical documentation to them.

� You must submit periodic updates as requested by your manager or Cigna.

� When you are ready to return to work, you must provide a note from your health care provider releasing you to return to work, with or without restrictions. If you fail to provide the required release to return to work, you will not be permitted to return to work, and your employment may be terminated.

If you are not eligible for FMLA leave or you have exhausted your FMLA rights, the Company is not obligated to reinstate you to the same position you held or to an equivalent position. However, the Company will make reasonable efforts to place you in any available position for which you are qualified. Your past performance will be considered in determining whether you are qualified.

OTHER BENEFITS

If your STD payments are insufficient to apply your benefit deductions, you may continue your other benefits (for example, medical) by making payments on a post-tax basis. You will receive direct billing information from the Sears Holdings Benefits Center. IMPORTANT NOTE

The STD Program is a payroll practice that is exempt from welfare benefit plan status under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The fact that a summary of this program is included in this Handbook should not be construed as making it an ERISA plan.


The following additional details about your benefit coverage are provided in the Other Information section of this Handbook: � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers � How to appeal a denied claim. SOME TERMS YOU SHOULD KNOW

Disabled means you are not able to perform your regular job duties as a result of an Illness or Injury defined below. Illness means a non-work related illness, including for this purpose pregnancy and childbirth, that disables you to the extent that you are unable to perform your regular duties. This includes injuries resulting from employment with another company. Injury means a non-work related injury sustained in an accident, incurred away from work, that disables you to the extent you are unable to perform your regular duties. This includes injuries resulting from employment with another company. Maximum Benefit is described above in the Benefit Amount and

Duration section. Physician means a person who is licensed or otherwise legally authorized to administer medical care or treatment so long as the person is acting within the scope of his/her license or authorization. Physician also means an accredited Christian Science practitioner listed in the current issue of the Christian Science Journal.

Waiting Period is described above in the How the Programs

Work and Benefit Amount and Duration sections.

Sears Holdings Benefits Handbook 2012 7-i Kmart Disability Income Plan Full-time Hourly

Short-term Disability Program (Kmart Associates) TABLE OF CONTENTS

Kmart Disability Income Plan (Kmart Associates) ........................................................................................................ 7-1

How the Plan Works ........................................................................................................................................................... 7-1

Eligibility .................................................................................................................................................................. 7-1

State Laws............................................................................................................................................................... 7-1

Initiating a Claim for Benefits .................................................................................................................................. 7-2

Penalties for Calling in a Late Claim ....................................................................................................................... 7-2

When Disability Benefits are Payable ..................................................................................................................... 7-2

Benefit Amount and Duration ........................................................................................................................................... 7-2

How Disability Benefits are Paid ...................................................................................................................................... 7-3

When Disability Benefits End ........................................................................................................................................... 7-3

Successive Disabilities ...................................................................................................................................................... 7-3

Benefits from Other Sources ............................................................................................................................................ 7-3

Work Incentive Benefit ...................................................................................................................................................... 7-3

Example .................................................................................................................................................................. 7-3

Exclusions and Limitations ............................................................................................................................................... 7-4

Examination ........................................................................................................................................................................ 7-4

Other Benefits..................................................................................................................................................................... 7-4

Important Note .................................................................................................................................................................... 7-4

For More Information ......................................................................................................................................................... 7-4

Some Terms You Should Know ........................................................................................................................................ 7-4

Sears Holdings Benefits Handbook 2012 7-1 Kmart Disability Income Plan Full-time Hourly

KMART DISABILITY INCOME PLAN (KMART ASSOCIATES)

Kmart Holding Corporation (“Kmart”) sponsors the Kmart Disability Income Plan (“Plan”), which is designed to help eligible Kmart hourly associates cope with an off-the-job Sickness or Injury (as defined below in Some Terms You Should Know), including pregnancy and childbirth, by providing benefits when you are unable to work. These benefits are provided at no cost to you, except in states that have disability laws as explained below. The Program is administered by Life Insurance Company of North America (referred to as “Cigna” in this section). Full-time Kmart Resource Center hourly associates working in a Support Center at the following locations are not eligible for the Kmart Disability Income Plan: Hoffman Estates, IL, Tucker, GA, Dallas, TX, SHIPS, Longwood, FL, New York Design Center Facilities, San Francisco Apparel Office, Troy, MI, and corporate associates working in Puerto Rico. They should instead refer to the section entitled Short Term Disability Program for short-term disability benefit information. Throughout this section of the Handbook, several terms are capitalized. Those terms are defined at the back of this section, under Some Terms You Should Know.

HOW THE PLAN WORKS

ELIGIBILITY

Eligibility for the Plan is based on your employment status and your length of employment. Except for associates working in New Jersey, Rhode Island or Puerto Rico, the following associates are automatically covered by the Plan after 90 days of continuous service (including full-time and part-time service) with Kmart: � Full-time store or field hourly associates. � Full-time Distribution Center hourly associates. Effective January 31, 2010, full-time hourly associates who work in New York, Hawaii and California with Dates of Disabilities on or after January 31, 2010 are eligible for “topped up” STD benefits under this Plan. “Topped up” STD is the difference between the statutory benefit and the STD benefit under this Plan. Associates who worked in New York, Hawaii, and California with Dates of Disabilities prior to January 31, 2010 were eligible for statutory benefits only and were not eligible for benefits under this Plan. To remain eligible for the Plan, you must continue to work an average of at least 30 hours per week. If you end your Kmart employment and are re-employed full-time within 90 days of your employment termination date, your Disability coverage will be reinstated effective the first day of the month following your full-time rehire date.

STATE LAWS

In states that have mandatory disability coverage laws, any applicable payroll deductions are made and benefits are paid in accordance with the applicable state law. In those states, statutory disability benefits are different than described in this section. States with mandatory disability programs at the time the Handbook was issued include California, Hawaii, New Jersey, New York, Rhode Island and the Commonwealth of Puerto Rico. The Plan does not provide coordination with state disability programs in New Jersey, Rhode Island or Puerto Rico. Therefore,

hourly Kmart associates working in one of these locations are not eligible for benefits under this Plan. The following information should help you determine if your state has a plan or a program for Disability payments. If you work in one of these locations, your manager or HR representative will provide you with information regarding the specific state disability benefits. Please note, however, that statutory disability amounts and agency information are subject to change. The Elimination Period and benefits payable in these states for statutory disability benefits are based on state law. Associates who work in California must file for statutory disability benefits directly with the state and file for “topped up” STD benefits with Cigna as follows:

California

� You must file for statutory disability benefits directly with the state:

� State of California EDD State Disability Insurance English: 1-800-480-3287 Spanish: 1-866-658-8846 Website: http://www.edd.ca.gov/Disability/

� You must file for “topped up” STD benefits with the Disability Claims Administrator: Cigna 1-800-828-6352

Associates who work in Rhode Island and Puerto Rico must file for statutory disability benefits directly with the state or commonwealth, as follows: Rhode Island

� Disability Determination Services 1-401-462-8420

Website: http://www.dlt.ri.gov/

Puerto Rico

� SINOT Office Departamento del Trabajo y Recursos Humanos Edificio

Prudencio Revera Martinez 505 Avenida Munoz Rivera San Juan, PR 00918-3514 787-754-5353

Associates who work in New York and Hawaii must file for statutory disability benefits and “topped up” STD benefits with the Disability Claims Administrator(s) as follows:

New York

� You must file for Disability benefits with the Disability Claims Administrator. Do not file claims directly with the state. Cigna will set up two separate claims: one for statutory benefits and one for “topped up” STD benefits.

� Disability Claims Administrator: Cigna 1-800-828-6352

� Cigna will issue two separate benefit payments.

Hawaii

� You must file for statutory disability benefits with the Local Affiliate of the Disability Claims Administrator:

� Local Affiliate: MDX Hawaii 1-808-522-7500 (Oahu) 1-800-345-4185 (Neighbor Islands)

� MDX Hawaii will forward a copy of the claim to Cigna, who will then set up a separate claim for “topped up” STD.

� MDX and Cigna will issue separate benefit payments.


Associates who work in New Jersey must file for statutory disability benefits only with the Disability Claims Administrator as follows: New Jersey

� Disability Claims Administrator: Cigna 1-800-828-6352

� Do not file claims directly with the state.

INITIATING A CLAIM FOR BENEFITS

A determination of eligibility and Disability coverage under the Plan does not begin until you have been away from work, as a result of a covered Sickness or Injury, for four work days. Your manager has responsibility for managing your time off during these four work days. You may be eligible for paid time off, such as vacation or personal days, which would allow you to receive income during these days. After such time, Cigna will begin making the determination for your eligibility for Disability benefits under the Plan. To be entitled to benefits beyond the 4th work day you must call Cigna at 1-800-828-6352. Cigna will provide case management services during your absence and will advise you of the time period for which you are eligible for Disability benefits based upon your medical condition. If you don’t contact Cigna, Disability benefits may not be paid. If you call and request a return phone call, a Cigna case manager will confidentially discuss your Sickness or Injury with you and advise you regarding what is needed to process your claim. During the first days of an absence, local management may request that you provide a written statement from your Physician to support the need for your absence. You are responsible for making sure your Physician submits medical documentation to Cigna that supports your inability to work. Your Physician may have you sign a form allowing him/her to release your medical records to Cigna, so be sure to ask your Physician about this when you see him/her. Cigna will not be able to establish a Disability until your Physician provides the required information. If Cigna does not receive the required information within 10 days from the date your Disability claim is filed, your claim will be denied. It is your responsibility to make sure that all information is provided to Cigna in a timely fashion. The Cigna case manager may also work with your manager or HR representative to look at ways you can return to work—perhaps with modified job activities. If it’s not possible for you to return to work after your STD benefits cease, your case manager can help you transition to the Sears Holdings Long-term Disability Plan (“LTD Plan”) if you participate in the LTD Plan or to community services that can help you with your Sickness or Injury. After you call in a Disability claim to Cigna: � You will receive a letter in the mail stating your length of

Disability or reason for denial. � An email will be sent to your work location so that they will

know when to expect your return to work. � It is your responsibility to assure that Cigna has been provided

with updated medical information from your Physician. � Cigna or its designee will have the right and opportunity to

examine any individual whose Sickness or Injury is the basis of a claim, as often as they may reasonably request, while a claim is pending.

It is important that you keep your manager/supervisor updated on the status of your Disability.

PENALTIES FOR CALLING IN A LATE CLAIM

Claims filed more than 30 days after a Disability begins will not be paid retroactively to the fifth day of Disability. In this case, the payment period will only begin two weeks prior to the date Cigna receives the claim. This may result in a decrease in the maximum number of days during which benefits are payable to you from the Plan. In no case will benefits be paid if the claim is filed more than two weeks after the approved length of disability would have ended, unless the reason is the absence of your legal capacity. No action at law or in equity may be brought to receive benefits from the Plan after one year from the date of Disability.

WHEN DISABILITY BENEFITS ARE PAYABLE

You are eligible to receive benefits from the Plan when you are unable to work because of a Non-Occupational Disability. Benefits begin on the fifth day of Disability following four missed work days of absence. To receive Plan benefits, you must: � Be under the Appropriate and Regular Care of a Physician; � Be unable to perform the Material and Substantial Duties of

your Regular Occupation or any other comparable job that you are reasonably qualified to perform;

� Make certain that satisfactory medical evidence of Disability (as determined by the Disability Claims Administrator, Cigna) is provided to the Disability Claims Administrator by your Physician; and

� Be absent from work as a result of a Non-Occupational Disability that occurred while you were covered under the Plan.

BENEFIT AMOUNT AND DURATION

The maximum length of Disability payments is 20 weeks during a continuous 52-week period, regardless of length of service. The amount of the benefit is based on your length of service and is calculated as a percentage of your Weekly Earnings as of your last day worked. Weekly Earnings means your average weekly wages earned during the twelve weeks worked immediately prior to your Disability.

Continuous Service as of Your Last Day

Worked

Elimination Period

Maximum Benefit During Any 52-Week

Period

90 days but less than 2 years 4 work days 70% for 6 weeks

50% for 14 weeks 2 but less than 5 years 4 work days 70% for 10 weeks

50% for 10 weeks 5 years or more 4 work days 70% for 20 weeks

� The Elimination Period is unpaid. � You may use vacation or personal days during the

Elimination Period. � Your weekly benefit is subject to income taxes. � If you pass your second or fifth continuous service

anniversary while absent and are receiving Disability benefits, you are not eligible for the increased Disability benefits based on length of service until after your return to work.


� If you pass the 90-day continuous service anniversary while absent due to Sickness or Injury, you are not eligible to begin receiving Disability benefits for that period of Disability.

Benefits under the Plan are only payable if you are taking time off pursuant to applicable Company Leave of Absence policies or if the time off is approved by your manager for your covered Sickness or Injury. Any such approval requires a showing of a satisfactory work and attendance record and must be consistent with current business needs.

HOW DISABILITY BENEFITS ARE PAID

Benefits under the Plan are paid as a weekly benefit directly from Cigna on behalf of the Kmart.

WHEN DISABILITY BENEFITS END

Benefits under this Plan will end upon the earliest of the following: � You are able to return to work full-time with or without

medical restrictions; � You have received benefits for the Maximum Period Payable; � Your employment terminates; � Your retire from Kmart; � You die; � You fail to provide proof of Disability; or � You no longer meet the definition of Disability.

SUCCESSIVE DISABILITIES

If a Disability for which benefits were payable ends, but recurs due to the same or related condition 30 days or less after the end of a prior Disability, it will be considered a resumption of the prior Disability. Such a recurrent Disability will be subject to the provisions of the Plan that were in effect at the time the prior Disability began. A Disability that recurs due to the same or related conditions more than 30 days after the end of the prior Disability is subject to: � A new Elimination Period; and � The other provisions of the Plan that are in effect on the date

the Disability recurs. The Disability must recur while your coverage is in force under the Plan. If you are absent for an Sickness or Injury from a different Disability, you will be eligible for benefit payments subject to a new Elimination Period if you have returned to work and been Actively at Work for at least one full day. Subsequent absences due to chronic conditions, such as migraine headaches or asthma, are not considered absences for the same Sickness or Injury. For example, each migraine headache is a new Sickness, not a continuation of the previous Sickness.

BENEFITS FROM OTHER SOURCES

Disability payments will be offset by benefits or income received from any other source. Kmart reserves the right to be reimbursed for any overpayments under the Plan. Overpayment may be the result of a miscalculation or because of payments you receive from a third party including, but not limited to: � Wages, � Statutory benefits, such as workers’ compensation,

� Benefits paid by a governmental plan, a mandatory no-fault insurance plan or law,

� Benefits paid from any other group insurance-type plan, or � As a result of claims against a third party for negligence,

wrongful acts, or omissions. Disability pay for associates due to work-related Injuries or Sickness will be coordinated and managed by Kmart’s designated workers’ compensation claims administrator. For locations subject to workers’ compensation coverage by a state insurance fund, Disability pay will be subject to the same medical case management oversight and standards as Non-Occupational Disabilities.

WORK INCENTIVE BENEFIT

A Work Incentive Benefit (WIB) will be provided if you are Disabled and Gainfully Employed after the end of the Elimination Period, or after a period during which you received weekly benefits. The WIB will be equal to the weekly benefit amount, less 50% of Disability Earnings. A WIB is intended to assist in your return to your job with Kmart, or the Company, or to an occupation for which you are qualified by education, training or experience on a full-time basis. The Disability Claims Administrator will review your case to determine if you are a candidate for the WIB. Although earnings you receive from participation in the WIB Plan may partially reduce your benefits from this Plan, your total monthly income can be increased if you return to work.

EXAMPLE

This example assumes the associate begins receiving weekly Disability Income Plan benefits of $300 and then begins Gainful Employment that provides Disability Earnings of $250 per week. The associate’s $300 weekly benefit will be reduced, or offset, by a portion of the Disability Earnings. The offset is calculated as follows:

Work Incentive Benefit Offset

Weekly Disability Earnings $250 WIB offset percentage x 0.50 WIB Offset $125

The offset is then applied to the $300 weekly Plan benefit to calculate a new weekly benefit, as shown below.

Weekly Benefit During Gainful Employment

Weekly Benefit Before Gainful Employment $300 WIB offset -$125 Weekly Benefit During Gainful Employment $175

By returning to work with the Work Incentive Benefit, the associate receives $125 more in total income, as shown below.

Total Income During Gainful Employment

Weekly Disability Earnings $ 250 Weekly Benefit During Gainful Employment + 175 Total Income During Gainful Employment $ 425

The Work Incentive Benefit will cease on the earliest of the following:


1. The date you are no longer Disabled; or 2. The end of the Maximum Period Payable.

EXCLUSIONS AND LIMITATIONS

Disability payments under the Plan will not be payable for: � An intentionally self-inflicted Injury; � Any bodily Injury sustained during the course of, or while

doing any act pertaining to, any occupation or employment for wage or profit for Kmart, or the Company, or any other employer;

� An Injury resulting from participation in or commission of an assault, battery, felony, riot, or civil disorder;

� All elective procedures including cosmetic surgery primarily intended to change appearance, liposuction, radial keratotomy, sex change, in-vitro fertilization, embryo transfer procedure, or for the initial or reversal of any sterilization procedure;

� Any period during which you are not under the Appropriate and Regular Care of a Physician;

� Any period during which you unjustifiably neglect, refuse or otherwise fail to accept or submit to rehabilitative or medical service; or

� Any Injury or Sickness that is incurred as a result of any activity that results in incarceration or occurs while you are incarcerated.

Disability benefit payments are not necessarily payable for absences due to operations and/or hospital confinements. If the condition for which the operation is performed or the hospital confinement that is required is not a covered Sickness or Injury, no Disability benefits will be paid for the absence. Sickness and Injuries cease being fully covered if alternate assignments or reduced hours schedules are available that you are able to perform. Should you refuse such assignments, disability benefits will cease. Disability benefits will not be paid if appearance is the only disabling factor. Disability benefits are paid entirely by Cigna on behalf of Kmart and can be withheld or terminated by Kmart at any time. It is not the intent of Kmart to indefinitely subsidize associates’ pay when they are repeatedly absent due to Sickness or Injury. Associates who are unable to maintain regular attendance on the job may be terminated, as permitted by law. You may not work elsewhere while receiving Disability benefits without the advance approval of your manager.

EXAMINATION

Kmart may require that an independent Physician examine you at any time and as often as is reasonable necessary when you are receiving benefits from the Plan. Such an examination will be at no cost to you. However, costs associated with your normal Physician(s) visits are not paid by the Plan.

OTHER BENEFITS

While you are receiving Disability benefits under the Plan, you will continue earning service with Kmart and you may continue your other benefits (for example, medical) provided you are enrolled and continue to make the appropriate associate contributions by making payments on a post-tax basis. You will

receive direct billing information from the Sears Holdings Benefits Center.

IMPORTANT NOTE

The Plan is currently maintained by Kmart as a welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). This section of the Handbook, together with the applicable provisions of the Introduction and Other

Information sections are intended to constitute a summary plan description in accordance with ERISA.


The following details about your benefit coverage are provided in the Other Information section of this Handbook: � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers. � How to appeal a denied claim.


Actively at Work means you must be: � Working at your usual place of business, or on assignment for

the purpose of furthering Kmart’s or the Company’s business, and

� Performing the Material and Substantial Duties of your Regular Occupation on a full-time basis.

Appropriate and Regular Care means that you are regularly visiting a Physician as frequently as medically required to meet your basic health needs. The effect of the care should be of demonstrable medical value for your disabling condition(s) to effectively attain and/or maintain Maximum Medical Improvement.

Company means Sears Holdings Corporation and its subsidiaries (including Kmart Holding Corporation). Disability means that during the Elimination Period and through the Maximum Period Payable because of Injury or Sickness, you are: � Continuously unable to perform the Material and Substantial

Duties of your Regular Occupation; � Under the regular care of a Physician, other than yourself or a

member of your immediate family; and � Not Gainfully Employed in any occupation for which you are

or become qualified by education, training or experience. You may also be considered Disabled after the Elimination Period in any week in which you are Gainfully Employed if an Injury or Sickness is causing physical or mental impairment to such a degree that you are unable to earn more than 80% of your weekly earnings in any occupation for which you are qualified by education, training or experience. You are not considered to be Disabled if you earn more than 80% of your Weekly Earnings. Disability Claims Administrator is the organization that has been engaged by the Company to perform Disability claims processing for the Plan. The Disability Claims Administrator is Cigna. Disability Earnings is the wage or salary you earn from Gainful Employment after a Disability begins. It does not include any other Disability payment you receive as a result of your Disability.


Elimination Period is the period of time you must be Disabled before benefits will start. The Elimination Period for the Disability Income Plan is four work days days; benefits start on the fifth day of Disability following four missed work days in which you were disabled to the extent that you were unable to perform the necessary functions of your job due to a non-occupational Disability. Gainfully Employed or Gainful Employment means the performance of any occupation for wages, remuneration, or profit, for which you are qualified by education, training, or experience on a full-time or part-time basis, for Kmart, or the Company, or another employer or you, and which the Disability Claims Administrator approves and for which the Disability Claims Administrator reserves the right to modify approval in the future. Generally Accepted Medical Practice means care and treatment that is consistent with relevant guidelines of national medical research and health care coverage organizations and government agencies. Injury means bodily injury caused by an accident that results, directly and independently of all other causes, in a Disability that begins while your coverage is in force. Material and Substantial Duties means the necessary functions of your Regular Occupation that cannot be reasonably omitted or altered. Maximum Medical Improvement is that level at which, based on reasonable medical probability, further material recovery from, or lasting improvement to, an Injury or Sickness can no longer be reasonably anticipated. Maximum Period Payable means the maximum length of Disability payments, which is 20 weeks during any 52-week period, regardless of the length of service. Non-Occupational Disability - you are Disabled when you are unable to perform the Material and Substantial Duties of your Regular Occupation or any other comparable job that you are reasonably qualified to perform. Your Disability is considered non-occupational only if it results from a Sickness or Injury that has not been caused by any work for pay or profit that you perform for Kmart, the Company or any other employer. Physician means a person legally licensed to practice medicine, psychiatry, psychology, or psychotherapy who is neither you nor a member of your immediate family. A licensed medical practitioner is a physician if applicable state law requires that such practitioners be recognized for purposes of certification of Disability, and the treatment provided by the practitioner is within the scope of his or her license. Plan - Unless stated otherwise, the term Plan means the Kmart Corporation Disability Income Plan. Regular Occupation means the job you are performing for income or wages on your date of Disability. It is not limited to the specific position you held at Kmart. Reinstatement means that if you participated in the Kmart Disability Income Plan at the time your Kmart employment ended and you are re-employed within 90 days of your employment termination date, your Disability coverage will be reinstated

effective the first day of the month following your full-time rehire date. Service, for the purpose of determining the amount and duration of benefits, means your full-time and part-time employment with Kmart for which you received continuous service credit as determined by Kmart or the Company.

Sickness is an illness or disease, including mental disease, causing Disability that begins while your coverage is in force. Weekly Earnings means your average regular weekly wages or salary, including shift differential, earned during the 12 calendar weeks prior to your last day worked. It does not include overtime earnings. Work Incentive Benefit is a benefit that will be provided if you are Disabled and gainfully employed after the end of the Elimination Period, or after a period during which you received weekly benefits. The Work Incentive Benefit will be equal to the weekly benefit amount less 50% of Disability Earnings. The Work Incentive Benefit will cease on the earliest of the following: (1) the date you are no longer Disabled; or (2) the end of the Maximum Period Payable.

Sears Holdings Benefits Handbook 2012 8-i Long-term Disability Plan Full-time Hourly

Long-Term Disability Plan

TABLE OF CONTENTS

About the Long-Term Disability Plan .........................................................................................................................................8-1

Contributions ....................................................................................................................................................................8-1

How the Plan Works ....................................................................................................................................................................8-1

Benefit Payment Duration ................................................................................................................................................8-1

Medical Evidence .............................................................................................................................................................8-1

Recurring Disabilities .......................................................................................................................................................8-1

Pre-Existing Conditions ....................................................................................................................................................8-1

Mental and Nervous Disorders .........................................................................................................................................8-2

Alcoholism and Drug Addiction or Abuse .........................................................................................................................8-2

When Benefits End ..........................................................................................................................................................8-2

LTD Contributions During Disability .................................................................................................................................8-2

Amount of Benefits ......................................................................................................................................................................8-2

Increases in Earnings .......................................................................................................................................................8-2

Decreases in Earnings .....................................................................................................................................................8-2

Monthly Benefit While Disabled .......................................................................................................................................8-2

Monthly LTD Covered Earnings .......................................................................................................................................8-3

Other Income Benefits .....................................................................................................................................................8-3

Social Security Benefits ...................................................................................................................................................8-3

Rehabilitative Employment .........................................................................................................................................................8-3

Some Examples ...........................................................................................................................................................................8-3

When Benefits Are Not Payable .................................................................................................................................................8-4

How to Cancel Coverage .............................................................................................................................................................8-4

Claims Information ......................................................................................................................................................................8-4

How to File a Claim ..........................................................................................................................................................8-4

Payment of Benefits .........................................................................................................................................................8-4

How to Appeal a Denied Claim ........................................................................................................................................8-4

Important Notes ...........................................................................................................................................................................8-4

Some Terms You Should Know..................................................................................................................................................8-5

Sears Holdings Benefits Handbook 2012 8-1 Long-term Disability Plan Full-time Hourly

ABOUT THE LONG-TERM DISABILITY PLAN

If you were unable to work for a long period of time because of a serious Illness or Injury, your paychecks would stop—but you would still have regular living expenses. Sears Holdings Long-Term Disability Insurance Plan (“LTD Plan”) enables you to ensure that you’ll have a continuing source of income to help meet those expenses throughout a disability. The LTD Plan is insured and administered by Life Insurance Company of North America (“Cigna”). In this section, Cigna is referred as “the insurance company.” Throughout this section, several terms are capitalized. Those terms are defined either in the text of this section or under Some Terms

You Should Know at the end of this section.

CONTRIBUTIONS

If you elect to participate in the LTD Plan, you are required to pay for your LTD coverage. Your contributions vary based on your rate of pay, your age as of July 1 of the current plan year and your classification as an hourly associate. Your age is calculated annually on the Plan Reclassification Date.

Age

(As of July 1)

Rate per $100 of Covered

Earnings (per month)*

Under 30 $0.30 30-39 $0.57 40-49 $0.75 50-59 $1.05

60 and older $1.22 * These rates are in effect through December 31, 2012. Rates may change for future plan years.

HOW THE PLAN WORKS

If you become Disabled while employed by the Company as a result of an Illness or Injury, you may be entitled to benefits from the LTD Plan after fulfilling a Waiting Period. The Waiting Period is the earlier of the exhaustion of short-term disability benefits or 140 days within a 52 week period during which you suffered from the same or related Illness or Injury. You will be entitled to LTD benefits if: � you become Disabled (as defined below) as a result of an

Illness or Injury; � you are covered by the LTD Plan at the time you become

Disabled; � you remain Disabled throughout the Waiting Period; � you continue to be Disabled after completing the Waiting

Period; and � you are receiving Appropriate Care and Treatment on a

continuing basis from a Physician.

BENEFIT PAYMENT DURATION

Benefits begin after you complete the Waiting Period and continue as long as you remain Disabled (as described below) until the end of your Maximum Benefit Period, described under When Benefits

End.

Disabled under the LTD Plan means: During the Waiting Period and thereafter, you are Incapable of Performing the material duties of any gainful occupation for which you are reasonably qualified based on your training, education and experience. You are considered Disabled if, solely because of Illness or Injury, you are:

1. unable to perform the material duties of your Regular Occupation, and

2. unable to earn more than 80% of your Indexed Earnings from working in your Regular Occupation.

After LTD benefits have been payable for 24 months, you are considered Disabled if, solely due to Illness or Injury, you are:

1. unable to perform the material duties of any occupation for which you are, or may reasonably become, qualified based on education, training or experience; and

2. unable to earn more than 60% of your Indexed Earnings. The insurance company will require proof of earnings and continued Disability. After the Waiting Period, if you are (or are able to be) engaged in any occupation for wage or profit other than Rehabilitative Employment approved in advance by the insurance company, you are not Disabled.

MEDICAL EVIDENCE

To qualify for benefits under the LTD Plan, your Disability must be supported by current medical documentation. You must be under the regular care of a Physician under a course of treatment appropriate for the Disability. You may be asked to undergo a medical examination by a Physician designated by the insurance company. If you cannot or will not provide conclusive medical evidence of Disability, LTD benefits will be denied or discontinued. Continuation of LTD benefit payments will require ongoing certification of disability based on updated medical documentation. The insurance company will determine how often you will need to provide updated medical documentation.

RECURRING DISABILITIES

If you complete the Waiting Period, begin to receive LTD benefits, return to Active Work status, and resume your LTD contributions, you may be required to complete another Waiting Period if thereafter you become Disabled again. This second period of Disability will be treated as a continuing disability if it: � begins within six months following your return to Active

Work; and � is due to the same or related Illness or Injury. In this case, LTD benefits will resume immediately without a new Waiting Period, and the Maximum Benefit Period will apply to the total benefits in all periods. Otherwise, the second period of Disability will be treated as a new Disability, and you will need to complete a new Waiting Period before LTD benefits can begin again.

PRE-EXISTING CONDITIONS

A Pre-Existing Condition is an Illness or Injury for which you incurred expenses, received medical treatment, care or services including diagnostic measures, took prescribed drugs or medicines, or for which a reasonable person would have consulted a Physician within 6 months before your most recent effective date of treatment. You will not be entitled to LTD benefits if, for that condition, you took prescribed drugs or medicine or received medical treatment or consultation, medical care or services, or diagnostic tests in the six months before you became an LTD Plan participant.


However, you will be entitled to LTD benefits for a Pre-Existing Condition if your Disability due to that condition begins 12 or more consecutive months after you become covered by the LTD Plan.

MENTAL AND NERVOUS DISORDERS

Payment of LTD benefits is limited to a maximum of 12 months during your lifetime if a Disability is caused by any one or more of the following conditions. Once 12 monthly LTD benefits have been paid, no additional LTD benefits will be payable for any of the following conditions.

1. Anxiety disorders 2. Delusional (paranoid) disorders 3. Depressive disorders 4. Eating disorders 5. Mental illness 6. Somatoform disorders (psychosomatic illness)

If, before reaching your lifetime maximum benefit, you are confined in a hospital, that period of confinement will not count against your lifetime limit. The confinement must be for the Appropriate Care and Treatment of any of the conditions listed above.

ALCOHOLISM AND DRUG ADDICTION OR ABUSE

If you are Disabled due to alcohol, drug or substance abuse or dependency, LTD benefits are limited to one period of Disability during your lifetime, but no longer than 12 months. You must be participating in a rehabilitation program recommended by a Physician. LTD benefits will not continue beyond completion of a rehabilitation program, nor will they continue if you refuse to participate in a rehabilitation program.

WHEN BENEFITS END

As long as you remain Disabled, continue under the regular care of a Physician, continue to provide evidence of that Disability to the insurance company, and are not Disabled from a mental and nervous disorder or alcohol, drug, or substance abuse or dependency, LTD benefits will continue until the end of the Maximum Benefit Period that applies to you or until your death, if sooner. Note: If the insurance company approves a rehabilitation program, please refer to the provisions under Rehabilitative Employment. Should you refuse or cease Rehabilitative Employment, LTD benefits will end. The Maximum Benefit Period that applies to you is the period shown in the right-hand column of the following chart opposite your age at the time benefits under the LTD Plan begin for your Disability.

Age When Benefits Begin

Maximum Benefit Period

Up to and including age 61 To age 65

62 or 63 To age 65 or for 31 months, whichever is later

64, 65 or 66 For 31 months

67 For 31 months, but not beyond age 70

68 To age 70

69 or older For 12 months

LTD CONTRIBUTIONS DURING DISABILITY

If you become Disabled, you must continue to pay LTD contributions during the Waiting Period. Once you qualify for LTD benefits, you will not have to pay any further LTD contributions during the period in which you receive LTD benefits, beginning on the first day of the month that coincides with or immediately follows the date that benefits become payable.

AMOUNT OF BENEFITS

The amount of the benefit you will receive during a period of Disability is based on your Eligible Annual Earnings up to a maximum of $250,000. While you are covered by the LTD Plan and before you begin receiving LTD benefits, your Eligible Annual Earnings are calculated annually on the Plan Reclassification Date established by the Plan Administrator. If you are on an approved leave of absence on the Plan Reclassification Date, a recalculation will not be done for you.

INCREASES IN EARNINGS

If your Eligible Annual Earnings have increased since the last time the reclassification calculation was made, the increase will be effective on the next Plan Reclassification Date, at which time you will qualify for a higher amount of LTD benefits. However, the increase will not apply to disabilities commencing before the annual Plan Reclassification Date.

DECREASES IN EARNINGS

If your Eligible Annual Earnings have decreased since the last time the reclassification calculation was made, the decrease will be effective on the next Plan Reclassification Date, at which time you will qualify for a lesser amount of LTD benefits. However, a decrease will not apply to disabilities commencing before that date and will only take effect if your Eligible Annual Earnings have qualified you for a lesser amount of LTD coverage for two consecutive years. Any payroll year in which you were on an approved leave of absence for two months or longer will be ignored for purposes of decreases in earnings.

MONTHLY BENEFIT WHILE DISABLED

The amount of the monthly LTD benefit you will receive while you are Disabled is equal to 50% of the first $20,834 of your Monthly LTD Covered Earnings less (a) any Other Income Benefits (defined in a later section to this chapter) to which you are entitled and (b) 50% of your earnings from Rehabilitative Employment, if any. If necessary, your monthly LTD benefit will be reduced so that the total amount you receive from LTD, Rehabilitative Employment, and Other Income Benefits does not exceed your Monthly LTD Covered Earnings. If you are eligible for LTD benefits, the maximum amount of monthly LTD benefit you can receive from the plan is $10,417. If you are eligible for LTD benefits, the minimum amount of monthly LTD benefit you can receive from the LTD Plan is $100, unless the insurance company has made an overpayment of benefits to you or the monthly LTD benefit, including Other Income Benefits plus Rehabilitative Employment earnings, results in earnings exceeding 100% of your Monthly LTD Covered Earnings.


MONTHLY LTD COVERED EARNINGS

Your Monthly LTD Covered Earnings are equal to your Eligible Annual Earnings in effect on the day before your Disability began, rounded to the next higher thousand and divided by 12. For instance, if your Eligible Annual Earnings fall between $23,000.01 and $24,000.00, your Monthly LTD Covered Earnings are $2,000 ($24,000 divided by 12).

OTHER INCOME BENEFITS

Other Income Benefits you are eligible to receive affect the amount that the LTD Plan pays you in monthly LTD benefits. Other Income Benefits include: � any amounts received (or assumed to be received*) by the

associate or his or her dependents under: o the Canada and Quebec Pension Plans; o the Railroad Retirement Act; o any local, state, provincial or federal government

disability or retirement plan or law payable for injury or sickness provided as a result of employment with the Company

o any sick leave or salary continuation plan of the Company

� any Social Security disability or retirement benefits the associate or any third party receives (or is assumed to receive*) on his or her dependents; or which his or her dependents receive (or are assumed to receive*) because of his or her entitlement to such benefits.

� any Retirement Plan benefits funded by the Company. Retirement Plan means any individual deferred compensation agreement; a profit sharing or any other retirement of savings plan maintained in addition to a defined benefit or other defined contribution pension plan, or any employee savings plan including a thrift, stock option or stock bonus plan, individual retirement account or 401(k) plan.

� any amounts received (or assumed to be received*) by the associate or his or her dependents under any workers’ compensation, occupational disease, unemployment compensation law or similar state or federal law payable for injury of sickness arising out of work with the Company including all permanent and temporary disability benefits.

� any amounts paid because of loss of earnings or earning capacity through settlement, judgment, arbitration or otherwise, where a third party may be liable, regardless of whether liability is determined

*Assumed Receipt of Benefits: The insurance company will assume

the associate (and his or her dependents, if applicable) are

receiving benefits for which they are eligible from other income

benefits.

All amounts available to you as Other Income Benefits will be used to calculate your monthly LTD benefit, whether or not you actually apply for and receive those amounts.

SOCIAL SECURITY BENEFITS

You can request assistance in applying for Social Security benefits by contacting the insurance company (Cigna). Often, the approval or denial of a claim for Social Security benefits takes quite a while. Therefore, the insurance company has the right to estimate Social Security benefits during the first 24 months of your disability benefit period. Included in the estimate will be Social Security benefits for you, your spouse, and your children.

However, if not later than six months following the date of the first LTD monthly payment, you provide the insurance company with written confirmation from the Social Security Administration that you have applied for Social Security benefits, then your monthly LTD benefit will not be reduced by estimated Social Security benefits. The insurance company will require you to sign an agreement confirming that you will repay them any overpayments caused by receipt of Social Security benefits, including retroactive payments, and authorizing them to obtain information on awards directly from the Social Security Administration. When the insurance company receives notification of your Social Security award or denial, it may cause a change in the amount of your monthly LTD benefit. If it turns out that the estimate of your Social Security award was too high, the insurance company will recalculate your LTD monthly benefit and pay you amounts owed to you for past months in a lump sum. If the estimate was too low, then you will be required to repay the insurance company for the resulting overpayment. The insurance company has the right to recover overpayments by applying them against all or part of future LTD benefits until the repaid amount has been recovered. Once you begin receiving benefits from the LTD Plan, your LTD benefit will not be reduced to reflect changes in your Social Security disability or retirement benefits due to cost-of-living increases. However, your monthly benefit will be adjusted to reflect changes in your Social Security payments due to changes in your marital or family status. REHABILITATIVE EMPLOYMENT

The LTD Plan provides a program designed to help you return to active, permanent work. However, such a program must be approved by the insurance company. Rehabilitation programs may allow for payment of your medical expense, education expense, moving expense, accommodation expense or family care expense while you participate in the program. If you participate in an approved rehabilitation program, your monthly LTD benefit is increased by 10%. The Rehabilitation Plan will consist of one or more of the following phases: � rehabilitation, under which the insurance company may

provide, arrange, or authorize educational, vocational, or physical rehabilitation or other appropriate services;

� work which may include modified work and work on a part-time basis

You may receive LTD benefits for up to 24 months following the date your disability ends if the insurance company determines you are no longer Disabled while: you are participating in the rehabilitation program; and you are not able to find employment. If you fail to fully cooperate in all required phases of the rehabilitation program and assessment without good cause, no disability benefits will be paid, and insurance will end. SOME EXAMPLES

The following examples show how the plan works.


Example 1 – No Other Income Benefits or Rehabilitation Earnings

Assume your Eligible Annual Earnings are $24,000. Therefore, your Monthly LTD Covered Earnings are $2,000 ($24,000 divided by 12). Your monthly LTD benefit is calculated as follows: $2,000 x 50% = $1,000 from the plan

Example 2 – Entitled to Social Security Benefits

Assume your Monthly LTD Covered Earnings are $2,200. Assume also that you have dependent children; you apply for and receive a family Social Security disability benefit in addition to your individual Social Security disability benefit, totaling $1,050 per month. Your monthly LTD benefit is calculated as follows: $2,200 x 50% = $1,100

minus

your monthly individual and family Social Security disability benefit ($1,050)

equals

$50 from the LTD Plan, however, because there is a $100/month minimum benefit from the Plan, you would receive $100 per month.

Example 3 – Receiving Rehabilitation Earnings

Assume your Monthly LTD Covered Earnings are $2,200. Assume also that during Disability after LTD Plan benefits begin, you begin earning $1,500 a month from Rehabilitative Employment. Assume you have no Other Income Benefits. Your monthly LTD benefit is calculated as follows: $2,200 x 50% = $1,100 plus

10% Rehabilitative incentive 10% x $1,100 = $110 minus

50% of your earnings from Rehabilitative Employment $1,500 x 50% = $750 equals

$460 from the plan Therefore, the sum of your total monthly payments from the LTD Plan and Rehabilitative Employment would be $1,960 ($460 LTD Plan benefits and $1,500 rehabilitative earnings).

WHEN BENEFITS ARE NOT PAYABLE

LTD benefits will not be paid if: � you earn, from any occupation, more than the percentage of

Indexed Earnings set forth in the definition of disability applicable to you at that time;

� the insurance company determines you are not Disabled; � the end of the Maximum Benefit Period has been reached; � you die or you refuse, without good cause, to fully cooperate in

all required phases of the rehabilitation plan and assessment; � you are no longer receiving Appropriate Care and Treatment; � you fail to cooperate with the insurance company in the

administration of the claim. Such cooperation includes, but is not limited to, providing any information or documents needed to determine whether benefits are payable or the actual benefit amount due.

Additionally, LTD benefits are not paid for disabilities resulting from:

� suicide, attempted suicide, or self-inflicted injury while sane or insane;

� war, or any act of war, whether or not declared. � active participation in a riot; � commission of a felony.

HOW TO CANCEL COVERAGE

Associates may cancel their coverage at any time by contacting the Sears Holdings Benefits Center at 1-888-88sears (1-888-887-

3277).

CLAIMS INFORMATION

HOW TO FILE A CLAIM

It may not be necessary for you to file a claim for LTD benefits if you are receiving Short-term Disability (STD) benefits. Generally, you only have to report your disability claim once. If payments transition from STD to LTD, you may not need to submit more paperwork. If it is likely that you will qualify for LTD, your case manager and a Social Security specialist can begin assisting you with the Social Security application process even before you transition to LTD. If you are not receiving STD benefits, you should call Cigna 1-800-

828-6352 to report your claim after you have been out of work for approximately 8 weeks due to a Disability. A claim should be filed prior to completing the Waiting Period, or as soon as is reasonably possible. The claims administrator will notify you in writing of its initial claims decision. Such notification will be provided within a reasonable period, not to exceed 45 days after receipt of the claim, except that under special circumstances, the claims administrator may have up to two 30-day extensions if needed due to matters beyond the plan’s control.

PAYMENT OF BENEFITS

Upon approval of your LTD claim, you will be paid all benefits due up until that time (from the day following completion of the Waiting Period through the end of the month before the date of approval) in one lump sum. Subsequent LTD benefit payments will be paid at regular intervals, but not less frequently than monthly. All LTD payments will come directly to you from the insurance company. For each day of a partial month, 1/30 of a full month’s benefit is payable. Any LTD benefit balance, unpaid at the end of a period during which you are entitled to LTD benefits, will be paid as soon as administratively feasible. Benefits will be paid to you, or if you die, any applicable benefits remaining (with respect to a period prior to your death) will be paid to your spouse, if living; otherwise your mother, father, children, brothers or sisters, or to the executors or administrators of you estate.


If you feel your claim for benefits has been improperly denied, you have the right to appeal the decision. Refer to the Claims Information in the Other Information section.

IMPORTANT NOTES

The LTD Plan is a welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). This section of the Handbook, together with the applicable provisions of the Introduction and Other Information sections are


intended to constitute a summary plan description in accordance with ERISA. The following details about your benefit coverage are provided in the Other Information section of this handbook: � When you can make changes to your benefits. � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers. � How to appeal a denied claim.


Actively at Work or Active Work means you are performing for the Company the duties of your employment at the place and in the manner in which the duties of your employment are usually and customarily performed. Appropriate Care and Treatment means medical care and treatment that meet all of the following: 1. it is received from a Physician whose medical training and

clinical experience are suitable for treating your Disability; 2. it is necessary to meet your basic health needs and is of

demonstrable medical value; 3. it is consistent in type, frequency and duration of treatment

with relevant guidelines of national medical, research and health care coverage organizations and governmental agencies;

4. it is consistent with the diagnosis of your condition; and 5. its purpose is maximizing your medical improvement.

Disabled is described above in the How the Plan Works section. Eligible Annual Earnings are your prior payroll year earnings, as determined by established Company practices. Illness means pregnancy or disease that causes deterioration in the state of health of the afflicted person. Incapable of Performing means that during the Waiting Period and the next 24 consecutive months you are unable to earn more than 80% of your Monthly LTD Covered Earnings, in accordance with the definition of Disabled for an associate in any job class. After the first 24 months, Incapable of Performing means you are unable to earn more than 60% of your Monthly LTD Covered Earnings, in accordance with the definition of Disabled for an associate in any job class. Indexed Earnings are equal to covered earnings for the first 12 months. After 12 monthly benefits are payable, Indexed Earnings will be an Employee’s covered earnings plus an increase applied to each anniversary of the date monthly benefits became payable. The amount of each increase will be the lesser of: (1) 10% of the employee’s Indexed Earnings during the preceding year of disability; or (2) the rate of increase in the Consumer Price Index during the preceding calendar year. Injury means accidental bodily injury. Maximum Benefit Period is described above in the How the Plan

Works and When Benefits End sections. Monthly LTD Covered Earnings are equal to your Eligible Annual Earnings in effect on the day before your Disability began, rounded to the next higher thousand, and divided by 12. Physician means a person who is licensed or otherwise legally authorized to administer medical care or treatment so long as the person is acting within the scope of his/her license or authorization.

“Physician” also means an accredited Christian Science practitioner listed in the current issue of the Christian Science Journal. Plan Reclassification Date is the date set by the Plan Administrator. As of January 1, 2007, the Plan Reclassification Date is July 1 of each year, unless or until it is changed prospectively by the Plan Administrator. Pre-Existing Condition is described above in the How the Plan

Works section. Regular Occupation is the occupation you routinely perform at the time the disability begins or any occupation for which you are, or may reasonably become qualified based on education, training, or experience. Rehabilitative Employment means a type of employment that the insurance company accepts as being employment which is designed to rehabilitate you while you are Disabled and for which you receive wage or profit. Waiting Period is described above in the How the Plan Works

section.

Sears Holdings Benefits Handbook 2012 9-i Company Paid Life Insurance Full-time Hourly

Company Paid Life Insurance Plan TABLE OF CONTENTS

How the Program Works .............................................................................................................................................................9-1 Amount of Coverage ...................................................................................................................................................................9-1

Increases in Earnings .......................................................................................................................................................9-1 Decreases in Earnings .....................................................................................................................................................9-1

Designating a Beneficiary ...........................................................................................................................................................9-1 Conversion Option ......................................................................................................................................................................9-1 Claims Information ......................................................................................................................................................................9-1

How to File a Claim ..........................................................................................................................................................9-1 Payment of Benefits .........................................................................................................................................................9-1 Assignment ......................................................................................................................................................................9-1 How to Appeal a Denied Claim ........................................................................................................................................9-1

Some Terms You Should Know..................................................................................................................................................9-1 For More Information ...................................................................................................................................................................9-2

Important Note .............................................................................................................................................................................9-2

Sears Holdings Benefits Handbook 2012 9-1 Company Paid Life Insurance Full-time Hourly


Sears Holdings provides eligible associates Company Paid Life Insurance. There is no cost to the associate for this coverage, and enrollment is automatic.

AMOUNT OF COVERAGE

The amount of your coverage is equal to one-times your Eligible Annual Earnings, up to a maximum of $50,000 of coverage. If you are newly hired, your coverage is based on your estimated annual earnings as determined by the Company. Your Eligible Annual Earnings are recalculated annually and the recalculation is effective on July 1, which is the Plan Reclassification Date established by the Plan Administrator. If you are on an approved leave of absence on the date the recalculation is made, a recalculation will not be done for you (if applicable), until the next Plan Reclassification Date when you are not on such a leave of absence.

INCREASES IN EARNINGS

If your earnings have increased since the last time a reclassification calculation was performed on your Eligible Annual Earnings, the increase will be effective on the next Plan Reclassification Date, at which time you will qualify for a higher amount of Company paid Life Insurance. If your Eligible Annual Earnings increase enough to make you eligible for additional coverage, your Company Paid Life Insurance coverage will automatically increase on the next Plan Reclassification Date, provided you are Actively at Work and able to perform normal activities.

