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 96 STAT. 502

PUBLIC LAW 97-248—SEPT. 3, 1982 "(ii) who is certified by the designated local agency as having a t t a i n e d age 16 b u t not 18 on the h i r i n g date (as defined in paragraph (14)), "(iii) who has not been a n employee of the employer during any period prior to the 90-day period described in subparagraph (B)(iii), and "(iv) who is certified by the designated local agency as being a m e m b e r of a n economically disadvantaged family (as determined under paragraph (11)). "(B)

SPECIAL

RULES

FOR DETERMINING

AMOUNT

OF

CREDIT.—For purposes of applying this subpart to wages paid or incurred to any qualified s u m m e r youth employee— "(i) subsection (a)(1) shall be applied by substituting "(ii) subsections (a)(2) and (b)(3) shall not apply, "(iii) subsection (b)(2) shall be applied by substituting 'any 90-day period between May 1 and September 15' for ' the 1-year period beginning with the day the individual begins work for the employer', and "(iv) subsection (b)(4) shall be applied by substituting '$3,000' for '$6,000'. "(C) SPECIAL RULE FOR CONTINUED EMPLOYMENT FOR SAME
 * 85 percent' for '50 percent',

EMPLOYER.—In the case of a n individual who, with respect to the same employer, is certified as a m e m b e r of a n other targeted group after such individual has been a qualified s u m m e r youth employee, paragraph (14) shall be applied by substituting 'certified' for 'hired by the employer'." 26 USC 51.

(c) TERMINATION OF INVOLUNTARILY T E R M I N A T E D C E T A EMPLOYEE AS M E M B E R OF TARGETED G R O U P. — Paragraph (10) of section 51(d)

(relating to involuntarily term i n a t e d CETA employee) is amended by adding at the end thereof the following new sentence: "This paragraph shall not apply to any individual who begins work for the employer after December 31, 1982." (d) V O U C H E R OR S C R I P P A Y M E N T S TO GENERAL RECIPIENTS I N QUALIFIED GENERAL ASSISTANCE P R O G R A M S. — S u b c l a u s e (II) of sec-

tion 51(d)(6)(B)(i) (defining qualified general assistance programs) is amended by inserting before the comma the following: "or voucher or scrip". 26 USC 51 note.

95 Stat. 260.

95 Stat. 260.

(e) ADDITIONAL AUTHORIZATION OF APPROPRIATIONS; REPORTS.—

Paragraph (2) of section 261(f) of the Economic Recovery T a x Act of 1981 is amended— (1) by inserting after "for fiscal year 1982 the s u m of $30,000,000" the following: ", and for fiscal years 1983 and 1984 such s u m s as may be necessary,"; and (2) by inserting a t the end thereof the following new sentence: "The Secretary of Labor shall each calendar year beginning with c a l e n d a r year 1983 report to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the S e n a t e with respect to the results of the testing conducted under subparagraph (A) during the preceding calend a r year." (f) CERTIFICATIONS.—Effective only with respect to individuals who begin work for the tax p a y e r after May 11, 1982, subparagraph (A) of section 51(d)(15) (relating to special rules for certifications), as in effect before the amendments m a d e by this Act, is amended by striking out "before the d a y " and inserting in lieu thereof "on or before the day".

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(g) EFFECTIVE DATES.— (1) SUBSECTION (b).—The amendments made by subsection (b) shall apply to amounts paid or incurred after April 30, 1983, to individuals beginning work for the employer after such date. (2) SUBSECTION (d).—The amendments made by subsection (d) shall apply to amounts paid or incurred after July 1, 1982, to individuals beginning work for the employer after such date.

26 USC 51 note.

SEC. 234. ACCELERATED PAYMENT OF INCOME TAX BY CORPORATIONS. (a) INCREASE IN AMOUNT OF ESTIMATED TAX REQUIRED TO BE PAID.—

(1) IN GENERAL.—Paragraph (1) of section 6655(b) (relating to amount of underpayment) is amended by striking out "80" each place it appears and inserting in lieu thereof "90". (2)

CONFORMING AMENDMENT.—Paragraph

(3)

of

26 USC 6655.

section

6655(d) (relating to exception to imposition of additional tax) is amended by striking out "80" and inserting in lieu thereof "90". (b) ELIMINATION OF ELECTION WITH RESPECT TO PAYMENT OF UNPAID TAXES.—

(1) IN GENERAL.—Section 6152 (relating to installment payments of tax) is amended by striking out subsections (a) and (b) and inserting in lieu thereof the following new subsections:

26 USC 6152.

"(a) PRIVILEGE TO ELECT TO MAKE FOUR INSTALLMENT PAYMENTS BY DECEDENT'S ESTATE.—A decedent's estate subject to the tax

imposed by chapter 1 may elect to pay such tax in four equal installments. "(b) DATES PRESCRIBED FOR PAYMENT OF FOUR INSTALLMENTS.—In

any case (other than payment of estimated income tax) in which the tax may be paid in four installments, the first installment shall be paid on the date prescribed for the payment of the tax, the second installment shall be paid on or before 3 months, the third installment on or before 6 months, and the fourth installment on or before 9 months, after such date.'". (2) Conforming amendments.— (A) Paragraph (2) of section 832(e) is amended by striking out ", as if no election to make installment payments under (B) Subsection (b) of section 6081 is amended by striking out "or the first installment thereof required under section 6152". (C) Section 6164 is amended— (i) by striking out the last sentence of subsection (c) and inserting in lieu thereof the following new sentence: "If an extension of time under this section relates to only a part of the tax, the time for payment of the remainder shall be the date on which payment would have been required if such remainder had been the tax."; and (ii) by striking out paragraph (2) of subsection (g) and inserting in lieu thereof the following new paragraph: "(2) the time for payment of such amount shall be considered to be the date on which payment would have been required if there had been no extension with respect to such amount.". (c) AMOUNT OF ADDITION TO TAX.—Subsection (a) of section 6655 (relating to addition to tax) is amended to read as follows:

97-200 O—84—pt. 1

18: QL3

26 USC 832. 26 USC 6081. 26 USC 6164.

26 USC 6655.

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 96 STAT. 504

PUBLIC LAW 97-248—SEPT. 3, 1982 "(a) ADDITION TO TAX.—Except as provided in subsections (d) and (e), in the case of any under payment of tax by a corporation— "(1) IN GENERAL.—There shall be added to the tax under chapter 1 for the taxable year a n a m o u n t determined a t the rate established under section 6621 on the a m o u n t of the underp a y m e n t for the period of the under payment. "(2) SPECIAL RULE WHERE CORPORATION PAID 80 PERCENT OR

MORE OF TAX.—In any case in which the r e would be no underp a y m e n t if subsection (b) were applied by substituting '80 percent' for '90 percent" each place it appears, the addition to tax under paragraph (1) shall be equal to 75 percent of the a m o u n t otherwise determined under paragraph (1)." (d) ADDITIONAL EXCEPTION F R O M PENALTY FOR U N D E R P A Y M E N T S OF ESTIMATED INCOME T A X W H E R E A CORPORATION H A S A R E C U R R I N G PATTERN OF SEASONAL I N C O M E. —

26 USC 6655.

(1) IN GENERAL.—Section 6655 (relating to failure by corporation to pay estimated income tax) is amended by redesignating subsections (e), (f), (g), and (h) as subsections (f), (g), (h), and (i), respectively, and by inserting after subsection (d) the following new subsection: "(e) ADDITIONAL EXCEPTION FOR R E C U R R I N G SEASONAL I N C O M E. —