DECREASES IN EARNINGS

If your earnings have decreased since the last time a reclassification calculation was performed on your Eligible Annual Earnings, the decrease will be effective on the next Plan Reclassification Date at which time you will qualify for a lesser amount of Company Paid Life Insurance. However, a decrease will only take effect if your Eligible Annual Earnings have qualified you for a lesser amount of Company Paid Life Insurance coverage for two consecutive years.

DESIGNATING A BENEFICIARY

A beneficiary is the person(s) who receives the life insurance benefit if you die while covered by the Plan. You must name a beneficiary for your Company Paid Life Insurance benefit coverage. You can designate your initial beneficiary or change your beneficiary in the future in either of two ways: � Submit the information on the Prudential MyBenefits web site

accessible by way of www.88sears.com (click on Benefits, then Life Insurance).

� Complete a Beneficiary Designation form (available upon request from the Sears Holdings Benefits Center at 1-888-

88sears) and mail it to: Prudential Insurance Co. of America P.O. Box 11786 Philadelphia, PA 19176-076

You may name any person(s), any organization or your estate as your beneficiary. If more than one beneficiary is designated, the beneficiaries will share the benefit equally unless you indicate otherwise. When two or more beneficiaries are named and you do not want them to share equally, you must indicate the percentage

of the benefit each beneficiary is to receive. Do not specify dollar

amounts.

CONVERSION OPTION

You are eligible to convert your Company Paid Life Insurance to an individual policy at the time of termination of coverage. You will receive information about converting your Company Paid Life Insurance shortly after your coverage ends. You may elect to convert your coverage within 31 days of your termination of employment. If coverage ends due to termination of the Plan or termination of coverage for the classification of associates to which you belong, you may convert your coverage to an individual policy only if you have been insured under the Plan for at least five years.

CLAIMS INFORMATION

HOW TO FILE A CLAIM

Contact the Sears Holdings HR Support Network through 1-888-88sears (1-888-887-3277) to report a life insurance claim. A claim kit will be sent to you or, if applicable, your beneficiary. The claim form must be completed and returned to the Claims Administrator at:

Prudential Insurance Company of America Group Life Claim Division P.O. Box 8517 Philadelphia, PA 19176-8517

PAYMENT OF BENEFITS

Upon approval of your claim, you (or your beneficiary) will be notified of the benefits paid. If any benefits have been denied, a written explanation will be provided. If you do not have a beneficiary on file, death benefits will be paid in the following order: � your spouse; � your child(ren); � your parent(s); � your sibling(s); � your estate. When the claim is paid, the full amount of insurance proceeds is paid in a single distribution to an interest-bearing account, or an Alliance Account set-up in the beneficiary’s name. The proceeds earn interest from the date the account is opened and the beneficiary can withdrawal all or some of the funds at any time. Alliance Account balances are not insured by the Federal Deposit Insurance Corporation.

ASSIGNMENT

You may be able to assign your rights under the Plan. For more information about assignment of benefits, contact a Prudential customer service representative at 1-888-88sears.


If you feel your claim for benefits has been improperly denied, you have the right to appeal the decision. See the Term Life Insurance section of the Other Information section for more details.


Actively at Work or Active Work means you are performing all of the usual and customary duties of your job on a full-time basis. This must be done at: � the Company’s place of business; or � an alternate place approved by the Company; or

Sears Holdings Benefits Handbook 2012 9-2 Company Paid Life Insurance Full-time Hourly

� a place to which the Company’s business requires you to travel.

You will be deemed to be Actively at Work during weekends or Company-approved vacations, holidays, or business closures if you were Actively at Work on the last scheduled workday preceding such time off. Eligible Annual Earnings are 120% of your base pay, as determined by Sears Holdings established personnel practices. Exception: For certain Sears Home Improvement Products associates who are paid on a salary plus bonus basis, Eligible Annual Earnings are your prior payroll year earnings, as determined by Sears Holdings established personnel practices (or if you are newly hired, your estimated annual earnings, as determined by Sears Holdings), rounded to the next higher $1,000. If your earnings are an even multiple of $1,000, then no rounding will occur. Company means Sears Holdings Corporation and any of its subsidiaries or affiliates to which Sears Holdings extends participation rights. Plan Reclassification Date is the annual date set by the Plan Administrator to determine increases or decreases in Earnings for the purposes of deciding future amounts of Company paid Life Insurance. The Plan Reclassification Date is July 1 of each year, unless it is changed prospectively by the Plan Administrator. FOR MORE INFORMATION The following details about your benefits coverage are provided in the Other Information section of this handbook: � When you can make changes to your benefits. � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers. IMPORTANT NOTE The Company Paid Life Insurance Plan is a welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended (ERISA). This section of the Handbook, together with the applicable provisions of the Introduction and Other

Information sections, are intended to constitute a summary plan description (SPD) in accordance with ERISA.

Sears Holdings Benefits Handbook 2012 10-i Optional Life Insurance Full-time Hourly

Optional Life Insurance Plan TABLE OF CONTENTS

How the Plan Works ..................................................................................................................................................................10-1

Choose the Coverage That Meets Your Needs .............................................................................................................10-1

Associate Coverage ..................................................................................................................................................................10-1

Spouse Coverage ......................................................................................................................................................................10-1

Child Coverage ..........................................................................................................................................................................10-1

Other Program Features ...........................................................................................................................................................10-2

Suicide Provision ............................................................................................................................................................10-2

Accelerated Benefit Option (ABO) .................................................................................................................................10-2

Accidental Death and Dismemberment Insurance (AD&D) ...................................................................................................10-2

AD&D Features ..............................................................................................................................................................10-2

Other Benefits ................................................................................................................................................................10-2

When AD&D Benefits Are Not Payable ..........................................................................................................................10-3

Cost for Coverage ......................................................................................................................................................................10-3

Coverage Changes ....................................................................................................................................................................10-4

Increases in Eligible Earnings ........................................................................................................................................10-4

How to Cancel Coverage ...........................................................................................................................................................10-4

Designating a Beneficiary .........................................................................................................................................................10-4

Continuing Your Coverage .......................................................................................................................................................10-4

Portability Option ............................................................................................................................................................10-4

Conversion Option .........................................................................................................................................................10-4

Claims Information ....................................................................................................................................................................10-4

How to File a Claim ........................................................................................................................................................10-4

Payment of Benefits .......................................................................................................................................................10-4

Prudential Alliance Account ...........................................................................................................................................10-5

Assignment ....................................................................................................................................................................10-5

How to Appeal a Denied Claim ......................................................................................................................................10-5

Some Terms You Should Know................................................................................................................................................10-5

Important Note ...........................................................................................................................................................................10-5

Kmart Executive Life Insurance Program You are not eligible to participate in the Optional Life Insurance Plan if you are enrolled in the Kmart Executive Life Insurance Program. Note that if you enroll in the Optional Life Insurance Plan, your coverage under the Kmart Executive Life Insurance Program will be terminated, and you will not be permitted to re-enroll. Note: Increases in the amount of coverage under the Kmart Executive Life Insurance Program as a result of a pay increase will be made once a year on July 1. Premiums for coverage under the Kmart Executive Life Insurance Program are based on your age as of May 1 of the current plan year.

Sears Holdings Benefits Handbook 2012 10-1 Optional Life Insurance Full-time Hourly

HOW THE PLAN WORKS

Sears Holdings recognizes associates’ desire to protect their family’s financial future. That’s why the Company offers you the Optional Life Insurance Plan underwritten by Prudential. The Optional Life Insurance Plan provides flexibility in meeting the specific needs of your family. You can increase your Optional Life Insurance Coverage as your income grows, expand benefits to include new family members, or reduce coverage as your family matures and you are near retirement. Note, however, that you may not be covered by more than one of following plans: the Sears Group Universal Life Plan, the Kmart Executive Life Insurance Plan or this Optional Life Insurance Plan.

CHOOSE THE COVERAGE THAT MEETS YOUR NEEDS

You can choose to cover yourself for 1, 2, 3, 4, 5, 6, 7 or 8 times your Eligible Earnings or you can choose a flat benefit option of $10,000, $20,000 or $30,000. You can also elect coverage for your spouse* and children. Coverage amounts can be adjusted as your life insurance needs change, within the program guidelines.

*For purposes of this Optional Life Insurance Plan section, references to spouse

shall also refer to an eligible same-sex domestic partner who has been

registered as a domestic partner through the Sears Holdings Benefits Center.

Your Registered Domestic partner means a person whose domestic partnership

with you has been validly registered in an appropriate state if registration is

recognized in that state; or a person with whom you have established a union

other than marriage, recognized in any state that recognizes civil union or same

sex registered domestic partnership.

Important Information for Residents of Certain States: There are state-specific requirements that may change the provisions under the Coverage(s) described in this Group Insurance Certificate. If you live in a state that has such requirements, those requirements will apply to your Coverage(s) and are made a part of your Group Insurance Certificate. Prudential has a website that describes these state-specific requirements. You may access the website at www.prudential.com/etonline. When you access the website, you will be asked to enter your state of residence and your Access Code. Your Access Code is 50555.

ASSOCIATE COVERAGE

You may elect a coverage amount of $10,000, $20,000 or $30,000 or up to eight times your Eligible Earnings (rounded to the next higher $1,000) up to a maximum of $4,000,000. Some levels of coverage may require evidence of good health. Please refer to the following guidelines for electing associate coverage:

Coverage Amount Requirements for Electing Coverage

Amount

Flat benefit options: � $10,000 � $20,000 � $30,000

Requires: � Meeting eligibility

requirements � Evidence of good health if

enrolling after 31 days of initial eligibility

Multiples of Eligible Earnings: � 1 times � 2 times � 3 times up to $500,000 maximum




Multiples of Eligible Earnings: � 4 times � 5 times � 6 times � 7 times � 8 times or amounts in excess of $500,000 in coverage


requirements � Evidence of good health � Medical underwriting

approval before coverage can be issued

If evidence of good health is required, you will need to fill out a good health questionnaire, available online at www.prudential.com/mybenefits. Coverage that is subject to the evidence of good health requirement will not take effect until the questionnaire is approved by the insurance company.

SPOUSE COVERAGE

Spouse coverage is available in $10,000 increments up to a maximum of $250,000. You are not required to participate in associate coverage under the Optional Life Insurance Plan in order to elect coverage for your spouse. However, spouse coverage cannot exceed the sum of your Optional Life coverage and the Company Paid Life Insurance Coverage. Newly elected spouse Optional Life Insurance and/or coverage in excess of $10,000 require evidence of good health. Please refer to the following guidelines for electing spouse Optional Life Insurance Coverage:


Amount

$10,000 spouse coverage cannot exceed associate coverage (Company Paid plus Optional Life)




$20,000 to $250,000 (in $10,000 increments); provided that spouse coverage cannot exceed sum of associate coverages (Company Paid plus Optional Life)


requirements � Evidence of good health � Medical underwriting

approval before coverage can be issued

If evidence of good health is required, you will need to fill out a good health questionnaire, available online at www.prudential.com/mybenefits. Coverage that is subject to the evidence of good health requirement will not take effect until the questionnaire is approved by the insurance company. Coverage also takes effect after the spouse or domestic partner is not home or hospital confined for medical care or treatment.

CHILD COVERAGE

Child coverage is available in $5,000 increments up to a maximum of $25,000 for each eligible dependent child at one low premium for all children in the family. You are not required to elect associate coverage under the Optional Life Insurance Plan in order for dependent children to be eligible for coverage.



Amount

Flat benefit options: � $5,000 � $10,000 � $15,000 � $20,000 � $25,000 The option you select applies to each eligible child

Coverage is guaranteed

OTHER PROGRAM FEATURES

SUICIDE PROVISION

Optional Life benefits will not be paid to the beneficiary if the covered individual commits suicide, while sane or insane, within two years from the effective date of coverage. Instead, the beneficiary will receive an amount equal to any contributions paid, without interest. If the covered individual commits suicide, while sane or insane, more than two years after the effective date of coverage, but within two years from the effective date of any increased coverage amount, the increased amount will not be paid to the beneficiary. Instead, the beneficiary will receive: � an amount equal to all contributions paid for the increased

amount, without interest; plus � an amount equal to the amount of coverage that was in effect

on the day before the effective date of the increased amount.

ACCELERATED BENEFIT OPTION (ABO)

The accelerated benefit option provides funds when you may need them most. If you are diagnosed with a terminal illness and a life expectancy of 24 months or less, up to 75% of the Life insurance Coverage amount (up to $600,000 maximum) may be requested. If your spouse is diagnosed with a terminal illness and a life expectancy of 24 months or less up to 75% of the Life Insurance Coverage amount (up to $187,500 maximum) may be requested. The advance payment permanently reduces the amount paid out as a death benefit. The remaining coverage amount will be reduced by the percentage of the benefit paid out. The premium must continue to be paid after an accelerated benefit has been disbursed. Premiums will be based on the remaining coverage amount. This accelerated benefit option is an accelerated death benefit that is intended to qualify for favorable tax treatment under the Internal Revenue Code. If the accelerated benefits qualify for such favorable treatment, they will be excluded from your income and not be subject to federal taxation. Tax laws relating to accelerated benefits are complex. You are advised to consult with a qualified tax advisor about circumstances under which you could receive accelerated benefits excludable from income under federal tax law. Receipt of accelerated benefits may affect your eligibility, or that of your spouse or family, for public assistance programs such as medical assistance (Medicaid), Aid to Families with Dependent Children (AFDC), supplementary Social Security income (SSI), and drug assistance programs. You are advised to consult with social service agencies concerning the effect receipt of accelerated benefits will have on public assistance eligibility for you, your spouse or your family. This accelerated benefit option is subject to state availability and plan design. The accelerated benefit option payable under dependents term life coverage is a spouse-only accelerated benefit option provision.

Accelerated benefits are only payable to you or your spouse and will not be payable if: � You have assigned your benefits; � You have notified the Sears Holdings Benefits Center that all or a

portion of your benefits are to be paid to your former spouse as part of a divorce agreement;

� The amount of your benefits is less than $10,000.

ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE (AD&D) The Accidental Death and Dismemberment (AD&D) option is designed to provide financial protection for you or your beneficiary if you or a covered family member dies or is seriously injured in a Covered Accident. You and your spouse may enroll for AD&D coverage in the amounts equal to your Optional Life coverages.

AD&D FEATURES

For the Loss of Percentage of AD&D

Benefit Payable

Life as a result of an accident 100% Two members1

100% One hand or foot 50% Thumb and index finger on same hand

25%

Sight of an eye 50% Hearing in both ears 50% Speech 50% Hearing in both ears and speech 100% Coma 1% per month, up to

100 months

Covered Losses Also Include Percentage of AD&D

Benefit Payable

Total paralysis of both upper and lower limbs

200%

Total paralysis of both lower limbs 75% Total paralysis of upper and lower limbs on one side of the body

50%

1A member is an eye, hand or foot.

OTHER BENEFITS

� Seat Belt Benefit: up to 10% of your accidental death benefit if you should die from injuries sustained in an accident while driving or riding in a private passenger car wearing a properly fastened seat belt. The benefit is an additional 10% of your accidental death benefit, but not less than $1,000 or more than $25,000.

� Day Care Benefits: 10% to $10,000 � Child Education Benefit: 10% to $25,000 � Spouse Education Benefit: 5% to $10,000 up to three years

subject to enrollment within 12 months of date of loss � Common Disaster Benefit: The difference between the

employee limit and spouse limit to a maximum of $250,000 is payable for a common accident or separate accidents within a 48 hour period provided insured has surviving dependent children. Exposure to the elements will be considered an accidental bodily injury.

� Air Bag Benefit: Additional benefit for loss of life as a result of an accident in an automobile while using an air


bag. The benefit is an amount equal to the lesser of (1) 10% of the amount of insurance on the person and (2) $25,000.

� Child Loss: Additional benefit for a qualified dependent child’s loss. This benefit only applies if (a) that loss is not a loss of life and (b) that child is insured for dependents insurance under the coverage on the date of the accident that results in that loss. This benefit is not payable if the child dies within 365 days of the accident.

� War Risk Rider: Limited war risk which excluded the United States, insured country of permanent residence, Afghanistan, Burundi, Central African Republic, Chad, Chechenia, Columbia, Congo, Darfur, East Timor, Georgia, Haiti, Iraq, Israel, Ivory Coast, Jammu & Kashmir, Kenya, Lebanon, Liberia, Nigeria, Somalia, Saudi Arabia and Yemen.

� Home/Vehicle Alteration Benefit: Home/Vehicle Alteration Benefit applies if the person suffers a Loss that requires home alteration or vehicle modification.

� Monthly Medical Premium Benefits: Additional benefit for monthly medical premiums applies if you suffer an accidental bodily injury that results in a Loss within 30 days of an accident; the accidental bodily injury results in your having to take a leave of absence for your job with your Employer. And if you choose to continue membership in your Employer’s medical plan beyond the time that it would otherwise end.

� Monthly Mortgage Benefit: Applies only if the following tests are met: (a) you suffer an accidental bodily injury that results in a Loss of life within 30 days of an accident. (b) your surviving spouse or domestic partner is a co-borrower on your Mortgage (c) you have a surviving spouse or domestic partner at the time of your death (d) you have an outstanding balance on your Mortgage at the time of your death.

WHEN AD&D BENEFITS ARE NOT PAYABLE

A loss is not covered if it results from any of these: � suicide or attempted suicide, while sane or insane; � intentionally self-inflicted injuries, or any attempt to inflict

such injuries; � sickness; � medical or surgical treatment of sickness; � any bacterial or viral infection. But, this does not include:

o a bacterial infection resulting from an accidental injury; or

o a bacterial infection resulting from accidental ingestion of a contaminated substance

� taking part in any insurrection; � War, or any act of War, except as provided by the War Risk

Hazard provision; � an accident that occurs while the person is serving on full-

time active duty for more than 30days in any armed forces. But this does not include Reserve or National Guard active duty for training;

� commission of or attempt to commit an assault or a felony; � travel or flight in any vehicle used for aerial navigation,

except as provided by any hazard provision, if any of these apply:

o the person is riding as a passenger in any aircraft not intended or licensed for the transportation of passengers

o the person is performing as a pilot or a crew member of any aircraft

� while operating a motor vehicle, being legally intoxicated as defined and determined by the laws of the jurisdiction where the loss or the cause of the loss was incurred;

� being under the influence of any narcotic unless administered or consumed on the advice of a doctor;

� participation in these hazardous sports: skydiving and parachuting.

Certain exclusions and limitations may be subject to state-specific requirements.

COST FOR COVERAGE

Use the rates below to calculate your monthly premium for coverage selected. Note: Your premium for Optional Life (including spouse coverage) is based on your age as of December 31 of the current plan year.

Associate and Spouse Optional Life

Monthly Rates Per $1,000 of Coverage

Age as of Next December 31

Non-Smoker Smoker

Under 25 $0.04 $0.05 25-29 $0.05 $0.05 30-34 $0.06 $0.07 35-39 $0.07 $0.10 40-44 $0.08 $0.12 45-49 $0.12 $0.16 50-54 $0.18 $0.27 55-59 $0.34 $0.49 60-64 $0.52 $0.74 65-69 $1.01 $1.43 70+ $1.63 $2.32

Associate and Spouse AD&D Coverage

Monthly Rates Per $1,000 of Coverage

(in addition to rates above)

Age Non-Smoker Smoker

Any age $0.011 $0.011

Child Life Insurance

Monthly Rates

Coverage Amount Flat Rate

$5,000 $0.59 $10,000 $1.18 $15,000 $1.77 $20,000 $2.36 $25,000 $2.95

EXAMPLES

Associate Coverage

Age 38, non-smoker, coverage is 3 times pay, eligible pay $30,000

$30,000 times 3 = $90,000 divided by $1,000 = 90 Life insurance: 90 times $0.07 = $6.30 AD&D insurance: 90 times $0.011 = $0.99 Total cost: $7.29 per month Spouse/Domestic Partner Coverage

Age 34, smoker, coverage is $40,000, no AD&D coverage

$40,000 divided by $1,000 = 40 Life insurance: 40 times $0.07 = $2.80 per month Child Coverage

3 children, coverage is $5,000 per child Monthly cost = $0.59 per month


COVERAGE CHANGES

Coverage amounts can be adjusted as your life insurance needs change, within program guidelines. You may apply for new coverage as a Late Entrant or for additional coverage at any time. However, coverage will be subject to completion of a statement of good health questionnaire and underwriter approval before coverage can be issued. The associate must also be Actively at Work and the dependent spouse or domestic partner also must not be home or hospital confined for medical care or treatment in order for the increase to be effective. INCREASES IN ELIGIBLE EARNINGS

If your earnings have increased since the last time a reclassification calculation was performed on your Eligible Earnings, the increase will be effective on the next Plan Reclassification Date at which time you will qualify for a higher amount of Optional Life Insurance. If your Eligible Earnings increase enough to make you eligible for additional coverage, your Optional Life Insurance Coverage and corresponding payroll deduction will automatically increase on the next Plan Reclassification Date, provided you are Actively at Work and able to Perform Normal Activities. HOW TO CANCEL COVERAGE You may cancel your coverage at any time. For further information contact the Sears Holdings Benefits Center at 1-888-88sears (1-888-887-7327).

DESIGNATING A BENEFICIARY

A beneficiary is the person(s) who receives the life insurance and AD&D benefit if the covered individual dies while covered by the Plan. You must name a beneficiary for your Optional Life insurance and AD&D benefit coverage. You can designate your initial beneficiary or change your beneficiary in the future in either of two ways: � Beneficiary updates can be completed on the

www.88sears.com Web site by clicking the “Enroll/View/Change Coverage at Your Benefits Resources™” link under Benefits. Once you are logged in, select “Change/Update Beneficiary(ies) and you will automatically be directed to Prudential’s Web site to make your change.

� Complete a Beneficiary Designation form (available upon request from the Sears Holdings Benefits Center) and mail it to:

Prudential Insurance Co. of America P.O. Box 11786 Philadelphia, PA 19176-076

You may name any person(s), any organization or your estate as your beneficiary. If more than one beneficiary is designated, the beneficiaries will share the benefit equally unless you indicate otherwise. When two or more beneficiaries are named and you do not want them to share equally, you must indicate the percentage of the benefit each beneficiary is to receive. Do not specify dollar

amounts.

You are automatically the beneficiary for any coverage your spouse and child(ren) have under the Plan.

CONTINUING YOUR COVERAGE

Upon termination of employment, you will receive information about continuing your insurance coverage directly from Prudential. You may elect to “port” or “convert” your coverage within 31 days of your termination.

PORTABILITY OPTION

If you have had associate coverage under the Optional Life Insurance Plan for at least 12 months and you terminate employment, you can continue up to 50% of your full coverage amount on a direct bill basis under the portability option. However, the coverage amount must be equal to or greater than $20,000. This coverage reduces to 60% at age 65, to 50% at age 70, and to 25% at age 75. Dependent (spouse and child) coverage is not portable. Portability is subject to state availability and plan design. Portability is not available if you are not Actively at Work when you are terminated.

CONVERSION OPTION

You are eligible to convert coverage under the Plan to an individual policy, an amount which represents the difference between the face amount of your coverage at the time coverage terminates and the amount you elect to continue through the portability option. Covered dependents may also convert their full amount of coverage to an individual policy.

CLAIMS INFORMATION

HOW TO FILE A CLAIM

To report a dependent life, Accelerated Benefits Option (ABO) or Accidental Death and Dismemberment (AD&D) claim, contact the Sears Holdings Benefits Center through 1-888-88sears. A claim kit will be sent to you or, if applicable, your beneficiary. The claim form must be completed and returned to the Claims Administrator at:

Prudential Insurance Company of America Group Life Claim Division P.O. Box 8517 Philadelphia, PA 19176-8517

PAYMENT OF BENEFITS

Upon approval of your claim, you (or your beneficiary) will be notified of the benefits to be paid. If any benefits have been denied, a written explanation will be provided. If you do not have a beneficiary on file, benefits will be paid in the following order: � your spouse; � your child(ren); � your parent(s); � your sibling(s); � your estate. For dependent coverage, benefits will be paid to you if you survive your dependent. Benefits will be paid to your estate if: � your dependent dies at the same time your death occurs or it cannot

be determined; or � your dependent dies within 24 hours of your death. In any other instance, benefits will be paid, at the Claims Administrator’s discretion, to one or more of the following persons who are related to your dependent and who survive your dependent: � parent; � child; � brother; � sister.


If there is no surviving relative, the amount will be payable to your dependent’s estate.

PRUDENTIAL ALLIANCE ACCOUNT

When a claim is paid, the full amount of insurance proceeds is paid in a single distribution to an interest-bearing Alliance Account set up in the beneficiary’s name. The proceeds earn interest from the date the account is opened and the beneficiary can withdrawal all or some of the funds at any time. Alliance Account balances are not insured by the Federal Deposit Insurance Corporation.

ASSIGNMENT

You may be able to assign your rights under the Plan. For more information about assignment of benefits, contact a Prudential customer service representative at 1-888-88sears.


If you feel your claim for benefits has been improperly denied, you have the right to appeal the decision. The following details about your benefits coverage, including claims appeal, are provided in the Other Information section of this Handbook: � When you can make changes to your benefits � Coverage continuation for certain benefits � Contact information for benefit claims administrators and

insurance carriers


Actively at Work means an individual is regularly working at Sears Holdings Corporation or its related companies and is physically able to perform the normal duties of his or her occupation. Controlled Substance is any substance defined as such in Title II of the Federal Comprehensive Drug Prevention and Control Act of 1970 as it is now and as it may be amended. Covered Accident means an accident that results in death, unless such death results from or is caused or contributed to by a physical or mental illness, an infection, suicide or attempted suicide, self-inflicted injury, use of a Controlled Substance, war or warlike action in time of peace, or the insured person’s committing or trying to commit a felony, an assault or other serious crimes. Refer to Section When AD&D Benefits Are Not Payable. Eligible Earnings are your prior payroll year earnings, as determined by Sears Holdings established Company practices (or, if you are newly hired, your estimated annual earnings, as determined by Sears Holdings), rounded to the next higher $1,000. If your earnings are an even multiple of $1,000, then no rounding will occur. Hospitalized means inpatient confinement for hospital care, hospice care or care in an intermediate or long-term care facility. It also includes outpatient hospital care for chemotherapy, radiation therapy or dialysis treatment. Late Entrant is an applicant enrolling in the Optional Life Insurance Plan after the 31 days has passed. Life Insurance Coverage is the stated amount of life insurance benefit provided on the associate’s life or the life of the associate’s spouse or child(ren).

Perform Normal Activities means an individual is not Hospitalized, not confined at home for sickness or injury and not receiving or entitled to receive disability or sick pay income from any source due to illness or injury. Plan Reclassification Date is the annual date set by the Plan Administrator to determine increases in Earnings for the purposes of deciding future amounts of Optional Life Insurance. The Plan Reclassification Date is July 1 of each year, unless it is changed prospectively by the Plan Administrator. War or Warlike means declared or undeclared war, and includes resistance to armed aggression, but this does not include Reserve or National Guard active duty for training.

IMPORTANT NOTE

The Optional Life Insurance Plan is a welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended (ERISA). This section of the Handbook, together with the applicable provisions in the Introduction and Other

Information sections, are intended to constitute a summary plan description (SPD) for the Optional Life Insurance Plan in accordance with ERISA.

Sears Holdings Benefits Handbook2012 Full-time Hourly 11-i Savings Plan

Sears Holdings Savings Plan

TABLE OF CONTENTS About the Savings Plan ...........................................................................................................................................................11-1

Recent History ..........................................................................................................................................................................11-1 How the Savings Plan Works .................................................................................................................................................11-1

Who is Eligible and When ..............................................................................................................................................11-1 Eligible Pay ....................................................................................................................................................................11-1 Your Contributions Under the Savings Plan ...................................................................................................................11-1 Before-tax Contributions ................................................................................................................................................11-1 After-Tax Contributions ..................................................................................................................................................11-2 Automatic Increase Feature ...........................................................................................................................................11-2 Before-tax Versus After-Tax Savings .............................................................................................................................11-2 Rollover Contributions ....................................................................................................................................................11-2 Catch-Up Contributions ..................................................................................................................................................11-2 Beneficiary Designation .................................................................................................................................................11-3

Company Matching Contributions ........................................................................................................................................11-3 Company Match Eligibility Rules ....................................................................................................................................11-3 Employee Stock Ownership Plan ...................................................................................................................................11-4

Accounts ....................................................................................................................................................................................11-4 Managing Your Accounts ...............................................................................................................................................11-4 Vesting—Ownership of Your Accounts ..........................................................................................................................11-4 Forfeitures ......................................................................................................................................................................11-4

Investment Funds ....................................................................................................................................................................11-4 Investment Choices ........................................................................................................................................................11-4 The Importance of Diversifying Your Account ................................................................................................................11-5 Automatic Rebalancing Feature .....................................................................................................................................11-5 Institutional Investment Funds .......................................................................................................................................11-5 Description of Investment Choices .................................................................................................................................11-5 Target Retirement Funds ...............................................................................................................................................11-5 Stable Value Fund ..........................................................................................................................................................11-6 Restrictions on the Stable Value Fund ...........................................................................................................................11-6 US Bond Index Fund ......................................................................................................................................................11-6 Bond Fund ......................................................................................................................................................................11-7 Large Cap Value Equity Fund ........................................................................................................................................11-7 S&P

® 500 Index Fund ....................................................................................................................................................11-7

Large Cap Growth Equity Fund ......................................................................................................................................11-7 Small-Mid Cap Growth Equity Fund ...............................................................................................................................11-7 Small-Mid Cap Index Fund .............................................................................................................................................11-7 Small-Mid Cap Value Equity Fund .................................................................................................................................11-7 Global Equity ex US Index Fund ....................................................................................................................................11-7 International Equity Fund ...............................................................................................................................................11-8 Sears Holdings Corporation Stock Fund ........................................................................................................................11-8 Company Match Diversification Tax Considerations ......................................................................................................11-8 Voting Rights for Sears Holdings Stock .........................................................................................................................11-8 Self-Directed Brokerage Account ...................................................................................................................................11-8 Daily Valuation of Your Account(s) ................................................................................................................................11-8 Investment Performance ................................................................................................................................................11-8 Fund Expenses ..............................................................................................................................................................11-9

Making Changes .....................................................................................................................................................................11-10 Changes to Contributions Throughout the Year ...........................................................................................................11-10 Changes to Investment Choices Throughout the Year ................................................................................................11-10 Default Fund .................................................................................................................................................................11-10

Loans ........................................................................................................................................................................................11-10 Who Can Request a Loan ............................................................................................................................................11-10 How Much You Can Borrow .........................................................................................................................................11-10 Loans Are Taken From What Accounts .......................................................................................................................11-10

Sears Holdings Benefits Handbook2012 Full-time Hourly 11-ii Savings Plan

Term of Loan ................................................................................................................................................................11-10 How Interest is Determined ..........................................................................................................................................11-10 Security For Your Loan ................................................................................................................................................11-11 How Your Loan is Repaid ............................................................................................................................................11-11 Failure to Repay Your Loan .........................................................................................................................................11-11 Applying for a Loan ......................................................................................................................................................11-11

Withdrawals .............................................................................................................................................................................11-11 Withdrawals During Employment .................................................................................................................................11-11 Withdrawal of Your Accounts After Termination of Employment .................................................................................11-12 Form of Payment ..........................................................................................................................................................11-12 Deferring Payment .......................................................................................................................................................11-13 Payment Upon Death ...................................................................................................................................................11-13

Tax Considerations ................................................................................................................................................................11-13 Withholding of Income Taxes .......................................................................................................................................11-13 Ten Percent Additional Tax ..........................................................................................................................................11-13 Effect on Other Benefits ...............................................................................................................................................11-13 Company Match Diversification Tax Considerations ....................................................................................................11-13

Limits on Contributions ........................................................................................................................................................11-14 Before-tax Contributions Limit ......................................................................................................................................11-14 Non-Discrimination Test ...............................................................................................................................................11-14

Compliance With Section 404(c) of ERISA ........................................................................................................................11-14 Investment Committee and Advisor ...................................................................................................................................11-14 Common Shares .....................................................................................................................................................................11-14 Where You Can Find More Information ..............................................................................................................................11-14 Terms to Know........................................................................................................................................................................11-15 This section constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933. The full prospectus includes the section in this handbook entitled “Other Information” and the Sears Holdings Corporation Form 10-K.

Please Note:

The information in this section of the Handbook is effective as of April 3, 2012.

Sears Holdings Benefits Handbook2012 Full-time Hourly 11-1 Savings Plan

ABOUT THE SAVINGS PLAN

The Sears Holdings Savings Plan (“Savings Plan”) enables you, as an eligible associate, to save for retirement by deferring a portion of your pay on a before-tax basis to your Savings Plan accounts, and as a result, deferring federal and (in most cases) state income tax on these contributions. The Savings Plan is sponsored by Sears Holdings Corporation (referred to as the Company) and covers eligible associates of Sears Holdings Corporation (“Sears Holdings”) and its wholly owned subsidiaries that have elected to be participating employers under the Savings Plan (“Employers”). The assets of the Savings Plan are held under the Sears Holdings 401(k) Savings Plan Master Trust (“Master Trust”), along with the assets of the Sears Holdings Puerto Rico Savings Plan. These assets are co-mingled for investment purposes, enabling the Master Trust to negotiate lower fees on behalf of all plan participants. The trustee of the Master Trust is currently State Street Bank and Trust Company (“Trustee”). With respect to the assets of the Sears Holdings Puerto Rico Savings Plan, the Trustee acts as the custodian. The assets of each participating plan under the Master Trust constitute a separate “Trust Fund.” Information regarding the Savings Plan can be obtained by calling the Sears Holdings Benefits Center at 1-888-88sears. You may also visit the Savings Plan website through www.88sears.com.

RECENT HISTORY

Effective April 1, 2006, the Kmart Retirement Savings Plan was merged into the Savings Plan and all eligible associates under the Kmart Retirement Savings Plan became eligible associates under the Savings Plan. Effective January 1, 2007, eligible associates under the Kmart Retirement Savings Plan for Manteno Distribution Center Union Employees became eligible associates under the Savings Plan. The Kmart Retirement Savings Plan for Manteno Distribution Center Union Employees was frozen as of December 31, 2006 and was merged into the Savings Plan as of August 31, 2007.

HOW THE SAVINGS PLAN WORKS

The Savings Plan provides you with an easy and effective way to build savings for your retirement. Generally, you may elect to contribute from 1% to 50% of your eligible pay on a before-tax basis and/or from 1% to 25% of your eligible pay on an after-tax basis, subject to certain limits. Total combined before-tax and after-tax contributions cannot exceed 50% of your eligible pay. After one year of service in which you work at least 1,000 hours, you will be eligible for a Company matching contribution, if any. Currently there is no Company matching contribution. The Company matching contribution was suspended in late January 2009. You may choose to invest your savings in a variety of investment funds, including a fund invested in common shares of Sears Holdings Corporation (“Sears Holdings stock”).

WHO IS ELIGIBLE AND WHEN

All regular associates of Sears Holdings (including associates of the Employers that have adopted the Savings Plan as participating employers) who are not covered by a collective bargaining agreement are eligible to participate in the Savings Plan. Individuals who are classified by the Company as temporary, seasonal, peak, on call, interns or independent contractors or who are employees of a

leasing organization or agency are not eligible to participate in the Savings Plan. Associates covered by a collective bargaining agreement may only participate in the Savings Plan if the agreement specifically provides for participation in the Savings Plan. Associates of the bargaining units for the Kmart Distribution Centers in Groveport, Ohio and Forest Park, Georgia do not participate in the Savings Plan. Puerto Rico associates are offered, if eligible, participation in the Puerto Rico savings plan sponsored and maintained for Puerto Rico associates. Newly hired associates are eligible to participate in the Savings Plan as of the first day of the third month after date of hire.

ELIGIBLE PAY

For Savings Plan contribution purposes your eligible pay includes regular pay, which includes (but is not limited to) hourly wages, salary, overtime pay, commission/draw, shift differential, standby pay, paid time off (normal vacation, holiday, personal and illness pay), Sunday premium pay, business training pay, short-term disability pay (other than state disability income) and annual or regular incentive pay. Eligible pay for contribution purposes does not include special pay, which includes (but is not limited to) accrued unused vacation pay issued in a lump sum, salary continuation pay (whether paid in lump sum or installments), taxable moving allowances and any related tax gross-up, merchandise and trip awards, cash prizes, tuition reimbursement, special bonuses which include (but are not limited to) sign-up bonuses, stay bonuses and referral bonuses, and state disability income.

YOUR CONTRIBUTIONS UNDER THE SAVINGS PLAN

Under the Savings Plan, unless subject to additional limits, you can contribute, in whole percentages, up to 50% of your eligible pay on a before-tax basis and/or up to 25% of your eligible pay on an after-tax basis. Total combined before-tax and after-tax contributions cannot exceed 50% of your eligible pay. Prior to the suspension of the Company matching contribution in late January 2009, any before-tax contributions you made in excess of 5% of your annual eligible pay and any after-tax contributions were not eligible for a share of the Company matching contribution for that year (if any). As a result of the match suspension, no employee contributions will be matched until the suspension is lifted and a new match adopted. Your before-tax contributions are subject to Internal Revenue Service (IRS) annual contribution limits as described in the Before-

tax Contributions section. In addition, the Company may reduce the amount of pay you are permitted to defer in order to comply with certain rules and limitations imposed by law. Currently, and until further notice, “Highly Compensated Employees” (HCE’s) will be capped at a specific deferral percentage of pay. As of the publication of this handbook, the HCE contribution limits are 2% on a before-tax basis and 0% on an after-tax basis. If these limits are changed, affected eligible employees will be notified. For the 2012 plan year, HCE’s are those employees who earned at least $110,000 from Sears Holdings (including any related company) in 2011.

BEFORE-TAX CONTRIBUTIONS

Before-tax contributions reduce your pay for federal and (in most cases) state income tax purposes (but not for Social Security tax). At your election, they are deposited into your before-tax contribution


account as soon as practicable after the payroll date to which they relate. These contributions are called “before-tax” because the contributions are made before income taxes are withheld. Thus, the federal and (in most cases) state income tax you owe on the before-tax contributions and their investment earnings is postponed until they are withdrawn from the Savings Plan. Before-tax contributions are limited to a specific dollar amount each calendar year set by the IRS. For 2012, the annual before-tax contribution limit is $17,000 (excluding catch-up contributions). See also “Catch-Up Contributions” for additional information. Keep in mind that, although the before-tax contribution limit under the Savings Plan is 50% of your eligible pay, for 2012 you cannot exceed the IRS annual before-tax contribution limit of $17,000. And, if you are an HCE, you are subject to the additional limits described above. See also “Limits on Contributions” for additional information.

AFTER-TAX CONTRIBUTIONS

After-tax contributions are treated as taxable income when they are deducted from your pay. You may choose to contribute up to 25% of your eligible pay on an after-tax basis; provided that your total before-tax and after-tax contributions do not exceed 50% of your eligible pay. If you are an HCE, your after-tax contributions are subject to the additional limits described above. At your election, they are deposited in your after-tax contribution account as soon as practicable after they are deducted from your pay. The contributions are not taxed again when you later withdraw them from the Savings Plan. However, earnings on your after-tax contributions are subject to tax upon withdrawal. AUTOMATIC INCREASE FEATURE You may use this feature to gradually increase your contributions over the years. The increases continue annually until you reach your target rate.

BEFORE-TAX VERSUS AFTER-TAX SAVINGS

Below is an example that shows the difference between saving on a before-tax basis and saving on an after-tax basis. The example assumes that you earn $20,000 a year and contribute 6% of your pay to the Savings Plan. Federal income taxes are estimated at 10%. Social Security tax is deducted from your pay in both cases, so it is not included in this example. This example is for illustration only, and does not take into account state and other taxes that might apply.

$20,000 Annual Pay Before-tax After-Tax

Annual Pay $20,000 $20,000 Before-tax Contributions (6%)

–1,200 N/A

Income Subject to Tax 18,800 20,000 Federal Taxes (10%) –1,880 –2,000 Net Income 16,920 18,000 After-Tax Contributions (6%) N/A –1,200 Spendable Income $16,920 $16,800

As the example shows, you can save the same amount on a before-tax basis and still take home more pay. That is money that you can spend or use to increase your contributions to the Savings Plan. Also, once the suspension is lifted, before-tax contributions are eligible for a share of the Company matching contributions.

ROLLOVER CONTRIBUTIONS

As a participant, you also can contribute to the Savings Plan through a rollover contribution. A rollover contribution is all or a part of an eligible distribution from a former employer’s qualified retirement plan or a rollover Individual Retirement Account (IRA) that you elect to deposit into a rollover account in your name under the Savings Plan. You will be eligible to make a rollover contribution once you are eligible for and have enrolled in the Savings Plan. A rollover is subject to certain conditions, including approval by the Plan Administrator: � It may be paid directly to the Savings Plan from your former

employer’s qualified retirement plan; or � It may be made from a traditional or conduit IRA, or by you

within 60 days after payment has been made to you from your former employer’s qualified retirement plan; and

� It must be paid in cash (i.e., property such as stock will not be accepted).

Any rollover contribution accepted by the Plan Administrator is not considered in determining the maximum amount that you can contribute for that year. Rollover contributions are not eligible for a share of any Company matching contributions. You will be required to complete a rollover form and submit supporting documents (showing that you have received an eligible rollover distribution) before your rollover into the Savings Plan will be approved. If you do not make an investment election on your rollover form, your rollover contribution will be automatically invested in one of the Target Retirement Funds based on the year in which you would attain age 65 (see the Investment Funds section for a description of the available investment funds).

CATCH-UP CONTRIBUTIONS

Savings Plan participants who are or will be age 50 or older during a plan year are eligible to make an additional before-tax contribution, known as a “catch-up contribution” up to 25% of eligible pay. For 2012, the annual catch-up contribution limit is $5,500. The catch-up contribution limit is subject to adjustment by the U.S. Treasury. This limit, however, is subject to the 25% Plan limit. In addition to the age requirement, during the plan year you must also reach one of the following annual before-tax contribution limits in order for before-tax contributions after reaching the applicable limit to continue to be designated as catch-up contributions as of year end:

� Savings Plan before-tax contribution limit of 50% of your eligible annual pay;

� In the case of an HCE, the lower before-tax contribution limit currently imposed on the HCE; or

� IRS before-tax contribution limit of $17,000.

If your eligible annual pay is less than $34,000 in 2012, your before-tax contributions won’t exceed the IRS limit of $17,000 for that year even if you contribute 50% of your eligible pay. In this case, the Savings Plan before-tax contribution limit of 50% would apply. For example, if you are 50 (or will be during the plan year) and earn $28,000 in 2012, once you contribute $14,000 on a before-tax basis you are eligible to make catch-up contributions (up to an additional $5,500). If instead you earn $34,000 or more in 2012 (but are not an HCE), the Savings Plan before-tax contribution limit of 50% for that year would not apply because it would cause your before-tax


contributions to exceed the IRS annual before-tax contribution limit of $17,000. Therefore, your before-tax contributions are subject to the IRS contribution limit instead. For example, if you are age 50 (or will be during the Plan year) and earn $34,000 or more in 2012, once you contribute $17,000 on a before-tax basis, you are eligible for catch-up contributions (up to an additional $5,500). And, if you are an HCE in 2012, the Savings Plan before-tax limit contribution limit of 50% would not apply to you because you would be subject to the 2% contribution limit. For example, if you are age 50 (or will be during the Plan year) and an HCE, once you contribute up to the 2% limit on a before-tax basis, you are eligible for catch-up contributions (up to an additional $5,500). After the end of each plan year, testing is performed to ensure all contributions are within Savings Plan and federal limits. If your before-tax contributions did not reach one of the applicable annual before-tax contribution limits described above, some or all of your catch-up contributions will need to be re-classified as regular before-tax contributions. Your catch-up contributions will be allocated to the same investments you have chosen for your before-tax contributions. If you live in a state that does not conform to federal tax legislation regarding catch-up contributions, you may have additional state tax obligations.

BENEFICIARY DESIGNATION

When you join the Savings Plan, you should complete a Beneficiary Authorization Form. Your beneficiary is the person you want to receive the balance in your account(s) in the event of your death. � If you are not married, you may name anyone as your

beneficiary. � If you are married, your primary beneficiary for all of your

account(s) is automatically your spouse, unless your spouse consents in writing to your naming someone else as primary beneficiary for all or part of your account(s). Your spouse’s signature on the beneficiary authorization form must be witnessed by a notary public. You can change your beneficiary designation at any time, but again, notarized spousal consent is required if you are married and wish to name a non-spouse primary beneficiary.

You can also designate one or more contingent or “secondary” beneficiaries to receive your Savings Plan assets if all of your primary beneficiaries die before you. You may change your beneficiary designation(s) at any time by completing and submitting a Beneficiary Authorization Form. Only a properly completed and filed Beneficiary Authorization Form will supersede an earlier Beneficiary Authorization Form. Also, only a Beneficiary Authorization Form signed and dated (or re-signed and re-dated) by you will be considered valid. If you do not designate a beneficiary, then upon your death your benefit will be paid to your legal spouse as of the date of your death. If you’re not married as of the date of your death, your benefit is payable to your estate. COMPANY MATCHING CONTRIBUTIONS

Please note that the Company matching contribution was suspended effective for payroll periods after January 31, 2009, until further notice.

The Company matching contribution, if any, is deposited in your Company contribution account shortly after the end of each quarter for which such a contribution is to be made. The Company matching contribution may be made in cash, in Sears Holdings stock, or a combination of the two, at the discretion of the Company. � Any match made in cash will be invested according to the

investment elections for your before-tax contributions at the time the match is deposited.

� Any match made in Sears Holdings stock will be automatically invested in the Sears Holdings Corporation Stock Fund.

You may diversify your matching contributions into other investment funds within the Savings Plan, once they have been credited to your account. The Company has the authority to approve an additional discretionary matching contribution under the Savings Plan. If such discretionary contributions are made, they will be subject to certain statutory and regulatory limitations applicable to safe harbor 401(k) plans, and will be subject to a 3-year cliff vesting schedule.

COMPANY MATCH ELIGIBILITY RULES

You meet the eligibility service requirement for the Company matching contribution (if any) on the first anniversary of your hire date, provided you are credited with at least 1,000 hours of service during your first anniversary year. If you do not complete 1,000 hours of service during your first anniversary year, you must complete 1,000 hours of service during the calendar year following your hire date, or in any subsequent calendar year. Hour of Service: In general, an hour of service means any hour for which you are paid by an Employer (or related company) including paid time at work and paid time off, such as vacations and holidays. Your employment with Sears Holdings and any other related company is included in computing your hours of service. Participating Employer: If you complete 1,000 hours of service within your first anniversary year or, alternatively, during any subsequent calendar year, and your employer or business group is not participating in the Savings Plan on your anniversary date or at the end of such subsequent calendar year, you will become a participant on the date your company or business group becomes a participating Employer. Periods of Service Applicable to Eligibility for the Company Match:

Generally, all periods of service with Sears Holdings and any of its wholly owned companies are aggregated for purposes of determining your eligibility. Consequently, it is very important that you inform your Employer if you have prior service with the Company or one of its wholly owned companies. However, if you were not a participant when you incurred a termination of employment and are then rehired, your prior service will not be reinstated for eligibility or vesting purposes unless you are rehired before the greater of five years or your number of years of service prior to your termination. If your prior service is not reinstated, you will be treated like a new associate for purposes of the Savings Plan.

EMPLOYEE STOCK OWNERSHIP PLAN

On December 20, 1989, an employee stock ownership plan feature (the “ESOP”) was added to the Savings Plan. Under the ESOP, in 1990, the Savings Plan purchased 800 million dollars of Sears, Roebuck and Co. stock. The purchase was funded by a loan (ESOP Loan) from Sears, Roebuck and Co.


As such, the ESOP portion of the Savings Plan previously included a leveraged employee stock ownership plan (the “LESOP”). The loan to the ESOP has been completely paid and all stock previously held under this LESOP has been released from the suspense account and allocated to participant accounts. All employer contributions in Sears Holdings stock to the Savings Plan are made to the ESOP portion of the Savings Plan or transferred to the non-ESOP portion by participant election to invest such amounts in the investment funds held under the non-ESOP portion of the Savings Plan.

ACCOUNTS

The following accounts are maintained for you under the Savings Plan:

� An Employee before-tax contribution account, which reflects

your interest in the total account balances attributable to your before-tax contributions.

� An Employee after-tax contribution account, which reflects your interest in the total account balances attributable to your after-tax contributions.

� A Pre-2/2009 SHC Match account, which reflects your interest in the total account balances attributable to the employer matching contributions, if any, made by the Company and/or the participating Employers, prior to 2009.

� A Post 1/2009 SHC Match account, which reflects your interest in the total account balances attributable to the employer matching contributions, if any, made by the Company after 2009.

� A discretionary SHC Match account, which reflects your interest in the total account balances attributable to the employer discretionary matching contributions, if any, made by the Company and/or the participating Employers.

� A before-tax rollover account, which reflects your interest in the total account balances if you have made a before-tax rollover contribution to the Savings Plan.

� An after-tax rollover account, which reflects your interest in the total account balances if you have made an after-tax rollover contribution to the Savings Plan.

� A prior plan company contributions account - If you are a longer service associate or participated in another 401(k) plan that was merged into the Savings Plan, you may also have an account that separately tracks prior employer contributions.

MANAGING YOUR ACCOUNTS

You can manage your accounts through the Savings Plan website, accessible through www.88sears.com or by calling 1-888-88sears and following the prompts to the Savings Plan menu. The Plan Administrator ensures that account statements are distributed shortly after the end of each calendar quarter. You may elect to access these statements electronically rather than receiving them in the mail. You can also generate a statement for any time period through the Savings Plan website. If you have any questions about your account statement or if you believe there may be an error, you should contact the Sears Holdings Benefits Center through 1-888-88sears.

VESTING—OWNERSHIP OF YOUR ACCOUNTS

Vesting refers to your ownership of the balance in your accounts. Effective January 1, 2006, active associates became 100% vested in all of their accounts, except for the portion of the employer contribution account attributable to any additional discretionary

matching contributions or to prior 401(k) plans merged into the Savings Plan. Discretionary matching contributions are subject to a 3-year vesting schedule. One year of vesting service is credited for each plan year in which you work 1,000 hours. Associate account balances that were transferred from the Kmart Retirement Savings Plan to this Savings Plan April 1, 2006 continue to be subject to the applicable vesting requirements of the prior Kmart Retirement Savings Plan. Associate account balances that were transferred from the Kmart Retirement Savings Plan for Manteno Distribution Center Union Employees on August 31, 2007 will continue to be subject to the applicable vesting requirements of the prior Kmart Retirement Savings Plan for Manteno Distribution Center Union Employees.

FORFEITURES

Notwithstanding the above, if the Plan Administrator has to return any of your before-tax contributions to you because you have contributed more than the IRS or Savings Plan annual before-tax contribution limits, or you were not eligible to make the contribution, any Company matching contribution or discretionary matching contributions attributable to those before-tax contributions will be forfeited. The Plan Administrator monitors the contribution amounts to try to prevent the annual before-tax contribution limits from being exceeded and to avoid, as much as reasonably possible, the need for forfeitures. If the Savings Plan does not pass certain annual nondiscrimination tests, refunds will need to be made to certain HCE’s. The reason for the additional contribution limits on HCE’s (as described above) is to avoid or at least minimize the refunds that need to be made to certain HCE’s to pass these tests. Forfeited amounts may be used to offset future Company contributions, offset reasonable administrative expenses or reinstate forfeitures for associates who return and become fully vested in amounts they had not been vested in when they terminated.

INVESTMENT FUNDS

INVESTMENT CHOICES

Your contributions and Company contributions to the Savings Plan, and earnings and losses from all contributions, less payments made by the Trustee, are held in the Trust Fund. (See the Other

Information section in of this handbook for more information.) The Trust Fund may be used only for the exclusive benefit of participants and their beneficiaries, and for the payment of reasonable expenses of administering the Savings Plan and the Trust Fund. The Investment Committee for the Savings Plan selects the investment funds offered under the Savings Plan, based on the recommendation of the investment advisor to the Savings Plan and Master Trust (“Advisor”). The current Advisor is Towers Watson Investment Consulting (formerly known as Watson Wyatt Investment Consulting). The Trustee keeps your contributions invested in one or more of the offered investment funds according to your instructions. The Savings Plan is a participant-directed investment plan that is intended to be a plan described in ERISA Section 404(c) and the applicable Department of Labor regulations. (See the Compliance with Section 404(c) of ERISA section in this handbook). This means that you have the choice of separately investing your contributions in any combination of the available investment funds in one-percent increments. The recordkeeper and Trustee only change your interests in the investment funds according to your instructions. Investment changes can be made


effective each day of the year that the New York Stock Exchange is open, unless one of the exceptions described below applies. You can also transfer funds from any investment fund offered (after the initial allocation of your contributions) to a Self-Directed Brokerage Account. Note: No contributions may be invested directly in a Self-Directed Brokerage Account. Instead, your contributions must first go into any of the investment funds (except the Stable Value Fund) from which they can then be transferred to your Self-Directed Brokerage Account. See the Making Changes section for how to change your investment elections. The available investment fund options are subject to change or elimination by the Investment Committee at any time without prior notice. However, the Plan Administrator and the Investment Committee make every effort to provide prior notice of such changes.

THE IMPORTANCE OF DIVERSIFYING YOUR ACCOUNT

To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk. In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the Savings Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerances for risk. It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the Savings Plan to help ensure that your retirement savings will meet your retirement goals. Visit the Savings Plan website or www.dol.gov/ebsa/investing/html for more information on individual investing and diversification. AUTOMATIC REBALANCING FEATURE Because different investments can gain or lose value at different times and different speeds, it’s easy for an investment mix to shift from what was originally intended. To avoid that situation, you can elect to have your portfolio automatically rebalanced every 90 days, every 180 days or annually.

INSTITUTIONAL INVESTMENT FUNDS

All of the investment options, except the Sears Holdings Corporation Stock Fund and the Self-Directed Brokerage Account, are “institutional” funds. This means the funds are specifically designed for large institutional investors, such as a company-sponsored savings plan, versus a retail mutual fund that is open to individual investors. The advantage of institutional funds is lower management fees. Investment returns for institutional investments are not published on a regular basis. To access fund performance

information, you can visit the Savings Plan’s website 24 hours a day through www.88sears.com.

DESCRIPTION OF INVESTMENT CHOICES

The following descriptions of the investment funds available under the Savings Plan are provided to help you make your investment decisions. Among the investment funds, the Sears Holdings Corporation Stock Fund has the greatest degree of investment risk and the Stable Value Fund has the least amount of investment risk. Through a Self-Directed Brokerage Account, which is also described here, you are also able to create your own individual investment fund portfolio, with investments that are not available through the Savings Plan. The Trustee or any of the investment managers have the authority to maintain a cash balance or short-term income securities, including a commingled fund of the trustee, pending the selection and purchase of permanent investments or for liquidity purposes. The Trustee, in its discretion, or as directed by any investment manager, may limit the daily volume of its purchases or sales of securities, and as a result, may limit the Savings Plan’s transactions in any or all of the investment funds. The Trustee may not complete Savings Plan transactions on a particular day for a number of reasons, including, but not limited to, suspension of trading in an asset important to one of the investment funds, insufficient liquidity within any investment fund to process transactions or a major market disruption. As a result, there may be a delay in accepting and/or execution of participants’ transactions for one or more days. Because the performance and investment holdings of each fund change frequently, a fund overview is available via the Savings Plan website at www.88sears.com, or you can request a copy by contacting the Sears Holdings Benefits Center through 1-888-

88sears. The Savings Plan offers the following investment options. Core Funds

• Income Fund • 2010 Fund • 2020 Fund • 2030 Fund • 2040 Fund • Stable Value Fund • US Bond Index Fund • Bond Fund • Large Cap Value Equity Fund • S&P 500 Index Fund • Large Cap Growth Equity Fund • Small-Mid Cap Growth Equity Fund • Small-Mid Cap Index Fund • Small-Mid Cap Value Equity Fund • Global Equity ex US Index Fund • International Equity Fund • Sears Holdings Corporation Stock Fund Brokerage Option

• Self-Directed Brokerage Account A detailed description of each investment option is provided below.

TARGET RETIREMENT FUNDS

Target Retirement Funds are designed to simplify the investment selection process and make it easier to manage and adjust your strategy through different stages of your life. A Target Retirement


Fund may be an appropriate option if you do not have the time to choose and manage a mix of individual funds yourself or are uncomfortable doing so. You can simply select the Target Retirement Fund with the year that most closely matches your expected retirement year and direct all or a portion of your contributions into that one fund. For example, if you are currently age 40 and plan on retiring at age 60, you may want to consider investing in the 2030 Target Retirement Fund. Target Retirement Funds are designed to adjust their asset mix between stocks and bond investments and become more conservative over time, just as most investors tend to focus less on growth and more on preserving principal as they get closer to retirement. Each of the five Target Retirement Funds is a complete, diversified investment program made up of a mix of stock investments and bond investments appropriate for specific retirement time frames. Funds with retirement years furthest into the future start out with a more aggressive, long-term growth strategy that favors stock investments. Funds with retirement years closer to the present date start out with a more conservative strategy that favors more bond investments.

Income Fund seeks to provide current income from fixed income securities while maintaining some exposure to equity investments for capital appreciation. The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash. The Fund emphasizes fixed income investment over stocks. The fixed income exposure emphasizes short-term bonds to reduce interest rate risk. The Fund maintains a small allocation to US and non-US stocks to provide moderate capital appreciation and diversification. The Income Fund has an asset allocation target of 25% equities and 75% fixed income securities.

2010 Fund seeks to provide moderate capital appreciation and some stability of principal for investors planning to retire within a few years of 2010. The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash, and allocates its assets among these funds according to a predetermined asset allocation strategy. On an annual basis, the Fund automatically rebalances to a more conservative strategy. Over time, the stock allocation decreases and the bond allocation increases. By the year 2015, the Fund will be invested in its most conservative mix of cash, bond and stock investment and will be mapped to the Income Fund.

2020 Fund seeks to provide long term capital appreciation and some stability of principal for investors planning to retire in approximately the year 2020. The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash, and allocates its assets among these funds according to a predetermined asset allocation strategy. On an annual basis, the Fund automatically rebalances to a more conservative strategy as the year 2020 gets closer. Over time, the stock allocation decreases and the bond allocation increases. By the year 2020 the Fund will be invested in its most conservative mix of cash, bond and stock investment and will be mapped to the Income Fund.

2030 Fund seeks to provide long-term capital appreciation for investors planning to retire in approximately the year 2030 and is comprised mainly of stocks for maximum growth potential. The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash, and allocates its assets among these funds according to a predetermined asset allocation strategy. On an annual basis, the Fund automatically rebalances to a more conservative

strategy as the year 2030 gets closer. Over time, the stock allocation decreases and the bond allocation increases. By the year 2030 the Fund will be invested in its most conservative mix of cash, bond and stock investment and will be mapped to the Income Fund.

2040 Fund seeks to provide long-term capital appreciation for investors planning to retire in approximately the year 2040 and is comprised mainly of stocks for maximum growth potential. The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash, and allocates its assets among these funds according to a predetermined asset allocation strategy. On an annual basis, the Fund automatically rebalances to a more conservative strategy as the year 2040 gets closer. Over time, the stock allocation decreases and the bond allocation increases. By the year 2040 the Fund will be invested in its most conservative mix of cash, bond and stock investment and will be mapped to the Income Fund.

State Street Global Advisors (SSgA) currently manages the Target Retirement Funds.

STABLE VALUE FUND

The Stable Value Fund seeks to provide stability of principal and an attractive rate of return by investing in a variety of high-quality interest-paying investments, which may include synthetic guaranteed investment contracts with a special feature called a “benefit responsive wrap,” bank investment contracts and money market-type investments. The Fund’s investments are structured both to provide more attractive long-term returns than a money market fund and to smooth out the investment returns associated with fixed income portfolios when the overall markets are volatile.

The Stable Value Fund is currently managed by Dwight Asset Management, who will, as directed by the Company, direct a portion of the fund to be managed by one or more sub-advisors, including BlackRock, SEI Dwight and Pacific Investment Management Company, LLC.

RESTRICTIONS ON THE STABLE VALUE FUND The Stable Value Fund is subject to an “equity wash” provision. This means that transfers out of the Stable Value Fund cannot be made directly to a “competing” fund. Currently, the only investment option that is considered a competing fund is the Self-Directed Brokerage Account. If you want to transfer money from the Stable Value Fund to the Self-Directed Brokerage Account, you will first need to transfer it to a non-competing fund. The money transferred must remain in the non-competing fund for at least 90 days. After 90 days, you may then transfer it to the competing fund, e.g. the Self-Directed Brokerage Account. There are no restrictions for transferring money into the Stable Value Fund.

US BOND INDEX FUND

The SSgA US Bond Index Fund seeks to closely approximate the performance of the Barclay’s Capital US Aggregate Bond Index prior to expenses. The US Bond Index Fund is managed using a passive index approach by which the manager attempts to replicate the return of the index. The fund invests primarily in U.S. dollar denominated fixed income securities and other debt instruments of domestic and foreign entities, including corporate bonds, securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, mortgage-backed securities and money-market instruments. The fund may also use derivatives and other


investment funds to better match the return of the Barclay’s Capital US Aggregate Bond Index. State Street Global Advisors (SSgA) currently manage the US Bond Index Fund.

BOND FUND

The Bond Fund is designed to provide a high level of income that exceeds general bond market indices. As a result, the Fund invests primarily in U.S. dollar denominated fixed income securities and other debt instruments of domestic and foreign entities, including corporate bonds, securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, mortgage-backed securities and money-market instruments. The Fund may also invest in non-U.S. dollar, high yield and emerging market securities to enhance portfolio returns and lower risk.

Pacific Investment Management Company, LLC, currently manages the Bond Fund.

LARGE CAP VALUE EQUITY FUND

The Large Cap Value Equity Fund seeks to achieve capital growth and dividend income by investing in a diversified portfolio of stocks of U.S. companies. The average market capitalization of companies included in the Fund is normally greater than $5 billion. The Fund invests in those companies it considers to provide value; in other words, it invests in good stocks at attractive prices. Generally, the price earnings ratio of these stocks will be less than that of the overall market. Dodge & Cox currently manages the Large Cap Value Equity Food.

S&P®

500 INDEX FUND

The S&P® 500 Index Fund seeks to match the performance of the Standard & Poor’s 500 Index prior to expenses. The S&P 500 Index is a widely used barometer of the performance of large-capitalization U.S. stocks. The fund invests proportionately in all 500 stocks in the S&P 500 Index. The strategy minimizes the need for trading and therefore results in lower expenses. The fund may also hold 2%–5% of its value in futures contracts (an agreement to buy or sell a specific security by a specific date at an agreed-upon price). This fund may be appropriate for you if you are willing to tolerate stock market fluctuations in exchange for the potential for high returns. State Street Global Advisors (SSgA) currently manages the S&P 500 Index Fund.

LARGE CAP GROWTH EQUITY FUND

The Large Cap Growth Equity Fund seeks to provide long-term capital appreciation through investments in common stocks of growth companies. The Fund focuses on companies that demonstrate high-quality earnings, strong free cash flow growth, and shareholder-oriented management. The portfolio is typically comprised of 45-60 stocks of companies that can support sustainable double-digit earnings growth. Generally, the price earnings ratio of these companies will be higher than that of the overall market. T. Rowe Price currently manages the Large Growth Equity Fund.

SMALL-MID CAP GROWTH EQUITY FUND

The Small-Mid Cap Growth Equity Fund seeks long term capital growth through a diversified portfolio of equity securities of small to mid-sized growth companies. This Fund is managed by two

investment managers. Half of the Fund is managed by Columbus Circle Investors, which invests primarily in small, rapidly growing companies with market capitalizations of $2.0 billion or less. The other half of the Fund is managed by William Blair & Company, which seeks to build a diversified portfolio of small to mid capitalized quality growth companies. Generally, the portfolio tends to hold companies that have proven business models and sustainable competitive advantages. The Fund also favors companies that have underestimated growth potential and whose price has been discounted due to a reaction to negative news in the market.

William Blair & Company and Columbus Circle Investors currently manage the Small-Mid Cap Growth Equity Fund.

SMALL-MID CAP INDEX FUND

The Russell Small/Mid Cap Index Fund seeks to match the performance of the Russell Small Cap Completeness Index prior to expenses. The fund seeks to offer broad exposure to stocks of small and medium sized US companies. The Russell Small/Mid Cap Index Fund will typically hold securities comprising the index in the same proportions as they are represented in the index. The fund may also use futures and other derivatives to better match the return of the Russell Small Cap Completeness Index. This fund may be appropriate for you if you are willing to tolerate stock market fluctuations in exchange for the potential for high returns. State Street Global Advisors (SSgA) currently manage the Small-Mid Cap Index Fund.

SMALL-MID CAP VALUE EQUITY FUND

The Small-Mid Cap Value Equity Fund seeks to achieve capital growth and dividend income through investment in a diversified portfolio of stocks of small to mid-sized companies. This Fund is managed by two investment managers. Half of the Fund is managed by RS Investments, which invests primarily in equity securities of companies with market capitalizations between $1.5 billion and $3 billion that are believed to be undervalued. In evaluating investments for the Fund, RS employs a value methodology, combining balance sheet and cash flow analysis. The other half of the Fund is managed by Donald Smith & Co., which invests in companies that are out-of-favor and are selling at a discount relative to their book value. Generally, these companies have a positive outlook for earnings potential over the next 2-4 years and low risk characteristics.

RS Investments and Donald Smith & Co. currently manage the Small-Mid Cap Value Equity Fund.

GLOBAL EQUITY EX US INDEX FUND

Global Equity ex US Index Fund seeks to match the performance of the MSCI ACWI ex-USA Index prior to expenses. The fund seeks to offer broad exposure to stocks in developed and emerging countries excluding the United States. The MSCI ACWI ex-USA Index Fund will typically hold securities comprising the index in the same proportions as they are represented in the index. The fund may also use futures and other derivatives to better match the return of the MSCI ACWI ex-USA Index. This fund may be appropriate for you if you are willing to tolerate stock market fluctuations in exchange for the potential for high returns. State Street Global Advisors (SSgA) currently manages the Global Equity ex US Index Fund.


INTERNATIONAL EQUITY FUND

The International Equity Fund seeks long term capital growth by investing in stocks of both value and growth-oriented international companies. The Fund invests primarily in equity securities of established foreign companies comprising the MSCI EAFE Index (Europe, Australia and the Far East), Canada and emerging market countries worldwide. Typically, the Fund holds about 80-120 stocks. Foreign investments, especially those in emerging markets, involve greater risk and may offer greater potential returns than U.S. based investments. This risk includes political and economic uncertainties of foreign countries, as well as the risk of currency fluctuation. Dodge & Cox currently manages the International Equity Fund.

SEARS HOLDINGS CORPORATION STOCK FUND

The Sears Holdings Corporation Stock Fund seeks to provide participants with the opportunity to share in the investment performance of Sears Holdings Corporation common shares (Sears Holdings stock) by investing in shares of Sears Holdings stock. For liquidity to process participant transactions on a daily basis, the Fund holds an appropriate level of short-term investments. Since the Fund holds a small percentage of investments other than Sears Holdings stock, fund performance will not always match the performance of Sears Holdings stock. For any given period, the Fund may perform better or worse than Sears Holdings stock. The Trustee purchases Sears Holdings stock for the Sears Holdings Corporation Stock Fund at fair market value on the open market or directly from Sears Holdings. Pending investment in Sears Holdings stock, available amounts may be invested in cash equivalents. The Sears Holdings Corporation Stock Fund’s value depends on the market value of Sears Holdings stock and on the value of temporary investments in a short-term cash reserve account. This Fund is the least diversified of the investment funds offered. Please see your copy of the Company’s annual report for further information on the Company’s operations and financial information. This fund may be appropriate for you if you are seeking long-term growth potential and are willing to accept volatility in share price and returns. State Street Global Advisors (SSgA) manages the Sears Holdings Corporation Stock Fund.

COMPANY MATCH DIVERSIFICATION TAX CONSIDERATIONS

If you transfer the cash value of your company match to one or more of the other investment funds, there may be tax consequences. Taxes will be deferred until you make a withdrawal from the Savings Plan. At that point, you may owe taxes on the increase in the value of the company match while it was in Sears Holdings stock in the Savings Plan. Before you decide to transfer your company match to another fund, you should talk to a tax advisor.

VOTING RIGHTS FOR SEARS HOLDINGS STOCK

You are responsible for directing the Trustee to vote all of the shares of Sears Holdings stock credited to your Savings Plan account(s). The Trustee votes those shares for which inadequate or no voting instructions have been received, or which have not yet been credited to participants’ accounts, in the same proportions as the shares for which instructions have been received. Before each shareholders meeting, you will receive information on the procedure for voting your Sears Holdings stock as well as a proxy statement in connection with matters to be voted on at such meeting.

SELF-DIRECTED BROKERAGE ACCOUNT

The Self-Directed Brokerage Account, provided by Hewitt Financial Services, is a brokerage option offered through the Savings Plan. It affords you additional flexibility in choosing your retirement savings investments. You define your own objective by designing your own portfolio of investments. Through the Self-Directed Brokerage Account, you can invest in most stocks listed in the New York Stock Exchange, American Stock Exchange and NASDAQ, including most corporate and government bonds, and mutual funds (all subject to Savings Plan restrictions). You set up the Self-Directed Brokerage Account for yourself as part of your Savings account. Your account is charged a $50 annual fee, which is prorated on a quarterly basis ($12.50/qtr). You also are charged the cost of any commissions owed on trades made for your own Self-Directed Brokerage Account. While investing in a Self-Directed

Brokerage Account, you are required to maintain a minimum

balance of $1,000 in the Savings Plan’s core funds.

DAILY VALUATION OF YOUR ACCOUNT(S)

The assets in your Savings Plan account(s) are valued on a daily basis. Daily valuation generally means that your account(s) will be updated each day the New York Stock Exchange is open. The update will reflect activity for that day, such as new contributions deposited on your behalf, changes in your investment elections and changes in the unit value of your investments under the Savings Plan. For this all to happen as anticipated on any given day, the Savings Plan’s recordkeeper must receive complete and accurate information from a variety of different sources. For this reason, there is no guarantee that any given transaction will be processed on the anticipated day. INVESTMENT PERFORMANCE

It’s important to understand that historic performance is not necessarily indicative of actual future investment performance, which could differ substantially. Total return assumes that an investment is made at the beginning of the period and redeemed at the end of the period after reinvestment of any dividends, income or capital gains distributions. Investment return and principal value may fluctuate so that your investment, when redeemed, may be worth more or less than the contributions to your individual account. All returns are calculated in U.S. dollars. The value of your account(s) in the Savings Plan at any time depends on how much you have invested in each investment fund, the amount and timing of your contributions and the Company matching contributions credited to your account(s), and the market value of the assets of the Trust Fund at that time. Information on investment returns of each investment fund under the Savings Plan can be found on the Savings Plan website, accessible through www. 88sears.com or you may also contact the Sears Holdings Benefits Center by calling 1-888-88sears.


Annualized Investment Returns as of December 31, 2011

(For more recent investment returns, please visit www.88sears.com)

Investment Option 3 month 1 year 3 year 5 year

Target Retirement Funds: Income Fund 2010 Fund 2020 Fund 2030 Fund 2040 Fund

4.8% 5.7% 7.7% 8.7% 9.3%

4.5% 6.8% 5.8% 3.4% -0.1%

9.3%

11.0% 13.1% 13.8% 13.6%

3.8% 3.9% 2.9% 1.7% 0.9%

Stable Value Fund 0.6% 2.2% 2.3% 3.0%

US Bond Index Fund 1.0% 7.6% 6.7% 6.4%

Bond Fund 0.7% 5.9% 10.1% 3.5 %

Large Cap Value Equity Fund 11.2% -4.2% 12.7% -4.1 %

S&P 500 Index Fund 11.8% 1.9% 13.9% -0.4%

Large Cap Growth Equity Fund 9.2% -1.7% 21.0% 2.7%

Small-Mid Cap Growth Equity Fund 12.2% 0.6% 23.3% 4.6%

Small-Mid Cap Index Fund 13.0% -4.1% 18.5% 1.2%

Small-Mid Cap Value Equity Fund 12.3% -9.9% 16.2% 1.6%

Global Equity ex US Index Fund 4.6% -13.8% 10.1% N/A

International Equity Fund 4.2% -16.1% 5.4% -8.0%

Sears Holdings Corporation Stock Fund -44.6% -56.9% -6.8% -28.4%

Note: The returns shown above are net of (after) investment management fees and Savings Plan expenses. FUND EXPENSES Savings Plan participants will share the expenses of administering the Savings Plan, except for those expenses paid for by the Company. Investment management fees associated with each investment option are charged against the respective investment fund. In addition to investment management fees, each investment fund will be charged a portion of the administrative expenses of the Savings Plan, which

include Trustee, recordkeeping and other administrative expenses, in accordance with guidelines established by the U.S. Department of Labor. All fees related to the Savings Plan are reviewed on an on-going basis to ensure reasonable fees are paid on behalf of Savings Plan participants. Information regarding expenses can be obtained by calling the Sears Holdings Benefits Center at 1-888-88sears. You can also access the Savings Plan website www.88sears.com. The table below shows annual expenses as of December 31, 2011.

Fund Name

Annual Expense as of December 31, 2011

(More recent information may be available on www.88sears.com)

Investment

Management Fees

Plan Administration

Expenses Total Expenses

Target Retirement Funds: � Income Fund � 2010 � 2020 � 2030 � 2040

0.10% 0.25% to 0.30% 0.35% to 0.40%

Stable Value Fund 0.42% 0.25% to 0.30% 0.67% to 0.72%


US Bond Index Fund 0.03% 0.25% to 0.30% 0.28% to 0.33% Bond Fund 0.31% 0.25% to 0.30% 0.56% to 0.61% Large Cap Value Equity Fund* 0.52% 0.25% to 0.30% 0.77% to 0.82% S&P 500 Index Fund 0.02% 0.25% to 0.30% 0.27% to 0.32% Large Cap Growth Equity Fund 0.40% 0.25% to 0.30% 0.65% to 0.70% Small-Mid Cap Growth Equity Fund 0.82% 0.25% to 0.30% 1.07% to 1.12% Small-Mid Cap Index Fund 0.03% 0.25% to 0.30% 0.28% to 0.33% Small-Mid Cap Value Equity Fund 0.70% 0.25% to 0.30% 0.95% to 1.00% Global Equity ex US Index Fund 0.06% 0.25% to 0.30% 0.31% to 0.36% International Equity Fund 0.56% 0.25% to 0.30% 0.81% to 0.86% Sears Holdings Corporation Stock Fund 0.01% 0.25% to 0.30% 0.26% to 0.31%

* Under a revenue-sharing arrangement with the fund manager, approximately 0.10% of assets are returned to Savings Plan participants who are invested in the Large Cap Value Equity Fund. MAKING CHANGES

CHANGES TO CONTRIBUTIONS THROUGHOUT THE YEAR

You can change your before-tax, after-tax and/or catch-up contribution rates at any time. Changes will be effective as of the first practicable payroll period after your request is received. You may also suspend or resume your contributions to the Savings Plan at any time, effective with the first practicable payroll period after your request is received.

CHANGES TO INVESTMENT CHOICES THROUGHOUT THE YEAR

You can make one or both of the following changes at any time: � Change your investment direction for future contributions in

multiples of one percent; and � Redistribute your existing account balance among the

investment funds. Your investment choices do not have to be the same for future contributions and existing account balances. Changes to your investment choices for existing account balances must be made by accessing the Savings Plan website or by calling the Sears Holdings Benefits Center by 4:00 p.m., Eastern Time, on any day the New York Stock Exchange is open, to be effective that same day. Investment changes will usually be effective on the next business day if your transaction is received after 4:00 p.m., Eastern Time, or on a day the Exchange is not open. Generally, you may transfer all or a portion of the balance in any investment fund to another investment fund. However, there are certain transfer restrictions associated with the Stable Value Fund (see above “Restrictions on the Stable Value Fund”).

DEFAULT FUND

During any period for which the Plan Administrator does not have current investment direction from you, contributions credited to your accounts under the Savings Plan will be invested in the Default Fund. The Default Fund applicable to you is the Target Retirement Fund that most closely matches the year in which you would attain age 65. However, you are not locked into a default investment election. As indicated above, you’re able to move funds among the various investment options. LOANS

You may request to borrow a portion of your vested account, which you then pay back to your account. A loan is generally not

subject to income taxes or penalties provided all the terms of the loan are satisfied.

WHO CAN REQUEST A LOAN

You may request to borrow a portion of your vested account provided you do not have an outstanding loan in this Savings Plan and you are an eligible employee.

HOW MUCH YOU CAN BORROW

The minimum loan you can request is $1,000. The most you can borrow is the lesser of:

(A) $50,000 (reduced by your highest outstanding loan balance,

if any, during the preceding 12 months, including loans from all 401(k) savings plans sponsored by the Employers in which you have an account balance); or

(B) 50% of your vested account balance.

LOANS ARE TAKEN FROM WHAT ACCOUNTS

Loans are taken from your accounts in the following order: 1. Your before-tax contributions (including catch-up

contributions) 2. Prior Plan Company contributions 3. Pre 2/2009 SHC Matching contributions 4. Post 1/2009 SHC Matching contributions 5. Discretionary SHC Matching contributions 6. Your Before-tax rollover contributions 7. Your after-tax rollover contributions 8. Your Employee after-tax contributions

TERM OF LOAN

A general purpose loan can be for a term of from 1 to 5 years. If the loan is to be used to purchase your primary residence, the term of the loan may be extended to up to 15 years.

HOW INTEREST IS DETERMINED

The interest rate on your loan will be the prime interest rate reported in the Wall Street Journal as of the 15th day of the month prior to the loan issue date plus one percent (1%). Once your loan is processed, the interest rate will not change for the duration of the term of your loan. However, if you enter or are called to active military duty, your loan will be administered in compliance with the applicable provisions of the Soldiers’ and Sailors’ Civil Relief Act, including with regard to the interest rate to be charged on your loan.

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SECURITY FOR YOUR LOAN

Your loan will be secured by your account balance.

HOW YOUR LOAN IS REPAID

Your loan repayments, consisting of principal and interest, are automatically deducted from your paycheck each payroll period. Repayments are allocated, on a pro-rata basis, back to the accounts in the reverse order from which they were taken. They are invested in accordance with your most current investment elections. You may prepay your loan in full at any time without penalty. You are not allowed to make partial prepayments. Special repayment methods are available if you are on an approved leave of absence from the Company, you wish to pay off your loan earlier than scheduled, or your pay is not sufficient to deduct the payments. If you pay off your loan, your loan payoff payment must be in the form of a cashier’s check, certified check or money order. Personal checks are not accepted.

FAILURE TO REPAY YOUR LOAN

Generally, if a loan payment is not paid in full when due, or if you terminate employment with an outstanding loan balance and do not timely repay the outstanding balance, or if you fail to satisfy any conditions of the loan agreement, the loan will be considered to be in default. Upon default the outstanding balance becomes due in full immediately. Failure to repay the outstanding balance will generally result in a taxable event to you in the year of the default, and additional tax penalties may apply. If you are eligible for and elect a full distribution of your account balances following a termination of employment with an outstanding balance, your distribution will be offset by the outstanding balance of the loan unless you pay off the balance in a timely manner. If you miss a payment your loan will be in default unless it is cured during the grace period. The grace period is the end of the calendar quarter following the calendar quarter in which the payment was missed. The Savings Plan allows only one outstanding loan at a time. This includes a loan from another savings plan sponsored by an Employer (in which you may have a balance). If you default on a loan, it is considered “outstanding” and you cannot initiate a new loan until the defaulted loan is repaid. If you leave employment with the Company and do not fully repay your outstanding loan balance within 90 days, it will be treated as a taxable distribution. The outstanding balance will be reported to the IRS as a distribution for tax purposes. If you choose, you can repay the entire outstanding balance of your loan early. (Under certain circumstances, partial loan repayments are allowed for separated participants.) To obtain a pay-off quote of your outstanding loan balance, please contact the Sears Holdings Benefits Center. You can view the outstanding balance of your loan on the Savings Plan website. Other conditions for determining when a default can occur and the related consequences are described in the Loan Disclosure Statement and other loan documents provided to you in connection with your request for a loan.

APPLYING FOR A LOAN

You can apply for a loan on the Savings Plan website or by calling the Sears Holdings Benefits Center. If you are applying for a loan

to purchase your primary residence, you must also provide documentation proving such purchase. A $50 processing fee will be charged to your account for each loan. The loan processing fee will be added to the loan amount and amortized with the loan. WITHDRAWALS

Federal law governs the types of contributions you may withdraw while employed, based on your age, employment status and whether the withdrawal is considered a “hardship withdrawal.” The minimum in-service withdrawal amount is $250 (or the total amount available for withdrawal, if less). You may only receive one withdrawal in any six-month period, except in the case of hardship (see below). It is important to remember that a mandatory 20% withholding applies to most taxable Savings Plan withdrawal, including hardship withdrawals, unless the withdrawal is eligible to be rolled over directly to another employer’s qualified plan or an IRA. This is not an additional tax but rather accelerates the collection of taxes that may be due. This withholding rule is explained in greater detail in the Tax Considerations section. Certain states also require mandatory state tax withholding.

WITHDRAWALS DURING EMPLOYMENT

Although the Savings Plan is designed to help meet your financial needs in retirement through long-term savings, you are permitted under certain circumstances to withdraw funds from your accounts while you are actively working, within certain legal limits. Withdrawals Prior to Age 59½

If you are younger than age 59½, you may withdraw from the following accounts: • your employee after-tax contributions (and the earnings on

those contributions) • your after-tax rollover contributions (and the earnings on

those contributions) • your before-tax rollover contributions (and the earnings on

those contributions) • the Prior Plan company contributions, credited to your

account prior to January, 1, 2006 (and the earnings on those contributions)

Withdrawals upon Permanent and Total Disability

If you become permanently and totally disabled, you may request a withdrawal from your accounts at any time. You are considered permanently and totally disabled if you are unable to perform each of the material duties of your regular occupation with an Employer, as determined by the Plan Administrator, based on the written opinion of a licensed physician selected by the Plan Administrator. Hardship Withdrawals of Before-tax Contributions

If you are younger than 59½ and you have withdrawn all of the amounts available to you under the other withdrawal provisions of the Savings Plan, you may make a hardship withdrawal of your before-tax contributions if you have an immediate and serious financial need and the money is not reasonably available from other sources. The hardship withdrawal may not exceed the amount necessary to meet the immediate and serious financial need (including any taxes imposed on monies received through the withdrawal).


Earnings on your before-tax contributions may not be withdrawn under the hardship rules. Circumstances in which the Savings Plan will allow a hardship withdrawal are: � The purchase (excluding mortgage payments) of your

principal residence; � The prevention of eviction from or foreclosure of the

mortgage on your principal residence; � Payment of tuition (and related expenses) for the next 12

months of post-secondary education for you, your spouse, your children or your dependents that are not reimbursed by a scholarship or grant;

� Uninsured medical bills that would be deductible under Section 213(d) of the Internal Revenue Code for you, your spouse or your dependents (as defined in Section 152 of the Internal Revenue Code);

� Funeral expenses of a family member; � Expenses for the repair of damage to your principal residence

that would qualify for the casualty deduction under Section 165 of the Internal Revenue Code; or

� Other events of immediate or heavy financial need established from time to time by the Commissioner of Internal Revenue.

Withdrawals on or After Age 59½

Whenever you are still working, you may withdraw all or a portion of your account, for any reason, once you reach age 59½. Withdrawals during Qualified Military Service

If you take an in-service or hardship withdraw while on a leave of absence for qualified military service (as defined under IRC Section 414(u)) from September 11, 2001 to December 31, 2007 (which military service lasts at least 180 days), your withdrawal will not be subject to the additional 10% tax. In addition, you may repay the withdrawal back to your account in the Savings Plan. If you choose to repay your withdrawal, you must do so within two years after the later of the end of Participants active service or August 17, 2006 (the enactment date of the Pension Protection Act of 2006). Requesting a Withdrawal During Employment

You may request a withdrawal through the Savings Plan website or by calling the Sears Holdings Benefits Center. No forms will be needed for a non-hardship withdrawal. Payment will usually be made within three business days. If you are requesting a hardship withdrawal, you will be required to submit documents and forms clearly indicating the nature and amount of your financial hardship. The Plan Administrator (or its delegate) will determine whether your request satisfies the Savings Plan’s hardship rules. To make its determination, the Plan Administrator (or its delegate) may require the making of representations or warranties (promises) as it deems desirable or necessary. Other Withdrawal Information

Withdrawals will be made in cash unless you request that all or a portion be made in Sears Holdings stock (other than for hardship withdrawals). If you want more Sears Holdings stock than your current Sears Holdings stock investment, you must first request an investment transfer to the Sears Holdings Corporation Stock Fund and then make your withdrawal request. This two-step process should occur over a two-day period. To ensure that the entire transaction flows smoothly, it is best to do the investment transfer on one day and then request the stock distribution/withdrawal on the next day.

A withdrawal during employment does not terminate your participation in the Savings Plan. You will continue to be eligible to make contributions to the Savings Plan. The Internal Revenue Code imposes a 10% additional tax on the taxable portion of most withdrawals made before age 59½. This additional tax does not apply under certain limited situations, including in the case of a participant who takes an in-service or hardship withdrawal while on a qualified military leave. See the Tax Considerations section. In addition, hardship withdrawals are not eligible for a tax-free rollover.

WITHDRAWAL OF YOUR ACCOUNTS AFTER TERMINATION OF

EMPLOYMENT

In general, you are entitled to receive the balance in your account(s) after you retire or otherwise leave the employment of Sears Holdings and its related companies. As long as the balance of your account(s) exceeds $1,000 you can also defer payment of your account(s) but no later than age 70. See the Deferring Payment section. You will receive further details regarding your distribution options once the Savings Plan’s recordkeeper is notified of your termination.

FORM OF PAYMENT

If you elect to receive a withdrawal after your employment ends, the balance in your account(s) will be paid in a single lump-sum payment. As more fully described below, you may elect that all or some of the taxable portion of this payment be paid directly by the Savings Plan to an IRA or eligible retirement plan of another employer designated by you. If the balance in your account(s) is $1,000 or less, payment will automatically be made to you. Before payment is made, the Plan Administrator will notify you of your right to request a rollover and/or a stock distribution. You may request that some or all of your interest in the Sears Holdings Corporation Stock Fund be distributed in whole shares of Sears Holdings stock. If you do not request a distribution within 90 days of the notice, the balance in your account(s) will be distributed in cash. In addition, you can have more than your current stock investment paid in whole shares of Sears Holdings stock. To do this, you must first do an investment transfer, and then request a withdrawal of the transferred amount. This two-step process should occur over a two-day period. To ensure that the entire transaction flows smoothly, it is best to do the investment transfer on one day and then request the stock distribution on the next day. You can defer paying any or some tax on your payment by requesting that all or some of the taxable part of your payment be paid directly to an eligible retirement plan. You will not pay tax until the money is eventually taken out of the eligible retirement plan. With respect to a participant or a spousal beneficiary, an eligible retirement plan is an individual retirement account or annuity (IRA) or the trust under another employer’s qualified retirement plan. For non-spousal beneficiaries, an eligible retirement plan is an IRA. If you do not elect a direct rollover of any portion of an eligible rollover distribution, the Trustee must withhold federal income taxes from any cash paid to you equal to 20% of the taxable part of the payment that is paid to you, including the value of any shares of Sears Holdings stock. However, shares issued to you as part of


the withdrawal will not have to be sold to satisfy withholding requirements. State taxes will be withheld as applicable.

DEFERRING PAYMENT

If you terminate employment and the balance in your account(s) exceeds $1,000, you have the option to defer payment of your account(s) until a later date, but no later than age 70. If you choose to defer payment, the balance in your account(s) will remain invested in the funds you have selected. You may change your investment direction at any time. You will also continue to have access to account statements showing investment gains and losses. You must call the Sears Holdings Benefits Center when you want payment. Your deferred payment will be distributed in a single lump-sum payment.

PAYMENT UPON DEATH

In the event that you die before you are paid the full value of your account(s), the balance will be paid to your beneficiary in a lump sum. If your beneficiary is your spouse and your balance is greater than $1,000, your spouse can elect to leave the balance invested under the Plan but must receive a distribution no later than December 31 of the calendar year following the year you would have attained age 70½. If your beneficiary is not your spouse, your account balance must be distributed to your beneficiary no later than December 31 of the calendar year following the year of your death (provided that your beneficiary can be located). If the balance in your account is $1,000 or less, payment will automatically be made to your beneficiary as soon as practicable. Before any payment is made, the Plan Administrator will notify your beneficiary of their right to request a rollover. If your beneficiary is your spouse, he/she can elect to have the payment paid directly to a traditional IRA or an eligible qualified retirement plan of another employer. If your beneficiary is not your spouse, he/she can elect to have the payment paid directly to an inherited IRA. If you die before your account(s) are paid in full and you do not have a properly designated beneficiary (who survives you), your benefits will be paid to your surviving spouse or, if there is no spouse, to your estate. If your beneficiary dies after you, but before receiving payment, anything left in your account(s) at your beneficiary’s death will be paid to his or her estate.

TAX CONSIDERATIONS

Employer contributions, your before-tax contributions, the taxable portion of any rollover contributions and all of the earnings in your account(s) become taxable in the year withdrawn or distributed unless timely rolled over to an eligible retirement plan. Your after-tax contributions are not taxed when withdrawn or distributed because they were subject to tax before they were deposited into the Trust Fund. Neither the Company nor the Plan Administrator can advise you of the tax consequences of a distribution or withdrawal of your account(s) from the Savings Plan. Consult a professional tax advisor to determine the tax consequences of receiving a distribution or withdrawal from the Savings Plan.

WITHHOLDING OF INCOME TAXES

The Trustee will withhold federal income tax equal to 20% of the taxable portion of any withdrawal paid to you. However, there is no withholding if you request that payment be made directly to an

eligible retirement plan. If 20% withholding applies, calculation of the amount to be withheld will include the value of any shares of stock paid to you, but the withholding will be made only from the cash paid to you. There is no withholding from the shares of stock distributed to you in certificate form. The same rules generally apply to payments made to your beneficiary after your death and to any payments made to your spouse or former spouse under a qualified domestic relations order (see the Other Information section of this handbook for more information). The trustee will withhold 10% federal income tax from the taxable portion of any distribution that is not eligible for rollover (e.g. after-tax contributions) unless you elect to have no taxes withheld. The trustee will also withhold state income taxes as required by the individual states.

TEN PERCENT ADDITIONAL TAX

A 10% additional federal tax is imposed on the taxable portion of amounts not rolled over for most withdrawals made before age 59½. This additional tax is not imposed in certain circumstances, such as if you are disabled or die or if you separate from service with Sears Holdings and its related companies not earlier than the year in which you attain age 55. You should consult a professional tax advisor for more detailed information about the 10% additional tax and when it applies. You can avoid the 10% additional tax and postpone payment of federal income tax on a lump-sum payment or any other eligible withdrawal or distribution. To do this, you must roll over the payment from the Savings Plan into an eligible retirement plan within 60 days after receiving it. Payments that you receive after age 59½ will be taxed as ordinary income without being subject to the 10% additional tax. Note: Not all tax considerations are covered here. Because the tax laws are complicated and the amount of tax you pay depends on your personal financial situation, you should always consult a qualified tax advisor before electing to receive all or a portion of the balance of your account(s) from the Savings Plan.

EFFECT ON OTHER BENEFITS

When you make before-tax contributions to the Savings Plan, you reduce your taxable income, which enables you to defer federal and (in most cases) state income taxes. Reducing your taxable income, however, does not reduce the amount of your pay subject to Social Security taxes, Social Security benefits or other Sears Holdings benefits based on pay. You receive the same benefits whether you contribute to the Savings Plan on a before-tax or an after-tax basis.

COMPANY MATCH DIVERSIFICATION TAX CONSIDERATIONS

There may be tax consequences if you transfer the cash value of your Company matching contribution contributed to the Sears Holdings Stock Corporation Fund to one or more of the other investment funds. Taxes will be deferred until you make a withdrawal from the Savings Plan. At that point, you may owe taxes on the increase in the value of the Company match while it was in the Stock Fund in the Savings Plan. Before transferring the Company match to another fund, consult a qualified tax advisor.


LIMITS ON CONTRIBUTIONS

BEFORE-TAX CONTRIBUTIONS LIMIT

The tax law also limits the amount of before-tax contributions that you can make in any calendar year to the Savings Plan or any other similar plan permitting before-tax contributions. This limit is $17,000 for 2012 and it will be adjusted for inflation in later years. If you exceed the applicable limit in any year because you contribute to more than one plan, you must notify Sears Holdings by March 1 of the following year of the amount of excess contributions allocated to the Savings Plan.

NON-DISCRIMINATION TEST

The tax regulations that govern the Savings Plan impose rules to ensure that the tax advantages of this program are shared proportionately by associates at all levels of income. For example, the Savings Plan must pass a test proving that the before-tax and after-tax contributions made by or on behalf of associates whose pay exceeds a certain level (i.e. HCE’s) are not at a substantially greater percentage of pay than those made by or on behalf of all other eligible associates. If for some reason the Savings Plan does not comply with these rules, certain affected HCE’s will have some of their contributions refunded. You will be notified if you are affected. The Internal Revenue Code sets various limits on the amount of contributions to a plan such as this Savings Plan. The Internal Revenue Code also sets a limit ($250,000 in 2012) on the amount of an individual’s compensation on which savings plan contributions can be based.

COMPLIANCE WITH SECTION 404(C) OF ERISA

The Savings Plan is intended to be a plan described in Section 404(c) of ERISA and the regulation issued under ERISA by the Department of Labor. This means that the fiduciaries of the Savings Plan (see Plan Trustees in the Other Information section) may be relieved of liability for any losses that are the direct and necessary result of investment directions (see the Investment

Funds section) you give to the recordkeeper. INVESTMENT COMMITTEE AND ADVISOR

The Investment Committee, as a fiduciary, and Towers Watson Investment Consulting, the Advisor to the Investment Committee, are responsible for selecting and monitoring the investment performance of the Savings Plan investment funds. Members are appointed by the CEO of Sears Holdings. Each investment fund, except for the Self-Directed Brokerage Account, is managed by a professional investment manager appointed by the Investment Committee at the recommendation of the Advisor.

COMMON SHARES

The deposits on behalf of plan participants, and cash contributed by Sears Holdings Corporation and its affiliates, may be used to purchase outstanding Sears Holdings Corporation Stock (SHLD), par value $.01 per share, at not more than the market price at the time of purchase. Under the federal securities laws, any holder who is deemed to be an "affiliate" of the Sears Holdings Corporation is restricted in the resale of common stock that he or she may own. Holders of Sears Holdings stock who are directors or executive officers of the Company and others who have the ability to influence the

management of the Company may be regarded as affiliates of the company and, therefore, should consult with counsel before disposing of Sears Holdings stock. The restrictions imposed by Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange Act), upon any director or executive officer of the company apply to transactions Sears Holdings stock, including transfers into or out of the Sears Holdings Corporation Stock Fund. Any person who is subject to Section 16 should consult with counsel before engaging in any transaction in Sears Holdings stock.