"(1) IN GENERAL.—Notwithstanding the preceding subsections, the addition to the tax with respect to any under payment of any installment shall not be imposed if the total a m o u n t of all payments of estimated tax m a d e on or before the last date prescribed for the payment of such installment equals or exceeds 90 percent of the a m o u n t determined under paragraph (2). "(2) DETERMINATION OF AMOUNT.—The a m o u n t determined under this paragraph for any installment shall be determined in the following m a n n e r — "(A) t a k e the taxable income for all months during, the taxable year preceding the filing month, "(B) divide such a m o u n t by the base period percentage for all months during the taxable year preceding the filing month, "(C) determine the tax on the a m o u n t determined under subparagraph (B), and "(D) multiply the tax computed under subparagraph (C) by the base period percentage for the filing month and all months during the taxable year preceding the filing month. "(8) DEFINITIONS AND SPECIAL RULES.—For purposes of t h i s

subsection— "(A) BASE PERIOD PERCENTAGE.—The base period percent-

age for any period of months shall be the average percent which the taxable income for the corresponding months in each of the 3 preceding taxable years bears to the taxable income for the 8 preceding taxable years. "(B) FILING MONTH.—The term 'filing month ' means the month in which the installment is required to be paid. "(C) LIMITATION

ON APPLICATION

OF SUBSECTION.—This

subsection shall only apply if the base period percentage for any 6 consecutive months of the taxable year equals or exceeds 70 percent. " (D) REORGANIZATIONS, ETC.—The Secretary may by regulations provide for the determination of the base period

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96 STAT. 505

percentage in the case of reorganizations, new corporations, and other similar circumstances." (2) TECHNICAL AMENDMENT.—Subsection (f) of section 6655 (as 26 USC 6655. redesignated by paragraph (D) is amended by striking out "(d), and (h)" and inserting in lieu thereof "(d), (e), and (i)" (e) EFFECTIVE DATE.—The amendments made by this section shall ^^^Y^^ ^^^^ note. apply to taxable years beginning after December 31, 1982.

Subtitle C—Pensions PART I—CONTRIBUTION AND LOAN LIMITS SEC. 235. LOWKR CONTRIIU TIO.N AM) MKNKFIT I.I.MITS FOR CERT.4IN .\NNHTIKS, KTC. (a) L I M I T ON A N N U A L D E F I N E D B E N E F I T LOWERED F R O M $136,425 TO $90,000; L I M I T ON A N N U A L D E F I N E D CONTRIBUTION LOWERED

FROM $45,475 TO $30,000.— (1) DEFINED BENEFIT PLANS.—Subparagraph (A) of section 415(b)(1) (relating to limitation for defined benefit plan) is amended by striking out "$75,000" and inserting in lieu thereof "$90,000". (2) DEFINED CONTRIBUTION PLANS.—Subparagraph (A) of section 415(c)(1) (relating to limitation for defined contribution plan) is amended by striking out "$25,000" and inserting in lieu thereof "$30,000". (3) CONFORMING AMENDMENTS.—

(A) Subparagraph (C) of section 415(b)(2) is amended by striking out "$75,000" each place it a p p e a r s and inserting in lieu thereof "$90,000". (B) The last sentence of paragraph (7) of section 415(b) is amended by striking out "by substituting '37,500' for '75,000' " and inserting in lieu thereof "by substituting the g r e a t e r of $68,212 or one-half the a m o u n t otherwise applicable for such year under paragraph (1)(A) for '$90,000' ". (b) COST-OF-LIVING ADJUSTMENTS. — (1) ADJUSTMENT TO REFLECT ADJUSTMENTS MADE IN SOCIAL SECURITY BENEFIT PAYMENTS RATHER THAN PRIMARY INSURANCE

A M O U N T S. — Paragraph (1) of section 415(d) (relating to cost-ofliving adjustments) is amended by striking out " p r i m a r y insurance a m o u n t s " and inserting in lieu thereof "benefit a m o u n t s ". (2) FREEZE ON COST-OF-LIVING ADJUSTMENTS BEFORE JANUARY i,

1986.— (A) IN GENERAL.—Subsection (d) of section 415 is amended by adding at the end thereof the following new paragraph: "(3) FREEZE ON ADJUSTMENT TO DEFINED CONTRIBUTION AND

BENEFIT LIMITS.—The Secretary shall not m a k e any adjustment under subparagraph (A) or (B) of paragraph (1) with respect to any year beginning after December 31, 1982, and before January 1, 1986." (B) C H A N G E IN BASE PERIOD TO REFLECT CHANGE IN LIMITS

AND FREEZE.—Paragraph (2) of section 415(d) (relating to base periods) is amended by striking out "1974" and inserting in lieu thereof "1984". (3) CONFORMING AMENDMENTS TO DECREASE IN LIMITS.—Para-

graph (1) of section 415(d) is amended—

26 USC 415.

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 96 STAT. 506

PUBLIC LAW 97-248—SEPT. 3, 1982 (A) by inserting (B) by inserting

striking out "$75,000" in subparagraph (A) and in lieu thereof "$90,000", and striking out "$25,000" in subparagraph (B) and in lieu thereof "$30,000".

(c) L O W E R L I M I T S W H E R E INDIVIDUAL I S COVERED BY BOTH D E F I N E D B E N E F I T P L A N AND D E F I N E D CONTRIBUTION P L A N. — (1) S U M OF DEFINED BENEFIT PLAN FRACTION AND DEFINED CONTRIBUTION PLAN FRACTION CANNOT EXCEED 1.25 FOR DOLLAR

LIMITS AND 1.4 FOR PERCENTAGE L I M I T S. — Paragraph (1) of section

26 USC 415.

415(e) (relating to limitation in case of defined benefit plan and defined contribution plan for s a m e employee) is amended by striking out "1.4" and inserting in lieu thereof "1.0". (2) D E F I N E D BENEFIT AND CONTRIBUTION PLAN FRACTIONS.— (A) D E F I N E D BENEFIT PLAN F R ACTION. — Subparagraph (B)

of section 415(e)(2) (defining defined benefit plan fraction) is amended to read as follows: "(B) the d e n o m i n a to r of which is the lesser of— "(i) the product of 1.25, multiplied by the dollar limitation in effect under subsection (b)(1)(A) for such year, or "(ii) the product of— "(I) 1.4, multiplied by "(II) the a m o u n t which may be t a k e n into account under subsection (b)(1)(B) with respect to such individual under the plan for such year." (B)

DEFINED

CONTRIBUTION

PLAN

FRACTION.—Subpara-

g r a p h (B) of section 415(e)(3) (defining defined contribution plan fraction) is amended to read as follows: "(B) the d e n o m i n a to r of which is the s u m of the lesser of the following a m o u n t s determined for such year and for each prior year of service with the employer: "(i) the product of 1.25, multiplied by the dollar limitation in effect under subsection (c)(1)(A) for such year (determined without regard to subsection (c)(6)), or "(ii) the product of— "(I) 1.4, multiplied by— "(II) the a m o u n t which may be t a k e n into account under subsection (c)(1)(B) (or subsection (c) (7) or (8), if applicable) with respect to such individual under such plan for such year." (d) T R A N S I T I O N RULES FOR D E F I N E D CONTRIBUTION F R ACTION. —

Section 415(e) is amended by adding at the end thereof the following new paragraph: "(6) SPECIAL TRANSITION RULE FOR DEFINED CONTRIBUTION FRACTION FOR YEARS E N D I N G AFTER DECEMBER 31, 1982. —

"(A) IN GENERAL.—At the election of the plan administrator, in applying paragraph (3) with respect to any year ending after December 31, 1982, the a m o u n t t a k e n into account under paragraph (3)(B) with respect to each particip a national years ending before January 1, 1983, shall be a n a m o u n t equal to the product of— "(i) the a m o u n t determined under paragraph (3)(B) (as in effect for the year ending in 1982) for the year ending in 1982, multiplied by "(ii) the transition fraction. "(B) TRANSITION FRACTION.—The term 'transition fraction' means a fraction—

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96 STAT. 507

"(i) the n u m e r a to r of which is the lesser of— "(I) $51,875, or "(II) 1.4, multiplied by 25 percent of the compensation of the participant for the year ending in 1981, and "(ii) the denominator of which is the lesser of— "(I) $41,500, or "(II) 25 percent of the compensation of the participant for the year ending in 1981." (e) ACTUARIAL ADJUSTMENTS. — (1) ACTUARIAL ADJUSTMENTS FOR EARLY RETIREMENT MADE BY

REFERENCE TO AGE 62 (INSTEAD OF 55).—Subparagraph ( O of section 415(b)(2) (relating to adjustments w h e r e benefit begins before age 55) is amended by striking o u t " 5 5 " each place it appears and inserting in lieu thereof "62".