WHERE YOU CAN FIND MORE INFORMATION

The Securities and Exchange Commission (SEC) allows Sears Holdings to incorporate by reference information that is filed with the SEC, which means that Sears Holdings can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this handbook. The following documents are available without charge, upon oral or written request, and are incorporated by reference into this handbook: � Sears Holdings Annual Report on Form 10-K for the fiscal

year ended January 28, 2012; � The Savings Plan’s Annual Report on Form 11-K for the year

ended December 31, 2010; � The description of Sears Holdings common shares contained

in the company’s Registration Statement on Form S-4, as amended (Registration No. 333-120954); and

� All documents filed by Sears Holdings or the Savings Plan pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this document and before the termination of the offering of Sears Holdings shares under the registration statement registering this Savings Plan.

In addition, all documents required to be delivered to associates pursuant to SEC Rule 428(b) are available without charge to each participant upon request. Requests for a hard copy or electronic copy of any documents should be directed to:

Sears Holdings Corporation Mail Station: 707BEN 3333 Beverly Road Hoffman Estates, IL 60179 1-888-88sears

www.searsholdings.com (investor information link) A copy of Sears Holdings’ annual report to shareholders has been or will be delivered to all associates eligible to participate in the Savings Plan. In addition, Sears Holdings will distribute to participants copies of future Sears Holdings annual reports to shareholders, as they become available. Information regarding the Savings Plan will be made available without charge to any eligible associate upon request directed to the Plan Administrator by calling the Sears Holdings Benefits Center at 1-888-88sears or visiting the Savings Plan website through www.88sears.com. The following details about your benefit coverage are provided in the Other Information section of this handbook: � When you can make changes to your benefits. � Coverage continuation for certain benefits.


� Contact information for benefit claims administrators and insurance carriers.

TERMS TO KNOW

Actively managed funds are funds in which the fund manager selects individual securities (stocks and/or bonds) in an attempt to outperform a corresponding market index. Actively managed funds are more volatile than index funds, which means their returns can move significantly higher or lower than the market as a whole.

Bonds are loans to a company or government agency. When you buy a bond, you actually lend money and the borrower (a company or government) promises to repay you the original amount of the loan, plus interest. Bonds are generally less risky than stocks but more risky than money market instruments.

Capitalization (also “market capitalization” or “market value”) is the dollar value of a company’s outstanding shares. It is computed by multiplying the number of outstanding shares by the stock price. “Small cap” and “large cap” do not necessarily indicate the physical size of a company. Relatively small companies with limited workforces showing little or no profits can be classified as large cap companies if their stock price is valued very high by the market and they have a large number of shares outstanding.

Equity is another term for stock.

Fixed income security is a security that pays the same rate of income every year for a specified period of time, such as bonds or Treasury bills and notes.

Guaranteed investment contract is an investment contract with a financial institution that promises to pay a specified rate of interest

for a defined period and to return the original investment on a certain date.

Index funds invest in the exact same securities, or a representative sampling of the same securities, as a specific market index in an effort to match the total return of the index. Market risk is the risk that an investment will fluctuate in value. An investment with low market risk will experience small changes in value and offer less opportunity for high returns; one with high market risk may experience larger changes in value, but may also tend to provide greater returns to outpace inflation over the long term. MSCI EAFE index represents over 1,000 stocks in the major non-U.S. markets. The index is used to represent the stock markets of the world’s developed countries. Shortfall risk is the risk that an investment will not grow enough to provide significant income at retirement. An investment with low retirement shortfall risk has a greater potential to outpace inflation and produce a sound income at retirement; one with high retirement shortfall risk is less likely to outpace inflation, thus not providing enough income in retirement.

S&P 500 index measures the market value of 500 widely held U.S. stocks. Stock represents ownership in a company. Stocks can be risky over the short term, but offer the potential of greater return over the long-term than bonds and money market instruments.

Sears Holdings Benefits Handbook 2012 12-i Associate Stock Purchase Plan Full-time Hourly

Associate Stock Purchase Plan TABLE OF CONTENTS

About the Associate Stock Purchase Plan .............................................................................................................................12-1

What are the Advantages of the Plan? ..........................................................................................................................12-1

What are the Risks? .......................................................................................................................................................12-1

Eligibility .....................................................................................................................................................................................12-1

How the Plan Works ..................................................................................................................................................................12-1

Decide How Much You Want to Invest ...........................................................................................................................12-1

How and When Stock is Purchased for You ..................................................................................................................12-2

What Happens to Your Stock After It is Purchased .......................................................................................................12-2

How to Enroll ..............................................................................................................................................................................12-2

Before You Enroll ...........................................................................................................................................................12-3

Enrolling Online ..............................................................................................................................................................12-3

Enrolling By Phone .........................................................................................................................................................12-3

Your Contributions ....................................................................................................................................................................12-3

Changing Your Contribution Percentage .......................................................................................................................12-3

Stopping Your Contributions ..........................................................................................................................................12-3

How Employment Changes Affect Your Participation ...........................................................................................................12-3

Managing Your Account............................................................................................................................................................12-4

Selling or Transferring Your Shares ...............................................................................................................................12-4

Dividends ....................................................................................................................................................................................12-4

Tax Implications .........................................................................................................................................................................12-4

Gifting Your Stock ..........................................................................................................................................................12-4

Dividends .......................................................................................................................................................................12-4

Selling Your Stock ..........................................................................................................................................................12-4

If You Hold the Stock for at Least Two Years ................................................................................................................12-4

If You Hold the Stock Less Than Two Years .................................................................................................................12-5

Capital Gains Rates .......................................................................................................................................................12-5

Insider Trading Policy ...............................................................................................................................................................12-5

Administration ...........................................................................................................................................................................12-5

Securities Offered Under the Plan ...........................................................................................................................................12-6

Amendment and Termination of the Plan ................................................................................................................................12-6

Restrictions on the Sale of Common Stock ............................................................................................................................12-6

Where You Can Find More Information ...................................................................................................................................12-6

Important Notes .........................................................................................................................................................................12-7

Terms to Know ...........................................................................................................................................................................12-7

This section constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

The full prospectus includes this section of the Sears Holdings Benefits Handbook and the Sears Holdings Corporation Annual

Report on Form 10-K.

Sears Holdings Benefits Handbook 2012 12-1 Associate Stock Purchase Plan Full-time Hourly

ABOUT THE ASSOCIATE STOCK PURCHASE PLAN

The Sears Holdings Corporation Associate Stock Purchase Plan (“Plan”) gives you a unique opportunity to become a stockholder of Sears Holdings Corporation (referred to herein as the “Company” or “Sears Holdings”) or, if you already own stock, to increase your ownership at a discount not available to the general public. In addition to providing you with a financial stake in our Company, the Plan provides a convenient means to invest for your future. The Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (“Code”), and was established effective August 1, 2006. You are encouraged to carefully review the following pages, as well as the Company’s annual report and the documents referred to that are filed with the Securities and Exchange Commission. As with any investment, you need to be fully aware of the risks associated with an investment in the Company’s common stock. This summary provides a detailed description of the Plan, including how to enroll and how to monitor your stock holdings.

WHAT ARE THE ADVANTAGES OF THE PLAN?

The ASPP provides several advantages to associates, including: 5% discount on your

purchases

When you purchase stock under the Plan, you receive a 5% discount off of the fair market value.

Convenient, automatic

payroll deductions

Your investment in the Plan is automatically deducted from your pay on an after-tax basis, so you don’t have to take the time to write a check.

No fees or

commissions to buy

stock

You don’t have to pay any fees or commissions when you purchase stock through the Plan.

Shares purchased are

yours to keep or sell,

regardless of your

employment status

The shares you purchase are always yours to do with as you please. You can hold your stock or sell it at any time. If you leave the Company (including all participating affiliates), you still own your shares, and can continue to hold or sell them at any time.

Shares are deposited

in an account in your

name

The shares you purchase are deposited in a limited purpose brokerage account in your name. There are no fees to maintain your account while you are employed by the Company (including all participating affiliates). You can access your account 24 hours a day.

You become an owner

and stockholder

You have all the rights of a stockholder, including voting rights and access to stockholder communications and meetings.

WHAT ARE THE RISKS?

You should carefully consider the amount you can afford to invest in Company common stock and the income tax consequences of the purchase and sale of common stock through the Plan. The return on your investment depends on the stock price, which is subject to fluctuations due to many factors. The future performance of Company and Company common stock is not guaranteed, and there may be periods of time when the stock price falls below your purchase price.

You should carefully consider your tolerance for short- and long-term investment risk. You should read the information in this Handbook, including the information under Tax Implications, review the Company’s financial reports, and consult with a financial advisor before deciding to invest. If you have any questions about how the Plan works, contact Morgan Stanley Smith Barney at 1-888-246-9637.

ELIGIBILITY

To be eligible for the Plan, you must meet all of the following conditions: • Be employed by Sears Holdings or any participating affiliate

(see Terms to Know section for a list of participating affiliates). • Be a regular associate, which for this Plan refers to associates

who customarily work more than five months in a calendar year. (You are not eligible if your customary schedule is to work 20 hours or less per week and you are also classified in the Company’s payroll system as a “flex part-time” associate.)

• Be paid by Sears Holdings or a participating affiliate. (If you are paid by a third party, you are not eligible to contribute to the Plan.)

• Own less than 5% of the total combined voting power or value of all classes of stock of Sears Holdings or any participating affiliate.

If you meet these conditions, you will become eligible on the first day of the third month after your date of hire. For example, if your date of hire is September 1 or any day in September, you would be eligible for the Plan on December 1. However, since December 1 is in the middle of a purchase period, you may not begin contributing until the next purchase period (January 1). You may not contribute to the Plan while you are on an unpaid leave of absence. You may not contribute to the Plan while you are on a paid leave of absence if you are being paid by a third party (e.g. disability claims administrator).

HOW THE PLAN WORKS

Below is a summary of how the Plan works.

DECIDE HOW MUCH YOU WANT TO INVEST

If you are eligible, you’ll first need to decide how much money you want to set aside or “contribute” to buy Company stock at a discount. You may contribute from 1% to 20% of your pay. The percentage you elect will be applied to your gross pay and deducted on an after-tax basis. Unlike pre-tax contributions to a Savings Plan, your contributions are not pre-tax and therefore do not reduce your current tax withholding. For example, assume you elect to invest 5% of your pay toward the purchase of Company stock.


Example

1st Month

2nd Month

3rd Month

Regular monthly wages $2,000 $1,800 $2,200 Overtime pay 0 0 500 Commissions + 200 0 + 0 Total gross pay $2,200 $1,800 $2,700 Stock purchase election x 5% x 5% x 5% Contribution to Plan $110 $90 $135

Your total investment for the quarter is $335.

HOW AND WHEN STOCK IS PURCHASED FOR YOU

Stock is purchased at the end of each calendar quarter, which is called the purchase period. Each purchase period starts on the first day of a quarter and ends on the last day of the quarter. The purchase periods for 2012 are:

January 1, 2012– March 31, 2012 April 1, 2012 – June 30, 2012 July 1, 2012 – September 30, 2012 October 1, 2012 – December 31, 2012

Company stock is purchased for you using the contributions you make during the purchase period. Contributions do not earn interest at any time. Stock is purchased based on 95% of the “fair market value” (as defined below) on the last business day of the purchase period (calendar quarter). No more than 1,000 shares can be purchased for you in any given purchase period and no more than $25,000 worth of Company stock can be purchased for you in any calendar year. You must be employed by the Company, or a participating affiliate of the Company (as defined in Terms to Know), on the purchase date (i.e., last day of the purchase period) in order to have stock purchased for you. If you leave the Company, your contributions for the quarter in which your employment ends will be refunded to you without interest. “Fair market value” is defined as the average of the highest and lowest reported sales prices of the stock on the NASDAQ stock market on the purchase date. If the purchase date is not a business day, the fair market value of the stock will be determined as of the next earlier business day. If, when the 5% discount is applied to the fair market value, the result is a fraction of one tenth (1/10) of a cent, the purchase price will be increased to the next higher tenth of one cent. Continuing the above example, your total investment for the purchase period is used to purchase shares.

Example (continued)

Lowest reported sale price $45.125 Highest reported sale price $55.625 Fair market value (average of low and high) $50.375 Your discount factor x 95% Purchase price (before rounding) $47.8563 Final purchase price $47.856 Your contributions $335 Divided by the purchase price / $47.856 Number of shares purchased for you 7.000

The actual value of your shares on the purchase date is

$50.375 x 7.000 = $ 352.63

That means your discount for this purchase period is

worth $352.63 - $335.00 = $ 17.63

WHAT HAPPENS TO YOUR STOCK AFTER IT IS PURCHASED

Once Company stock is purchased for you, it is deposited in a limited purpose brokerage account in your name at Morgan Stanley Smith Barney. It will take about seven business days after the end of the purchase period for the stock to be credited to your account. Shortly after the first time stock is purchased for you, you will receive a letter from Morgan Stanley Smith Barney instructing you on how to access your account and providing you a secure password. After all purchases, you will receive a statement of the number of shares purchased on your behalf. After stock is purchased for you, it is yours to keep or sell. There are tax advantages to holding your stock for a certain period of time. See the Tax Implications section for details.

HOW TO ENROLL

The enrollment period for each quarterly purchase period is approximately the last two weeks of the prior quarter. The enrollment period begins on the 16th calendar day of the month immediately before the purchase period and ends on the day before the purchase period begins. The enrollment periods for the 2012 purchase periods are as follows:

2012 Purchase Periods Enrollment Periods

January 1 – March 31, 2012 December 16 – 31, 2011 April 1 – June 30, 2012 March 16 – 31, 2012 July 1 – September 30, 2012 June 16 – 30, 2012 October 1 – December 31, 2012 September 16 – 30, 2012

If you are first eligible for the Plan on the first day of a quarterly purchase period, you may enroll during the enrollment period immediately before that quarterly purchase period. Your enrollment election will be effective with the first paycheck of the calendar quarter following the enrollment period, unless your election is not received until after the first paycheck is processed. In that case, your deductions would begin on the second paycheck. You can enroll through Morgan Stanley Smith Barney’s Benefit Access® web site 24 hours a day. You can also enroll by phone. You do not need a password to enroll.


BEFORE YOU ENROLL

It is important that you understand how the Plan works and the risks associated with investing in Company stock. Before enrolling, you should read this Handbook section, the Sears Holdings Corporation annual report on Form 10-K and the documents listed under the section Where You Can Find More

Information. To obtain additional copies of the annual report on Form 10-K, here are several options: • View or print a copy from the Company intranet – if you do

not have access to a computer, your manager can provide access for you. - Visit www.88sears.com/benefits and click on Associate

Stock Purchase Plan (under the Financial Benefits section).

• View or print a copy from the Securities and Exchange Commission Web site at www.sec.gov/edgar.shtml.

• View or print a copy from the Sears Holdings Corporation Web site at www.searsholdings.com/invest/.

• Call 1-888-88sears to request a copy be mailed to you.

ENROLLING ONLINE

From work: Visit the Company intranet at www.88sears.com/benefits and click on “Associate Stock Purchase Plan” under “Financial Benefits.”

From outside of work: Visit the Morgan Stanley Smith Barney Benefit Access® web site at www.benefitaccess.com. From the Morgan Stanley Smith Barney Benefit Access® web site: • Click on “Enroll or adjust your contributions.” • You will be prompted to enter the Sears Holdings ticker

symbol: SHLD. • You will need to enter your social security number. • You will be asked to enter your birth date in the format

MMDDYYYY. For example, if you were born July 15, 1958, enter 07151958. A calendar will appear for you to populate the date.

• If you are a first time enrollee, you will see a page that indicates you are currently not enrolled. Select the action button that says “enroll now.”

• If you are changing your contributions, the next screen will show your current election as a percent of pay. To change your contribution elections, click on the button next to “Modify the percentage of your salary” and enter a whole percent.

• Once you confirm your election, you will see an enrollment summary. You should print this summary for your records.

ENROLLING BY PHONE

1. Call Morgan Stanley Smith Barney at 1-888-246-9637 (or 1-888-88sears).

2. Enter your social security number. 3. Follow the prompts to bypass entering your password/PIN

and speak to a customer representative. 4. When prompted, press 2 for “Purchase account.” YOUR CONTRIBUTIONS

You may contribute any whole percent of your pay to the Plan from 1% to 20%. Purchases under the Plan are limited to 1,000 shares per purchase period and to $25,000 in value per calendar year. Any contributions in the Plan that result in these limits being exceeded will be refunded to you.

Once you’ve elected a contribution rate, it remains in effect until you decide to change your contribution percentage or stop contributing to the Plan, or you are no longer eligible to contribute to the Plan. You do not have to make a new election each quarter.

CHANGING YOUR CONTRIBUTION PERCENTAGE

You may change your contribution percentage for future quarters beginning on the 16th day and ending on the last day of the month immediately before a quarterly purchase period. This is the same timeframe as the enrollment period. Your election is effective with the first paycheck of the following quarter, unless your election is not received until after the first paycheck is processed. In that case, your contributions will change on the second paycheck.

2012 Purchase Periods Change Periods

January 1 – March 31, 2012 December 16 – 31, 2011 April 1 – June 30, 2012 March 16 – 31, 2012 July 1 – September 30, 2012 June 16 – 30, 2012 October 1 – December 31, 2012 September 16 – 30, 2012

To change your contribution percentage, access Morgan Stanley Smith Barney’s Benefit Access® web site. You can also change your contribution percentage by phone. Follow the instructions under How to Enroll.

STOPPING YOUR CONTRIBUTIONS

You may stop your future contributions to the Plan at any time on or before the 14th day of the last month in a quarterly purchase period. See the chart below for the last day you may stop your contributions for the 2012 purchase periods. Your election will be effective as soon as administratively possible – generally within one or two pay cycles.

2012 Purchase Periods

Last Day to Suspend

Contributions for Current

Purchase Period

January 1 – March 31, 2012 March 14, 2012 April 1 – June 30, 2012 June 14, 2012 July 1 – September 30, 2012 September 14, 2012 October 1 – December 31, 2012 December 14, 2012

To stop your contributions, access Morgan Stanley Smith Barney’s Benefit Access® web site. You can also stop your contributions by phone. The contributions you made prior to your election to stop contributing will be used to purchase Company stock at the end of the purchase period. You may resume contributing to the Plan in any subsequent purchase period by making a new contribution election during an enrollment period.

HOW EMPLOYMENT CHANGES AFFECT YOUR PARTICIPATION

If your employment is terminated for any reason, or if you otherwise cease to be eligible to participate in the Plan (see examples below), your participation in the Plan will immediately terminate and your contributions will stop automatically. In addition: (1) the cash balance of your account will be refunded to you

without interest; (2) the number of full shares of stock purchased under the Plan

and held for your benefit will be credited to a book entry


account for you maintained by the Company’s transfer agent, or, if you elect, to a brokerage account designated by you; and

(3) the cash equivalent for any fractional share will be refunded to you.

Examples of when your participation ends include: • Your employment with the Company (and all participating

affiliates) ends. • You begin receiving severance pay and benefits from the

Company. • You transfer to an affiliate of the Company that does not

participate in the Plan. • Your employment is reclassified as an associate who

customarily works 20 or fewer hours in a week or whose employment is for five or fewer months in a calendar year.

If you leave the Company (including all participating affiliates) and are later rehired, you will need to satisfy a new waiting period for eligibility. If you take an unpaid leave of absence, or if you take a paid leave of absence and you are paid by a third party (i.e., disability claims administrator), your contributions will stop automatically. The contributions you made during the quarter in which your leave of absence began will be used to purchase stock for you.

MANAGING YOUR ACCOUNT

At the end of each purchase period, Company stock will be purchased with your accumulated contributions. The stock will be deposited into a limited purpose brokerage account in your name at Morgan Stanley Smith Barney. You can decide to keep your shares in your account, sell them or transfer them to another brokerage account. You will not receive a stock certificate when stock is purchased for you. Sears Holdings does not issue stock certificates; all shares are held in book entry form. A record of all stock purchased for you will be maintained by Morgan Stanley Smith Barney. You will receive annual statements as well as statements each time that shares are purchased and deposited into your account. You can visit Morgan Stanley Smith Barney’s Benefit Access® web site (www.benefitaccess.com) or call Morgan Stanley Smith Barney at 1-888-246-9637 to find out how many shares you own.

SELLING OR TRANSFERRING YOUR SHARES

You can sell your shares or transfer them to another brokerage account anytime after they are posted to your account. The following estimated fees apply when you sell or transfer shares:

Number of Shares

Sold or Transferred Fees and Commissions*

1 – 500 $0.07 per share 501 – 1,000 $0.06 per share

1001 or more $0.05 per share * Subject to a $25 minimum per trade, plus prevailing

service fees.

Additional Fees

$25 wire transfer fee $25 overnight delivery fee (U.S.) $50 overnight delivery fee (non U.S.)

To sell or transfer your shares, access the Morgan Stanley Smith Barney Benefits Access® web site (www.benefitaccess.com). You can also call Morgan Stanley Smith Barney at 1-888-246-9637. Except as otherwise permitted under Code Section 424 and Rule 16b-3, you may not pledge, assign or transfer your shares under the Plan to another person, other than by will and the laws of descent and distribution. DIVIDENDS

Any dividends paid by Sears Holdings Corporation will be reinvested in Company stock (full and fractional) at the market price on the dividend payment date and credited to your Morgan Stanley Smith Barney account.

TAX IMPLICATIONS

There are no immediate tax implications to you when you contribute to the Plan or when stock is purchased on your behalf. However, when you sell your stock, you may be taxed on the 5% discount provided by the Company and on any gain in the value of the stock. The amount of your tax depends on how long you hold your Company stock before you sell. You may receive more favorable tax treatment (i.e., you pay less tax) if you hold your stock for at least two years. Tax rules are complex and subject to legislative change, so it’s best to consult with a financial advisor or tax professional for more information about how the rules apply to your personal situation. If you live in or are taxed in a country outside the United States, your tax treatment may vary from what is described in this document.

GIFTING YOUR STOCK

If you give your stock to someone else as a gift, for tax purposes it will be treated as a sale. The amount of time you held the stock, prior to gifting your stock, will determine the exact tax treatment.

DIVIDENDS

If any dividends are paid, you will receive a tax notice (Form 1099-DIV) shortly after the end of the year reporting the dividends paid during the past calendar year. You are responsible for reporting as income the amount of dividends paid on shares of Sears Holdings Corporation stock held in your name.

SELLING YOUR STOCK

The following is a summary of the tax treatment based on our general interpretation of the tax laws currently in effect. However, you should consult your tax advisor for the most current laws pertaining to the tax treatment of stock, including the federal capital gains tax treatment.

IF YOU HOLD THE STOCK FOR AT LEAST TWO YEARS

If you hold the stock for at least two years from the purchase date, your federal income taxes are calculated this way:


• You will pay income taxes at ordinary income rates on your profit up to the 5% discount. Your profit is the difference between the price at which you sell your shares and the purchase price on the purchase date. If there is no profit, you owe no income tax on the 5% discount.

• You will pay income taxes at long-term capital gains rates on the rest of your profit, if any. If you sell the stock for less than the amount you paid for the stock, the difference is a long-term capital loss.

Examples

#1 #2 #3

Your sale price $70.000 $50.000 $40.000 Purchase price - $47.856 - $47.856 - $47.856 Your profit – gain or (loss) $22.144 $2.144 ($7.856) Fair market value on purchase date $50.375 $50.375 $50.375 Purchase price - $47.856 - $47.856 - $47.856 Amount attributable to 5% discount $2.519 $2.519 $2.519 Lesser of profit or 5% discount $2.519 $2.144 $0

You pay ordinary income tax on the amount in bold.

Your profit $22.144 $2.144 ($7.856) Amount attributable to 5% discount - $2.519 -$2.144 - $0 Capital gain/loss (after 5% discount) $19.625 $0 ($7.856)

You pay long-term capital gains tax (or take

a long-term capital loss) on the amount in bold.

IF YOU HOLD THE STOCK LESS THAN TWO YEARS

If you sell your stock within two years of the purchase date, your federal income taxes will be calculated in this way (for tax purposes, this is called a “disqualifying disposition”): • You will pay income taxes at ordinary income rates on the

difference between what you paid for the shares and the fair market value on the purchase date. This is equal to the 5% discount that the Plan provides. This is taxed as ordinary income. You will pay income taxes on the 5% discount even if your profit when you sell the shares is less than the 5% discount.

• You will pay income taxes on the excess, if any, of your selling price over the fair market value on the purchase date. This gain is taxed as a short-term or long-term capital gain, depending on how long you hold the shares from the purchase date. If your selling price is less than the fair market value on the purchase date, the difference is a capital loss.

Examples

#1 #2 #3

Your selling price $70.000 $50.000 $40.000 Purchase price - $47.856 - $47.856 - $47.856 Your profit - gain or (loss) $22.144 $2.144 ($7.856) Fair market value on purchase

date $50.375 $50.375 $50.375

Purchase price - $47.856 - $47.856 - $47.856 Amount attributable to 5%

discount $2.519 $2.519 $2.519

You pay ordinary income tax on the amount in bold.

Your selling price $70.000 $50.000 $40.000 Fair market value on purchase

date -$50.375 -$50.375 -$50.375

Gain/loss (after 5% discount) $19.625 ($0.375) ($10.375)

You pay short-term or long-term capital gains tax (or take a short

or long-term capital loss) on the amount in bold.

CAPITAL GAINS RATES

The amount of time you hold the stock from the purchase date determines which capital gains rate—short-term or long-term—will be applied to your capital gains. If you hold the stock 12 months or less, the short-term capital gains rate applies. If you hold the stock more than 12 months, the long-term rate applies.

INSIDER TRADING POLICY

Please note that any transaction under the Plan is subject to the requirements of the Sears Holdings Corporation’s Insider Trading Policies. You can view this policy on www.88sears.com (click on Corporate Policies under Policies, Procedures, Ethics & Forms)

ADMINISTRATION

The Compensation Committee of the Board of Directors of Sears Holdings (“Committee”) is responsible for managing the operation and administration of the Plan, and retains the authority to delegate certain responsibilities to representatives of the Committee. The members of the Committee, as members of the Board of Directors of Sears Holdings (“Board”), are elected by the Company’s stockholders. Each member of the Board serves until the next annual meeting of stockholders or until a successor has been duly elected and qualified, subject to the director’s earlier death, resignation, disqualification or removal. Vacancies on the Board, including vacancies and unfilled newly created directorships resulting from any increase in the authorized number of directors, may be filled by a majority vote of the directors then in office, even if those directors do not constitute a quorum. The by-laws of Sears Holdings state that, subject to the rights of any preferred stockholders, any director may be removed with or without cause from office at any time by stockholders in accordance with Delaware law. Such removal from office would also remove the director from his or her position with respect to the administration of the Plan. The Committee has full discretion to interpret the provisions of the Plan, including establishing and changing any rules relating to the Plan, determine the terms and provisions of any agreements made pursuant to the Plan, and make all other determinations that may be necessary or advisable for the administration of the Plan. The Committee’s decision as to any matter arising under the Plan is final and binding on all persons. Pursuant to an agreement with the Company, Morgan Stanley Smith Barney will perform administrative services relating to the


Plan. If Morgan Stanley Smith Barney should resign or otherwise cease to perform these services, the Committee will make such other arrangements as it deems appropriate. The Company may terminate the agreement with Morgan Stanley Smith Barney with or without cause. SECURITIES OFFERED UNDER THE PLAN

As of the August 1, 2006 effective date of the Plan, approximately 5,000,000 shares of common stock of Sears Holdings, par value $0.01 per share, were made available under the Plan, subject to appropriate adjustment in the event of a stock dividend or stock split of shares or combination of shares. Shares for the Plan will be purchased on the open market, on an exchange or in negotiated transactions (in accordance with regulations of the Securities and Exchange Commission for open market purchases), unless the Company’s chief financial officer deems it necessary or advisable to use previously acquired treasury shares, authorized and unissued shares, or any combination of shares purchased in the open market or in negotiated transactions, previously acquired treasury shares or unauthorized and unissued shares. In the event of a change in control of the Company, the then current quarterly purchase period will end, and all participants’ account balances will be applied to purchase shares of common stock. The Plan will terminate immediately thereafter.

AMENDMENT AND TERMINATION OF THE PLAN

The Board or the Committee may, at any time, amend the Plan; provided, however, that no amendment can adversely affect the rights of any participant with respect to shares that have been purchased prior to the date such amendment is adopted by the Committee. In addition, no amendment of the Plan may be made without approval of the Company's stockholders to the extent that such approval is required to maintain compliance with the requirements of Code Section 423. The Company, by action of the Board or the Committee, may terminate the Plan at any time. Without any action being required, the Plan will terminate in any event when the maximum number of shares of common stock to be sold under the Plan has been purchased. Any termination of the Plan will not adversely affect the rights of any participant with respect to shares of stock that have been purchased on or prior to the date of such termination. If the Plan is terminated as described above, (1) the cash balance of each participant’s account will be refunded to him or her without interest, (2) the number of full shares of stock purchased under the Plan and held for his or her benefit will be credited to a book entry account for the participant maintained by the Company’s transfer agent, or, if the participant elects, to a brokerage account designated by the participant, and (3) the cash equivalent for any fractional share so held will be refunded to the participant.

RESTRICTIONS ON THE SALE OF COMMON STOCK

The provisions of the Plan do not impose restrictions on the resale by holders of common stock acquired under the Plan. However, under the federal securities laws, any such holder who is deemed to be an “affiliate” of the Company is restricted in the resale of common stock that he or she may own (whether acquired under the Plan or otherwise). Holders of common stock who are directors or executive officers of the Company and others who have the ability to influence the management of the Company may be regarded as affiliates of the Company and, therefore, should consult with counsel before disposing of common stock.

The restrictions imposed by Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange Act), upon any director or executive officer of the Company apply to transactions in Sears Holdings stock, including the sale of Company stock purchased under the Plan. Any person who is subject to Section 16 should consult with counsel before engaging in any transaction in Company stock. The Sears Holdings Corporation Insider Trading Policy and federal securities laws prohibit associates from selling Company stock while in possession of material, nonpublic information. Before electing to participate in the Plan, each participant should carefully read the prospectus, consisting of this section of the Handbook and the Company’s most recent Annual Report on Form 10-K. In addition, each participant in the Plan should carefully read the Company’s other reports, the proxy statement and other information filed pursuant to the Exchange Act, copies of which are available from the Company as described herein.

WHERE YOU CAN FIND MORE INFORMATION

The Securities and Exchange Commission (SEC) allows the Company to incorporate by reference information we file with the SEC. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this handbook section and should be read with the same care. When we update the information contained in the documents that have been incorporated by reference by making future filings with the SEC, the information incorporated by reference in this section is considered to be updated automatically and superseded. The following documents are available without charge, upon oral or written request, and are incorporated by reference into this prospectus, except that we are not incorporating by reference any document or information that is only “furnished” to the SEC or that is otherwise not deemed to be filed with the SEC: • Sears Holdings Corporation Annual Report on Form 10-K for

the fiscal year ended January 28, 2012; • Sears Holdings Current Reports on Form 8-K as filed from

time to time; • The description of Sears Holdings Corporation common stock

contained in the Company’s Registration Statement on form S-4, as amended (Registration No. 333-120954); and

• All documents filed by Sears Holdings or the Plan pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this prospectus and before the termination of the offering of securities covered by this prospectus.

In addition, all documents required to be delivered to associates pursuant to SEC Rule 428(b) are available without charge to each participant upon oral or written request. Requests for a hard copy or electronic copy of any documents should be directed to:

Sears Holdings Benefits Department 707BEN A4-165A 3333 Beverly Road Hoffman Estates, IL 60179 1-888-88sears

A copy of Sears Holdings annual report to shareholders has been or will be delivered to all associates eligible to participate in the Plan. In addition, the Company will distribute to participants copies of future annual reports to shareholders, as they become available. Information regarding the Plan will be made available


without charge to any eligible associate upon request directed to the Plan Administrator by calling 1-888-88sears. IMPORTANT NOTES

It is not possible to predict the value of Sears Holdings stock. The actual value depends on future Company performance and other variables. Remember that the value of the shares can decrease as well as increase. Past performance of the Company’s stock is not an indication of actual future performance. See the Risk Factors contained in the Sears Holdings Corporation Annual Report on form 10-K for the fiscal year ended January 28, 2012. Neither the delivery of this information nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this document. No person has been authorized to give any information or to make any representations with respect to the matters described in this section other than those contained or incorporated by reference herein, and, if given or made, such information or representation must not be relied upon. This information does not constitute an offer to sell or the solicitation of any offer to buy any securities in any jurisdiction to or from any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. The Company reserves the right to modify, amend, suspend or end this Plan at any time, although some changes may require shareholder approval. As noted above, the Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (“Code”). The Plan is not a plan governed by the Employee Retirement Income Security Act of 1974 (ERISA), as amended. The fact that a summary of the Plan is included in this Handbook should not be construed as making it an ERISA plan.

TERMS TO KNOW

Board - The Board of Directors of Sears Holdings Corporation. Capital gain (loss) - The profit (or loss) from the sale of a capital asset, such as a share of stock. Capital gains (losses) may be short-term (held 12 months or less from the purchase date) or long-term (held more than 12 months from the purchase date). Special tax rules apply to the taxation and use of capital gains and losses. Disqualifying disposition - The sale, exchange, gift or transfer of legal title of stock purchased under the Plan, before having held the stock for the entire two-year holding period. Special tax rules apply to disqualifying dispositions. Dividend - A distribution of a corporation’s earnings and profits to a corporation’s shareholders in cash or stock. You must own the stock on the record date to receive the dividend. Dividends are taxable income when paid. Fair market value - The value of the stock on a given day for purposes of the Plan, as defined above.

� If the day is a business day, the fair market value is the average of the highest and lowest reported sales prices for that day.

� If the day is not a business day, the fair market value is the average of the highest and lowest reported sales prices of the stock as of the next earlier business day (i.e., the day before).

Holding Period - (1) For determining the amount of capital gain and ordinary income: the two-year period from the purchase date. (2) For determining the capital gains rate: the periods described in the definition of capital gain (loss) in this section. NASDAQ - The stock market in which Sears Holdings common stock trades. The symbol for Sears Holdings stock is “SHLD.” Participating affiliate - Currently, the following entities: � Sears Holdings Corporation � Sears Holdings Management Company � Sears, Roebuck and Co., and all of its direct and indirect

wholly-owned domestic subsidiaries � Sears Roebuck de Puerto Rico, Inc. � Kmart Holding Corporation, and all of its direct and indirect

wholly-owned domestic subsidiaries � Kmart Management Corporation, and all of its direct and

indirect wholly-owned domestic subsidiaries � Kmart Corporation, and all of its direct and indirect wholly-

owned domestic subsidiaries � S.F.P.R. Inc. � Lands’ End, Inc, and all of its direct and indirect wholly-

owned domestic subsidiaries Plan document - The legal document that establishes the provisions of the Plan. Prospectus - A disclosure document that is provided to potential purchasers of a Company’s stock. Purchase date - The date on which shares are purchased for you with your accumulated payroll deductions. Purchases occur the last day of each calendar quarter (March 31, June 30, September 30 and December 31). Purchase price - 95% of the fair market value on the last day of the quarter. .

Sears Holdings Benefits Handbook 2012 13-i Voluntary Benefits Program Full-time Hourly

Voluntary Benefits Program TABLE OF CONTENTS Voluntary Benefits ........................................................................................................................................................... 13-1 How the Program Works ................................................................................................................................................. 13-1 Enrollment ......................................................................................................................................................................... 13-1 Program Administration .................................................................................................................................................. 13-1 For More Information ....................................................................................................................................................... 13-1 Important Note .................................................................................................................................................................. 13-1

Sears Holdings Benefits Handbook 2012 13-1 Voluntary Benefits Program Full-time Hourly

VOLUNTARY BENEFITS

Sears Holdings makes available to associates the PersonalPlans®

Voluntary Benefits Program (“Voluntary Benefits Program”) that offers insurance protection for automobiles, homes and other valuables, and other services such as pet insurance, long-term care, legal services, identity theft protection and vision care benefits. Sears Holdings does not sponsor the Voluntary Benefits Program.


The Voluntary Benefits Program offers a single, convenient source for you to compare and purchase insurance products and services. The Voluntary Benefits Program provides the following advantages: � Convenient access by phone or online. The toll-free

number at 1-888-88sears through which you can choose a Voluntary Benefits Program product or the Web site available through www.88sears.com give you access to in-depth information and tools to help instill confidence in your decisions. You can also obtain information on these insurance products directly from Marsh U.S. Consumer (the Program administrator) by calling 1-800-845-6270 or visiting their Web site at www.voluntarybenefits-shc.com.

� A choice of providers and plans. The Program provides access to highly rated companies, offering flexible plans that can be tailored to particular needs.

� Personalized help from professionals. Professionals are available to give objective advice in selecting the best protection plan and options for your needs. They are also there to serve you after you purchase a product.

� Convenient payment options—Depending on your product selection, you may be able to pay your premiums by payroll deduction (after-tax), credit card, direct bill or automatic account withdrawal from a bank account (also known as an electronic funds transfer).

Examples of products available include: � Auto Insurance. Side-by-side comparison quotes on policies

and providers allow you to obtain protection for your car and most other vehicles such as classic cars, motorcycles, trucks, SUVs, RVs and watercraft.

� Homeowners and Renters Insurance. You can purchase coverage for your home or rental unit through the program. The Voluntary Benefits Program licensed representatives can help you find new protection, as well as review your current policy to ensure that your coverage and rates are competitive.

� Vision Care. Two vision plans are available under this insurance product. � Premier Vision Plan. This plan offers a higher level of

coverage than the Basic Vision Plan. You can receive an eye examination every 12 months for each enrolled person with a $0 co-pay. This plan also covers eyeglass lenses, frames and contact lenses and provides a discount on laser vision correction surgery.

� Basic Vision Plan. Under this plan you can receive an eye examination every 12 months for each enrolled person. This plan also covers eyeglass lenses, frames and contact lenses and provides a discount on laser correction surgery.

� Long-Term Care Insurance. You can purchase coverage for many types of health care services, such as skilled nursing care and home health care. This product is available to associates and their eligible spouse or domestic partner.

� Pet Insurance. You can purchase health insurance for your pets that covers a wide range of routine and specialized treatments and procedures. With the assistance of licensed professionals, you can tailor a plan to meet the special needs of your pet.

� Legal Services. You can get access to legal advice on issues such as real estate, wills and trusts, guardianship and matrimonial matters.

� ID TheftSmart. This product provides continuous credit monitoring and comprehensive restoration service in the event of an identity theft. If identity theft strikes, ID TheftSmart licensed investigators do most of the legwork and paperwork to restore your name, saving you time, money and aggravation.

ENROLLMENT

You may enroll in any of the PersonalPlans® Voluntary Benefits Program options, except vision and legal services, at any time during the year. A separate enrollment period for vision and legal services is held annually. Please note that purchase of either the vision or legal services product requires a one-year commitment upon enrollment.

PROGRAM ADMINISTRATION

The Voluntary Benefits Program administrator is Marsh U.S. Consumer. Marsh U.S. Consumer offers insurance products and services through its partners. Some products and services may not be available in all states, and rates are subject to change. The Voluntary Benefits Program is offered on a voluntary basis to associates of the Company and its participating affiliates and subsidiaries. The Company does not sponsor, nor endorse any of the products or service benefits offered under this Program. The Voluntary Benefits Program administrator (including its partners) provides and administers the products and services. While not sponsoring the Program, Sears Holdings will provide the program administrator with the records and information necessary to verify your eligibility under the Program.


The following details about your benefits coverage under the Voluntary Benefits Program are provided in the Other Information

section of this handbook: � When you can make changes to your benefits. � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers.

IMPORTANT NOTE

The PersonalPlans® Voluntary Benefits Program (including all of the individual types of insurance products and services available under the Program) is not intended to be nor treated by the Company as a welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended (ERISA). The program is intended to satisfy the exception under ERISA for

Sears Holdings Benefits Handbook 2012 13-2 Voluntary Benefits Program Full-time Hourly

certain group or group-type insurance programs that are made available by but not sponsored nor endorsed by the Employer. The fact that a summary of the Voluntary Benefits Program is included in this Handbook should not be construed as making it an ERISA plan.

Sears Holdings Benefits Handbook 2012 14-i Starbridge Full-time Hourly

Starbridge Program TABLE OF CONTENTS About the Starbridge Program .................................................................................................................................................14-1

Eligibility .........................................................................................................................................................................14-1

When Coverage Begins .................................................................................................................................................14-1

When Coverage Ends ....................................................................................................................................................14-1

How to Enroll ..................................................................................................................................................................14-1

Contributions ..................................................................................................................................................................14-1

Medical Benefits ........................................................................................................................................................................14-1

State Law Restrictions and Disclosures .........................................................................................................................14-1

Dental/Vision Benefits ...............................................................................................................................................................14-2

Term Life Insurance ...................................................................................................................................................................14-2

Short-Term Disabilty Plan .........................................................................................................................................................14-2

For More Information .................................................................................................................................................................14-2

Important Note ...........................................................................................................................................................................14-2

Sears Holdings Benefits Handbook 2012 14-1 Starbridge Full-time Hourly

ABOUT THE STARBRIDGE PROGRAM

Sears Holdings makes available to full-time hourly associates who have to complete a six month waiting period before becoming eligible for Company health care benefits, the Starbridge Program (“Starbridge). The Starbridge Program includes the following benefit coverages: � Limited medical coverage (not available in all states) � Combined dental and vision coverage (not available in all

states) � Life insurance (not available in all states) � Short-term disability benefits (not available in all states) All full-time hourly associates are eligible for Starbridge during their six month waiting period before becoming eligible for medical and dental benefits under the Sears Holdings Medical and Dental Plans, provided they enroll a timely manner, as stated below. Eligible associates can enroll in one or any combination of these benefit coverages. Please note that Sears Holdings does not sponsor or administer Starbridge.

ELIGIBILITY

As a full-time hourly associate, you are eligible for Starbridge, if you are not eligible for the Sears Holdings Medical and Dental Plans, until the first day of the sixth month after your date of hire. If you are eligible for the Sears Holdings Medical and Dental Plans sooner, you are not eligible for Starbridge. Eligibility for Starbridge ends on the day before you become eligible for the Sears Holdings Medical and Dental Plans, regardless of whether you elect to be covered by the Sears Holdings Medical or Dental Plans.

WHEN COVERAGE BEGINS

New Hire: If you enroll within 31 days after your date of hire, coverage will begin on the first day of the month following your enrollment. Annual Open Enrollment: If you do not enroll as a new hire, your next opportunity to enroll is during the Annual Enrollment period held in the fall, provided that you have not completed the six-month waiting period for the Sears Holdings Medical and Dental Plans. If you enroll in Starbridge during Annual Open Enrollment, your coverage will become effective on January 1 of the immediately following calendar year.

WHEN COVERAGE ENDS

If you enroll in Starbridge, coverage ends on the day prior to first day of the sixth month after your date of hire, when you become eligible for the Sears Holdings Medical and Dental Plans. If you choose to cancel your coverage or terminate your employment before you become eligible for the Sears Holdings Medical and Dental Plans, your coverage will stop at the end of your last pay period (or month) in which payroll deductions were last taken.

HOW TO ENROLL

Eligible associates may enroll by phone or online at: • Telephone: 1-877-646-5609 (1-800-754-1896 for

Washington residents)

• Online: www.starbridge.com/info/sears (click on Enroll

Now)

CONTRIBUTIONS

If you enroll in one of the medical options under Starbridge, you pay for your coverage through pre-tax payroll deductions under the premium conversion portion of the Sears Holdings Flexible Benefits Plan. The cost for all other Starbridge options (dental/vision, life insurance, disability) you enroll in will be deducted from your paycheck on an after-tax basis. MEDICAL BENEFITS

Starbridge offers three limited medical benefit options that are insured and administered by Cigna. Please note that these options do not provide comprehensive coverage and are not major medical plans. The Starbridge Medical Plan helps cover bills for minor illnesses and accidents such as the flu or a broken arm. Benefits under the Starbridge Medical Plan include: � Coverage for doctor visits at an affordable copay � Coverage for inpatient and outpatient care � Surgery and maternity benefits � Prescription drug benefits � Employee assistance program � 24-Hour NurseLine support � Cigna PPO Network of providers � Comprehensive Web site/Online resources Coverage is available for you or for you and your family.

STATE LAW RESTRICTIONS AND DISCLOSURES

• Connecticut: Connecticut requires a specific disclosure for limited medical benefit plans, such as the Starbridge Program, notifying individuals that it does not provide comprehensive medical coverage. This Program is a basic or limited benefits policy and is not intended to cover all medical expenses. It is not designed to cover the cost of serious or chronic illness and contains specific dollar limits on what will be paid for medical services which may not be exceeded. If the cost of services under this Program exceeds those limits, the covered associate, and not Cigna, is responsible for payment of the excess amounts.

• Massachusetts: Massachusetts law requires that

Massachusetts residents, eighteen (18) years of age and older, must have health coverage that meets the “creditable

coverage” standards set by the appropriate Massachusetts authorities, unless waived from the health insurance requirement based on affordability or individual hardship. For more information call the Connector at 1-877-MA-ENROLL or visit the Connector website (www.mahealthconnector.org).

The Starbridge Program does not meet this creditable coverage standard. If you purchase coverage under this Program and no other health coverage, you will not satisfy the Massachusetts requirement that you have health insurance meeting these standards.

• Montana: The Starbridge Program is not available to associates who are residents of Montana.

• New Hampshire: The Starbridge Program is not available to

associates who are residents of New Hampshire. • New Jersey: The Starbridge Program is not available to

associates who are residents of New Jersey.

Sears Holdings Benefits Handbook 2012 14-2 Starbridge Full-time Hourly

• North Dakota: The Starbridge Program is not available to

associates who are residents of North Dakota. • Puerto Rico: The Starbridge Program is not available to

associates who are residents of Puerto Rico. • State of Washington: Only the Starbridge medical options can

be offered to associates who are residents of the State of Washington. The other benefit coverages offered by Starbridge are not available.

• Vermont: The Starbridge Program is not available to

associates who are residents of Vermont.

As an insured program, this Program is subject to all applicable state insurance laws and will be operated by Cigna in accordance with such laws. DENTAL/VISION BENEFITS

Starbridge offers a combined dental/vision option, which features: � Reimbursement for common dental preventive treatment � Reimbursement for basic dental procedures � Network of dental providers � Savings on eye examinations, frames and lens through the

Cigna Vision Network Coverage is available for you or for you and your family. TERM LIFE INSURANCE

Starbridge offers life insurance benefits for you and your family: � Associate coverage: $10,000 � Spouse coverage: $5,000 � Child coverage: $2,000 per child SHORT-TERM DISABILTY PLAN

Starbridge offers short-term disability coverage for eligible associates who are disabled and unable to work due to non-work related accidents. This disability coverage is not available to associates in California, Hawaii, Montana, New Hampshire, New Jersey, New York, North Dakota, Rhode Island, State of Washington, Vermont, and Puerto Rico. FOR MORE INFORMATION

For more information about Starbridge, call 1-877-646-5609 to speak with a Benefits Specialist. Specialists are available Monday through Friday between 5:00 a.m. and 6:00 p.m. Mountain time. You can also visit www.starbridge.com/info/sears to access benefit information and locate participating physicians and pharmacies in the Cigna PPO Network of providers. IMPORTANT NOTE

Starbridge (including all of the individual types of insurance and benefits available under the program) is not intended to be nor treated by the Company as a welfare benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Starbridge is intended to satisfy the exception under ERISA for certain group or group-type insurance programs that are made available by, but not sponsored nor endorsed by, an employer.