26 USC 415.

(2) $75,000 FLOOR ON ACTUARIAL ADJUSTMENT WHERE BENEFIT

BEGINS BEFORE 62.—Subparagraph (C) of section 415(b)(2) is amended by adding a t the end thereof the following new sentence: "The reduction under this subparagraph shall not reduce the limitation of paragraph (1)(A) below— "(i) if the benefit begins a t or after age 55, $75,000, or "(ii) if the benefit begins before age 55, the a m o u n t which is the equivalent of the $75,000 limitation for age 55." (3) ACTUARIAL ADJUSTMENTS WHERE BENEFIT BEGINS AFTER AGE

65.—Paragraph (2) of section 415(b) is amended by adding a t the end thereof the following new subparagraph: "(D) ADJUSTMENT TO $90,OOO LIMITATION WHERE BENEFIT

BEGINS AFTER AGE 65.—If the retirement income benefit under the plan begins after age 65, the determination as to w h e the r the $90,000 limitation set forth in paragraph (1)(A) has been satisfied shall be made, in accordance with regulations prescribed by the Secretary, by adjusting such benefit so that it is equivalent to such a benefit beginning a t age 65." (4) LIMITATIONS ON ACTUARIAL ADJUSTMENTS UNDER SECTION

4 1 5 (b)(2). — Paragraph (2) of section 415(b) is amended by adding a t the end thereof the following new subparagraph: "(E) LIMITATION ON CERTAIN ASSUMPTIONS.—

"(i) For purposes of adjusting any benefit under subparagraph (B) or (C), the interest r a t e assumption shall not be less than the g r e a t e r of 5 percent or the r a t e specified in the plan. "(ii) For purposes of adjusting any benefit under subparagraph (D), the interest r a t e assumption shall not be g r e a t e r than the lesser of 5 percent or the r a t e specified in the plan. "(iii) For purposes of adjusting any benefit under subparagraph (B), (C), or (D), no adjustments under subsection (d)(1) shall be t a k e n into account before the year for which such adjustment first takes effect." (f) LIMITATIONS ON DEDUCTIBILITY OF CONTRIBUTIONS.—Section 404

(relating to contributions of a n employer to a n employee's trust, etc.) is amended by adding a t the end thereof the following new subsection: "(j) SPECIAL RULES R E L A T I N G TO APPLICATION W I T H SECTION 415.—

95 Stat. 293

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 96 STAT. 508

PUBLIC LAW 97-248—SEPT. 3, 1982 "(1) N o DEDUCTION IN EXCESS OF SECTION 415 LIMITATION.—In

26 USC 415.

computing the a m o u n t of any deduction allowable under paragraph (1), (2), (3), (4), (7), or (10) of subsection (a) for any year— "(A) in the case of a defined benefit plan, the r e shall not be t a k e n into account any benefits for any year in excess of any limitation on such benefits under section 415 for such year, or "(B) in the case of a defined contribution plan, the a m o u n t of any contributions otherwise t a k e n into account shall be reduced by any annual additions in excess of the limitation under section 415 for such year. "(2) N o ADVANCE FUNDING OF COST-OF-LIVING ADJUSTMENTS.—

For purposes of clause (i), (ii) or (iii) of subsection (a)(1)(A), and in computing the full funding limitation, the r e shall not be t a k e n into account any adjustments under section 415(d)(1) for any year before the year for which such adjustment first t a k e s effect." 26 USC 415 note.

(g) EFFECTIVE D A T E S. — (1) IN GENERAL. —

(A) N E W PLANS.—In the case of any plan which is not in existence on July 1, 1982, the amendments made by this section shall apply to years ending after July 1, 1982. (B) EXISTING P L A N S. —

(i) In the case of any plan which is in existence on July 1, 1982, the amendments m a d e by this section shall apply to years beginning after December 31, 1982. (ii) P L A N REQUIREMENTS.—A p l a n shall not be t r e a t e d

as failing to meet the requirements of section 401(a)(16) of the I n t e r n a l Revenue Code of 1954 for any year beginning before January 1, 1984, merely because such plan provides for benefit or contribution limits which a r e in excess of the limitations under section 415 of such Code, a s amended by this section. The preceding sentence shall not apply to any plan which provides such limits in excess of the limitation under section 415 of such Code before such amendments. (2) AMENDMENTS RELATED TO COST-OF-LIVING ADJUSTMENTS.—

(A) IN GENERAL.—Except as provided in subparagraph (B), the amendments m a d e by subsection (b) shall apply to adjustments for years beginning after December 31, 1982. (B) ADJUSTMENT PROCEDURES.—The amendments m a d e by

subsections (b)(1) and (b)(2)(B) shall apply to adjustments for years beginning after December 31, 1985. (3) TRANSITION RULE WHERE THE SUM OF DEFINED CONTRIBUTION AND DEFINED BENEFIT PLAN FRACTIONS EXCEEDS 1.0.—In the

Ante, p. 506.

case of a plan which satisfied the requirements of section 415 of the I n t e r n a l Revenue Code of 1954 for the last year beginning before January 1, 1983, the Secretary of the Treasury or his delegate shall prescribe regulations under which a n a m o u n t is subtracted from the n u m e r a to r of the defined contribution plan fraction (not exceeding such n u m e r a to r) so that the s u m of the defined benefit plan fraction and the defined contribution plan fraction computed under section 415(e)(1) of the I n t e r n a l Revenue Code of 1954 (as amended by the T a x Equity and Fiscal Responsibility Act of 1982) does not exceed 1.0 for such year. (4) R I G H T TO HIGHER ACCRUED DEFINED BENEFIT PRESERVED.—

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96 STAT. 509

(A) IN GENERAL.—In the case of a n individual who is a participant before January 1, 1983, in a defined benefit plan which is in existence on July 1, 1982, and with respect to which the requirements of section 415 of such Code have been m e t for all years, if such individual's c u r r e n t accrued benefit under such plan exceeds the limitation of subsection (b) of section 415 of the I n t e r n a l Revenue Code of 1954 (as amended by this section), the n (in the case of such plan) for purposes of subsections (b) and (e) of such section, the limitation of such subsection (b) with respect to such individual shall be equal to such c u r r e n t accrued benefit. (B) C U R R E N T ACCRUED BENEP^IT DEFINED.—

(i) IN GENERAL.— For purposes of this paragraph, the term " c u r r e n t accrued benefit" means the individual's accrued benefit (at the close of the last year beginning before January 1, 1983) when expressed as an annual benefit (within the m e a n i n g of section 415(b)(2) of such Code as in effect before the amendments made by this Act).

26 USC 415.

(ii) SPECIAL RULE. — For purposes of determining the

a m o u n t of any individual's c u r r e n t accrued benefit— (I) no change in the term s and conditions of the plan after July 1, 1982, and (II) no cost-of-living adjustment occurring after July 1, 1982, shall be t a k e n into account. (5) SPECIAL RULE FOR COLLECTIVE BARGAINING AGREEMENTS.—

In the case of a plan m a i n t a i n e d on the date of the e n a c t m e n t of this Act pursuant to 1 or more collective bargaining a g r e e m e n t s between employee representatives and 1 or more employers, the amendments made by this section and section 253 (relating to age 70 V2) shall not apply to years beginning before the earlier of(A) the date on which the last of the collective b a r g a i n i n g a g r e e m e n t s relating to the plan term i n a t e s (determined without regard to any extension thereof agreed to after the date of the e n a c t m e n t of this Act), or (B) January 1, 1986. For purposes of subparagraph (A), any plan amendment m a d e pursuant to a collective bargaining a g r e e m e n t relating to the plan which amends the plan solely to conform to any requirement added by this section and section 253 shall not be treated as a termination of such collective bargaining a g r e e m e n t. SKC. 2;jfi. LOANS TRKATKI) AS DI.STRIBl TIONS.