The fact that a summary of Starbridge is included in this Handbook should not be construed as making it an ERISA plan.

Sears Holdings Benefits Handbook 2012 15-i Paid Time Off Full-time Hourly

Paid Time Off TABLE OF CONTENTS

Paid Time Off ..............................................................................................................................................................................15-1

Vacation ......................................................................................................................................................................................15-1

Your Vacation Allotment .................................................................................................................................................15-1

Newly Hired Associates .................................................................................................................................................15-1

How You Earn Vacation .................................................................................................................................................15-1

Accumulating Vacation ...................................................................................................................................................15-1 If You Go on Leave of Absence .....................................................................................................................................15-1

If You Leave the Company .............................................................................................................................................15-1 If You Transfer to a Different FEIN .................................................................................................................................15-1

National Holidays .......................................................................................................................................................................15-1

Personal Days ............................................................................................................................................................................15-2 If You Leave the Company .............................................................................................................................................15-2

Unpaid Personal Time Off .........................................................................................................................................................15-2 Exceptions ......................................................................................................................................................................15-2 Requirements .................................................................................................................................................................15-2

Important Note ...........................................................................................................................................................................15-2

For More Information .................................................................................................................................................................15-2

Sears Holdings Benefits Handbook 2012 15-1 Paid Time Off Full-time Hourly

PAID TIME OFF

Like all employers, Sears Holdings recognizes the importance of time away from work. Depending on your length of service, you may qualify for as much as four weeks of vacation and up to 10 holidays and personal days to use each year. Important Note: Certain paid time off provisions may be different for associates in certain locations, including California, Connecticut, Montana, North Dakota and Puerto Rico. Provisions may also differ for associates who work in Kmart Distribution Centers and for associates covered by a collective bargaining agreement. Please consult your HR representative for more information.

VACATION

YOUR VACATION ALLOTMENT

As a full-time hourly associate, you are entitled to earn vacation each year up to a specified amount. The plan year for vacation is aligned with Sears Holdings’ fiscal year, which runs from approximately February 1 to January 31. The actual dates are based on the Sears Holdings fiscal year and your payroll schedule.

NEWLY HIRED ASSOCIATES

Newly hired associates are eligible for vacation after one year of service. The amount of vacation available after one year is pro-rated based on the number of months remaining in the year. Once you have completed at least one year of service, you can begin to earn vacation.

HOW YOU EARN VACATION

Full-time hourly associates will earn vacation as set forth in the chart below and according to the average number of hours worked in the previous fiscal year. However, you do not earn any vacation while you are on a paid or unpaid continuous leave of absence or a paid or unpaid pending continuous leave of absence.

*Grandfathered associates are those who were eligible for 5 weeks of vacation as of January 1, 2006. Since you do not earn vacation while on a paid or unpaid continuous leave of absence or a paid or unpaid pending continuous leave of absence, the amount of vacation you are entitled to take during any year in which you are on a paid or unpaid continuous leave of absence or a paid or unpaid pending continuous leave of absence is reduced proportionately. Similarly, if you do not work for a full year, your vacation benefit for that year would be reduced. You begin earning vacation at a higher weekly rate the pay cycle after you reach your 2nd, 7th, and 15th anniversaries. This means that during the year in which one of these anniversary dates occurs, your vacation benefit will be somewhat different than shown in the chart.

It’s important that you understand that as long as you have at least one year of service, you can take up to 40 hours of your vacation during the year before you actually earn it. However, you may not use a future year’s vacation. This gives you the flexibility you need to take your vacation when you want to—subject to your manager’s approval.

ACCUMULATING VACATION

If you are a full-time hourly associate, you can accumulate up to the maximum vacation time shown in the following chart.

Years of Continuous Service

Maximum Accumulation

FT40 FT30

1 but less than 2 years 60 hours 53 hours 2 but less than 7 years 120 hours 105 hours 7 but less than 15 years 180 hours 158 hours 15 years and over 240 hours 210 hours Grandfathered 300 hours 263 hours

Once you have reached the maximum accumulation amount for your years of service, you can’t earn or accumulate any additional vacation until you use some of your maximum accumulated time. For example, if your vacation account becomes full in April and you decide not to take a vacation until June, you will not earn or receive any additional vacation hours for May – none would be added to your vacation account balance. If you took a week of vacation at the end of June, you could then start to accumulate vacation again for each following week until your vacation account becomes full again.

IF YOU GO ON LEAVE OF ABSENCE

You may request that earned but unused vacation be paid to you at the time you are placed on continuous leave of absence or a pending continuous leave of absence. Please note: You do not earn additional vacation while you are on a continuous leave of absence or a pending continuous leave of absence.

IF YOU LEAVE THE COMPANY

If you leave the Company and you have taken less vacation than you have earned during the current year, the Company will pay you for your accrued, unused vacation when you leave. If you have taken more vacation than you have earned, you will owe the Company the difference. In this case, to the extent possible, the Company will deduct the amount owed from any final pay or severance allowance to which you may be entitled.

IF YOU TRANSFER TO A DIFFERENT FEIN

Per Company payroll accounting policy governing vacation allocation, if you transfer to another job and work for a business unit with a different FEIN (Federal Employer Identification Number), you will be paid out any unused vacation due.

NATIONAL HOLIDAYS

You may be eligible for national and designated holidays each year. The Company observes six national holidays each year, including New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Years of Continuous

Service

Hours of Vacation Earned for Each

Week

Annual Equivalent

(weeks)

FT40 FT30

1 but less than 2 years 0.76924 0.67308 1 2 but less than 7 years 1.53848 1.34617 2 7 but less than 15 years 2.30772 2.01926 3 15 years and over 3.07720 2.69234 4 Grandfathered* 3.84616 3.36539 5

Sears Holdings Benefits Handbook 2012 15-2 Paid Time Off Full-time Hourly

Please note: Associates do not receive pay if they are on a continuous leave of absence or a pending continuous leave of absence.

Some units or work locations may observe additional designated holidays. These are days on which the Company has authorized non-selling units/work locations to be closed.

For Support Center associates: If a National holiday falls on a Saturday, it will be observed on the previous Friday for those units normally closed on Saturdays. If a National holiday falls on a Sunday, it will be observed on the following Monday for those units normally closed on Sundays. Exceptions based on business needs may apply. "Observed" in this context means that time off is afforded and is not intended to govern when the National Holiday will be paid.

PERSONAL DAYS

You are eligible for up to four personal days, to take as you wish, after you complete six months of service with Sears Holdings. Once you complete six months of service, you will receive the next allocation of personal days. Personal days are allocated throughout the year as follows: � First day of the fiscal year (about February 1) 2 days � On May 1 1 day � On August 1 1 day Personal days not taken by the end of the plan year are forfeited, unless prohibited by state law. The plan year tracks Sears Holdings’ fiscal year, which runs from approximately February 1 to January 31. The actual dates are based on the Sears Holdings fiscal year and your payroll schedule.

Please note: If more than six national and designated holidays are observed in your unit/work location, the number of personal days for which you are eligible will be reduced by the number of additional designated holidays observed by your unit/work location.

IF YOU LEAVE THE COMPANY

Personal days not taken when you leave the Company are forfeited, unless prohibited by state law.

UNPAID PERSONAL TIME OFF

Full-time hourly Sears Holdings associates with at least one year of service are eligible for one to 10 days of unpaid time off in a calendar year.

EXCEPTIONS

• Certain businesses may be excluded under the policy. Certain units covered under collective bargaining agreements may also be excluded. See your HR representative for information.

• This does not apply to associates in California, Connecticut, Montana, North Dakota and Puerto Rico.

REQUIREMENTS

• request for unpaid time off does not conflict with business specific blackout periods;

• request is made to manager in advance of when it is planned to be taken;

• request must be made in full day increments. Partial unpaid days may not be requested under this policy;

• approval is received from the designated unit manager; • all company-paid vacation (which includes accrued, carry-over

and maximum advanceable vacation) must be used before unpaid time of issued.

Please note: Unpaid time off cannot be used to extend a continuous leave of absence or a pending continuous leave of absence. If an associate wishes to take unpaid time off at the end of an approved continuous leave of absence or a pending continuous leave of absence, reasonable advance notice must be provided and approval must be obtained in advance from the designated unit manager.

IMPORTANT NOTE

The Paid Time Off programs are payroll practices that are exempt from welfare benefit plan status under the Employee Retirement Income Security Act of 1974 (ERISA), as amended (ERISA). The fact that a summary of the Paid Time Off programs are included in this Handbook should not be construed as making them ERISA plans.


The following details about your benefit coverage are provided in the Other Information section of this handbook: � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers.

Sears Holdings Benefits Handbook 2012 16-i Business Travel Insurance Plan Full-time Hourly

Business Travel Insurance Plan TABLE OF CONTENTS How the Plan Works ......................................................................................................................................................... 16-1

Covered Accidents .........................................................................................................................................................16-1 What is not Covered .......................................................................................................................................................16-1

Coverage Amount ............................................................................................................................................................ 16-1 If You Die .......................................................................................................................................................................16-1 If You Are Injured ...........................................................................................................................................................16-1 Other Benefit Features ...................................................................................................................................................16-1 To Whom the Benefit Is Paid .........................................................................................................................................16-2 Coverage Extension for Spouses and Dependent Children ...........................................................................................16-2

Claims Information ........................................................................................................................................................... 16-2 How to File a Claim ........................................................................................................................................................16-2 How to Appeal a Denied Claim ......................................................................................................................................16-2

For More Information ....................................................................................................................................................... 16-2

Travel Assistance Services ............................................................................................................................................. 16-2

Some Terms You Should Know ...................................................................................................................................... 16-3

Important Note .................................................................................................................................................................. 16-3

Sears Benefits Handbook 2012 16-1 Business Travel Insurance Plan Full-time Hourly

HOW THE PLAN WORKS

Sears Holdings provides eligible associates Business Travel Insurance at no cost to the associate and regardless of length of service. The Business Travel Insurance Plan provides 24-hour insurance that pays for accidental death or dismemberment from injuries caused by an accident while traveling on Company business. The Plan covers accidents in which death or dismemberment results (within 365 days of the accident) from injury caused by the accident while the associate is traveling on Company business. This includes hotel fires and other accidents incidental to Company business. For purposes of the Business Travel Insurance Plan, injury means accidental bodily injury resulting independently of sickness and all other causes. Any associate, while on an authorized business trip away from the premises of his or her regular place of employment is considered to be traveling on company business. For service technicians, business travel occurs when an associate is traveling outside his or her city of permanent assignment. Such trips begin when you leave your home or place of employment, whichever occurs last. A trip ends when you return to your home or place of employment, whichever occurs first.

COVERED ACCIDENTS

When traveling on company business, you are covered while: � A passenger in, boarding or alighting from any Sears Holdings-

owned aircraft; � A passenger in, boarding or alighting from a commercial

aircraft, or any public conveyance licensed to carry passengers for hire (common carriers);

� A passenger in, boarding or alighting from any non-scheduled, private aircraft used for pleasure purposes with no commercial intent during flight or as a passenger in military aircraft flown by the Air Mobility Command or its foreign equivalent;

� A passenger in, boarding or alighting from a chartered multi-engine aircraft;

� An authorized Sears Holdings pilot or Sears Holdings crew member;

� Driving a car, or as a passenger in someone else’s car; and � During the course of any trip, including a sojourn or personal

deviation taken during the course of the trip

WHAT IS NOT COVERED

Aircraft travel other than that listed above is not covered. Injury or death caused by suicide, attempted suicide, or intentionally self-inflicted injury or acts of declared or undeclared war within the U.S. (including its territories or possessions) or your country of citizenship or permanent residence. Driving to and from work, travel for any vacation or holiday or travel while on leave of absence is not covered. In no event is coverage provided for a flight that includes crop dusting or seeding or spraying, fire fighting, exploration, pipe or power line inspection, any forms of hunting, bird or fowl herding, banner towing, or any test or experimental purpose. Other exclusions include: � Sickness, disease, or mental infirmity; � Viral or bacterial infection or medical, surgical treatment

related to the infection;

� Exposure to viral, bacterial or chemical agents except for infection from an external cut or accidental ingestion of contaminated food; and

� Accidents while engaged in military active duty or reserve or National Guard training extending beyond 31 days.

COVERAGE AMOUNT

IF YOU DIE

The amount of your insurance coverage for death from other than common carrier accidents is two times your Annual Salary (as defined below), up to a Principal Sum of $500,000 (subject to the age restrictions below). The Principal Sum is $500,000 for an associate’s death while traveling in a common carrier such as a taxi cab or train or any airplane in which you are traveling as a fare-paying passenger. When riding in a Sears Holdings-owned or operated aircraft, your Principal Sum remains at two times your Annual Salary, up to $500,000. The maximum limit of liability for covered losses for all persons that may result from any one accident is $15 million.

IF YOU ARE INJURED

Where the injuries are not fatal; but within 365 days of the accident that caused the loss of: � two limbs (such as two hands, two feet or a hand and a foot – or

the sight in both eyes, or a combination of a hand or foot and sight of one eye) or the loss of speech and hearing in both ears, you will receive 100% of the Principal Sum as described above.

� one limb or the sight in one eye, or loss of hearing in both ears, you will be paid 50% of the amount of the Principal Sum.

� the thumb and index finger on the same hand, you will be paid 25% of the Principal Sum.

If as a result of a covered accident you experience Paralysis determined by the Physician to be permanent, the following benefits will be payable: � 25% of the Principal Sum is payable for Paralysis in one limb � 50% of the Principal Sum is payable for Paralysis of the upper

and lower limbs on the same side of the body � 75 % of the Principal Sum is payable for Paralysis in the two

upper or the two lower limbs � 100% of the Principal Sum is payable for Paralysis in all four

limbs. If you lapse into an irreversible Coma within 90 days of the accident that caused the injury as a result of a covered accident and the Coma continues for 30 consecutive days, the Plan will pay 1% of the Principal Sum per month. The benefits ceases on the earliest of: (1) the date the insured person ceases to be comatose due to that injury; (2) the date the insured person dies; or (3) the date of the total amount of the monthly Coma benefits paid for all injuries caused by the accident equals 100% of the Principal Sum.

OTHER BENEFIT FEATURES

Seatbelts and Airbags: If you are wearing a seat belt in a private passenger automobile during a covered accident resulting in your loss of life, an additional 10% of the Principal Sum up to a maximum of $50,000 is payable. If the vehicle is equipped with an air bag during a covered accident resulting in your loss of life, an additional 10% of the Principal Sum up to a maximum of $50,000 is payable. If it is unclear if the person


was wearing a seat belt or was positioned in a seat with a properly functioning and properly deployed airbag, $1,000 will be paid.

Exposures and Disappearances: A loss due to accidental exposure to the elements is covered as an injury under this Plan. Loss of life is presumed after one year following the disappearance of the insured. Bereavement and Trauma Counseling: If you or your immediate family member requires bereavement and trauma counseling because of a covered loss, a benefit of $150 per session up to 10 sessions will be paid if the counseling expenses are incurred within one year of the date of the covered accident. Home Alteration and Vehicle Modification: If you suffer a covered dismemberment or Paralysis during a covered business trip or if your spouse or dependents suffer a covered dismemberment or Paralysis while on a covered business or relocation trip, an additional benefit of up to $25,000 will be provided for modifying your home or vehicle as long as the adaptive services are required within one year of the date of the covered accident. Accident Medical Expense Benefit: If an insured person suffers an Injury that within 90 days of the date of the accident that caused the Injury, requires him or her to be treated by a Physician, the Company will pay the usual and customary charges incurred for covered medical services received due to that Injury up to $250,000 per insured person for all Injuries caused by the same accident. This benefit is payable for such charges incurred after the deductible of $100 has been met and within 52 weeks after the date of accident causing that Injury Rehabilitation Benefit: A benefit of up to a maximum of $50,000 will be paid if you or your covered dependents require rehabilitation within two years of the date of the covered loss as determined necessary by a Physician. Felonious Assault: In the event you suffer a covered loss resulting from attempted robbery or holdup, kidnapping or attempted kidnapping, or other felony assault that takes place on the premises of your place of permanent assignment, a benefit of two times your Annual Salary up to a maximum of $500,000 will be provided. However this benefit does not apply, if the insured person commissions or attempts to commit a felony.

TO WHOM THE BENEFIT IS PAID

All covered injuries, other than loss of life will be payable to you. In the event of a covered loss of life, the Principal Sum is payable to the person designated under the Group Life policy. If there is no such designation, then the benefit is payable to your spouse. If there is no spouse, the benefit is payable to your children, if there are no children, then to your parents, and if there are no living parents, then to your siblings, and if there are no siblings, then to your estate.

COVERAGE EXTENSION FOR SPOUSES AND DEPENDENT CHILDREN

Spouses and dependent children (enrolled full-time students up to age 19 or age 25 and primarily supported by you) are covered during a relocation or business trip for which Sears Holdings pays part or all of the cost. The definition of a dependent child is an unmarried child who is one of the following: � A child from birth date to 19 years of age; or � A child who is age 19 or more but less than age 25, enrolled in

school as a full-time student and primarily supported by the covered person; or

� A child who is age 19 or more who is incapable of self-sustaining employment by reason of mental or physical handicap and is primarily supported by the covered person.

CLAIMS INFORMATION

HOW TO FILE A CLAIM

Forms for filing a Business Travel Accident Insurance claim can be obtained from:

Sears Holdings Risk Management Dept. 769RM 3333 Beverly Road Hoffman Estates, IL 60179

The claims administrator will notify you in writing of its initial claims decision. Such notification will be provided within a reasonable period, not to exceed 90 days after receipt of the claim, unless the claims administrator determines that an extension is necessary (up to an additional 90 days) .


If you feel your claim for benefits has been improperly denied, you have the right to appeal the decision. See the Other Information

section for more information.


The following details about your benefits coverage are provided in the Other Information section of this Handbook: � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers.

TRAVEL ASSISTANCE SERVICES

When traveling you have access to information 24 hours a day including: Travel Medical Assistance (including)

� Emergency medical evacuation transportation assistance � Physician / hospital referrals

Worldwide Travel Assistance (including) � Lost baggage search; stolen luggage assistance � Lost passport / travel documents � Inoculation information � Embassy or Consulate Referral

Emergency Travel Assistance (including) � Emergency return travel arrangements

Concierge Services (including) � Group transportation coordination � Wireless device assistance

Personal Security (including) � Security Evacuation � Security and safety advisories

Identity Theft Services

In addition, if you or your dependents that may be traveling with you suffer a medical emergency and a physician designated by Ambassador Travel in consultation with a local attending physician determines that it is medically necessary to be transported under medical supervision, Ambassador Travel will arrange and pay for the evacuation. Contact Ambassador Travel Assistance at 1-877-244-6871 (U.S. and Canada) or Overseas at +1-713-260-5592 to speak to a personal assistant. When contacting Ambassador Travel Assistance, please indicate that you are an associate of Sears Holdings Corporation covered under policy # GTP 0009129594.



Annual Salary: Your Annual Salary is the total compensation you received from the company during the 12-month period immediately prior to the covered accident. If you have less than 12 months’ earnings, your Annual Salary amount is computed by extending for a 12-month period the average compensation that you received before the loss. Coma: A profound state of unconsciousness from which it is unlikely to recover through powerful stimulation, as determined by a Physician. The Coma must begin within 90 days of the accident and continue for 30 consecutive days.

Paralysis: The total loss of use as determined by a Physician to be complete and irreversible. Physician: A U.S. licensed health care provider practicing in the United States within the scope of his/her license and rendering care and treatment to the covered person that is appropriate for the condition and locality and who is not the covered person, a parent, sibling, spouse or child of the covered person ; a person living in the covered person’s household; a person employed or retained by the policyholder; or a person providing homeopathic, aroma-therapeutic or herbal-therapeutic services. Principal Sum: The amount of your insurance coverage for accidental death. Principal Sum is also used in the determination of the percentage of payout for accidental dismemberment and paralysis benefits.

Principal Sum Age Reductions 100% of Principal Sum ages 70-74 65% of Principal Sum ages 75-79 30% of Principal Sum age 80-84 15% of Principal Sum age 85 and over

IMPORTANT NOTE

The Business Travel Accident Insurance Plan is a welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended (ERISA). This section of the Handbook, together with the applicable provisions of the Introduction and Other Information sections, are intended to constitute a summary plan description (SPD) in accordance with ERISA.

Sears Holdings Benefits Handbook 2012 17-i WorkLife Solutions Full-time Hourly

WorkLife Solutions TABLE OF CONTENTS How the Program Works ...........................................................................................................................................................17-1

Resource and Referral Services ....................................................................................................................................17-1 Employee Assistance .....................................................................................................................................................17-1

Claims Information ....................................................................................................................................................................17-2 For More Information .................................................................................................................................................................17-2 Important Note ...........................................................................................................................................................................17-2

Sears Holdings Benefits Handbook 2012 17-1 WorkLife Solutions Full-time Hourly


WorkLife Solutions is an employee assistance program (EAP) that provides resources and referral services designed to help you better manage the demands of both your career and your family. Whenever you need information or assistance to resolve a personal or family issue, a trained consultant is available to assess your situation and provide consultation and counseling services if requested and propose appropriate resources to help you address the particular issue. Generally, the program works as follows: � You call WorkLife Solutions and consultants are available to

assist you with a wide variety of resource and referral services or personal issues as well as in the moment counseling services 24 hours a day, seven days a week. Simply call 1-

800-424-4732. � Most conversations only take about 15 minutes. In some

cases, the consultant can assist you right away in developing an action plan to address your concerns. If you wish to speak with a counselor for a full counseling session, a session typically runs about 50 minutes. Packets of educational materials related to your concerns can also be sent to you immediately.

� If you need a referral for resources, such as a referral for childcare, school options or senior care including housing, the consultant will listen to your needs to address your concerns. Using the information you provide, the consultant will conduct a search for appropriate providers in your area, and screen them via phone interviews based on your needs. Once the search is complete, you will receive customized, qualified referrals and educational materials such as informational packs and books. Consultants follow up with every caller to ensure that the information received has met their needs.

RESOURCE AND REFERRAL SERVICES

Wherever you are in life—new to parenthood, raising school-aged children or on the verge of retirement—it is very likely that at some point you or a family member may need to make decisions about day care, elder care, college or other special needs. Sorting through the options can be very time consuming. WorkLife Solutions is intended to save you time and help you make informed decisions. Becoming a Parent

As most parents already know, and as new parents will soon discover, there will always be new challenges in the art of being a parent. Here are a few areas in which you can receive information and referrals: � Preparing for pregnancy � Adoption � The essentials of good parenting � Parenting – from toddlers to teens � Keeping kids safe and healthy Child Care

Choosing an appropriate day care provider is one of the most important decisions a parent can make. WorkLife Solutions consultants can help you sort through the many options and issues associated with child care, including: � Family home providers, day care centers, nannies and/or au

pairs � Emergency and sick care � Knowing state licensing requirements Special Needs

Get help for you and your special needs child:

� Testing and assessment � Intervention programs � Supportive resources for handling disabilities � Community resources for dealing with attention disorders Emergency Care Services

Sometimes a situation needs immediate attention, but you’re not sure where to go for help with care needs. The program can help you identify resources such as: � Nanny and back-up child care services � Home health agencies � Community resources School and College Decisions

WorkLife Solutions can help you with topics such as: � School options, camps and special programs � Financial aid and scholarships � Admissions and standardized test preparations Mature Transitions

Mature transition topics include: � Lifestyle changes � Health and wellness issues � Volunteer opportunities Elder Care

WorkLife Solutions consultants understand the issues surrounding elder care. Here are some of the ways they can help: � Senior housing options � Adult day care � Home Health Care

EMPLOYEE ASSISTANCE

WorkLife Solutions consultants are also available to provide access to personal consultation 24 hours a day, seven days a week. Use of the personal consultation services is voluntary, but the Company encourages associates and/or other eligible family members with personal problems to take advantage of this service. Employee assistance consultants are trained to offer assistance on any number of issues you might face, whether they are related to work, family, relationships, grief, finance, anxiety or depression, substance abuse, or other personal issues including assistance with chronic medical conditions, quality of life concerns, and in working to achieve better work/life balance. When you need to speak to an employee assistance consultant, call the toll free number 1-800-424-4732. Telephonic counseling is available at any time, 24 hours, and 7 days a week. Such services are provided by master’s level counselors. If the employee assistance consultant determines that you need in-person counseling that is not covered under your medical plan, you may be referred to an employee assistance counselor in your community to receive one in-person counseling session. The employee assistance consultant can also assist you with referrals to behavioral health treatment available through your medical plan, when applicable. You will be responsible for the costs of any such treatment. You may also be referred to an employee assistance counselor for an in-person counseling session if you violate the Sears Holdings Drug-Free Workplace Policy or if it appears you may be having a personal problem that is negatively affecting your job performance. If you require treatment beyond the scope of the employee assistance counseling session, you are responsible for the costs. Confidentiality

Personal consultation services are confidential. Employee assistance consultants will not release personal information to the

Sears Holdings Benefits Handbook 2012 17-2 WorkLife Solutions Full-time Hourly

Company unless you provide your written consent or the counselor is professionally bound or required by law to do so. Time Off

Time off from work to seek employee assistance is subject to the Company’s established policies for excused absences; however, it is expected that you will typically seek employee assistance outside of regular work hours.

CLAIMS INFORMATION

There is no need to file a claim to receive any of the services under the WorkLife Solutions Program.


The following details about your benefit coverage are provided in the Other Information section of this handbook: � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers.

IMPORTANT NOTE

The WorkLife Solutions Program is a short-term counseling, consultation, resource and referral program. While the benefits described above under Resource and Referral Services are not intended to be nor treated by the Company as employee welfare benefits under the Employee Retirement Security Act of 1974, as amended (ERISA), the counseling benefit described above under Employee Assistance are treated by the Company as employee welfare benefits under ERISA.

Sears Holdings Benefits Handbook 2012 18-i Associate Discounts and Educational Assistance Full-time Hourly

Associate Discount and Educational Assistance TABLE OF CONTENTS

Associate Discounts .................................................................................................................................................................18-1 Discount Policy ...............................................................................................................................................................18-1 Discount Cards ...............................................................................................................................................................18-1 Discounts at Sears Formats ...........................................................................................................................................18-2 Discounts at Kmart Formats ...........................................................................................................................................18-2 Abuse of Discount Privileges .........................................................................................................................................18-2

Other Discounts .........................................................................................................................................................................18-3 ConSern Education Program ....................................................................................................................................................18-3 Important Note ...........................................................................................................................................................................18-3 For More Information .................................................................................................................................................................18-3

Sears Holdings Benefits Handbook 2012 18-1 Associate Discounts and Educational Assistance Full-time Hourly

ASSOCIATE DISCOUNTS

As a Sears Holdings associate, you may be entitled to discounts on merchandise and services purchased in various Sears Holdings retail formats and .com web sites. The discount is available to you as soon as you receive your associate discount card. Eligibility is based on the line of business in which you work. See the information and eligibility chart that follows. Please note: � A discount may also be available to you at a participating

Licensed Business. � Merchandise purchased through Licensed Business catalogs is

not eligible for the associate discount. Only merchandise purchased through Sears proprietary catalogs, such as Craftsman and Fine Jewelry, is eligible for associate discount.

� Sears associates working in a Sears-owned Hometown store are entitled to the same discount as full-line store associates.

� Due to Federal Income Tax laws, Sears Holdings associates are not eligible for an “associate” discount at Independently- owned Hometown Stores, Independently-owned and Franchisee Appliance Showrooms, and Independently-owned and Franchisee Sears Appliance & Hardware stores.

� Associates may not accept discounts on merchandise purchased directly from a Company vendor.

DISCOUNT POLICY

� It is your responsibility to understand the eligibility rules that apply to you and to ask for a discount only where you are eligible. The discount applies to merchandise and services purchased and paid for by associates, their spouses and their eligible dependent children who have a discount card. Eligible purchases include items for the cardholder’s personal use including the purchase of gifts. Purchases made for later reimbursement by individuals not otherwise eligible for the discount are prohibited. This includes purchases for parents, siblings and other ineligible family members.

� The discount applies when purchases are made with cash, check, Sears gift card, Kmart gift card, TGI gift card, Green Dot prepaid card, Sears credit card, or other in-house credit. The associate discount is also allowed when PIN debit cards are used at most registers within stores. eBillme can be used for most .com purchases, however some restrictions apply. Specific forms and methods of payment are identified on the .com sites.

� Purchases made using Company promotional coupons are not eligible for the discount unless otherwise noted. Coupons issued by a Manufacturer may be used with the associate discount unless otherwise noted. Purchases made using reward certificates, such as Sears Premier rewards or KidVantage rewards, special savings event coupons and Family & Friends discount shopping passes, continue to be eligible for the discount. The discount is available in conjunction with Craftsman Club events; however, the discount is not available with purchases made using Craftsman Club promotional coupons.

DISCOUNT CARDS

You’ll receive one discount card for yourself and another for your spouse shortly after you are hired. You can apply for additional discount cards for your eligible student dependents by calling 88sears (1-888-887-3277). Student dependents must: � Be at least 16 but less than 23 years old; � Be unmarried; � Attend high school, college or the equivalent; and

� Qualify as dependents for federal income tax purposes.

Your Business Discount Available

Auto Centers1 Auto Centers, Full-line stores, Sears Grand, Sears Essentials

Carpet Cleaning Carpet, Full-line stores, Sears Essentials, The Great Indoors stores, SHIP, Kmart, Big Kmart, Kmart Super Centers

Catalogs Sears-owned Hardware stores4, Full-line stores, Sears Grand, Sears Essentials, sears.com, Sears proprietary catalogs

Commercial Sales Full-line stores, Sears Grand, Sears Essentials, The Great Indoors stores, Sears Outlet stores, searsoutlet.com, Commercial Sales3

Corporate2

Customer Care

Network

Auto Centers, Carpet, Full-line stores, Sears Grand, Sears Essentials, Sears-owned Hardware stores4, landsend.com, Lands’ End stores, Home Services, sears.com, Sears proprietary catalogs, SHIP, The Great Indoors stores, Commercial Sales3, Kmart, Big Kmart, Kmart Super Centers, kmart.com, Sears Outlet stores, searsoutlet.com, Sears-owned Hometown stores4

Sears Full-line stores

Sears Grand

Sears Essentials

Attached Auto Centers, Carpet (except for Sears Grand associates), Full-line stores, Sears Grand, Sears Essentials, landsend.com, Lands’ End stores, Home Services, sears.com, Sears proprietary catalogs, SHIP, Commercial Sales3, Kmart, Big Kmart, Kmart Super Centers, kmart.com, Sears Outlet stores, searsoutlet.com

Sears-owned

Hardware stores1 Full-line stores, Sears Grand, Sears Essentials, Sears-

owned Hardware stores4, Home Services Lands’ End Full-line stores, Sears Grand, Sears Essentials,

landsend.com, Lands’ End stores, sears.com Licensed Businesses

� Sears

� Kmart

Full-line stores, Sears Grand, Sears Essentials, Kmart, Big Kmart, Kmart Super Centers

Home Services Full-line stores, Sears Grand, Sears Essentials, The Great Indoors stores, Sears-owned Hardware stores4, Home Services, sears.com, Kmart, Big Kmart, Kmart Super Centers, kmart.com, Sears Outlet stores, searsoutlet.com

Sears Outlet stores

searsoutlet.com Full-line stores, Sears Grand, Sears Essentials, The Great Indoors stores, Home Services, sears.com, Kmart, Big Kmart, Kmart Super Centers, kmart.com, Sears Outlet stores, searsoutlet.com

sears.com

Full-line stores, Sears Grand, Sears Essentials, Sears-

owned Hardware stores4, landsend.com, Lands’ End stores, Home Services, sears.com, Sears proprietary catalogs, SHIP, Kmart, Big Kmart, Kmart Super Centers, kmart.com

Sears Distribution

Centers

Auto Centers, Full-line stores, Sears Grand, Sears Essentials, Sears-owned Hardware stores4, landsend.com, Lands’ End stores, Home Services, sears.com, Sears proprietary catalogs, SHIP, The Great Indoors stores, Commercial Sales3, Kmart, Big Kmart, Kmart Super Centers, kmart.com, Sears Outlet stores, searsoutlet.com

SHIP Full-line stores, Sears Grand, Sears Essentials, Carpet, sears.com, SHIP, Kmart, Big Kmart, Kmart Super Centers, kmart.com


Your Business Discount Available

The Great Indoors

stores

The Great Indoors stores, Home Services, Sears Outlet stores, searsoutlet.com, Commercial Sales3

Sears-owned

Hometown Stores4

Full-line stores, Sears Grand, Sears Essentials, landsend.com, Lands’ End stores, Home Services, sears.com, Sears proprietary catalogs, SHIP, Commercial Sales,3 Kmart, Big Kmart, Kmart Super Centers, kmart.com

Kmart, Big Kmart,

Kmart Super

Centers

Kmart, Big Kmart, Kmart Super Centers, Kmart.com, Sears Full-line stores, Sears Grand, Sears Essentials, Sears Home Services, Sears Carpet, SHIP, Sears.com, Sears Outlet stores, searsoutlet.com

Kmart Distribution

Centers

Kmart, Big Kmart, Kmart Super Centers, Kmart.com, Full-line stores, Sears Grand, Sears Essentials, sears.com, Sears Outlet stores, searsoutlet,com

Kmart.com Kmart, Big Kmart, Kmart Super Centers, Kmart.com, Sears Full-line stores, Sears Grand, Sears Essentials, Sears Home Services, SHIP, Sears.com, Sears Outlet stores, searsoutlet.com

1 15% discount applies to purchases on apparel merchandise. 2 Corporate includes but not limited to the following locations and campuses: Hoffman Estates, Michigan, Sears Holdings HR Service Center, Dallas Accounting Center, New York Design Office and San Francisco Apparel Office. 3 Associates are eligible for Commercial Sales discounts only when they are working with a builder that participates in the Appliance Select program. The discount is the greater of the Sears associate discount or the Appliance Select program discount, but not both. 4 Sears-owned Hometown stores and Sears-owned Hardware stores are those stores that are not in consideration for independent third party ownership.

DISCOUNTS AT SEARS FORMATS

When you, your spouse or an eligible dependent presents the associate discount card at stores and sears.com, the following discounts are available: � 20%* discount on apparel (includes ready-to-wear, intimate,

accessories, fine jewelry, children’s, men’s, fragrances and footwear) at stores and sears.com

� 20%** on cosmetics sold in Sears Full-line stores only. � 20% discount on merchandise ordered through

landsend.com/internalorders web site � 10% on promotional and 20% on non-promotional

merchandise at Lands’ End stores � 10%*** on services and other merchandise at stores and

sears.com � 10% for Two Hearts Maternity and Edwin Watts Golf apparel � 10% on services and merchandise (including apparel) at Sears

Outlet stores and searsoutlet.com * 15% for Sears associates in automotive centers and Sears-owned hardware stores ** Cosmetics sold in Sears Full-line stores only (excludes Sears Grand, Sears Essentials, sears.com) *** Only merchandise identified as “Sold by Sears” or “Sold by Kmart” for .com purchases is eligible for the associate discount. Discounts apply to regular, promotional and clearance-priced merchandise.

Exclusions

� Delivery and transportation charges � Finance charges � Gift cards and gift certificates � Cigarettes and tobacco products � Alcoholic beverages � Lottery tickets � Service providers (e.g. Western Union wire transfers or

money orders). � Prescriptions billed under insurance coverage or purchased

using Kmart Pharmacy Prescription Savings Club or similar preferred pricing arrangements.

� Sears Water Testing Lab charges

� Certain licensed business merchandise and services as determined by the licensed business

� Merchandise or services purchased at Contract Sales Liquidation Centers

� Merchandise purchased from Sears Shop-at-Home licensed catalogs

� Merchandise and services purchased through the Vision One special discounts program

� Apple Branded Products � givetogether � international shipping � Craftsman products sold in Ace Hardware stores � Diehard batteries sold at Costco, Diehard batteries and over-

the-counter products sold at Meijer

DISCOUNTS AT KMART FORMATS

When you or an eligible dependent presents the associate discount card at stores and kmart.com, the following discounts are available: � 20% discount on apparel (includes ladies, fashion accessories,

jewelry, infants and children’s men’s, and footwear) at stores and kmart.com

� 25% on prepared food purchased at Kmart restaurants within a Kmart store or a Kmart Super Center

� 10%* on other merchandise at stores and kmart.com � 10% for Two Hearts Maternity * Only merchandise identified as “Sold by Sears” or “Sold by Kmart” for .com purchases is eligible for the associate discount. Discounts apply to regular and clearance-priced merchandise.

Exclusions

� Advertised merchandise, including buy one get one events (you will pay the lesser of the advertised price or the discounted regular price)

� Cigarettes and tobacco products � Alcoholic beverages � Lottery tickets � Gift cards � Gasoline (Kmart Express stores) � Federal, state and local licenses (such as hunting and fishing

licenses) � Vending and amusement machines � Extended warranty contracts � Commemorative coins � Service and products from concessionaires (such as PCA or

gold vendors) � Service providers (Western Union transfers or money orders) � Ticketmaster tickets � Prescriptions billed under insurance coverage or purchased

using Kmart Pharmacy Prescription Savings Club or similar preferred pricing arrangements

� Most groceries � Apple Branded Products � givetogether � international shipping � Craftsman products sold in Ace Hardware stores � Diehard batteries sold at Costco, Diehard batteries and over-

the-counter products sold at Meijer ABUSE OF DISCOUNT PRIVILEGES

Violation of the associate discount policy or abuse of the discount privilege may result in revocation of the discount privilege and/or discipline, up to and including termination of employment. Violation or abuse by an individual not employed by a Sears


Holdings company may result in action, including revocation of the discount privilege.

OTHER DISCOUNTS

You and your eligible dependents may be able to obtain discounts from various participating licensed businesses, including but not limited to those listed below. These offers are subject to change. � Sears Optical � Sears Portrait Studios � Sears Hearing Aid Centers � H&R Block at Sears locations - discount on tax preparation

and electronic filing. Be sure to bring your Sears Holdings W-2 form

� Sears Flowers - use the special discount code, EMPSF, when ordering at www.searsflowers.com or 1-800-598-4005

CONSERN LOANS FOR EDUCATION

Continuous learning is critical to our success at Sears Holdings. To help you further your personal educational and career development goals, Sears Holdings offers the ConSern Education Program.

The ConSern Education Program offers a comprehensive suite of student loan programs designed to make paying for an education easy and affordable. The program can help you take advantage of all the options – that means exploring the feasibility of federal and alternative loan funding, or a combination of both, to end up with the most cost-effective education financing solution. To learn more, visit www.wellsfargo.com/student or call Customer Service at 1-800-378-5526.

IMPORTANT NOTE

The Company does not intend the Associate Discount program and the ConSern Education program described in this section to be employee welfare benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA). The fact that the summaries of these programs are included in this Handbook should not be construed as making them ERISA plans.


The following details about your benefits coverage are provided in the Other Information section of this handbook: � When you can make changes to your benefits. � Coverage continuation for certain benefits. � Contact information for benefit claims administrators and

insurance carriers.

Sears Holdings Benefits Handbook 2012 19-i Commuter Benefit Program Full-time Hourly

Commuter Benefit Program TABLE OF CONTENTS Commuter Benefit Program ..................................................................................................................................................... 19-1 What Is Covered ........................................................................................................................................................................ 19-1 How the Program Works .......................................................................................................................................................... 19-1

Pre-Tax vs. After-Tax .................................................................................................................................................... 19-1 Receiving your Pass or Voucher ................................................................................................................................... 19-1 Pay My Provider ............................................................................................................................................................ 19-1 Getting Reimbursed (Pay Me Back) .............................................................................................................................. 19-1

Important Note .......................................................................................................................................................................... 19-1 For More Information ................................................................................................................................................................ 19-1

Sears Holdings Benefits Handbook 2012 19-1 Commuter Benefit Program Full-time Hourly

COMMUTER BENEFIT PROGRAM

Sears Holdings provides a way for associates to save on work-related commuting expenses through the Commuter Benefit Program. The program allows you to pay for eligible commuting expenses with pre-tax dollars.

WHAT IS COVERED

The following commuter services are eligible: � Public Transportation

- Bus - Train - Subway - Ferry - Streetcar

� Vanpool - Vehicle must have seating for 6 or more adult

passengers, with 80% of mileage and 50% of seating capacity used for employee transportation

� Parking - Parking at or near work - Parking at or near public transportation you use to get to

work


When you enroll, you select whatever transit product or payment method you need for your monthly commute. You can elect to: � Transit:

- Purchase a monthly transit pass for delivery to your home address (no P.O. Boxes);

- Use the WageWorks Commuter Card (stored value card that can be used to purchase transit tickets and passes at transit agency ticket vending machines, windows and other locations).

� Parking: - Pay your parking facility directly (Pay My Provider

option); or - Be reimbursed for your parking expense if direct purchase

or payment is not available (Pay Me Back option). You can enroll, change, or cancel your commuter benefits prospectively. Monthly deadlines determine when your request to enroll in, change, or cancel commuter benefits will take effect. The monthly order deadline is the 10th of the month prior. For example, if you are looking to enroll for March, you will need to enroll by Feb 10th 11:59PM EST.

PRE-TAX VS. AFTER-TAX

You may receive pre-tax benefits up to limits established by the Internal Revenue Service. Limits are $125 for transit and $240 for parking. These are not combined, but separate limits. Currently these limits are a combined limit of $125 per month for transit and vanpool, and up to $240 a month for qualified parking. The first $125 in transit and/or vanpool benefits and $240 in parking expenses will be deducted from your paycheck on a pre-tax basis; and the remainder (if any) will be deducted from your paycheck on an after-tax basis.

RECEIVING YOUR PASS OR VOUCHER

WageWorks, the administrator of the Commuter Benefits Program, will mail your monthly pass or voucher directly to your home. You will receive your pass before the first day of each month. You will receive the same pass or voucher for recurring orders each month until you change or cancel this election.

PAY MY PROVIDER

If you elect the Pay My Provider option, WageWorks will send your payment to your parking provider by the 12th of the prior month. For example, if March is the benefit month, WageWorks will send the payment on February 12th. They will continue to send the same payment for recurring orders to the same provider each month until you change or cancel this election.

GETTING REIMBURSED (PAY ME BACK)

Under the Pay Me Back option, you are required to pay out of pocket for your parking expense and then submit a request for reimbursement online or by paper form. You will be reimbursed directly by check or direct deposit. IMPORTANT NOTE

The Commuter Benefit Program is not a welfare benefit plan for purposes of the Employee Retirement Income Security Act of 1974 as amended, (ERISA). It is a tax-advantaged benefit that the Company can offer to associates under a specific section of the Internal Revenue Code. The fact that a summary of this program is included in this Handbook should not be construed as making it an ERISA plan. FOR MORE INFORMATION The following details about your benefits coverage are provided in the Other Information section of this handbook: � When you can make changes to your benefits. � Coverage continuation for certain benefits. � Contact information for benefit claims administrators.

Sears Holdings Benefits Handbook 2012 20-i Adoption Assistance Program Full-time Hourly

Adoption Assistance Program TABLE OF CONTENTS How the Program Works ...........................................................................................................................................................20-1

Eligibility .........................................................................................................................................................................20-1 Coverage ........................................................................................................................................................................20-1 Eligible Expenses ...........................................................................................................................................................20-1 Maximum Number of Adoptions .....................................................................................................................................20-1 Paid Time Off .................................................................................................................................................................20-1

Claim Submission ......................................................................................................................................................................20-1 Adoption and Other Company Benefits ..................................................................................................................................20-1 For More Information .................................................................................................................................................................20-1 Important Note ...........................................................................................................................................................................20-2

Sears Holdings Benefits Handbook 2012 20-1 Adoption Assistance Program Full-time Hourly


Sears Holdings provides the Adoption Assistance Program in recognition of the special needs of associates who are adopting a child(ren). The Program seeks to make the process easier by covering a portion of expenses associated with an adoption. Please note: Provisions may be different for associates in different locations, including, but not limited to, Puerto Rico.

ELIGIBILITY

Sears Holdings associates must meet the following eligibility requirements for benefits under this program. The associate: � has a full-time status; � has completed 12 consecutive months of full-time service

with the Company; � is adopting a child(ren) under the age of 18; and � neither associate, spouse nor domestic partner is related,

either biologically or through previous adoption, to the adopted child(ren).

COVERAGE

Under the Program, the Company will reimburse 80% of eligible expenses as described below for each eligible adoption, up to a maximum benefit of: • $5,000 for a single-child adoption (when adopting only one

child), or • $5,000 for each child in a sibling group adoption Please Note: The Company will reimburse 80% of eligible expenses up to a maximum benefit of $7,000 for the adoption of a child with special physical and/or medical needs. The definition of a “special needs” child is as defined by the state in which the associate resides.

ELIGIBLE EXPENSES

Customary and reasonable expenses eligible for coverage under the Program include: � Legal costs, such as attorney fees � Court fees � Adoption agency fees � Pregnancy expenses for the child(ren)’s birth mother � Temporary foster-care expenses � Costs for the child(ren)’s required medical examinations � Travel expenses incurred to pick up adopted child(ren)

MAXIMUM NUMBER OF ADOPTIONS

The Program will cover eligible expenses for up to two adoptions per family per lifetime, regardless of whether one or both adopting parents are associates of the Company. This means that an associate can receive coverage for: � Two single-child adoptions, � One sibling-group adoption. Note: If both the associate and spouse are associates of the Company, only one can apply for reimbursement from the Program with respect to an adoption. PAID TIME OFF Adopting associates will be granted paid time off based upon service with Sears Holdings. If a married couple both work for the Company and are adopting, only one associate is eligible for the paid time off benefit (per covered adoption).

• Associates with at least 12 consecutive months of service but less than five years of service are eligible to receive one week paid time off at 50% their then current pay.

• Associates with at least five years of service would be eligible for one week paid time off at 100% of their then current pay.

CLAIM SUBMISSION

Claims must be submitted within one year after the adoption is final to receive reimbursement. An adoption is final for purposes of this Program when both of the following have occurred: � The adopted child(ren) is placed in associate's home; and � The court finalizes the adoption. Note: For international adoptions, English translations of official adoption documentation from the country of origin and the VISA validating the final adoption can be used in place of the US court document. Records of all expenses should be kept and copies made of adoption-related bills that have been paid. Associates should follow these steps when submitting a claim for reimbursement: 1. Obtain an Adoption Assistance Information Kit by calling

1-888-88sears (1-888-887-3277) and follow the prompts to speak to a benefits representative.

2. Complete the Adoption Assistance Reimbursement Request

Form, and attach all itemized bills, receipts, and other required documentation listed on the claim form for eligible expenses.

3. Mail the completed form to: Sears Holdings Benefits Center 100 Half Day Road P.O. Box 1498 Lincolnshire, IL 60069-1498

The associate will receive a check for the covered portion of eligible expenses. FICA and, where applicable, state income taxes will be withheld from reimbursement. Associates may want to consult with a tax advisor regarding these and other taxes that may apply to their reimbursement.

ADOPTION AND OTHER COMPANY BENEFITS

Adopting one or more children qualifies as a change in status under certain other Company benefit programs. Associates should review other benefit coverage (such as medical, dental, child life insurance, etc.) to determine if they need to make any coverage changes. The effective date of the change in coverage occurs the date the child(ren) is placed in the associate’s home either as a final adoption or placement for finalization of the adoption process (based upon state or international adoption requirements), provided the adoption is reported to the Sears Holdings Benefits Center within 31 days after the event. Associates should address questions to the Sears Holdings Benefits Center at 1-888-88sears (1-888-887-3277).


The following details about your benefits coverage are provided in the Other Information section of this handbook: � Coverage continuation for certain benefits.

Sears Holdings Benefits Handbook 2012 20-2 Adoption Assistance Program Full-time Hourly

� Contact information for benefit claims administrators and insurance carriers.