(a) GENERAL RULE.—Section 72 (relating to a n n u i t i e s and certain proceeds of endowment and life insurance contracts) is amended by redesignating subsection (p) as subsection (q) and by inserting after subsection (o) the following new subsection: "(p)

LOANS TREATED

AS DISTRIBUTIONS.—For

purposes

of

this

section — "(1) T R E A T M E N T AS DISTRIBUTIONS.—

"(A) LOANS.—If during any taxable year a participant or beneficiary receives (directly or indirectly) any amouiit as a loan from a qualified employer plan, such a m o u n t shall be treated as having been received by such individual as a distribution under such plan.

95 Stat. 278.

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 96 STAT. 510

PUBLIC LAW 97-248—SEPT. 3, 1982 "(B) ASSIGNMENTS OR PLEDGES.—If during any taxable

year a participant or beneficiary assigns (or agrees to assign) or pledges (or agrees to pledge) any portion of his interest in a qualified employer plan, such portion shall be treated as having been received by such individual as a loan from such plan. "(2) EXCEPTION FOR CERTAIN LOANS.— "(A) GENERAL RULE.—Paragraph (1) shall not apply to

any loan to the extent that such loan (when added to the outstanding balance of all other loans from such plan whether made on, before, or after August 13, 1982), does not exceed the lesser of— "(i) $50,000, or "(ii) Vz of the present value of the nonforfeitable accrued benefit of the employee under the plan (but not less than $10,000). "(B) REQUIREMENT THAT LOAN BE REPAYABLE WITHIN 5 YEARS.—

26 USC 267.

"(i) IN GENERAL.—Subparagraph (A) shall not apply to any loan unless such loan, by its terms, is required to be repaid within 5 years. "(ii) EXCEPTION FOR HOME LOANS.—Clause (i) shall not apply to any loan used to acquire, construct, reconstruct, or substantially rehabilitate any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the participant or a member of the family (within the meaning of section 267(c)(4)) of the participant. "(C) RELATED EMPLOYERS AND RELATED PLANS.—For purposes of this paragraph— "(i) the rules of subsections (b), (c), and (m) of section 414 shall apply, and "(ii) all plans of an employer (determined after the application of such subsections) shall be treated as 1 plan. "(3) QUALIFIED EMPLOYER PLAN, ETC.—For purposes of this subsection, the term 'qualified employer plan' means any plan which was (or was determined to be) a qualified employer plan (as defined in section 219(e)(3) without regard to subparagraph (D) thereof). For purposes of this subsection, such term includes any government plan (as defined in section 219(e)(4)). "(4)

SPECIAL RULES FOR LOANS, ETC., FROM CERTAIN CON-

TRACTS.—For purposes of this subsection, any amount received as a loan under a contract purchased under a qualified employer plan (and any assignment or pledge with respect to such a contract) shall be treated as a loan under such employer plan." (b) TECHNICAL AMENDMENTS.—

95 Stat. 284. 26 USC 72. 95 Stat. 278. 26 USC 72 note.

(1) Subsection (m) of section 72 is amended by striking out paragraphs (4) and (8). (2) Subparagraph (A) of section 72(o)(3) is amended by striking out "subsection (m)(4) and (8)" and inserting in lieu thereof "subsection (p)". (c) EFFECTIVE D A T E. —

(1) IN GENERAL.—The amendments made by this section shall apply to loans, assignments, and pledges made after August 13,

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96 STAT. 511

1982. For purposes of the preceding sentence, the o u t s t and i n g balance of any loan which is renegotiated, extended, renewed, or revised after such date shall be t r e a t e d as a n a m o u n t received as a loan on the date of such renegotiation, extension, renewal, or revision. (2) EXCEPTION FOR CERTAIN LOANS USED TO REPAY OUTSTANDING OBLIGATIONS.—

(A) IN GENERAL.—Any qualified refunding loan shall not be t r e a t e d as a distribution by reason of the amendments m a d e by this section to the e x t e n t such loan is repaid before August 14, 1983. (B) QUALIFIED REFUNDING L O A N. — For purposes of s u b p a r -

a g r a p h (A), the term "qualified refunding l o a n " means any loan m a d e after August 13, 1982, and before August 14, 1983, to the extent such loan is used to m a k e a required principal payment. (C) REQUIRED PRINCIPAL P A Y M E N T. — For purposes of sub-

paragraph (B), the term "required principal payment " means any principal r e payment on a loan m a d e under the plan which w a s o u t s t and i n g on August 13, 1982, if such r e payment is required to be m a d e after August 13, 1982, and before August 14, 1983.

PART II—REPEAL OF SPECIAL LIMITATIONS ON PLANS BENEFITING SELF-EMPLOYED INDIVIDUALS OR OWNER-EMPLOYEES SEC. 237. REPEAL OF SPECIAL QUALIFICATION REQUIREMENTS. (a) GENERAL RULE. — S u b s e c t i o n

(d) of section

401 ( r e l a t i n g to

26 USC 401.

additional requirements for qualifications of t r u s t s and plans benefiting owner-employees) is amended— (1) by striking out paragraph s (1) through (7), and (2) by redesignating paragraph s (9), (10), and (11) a s paragraph s (1), (2), and (3), respectively. (b) R E P E A L OF LIMITATIONS O N A M O UNT OF COMPENSATION T A K E N I N TO ACCOUNT A N D ON CERTAIN D E F I N E D B E N E F I T P L A N S. — P a r a -

g r a p h s (17) and (18) of section 401(a) a r e hereby repealed. (c) R E P E A L OF EXCISE T A X ON EXCESS CONTRIBUTIONS FOR S E L F EMPLOYED INDIVIDUALS.—

(1) Section 4972 (relating to tax on excess contributions for 26 USC 4972. self-employed individuals) is hereby repealed. (2) The table of sections for chapter 43 is amended by striking out the item relating to section 4972. (d) PENALTY FOR P R E M A T U R E WITHDRAWALS EMPLOYEES IN TO P - H E A V Y P L A N S. —

LIMITED

TO K E Y

(1) Subparagraph (A) of section 72(m)(5) is amended— (A) by striking o u t " a n owner-employee" the first place it a p p e a r s and inserting in lieu thereof " a key employee", (B) by striking out "while h e w a s a n owner-employee" and inserting in lieu thereof "while h e was a key employee in a top-heavy plan", and (C) by striking, out " a n owner-employee" in clause (ii) and inserting in lieu thereof "a key employee". (2) Paragraph (5) of section 72(m) is amended by adding a t the end thereof the following new subparagraph:

26 USC 72.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/554

 96 STAT. 512

95 Stat. 284.

PUBLIC LAW 97-248—SEPT. 3, 1982 "(C) For purposes of this paragraph, the terms 'key employee' and 'top-heavy plan' have the same meanings as when used in section 416." (3) Paragraph (6) of section 72(m) is amended by striking out "except in applying paragraph (5),". (e) CONFORMING AMENDMENTS.—

26 USC 401.

(1) Paragraph (10) of section 401(a) is amended to read as follows: "(10) OTHER REQUIREMENTS.— "(A) PLANS BENEFITING OWNER-EMPLOYEES.—In the case of

26 USC 404.

26 USC 408.

12 USC 1752.

any plan which provides contributions or benefits for employees some or all of whom are owner-employees (as defined in subsection (c)(3)), a trust forming part of such plan shall constitute a qualified trust under this section only if the requirements of subsection (d) are also met." (2) Paragraph (2) of section 404(a) is amended— (A) by striking out "(8), (11)" and inserting in lieu thereof "(8), (9), (11)", and (B) by striking out "section 401(a)(9), (10), (17), and (18), and of section 401(d) (other than paragraph (1))" and inserting in lieu thereof "section 401(a)(10) and of section 401(d)". (3)(A) Paragraph (2) of section 408(a) (defining individual retirement account) is amended by striking out "as defined in section 401(d)(1)" and inserting in lieu thereof "as defined in subsection (n)". (B) Section 408 is amended by redesignating the subsection relating to cross references as subsection (o) and by inserting immediately before such subsection the following new subsection: "(n) BANK.—For purposes of subsection (a)(2), the term 'bank' means— "(1) any bank (as defined in section 581), "(2) an insured credit union (within the meaning of section 101(6) of the Federal Credit Union Act), and "(3) a corporation which, under the laws of the State of its incorporation, is subject to supervision and examination by the Commissioner of Banking or other officer of such State in charge of the administration of the banking laws of such State." SEC. 238. REPEAL OF SPECIAL LIMITATIONS ON DEDUCTION FOR SELFEMPLOYED INDIVIDUALS AND SUBCHAPTER S CORPORATIONS. (a) REPEAL OF LIMIT OF LOWER OF $15,000 OR 15 PERCENT OF

26 USC 404.

EARNED INCOME.—Subsection (e) of section 404 (relating to special limitations for self-employed individuals) is amended to read as follows: "(e) CONTRIBUTIONS ALLOCABLE TO LIFE INSURANCE PROTECTION FOR SELF-EMPLOYED INDIVIDUALS.—In the case of a self-employed

individual described in section 401(c)(1), contributions which are allocable (determined under regulations prescribed by the Secretary) to the purchase of life, accident, health, or other insurance shall not be taken into account under this section." (b) REPEAL OF LIMITATIONS ON DEFINED BENEFIT PLANS.—Subsec-

26 USC 401.

tion (j) of section 401 (relating to defined benefit plans providing benefits for self-employed individuals and shareholder-employees) is hereby repealed.

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 513

(c) REPEAL OF LIMITATIONS APPLICABLE TO SUBCHAPTER S CORPORA-

TIONS.—Section 1379 is amended— (1) by striking out subsections (a) and (b), and (2) by redesignating subsections (c) and (d) as subsections (a) and (b), respectively.

26 USC 1379.

(d) TECHNICAL AMENDMENTS.—

(1) Paragraph (1) of section 401(c)(1) (defining employee) is amended to read as follows:

26 USC 401.

"(1) SELF-EMPLOYED INDIVIDUAL TREATED AS EMPLOYEE.—

"(A) IN GENERAL.—The term 'employee' includes, for any taxable year, an individual who is a self-employed individual for such taxable year. "(B) SELF-EMPLOYED INDIVIDUAL.—The term 'selfemployed individual' means, with respect to any taxable year, an individual who has earned income (as defined in paragraph (2)) for such taxable year. To the extent provided in regulations prescribed by the Secretary, such term also includes, for any taxable year— "(i) an individual who would be a self-employed individual within the meaning of the preceding sentence but for the fact that the trade or business carried on by such individual did not have net profits for the taxable year, and "(ii) an individual who has been a self-employed individual within the meaning of the preceding sentence for any prior taxable year." (2) Subparagraph (A) of section 401(c)(2) (defining earned income) is amended by striking out "and" at the end of clause (iii), by striking out the period at the end of clause (iv) and inserting in lieu thereof ", and", and by adding at the end thereof the following new clause: "(v) with regard to the deductions allowed by sections 404 and 405(c) to the taxpayer." (3) Subsection (j) of section 408 is amended to read as follows:

26 USC 408.

"(j) INCREASE IN MAXIMUM LIMITATIONS FOR SIMPLIFIED EMPLOYEE

PENSIONS.—In the case of any simplified employee pension, subsections (a)(1) and (b)(2) of this section shall be applied by increasing the $2,000 amounts contained therein by the amount of the limitation in effect under section 415(c)(1)(A)." (4)(A) Paragraph (6) of section 408(k) is hereby repealed. (B) Paragraph (1) of section 408(k) is amended by striking out "(5), and (6)" and inserting in lieu thereof "and (5)". (C) Subparagraph (C) of section 408(k)(3) is amended to read as follows: "(C) CONTRIBUTIONS MUST BEAR UNIFORM RELATIONSHIP TO

TOTAL COMPENSATION.—For purposes of subparagraph (A), employer contributions to simplified employee pensions shall be considered discriminatory unless contributions thereto bear a uniform relationship to the total compensation (not in excess of the first $200,000) of each employee maintaining a simplified employee pension." (5) Paragraph (5) of section 415(c) (relating to application with 26 USC 415. section 404(e)) is hereby repealed.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/556

 96 STAT. 514

26 USC 101.

PUBLIC LAW 97-248—SEPT. 3, 1982 SEC. 239. ALLOWANCE OF EXCLUSION OF DEATH BENEFIT FOR SELFEMPLOYED INDIVIDUALS. Paragraph (3) of section 101(b) (relating to self-employed individual not considered as employee) is amended to read as follows: "(3) T R E A T M E N T

O F SELF-EMPLOYED INDIVIDUALS.—For

pur-

poses of this subsection— "(A)

SELF-EMPLOYED

INDIVIDUAL

NOT

CONSIDERED

EMPLOYEE.—Except as provided in subparagraph (B), the term 'employee' does not include a self-employed individual described in section 401(c)(1). "(B)

SPECIAL

RULE

FOR CERTAIN

LUMP

SUM DISTRIBU-

TIONS.—In the case of any l u m p s u m distribution described in the second sentence of paragraph (2)(B), the term 'employee' includes a self-employed individual described in section 401(c)(1)." SEC. 240. SPECIAL RULES FOR TOP-HEAVY PLANS. (a) GENERAL RULE. — Subpart

B of part

I of subchapter

D of

chapter 1 (relating to special rules) is amended by adding a t the e n d thereof the following new section: 26 USC 416.

"SEC. 416. SPECIAL RULES FOR TOP-HEAVY PLANS.

"(a) GENERAL RULE. — A t r u s t shall not constitute a qualified t r u s t under section 401(a) for any plan year if the plan of which it is a part is a top-heavy plan for such plan year unless such plan meets— "(1) the vesting requirements of subsection (b), "(2) the minimum benefit requirements of subsection (c), and "(3) the limitation on compensation requirement of subsection (d). "(b) V E S T I N G REQUIREMENTS. —

"(1) IN GENERAL.—A plan satisfies the requirements of this subsection if it satisfies the requirements of e i the r of the following subparagraph s: "(A) 3-YEAR VESTING.—A plan satisfies the requirements of this subparagraph if a n employee who has completed a t least 3 years of service with the employer or employers m a i n t a i n i n g the plan has a nonforfeitable right to 100 percent of his accrued benefit derived from employer contributions. "(B) 6-YEAR GRADED VESTING.—A plan Satisfies the requirements of this subparagraph if a n employee has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions determined under the following table: "Years of service 2 3 4 5 6 or more

The nonforfeitable percentage is: 20 40 60 80 100

"(2) CERTAIN RULES MADE APPLICABLE.—Except to the e x t e n t

inconsistent with the provisions of this subsection, the rules of section 411 shall apply for purposes of this subsection. "(c) P L A N M U S T PROVIDE MINIMUM B E N E F I T S. — "(1) D E F I N E D BENEFIT PLANS.—

"(A) IN GENERAL.—A defined benefit plan meets the requirements of this subsection if the accrued benefit

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 515

derived from employer contributions of each participant who is a non-key employee, when expressed as a n annual retirement benefit, is not less than the applicable percentage of the participant's average compensation for years in the testing period. "(B) APPLICABLE PERCENTAGE.—For purposes of s u b p a r a -

g r a p h (A), the term 'applicable percentage' means the lesser of— "(i) 2 percent multiplied by the n u m b e r of years of service with the employer, or "(ii) 20 percent. "(C) YEARS OF SERVICE.—For purposes of t h i s paragraph —

"(i) IN GENERAL.—Except a s provided in clause (ii), years of service shall be determined under the rules of paragraph s (4), (5), and (6) of section 411(a). "(ii) EXCEPTION FOR YEARS DURING W H I C H PLAN W A S

NOT TOP-HEAVY.—A year of service with the employer shall not be t a k e n into account under this paragraph if— "(I) the plan was not a top-heavy plan for any plan year ending during such year of service, or "(II) such year of service was completed in a plan year beginning before January 1, 1984. "(D) A V E R A G E COMPENSATION FOR HIGH 5 YEARS.—For

purposes of this paragraph — "(i) IN GENERAL.—A participant's testing period shall be the period of consecutive years (not exceeding 5) during which the participant h a d the greatest aggregate compensation from the employer. "(ii) Y E A R MUST BE INCLUDED IN YEAR OF SERVICE.—

The years t a k e n into account under clause (i) shall be properly adjusted for year s not included in a year of service. "(iii) CERTAIN YEARS NOT TAKEN INTO ACCOUNT.—