IMPORTANT NOTE The Adoption Assistance Program is not intended to be nor treated by the Company as a welfare benefit plan under the Employee Retirement Security Act of 1974, as amended (ERISA). The fact that a summary of the Adoption Assistance Program is included in this Handbook should not be construed as making it an ERISA plan.

Sears Holdings Benefits Handbook 2012 21-i Other Information Full-Time Hourly

Other Information TABLE OF CONTENTS

Highlights ...................................................................................................................................................................................21-1 How To Use This Section ............................................................................................................................................21-1

General Administrative Information .........................................................................................................................................21-1 A Note About the Plan Administrator .........................................................................................................................21-4 Plan Documents ...........................................................................................................................................................21-4

General Information About Your Benefits ...............................................................................................................................21-4 Changes in Cost of Coverage .....................................................................................................................................21-4 Qualified Changes in Status .......................................................................................................................................21-5 Continuing Your Benefits During a Leave of Absence .............................................................................................21-8 Termination of Coverage ...........................................................................................................................................21-10

Coordination of Benefits .........................................................................................................................................................21-12 HMO Options ..............................................................................................................................................................21-12 Medical and Dental Plans ..........................................................................................................................................21-12 Other Medical Plan Coordination of Benefits Rules ...............................................................................................21-14

Other Medical Plan Coverage Information ............................................................................................................................21-14 Retiree Medical Plan ..................................................................................................................................................21-14 Suspension of Coverage ...........................................................................................................................................21-15 Qualified Medical Child Support Orders (QMCSO) .................................................................................................21-15

Continuation of Coverage Under COBRA or USERRA ........................................................................................................21-15 How COBRA Works ...................................................................................................................................................21-16

Claims Information ..................................................................................................................................................................21-17 Non-Retirement Plans ................................................................................................................................................21-17 If Your Eligibility is Denied ........................................................................................................................................21-23 Savings Plans .............................................................................................................................................................21-23 Claims Administrators/Insurance Companies ........................................................................................................21-25 Third-Party Administrators .......................................................................................................................................21-26

Miscellaneous Information .....................................................................................................................................................21-26 Right of Recovery ......................................................................................................................................................21-26

Right of Reimbursement ...........................................................................................................................................21-26 Subrogation ................................................................................................................................................................21-27 Coordination of Benefits ...........................................................................................................................................21-27 Additional Protection for Plans ................................................................................................................................21-27 Non-Assignment of Benefits .....................................................................................................................................21-27 Qualified Domestic Relations Order (QDRO) ..........................................................................................................21-27 If You Become Incompetent ......................................................................................................................................21-28 Clerical Error ..............................................................................................................................................................21-28 Right to Investigate a Claim ......................................................................................................................................21-28 Misrepresentation of Eligibility or Claim Information .............................................................................................21-28 Material Misstatements or Omissions ......................................................................................................................21-28 Note for Key and Highly Compensated Associates ................................................................................................21-28 Conflict with Plan Documents ..................................................................................................................................21-28 Employment Rights Not Guaranteed .......................................................................................................................21-29 Plan Amendment or Termination ..............................................................................................................................21-29 USERRA Rights ..........................................................................................................................................................21-29

Notice of Privacy Practices .....................................................................................................................................................21-29 Important Notice About Your Prescription Drug Coverage and Medicare .........................................................................21-35

About Medicare Prescription Drug Coverage .........................................................................................................21-35 Creditable Health Plans .............................................................................................................................................21-35 Non-Creditable Health Plans .....................................................................................................................................21-35 Decisions You Need to Make ....................................................................................................................................21-35 For More Information about This Notice or Your Current Prescription Drug Coverage .....................................21-35 For More Information about Your Options Under Medicare Prescription Drug Coverage ..................................21-36 List of Sears Holdings Health Plans and Determination of Medicare Part D Creditability ..................................21-36

Statement of ERISA Rights .....................................................................................................................................................21-37

Sears Holdings Benefits Handbook 2012 21-1 Other Information Full-time Hourly

HIGHLIGHTS

This section contains information on the administration and funding of the Sears Holdings associate benefit plans. It completes the information provided in other sections of this handbook and contains important information about your rights as a participant in these plans. This section also provides information on the Employee Retirement Income Security Act of 1974, as amended (ERISA), the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (COBRA), the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) and other federal legislation affecting certain benefit plans described in this Handbook. It also provides addresses and phone numbers for the Plan Sponsors, the Plan Administrator, the claims administrators, and other service providers of the benefits programs.

This Handbook is intended to satisfy the summary plan description (SPD) requirements under ERISA with respect to those plans that are governed by ERISA. You are strongly encouraged to read the entire SPD and ask questions if you are unsure of any of its terms. After reading this information, we recommend keeping it with your important documents for future reference.

HOW TO USE THIS SECTION

You can use this section as a guide to your benefits—it contains administrative and funding information about the plans. This section also tells you about coverage options after your employment ends or when you go on a leave of absence and provides the claims procedures.

GENERAL ADMINISTRATIVE INFORMATION

Plan Sponsor(s) Health/Welfare Plans: Sears Holdings Corporation sponsors most of these plans, but certain plans continue to be sponsored by Sears, Roebuck and Co. or Kmart Holding Corporation, as indicated in the applicable sections. Sears Holdings Savings Plan and Sears Holdings Puerto Rico Savings Plan: Sears Holdings Corporation

Plan Administrator Sears Holdings Corporation Administrative Committee (Administrative Committee) Plan Administrator

Address

Plan Administrator Sears Holdings Management Corporation c/o Department 707BEN 3333 Beverly Road Hoffman Estates, IL 60179

Employer Identification

Number

Sears Holdings Corporation: 20-1920798 Sears, Roebuck and Co.: 36-1750680 Kmart Corporation: 32-0073116

Agent For Service of

Legal Process

Plan Administrator or Sears Holdings Corporation Administrative Committee Sears Holdings Management Corporation c/o Department 707BEN 3333 Beverly Road Hoffman Estates, IL 60179

Plan Year Except as noted in this or another section, all plans are maintained on a calendar year basis, beginning on January 1 and ending on December 31. Business Travel Insurance, for business travel other than company-owned aircraft, is maintained on a February 1 through January 31 plan year.

Plan Trustees Sears Holdings Savings Plan State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 Sears Holdings Puerto Rico Savings Plan Banco Popular Trust Division (725) P.O. Box 362708 San Juan, Puerto Rico 00936 State Street Bank and Trust is the plan custodian

Savings Plans

Investment Committee

The Sears Holdings Corporation Investment Committee (Investment Committee) is responsible for the management and investment of the assets of the Savings Plans, which duties include (among other duties) appointing the investment advisor, reviewing and approving investment policy guidelines recommended by the Advisor, determining the number and type of Investment Funds offered under the Savings Plans, appointing, terminating and replacing Trustees and custodians of the Savings Plans, and reviewing and monitoring the performance of the Advisor and the investment funds offered under the Savings Plans. The investment advisor is currently Towers Watson Investment Consulting, Inc. and is responsible for (among other duties) the development of investment guidelines, monitoring the performance of investment managers, and performing investment manager searches on behalf of the Savings Plans.


GENERAL ADMINISTRATIVE INFORMATION (continued)

Plan Names, Numbers, and Type Plan Financing Plan Administration

Sears Holdings Medical Plan Part of the Sears Holdings Corporation Employee Welfare Benefit Plan Plan number: 501 ERISA welfare plan

PPO - Self-funded. HMOs and the Triple S PPO plan – fully insured. Under the fully insured plans, the HMO or Triple S PPO pays the benefits. Coverage is paid for by both the company and pre-tax contributions of active associates. Coverage for same-sex domestic partners and dependent children of same-sex domestic partners is paid for by after-tax contributions of active associates (and the company-paid portion of that coverage is imputed in income). Contributions made by associates while on an unpaid leave of absence, while continuing coverage under COBRA, and as a retiree or surviving dependent are made with after-tax dollars.

Sponsor: Sears Holdings See A Note About the Plan

Administrator on the page following this chart for details pertaining to claims administration responsibility. The insurance carriers for the HMO plans and the Triple S PPO have claims administration and fiduciary responsibility.

Starbridge Program Non-ERISA program

Coverage is paid for entirely by associates. Benefits are paid by Starbridge, a subsidiary of Cigna. This coverage is not sponsored by or endorsed by Sears Holdings.

Cigna

Sears Holdings Dental Plan Part of the Sears Holdings Corporation Employee Welfare Benefit Plan Plan number: 501 ERISA welfare plan

Fully insured. Coverage is paid for by pre-tax contributions of active associates. Coverage is paid for by after-tax contributions for same-sex domestic partners and dependent children of same-sex domestic partners of active associates (and that company-paid portion of that coverage is imputed in income), for associates while on an unpaid leave of absence and for continuing coverage under COBRA. The insurance company pays the benefits.

Sponsor: Sears Holdings MetLife (claims administration and fiduciary responsibility) Administrative Committee (eligibility administration)

Sears Holdings Puerto Rico Dental Plan Part of the Sears Holdings Corporation Employee Welfare Benefit Plan Plan number: 501 ERISA welfare plan

Fully insured. Coverage is paid for by pre-tax contributions of active associates. Coverage is paid for by after-tax contributions for same-sex domestic partners and dependent children of same-sex domestic partners of active associates, for associates while on an unpaid leave of absence and for continuing coverage under COBRA. The insurance company pays the benefits.

Sponsor: Sears Holdings Triple S has claims administration and fiduciary responsibility. Administrative Committee (eligibility administration)

Sears Holdings Flexible Benefits Plan (as it relates to the pre-tax premium conversion and the Flexible Spending Accounts) Plan number: 503 ERISA welfare plan

Funded solely through associate contributions. If a deficit arises in the Health Care FSA, the Company contributes an amount necessary to cover the deficit.

Sponsor: Sears Holdings Anthem BlueCross BlueShield (claims administration) Administrative Committee (eligibility administration)

Sears Holdings Short-Term Disability Plan Payroll Practice Non-ERISA plan

Self-funded. Claims management services are paid for by the Company through an administrative fee.

Sponsor: Sears Holdings Cigna (claims management services) Administrative Committee (eligibility administration)

Kmart Disability Income Plan Plan number: 505 ERISA welfare Plan

Kmart is fully responsible for funding the payments of all claims. Claims management services are paid for by the Company through an administrative fee. The insurance company processes the benefits on behalf of the Company. Covers Kmart hourly associates only, with the exception of Kmart Corporate hourly Support Center associates who are covered under the Sears Holdings Short-Term Disability Plan.

Sponsor: Kmart Holding Corporation Cigna(claims administration and fiduciary responsibility) Administrative Committee (eligibility administration)

Sears Holdings Long-Term Disability Insurance Plan Part of the Sears Holdings Corporation Employee Welfare Benefit Plan

Insurance contract, funded solely by associate contributions. The insurance company pays the benefits.

Sponsor: Sears Holdings Cigna (claims administration and fiduciary responsibility)



Plan number: 501 ERISA welfare plan

Administrative Committee (eligibility administration)

Sears Holdings Company Paid Life Insurance Plan Part of the Sears Holdings Corporation Employee Welfare Benefit Plan Plan number: 501 ERISA welfare plan

Insurance contract, funded solely by company contributions. The insurance company pays the benefits.

Sponsor: Sears Holdings Prudential (claims administration and fiduciary responsibility) Administrative Committee (eligibility administration)

Sears Holdings Optional Life Insurance Plan Part of the Sears Holdings Corporation Employee Welfare Benefit Plan Plan number: 501 ERISA welfare plan

Insurance contract, funded solely by associate contributions. The insurance company pays the benefits.

Sponsor: Sears Holdings Prudential (claims administration and fiduciary responsibility) Administrative Committee (eligibility administration)

Sears Holdings Business Travel Accident Insurance Plan Part of the Sears Holdings Corporation Employee Welfare Benefit Plan Plan number: 501 ERISA welfare Plan

Insurance contract. Premiums are paid out of Company assets. The insurance company pays the benefits.

Sponsor: Sears Holdings Cigna (claims administration and fiduciary responsibility) Administrative Committee (eligibility administration)

Voluntary Benefits Program Non-ERISA plan

Coverage is paid for entirely by associates. Benefits are paid by the individual insurers and other provides under the PersonalPlans program. These benefits are not sponsored by or endorsed by Sears Holdings.

Marsh Voluntary Benefits Auto/Home Insurance – MetLife, SafeCo and Travelers (not available in all states) Vision – EyeMed Legal – Signature Legal Care under GE Legal Long-Term Care – CNA Financial Corporation Pet Insurance – Veterinary Pet Insurance Company

Sears Holdings WorkLife Solutions, Employee Assistance Program Part of the Sears Holdings Corporation Employee Welfare Benefit Plan Plan number: 501 ERISA welfare plan

Self-funded. Coverage is paid for by the Company through an administrative fee.

Sponsor: Sears Holdings Aetna Behavioral Services, LLC Administrative Committee (eligibility administration)

Sears Holdings Adoption Assistance Program Non-ERISA plan

Self-funded reimbursement program Sponsor: Sears Holdings

Kmart Pharmacy Prescription Drug Savings Club Non-ERISA plan

Unfunded discount plan with no plan assets, trust or insurance contract. No Company contributions to the program. Associate contributions are not required in order to participate in the plan.

Sponsor: Sears Holdings

Sears Holdings Savings Plan Plan number: 002 Defined contribution plan ERISA plan

Eligible associates who elect to participate in the applicable savings plan make before-tax and/or after-tax contributions (by salary deferral), subject to annual contribution limits. Participating employers of each savings plan may make matching contributions each calendar quarter, based on a participant’s contribution rate up to a maximum amount. No matching contributions are currently being made

Sponsor: Sears Holdings Corporation Initial Claim Administration: Aon Hewitt (recordkeeper) Appeal and Eligibility Administration: Administrative



Sears Holdings Puerto Rico Savings Plan Plan number: 003

Defined contribution plan ERISA plan

under the savings plans. Nearly all of the expenses of administering the savings plans and investing plan assets—such as investment management fees, trustee’s fees, brokerage commissions and participant recordkeeping and legal fees—are paid from plan’s assets. The Company pays remaining plan expenses.

Committee

Sears Holdings 2006 Associate Stock Purchase Plan Non-ERISA plan

Eligible associates who elect to participate in the Plan make after-tax contributions by salary deferral. Contributions are used to purchase Sears Holdings common stock at a 5% discount at the end of each quarterly purchase period.

Sponsor: Sears Holdings Morgan Stanley Smith Barney Administrative Committee (eligibility administration)

A NOTE ABOUT THE PLAN ADMINISTRATOR

The Plan Administrator (or its authorized delegates), has the sole discretionary authority to determine eligibility for benefits under the plans, to determine the amount and form of benefits payable under the plans, to construe the terms of the plans, and to make factual determinations about all plan matters. The decisions of the Plan Administrator or its delegate are final and binding. The Plan Administrator may appoint one or more persons to carry out the responsibilities for performing certain duties of the Plan Administrator under the terms of the plans and may seek such expert advice as the Plan Administrator deems reasonably necessary with respect to the plans. The Plan Administrator will be entitled to rely upon the information and advice furnished by such delegate(s) and experts, unless actually knowing such information and advice to be inaccurate or unlawful. In carrying out their respective responsibilities under the plans, the Plan Administrator or its delegate(s) shall have full discretionary authority to determine eligibility for plan benefits, to make factual findings and to interpret the terms of the plans. Any interpretation or determination based on this discretionary authority will be given full force and effect, unless it can be shown that the interpretation or determination was arbitrary and capricious. Plan benefits will be paid under such plan only if the Plan Administrator decides in its discretion that the applicant is entitled to them under the terms of the plan. In addition to the Plan Administrator, the applicable Plan Sponsors have engaged claims administrators (as indicated in the previous chart and shown later under the heading Claims Information) to administer claims for benefits and to provide certain services under the plans. The claims administrators will authorize payment of claims or services in accordance with the plans, but with respect to the self-funded plans are not insurers of the plans; they provide only administrative services for the plans. Sears Holdings retains full responsibility as Plan Administrator and as named fiduciary for eligibility decisions, and is responsible for funding the benefits under the self-funded plans as long as they are in effect.

Under the PPO option of the Medical Plan, the Plan Administrator has delegated the authority for claims determinations and appeals of denied claims to Anthem BlueCross BlueShield for medical claims, mental health and substance abuse and medical management decisions. The Plan Administrator has delegated the authority for claims determinations to Medco for pharmacy benefits. The foregoing is subject to the Plan Administrator’s retention of full responsibility as Plan Administrator and as named fiduciary for eligibility decisions.

PLAN DOCUMENTS

This Handbook contains the provisions of the Sears Holdings benefit plans as they apply to full-time hourly associates and their dependents. Unless otherwise specified, this Handbook and the HMO documents incorporated by reference represent a summary plan description (SPD) required by ERISA with respect to the plans that are governed by ERISA. The benefits and other principal provisions described in this Handbook with respect to a particular plan apply to you only if you are eligible to participate, become covered by the plan, and remain covered in accordance with the provisions of such plan. GENERAL INFORMATION ABOUT YOUR BENEFITS

Below is information on rules that affect your eligibility for benefits. For all plans, coverage ceases as of the earlier of the date specified below or the date the plans are terminated or modified to terminate coverage for the specified class of associates or dependents to which you belong.

CHANGES IN COST OF COVERAGE

If the cost of group health coverage to increases or decreases by an insignificant amount (as determined by the Plan Administrator) during a plan year, the Plan Administrator may on a reasonable and consistent basis, provide that the cost of coverage to be charged to you under the affected plan be automatically adjusted on a prospective basis. If the cost of group health coverage to be charged to you increases by a significant amount (as determined by the Plan Administrator)


during a plan year, you will have the right to make a corresponding change to your coverage election.

QUALIFIED CHANGES IN STATUS

Certain events enable you to change your group health coverage choices during the year for the plans described below. These events are defined by federal law. In other circumstances, the plans have set rules governing coverage changes. These are collectively called “qualified changes in status.” Except as otherwise specified, changes made as a result of a qualified change in status must be made within 31 days of the event and must be consistent with that event, as shown in the following chart. The change in status must also result in the associate, spouse or dependent gaining or losing eligibility for health coverage.

Medical and Dental coverage changes may be made in accordance with the chart on the following pages. These rules do not apply to the Starbridge dental coverage or the Health Savings Account under the High Deductible Health Plan. Flexible Spending Account

Changes can be made at the time of a qualified change in status. The change must be consistent with the qualified status change. For example, if you add a new eligible dependent, you can enroll or increase your contributions in the Flexible Spending Accounts. The change becomes effective the first of the month following your request. You may also be able to change contributions to your

Dependent Care FSA if you change day care providers during the year and/or your provider’s cost changes. Optional Life or Kmart Executive Life (Legacy Kmart)

Coverage changes can be made at any time with evidence of good health. Coverage requiring evidence of good health is effective the first day of the month following carrier approval. Please note that the Group Universal Life and Kmart Executive Life plans are no longer available to new participants. If the change is due to marriage or a new child (through birth or adoption), evidence of good health is not required if the change is made within 45 days of the marriage, birth or adoption/placement. You can apply for coverage for your new spouse or child. You can increase your current associate coverage by one times your eligible earnings up to certain limits within 45 days of one of the following events: � marriage; � death of spouse; � adoption; � birth; � divorce; or � purchase of a home. Commuter Benefits Program Changes may be made at any time, subject to monthly deadlines.

Qualified Status Changes - Changes You Can Make To Your Benefit Plans

Life Event Medical Dental

If you are already enrolled

If you are not already enrolled



Marriage or

commencement of

domestic partnership

� Add your spouse or domestic partner and/or eligible dependent children

� Cancel coverage for yourself or any dependent children who gain eligibility for and become covered by spouse’s or domestic partner’s plan

� Change plan options

� Enroll yourself � If you enroll, you may

enroll your spouse or domestic partner and/or eligible dependent children

� Add spouse or domestic partner and/or eligible dependent children

� Cancel coverage for yourself or any dependent children who gain eligibility for and become covered by spouse’s or domestic partner’s plan

N/A

When change is

effective

If enrolling or changing plan options, the first of month following eligibility and enrollment.

If canceling coverage, end of month request is submitted. Divorce, legal

separation,

annulment or

termination of domestic

partnership*

� Cancel coverage for your former spouse or former domestic partner (mandatory cancellation if divorce or termination of domestic partnership–COBRA will be offered)

� Add your eligible dependent children who lost coverage under your spouse’s plan


� Enroll yourself if you lost coverage under your former spouse’s plan or former domestic partner’s plan

� If you enroll, you may enroll your eligible dependent children who lost coverage under your spouse’s or domestic partner’s plan

� Cancel coverage for your former spouse or former domestic partner (mandatory cancellation if divorce or termination of domestic partnership–COBRA will be offered)

� Add your eligible dependent children who lost coverage under your spouse’s or domestic partner’s plan

� Enroll yourself if you lost coverage under your former spouse’s plan or former domestic partner’s plan

� If you enroll, you may enroll your eligible dependent children who lost coverage under your spouse’s or domestic partner’s plan

When change is

effective


If canceling coverage, end of month request is submitted. *You must notify the Sears Holdings Benefits Center of these events immediately.


Qualified Status Changes - Changes You Can Make To Your Benefit Plans

Life Event Medical Dental





Birth, adoption or

placement for adoption

of a child

� Add spouse and/or eligible dependent children



enroll your spouse or domestic partner and/or eligible dependent children

� Add eligible dependent child

N/A

When change is

effective

Date of birth, adoption, or placement for adoption. First of month following eligibility and enrollment.

Death of spouse

� Cancel coverage for your spouse

� Add eligible dependent children who lost coverage under your spouse’s plan


� Enroll yourself if you lost coverage under your spouse’s plan, and

� If you enroll, you may enroll your eligible dependent children who lost coverage under your spouse’s plan

� Cancel coverage for your spouse

� Add eligible dependent children who lost coverage under your spouse’s plan

� Enroll yourself if you lost coverage under your spouse’s plan, and

� If you enroll, you may enroll your eligible dependent children who lost coverage under your spouse’s plan

When change is

effective


If canceling coverage, end of month request is submitted. Death of a domestic

partner • Cancel coverage for your domestic partner • Enroll yourself if you lost coverage under your domestic partner’s plan, and

• If you enroll, you may enroll your eligible dependent children who lost coverage under your domestic partner’s plan

When change is

effective


If canceling coverage, end of month request is submitted.

Death of dependent � Cancel coverage for your dependent

N/A � Cancel coverage for your dependent

N/A

When change is

effective

End of month request is submitted.

Dependent child’s loss

of eligibility under a

Sears Holdings plan*

� Cancel coverage for your ineligible dependent (mandatory cancellation–COBRA will be offered)

N/A � Cancel coverage for your ineligible dependent (mandatory cancellation–COBRA will be offered)

N/A

When change is

effective


You, your spouse or

domestic partner

and/or dependent

child’s loss of

eligibility or coverage

under another plan

(includes

� Change in coverage

due to spouse or

domestic partner’s

open enrollment

election

� COBRA)

� Add your spouse or domestic partner and/or eligible dependent(s) who lost coverage



enroll your spouse or domestic partner and/or eligible dependent children who lost coverage

� Add your spouse or domestic partner and/or eligible dependent(s) who lost coverage


enroll your spouse or domestic partner and/or eligible dependent children who lost coverage

When change is

Effective

First of month following eligibility and enrollment.

Receipt of Qualified

Medical Child Support

Order (QMCSO) by

associate

� Add eligible dependent child in accordance with QMCSO

� Enroll yourself and your eligible dependent child in accordance with QMCSO

� Add eligible dependent child in accordance with QMCSO

� Enroll yourself and your eligible dependent child in accordance with QMCSO

When change is

effective

First of month following eligibility and enrollment.

Receipt of Qualified

Medical Child Support

Order (QMCSO) by

spouse or domestic

partner

� Cancel coverage for dependent child in accordance with QMCSO

N/A � Cancel coverage for dependent child in accordance with QMCSO

N/A

When change is

effective


*You must notify the Sears Holdings Benefits Center of these events immediately.


Relocation or other

change in employment

status (e.g., taking a

leave of absence,

change in work

schedule) resulting in

change in plan

eligibility

� Cancel coverage or add

coverage to the extent consistent with the change

� Change plan options for yourself, your spouse or domestic partner and/or covered dependents

N/A

N/A

N/A

When change is

effective

If changing plan options, the first of the month following eligibility and enrollment.

If canceling coverage, end of month request is submitted.

You, your spouse or

domestic partner

and/or dependent

child’s gain of

eligibility or coverage

under another plan

(includes:

� Change in coverage

due to spouse or

domestic partner’s

open enrollment

election)

� Cancel coverage for you, your spouse or domestic partner and/or eligible dependent(s) if enrolling in other plan

N/A

� Cancel coverage for you, your spouse or domestic partner and/or eligible dependent(s) if enrolling in other plan

N/A

When change is

effective


*You must notify the Sears Holdings Benefits Center of these events immediately.


CONTINUING YOUR BENEFITS DURING A LEAVE OF ABSENCE

The following chart describes the length of time you may continue your benefit coverage during various types of leave of absence. FMLA, Extended Care, Workers’ Compensation and Layoff leaves run concurrently with the 12 month maximum Medical/Illness leave. Please note that some exceptions apply under collective bargaining agreements.

Benefit Continuation During a Leave of Absence*

Medical and Dental

Coverage

(including Starbridge)

You may continue coverage during an authorized leave of absence by continuing to make the required contributions, for up to: � 12 weeks for FMLA leave or Personal leave � 8 months for Educational Leave (Kmart Pharmacists only) � 12 months for Workers’ Compensation leave, Medical/Illness leave and Layoff (with or without pay)*.

The 12 months includes 12 weeks of FMLA leave. � 60 months for Military leave (this period runs concurrently with the USERRA continuation period) Coverage does not continue during any other types of leave of absence. If you are on a paid leave, contributions will be deducted from your pay if you are being paid from the Company’s payroll system in an amount sufficient to cover your contributions. In all other cases, you will be billed monthly for your contributions on an after-tax basis. Your pre-tax contributions will resume on a payroll deduction basis when you return from leave. However, you may change your election by contacting the Sears Holdings Benefits Service Center within 31 days. (Your eligibility date is the first day of the month after you return from your leave of absence.)

Flexible Benefits Plan

(Flexible Spending

Accounts)

You may only continue coverage in the Health Care Flexible Spending Account during an authorized leave of absence through COBRA (except with respect to an FMLA leave, in which case COBRA is offered if you do not return to work at the conclusion of your FMLA leave). Coverage is only available through the end of the calendar year in which your leave of absence begins and may continue until the earlier of the end of the current calendar year or: � 12 weeks for FMLA leave or Personal leave � 8 months for Educational Leave (Kmart Pharmacists only) � 12 months for Workers’ Compensation leave, Medical/Illness leave and Layoff (with or without pay)*;

the 12 months includes 12 weeks of FMLA leave � 12 months for Military leave (this period runs concurrently with the USERRA continuation period) Coverage does not continue during any other types of leave of absence.

Short-Term Disability Coverage continues during an authorized leave of absence, for up to: � 12 weeks for FMLA leave � 12 months for a Medical/Illness leave*; the 12 months includes 12 weeks of FMLA leave Coverage does not continue during any other types of leave of absence.

Long-Term Disability You may continue coverage during an authorized leave of absence by continuing to make the required contributions, for up to: � 12 weeks for FMLA leave � 12 months for a Medical/Illness leave or Workers’ Compensation leave. *The 12 months includes 12

weeks of FMLA leave. Coverage does not continue during any other types of leave of absence. Upon return from leave of absence, your coverage and deductions will be reinstated. You will not need to provide evidence of good health.

Company Paid Life

Insurance

Coverage continues during an authorized leave of absence, for up to: � 12 weeks for FMLA leave � 12 months for a Workers’ Compensation leave, Medical/Illness leave or Military leave. The 12 months

includes 12 weeks of FMLA leave.* � 30 days for Educational leave (Kmart pharmacists only) Coverage does not continue during any other types of leave of absence.

Optional Life

Insurance

Kmart Executive Life

Insurance (Legacy

Kmart)

You may continue coverage during an authorized leave of absence by continuing to make the required contributions, for up to: � 12 weeks for FMLA leave or Personal leave � 8 months for Educational leave (Kmart pharmacists only) � 12 months for a Medical/Illness leave, Workers’ Compensation leave or Layoff (with or without pay) *;

the 12 months includes 12 weeks of FMLA leave. � 60 months for Military leave (this period runs concurrently with the USERRA continuation period) Coverage does not continue during any other types of leave of absence.

*Some exceptions apply under collective bargaining agreements.


Benefit Continuation During a Leave of Absence*

Savings Plans You may continue to contribute to the Savings Plan during an authorized leave of absence while you are paid by the Company’s payroll system. Salary continuation payments under a Transition Pay Plan or any other severance-related arrangement are not eligible for making contributions to the plan. Any pay to an associate during a WARN period is not severance-related, but rather is active pay eligible for contributions to the Savings Plans. You may make investment fund transfers, partial withdrawals and hardship withdrawals during a leave. You may not request a loan from your account while on an unpaid leave of absence. If you take a Military leave and you do not return to work within 90 days following your discharge from military service, the period of your leave will be taken into consideration to determine if you incurred a break in service under the Plan. Upon return to work after Military leave, you will be permitted to make additional contributions to the Plan to make up for the contributions you could not make while on Military leave. Additional contributions can be made for each year you were on Military leave, based on the rate of pay you earned prior to the beginning of your leave of absence and subject to the limits that would have applied in those years and if made within the statutory time period for such make-up contributions. Make-up pre-tax contributions are eligible for the Company match, if applicable.

Associate Stock

Purchase Plan

You may continue to participate and make contributions to the plan during a leave of absence, as long as you continue to receive pay directly from the Company. However, if you are paid by a third party, or if your leave is unpaid, you will not be allowed to contribute to the Plan.

Voluntary Benefits You may continue coverage for most types of voluntary benefits during an authorized leave of absence by continuing to make the required contributions. Questions regarding continuation of these benefits should be directed to the program administrator.

Paid Time Off Additional paid time off (vacation, holidays and personal days) is not earned during a leave of absence. You may use earned, but unused, paid time off during an unpaid leave of absence, except during a Military leave.

Business Travel

Insurance

Coverage does not continue during a leave of absence.

WorkLife Solutions Coverage continues during an authorized leave of absence, for up to: � 12 weeks for FMLA leave or Personal leave � 8 months for Educational Leave (Kmart Pharmacists only) � 12 months for Workers’ Compensation leave, Medical/Illness leave and Layoff (with or without pay)*;

the 12 months includes 12 weeks of FMLA leave � 60 months for Military leave (this period runs concurrently with the USERRA continuation period) Coverage does not continue during any other types of leave of absence.

Associate Discounts Eligibility for the Associate Discount continues during an authorized leave of absence, for up to: � 12 weeks for FMLA leave or Personal leave � 8 months for Educational Leave (Kmart Pharmacists only) � 12 months for Workers’ Compensation leave, Medical/Illness leave and Layoff (with or without pay)*;

the 12 months includes 12 weeks of FMLA leave � 60 months for Military leave (this period runs concurrently with the USERRA continuation period)

Commuter Benefits

Program

Coverage/participation ceases during a leave of absence. You may make new elections upon your return.

Adoption Assistance

Program

Eligibility for Adoption Assistance continues during an authorized leave of absence, for up to: � 12 weeks for FMLA leave or Personal leave � 12 months for Workers’ Compensation leave, Medical/Illness leave and Layoff (with or without pay)*;

the 12 months includes 12 weeks of FMLA leave � 60 months for Military leave (this period runs concurrently with the USERRA continuation period) Payment for adoptions during a leave will be paid after you return to work.

*Some exceptions apply under collective bargaining agreements.


TERMINATION OF COVERAGE

Benefit When Coverage Ends*

Medical and Dental

Coverage

(excluding Starbridge)

Coverage for you as an associate ends on the earliest of the following: � December 31 if you cancel your payroll deduction authorization for associate coverage during an

annual election period; � Fourteen days after:

- You are no longer an eligible associate; - You terminate employment or retire; or - You last made a required contribution; or - If you are on a severance- related leave of absence under a Transition Pay Plan or any other

severance-related arrangement, the end of the severance-related leave period. Coverage for your dependents ends on the earliest of the following: � December 31 if you cancel your payroll deduction authorization for dependent coverage during an

annual election period; � The date your coverage terminates; or � The end of the month in which:

- Your dependent is no longer an eligible dependent - You request that dependent coverage terminates as a result of a qualified change in status; or - You fail to pay any required contribution for dependent coverage.

In addition to the circumstances described above, coverage for domestic partners and their children who are not dependents for federal income tax purposes terminates upon your death or the dissolution of the domestic partner relationship. Coverage for an unmarried dependent child whose coverage is ending because he or she has reached age 26 may continue beyond the date it would otherwise terminate if: � The dependent is incapable of self-sustaining employment because of mental retardation or a

permanent physical disability; � Is wholly dependent on you for financial support; and � You provide satisfactory proof of these qualifications on an annual basis. Certificate of Creditable Coverage

Shortly after termination of coverage, you will receive a Certificate of Creditable Coverage, which you can use as evidence of prior health coverage. For more information or to request a Certificate at any time, call the Sears Holdings Benefits Center at 1-888-88sears (1-888-887-3277).

Extension of Dental Benefits

Coverage for a dental procedure that was started before dental coverage ends will be extended for charges incurred for no more than 30 days after coverage ends, for the following services only: � Impressions that have been taken from which dentures, crowns or fixed bridgework will be made; and � Fixed bridgework and crowns where the teeth have been fully prepared, if they will serve as retainers

or support or they are being restored. The extension of coverage applies only if the item is finally installed or delivered no more than 30 days after coverage ends.

Starbridge

Coverage for you as a full-time hourly associate ends on the earliest of the following: � December 31 if you cancel your payroll deduction authorization for associate coverage during an

annual election period; � The first day of the sixth month after date of hire (at which time you become eligible for the

Company’s medical and dental benefits; � You are no longer an eligible associate; � You terminate employment or retire; or � The last day of the month in which you last made a required contribution. Coverage for your dependents ends on the earliest of the following: � December 31 if you cancel your payroll deduction authorization for dependent coverage during an

annual election period; � The date your coverage terminates; or � The end of the month in which:

- Your dependent is no longer an eligible dependent;[same comment as above] - You request that dependent coverage terminates as a result of a qualified change in status; or



Starbridge

(continued)

- You fail to pay any required contribution for dependent coverage. In addition to the circumstances described above, coverage for domestic partners and their children who are not dependents for federal income tax purposes terminates upon your death or the dissolution of the domestic partner relationship. Coverage for an unmarried dependent child whose coverage is ending because he or she has reached age 26 may continue beyond the date it would otherwise terminate if: � The dependent is incapable of self-sustaining employment because of mental retardation (not

including psychiatric disorders) or a permanent physical disability; � Is wholly dependent on you for financial support; and � You provide satisfactory proof of these qualifications on an annual basis.

Flexible Spending

Accounts (FSA)

You are no longer eligible to participate in either FSA upon: � Termination of employment; � Retirement; � Change to part-time status; � Failure to make a required contribution; or � Leave of absence, including salary continuation (except you may continue to participate in the Health

Care FSA while on an FMLA leave of absence, as explained earlier). Upon return from a leave of absence or reinstatement, you may reinstate FSA elections within 31 days of your return to work. In some cases, Health Care FSA deductions will be automatically reinstated.

Short-Term Disability

Coverage

Your coverage under the Sears Holdings Short-Term Disability Pay Program or the Kmart Disability Income Plan ends on the earliest of the following dates: � The day your employment ends (coverage ends on the last day of employment); � Retirement (coverage ends on the last day worked); � The day you die; � The day prior to the day your employment changes to an ineligible status (for example, part-time); � The day prior to the day you begin a leave of absence (other than a FMLA leave or Medical/Illness

leave); or � The day prior to the day you are placed on salary continuation under a Transition Pay Plan or any

other severance-related arrangement. Long-Term Disability

Insurance

Your coverage ends on the earliest of the following dates: � Fourteen days after:

- You terminate employment or retire; - You are placed on an approved Military, Layoff or Personal Leave of Absence; - You cancel your participation in the plan; - You last made a required contribution; or - You no longer meet eligibility requirements;

� The day you die; � Fourteen days after being placed on salary continuation under a Transition Pay Plan or any other

severance-related arrangement; or � The day the plan terminates. If your coverage ends due to a leave of absence, your coverage will be reinstated upon your return to active work. You will not need to provide evidence of good health.

Business Travel

Accident Insurance

Coverage ends on the date you terminate or retire.

Company Paid Life

Insurance

Coverage ends on the earliest of the following dates: � The day your employment ends; � The date of your death; � The day prior to an employment status change that affects your eligibility for coverage; � The day prior to being placed on a Personal, Layoff, Transition Pay Plan, or any other severance-

related leave of absence; or � The day the plan terminates.

Optional Life

Insurance

Coverage ends on the earliest of the following dates: � Fourteen days after:

- You terminate employment or retire; - You cancel participation in the plan; - You last made a required contribution; or - You or your covered dependents no longer meet eligibility requirements;



� The day you die; or � The day the plan terminates.

Commuter Benefit Participation ends upon termination of employment. Voluntary Benefits

Program

You may continue your coverage for most types of voluntary benefits you have elected under the Voluntary Benefits Program by continuing to pay the required contributions. Any questions regarding these benefits should be directed to the program administrator.

Savings Plan Your active participation in the plan terminates on the earliest of the following: � Termination of employment; � Change to ineligible status; or � Retirement. If you decide not to return from a leave of absence, you will no longer be considered an active participant. You will receive company matching contributions (if any) attributable to any pre-tax contributions you made up through your date of termination or retirement. You will be an inactive participant until you have received a full distribution of your plan account. Once you leave the company, you may request your account be distributed directly to you or rolled over to your IRA account or another employer’s eligible retirement plan. If your account balance is greater than $1,000, you may keep your account in the plan and defer distribution until a later date (but no later than the required beginning date under the Plan). In the event of your death

Your spouse or beneficiary will be eligible to receive a distribution of your plan account. Associate Stock

Purchase Plan

Participation ends on your termination date. Any contributions made in the quarterly purchase period which includes your termination date will be refunded to you through Payroll. No purchases will be made for terminated associates.

COORDINATION OF BENEFITS

HMO OPTIONS

If you elected an HMO option under the Sears Holdings Medical Plan, the HMO controls the coordination of benefits between the HMO and any other medical coverage you have. Please contact the HMO in which you are enrolled for details.

MEDICAL AND DENTAL PLANS

The Sears Holdings Medical and Dental Plans coordinate benefits with other plans in which a covered person participates. To obtain all benefits available, a claim should be filed under each plan that covers the person for whom allowable expenses were incurred. Any person who claims benefits under the Sears Holdings Medical or Dental Plan must give the insurer or administrator the information needed to coordinate benefits. Medical Plans

Benefits from the Sears Holdings Medical Plan options will be determined so that when they are combined with benefits from any other plans, they will not exceed that which would have been paid under these plans if no other coverage existed. The other plans could be any of the following: � another employer group health plan; � no-fault automobile insurance law; or � a government or tax-supported program excluding Medicaid. Expenses Allowed

Charges that are reasonable and customary or are negotiated fees for network providers and are covered, at least in part, by one or more of the plans under which the person is covered are allowed for reimbursement when plan payments are coordinated. The difference between the charge for a private and semiprivate hospital room is not considered an allowable expense, unless the person’s stay in a private room is:

� medically necessary; or � uniformly or professionally endorsed as standard medical

care. Effect on Benefits

If the Sears Holdings Medical Plan is your primary plan (the plan that pays first), benefits will be paid without regard to any other plans. The secondary plans then adjust their payments. If the Sears Holdings Medical Plan option is your secondary plan, benefits will be determined as follows: � If the primary plan’s payment is the same as or greater than

the benefits provided under the Sears Holdings plan, then no payment will be made in addition to payments made by the primary plan.

� If the primary plan’s payment is less than the benefits provided under the Sears Holdings plan, then the Sears Holdings plan benefit will be reduced by the primary plan’s payment.

In no event will the Sears Holdings plan pay more than it would without the Coordination of Benefits provision. If a plan provides services directly, the reasonable cash value of each service is an allowable expense and is considered paid. If a covered person, including a covered spouse or domestic partner or dependent child, is enrolled in an HMO as well as in a Sears Holdings Medical Plan option, and the HMO is the primary plan and the covered person fails to obtain services through the HMO, benefits under the Sears Holdings Medical Plan option will nevertheless be calculated as if the person had received benefits under the HMO.


If a person was eligible at any time to enroll in Medicare but did not do so and Medicare should pay benefits first, benefits under the medical plan will be paid as if the person had received full benefits under Medicare. Dental Plan

Benefits from the Sears Holdings Dental Plan will be determined so that when they are combined with benefits from other plans, they will never be more than 100% of allowable expenses. Allowable expenses include any reasonable and customary expenses for necessary services, at least a portion of which is covered under any of the plans covering the person for whom a claim is being made. When a plan provides fixed benefits, rather than expenses incurred, for specific events or conditions, such benefits are allowable expenses. When a plan provides benefits in the form of services rather than cash payments, the reasonable cash value of each service will be considered an allowable expense. Allowable expenses do not include: � expenses for services received because of an occupational

sickness or injury; � any amount of expenses in excess of the higher reasonable

and customary fee for a service, if two or more plans compute their benefit payments on the basis of reasonable and customary fees;

� any amount of expenses in excess of the higher negotiated fee for a service, if two or more plans compute their benefit payments on the basis of negotiated fees; and

� any amount of benefits that a primary plan does not pay because the covered person fails to comply with the primary plan’s managed care or utilization review provisions; these include provisions requiring:

� second surgical opinions; � pre-certification of services; � use of providers in a plan’s network of providers; or � any other similar provisions.

This provision will not be applied to refuse to pay benefits because an HMO member has elected to have dental services provided by a non-HMO provider and the HMO’s contract does not require the HMO to pay for providing those services. Under no circumstances will a plan pay for any charge that is excluded or not covered under the Sears Holdings Dental Plan. In addition, you cannot be reimbursed for the same service under both the medical plan and the dental plan. Generally, the amount normally reimbursed is reduced to take into account payments for the same dental expenses made from other group plans, group prepayment plans, group practice plans, mandatory no-fault automobile insurance or other statutory coverage, workers' compensation or other government programs including Medicare or coverage required or provided by any law. Effect on Benefits

If the Sears Holdings Dental Plan is primary, it pays the amount of benefits it normally would if no other plan were involved. If the Sears Holdings Dental Plan is secondary, it adjusts benefits so that your total reimbursement from all plans is no more than the total allowable expenses. The amount by which the Sears Holdings Dental Plan’s benefits have been reduced shall be used by the Sears Holdings Dental Plan to pay allowable expenses not otherwise paid, which were incurred during the calendar year by the person for whom the claim is made. As each claim is

submitted, the Sears Holdings Dental Plan determines its obligation to pay for allowable expenses based on all claims that were submitted up to that point in time during the calendar year. The benefits of the Sears Holdings Dental Plan will only be reduced when the sum of the benefits that would be payable for the allowable expenses under the other plans, in the absence of provisions with a purpose like that of this Coordination of Benefits provision, whether or not claim is made, exceeds those allowable expenses in a calendar year. When the benefits of this Plan are reduced as described above, each benefit is reduced in proportion. It is then charged against any applicable benefit limit of this Plan. Determining Which Plan Pays First

If a person is covered under a Sears Holdings group health plan and another plan at the same time, benefits will be paid in this order: Any plan that has no Coordination of Benefits provision will pay

first. Any plan that has a Coordination of Benefits provision will then

pay as follows: � Primary: Any plan that covers the person as an associate,

member or subscriber (that is, other than as a dependent). � Secondary: Any plan in which the covered person is covered

as a dependent of an associate, member or subscriber; except when the person is also a Medicare beneficiary and, as a result of the rules established by Title XVIII of the Social Security Act and implementing regulations, Medicare is: - secondary to the plan covering the person as a dependent,

and - primary to the plan covering the person as other than a

dependent (e.g., a retired associate), - then the benefits of the plan covering the person as a

dependent are determined before those of the plan covering that person as other than a dependent.

� When a claim is made for a dependent child who is covered under plans of both parents and the parents are not separated or divorced, benefits will be paid in this order: - Primary: Any plan in which the child is covered as a

dependent of the parent whose birth date occurs earlier in the calendar year.

- Secondary: Any plan in which the child is covered as a dependent of the parent whose birth date occurs later in the calendar year.

- If the birth dates of the parents are the same, the plan that has covered the dependent for the longest time will pay before the plan of the other parent.

� When a claim is made for a dependent child who is covered under the plans of both parents, and the parents are separated or divorced:

1. If the parent with custody of the child has not remarried, the plans will pay in this order:

Primary: Any plan in which the child is covered as a dependent of the parent who has custody. Second: Any plan in which the child is covered as a dependent of the parent who does not have custody.

2. If the parent with custody of the child has remarried, the plans will pay in this order:

Primary: Any plan in which the child is covered as a dependent of the parent who has custody. Secondary: Any plan in which the child is covered as the dependent of the stepparent.


Tertiary: Any plan in which the child is covered as a dependent of the parent who does not have custody.

These rules do not apply when a court decree specifies the responsible parent for the health care costs of a child whose parents have separated or divorced. Any plan in which the child is covered as the dependent of a parent with this legal responsibility will always pay first.

� When a claim is made for a covered former, laid-off or retired associate or a covered dependent of that person (including those being covered under the provisions of COBRA), benefits will be paid in this order: - Primary: Any plan in which the person is covered other

than as a former, laid-off or retired associate or a dependent of that person.

- Secondary: Any plan in which the person is covered as a former, laid-off or retired associate or a dependent of that person.

In some cases, the order of payment may be unclear. Priority then goes to the plan that has covered the person for the longest continuous time. It may be necessary for information to be obtained or released to administer coordination of benefit provisions with other plans. This can be from or to any other insurance company, organization or person, without the covered person’s notice or consent. Any person claiming benefits must furnish any information needed to coordinate benefit payments. In addition, payment may be made to any other organization as needed to properly carry out this provision. These payments, made in good faith, are considered benefits paid under Sears Holdings group health plans. Also, they discharge the Sears Holdings group health plans from further liability, to the extent the payments are made.

OTHER MEDICAL PLAN COORDINATION OF BENEFITS RULES

Coordination With Medicare Benefits

Medicare pays primary to the Sears Holdings medical plan for covered persons who are Medicare-eligible if: � The associate is a retired associate. � Eligibility is due to disability and the associate does not have

“current employment status” with the employer as defined by federal law and determined by the employer.

� Eligibility for Medicare is due to end-stage renal disease (ESRD), but only after the first 30 months of entitlement to Medicare due to ESRD. However, Medicare continues to be primary if: - The person was already Medicare-eligible due to age or

disability when the person became eligible due to ESRD; or

- Medicare was already paying primary to the medical plan in accordance with Medicare Secondary Payer requirements.

Coordination With Other Government Plans

A government plan is any plan, program, or coverage other than Medicare or Medicaid that is established under the laws or regulations of any government, or in which any government participates other than as an employer. If the covered person is also covered under a government plan, the Sears Holdings Medical Plan does not cover any services or

supplies to the extent that those services or supplies, or benefits for them, are available to that covered person under the government plan. This provision does not apply to any government plan that, by law, requires the Sears Holdings Medical Plan to be primary. Coordination of Medical Coverage With No-Fault Automobile

Insurance

The Sears Holdings group health plans are subject to the Employee Retirement Income Security Act of 1974 (ERISA), as amended, which preempts the application of state laws that purport to apply to the self-insured plans. Some people covered under the medical plan also are covered under the mandatory provisions covering medical expenses in a no-fault motor vehicle insurance policy, which are generally referred to as personal injury protection (PIP) benefits, and which are hereafter referred to as no-fault PIP benefits. Some no-fault PIP benefits provisions provide, under applicable state laws, that their benefits are payable after the benefits payable under an employer-provided health care plan (such as the medical plan). Because such provisions are based on state laws that are preempted by ERISA, they do not apply to the self-insured Medical Plan options. Even if state law provides otherwise, any benefits payable under the self-insured Medical Plan will be paid secondary to the benefits under the no-fault PIP benefits. In addition, the provisions of the medical plan for deductibles, reimbursement levels or exclusions apply to the eligible expense remaining after such reduction. HMOs are not subject to this provision.