Except to the e x t e n t provided in the plan, a year shall not be t a k e n into account under clause (i) if— "(I) such year ends in a plan year beginning before January 1, 1984, or "(II) such year begins after the close of the last year in which the plan was a top-heavy plan. "(E) A N N U A L RETIREMENT B E N E F I T. — For purposes of t h i s

paragraph, the term ' annual retirement benefit' means a benefit payable annual l y in the form of a single life a n n u i t y (with no ancillary benefits) beginning a t the normal retirement age under the plan. "(2) D E F I N E D CONTRIBUTION PLANS.—

"(A) IN GENERAL.—A defined contribution plan meets the requirements of the subsection if the employer contribution for the year for each participant who is a non-key employee is not less than 3 percent of such participant's compensation (within the m e a n i n g of section 415). "(B) SPECIAL RULE WHERE MAXIMUM CONTRIBUTION LESS THAN 3 PERCENT.—

"(i) IN GENERAL.—The percentage referred to in subparagraph (A) for any year shall not exceed the percentage at which contributions a r e made (or required to be made) under the plan for the year for the key

26 USC 411.

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 96 STAT. 516

PUBLIC LAW 97-248—SEPT. 3, 1982 employee for whom such percentage is the highest for the year. "(ii) DETERMINATION OF P E R C E N T A G E. — The d e term i -

nation referred to in clause (i) shall be determined for each key employee by dividing the contributions for such employee by so m u c h of his total compensation for the year as does not exceed $200,000. "(iii) T R E A T M E N T OF AGGREGATION GROUPS.—

26 USC 401, 410.

"(I) For purposes of this subparagraph, all defined contribution plans required to be included in a n aggregation group under subsection (g)(2)(A)(i) shall be t r e a t e d a s one plan. "(II) This subparagraph shall not apply to any plan required to be included in a n aggregation group if such plan enables a defined benefit plan required to be included in such group to meet the requirements of section 401(a)(4) or 410. "(C) CERTAIN AMOUNTS N O T TAKEN INTO ACCOUNT.—For

purposes of this paragraph, any employer contribution a t t r i b u t a b l e to a salary reduction or similar a r r a n g e m e n t shall not be t a k e n into account. "(d) N O T M O R E T H A N $200,000 I N A N N U A L COMPENSATION T A K E N INTO ACCOUNT. —

"(1) IN GENERAL.—A plan meets the requirements of this subsection if the annual compensation of each employee t a k e n into account under the plan does not exceed the first $200,000. "(2) COST-OF-LIVING ADJUSTMENTS.—The Secretary shall a n n u ally adjust the $200,000 a m o u n t contained in paragraph (1) of this subsection and in clause (ii) of subsection (c)(2)(B) in the same m a n n e r as h e adjusts the dollar a m o u n t contained in section 415(c)(1)(A). "(e) P L A N M U S T M E E T REQUIREMENTS W I T H O U T T A K I N G I N TO ACCOUNT SOCIAL SECURITY A N D SIMILAR CONTRIBUTIONS A N D

26 USC 1401 etseq. 26 USC 3101 !o1^aV. -.m

42 USC 401.

BENEFITS.—A top-heavy plan shall not be t r e a t e d a s meeting the requirement of subsection (b) or (c) unless such plan meets such requirement without taking into account contributions or benefits under chapter 2 (relating to tax on self-employment income), chaptej. 21 (relating to Federal Insurance Contributions Act), title II of ^]^g Social Security Act, or any other Federal or State law. "(f) COORDINATION W H E R E EMPLOYER H A S 2 OR M O R E P L A N S. — The

Secretary shall prescribe such regulations a s may be necessary or appropriate to carry out the purposes of this section w h e r e the employer has 2 or more plans including (but not limited to) regulations to prevent inappropriate omissions or require duplication of minimum benefits or contributions. "(g) TO P - H E A V Y P L A N D E F I N E D. — For purposes of t h i s section— "(1) IN GENERAL. — "(A) P L A N S NOT REQUIRED TO BE AGGREGATED.—Except a s

provided in subparagraph (B), the term 'top-heavy plan' means, with respect to any plan year— "(i) any defined benefit plan if, as of the determination date, the present value of the cumulative accrued benefits under the plan for key employees exceeds 60 percent of the present value of the cumulative accrued benefits under the plan for all employees, and "(ii) any defined contribution plan if, a s of the determination date, the aggregate of the accounts of key

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 517

employees under the plan exceeds 60 percent of the aggregate of the accounts of all employees under such plan. "(B)

AGGREGATED P L A N S. — E a c h

plan

of

an

employer

required to be included in a n aggregation group shall be treated as a top-heavy plan if such group is a top-heavy group. "(2) AGGREGATION.—For purposes of this subsection— "(A) AGGREGATION G R O U P. — "(i) REQUIRED AGGREGATION.—The term

'aggregation

group' means— "(I) each plan of the employer in which a key employee is a participant, and "(II) each other plan of the employer which enables any plan described in subclause (I) to meet the requirements of section 401(a)(4) or 410. 26 USC 401, 410. "(ii) PERMISSIVE AGGREGATION.—The e m p l o y e r

may

t r e a t any plan not required to be included in an aggregation group under clause (i) a s being part of such group if such group would continue to meet the requirements of sections 401(a)(4) and 410 with such plan being taken into account. "(B) TOP-HEAVY GROUP.—The term 'top-heavy group' means any aggregation group if— "(i) the sum (as of the determination date) of— "(I) the present value of the cumulative accrued benefits for key employees under all defined benefit plans included in such group, and "(II) the aggregate of the accounts of key employees under all defined contribution plans included in such group, "(ii) exceeds 60 percent of a similar s u m determined for all employees. "(3)

DISTRIBUTIONS

DURING

LAST

5

YEARS

TAKEN

INTO

ACCOUNT.—For purposes of determining— "(A) the present value of the cumulative accrued benefit for any employee, or "(B) the a m o u n t of the account of any employee, such present value or a m o u n t shall be increased by the aggregate distributions made with respect to such employee under the plan during the 5-year period ending on the determination date. "(4) OTHER SPECIAL RULES.—For purposes of this subsection— "(A) ROLLOVER CONTRIBUTIONS TO PLAN NOT TAKEN INTO

ACCOUNT.—Except to the extent provided in regulations, any rollover contribution (or similar transfer) initiated by the employee and made after December 31, 1983, to a plan shall not be t a k e n into account with respect to the transferee plan for purposes of determining w h e the r such plan is a top-heavy plan (or w h e the r any aggregation group which includes such plan is a top-heavy group). "(B) BENEFITS NOT TAKEN INTO ACCOUNT IF EMPLOYEE CEASES TO BE KEY EMPLOYEE.—If any individual is a non-key

employee with respect to any plan for any plan year, b u t such individual was a key employee with respect to such plan for any prior plan year, any accrued benefit for such

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 96 STAT. 518

PUBLIC LAW 97-248—SEPT. 3, 1982 employee (and the account of such employee) shall not be t a k e n into account. "(C)

DETERMINATION

DATE.—The

term

'determination

date ' means, with respect to any plan year— "(i) the last day of the preceding plan year, or "(ii) in the case of the first plan year of any plan, the last day of such plan year. "(D) YEARS.—To the extent provided in regulations, this section shall be applied on the basis of any year specified in such regulations in lieu of plan years. "(h) ADJUSTMENTS IN SECTION 415 LIMITS FOR TO P - H E A V Y P L A N S. —

Ante, p. 506.

"(1) IN GENERAL.—In the case of any top-heavy plan, paragraph s (2)(B) and (3)(B) of section 415(e) shall be applied by substituting '1.0' for '1.25'. "(2) EXCEPTION W H E R E BENEFITS FOR KEY EMPLOYEES DO NOT EXCEED 9 0 PERCENT OF TOTAL BENEFITS AND ADDITIONAL CONTRI-

BUTIONS ARE MADE FOR NON-KEY EMPLOYEES.—Paragraph (1) shall not apply with respect to any top-heavy plan if the requirements of subparagraph s (A) and (B) of this paragraph a r e met with respect to such plan. "(A) MINIMUM BENEFIT REQUIREMENTS.—

"(i) IN GENERAL.—The requirements of this subparagraph a r e m e t with respect to any top-heavy plan if such plan (and any plan required to be included in a n aggregation group with such plan) meets the requirements of subsection (c) as modified by clause (ii). "(ii) MODIFICATIONS.—For purposes of clause (i)— "(I) paragraph (1)(B) of subsection (c) shall be applied by substituting '3 percent' for '2 percent', and by increasing (but not by more than 10 percentage points) 20 percent by 1 percentage point for each year for which such plan was t a k e n into account under this subsection, and "(II) paragraph (2)(A) shall be applied by substituting '4 percent' for '3 percent'. "(B) B E N E F I T S FOR KEY EMPLOYEES CANNOT EXCEED 90 PERCENT OF TOTAL BENEFITS.—A p l a n m e e t s the r e q u i r e -

m e n t s of this subparagraph if such plan would not be a topheavy plan if '90 percent' were substituted for '60 percent' each place it appears in paragraph s (1)(A) and (2)(B) of subsection (g). "(3) TRANSITION RULE.—If, b u t for this paragraph, paragraph (1) would begin to apply with respect to any top-heavy plan, the application of paragraph (1) shall be suspended with respect to any individual so long as the r e a r e no— "(A) employer contributions, forfeitures, or voluntary nondeductible contributions allocated to such individual, or "(B) accruals for such individual under the defined benefit plan. "(4) COORDINATION WITH TRANSITIONAL RULE UNDER SECTION

415.—In the case of any top-heavy plan to which paragraph (1) applies, section 415(e)(6)(B)(i) shall be applied by substituting '$41,500' for '$51,875'. "(i) DEFINITIONS.—For purposes of this section— "(1) K E Y EMPLOYEE.—

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 519

"(A) IN GENERAL.—The term 'key employee' means any participant in a n employer plan who, a t any time during the plan year or any of the 4 preceding plan years, is— "(i) a n officer of the employer, "(ii) 1 of the 10 employees owning (or considered a s owning within the m e a n i n g of section 318) the largest interests in the employer, "(iii) a 5-percent owner of the employer, or "(iv) a 1-percent owner of the employer having a n annual compensation from the employer of more than $150,000. For purposes of clause (i), no more than 50 employees (or, if lesser, the g r e a t e r of 3 or 10 percent of the employees) shall be t r e a t e d as officers. "(B) P E R C E N T A G E O W N E R S. — "(i) 5-PERCENT O W N E R. — For purposes of t h i s

para-

g r a p h, the term *5-percent owner' means — "(I) if the employer is a corporation, any person who owns (or is considered as owning within the m e a n i n g of section 318) more than 5 percent of the o u t s t and i n g stock of the corporation or stock possessing more than 5 percent of the total combined voting power of all stock of the corporation, or "(II) if the employer is not a corporation, any person who owns more than 5 percent of the capital or profits interest in the employer. "(ii) 1-PERCENT OWNER.—For purposes of this paragraph, the term '1-percent owner' means any person who would be described in clause (i) if '1 percent' were substituted for '5 percent' each place it a p p e a r s in clause (i). "(iii) CONSTRUCTIVE O W N E R S H I P RULES.—For purposes

of this subparagraph and subparagraph (A)(ii)((II)— "(I) subparagraph (C) of section 318(a)(2) shall be applied by substituting '5 percent' for '50 percent', and "(II) in the case of any employer which is not a corporation, ownership in such employer shall be determined in accordance with regulations prescribed by the Secretary which shall be based on principles similar to the principles of section 318 (as modified by subclause (I)). "(C) AGGREGATION RULES DO NOT APPLY FOR PURPOSES O F DETERMINING 5-PERCENT OR 1-PERCENT OWNERS.—The r u l e s

of subsections (b), (c), and (m) of section 414 shall not apply for purposes of determining ownership in the employer. "(2) NON-KEY EMPLOYEE.—The term 'non-key employee' means any employee who is not a key employee. "(3)

SELF-EMPLOYED INDIVIDUALS.—In

the

case

of

a

self-

employed individual described in section 401(c)(1)— "(A) such individual shall be t r e a t e d as a n employee, and "(B) such individual's e a r n e d income (within the m e a n i n g of section 401(c)(2)) shall be t r e a t e d as compensation. "(4) T R E A T M E N T OF EMPLOYEES COVERED BY COLLECTIVE BAR-

GAINING AGREEMENTS.—The requirements of subsections (b), (c), and (d) shall not apply with respect to any employee included in a unit of employees covered by a n a g r e e m e n t which the Secre-

26 USC 318.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/562

 96 STAT. 520

PUBLIC LAW 97-248—SEPT. 3, 1982 tary of Labor finds to be a collective bargaining agreement between employee representatives and 1 or more employers if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. "(5) TREATMENT OF BENEFICIARIES.—The terms 'employee' and 'key employee' include their beneficiaries. "(6) TREATMENT OF SIMPLIFIED EMPLOYEE PENSIONS.— "(A) TREATMENT AS DEFINED CONTRIBUTION PLANS.—A

simplified employee pension shall be treated as a defined contribution plan. "(B) ELECTION TO HAVE DETERMINATIONS BASED ON EMPLOYER CONTRIBUTIONS.—In the case of a simplified

employee pension, at the election of the employer, paragraphs (l)(A)(ii) and (2)(B) of subsection (g) shall be applied by taking into account aggregate employer contributions in lieu of the aggregate of the accounts of employees." (b)

Ante, p. 512.

QUALIFICATION REQUIREMENTS.—Paragraph

(10)

of

section

401(a) (relating to other requirements) is amended by adding at the end thereof the following new subparagraph: "(B) TOP-HEAVY PLANS.—

"(i) IN GENERAL.—In the case of any top-heavy plan, a trust forming part of such plan shall constitute a qualified trust under this section only if the requirements of section 416 are met. "(ii) PLANS WHICH MAY BECOME TOP-HEAVY.—Except

to the extent provided in regulations, a trust forming part of a plan (whether or not a top-heavy plan) shall constitute a qualified trust under this section only if such plan contains provisions— "(I) which will take effect if such plan becomes a top-heavy plan, and "(II) which meet the requirements of section 416." (c) TECHNICAL AMENDMENTS.—

26 USC 414.

(1) Subsections (b) and (c) of section 414 (relating to employees of controlled groups) are each amended by striking out "and 415" and inserting in lieu thereof "415, and 416". (2) Paragraph (4) of section 414(m) (relating to employees of an affiliated service group) is amended by striking out "and 415" in subparagraph (B), and inserting in lieu there of "415, and 416". (d) CLERICAL AMENDMENT.—The table of sections for subpart B of part I of subchapter D of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 416. Special rules for top-heavy plans."

26 USC 416 note.

SEC. 241. EFFECTIVE DATES.

(a) GENERAL RULE.—Except as provided in subsection (b), the amendments made by this part shall apply to years beginning after December 31, 1983. (b) ALLOWANCE OF EXCLUSION OF DEATH BENEFIT FOR SELFEMPLOYED INDIVIDUALS.—The amendment made by section 239 shall

apply with respect to decedents dying after December 31, 1983.

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text: The Liberty to Trade as Buttressed by National Law/The Sherman Act


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96 STAT. 521

PART III—OTHER REQUIREMENTS SEC. 242. REQUIRED DISTRIBUTIONS FOR QUALIFIED PLANS. (a) GENERAL RULE. — Paragraph (9) of section 401(a) (relating to requirements for qualification) is amended to read as follows:

^^ USC 401.