OTHER MEDICAL PLAN COVERAGE INFORMATION

RETIREE MEDICAL PLAN

When your medical coverage as an active associate or a dependent of an active associate terminates, you may be eligible to continue coverage as a retiree or a surviving dependent of a deceased associate, subject to the terms of the applicable retiree medical plan. However, plan provisions are subject to change at any time. The following provides an overview of the eligibility requirements. For information about the available medical options and prices, please visit www.88sears.com and click on Retirement

Information.

Retired Associates and Their Dependents

You are eligible to participate in a retiree medical plan if: 1. You retire from Sears Holdings employment after both (a)

completing at least 10 years of consecutive service with the Company (based on your most recent service date) and (b) attaining age 55 (age 50 if your retirement is a result of a unit closing, re-organization or health reasons); and

2. You were continuously covered as an associate (or dependent

of another Sears Holdings associate) under the Company’s Medical Plan for at least 5 years immediately before your retirement date. If you were employed by Kmart Corporation (or any of its subsidiaries) as of December 31, 2007, and you retire within five years of January 1, 2008 (i.e., you retire on or before


January 1, 2013), you must have been continuously covered as an associate (or dependent of another Sears Holdings associate) under the company’s medical plan from January 1, 2008 to the date of your retirement.

Subject to all other provisions regarding dependent eligibility, your dependents are eligible to participate in a retiree medical plan if, at the time of your retirement, they are: � Covered as your dependents; or � Eligible but not covered because they have coverage under

another employer-sponsored group medical plan. Surviving Dependents of Deceased Associates

Surviving dependents who are covered by the Company’s medical plan at the time of a Sears Holdings associate’s death are eligible to participate in a retiree medical plan (subject to all other plan provisions relative to dependent eligibility) if: � The associate dies while an active Sears Holdings associate;

and � The associate was 50 years of age or older at the time of

death; and � The associate satisfied the continuous coverage rule (#2

above) before the date of death. Domestic partners and their children who are not dependents for federal income tax purposes are not eligible for coverage as surviving dependents.

SUSPENSION OF COVERAGE

During an approved Transition Pay Plan leave of absence prior to retirement, you may suspend participation in the Medical Plan without jeopardizing your eligibility for retiree medical coverage if: � You would be eligible for retiree medical coverage at the end

of your leave; and � You have coverage under another group health plan. If you suspend coverage for yourself, you must suspend coverage for your eligible dependents. You may suspend coverage for your eligible dependents without suspending your own coverage. In order to suspend coverage and continue eligibility for retiree coverage, you must provide acceptable proof of other group health coverage for yourself and your eligible dependents. The following items will be considered acceptable proof of coverage: � A copy of your enrollment form; � A copy of your and your dependent’s health plan

identification card; or � A letter from the sponsoring employer, insurance carrier or

third-party administrator certifying your enrollment and associate/dependent status.

You may request to suspend coverage by contacting the Sears Holdings Benefits Center. Your medical coverage will cease at the end of the month in which the Benefits Center receives your request. Note: If, while on leave due to a unit closing, reorganization or layoff, you acquire a newly eligible dependent, you must submit a new suspension of medical coverage request for that dependent within 31 days. Refer to the Introduction section in the front of this handbook for additional information regarding eligible dependents.

Re-Enrollment Following Suspension

If, prior to retirement, you or your eligible dependents lose eligibility for your other coverage or reach the maximum lifetime benefit payable under such other plan after you have suspended Sears Holdings retiree medical coverage, you may re-enroll in the retiree medical plan. Re-enrollment will not be allowed if your loss of other coverage is due to failure to pay premiums or your voluntary dis-enrollment from the other plan. Your request for re-enrollment must be received within 60 days of loss of other coverage, or you will lose your eligibility for retiree medical coverage. You must submit proof of loss of other medical coverage in the form of a letter written and signed by the employer or insurance carrier. The effective date of coverage upon re-enrollment is the later of: � The first of the month that coincides with or next follows the

date the written request for re-enrollment and acceptable proof of loss is received by the Sears Holdings Benefits Center; or

� The first of the month that coincides with or follows the loss of other coverage.

The retiree medical plan provisions and contribution requirements in effect on your date of re-enrollment will apply. While you are on leave due to unit closing, reorganization or layoff, the period during which your active medical coverage is suspended will count toward the 5 year continuous coverage requirement for retiree medical plan eligibility. Note: If you do not comply with these provisions, you and/or your

dependents may not enroll for retiree medical coverage at a later

date.

QUALIFIED MEDICAL CHILD SUPPORT ORDERS (QMCSO)

A qualified medical child support order (QMCSO) is an order or judgment from a state court, or an order issued under an administrative process established under law, that meets the applicable qualification requirements. It is served on a plan or its agent for service of legal process and directs the plan to cover the dependent child(ren) of an eligible associate for benefits under certain company plans. Coverage is provided in accordance with federal and applicable state law and the terms of the plan. If you become subject to a QMCSO, you and each child will be notified about further procedures to validate and implement the QMCSO. A copy of the plan’s QMCSO procedures can be obtained, without charge, from the Sears Holdings Benefits Center.

CONTINUATION OF COVERAGE UNDER COBRA OR USERRA

Federal legislation provides for certain circumstances under which you and your dependents can continue certain health care coverage that would otherwise end. You and your dependents who would otherwise lose coverage under certain circumstances may choose to continue medical, dental, and Health Care Flexible Spending Account coverage, at your own expense, under the Consolidated Omnibus Budget Reconciliation Act of 1987 (COBRA), as amended, or the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) for Military leave.


Note that vision benefits that are made available under the Voluntary Benefits Program can be continued indefinitely, at your expense (or your dependent’s expense) even after an event that would normally result in a loss in coverage. Therefore, because there is no loss of vision coverage because of such events, the COBRA and USERRA continuation rights do not apply to vision coverage. Domestic partners and their children who are not dependents for federal income tax purposes will be offered COBRA-like coverage upon your death or if the child is no longer an eligible dependent. If you are eligible for coverage as a result of COBRA or USERRA, you may change your coverage each year during the annual election period or if you have a qualified change in status.

HOW COBRA WORKS

COBRA continuation coverage provides the same medical and dental coverage that is available to active associates. However, when COBRA coverage is elected you or your dependent(s) are responsible for the full cost of the continued medical and/or dental coverage (including any portion formerly paid by Sears Holdings) plus an administrative fee, which currently is 2%. If you elect to continue coverage for your Health Care Spending Account, your contributions will be equal to 102% of the contributions you were making at the time you lost eligibility. Payment must be made on an after-tax basis in accordance with the instructions that will be issued to you by the Sears Holdings Benefits Center. You can elect continued medical and/or dental coverage for yourself and/or your covered dependents under the Sears Holdings Medical and Dental plans. Each covered individual has an independent right to elect continuation coverage even if you do not elect it on their behalf. COBRA continuation of your Health Care Spending Account may only continue until the end of the current calendar year. The length of coverage for medical or dental depends on the reason for the loss of coverage – see the chart below.

Qualifying Event

Medical and Dental Maximum Coverage

Period:

Employee’s reduced work hours or employment reclassification causing ineligibility for coverage

18 months

Employee’s termination or retirement (except for gross misconduct)

18 months

Employee’s death 36 months Divorce, legal separation or annulment, end of domestic partnership

36 months

Dependent child’s loss of eligibility (for example, by reaching the age limit, getting married or becoming a Sears Holdings associate)

36 months

In the case of divorce, legal separation or annulment, end of domestic partnership, or a dependent child’s loss of eligibility, it is the responsibility of the associate, family member or dependent to notify the Sears Holdings Benefit Service Center at 1-888-88sears

(1-888-887-3277) within 60 days of the event. Upon receipt of timely notification, the dependent losing coverage will be sent a COBRA election notice. You or your dependents have 60 days from the later of the following to elect continuation of coverage: � The date of the event that made you or your dependents first

eligible for the continuance; or � The date you or your dependents received a COBRA election

notice. Coverage will terminate before the end of the maximum COBRA period for any of the following reasons: � Nonpayment of contributions; � Coverage under another group medical or dental plan after

electing COBRA coverage, unless that plan contains a pre-existing condition limitation that affects you or a covered dependent;

� Becoming entitled to Medicare after electing COBRA coverage; or

� Termination of the plan. If you or your dependents do not elect continuation of coverage, the coverage for you or your dependents will terminate. Extension of 18-month coverage period

If you elect continuation coverage, and the applicable maximum coverage period is 18 months, an extension of this maximum period may be available if you, your spouse, or covered dependent is disabled or a second qualifying event occurs. � An 11-month extension of coverage may be available if any

of the covered family members is determined by the Social Security Administration (SSA) to be disabled. The disability has to have started at some time before the 60th day of continuation coverage and must last at least until the end of the 18-month period of continuation coverage. The SSA’s disability determination must be received within the disabled individual’s 18 months of continuation coverage. You must notify the Sears Holdings Benefits Center at 1-888-88sears (1-888-887-3277) of the SSA’s disability determination within 60 days of the disabled individual’s receipt of the disability award. If the disability determination occurred before COBRA coverage started, you must notify the Sears Holdings Benefit Service Center at 1-888-88sears (1-888-887-3277) within the first 60 days of COBRA coverage. If the disabled individual is determined by the SSA to no longer be disabled, you, your covered spouse, or your covered dependents must notify the Sears Holdings Benefits Center at 1-888-88sears (1-888-887-3277) within 30 days after SSA’s determination.

� An 18-month extension of coverage may be available to your

spouse and dependent children who elect continuation coverage if a second qualifying event occurs during their first 18 months of COBRA coverage. The maximum amount of continuation coverage available when a second qualifying event occurs is 36 months. The second qualifying events include: - Your death - Your divorce or legal separation or end of domestic

partnership - A dependent’s loss of eligibility for coverage under the

plan


To receive this additional coverage, you, your covered spouse, or your covered dependents must notify the Sears Holdings Benefit Center at 1-888-88sears (1-888-887-3277) within 60 days after a second qualifying event occurs.

� If you take a leave of absence that qualifies as a leave under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), and you elect COBRA continuation coverage, an extension of six (6) months may be available to you. If the entire length of the leave is 30 days or less, you will not be required to pay any more than the portion you paid for medical coverage before the leave. However, if the entire length of the leave is 31 days or longer, you may be required to pay up to 102% of the entire cost of coverage for active employees.

If you are covered by a fully insured California HMO, you may be eligible for up to an additional 18 months of continued coverage under that HMO (for a total period of 36 months) once your federal COBRA coverage ends. This coverage is provided under the California Continuation Benefits Replacement Act (Cal-COBRA). Please contact the HMO directly for additional information once your federal COBRA coverage ends. Trade Adjustment Assistance

The Trade Act of 2002 created a new tax credit for certain individuals who become eligible for trade adjustment assistance and for certain retired employees who are receiving pension payments from the Pension Benefit Guaranty Corporation (PBGC) (eligible individuals). Under these tax provisions, eligible individuals can either take a tax credit or get advance payment of 65% of premiums (from Jan. 1, 2011 to Feb. 12, 2011, this was 80%) paid for qualified health insurance, including continuation coverage. If you have questions about these new tax provisions, you may call the Health Coverage Tax Credit Customer Contact Center toll-free at 1-866-628-4282. TTD/TTY callers may call toll-free at 1-866-626-4282. More information about the Trade Act is also available at http://www.doleta.gov/tradeact/.

CLAIMS INFORMATION

There is information on how to file a claim with respect to each ERISA-governed benefit plan mentioned in the Handbook (except HMOs, claims information for them is available in the HMO plan materials). The following information will help you to better understand the claim review and appeal process.

NON-RETIREMENT PLANS

Proof of Claims

The claims administrator and/or insurer, as applicable, reserves the right to require verification of any claim for benefits. For example, the claims administrator may require submission of medical summaries, discharge reports, x-rays or other appropriate materials. Benefits may be reduced or not paid if verification cannot be made. How to Appeal a Denied Claim

If a claim is being denied, in whole or in part, you will receive an initial claim denial notice within the timelines described in the relevant sections of this handbook. A claim denial notice, sometimes referred to as an Explanation of Benefits notice (EOB) by health plans, will: � Explain the specific reasons for the denial.

� Provide a specific reference to the pertinent plan provisions on which the denial is based.

� Provide a description of any material or information that is necessary for you to perfect the claim, along with an explanation of why such material or information is necessary, if applicable.

� Provide appropriate information as to the steps you can take to submit the claim for appeal (review).

� In the case of a denial under a health plan or in connection with a claim for disability benefits, - If an internal rule, guideline, protocol or other similar

criteria was used to make the determination, either (1) the rule, guideline or protocol or (2) a statement that the rule, guideline or protocol used will be provided to the claimant free of charge upon request; or

- If the determination is based on medical necessity or experimental treatment or similar exclusion or limit, either (1) an explanation of the scientific or clinical basis for the determination or (2) a statement that the explanation will be furnished free of charge upon request.

Provide, in the case of a denial of an urgent care claim, a description of the expedited review process applicable to such claims. You may appeal a denial or partial denial of a claim by following the appeal procedures described below. Generally, a request for review of a denied claim should include: � The associate’s name, address and telephone number; � The Group Prefix and the associate’s identification number

and the Group Number (if applicable) as it appears on the ID card;

� The name of the person denied benefits; � The date the service was provided and the place of service

(such as a physician’s office, etc.); � A description of the service and the charge for the service;

and � A statement of opinion as to why the denial was improper. You should submit any additional material or information necessary to support the claim. As part of your appeal, you may request from the claims administrator, free of charge, copies of all documents, records, and other information relevant to the claim. PPO Medical and Mental Health/Substance Abuse Claims

If you are dissatisfied with the initial claims decision, you may file an appeal or grievance with the claims administrator. An appeal is a request to have the administrator reconsider a denial based on a finding that the service is not medically necessary or is considered to be experimental or investigational. A grievance is a request to have the administrator reconsider a denial based on any other terms of the benefit plan. The person making the decision on your appeal or grievance will be someone other than the person who made the initial denial decision, and will not be a subordinate of that person. If the decision involves a medical necessity decision or a determination as to whether the service is experimental, the reviewer will be a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment. The review will be conducted without giving deference to the initial denial.


There are two internal levels of appeals and grievances. The timeframes are the same for both appeals and grievances. First Level: Your request must be received within 180 days of the date of the initial decision. If the appeal or grievance is not submitted within that timeframe, it will not be reviewed and the initial decision will stand. The administrator will comply with the following timeframes in reviewing first level appeals and grievances: � Preauthorization – The administrator will complete its review

of a preauthorization appeal within 15 days of receipt of the appeal. However, if the need for the service is urgent, the administrator will complete the review as soon as possible, taking into account the medical circumstances, but in any event within 72 hours of receipt of the appeal.

� Concurrent – The administrator will complete its review of a concurrent appeal within 15 days of receipt of the appeal. However, if the need for the service is urgent, the administrator will complete the review as soon as possible, taking into account the medical circumstances, but in any event within 72 hours of receipt of the appeal.

� Post-Service – The administrator will complete its review of a post-service (retrospective) appeal within 30 days of receipt of the appeal.

Second Level: If the claims administrator continues to uphold the denial and you wish to appeal the decision further, you may request that the claims administrator conduct a second level review. Your request must be received within 60 days of the date of the decision on your first level appeal or grievance. If the appeal or grievance is not submitted within that timeframe, it will not be reviewed and the decision on the first level appeal or grievance will stand. The administrator will comply with the following timeframes in reviewing second level appeals and grievances: � Preauthorization – The administrator will complete its review of a

preauthorization appeal within 15 days of receipt of the appeal. There is no second level of appeal for urgent preauthorization requests.

� Concurrent – The administrator will complete its review of a concurrent appeal within 15 days of receipt of the appeal. There is no second level of appeal for urgent concurrent requests.

� Post-Service – The administrator will complete its review of a post-service (retrospective) appeal within 30 days of receipt of the appeal.

Appeals and grievances may be filed by phone or in writing by contacting the claims administrator at the address listed in the chart that follows this section. Adverse benefit determinations will include the specific reasons for determination and reference to the plan provisions on which the determination is based. If an internal rule, guideline, protocol or other similar criterion was used to make the determination, either (1) the rule, guideline or protocol or (2) a statement that the rule, guideline or protocol used will be provided to the claimant free of charge upon request. If the determination is based on medical necessity or experimental treatment or similar exclusion or limit, either (1) an explanation of the scientific or clinical basis for the determination or (2) a statement that the explanation will be furnished free of charge upon request. You have the right to receive, upon request and at no charge, the information used to review your appeal.

The decision made on your second level appeal (first level appeal for urgent requests) is final and binding. If you are not satisfied with the decision of the final level appeal, you also have the right to bring a civil action under section 502(a) of ERISA, provided, however, that you bring such action within six months after you receive an adverse benefit determination of your final level appeal. PPO Prescription Drug Claims

In the event you receive an adverse determination following a request for coverage of a prescription benefit claim, you have the right to appeal the adverse benefit determination in writing within 180 days of receipt of notice of the initial coverage decision. To initiate an appeal for coverage, you or your authorized representative (such as your physician), must provide in writing, your name, member ID, phone number, the prescription drug for which benefit coverage has been denied and any additional information that may be relevant to your appeal. This information should be mailed to the claims administrator shown in the chart that follows this section. A decision regarding your appeal will be sent to you within 15 days of receipt of your written request. The notice will include the specific reasons for the decision and the plan provisions on which the decision is based. You have the right to receive, upon request and at no charge, the information used to review your appeal. If you are not satisfied with the coverage decision made on appeal, you may request in writing, within 90 days of the receipt of notice of the decision, a second level appeal. To initiate a second level appeal, you or your authorized representative (such as your physician), must provide in writing, your name, member ID, phone number, the prescription drug for which benefit coverage has been denied and any additional information that may be relevant to your appeal. This information should be mailed to the claims administrator shown in the chart that follows this section. A decision regarding your request will be sent to you in writing within 15 days of receipt of your written request for appeal. You have the right to receive, upon request and at no charge, the information used to review your second level appeal. The decision made on your second level appeal is final and binding. If you are not satisfied with the decision of the second level appeal, you also have the right to bring a civil action under section 502(a) of ERISA, provided, however, that you bring such action within six months after you receive an adverse benefit determination of your final appeal. You have the right to request an urgent appeal of an adverse determination if you request coverage of a claim that is urgent. Urgent appeal requests may be oral or written. You or your physician may call or send a written request to the claims administrator shown in the chart that follows this section. In the case of an urgent appeal for coverage involving urgent care, you will be notified of the benefit determination within 72 hours of receipt of the claim. This coverage decision is final and binding. You have the right to receive, upon request and at no charge, the information used to review your appeal. You also have the right to bring a civil action under section 502(a) of ERISA if your final appeal is denied, provided, however, that you bring such an action within six months after you receive an adverse benefit determination on your final appeal.


Flexible Spending Accounts

If you are dissatisfied with the initial claims decision, you may file an appeal to request to have the administrator reconsider a denial. The person making the decision on a Health Care FSA appeal will be someone other than the person who made the initial denial decision, and will not be a subordinate of that person. Your request must be received within 180 days of the date of the initial decision. If the appeal is not submitted within that timeframe, it will not be reviewed and the initial decision will stand. The administrator will complete its review within 30 days of receipt of the appeal. Appeals may be filed by phone or in writing by contacting the claims administrator at the address listed in the chart that follows this section. Adverse benefit determinations will include the specific reasons for determination and reference to the plan provisions on which the determination is based. The decision made on appeal is final and binding. If you are not satisfied with the decision of the appeal, you also have the right to bring a civil action under section 502(a) of ERISA if your appeal is denied, provided, however, that you bring such action within six months after you receive an adverse benefit determination of your final appeal. Long-Term Disability Coverage

If the claims administrator has denied your claim, you may appeal the decision. You must file a written appeal within 180 days of the claims administrator’s decision, assuming that there are not extenuating circumstances, as determined by the claims administrator, in which case the time to file the appeal may be more than 180 days. Appeals must be in writing and must include the following information: � Name of associate � Name of the plan � Reference to the initial determination � Explain reason why you are appealing the initial

determination Send your appeal to the claims administrator at the address listed in the chart that follows this section. You may submit any additional information to the claims administrator when you submit your request for appeal. You may also request that the claims administrator provide you copies of documents, records and other information that is relevant to your claim, as determined by the claims administrator under applicable federal regulations. Your request must be in writing. Such information will be provided at no cost to you. After the claims administrator receives your written request to appeal the initial determination, the claims administrator will review your claim de novo, which means the appellate reviewer will look at the claim anew and give no deference to the initial claim decision. The appellate review will take into account all comments, documents, records, etc. submitted to the claims administrator that is related to the claim without regard to whether such information was submitted or considered in the initial determination. The person who will review your appeal will not be the same person as the person who made the initial decision to deny the claim. In addition, the person who is reviewing the appeal

will not be a subordinate who reports to the person who made the initial decision to deny the claim. If the adverse decision is based on medical judgment, the claims administrator will consult a health care professional with appropriate training and experience in the field of medicine involved in the medical judgment. This health care professional may not be the same person consulted for the initial determination, and may not be a subordinate who reports to the person who was consulted for the initial determination. The claims administrator will notify you in writing of its final decision. Such notification will be provided within a reasonable period, not to exceed 45 days of the written request for appellate review, except that under special circumstances, the claims administrator may have up to an additional 45 days to provide written notification of the final decision. If the claims administrator needs such an extension, it will notify you prior to the expiration of the initial 45 day period, state the reason(s) why such an extension is needed, and state when it will make its determination. If an extension is needed because you did not provide sufficient information, the time for the claims administrator to make a final decision is tolled from the date of the extension notice until the plan receives the requested information. You will have 45 days to provide the requested information from the date you receive the notice of insufficiency from the plan. The initial 45 day time period for the claims administrator to make a final written decision, plus the 45 day extension period (if applicable) are tolled from the date the notification of insufficiency is sent to you until the date on which it receives your response. The tolling period ends when the claims administrator receives your response, regardless of the adequacy of your response. If the applicable claims administrator denies the claim on appeal, the claims administrator will send you a final written decision that states the reason(s) why the claim you appealed is being denied, and refer to the pertinent plan provision(s). If an adverse decision is based on advice of medical or vocational experts, then the final written decision will identify the experts whose advice was obtained, without regard to whether the advice was relied upon in making the adverse decision. If the claim is denied because the claims administrator did not have sufficient information, the final written decision will explain that the claim was denied because of insufficient information, and explain why such information was needed. Further, if an internal rule, protocol, guideline or other criteria was relied upon in making the decision, the final written decision will indicate that such rule, protocol, guideline or other criteria was relied upon and that you may request a copy (if a copy is available) free of charge. Such request must be made within 120 days after the notification of denial of your appeal. You may also request that the claims administrator provide you copies of documents, records and other information that is relevant to your claim, as determined by the claims administrator under applicable federal regulations. Your request must be in writing no later than 120 days after notification of denial of your appeal. Such information will be provided at no cost to you. The decision made on appeal is final and binding. If you are not satisfied with the decision of the appeal, you also have the right to bring a civil action under section 502(a) of ERISA. However, you must bring such action within six months of receiving an adverse benefit determination of your appeal.


Short Term Disability Plan (covers Sears full-time hourly and

salaried associates and Kmart corporate hourly and salaried

associates).

If the claims administrator denies your claim and you wish to have the decision reviewed, you must submit a written request to the claims administrator for a review of the decision within 180 days of the receipt of the decision. This request should include why you disagree with the claims administrator’s decision and any additional medical information that is available. The appeal should be mailed to the claims administrator listed for this benefit program in the table Claims Administrators/Insurance Companies

provided later in this section. Appeals regarding the withholding of STD benefits due to failure in qualifying for a leave of absence (as determined by Sears Holdings) should be directed to the Sears Holdings Benefits Administration. The claims administrator will respond within 45 days of the receipt of the appeal. Under special circumstances, an additional 45 days may be required to review the claim. The claims administrator will notify the claimant if an additional 45-day extension is needed. Kmart Disability Income Plan (covers field Kmart full-time

hourly associates)

If the claims administrator denies your claim and you wish to have the decision reviewed, you must submit a written request for review to the claims administrator listed for this benefit program in the table Claims Administrators/Insurance Companies provided later in this section. Your written appeal letter must be received within 180 days of the date of the claim denial notice. The appeal must include all information and medical documentation you feel supports your claim. You may have reasonable access to all documents and information relevant to your claim. The review on appeal will take into account all comments, documents, and other information that you submit relating to your claim, whether or not this information was presented or available when the initial claim was made. The claims administrator will notify you in writing of the final decision concerning your claim within 45 days of receipt of your appeal. Under special circumstances, an additional 45 days may be required to review your claim. The claims administrator will notify you if an additional 45-day extension is needed. If an extension is necessary due to your failure to submit the information necessary to decide the appeal, the notice of extension will describe the required information and you will have at least 45 days from the receipt of the notice to provide the specified information. If you deliver the requested information within the time specified, the 45-day extension of the appeal period will begin after you have provided that information. If you fail to deliver the requested information within the time specified, the claims administrator may decide your appeal without that information. The review will be conducted by the claims administrator, but will be made by a person who is different from the person who made the initial decision and who is not the original decision maker’s subordinate. No deference will be given to the initial decision. In the case of a claim denied on the basis of a medical judgment, the claims administrator will consult with a health professional who has appropriate training and experience. The health care professional who is consulted on appeal will not be the individual who was consulted during the initial decision or is this individual’s subordinate. If the advice of a medical or vocational expert was obtained by the Plan in connection with the denial of your claim, upon your request, the claims administrator will provide you with

the names of each expert, regardless of whether his/her advice was relied on. The decision made on appeal is final and binding. If you are not satisfied with the decision of the appeal, you also have the right to bring a civil action under section 502(a) of ERISA. However, you must bring such action within six months of receiving an adverse benefit determination of your appeal. Company Paid and Optional Life Insurance

If the claims administrator denies your claim in whole or in part, you or, if applicable, your beneficiary can request a review of your claim. This request for review should be sent to Group Insurance Claims Review at the address of Claims Administrator’/Insurance company listed later in this section which processed the claim within 60 days after you or, if applicable, your beneficiary received notice of denial of the claim. When requesting a review, please state the reason you or, if applicable, your beneficiary believe the claim was improperly denied and submit any data, questions or comments you or, if applicable, your beneficiary deems appropriate. The claims administrator will re-evaluate all the information and you or, if applicable, your beneficiary will be informed of the decision within 60 days, subject to an additional 60-day extension. The notice will include the specific reasons for the decision and the plan provisions on which the decision is based. You have the right to receive, upon request and at no charge, the information used to review your appeal. If you or your beneficiary are not satisfied with the results of the appeal decision, you must appeal within 31 days of the second denial. Enclose copies of pertinent information, statements or rejection letters, and an explanation of the basis for the appeal. Be sure to keep copies of all materials for your records. Appeals should be sent to the claims administrator at the address listed in the chart that follows this section. The claims administrator will re-evaluate all the information and you or, if applicable, your beneficiary will be informed of the decision within 60 days, subject to an additional 60-day extension. The notice will include the specific reasons for the decision and the plan provisions on which the decision is based. You have the right to receive, upon request and at no charge, the information used to review your appeal. The decision made on your second level appeal is final and binding. If you are not satisfied with the decision of the second level appeal, you also have the right to bring a civil action under section 502(a) of ERISA, provided that you bring such action within six months of receiving an adverse benefit determination of your second level appeal. Appeals of Adverse Determination

If your claim for benefits is denied or if you do not receive a response to your claim within the appropriate time frame (in which case the claim for benefits is deemed to have been denied), you or your representative may appeal your denied claim in writing to Prudential within 180 days of the receipt of the written notice of denial or 180 days from the date such claim is deemed denied. You may submit with your appeal any written comments, documents, records and any other information relating to your claim. Upon your request, you will also have access to, and the


right to obtain copies of, all documents, records and information relevant to your claim free of charge.

A full review of the information in the claim file and any new information submitted to support the appeal will be conducted by Prudential, utilizing individuals not involved in the initial benefit determination. This review will not afford any deference to the initial benefit determination.

Prudential shall make a determination on your claim appeal within 45 days of the receipt of your appeal request. This period may be extended by up to an additional 45 days if Prudential determines that special circumstances require an extension of time. A written notice of the extension, the reason for the extension and the date that Prudential expects to render a decision shall be furnished to you within the initial 45-day period. However, if the period of time is extended due to your failure to submit information necessary to decide the appeal, the period for making the benefit determination will be tolled (i.e., suspended) from the date on which the notification of the extension is sent to you until the date on which you respond to the request for additional information.

If the claim on appeal is denied in whole or in part, you will receive a written notification from Prudential of the denial. The notice will be written in a manner calculated to be understood by the applicant and shall include: (a) the specific reason(s) for the adverse determination, (b) references to the specific plan provisions on which the determination was based, (c) a statement that you are entitled to receive upon request and free of charge reasonable access to, and make copies of, all records, documents and other information relevant to your benefit claim upon request, (d) a description of Prudential’s review procedures and applicable time limits, (e) a statement that you have the right to obtain upon request and free of charge, a copy of internal rules or guidelines relied upon in making this determination, and (f) a statement describing any appeals procedures offered by the plan, and your right to bring a civil suit under ERISA. If a decision on appeal is not furnished to you within the time frames mentioned above, the claim shall be deemed denied on appeal.

If the appeal of your benefit claim is denied or if you do not receive a response to your appeal within the appropriate time frame (in which case the appeal is deemed to have been denied), you or your representative may make a second, voluntary appeal of your denial in writing to Prudential within 180 days of the receipt of the written notice of denial or 180 days from the date such claim is deemed denied. You may submit with your second appeal any written comments, documents, records and any other information relating to your claim. Upon your request, you will also have access to, and the right to obtain copies of, all documents, records and information relevant to your claim free of charge. Prudential shall make a determination on your second claim appeal within 45 days of the receipt of your appeal request. This period may be extended by up to an additional 45 days if Prudential determines that special circumstances require an extension of time. A written notice of the extension, the reason for the extension and the date by which Prudential expects to render a decision shall be furnished to you within the initial 45-day period. However, if the period of time is extended due to your failure to submit information necessary to decide the appeal, the period for making the benefit determination will be tolled from the date on which the notification of the extension is sent to you until

the date on which you respond to the request for additional information.

Your decision to submit a benefit dispute to this voluntary second level of appeal has no effect on your right to any other benefits under this plan. If you elect to initiate a lawsuit without submitting to a second level of appeal, the plan waives any right to assert that you failed to exhaust administrative remedies. If you elect to submit the dispute to the second level of appeal, the plan agrees that any statute of limitations or other defense based on timeliness is tolled during the time that the appeal is pending.

If the claim on appeal is denied in whole or in part for a second time, you will receive a written notification from Prudential of the denial. The notice will be written in a manner calculated to be understood by the applicant and shall include the same information that was included in the first adverse determination letter. If a decision on appeal is not furnished to you within the time frames mentioned above, the claim shall be deemed denied\ Business Travel Insurance Plan

If the claims administrator denies your claim in whole or in part, you or, if applicable, your beneficiary can request a review of your claim. This request for review should be sent to the claims administrator within 60 days after you or, if applicable, your beneficiary received notice of denial of the claim. When requesting a review, please state the reason you or, if applicable, your beneficiary believe the claim was improperly denied and submit any data, questions or comments you or, if applicable, your beneficiary deems appropriate. Your claim will be re-evaluated and you or, if applicable, your beneficiary will be informed of the decision within 60 days, subject to an additional 60-day extension. The notice will include the specific reasons for the decision and the plan provisions on which the decision is based. You have the right to receive, upon request and at no charge, the information used to review your appeal. If you or your beneficiary are not satisfied with the results of the appeal decision, you must appeal within 31 days of the second denial. Enclose copies of pertinent information, statements or rejection letters, and an explanation of the basis for the appeal. Be sure to keep copies of all materials for your records. Your claim will be re-evaluated and you or, if applicable, your beneficiary will be informed of the decision within 60 days, subject to an additional 60-day extension. The notice will include the specific reasons for the decision and the plan provisions on which the decision is based. You have the right to receive, upon request and at no charge, the information used to review your appeal. The decision made on your second level appeal is final and binding. If you are not satisfied with the decision of the second level appeal, you also have the right to bring a civil action under section 502(a) of ERISA, provided that you bring such action within six months of receiving an adverse benefit determination of your second level appeal. WorkLife Solutions (Employee Assistance Program feature)

You or your authorized representative will have 180 days from the date of the adverse determination to submit a written request to appeal the determination. You or your authorized representative may submit written comments, documents, or other written information to assist in the review.


Upon receipt of a written request for appeal, the EAP appeals coordinator or designee will review the case record. The EAP appeals coordinator may contact you to solicit further information. As necessary, the EAP appeals coordinator or designee may seek consultation from the account manager. The EAP will review the EAP case record and any additional information submitted by you or your authorized representative and will make a determination. When you authorize written communication, written notification of the appeal determination will be sent to you or your authorized representative. If you do not authorize written communication, you or your authorized representative will be notified telephonically. Notification of the appeal determination will be provided to you or your authorized representative within the following time frames: � If the case involves an adverse determination of a request for

EAP services or a pre-service adverse determination relating to payment for services, within thirty (30) days of the EAP’s receipt of the request for appeal;

� If the case involves a post-service adverse determination relating to payment for services, within sixty (60) days of EAP’s receipt of the request for appeal.

Notification of an appeal determination will include the following: � The specific reason for the review determination; � Notice of your right to receive, without charge, copies of

documents relevant to his/her claim; � Identification of any of the EAP’s rule, guideline or procedure

relied upon; � An explanation of the clinical judgment, where applicable, on

which the determination was based; and � A statement of your right to bring a civil suit under section

502(a) of ERISA within six months after you receive an adverse benefit determination on your final appeal.

Dental Plan

Within 180 days after receipt of a coverage decision, you or the provider/representative acting on your behalf must submit an oral or written request asking for a change in the initial determination decision regarding: � Certification of health care services; (e.g., pre-certification,

concurrent review, emergency services) � Claim payment � Plan interpretation � Benefit determinations � Eligibility If you, your provider or facility submitted additional information in connection with the review, a comprehensive review letter explaining the reason for the appeal determination will be sent no later than 30 days from receipt of the information. If no additional information was submitted, a comprehensive review letter explaining the reason for the denial will be sent no later than 30 days from receipt of the appeal. Expedited appeal determinations are made within 72 hours. Internal Review

The customer resolution team reviews non-clinical denial appeals with assistance, if needed, from their supervisor. For cases involving denials of coverage based on medical necessity, the customer resolution team forwards the case to the appropriate clinical business unit for review. The specific steps in the decision-making process may include a review of the following:

� Applicable policy or contract language

� Claims and utilization management guidelines and policies

� Relevant medical and dental records

The following may be involved in the appeals process: � Attending provider, if willing to cooperate � Benefit, risk policy, and claim personnel � Customer service professionals � Legal/compliance � Medical or dental policy personnel � Technology assessment and policy staff about

investigational or other status � Providers in the same or similar specialty as the attending

provider � Others, as appropriate to the issues raised by the appeal

If an appeal is denied, the written notice will include all specific reasons for the denial, including the clinical rationale, reference to applicable plan provisions, medical and dental information reviews, and any other applicable appeal procedures that may be available. You or the provider/representative acting on your behalf has 180 days after receipt of a decision to request a Level II appeal. If you or the provider/representative acting on your behalf is not satisfied with the outcome of the Level I appeal decision, you may submit a written request for further appeal review. For clinical appeals the second level review is performed by a practitioner who typically treats the condition, performs the procedure, or provides the treatment under review and was neither involved in the original denial of coverage determination or Level I appeal. The practitioner must hold a current unrestricted license to practice medicine and be board certified by a specialty board of Medical Specialties. If a Level II appeal is denied, the written notice will include all specific reasons for the denial, including the clinical rationale, reference to applicable plan provisions, medical and dental information reviews, and any other applicable appeal procedures that may be available. External Review

Following the internal review process described above, you may appeal the decision if the coverage denial is based on the claims administrator’s determination that the requested service or treatment is not medically necessary or is experimental or investigational and the cost of the service or treatment at issue for which you are financially responsible exceeds $500. You or a physician on your behalf may request an external review within 60 days after the internal appeal process has been exhausted. An external review organization refers the case for review by a neutral, independent physician with appropriate expertise in the area in question. After all necessary information is submitted, the external reviewer decides within 30 days of the request. Expedited reviews are available when your physician certifies that a delay in service would jeopardize your health. Once the review is complete, the decision of the external reviewer is final and binding. If you are not satisfied with the decision of the second level appeal or external review, you also have the right to bring a civil action under section 502(a) of ERISA, provided that you bring such


action within six months of receiving an adverse benefit determination of your second level appeal.

IF YOUR ELIGIBILITY IS DENIED

(All health and welfare benefit plans)

If your eligibility for coverage is denied and the denial does not involve a claim for benefits, the decision will be reviewed in accordance with this section. If, however, you file a claim for benefits that is denied because you are not eligible for coverage under a plan, then you are considered to have submitted a claim for benefits, which will be reviewed as previously described. To appeal an eligibility denial, you should submit, within 60 days of the date of the denial, a written explanation of the reasons for your appeal–along with any additional information or documentation should be mailed to the Plan Administrator (or its authorized representative). The Plan Administrator will review your appeal and notify you of its decision in writing. You will generally receive notice within 60 days after the Plan Administrator receives your appeal. If the Plan Administrator requires additional time to review your claim, you will be notified within 60 days after the day your appeal is received that the Plan Administrator is exercising its right to extend the appeal review period up to an additional 60 days to review your appeal, or a total of 120 days from the date your appeal was received. If your appeal is ultimately denied, the reasons for the denial will be included in the notice. If you are not satisfied with the results of the first appeal decision, you may file a second appeal with the Plan Administrator within 60 days of the date of the denial. You must complete both levels of the appeal process before you can file a lawsuit regarding a denial of your eligibility. The Plan Administrator is:

Plan Administrator Sears Holdings Corporation Department 707BEN 3333 Beverly Road Hoffman Estates, IL 60179

Legal Actions

Any decision on any matter within the claims or Plan Administrator’s authority, upon final review of the appeal of a claim denial, will be made at the sole discretion of the claims administrator or Plan Administrator and will be final and binding on all parties (see Statement of ERISA Rights later in this section). This includes determinations regarding plan eligibility and plan terms made by the claims or Plan Administrator in good faith. No legal action regarding a claim can be initiated until: � You have requested a final review and a final decision has

been reached on that review; or � 60 days have elapsed since the claims or Plan Administrator

received your request for final review and you have not been notified of an extension.

Once you have exhausted the claims procedures, if you wish to pursue legal action, you must bring such action within six months of receiving (or have been deemed to receive) an adverse determination of your final claim appeal. If you do not file legal action within six months, you will be barred from filing such action at a later date.

No legal action regarding a claim may be started more than six months after the final claim determination has been made or has been deemed to have been made through the appeals process.

SAVINGS PLAN

If you think you are entitled to a benefit under a Company-sponsored Savings Plan that you have not received, you should make a written claim for that benefit to:

Sears Holdings Corporation Mail Station: 707BEN 3333 Beverly Road Hoffman Estates, IL 60179

In general you will receive a written notice in response to your claim within 90 days after the claim is filed. If your claim is denied, either completely or partly, the notice will explain:

• the reason for the denial; • refer to the specific plan provision or provisions upon

which the denial is based; • tell what additional information, if any, is necessary to

correct the applications; and • describe the review procedure under the plan.

You will also receive written notice within 90 days if there is a delay in processing your claim. The notice must include the reasons for the delay and the date a final decision may be expected. If the Plan Administrator needs more than 90 days to process the claim, the Plan Administrator may take an additional 90 days, up to a total of 180 days. If your claim is denied and you disagree with the denial, you may request, in writing, an appeal by the Administrative Committee of the claim denial. An appeal request must be made within 60 days from the time you receive notice that your claim for a benefit is denied. You will be entitled to receive pertinent documents and submit issues and comments in writing. In general you will receive a written notice in response to your appeal within 60 days after the appeal is filed. If your appeal is denied, either completely or partly, the notice will explain:

• the reason for the denial; • refer to the specific plan provision or provisions upon

which the denial is based; • tell what additional information, if any, is necessary to

correct the applications; • describe the review procedure under the plan; and • your right to bring a civil action under section 502(a) of

ERISA. You will also receive written notice within 60 days if there is a delay in processing your appeal. This notice must include the reasons for the delay and the date a final decision may be expected. If the Administrative Committee needs more than 60 days to process the appeal, the Administrative Committee may take an additional 60 days, up to a total of 120 days. In this case, the Administrative Committee will reach a final decision and you will be notified within 120 days after the request for a review is received. The decision made on appeal is final and binding.


Once you have exhausted the claims procedures, if you wish to pursue legal action, you must bring such action within six months after you receive (or have been deemed to have received) an adverse determination of your final claim appeal. If you do not file legal action within six months, you will be barred from filing such action at any later date. The same rules apply to any claim made by a beneficiary. If you submit a claim related to a determination of whether you are totally and permanently disabled for purposes of requesting an in-service withdrawal from the Savings Plan that allows for such a withdrawal, the determination of your disability will be subject to the following claims procedures. If the Plan Administrator denies your claim, you may appeal the decision. You must file a written appeal within 180 days of the Plan Administrator’s decision, assuming that there are not extenuating circumstances, as determined by the Administrative Committee, in which case the time to file the appeal may be more than 180 days. Appeals must be in writing and must include the following information: � Name of associate; � Name of the plan; � Reference to the initial determination; and � Explanation of reason for appealing initial determination. You may submit any additional information to the Administrative Committee when you submit your request for appeal. You may also request that the Plan Administrator provide you copies of documents, records and other information that is relevant to your claim, as determined by the Administrative Committee under applicable federal regulations. Your request must be in writing. Such information will be provided at no cost to you. After the Administrative Committee receives your written request to appeal the initial determination, the Administrative Committee will review your claim de novo, which means the reviewer will look at the claim anew and give no deference to the initial claim decision. The review on appeal will take into account all comments, documents, records, etc. submitted to the Plan Administrator that are related to the claim without regard to whether such information was submitted or considered in the initial determination. The person(s) who will review your appeal will not be the same person as the person(s) who made the initial decision to deny the claim. In addition, the person who is reviewing the appeal will not be a subordinate who reports to the person who made the initial decision to deny the claim. If the adverse decision is based on medical judgment, the Administrative Committee will consult a health care professional with appropriate training and experience in the field of medicine involved in the medical judgment. This health care professional may not be the same person consulted for the initial determination, and may not be a subordinate who reports to the person who was consulted for the initial determination.

The Administrative Committee will notify you in writing of its final decision. Such notification will be provided within a reasonable period, not to exceed 45 days of the written request for appeal, except that under special circumstances, the Administrative Committee may have up to an additional 45 days to provide written notification of the final decision. If the Administrative Committee needs such an extension, it will notify you prior to the expiration of the initial 45 day period, state the reason(s) why such an extension is needed, and state when it will make its determination. If an extension is needed because you did not provide sufficient information, the time for the Administrative Committee to make a final decision is tolled from the date of the extension notice until the plan receives the requested information. You will have 45 days to provide the requested information from the date you receive the notice of insufficiency from the plan. The initial 45 day time period for the claims administrator to make a final written decision, plus the 45 day extension period (if applicable) are tolled from the date the notification of insufficiency is sent to you until the date on which it receives your response. The tolling period ends when the claims administrator receives your response, regardless of the adequacy of your response. If the Administrative Committee denies the claim on appeal, the Administrative Committee will send you a final written decision that states the reason(s) why the claim you appealed is being denied, and refer to the pertinent plan provision(s). If an adverse decision is based on advice of medical or vocational experts, then the final written decision will identify the experts whose advice was obtained, without regard to whether the advice was relied upon in making the adverse decision. If the claim is denied because the Administrative Committee did not have sufficient information, the final written decision will explain that the claim was denied because of insufficient information, and explain why such information was needed. Further, if an internal rule, protocol, guideline or other criteria was relied upon in making the decision, the final written decision will indicate that such rule, protocol, guideline or other criteria was relied upon and that you may request a copy (if a copy is available) free of charge. Such request must be made within 120 days after the notification of denial of your appeal. You may also request that the Administrative Committee provide you copies of documents, records and other information that is relevant to your claim, as determined by the claims administrator under applicable federal regulations. Your request must be in writing no later than 120 days after notification of denial of your appeal. Such information will be provided at no cost to you. The decision made on appeal is final and binding. If you are not satisfied with the decision of the appeal, you also have the right to bring a civil action under section 502(a) of ERISA if your appeal is denied, provided, however, that you must bring such action within six months after you receive an adverse benefit determination of your appeal.


CLAIMS ADMINISTRATORS/INSURANCE COMPANIES

Plan Claims Administrator or Insurer

Medical Plan � PPO Options

Medical and Mental Health/Substance Abuse:

PPO: Anthem BlueCross BlueShield P.O. Box 105187 Atlanta, GA 30348 1-800-803-2432

Prescription Drug:

Claims:

Medco Health P.O. Box 14711 Lee’s Summit, MO 40512 1-800-233-7865

Appeals: Medco Health Solutions of Irving 8111 Royal Ridge Parkway Irving, TX 75063 1-800-233-7865

� HMO Options Refer to your HMO member handbook (a list of HMOs is in the Medical Plan section of this

handbook) Dental Plan MetLife Dental Claims

P. O. Box 981282 El Paso, TX 79998-1282 1-888-251-0932

Flexible Spending Accounts Anthem BCBS Reimbursement Accounts P. O. Box 660165 Dallas, TX 75266-0165 1-800-803-2432

Short-Term Disability Plan (for Sears hourly and salaried and Kmart salaried associates)

Claims:

Phone 1-800-828-6352 Appeals:

Cigna Disability Management Solutions Paper Intake Team P.O. Box 709015 Dallas, TX 75370-9015 Fax: 1-800-642-8553

Kmart Disability Income Plan (for Kmart hourly associates)

Claims:

Phone 1-800-828-6352 Appeals:


Long-Term Disability (LTD) Coverage Claims:

1-800-828-6352

Appeals:


Company Paid Life and Optional Life Insurance Plan

Claims and Appeals:

Prudential Insurance Company of America Group Life Claim Division P.O. Box 8517 Philadelphia, PA 19176-8517 1-888-88sears

Business Travel Insurance Plan Report claim to: Sears Holdings Corporation


Plan Claims Administrator or Insurer

Risk Management Dept. 768RM 3333 Beverly Road Hoffman Estates, IL 60179 847-286-2500

Cigna Group Insurance Claims Administration P.O. Box 22328 Pittsburgh, PA 15222-0328 1-800-238-2125

WorkLife Solutions, EAP Feature Aetna Resources For Living Attn: Appeals 151 Farmington Ave., RS32 Hartford, CT 06156 1-800-424-4732

THIRD-PARTY ADMINISTRATORS

Plan Third-Party Administrators Starbridge Cigna

P.O. Box 55270 Phoenix, AZ 85078 1-877-646-5609

Voluntary Benefits Marsh U.S. Consumer 12421 Meredith Dr. Urbandale, IA 50398 1-800-845-6270

Savings Plan Sears Holdings Benefits Center 100 Half Day Road PO Box 1498 Lincolnshire, IL 60069-1498 1-888-887-3277

Associate Stock Purchase Plan Morgan Stanley Smith Barney 1-888-246-9637

MISCELLANEOUS INFORMATION

Following is information that pertains to certain plans (as indicated) and to you as a participant in such plans.

RIGHT OF RECOVERY

If the plans pay more benefits than should have been paid, the plans have the right to recover any excess amount. This can be from the person for whom the payments were made or from any other insurance company, provider or organization who should or would have been responsible for payments. The plans have the right to pursue any or all of the following remedies.

RIGHT OF REIMBURSEMENT

If any covered person, their dependents, legal representatives, estate or heirs receives benefits payments or receives any payments or damages awarded in a suit or settlement, verdict or otherwise from any third party or any insurance carrier, the health or disability plans have the right to recover an amount equal to the benefits they have paid on behalf of the covered person, their dependents, legal representatives, estate or heirs. This section also applies when the covered person, their dependents, legal representatives, estate or heirs recover compensation by settlement, verdict or otherwise, for an injury, sickness or other condition. If the covered person has made, or in the future may make, such a recovery including a recovery from any insurance carrier, the plans may decide not to cover either the

reasonable value of the services to treat such an injury or sickness or the treatment of such an injury or sickness. However, if the health or disability plans pay or provide benefits for such an injury, sickness or other condition, the covered person shall promptly reimburse the plans from the settlement, verdict, damages, award or insurance proceeds received by the covered person, for the reasonable value of the benefits paid for or provided by the plans. The covered person, their dependents, legal representatives, estate or heirs shall cooperate with the plans, including signing, delivering any documents, providing any relevant information and taking such actions as the plans reasonably request to assist the plans in making a full recovery of the reasonable value of the benefits provided and to protect the plans’ right of reimbursement. The covered person, their dependents, legal representatives, estate or heirs shall not take any actions that would prejudice the plans’ right of reimbursement. If a recovery is made, the plans shall have first priority in payment over the covered person, their dependents, legal representatives, estate or heirs or any other party, to receive reimbursement of the benefits advanced on the covered person’s behalf. This reimbursement shall be from any recovery made by the covered person, and includes, but is not limited to, uninsured and underinsured motorist coverage, any no-fault insurance, medical payment coverage (auto, homeowners or otherwise), workers’


compensation settlement, compromises or awards, other group insurance (including student plans), and direct recoveries from liable parties. The plans’ right of recovery will not be defeated or reduced by the application of the “make-whole doctrine” or any other such doctrine purporting to allocate any recovery to non-medical expense damages. In order to secure the rights of the plans under this section, and because of the plans’ advancement of benefits, the covered person, their dependents, legal representative, estate or heirs hereby [1] acknowledge that the plans shall have first priority against the proceeds of any such settlement, arbitration award, verdict, or any other amounts received by the covered person their dependents, legal representative, estate or heirs; and [2] assign to the plans any benefits the covered person, their dependents, legal representative, estate or heirs may have under any automobile policy or other coverage, to the extent of the plans’ claim for reimbursement. The health or disability plans shall be responsible only for those legal fees and expenses to which they agree in writing. No covered person, their dependents, legal representative, estate or heirs hereunder shall incur any expenses on behalf of the plans in pursuit of the plans’ rights hereunder. Specifically, no court costs or attorney’s fees may be deducted from the plans’ recovery without the express written consent of the plans. Any so-called “Fund Doctrine” or “Common Fund Doctrine” or “Attorney’s Fund Doctrine” shall not defeat this right.

SUBROGATION

This section applies when another party is, or may be considered, liable for a covered person’s injury, sickness or other condition (including insurance carriers who are so liable) and the health or disability plans have approved or paid for benefits. To the extent of the reasonable value of the services provided, the health or disability plans are subrogated to all of the covered person’s rights and the rights of their dependents, legal representatives, estate or heirs, against any party liable for the covered person’s injury or sickness or any party (including any insurance carrier) for payment for the medical treatment of such injury or sickness. The health or disability plans may assert this right independently of the covered person, their dependents, legal representative, estate or heirs. This right includes, but is not limited to, the covered person’s rights under uninsured and underinsured motorist coverage, any no-fault insurance, medical payment coverage (auto, homeowners or otherwise), workers’ compensation coverage, or other insurance, as well as the covered person’s rights under the plans to bring an action to clarify his or her rights under the plans. The plans are not obligated in any way to pursue this right independently or on behalf of the covered person, but may choose to pursue its rights to reimbursement under the plans, at their sole discretion. If the covered person, their dependents or their legal representative, estate or heirs enters into litigation or settlement negotiations regarding the obligations of other parties, the covered person , their dependents or their legal representative, estate or heirs must not prejudice, in any way, the rights of the health or disability plans under this section. The costs of legal representation of the health or disability plans in matters related to subrogation shall be borne solely by the plans. The costs of legal representation of the covered person their dependents or their legal representative, estate or heirs shall be borne

solely by the covered person. No covered person, their dependents, legal representative, estate or heirs hereunder shall incur any expenses on behalf of the plans in pursuit of the plans’ rights hereunder. Specifically, no court costs or attorney’s fees may be deducted from the plans’ recovery without the express written consent of the plans. Any so-called “Fund Doctrine” or “Common Fund Doctrine” or “Attorney’s Fund Doctrine” shall not defeat this right. COORDINATION OF BENEFITS Benefits payable under the plans will be secondary to benefits provided or required by any group or individual automobile, homeowner’s or premises insurance, including medical payments, personal injury protection, or no-fault coverage, regardless of any provision to the contrary in any other policy of insurance. ADDITIONAL PROTECTIONS FOR PLANS When a benefit paid is under the plans and a third party is or may be considered responsible for such payment, a covered person, their dependents, legal representatives, estate or heirs shall reimburse the plans for any amounts received from third parties with respect such claim or shall hold any such amounts in “constructive trust” for the plans and transfer the covered person’s interest in that trust to the plans. No covered person or dependent may assign any rights to recover medical expenses from a third party to any minor child or children of such covered person or dependent without the prior express consent of the plans. Also, no covered person or dependent may make any settlement which specifically reduces or excludes benefits provided by the plans. The plans shall recover the full amount of benefits provided for under the terms of the plans without regard to any claim of fault on the part of any covered person or dependent. Also, in the event that a covered person or dependent fails to honor his or her recovery-related obligations under the terms of the plans, then the plans will be entitled recover any costs incurred in enforcing the terms of the plans. By acceptance of benefits under the plans, a covered person or dependent agrees that a breach of these recovery-related provisions would cause irreparable and substantial harm and that no adequate remedy at law would exist, meaning the plans would be entitled to invoke such equitable remedies as may be necessary to enforce the terms of the plans.

NON-ASSIGNMENT OF BENEFITS

Generally, benefits or a right of a benefit may not be assigned or transferred in any manner except as permitted by law, unless otherwise stated in this Handbook. Except for tax withholding, an IRS lien or a Qualified Domestic Relations Order (described below), you may not legally assign your benefit or right of a benefit under the plans to another person or alienate the plans in any way. You may not sell, transfer, pledge or otherwise use your benefits to obtain credit in any form. The plans are not liable for, or subject to, and will not pay, any debts or obligations of a participant who becomes eligible for benefits.

QUALIFIED DOMESTIC RELATIONS ORDER (QDRO)

A qualified domestic relations order (QDRO) is a judgment, decree or order that meets the requirements of Internal Revenue Code Section 414(p) and ERISA Section 206(d)(3) relating to the


provision of child support, alimony payments or marital property rights to a spouse, former spouse or other dependent of a participant and is made under a state domestic relations law. Under such an order, payment of your benefits may be made to the alternate payee named in the order instead of you provided that such order has been presented to the Plan and determined by the Plan Administrator (or its authorized delegate) to be qualified under the applicable statutory provisions. A copy of the QDRO procedures for the Company-sponsored retirement plans can be obtained, without charge, from the Plan Administrator.

IF YOU BECOME INCOMPETENT

If benefits are payable to you and the Plan Administrator determines that you are unable to care for your financial affairs, then any payment due you may be made to your legal representative or to a relative or person who is taking care of you. Alternatively, the Plan Administrator may direct the application of your benefit in any manner selected by the Plan Administrator, which is permitted by law and is consistent with the plan. If LTD plan benefits become payable, and you are a minor, or, in Cigna’s opinion, legally incapacitated, Cigna may make payment of $2,000 or less to an individual or institution it believes has assumed custody or principal support of you. Payments made in good faith under this provision will fully discharge Cigna to the extent of the payment.

CLERICAL ERROR

A clerical error will not void coverage that should be in force nor will it continue coverage that should have ended. When an error is found, an appropriate adjustment in any contribution will be made. However, clerical and payroll errors not reported by a participant (or beneficiary) within 12 months will not be corrected, unless otherwise required by law. In such cases, reinstatement of lapsed coverage caused by payroll or clerical error will be subject to normal plan rules for re-enrollment and evidence of insurability, if applicable. An error in claims processing will not set precedent for future benefits. Also, verbal misinformation from a telephone representative or manager that goes against the intent of the plans cannot supersede this document or the respective plan document. Errors in written communications cannot supersede this document or the respective plan document.

RIGHT TO INVESTIGATE A CLAIM

The Plan Administrator or its delegate has the right to investigate any claim and may seek the opinion or services of outside consultants.

MISREPRESENTATION OF ELIGIBILITY OR CLAIM INFORMATION

Your participation in the plans and that of your dependents will be terminated if, while enrolling or enrolled in the plans, you or your covered dependents knowingly and intentionally: � Submit any materially false information; � Conceal any information material to enrollment in the plans;

or � Assist another person to submit or conceal any such

information. Your participation in the plans and that of your dependents will be terminated if, when submitting a claim for benefits under the

plans, you or your covered dependents knowingly and intentionally: � Include any materially false information; � Conceal any information material to the claim; or � Assist another person to submit or conceal any such

information. Note: If your participation is terminated as described, coverage for any dependent also will be terminated even though your dependent took no part in your actions, unless such dependent has an independent right to continuation in the plans or extension of benefits.

MATERIAL MISSTATEMENTS OR OMISSIONS

At all times, it is necessary to provide accurate and complete information. A material misstatement or failure to disclose important information could result in payment of benefits in error for someone who is ineligible for coverage. If this occurs, the Plan Administrator may rescind coverage, subject to appropriate review procedures as required by ERISA. You will be obligated to refund to any affected plan any benefit payments resulting from the material misstatements or omissions, less overpaid contributions. You will be obligated to refund such benefit payments to the plans even if you make an unintended material misstatement or omission. If your age or your dependent’s age is misstated, the correct age will be used to determine if coverage is in effect and your benefits and/or premiums under the LTD and Optional Life plans will be adjusted accordingly. No statement made by you can be used to contest your coverage after your coverage has been in effect for two years. No statement you make can be used to contest your coverage unless it is in writing and signed by you, and a copy was given to you.

NOTE FOR KEY AND HIGHLY COMPENSATED ASSOCIATES

Key and highly compensated associates are generally participants who are highly paid, as defined by the Internal Revenue Code. The company will notify you if you are classified within these categories and it has an implication on your participation in any of the plans. For example, under certain circumstances, as a highly compensated associate, the amount of pre-tax contributions and benefits you have elected to make under the Savings Plan may need to be reduced to ensure that these plans can satisfy certain nondiscrimination rules.

CONFLICT WITH PLAN DOCUMENTS

This Handbook summarizes the benefit plans that are offered to eligible Sears Holdings associates. The plans are governed by the text of the official plan documents and/or insurance policies that provide the benefits under the plans. If there is a conflict between this Handbook and the text of the plan documents and insurance policies, the plan documents and insurance policies will govern. With respect to the following plans, the Sears Holdings Corporation Employee Welfare Benefit Plan along with the relevant provisions of this Handbook and applicable insurance policy constitute the plan document: � Medical Plan � Dental Plan � Kmart Disability Income Plan � WorkLife Solutions


� Company Paid Life Insurance Plan � Optional Life Insurance Plan � Long-Term Disability Insurance Plan � Business Travel Accident Insurance Plan

EMPLOYMENT RIGHTS NOT GUARANTEED

Your participation in any of the plans does not assure you of continued (or renewed) employment with the company or rights to benefits except as specified under the terms of the plans. This summary plan description is not a contract of employment.

PLAN AMENDMENT OR TERMINATION

Although the Company expects to continue the plans, the Company (or the Employer that sponsors a particular plan) reserves the right to modify, amend, suspend or terminate any or all of the plans at any time and for any reason.

USERRA RIGHTS

Notwithstanding any provision of the plans to the contrary, contributions, benefits and service credit with respect to qualified military service shall be provided in accordance with Internal Revenue Code Section 414(u) and the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).

NOTICE OF PRIVACY PRACTICES

I. THIS NOTICE DESCRIBES HOW MEDICAL INFORMATION ABOUT YOU MAY BE USED AND DISCLOSED AND HOW YOU CAN GET ACCESS TO THIS INFORMATION. PLEASE REVIEW IT CAREFULLY.

II. SEARS HOLDINGS GROUP HEALTH AND

WELFARE BENEFIT PLANS' LEGAL DUTY TO SAFEGUARD YOUR PROTECTED HEALTH INFORMATION

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) requires the health plans that are part of the Sears Holding Corporation Employee Welfare Benefit Plan (collectively known as an Organized Health Care Arrangement or "OHCA" under HIPAA and hereinafter referred to as “the Plans”) to protect the privacy and security of your health information. This information, known as “protected health information” or “PHI”, includes data that can be used to identify you and that the Plans have created or received about your past, present or future health or condition, the provision of health care to you, or the payment for this health care. HIPAA requires the Plans to provide you with this notice about the Plans' legal duties and privacy practices with respect to your PHI. The Plans must follow the terms and conditions of this notice as long as it is in effect. However, the Plans reserve the right to change the terms and conditions of this notice at any time. Any changes will apply to the PHI that the Plans already have. If the Plans materially change this notice, a revised notice will be sent to you by regular mail or by e-mail, if you have agreed to receive amended versions of this notice electronically. You can also request a copy of this notice by writing to the address listed in Section VIII of this notice at any time and you can view a copy of this notice, as amended, on the Sears Holdings Web sites at www.88sears.com. Except when required by law, the Plans will not implement a material change to any term of this notice prior to

the effective date of the new notice, which includes the material change. For purposes of this notice, the Plans include the following: � Sears Holdings PPO Plans � Health Care Flexible Spending Accounts � Employee Assistance Program � Kmart Pharmacy Prescription Savings Club You should receive a separate Notice of Privacy Practices from the insurer if you participate in the Sears Holdings Dental Plan, an HMO, or Starbridge medical coverage for part-time associates. For purposes of this notice, capitalized terms shall have the meaning as such terms are defined in the Health Insurance Portability and Accountability Act of 1996, as amended from time to time and regulations issued thereunder (“HIPAA”), the Privacy Rule, the Transaction Rule or the Security Rule, as applicable all as amended by the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), as set forth in the American Recovery and Reinvestment Act of 2009.

III. USES AND DISCLOSURES OF YOUR PROTECTED HEALTH INFORMATION

The Plans use and disclose PHI for many different reasons. The Plans will share PHI with each other as necessary to carry out treatment, payment or health care operations relating to the OHCA. With some exceptions, they may not use or disclose any more of your PHI than is necessary to accomplish the purpose of the use or disclosure. Described below are the different categories of the Plans' uses and disclosures, along with some examples of each category.

A. Uses and Disclosures Relating to Treatment, Payment, or

Health Care Operations.

With limited exceptions, the Plans may use or disclose your PHI for treatment, payment, and health care operations without your authorization. Examples of these uses and disclosures include the following:

1. For treatment:

“Treatment” includes the provision, coordination, or management of health care and related services by one or more health care providers, including the coordination or management of health care by a health care provider with another party. It also includes consultation between health care providers relating to a patient or the referral of a patient for health care from one health care provider to another. As your health benefits plans, the Plans do not provide treatment. However, from time to time they may need to use or disclose your PHI for treatment purposes. For example, prior to providing a health service to you, your doctor may ask the Plans for information concerning whether and when the service was previously provided to you. The Plans may use and disclose your PHI for treatment activities of a health care provider. 2. For payment:

The Plans use and disclose your PHI in order to fulfill their responsibilities for providing coverage and health care benefits under the Plans or to obtain or provide reimbursement for the provision of health care. This includes the following activities:


� Determinations of eligibility or coverage (including coordination of benefits or the determination of cost sharing amounts), and adjudication or subrogation of health benefit claims.

� Risk adjusting amounts due based on participant health status and demographic characteristics.

� Billing, claims management, collection activities, obtaining payment under a contract for reinsurance (including stop-loss insurance and excess of loss insurance), and related health care data processing.

� Review of health care services with respect to medical necessity, coverage under the Plans, appropriateness of care, or justification of charges.

� Utilization review activities, including precertification and preauthorization of services, concurrent and retrospective review of services.

� Disclosure to consumer reporting agencies of certain PHI relating to collection of premiums or reimbursement.

For example, the Plans will use your PHI in reviewing a claim submitted by you or your doctor to determine payment. They may also disclose your PHI to another carrier to determine which carrier is primary or to otherwise determine cost sharing between the Plans and the other carrier. They may disclose your PHI to a physician for his or her opinion as to whether the requested services are necessary. The Plans may also disclose your PHI to an attorney or collection agency to make a collection effort for amounts that are due to the Plans. The Plans may use and disclose your PHI to other health plans, clearinghouses or health care providers for their payment activities.

3. For Health Care Operations:

The Plans will use and disclose your PHI in performing those day-to-day administrative uses that are necessary for them to act as your health benefits plans. The Plans' health care operations include the following activities: � Conducting quality assessment and improvement activities, as

well as population based activities relating to improving health or reducing health care costs, protocol development, case management and care coordination, contacting health care providers and patients with information about treatment alternatives and performing related functions that do not include treatment.

� Reviewing the qualifications and performance of health care providers, evaluating health plan performance, training, and performing accreditation, certification, or licensing activities.

� Performing underwriting, premium rating, and other activities relating to the creation, renewal or replacement of health benefits, and ceding, securing, or placing a contract for reinsurance of risk relating to claims for health care (including stop-loss and excess of loss insurance).

� Conducting or arranging for medical review, legal services, and auditing functions, including fraud and abuse detection and compliance programs.

� Business planning and development. � Managing Plan business and performing general

administrative activities. For example, the Plans need to use your PHI along with that of other participants for purposes of establishing budgets. Or, if you have a complaint about a provider or with the Plans, the Plans may, in order to resolve matters, need to review your file, which may contain relevant PHI. The Plans also may need to review your

PHI for purposes of conducting programs to curb provider fraud. They may disclose your PHI to other health plans, health care clearinghouses or health care providers covered under HIPAA for their health care operations provided that the other entity has (or had) a relationship with you, the PHI that the Plan discloses pertains to that relationship, and the disclosure is for limited health care operations described in the first two items listed above (quality assurance, reviewing qualifications and performance) or for fraud and abuse detection or compliance.

B. Other Purposes for Which the Plans are Permitted or

Required to Use or Disclose Your Protected Health

Information Without Your Written Authorization. The Plans may also use and disclose your PHI without authorization for the following reasons: 1. When a disclosure is required by federal, state or local

law. For example, the Plans make disclosures when a law requires that they report information to government agencies.

2. In the course of judicial or administrative proceedings.

For example, the Plans may disclose information pursuant to a court order.

3. For law enforcement purposes. For example, the Plans may disclose information in response to a law enforcement official’s request for such information to identify or locate a suspect, material witness or missing person.

4. For public health activities. For example, the Plans may report information about the safety or effectiveness of an FDA-regulated product or activity or information about various diseases to government officials in charge of collecting that information.

5. To report incidents of abuse, neglect or domestic violence.

If the Plans' employees suspect abuse, neglect or domestic violence, the Plans may provide information to appropriate authorities.

6. For health oversight activities. For example, the Plans will provide information to assist the government when it conducts an investigation of a health care plan or provider.

7. For research purposes. In certain circumstances, the Plans may provide PHI in order to conduct medical research.

8. To avoid harm. In order to avoid a serious threat to the health or safety of a person or the public, the Plans may provide PHI to law enforcement personnel or persons able to prevent or lessen such harm.

9. For specific government functions. The Plans may disclose PHI of military personnel and veterans in certain situations. And they may disclose PHI for national security purposes, such as protecting the president of the United States or conducting intelligence operations.

10. For workers’ compensation purposes. The Plans may provide PHI in order to comply with workers’ compensation laws.

11. Appointment reminders and health-related benefits or

services. The Plans may use PHI to provide appointment reminders or give you information about treatment alternatives, or other health care services or benefits.

12. To Vendors. There are some services provided to the Plans through various vendors. Examples include the third-party administrators that the Plans engage to process payment of your health claims. (Information regarding where to find a complete list of these vendors is set forth in Section VII of this notice.) The Plans may disclose your PHI to these vendors so that they can perform the services the Plans have contracted with them to perform. To protect your PHI,


however, the Plans require that the vendors appropriately safeguard your information.

13. To Limited Data Set Recipients. The Plans may make available to another individual or entity your PHI in a “limited data set” for purposes of research, public health and health care operations. A limited data set is PHI that excludes direct identifiers of you or your relatives, employers, or household members. To protect your PHI, the Plans require that the recipient of the limited data set appropriately safeguard your information.

14. Incidental Disclosures. The Plans may use or disclose your PHI incidentally as part of another use or disclosure that is permitted under law.

C. Marketing.

We will need your written authorization to use and disclose your PHI for marketing purposes, except if the marketing is a face-to-face communication or if it involves a promotional gift of nominal value. “Marketing” includes a communication about a product or service that encourages you to purchase or use the product or service. It also includes an arrangement whereby the Plans disclose your PHI to another entity, in exchange for compensation, and the other entity communicates about its own product or service to encourage purchase or use of that product or service. Marketing does not include a description of a health-related product or service (or payment for such product or service) that the Plans provide or include in their plan of benefits. For example, the Plans may communicate to you (without your authorization) about the Plans' provider network, replacement of, or enhancements to, the health plans, and health-related products or services available only to plan participants that add value to, but are not part of the plan of benefits. Marketing also does not include the Plans' communication for your treatment or for case management or care coordination purposes, or to recommend to you alternative treatments, therapies, health care providers, or settings of care. D. Disclosures of your Protected Health Information to Sears

Holdings, the Sponsor of Your Plan. Sears Holdings may ask the Plans to provide your PHI to it. The Plans will provide the PHI unless it is prohibited by law from doing so. In most cases, the Plans will disclose your PHI to Sears Holdings only to the extent necessary to carry out plan administration functions. The Plans will not disclose your PHI to Sears Holdings for the purpose of employment-related actions or decisions or in connection with any other benefit or employee benefit plan of Sears Holdings. E. Uses and Disclosures for Which You Have the Opportunity

to Object. The Plans may use or disclose your PHI to: (1) a family member, friend, or other person that you indicate is involved in your care or the payment for your health care; (2) notify, or assist in the notification of (including identifying or locating), a family member, your personal representative, or another person responsible for your care regarding your location, general condition, or death; or (3) a disaster relief organization for purposes listed in (2) above. In all of these cases, the Plans may do so unless you object in whole or in part. If you are not present or in the event of your incapacity or an emergency, the Plans will, in the exercise of their professional judgment, determine if the disclosure is in your best interests and, if so, disclose only the PHI that is directly relevant to the person’s involvement with your health care. However, in an emergency, the Plans may use and disclose your

PHI without approval for notification purposes to disaster relief organizations. F. All Other Uses and Disclosures of Your Protected Health

Information Require Your Written Authorization. Uses and disclosures of your protected health information for purposes other than those referred to above will be made only with your written authorization. If you choose to sign an authorization to disclose your PHI, you can later revoke that authorization in writing to stop any future uses and disclosures (to the extent that the Plans have not taken any action relying on the authorization). G. Additional State and Federal Law Requirements.

State laws of general applicability which have criminal penalties, as well as some federal laws, may further limit the Plans' use and disclosure of your PHI. For example, state law may require that the Plans obtain your written permission to use and disclose your PHI even though written authorization would not otherwise be required under this notice. The Plans will abide by applicable state and federal law. H. If Your PHI is Improperly Disclosed.

Your PHI may or may not be encrypted when it is held by a vendor. If it is not encrypted and is improperly disclosed in a way that poses a significant risk to you, the vendor will notify you promptly upon learning of the problem in full compliance with federal law. This notice will explain to you what type of information was involved, what happened to the PHI, what the vendor is doing to fix the problem and mitigate any potential harm, and what steps you can take to protect yourself. You will also receive any notice that may be required under a state law. I. Protection of Your Electronic Health Information

With respect to electronic PHI, the Plan Sponsor: (i) has implemented administrative, physical and technical safeguards that reasonably and appropriately protect the confidentiality, integrity and availability of electronic PHI that the Plan Sponsor creates, receives, maintains or transmits on behalf of the Plan; (ii) ensures that the adequate separation required by federal law is supported by reasonable and appropriate security measures; (iii) ensures that any agent, including a subcontractor, to whom the Plan Sponsor provides such information agrees to implement reasonable and appropriate safeguards to protect the information; and (iv) reports to the Plan any Security Incident of which the Plan Sponsor becomes aware. J. Breaches of Unsecured Protected Health Information

In the event of a breach of your PHI, the Plan Administrator (or its designee) shall comply with the notification duties under federal law. You will be notified in writing that your PHI has been, or is reasonably believed to have been, accessed, acquired, used, or disclosed as a result of a breach without unreasonable delay and in no case later than 60 calendar days after discovery of such breach. The notice will include: (i) a brief description of what happened, including the date of the discovery of the breach, if known; (ii) a description of the types of unsecured PHI that were involved with the breach (i.e. full name, social security number, date of birth) (iii) any steps you should take to protect yourself from potential harm resulting from the breach; (iv) a brief description of what the Plan Administrator is doing to investigate the breach, to mitigate harm to you and to protect against any further breaches; and (v)contact procedures for you to ask questions or learn additional


information, which shall include a toll-free telephone number, and e-mail address, web-site, or postal address. If a breach involves more than 500 residents of a State or jurisdiction, the Plan Administrator shall, following the discovery of a breach, notify prominent media outlets serving the State or jurisdiction without unreasonable delay, but in no case later than 60 days after the discovery of a breach. The Plan Administrator shall also notify the Secretary of Health and Human Resources (“HHS”) in accordance with HHS requirements. Separately, State law may provide greater protections or notification requirements than those described here. K. Sale of Your Protected Health Information

Except as permitted under federal law, the Plans shall not directly or indirectly receive remuneration in exchange for PHI.

L. Business Associate Agreements

If an entity acts as a Business Associate of the Plans, the Plans and such Business Associate shall execute a contract that meets the requirements under federal law for such agreements.

IV. YOUR RIGHTS REGARDING YOUR PHI

You have the following rights described below with respect to PHI held by the Plans' vendors (information regarding where to find a complete list of these vendors is set forth in Section VII of this notice).

A. The Right to Choose How PHI is Sent to You. You have the right to ask each vendor to send information to you at an alternate address (for example, sending information to your work address rather than your home address) or by an alternate means (for example, e-mail instead of regular mail). The vendors are required to accommodate reasonable requests if you inform such vendor that to provide the information otherwise would put you in danger. Separately, B. The Right to Get This Notice by Paper Copy. If we send you this notice via e-mail, you have the right to request a paper copy.

C. The Right to Amend Your PHI. If you believe that there is a mistake in your PHI or that a piece of important information is missing, you have the right to request the vendor in possession of the information to correct the existing information or to add the missing information. You must provide the request and your reason for the request in writing to the vendor that you believe has the incorrect information (hereinafter referred to as the “Request For Amendment”). The vendor may have prepared forms to assist you in this process. The vendor will respond within 60 days of receiving your request. If your request is denied, the written denial you receive will state the reasons for the denial and explain your right to file a written statement of disagreement with the denial. If you do not file a statement of disagreement, you have the right to request that your written request and the denial be attached to all future disclosures of that PHI. If a vendor approves your Request For an Amendment, the vendor must report the amendment of PHI to other vendors of the Plans that the vendor’s agents reasonably believe possess the unamended PHI and to persons or entities that you identify in your Request

For Amendment. (In your Request For Amendment, you may provide a list of individuals or entities that you believe possess the unamended PHI and either the vendor or the Plans will use their best efforts to contact such individuals and entities regarding the amendment.)

D. The Right to Request Limits on Uses and Disclosures of

Your PHI. You have the right to request a vendor to limit how it uses and discloses your PHI for treatment, payment and health care operations (discussed above) or to cease uses and disclosures for which you have the right to object (also discussed above). A vendor will consider your request, but generally is not legally required to accept it. If the vendor accepts your request, it will abide by the limitation except in emergency treatment situations. E. The Right to Access Your PHI. In most cases, you have the right to view or obtain copies of your PHI on file with each vendor, but you must make the request in writing to each vendor. If the vendor that you contact does not have your PHI but is aware of a vendor that does, it will redirect you to the appropriate vendor or to the Plan. A vendor will respond to you within 30 days after receiving your written request. In certain situations, a vendor may deny your request. If so, the vendor will notify you, in writing, of the reasons for the denial and explain your right to have the denial reviewed. If you request copies of your PHI, the vendor may charge a fee. Instead of providing the PHI you requested, the vendor may provide you with a summary explanation of the PHI as long as you agree to the summary and to the costs associated with the summary in advance. F. The Right to an Accounting of Disclosures of Your PHI. You have the right to get a list of instances in which each vendor has disclosed your PHI (hereinafter sometimes referred to as an “accounting”). The list will not include uses or disclosures: (i) made to you, (ii) made for treatment, payment, or health care operations, (iii) made pursuant to an authorization, (iv) which are incidental, or (v) for which you have the right to object (and you did not object). The list also will not include uses and disclosures: (a) made for national security purposes, (b) made to corrections or law enforcement personnel, (c) made as part of a limited data set, or (d) which were made before April 14, 2003. Each vendor will respond within 60 days of receiving your request. The list provided will include disclosures made in the last six years, unless you request a shorter time frame. The list will also include the date of the disclosure, to whom PHI was disclosed (including contact information, if available), a brief description of the information disclosed, and the purpose for the disclosure. A vendor may impose fees for such service. When exercising your right to receive access to your PHI, to request an accounting of the use and disclosure of your PHI, or to limit the uses and disclosures of your PHI, you must separately contact each vendor of the Plans that may have the relevant PHI and request the appropriate action. If you are unsure as to which vendors to contact or to whom to make a request, you may write to Sears Holdings HIPAA Privacy Official at the address listed in Section VIII of this notice. Any such access, accounting, or limitations on your PHI will only be effective as to those vendors that you contact. If, for example, you wish to limit the use or disclosure of your PHI, you may wish to separately request such a limitation from each vendor that may possess such information. A vendor will assist you in exercising your rights according to its policies and procedures and the policies and procedures of the


Plans that govern the responsibilities of a vendor. For this purpose Sears Holdings is treated as a vendor to the extent that it uses or discloses PHI for Plan administration. V. IF YOU HAVE COMPLAINTS If you think that the Plans or one of its vendors may have violated your privacy rights, you may file a written complaint by sending it to the address listed in Section VIII of this notice. You also may send a written complaint to the Secretary of the Department of Health and Human Services. The Plans will take no retaliatory action against you if you file a complaint about their privacy practices. VI. VENDORS To accommodate the administrative needs of their vendors, the Plans have agreed to adopt, when available, the policies and procedures of each of their vendors with respect to PHI used or disclosed by that vendor in connection with the services it renders to the Plans. If a vendor does not adopt appropriate policies and procedures regarding your rights with respect to your PHI, the Plans will adopt appropriate policies and procedures for use by that vendor. VII. CONTACTING PLAN VENDORS Accompanying this Notice is a list of the Plans' vendors. Updates to this list (if any) may be found at the Sears Holdings Web site at www.88sears.com. If, upon contacting the vendors at the locations listed, you are unable to exercise your privacy rights as set forth in Section IV of this notice, you may write to Sears Holdings HIPAA Privacy Official at the address listed in Section VIII of this notice. VIII. WHO TO CONTACT FOR INFORMATION ABOUT THIS NOTICE OR TO COMPLAIN ABOUT OUR PRIVACY PRACTICES If you have any questions about this notice or any complaints about the Plans' privacy practices, or would like to know how to file a complaint with the Secretary of the Department of Health and Human Services, please write to Sears Holdings HIPAA Privacy Official at the following address: Sears Holdings Corporation. HIPAA Privacy Official 3333 Beverly Road Department 707BEN Hoffman Estates, IL 60179 Phone: 248-463-7900


Sears Group Health Plans Vendor Contact Information May have PHI that participants

have the Right to:

Sears Holdings Group Health Plan(s) Vendor Contact Information Access Amend Account For

Sears Holdings PPO Plans

Health Care Flexible Spending Accounts Plan

Anthem HealthChoice Assurance, Inc. P. O. Box 105187 Atlanta, GA 30348 - - or - - Call Member Services at the phone number listed on the back of your ID card

� � �

Prescription Drug Program for the Sears Holdings PPO Plans

Medco Health Privacy Services Unit P.O. Box 800 Franklin Lakes, NJ 07417 Fax (800) 845-6190

� � �

Employee Assistance Program Aetna Resources for Living 4300 Centreway Place Arlington, TX 76018 1-800-424-4732

� � �

Other Support Vendors to Sears Holdings Group Health Plans May have PHI that participants

have the Right to:

Vendor Contact Information Description of Services Access Amend Account For

Active Health Management, Inc. 14120 Newbrook Drive, Suite 140 Chantilly, VA 20151-2223 Phone (866) 216-1134

Performs disease prevention management services for participants in the Sears Holdings PPO plans. � � �

Health Data & Management Solutions, Inc. 3201 Enterprise Pkwy, Suite 100 Beachwood, OH 44122 Phone (216) 595 -1911

Performs data aggregation, analysis and reporting for Sears Holdings PPO plans � � �

Healthcare Recoveries, Inc. 1930 Bishop Lane Louisville, KY 40218 Phone (800) 926-4353

Performs subrogation and recovery services for Sears Holdings PPO plans � � �

Hewitt Associates LLC 100 Half Day Road Lincolnshire, IL 60069 - - or - - Active associates: Phone 1-888-88sears and follow path to health and group benefits Retirees: Phone (800) 762-7327

Performs services for Sears Holdings PPO and FSA plans such as annual enrollment processing and COBRA administration.

� � �

Mercer Human Resource Consulting, Inc. 3131 E Camelback Road - Suite 300 Phoenix, AZ 85016 Phone (602) 522-6500

Performs actuarial services and consulting for Sears Holdings PPO plans. �

Sears Holdings Corporation acting through its employees as HIPAA Privacy Official and Plan Administrator 3333 Beverly Road Department 707BEN Hoffman Estates, IL 60179 Phone: 248-463-7900

Oversees all ongoing activities related to the development, implementation, maintenance of, and adherence to Sears Holdings health plans policies and procedures covering the privacy of, and access to, protected health information.

�


IMPORTANT NOTICE ABOUT YOUR PRESCRIPTION DRUG COVERAGE AND MEDICARE

THIS NOTICE APPLIES TO MEDICARE-ELIGIBLE INDIVIDUALS ONLY. Please read this notice carefully. This notice has information

about the current prescription drug coverage options offered

through the Sears Holdings Corporation Associate Benefit

Plans and about your options under Medicare’s prescription

drug coverage. This information can help you decide whether

or not you want to join a Medicare Part D plan. Information

about where you can get help to make decisions about your

prescription drug coverage is at the end of this notice.

ABOUT MEDICARE PRESCRIPTION DRUG COVERAGE

Medicare prescription drug coverage became available in 2006 to everyone eligible for Medicare. You can get this coverage if you join a private Medicare Prescription Drug Plan or a Medicare Advantage Plan (like an HMO or PPO) that offers prescription drug coverage. All Medicare drug plans provide at least a standard level of coverage set by Medicare. Some plans may also offer more coverage for a higher monthly premium.

CREDITABLE HEALTH PLANS

Sears Holdings has determined that some of the prescription drug programs offered through the Associate Benefit Plans are “CREDITABLE,” meaning that on average, for all plan participants, those programs are expected to pay out at least as much as the standard Medicare Part D coverage pays. Your coverage is CREDITABLE if you receive coverage through the Select PPO, the Basic PPO or an HMO (unless it is noted below).

NON-CREDITABLE HEALTH PLANS

Sears Holdings also has determined that some of the prescription drug programs offered through the Associate Benefit Plans are “NON-CREDITABLE,” meaning that on average, for all plan participants, those programs are NOT expected to pay out as much as standard Medicare Part D coverage pays. This is important, because you most likely will get more help with your drug costs if you join a Medicare drug plan than if you only have prescription drug coverage from one of the NON-CREDITABLE options listed below: NON-CREDITABLE Medical Options

� High Deductible Health Plan

� Vista Health Plan

� Starbridge

DECISIONS YOU NEED TO MAKE

If you are enrolled in a Sears Holdings PPO or HMO, you have decisions to make about Medicare prescription drug coverage that may affect how much you pay for that coverage, depending on if and when you join. Read this notice carefully - it explains your options. If you are enrolled in a Sears Holdings health coverage option with prescription coverage that is considered “CREDITABLE,” then your coverage is, on average, at least as good as standard Medicare prescription drug coverage. You do not need to enroll in a Medicare drug plan, and you can keep this coverage and not pay a higher premium (a penalty) if you later decide to join a Medicare drug plan.

If you are enrolled in a Sears Holdings health coverage option with prescription drug benefits that are considered “NON-CREDITABLE,” consider joining a Medicare drug plan. You can keep your Sears Holdings coverage. However, because your existing coverage is, on average, NOT at least as good as standard Medicare prescription drug coverage, joining a private Medicare drug plan might help you avoid paying a higher premium (a penalty) if you later decide to join a Medicare drug plan. You can join a Medicare drug plan when you first become eligible for Medicare and each year from October 15th through December 7th. This may mean that you may have to wait to join a Medicare drug plan and that you may pay a higher premium (a penalty) if you join later. You may pay that higher premium (a penalty) as long as you have Medicare prescription drug coverage. However, if you lose creditable prescription drug coverage, through no fault of your own, you will be eligible for a sixty (60) day Special Enrollment Period (SEP) because you lost creditable coverage to join a Part D plan. In addition, if you lose

or decide to leave Sears Holdings sponsored coverage you will be

eligible to join a Part D plan at that time using an Employer

Group Special Enrollment Period. You should compare your current coverage, including which drugs are covered at what cost, with the coverage and costs for Medicare. If you decide to join a Medicare drug plan, your Sears Holdings prescription drug coverage will not be affected. See below for more information about what happens to your current coverage if you join a Medicare drug plan. If you do decide to join a Medicare drug plan and drop your Sears Holdings prescription drug coverage, be aware that you and your dependents may not be able to get this coverage back. You also should know that if you drop or lose your coverage with Sears Holdings and do not join a Medicare drug plan within 63 continuous days after your current coverage ends, you may pay a higher premium (a penalty) to join a Medicare drug plan later. If you go 63 continuous days or longer without prescription drug coverage that’s at least as good as Medicare’s prescription drug coverage, your monthly premium may go up by at least 1% of the base beneficiary premium per month for every month that you did not have that coverage. For example, if you go nineteen months without coverage, your premium may consistently be at least 19% higher than the base beneficiary premium. You may have to pay this higher premium (a penalty) as long as you have Medicare prescription drug coverage. In addition, you may have to wait until the following October to join.

FOR MORE INFORMATION ABOUT THIS NOTICE OR YOUR

CURRENT PRESCRIPTION DRUG COVERAGE

If you have questions about this notice, call the Sears Holdings Benefit Center at 1-888-88sears (select the option for medical). You will receive this notice each year. You will also receive it before the next period you can join a Medicare drug plan. You also may request a copy at any time. If you have questions about your current Sears Holdings health care coverage, visit www.88sears.com or call the Sears Holdings Benefit Center at 1-888-88sears (select the option for medical).


FOR MORE INFORMATION ABOUT YOUR OPTIONS UNDER

MEDICARE PRESCRIPTION DRUG COVERAGE

Detailed information about Medicare plans that offer prescription drug coverage is available in the “Medicare & You” booklet. You will receive a copy of this booklet in the mail every year from Medicare. You may also be contacted directly by individual Medicare drug plans within your state. For more information about Medicare prescription drug coverage: � Visit www.medicare.gov � Call your State Health Insurance Assistance Program (see the

inside back cover of your copy of the “Medicare & You” handbook for their telephone number) for personalized help,

� Call 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048.

If you have limited income and resources, extra help paying for Medicare prescription drug coverage is available. For information about this extra help, visit Social Security on the web at www.socialsecurity.gov, or call them at 1-800-772-1213 (TTY 1-800-325-0778).

LIST OF SEARS HOLDINGS HEALTH PLANS AND DETERMINATION

OF MEDICARE PART D CREDITABILITY

If a health plan is listed as creditable it means that Sears Holdings has determined that the prescription drug coverage offered by the health plan or HMO is, on average for all plan participants, expected to pay out as much as standard Medicare prescription drug coverage pays. If a health plan is listed as non-creditable it means that Sears Holdings has determined that the prescription drug coverage offered by the health plan or HMO will not on average for all plan participants, expected to pay out as much as standard Medicare prescription drug coverage pays. For more information about Medicare Part D see the Notice included in this Handbook.

Health Plan

Medicare Part

D Creditable?

High Deductible Health Plan No Vista Health Plan (FL) No Starbridge No BlueCross of California (CA) Yes Health Net, Inc. (S. CA) Yes Kaiser Permanente (N. CA) Yes Kaiser Permanente (S. CA) Yes Kaiser Permanente (CO) Yes Blue Cross Blue Shield of Georgia (GA) Yes Kaiser Permanente (GA) Yes NetCare (Guam) Yes Take Care Health Systems (Guam) Yes Blue Cross Blue Shield of Hawaii (HI) Yes Blue Cross Blue Shield of Hawaii HMSA PPO (HI)

Yes

Kaiser Permanente (HI) Yes Blue Advantage (IL) Yes Blue Cross Blue Shield of Michigan-Blue Care Network of S.E. Michigan (MI)

Yes

Health Alliance Plan of Michigan (MI) Yes Health Plan of Nevada (NV) Yes Capital District Physicians Health (NY) Yes Emblem Health (fmrly HIP Health) (NY) Yes Preferred Care (NY) Yes The Health Plan of Upper Ohio Valley (OH) Yes Kaiser Permanente (OH) Yes Blue Cross of NE Pennsylvania (Keystone East 1999 Union) (PA)

Yes

Blue Cross of NE Pennsylvania (Keystone Health Plan East) (PA)

Yes

Blue Cross of NE Pennsylvania (Amerihealth) (PA)

Yes

Geisinger Health Plan (PA) Yes University of Pittsburgh Medical Center Health Plan (PA)

Yes

Blue Cross Blue Shield of Puerto Rico (PR) (Triple S)

Yes

Humana Health Plans, Inc. (Puerto Rico) Yes Kaiser Permanente (DC) Yes Kaiser Permanente (OR/WA) Yes CIGNA HealthCare INTERNATIONAL Yes


STATEMENT OF ERISA RIGHTS

As a participant under the plan described in this Handbook that are ERISA plans, 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: Receive Information About Your Plan and Benefits

� Examine, without charge, at the Plan Administrator’s office and at other specified locations, such as worksites and union halls, all documents governing the plan, including insurance contracts and collective bargaining agreements, and a copy of the latest annual report (Form 5500 Series) filed by the plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.

� Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of a plan, including insurance contracts and collective bargaining agreements, and copies of the latest annual report (Form 5500 Series) and updated summary plan description. The administrator may make a reasonable charge for the copies.

� Receive a summary of the plan’s annual financial report. The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report.

� Regarding the Savings Plan, obtain a statement telling you whether you have a right to receive a pension at normal retirement age (age 65) and if so, what your benefits would be at normal retirement age if you stop working under the plan now. If you do not have a right to a benefit, the statement will tell you how many more years you have to work to get a right to a pension. This statement must be requested in writing and is not required to be given more than once every twelve (12) months. The plan must provide the statement free of charge.

Continue Group Health Plan Coverage

You can continue health care coverage for yourself, spouse or dependents if there is a loss of coverage under the Medical Plan or Dental Plan or health Flexible Benefits Plan as a result of a qualifying event. You or your dependents may have to pay for such coverage. Review this summary plan description and the documents governing the plan on the rules governing your COBRA continuation coverage rights. There is a reduction or elimination of exclusionary periods of coverage for preexisting conditions under your group health plan if you have creditable coverage from another plan. You should be provided a certificate of creditable coverage, free of charge, from your group health plan or health insurance issuer when you lose coverage under the plan, when you become entitled to elect COBRA continuation coverage, when your COBRA continuation coverage ceases, if you request it before losing coverage, or if you request it up to 24 months after losing coverage. Without evidence of creditable coverage, you may be subject to a pre-existing condition exclusion for 12 months (18 months for late enrollees) after your enrollment date in your coverage. Prudent Actions of Plan Fiduciaries

In addition to creating rights for plan participants ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. These people are called “fiduciaries”

and have a duty to operate the plans prudently and in the interest of you and other plan participants and beneficiaries. No one, including your employer, your union, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. Enforce Your Rights

If your claim for a benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of plan documents or the latest annual report from the plan and do not receive them within 30 days, you may file suit in a Federal court subsequent to exhausting the plan’s claims procedures (refer to the Claims Information Section of this Summary). 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 subsequent to exhausting the plan’s claims procedures (refer to the Claims Information Section of this Summary). In addition, if you disagree with the plan’s decision or lack thereof concerning the qualified status of a domestic relations order or a medical child support 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. The court will decide who should pay court costs and legal fees. If you are successful the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. Assistance with Your Questions

If you have any questions about your plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the plan administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.

About This Handbook Sears Holdings provides a comprehensive and competitive benefits program designed to meet the needs of associates and their families. This Handbook provides a detailed description of the Sears Holdings benefit plans. Use it as reference when you have specific benefits questions. The information in this Handbook is effective January 1, 2012, except as otherwise noted. This Handbook, the HMO documents incorporated by reference (if applicable) and any summaries of material modifications distributed after January 1, 2012 constitute the most current summary plan description. Nothing in this Handbook should be interpreted as a contract or guarantee of employment. Sears Holdings retains the right to modify, amend, suspend or terminate the benefit plans at any time. If the information provided in this Handbook differs from the terms of the legal documents governing the plans, the legal documents govern.

Important Note The benefits described in this handbook are available to all eligible, full-time hourly associates, except for those businesses or associate groups that do not participate in certain benefits or have different benefit provisions, including but not limited to:

Ayuda La Compañía proveerá ayuda a aquellos empleados que puedan tener dificultad en comprender este folleto en inglés. Si necesita ayuda, consulte con su gerente de unidad o su representante de Recursos Humanos.

© 2012 Sears Holdings Corporation

Business / Associate Group

Benefits that are different from what is described in this booklet

Kmart Distribution Centers •Eligibility for Benefits

•Paid Time Off Associates in California • Paid Time Off

• Short-term Disability Associates in Montana • Paid Time Off Associates in New Jersey, New York and Rhode Island

• Short-term Disability

Associates in Hawaii • Eligibility for Benefits • Starbridge Choices • Short-term Disability

Associates in Guam and the Virgin Islands • Eligibility for Benefits • Starbridge Choices

Associates in Ontario, Canada • Medical • Flexible Spending Accounts • Voluntary Benefits • Commuter Benefits • Starbridge Choices

Associates in Puerto Rico • Medical • Dental • Flexible Spending Accounts • Short-term Disability • Savings Plan

• Paid Time Off • Starbridge Choices • Commuter Benefits • Voluntary Benefits

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