"(9) REQUIRED DISTRIBUTIONS.—

"(A) BEFORE DEATH.—A t r u s t forming part of a plan shall not constitute a qualified t r u s t under this section unless the plan provides that the e n t i r e interest of each employee— "(i) either will be distributed to him not later than his taxable year in which h e a t t a i n s age 70 y2 or, in the case of a n employee other than a key employee who is a participant in a top-heavy plan, in which he retires, whichever is the later, or "(ii) will be distributed, commencing not later than such taxable year— "(I) in accordance with regulations prescribed by the Secretary, over the life of such employee or over the lives of such employee and his spouse, or "(II) in accordance with such regulations, over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and his spouse. "(B) AFTER DEATH.—A t r u s t forming part of a plan shall not constitute a qualified t r u s t under this section unless the plan provides that if— "(i) an employee dies before his e n t i r e interest has been distributed to him, or "(ii) distribution has been commenced in accordance with subparagraph (A)(ii) to his surviving spouse and such surviving spouse dies before his entire interest has been distributed to such surviving spouse, his e n t i r e interest (or the r e m a i n i n g part of such interest if distribution thereof has commenced) will be distributed within 5 years after his death (or the death of his surviving spouse). The preceding sentence shall not apply if the distribution of the interest of the employee has commenced and such distribution is for a term certain over a period permitted under subparagraph (A)(ii)(II)." (b) EFFECTIVE D A T E. —

(1) IN GENERAL.—The amendment made by subsection (a) shall apply to plan years beginning after December 31, 1983. (2) TRANSITION RULE.—A t r u s t forming part of a plan shall not be disqualified under paragraph (9) of section 401(a) of the I n t e r n a l Revenue Code of 1954, as amended by subsection (a), by reason of distributions under a designation (before January 1, 1984) by any employee of a method of distribution— (A) which does not meet the requirements of such paragraph (9), but (B) which would not have disqualified such t r u s t under paragraph (9) of section 401(a) of such Code as in effect before the amendment m a d e by subsection (a). SEC.

243. R E Q U I R E D DISTRIBUTIONS IN CASE O F INDIVIDUAL RETIREMENT PLANS.

(a) REQUIRED DISTRIBUTIONS A F T E R D E A T H. —

26 USC 401 note.

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 96 STAT. 522

PUBLIC LAW 97-248—SEPT. 3, 1982 (1) INDIVIDUAL RETIREMENT ACCOUNTS. — Paragraph (7) of

26 USC 408.

sec-

tion 408(a) (defining individual retirement account) is amended to read a s follows: "(7) I f "(A) a n individual for whose benefit the t r u s t is maintained dies before his e n t i r e interest has been distributed to him, or "(B) distribution has been commenced as provided in paragraph (6) to his surviving spouse and such surviving spouse dies before the e n t i r e interest has been distributed to such spouse, the e n t i r e interest (or the r e m a i n i n g part of such interest if distribution thereof has commenced) will be distributed within 5 years after his death (or the death of the surviving spouse). The preceding sentence shall not apply if distributions over a term certain commenced before the death of the individual for whose benefit the t r u s t was m a i n t a i n e d and the term certain is for a period permitted under paragraph (6)." (2) INDIVIDUAL RETIREMENT A N N U I T I E S. — Paragraph (4) of sec-

tion 408(b) (defining individual retirement annuity) is amended to read as follows: "(4) I f "(A) the owner dies before his e n t i r e interest has been distributed to h i m, or "(B) distribution has been commenced as provided in paragraph (3) to his surviving spouse and such surviving spouse dies before the e n t i r e interest has been distributed to such spouse, the e n t i r e interest (or the r e m a i n i n g part of such interest if distribution thereof has commenced) will be distributed within 5 years after his death (or the death of his surviving spouse). The preceding sentence shall not apply if distributions over a term certain commenced before the death of the owner and the term certain is for a period permitted under paragraph (3)." (b) T R E A T M E N T OF INHERITED INDIVIDUAL RETIREMENT (1) D E N I A L OF ROLLOVER T R E A T M E N T. —

PLANS.—

(A) Paragraph (3) of section 408(d) (defining rollover contributions) is amended by adding a t the end thereof the following new subparagraph: "(C) D E N I A L OF ROLLOVER ACCOUNTS, E T C. —

TREATMENT

FOR

INHERITED

"(i) IN GENERAL.—In the case of a n inherited individual retirement account or individual retirement annuity— "(I) this paragraph shall not apply to any a m o u n t received by a n individual from such an account or a n n u i t y (and no a m o u n t transferred from such account or a n n u i t y to a n other individual retirement account or a n n u i t y shall be excluded from gross income by reason of such transfer), and "(II) such inherited account or a n n u i t y shall not be t r e a t e d as a n individual retirement account or a n n u i t y for purposes of determining w h e the r any other a m o u n t is a rollover contribution. "(ii) INHERITED INDIVIDUAL RETIREMENT ACCOUNT OR

ANNUITY.—An individual retirement account or indi-

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Page:United States Statutes at Large Volume 96 Part 1.djvu/565

 PUBLIC LAW 97-248—SEPT. 3, 1982 vidual retirement a n n u i t y shall be t r e a t e d as inherited if— "(I) the individual for whose benefit the account or a n n u i t y is m a i n t a i n e d acquired such account by reason of the death of a n other individual, and "(II) such individual was not the surviving spouse of such other individual." (B) Subparagraph (C) of section 409(b)(3) (relating to rollover into a n individual retirement account or a n n u i t y or a qualified plan) is amended by adding a t the end thereof the following new sentence: "This subparagraph shall not apply to any retirement bond if such bond is acquired by the owner by reason of the death of a n other individual and the owner was not the surviving spouse of such other individual."

96 STAT. 523

26 USC 409.

(2) D E N I A L OF DEDUCTION FOR CONTRIBUTIONS TO INHERITED

INDIVIDUAL RETIREMENT ACCOUNTS OR ANNUITIES.—Subsection (d) of section 219 (relating to other limitations and restrictions) is amended by adding a t the end thereof the following new paragraph: "(4)

DENIAL

OF DEDUCTION

FOR AMOUNT

95 Stat. 274.

CONTRIBUTED TO

INHERITED ANNUITIES OR ACCOUNTS.—No deduction shall be allowed under this section with respect to any a m o u n t paid to a n inherited individual retirement account or individual retirement a n n u i t y (within the m e a n i n g of section 408(d)(3)(C)(ii))." (c) EFFECTIVE D A T E S. —

26 USC 408 note.

(1) SUBSECTION (a).—The amendments m a d e by subsection (a) shall apply in the case of individuals dying after December 31, 1983. (2) SUBSECTION (b).—The amendments m a d e by subsection (b) shall apply to taxable year s beginning after December 31, 1983. SEC. 244, LIMITATION ON EXCLUSION FOR GROUP-TERM LIFE INSURANCE PURCHASED FOR EMPLOYEES. (a) GENERAL RULE.—Section 79 (relating to group-term life insurance purchased for employees) is amended by adding a t the end thereof the following new subsection: "(d) NONDISCRIMINATION REQUIREMENTS. —

"(1) IN GENERAL.—In the case of a discriminatory group-term life insurance plan, paragraph (1) of subsection (a) shall not apply with respect to any key employee. "(2) DISCRIMINATORY GROUP-TERM LIFE INSURANCE P L A N. — For

purposes of this subsection, the term 'discriminatory group-term life insurance plan' means any plan of a n employer for providing group-term life insurance unless— "(A) the plan does not discriminate in favor of key employees as to eligibility to participate, and "(B) the type and a m o u n t of benefits available under the plan do not discriminate in favor of part i c i p a n t s who a r e key employees. "(3) NONDISCRIMINATORY ELIGIBILITY CLASSIFICATION.—

"(A) IN GENERAL.—A plan does not meet requirements of subparagraph (A) of paragraph (2) unless— "(i) such plan benefits 70 percent or more of all employees of the employer, "(ii) a t least 85 percent of all employees who a r e part i c i p a n t s under the plan a r e not key employees,

26 USC 79.

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 96 STAT. 524

Ante, p. 514.

PUBLIC LAW 97-248—SEPT. 3, 1982 "(iii) such plan benefits such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of key employees, or "(iv) in the case of a plan which is part of a cafeteria plan, the requirements of section 125 are met. "(B) EXCLUSION OF CERTAIN EMPLOYEES.—For purposes of subparagraph (A), there may be excluded from consideration— "(i) employees who have not completed 3 years of service; "(ii) part-time or seasonal employees; "(iii) employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if the benefits provided under the plan were the subject of good faith bargaining between such employee representatives and such employer or employers; and "(iv) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)). "(4) NONDISCRIMINATORY BENEFITS.—A plan does not meet the requirements of paragraph (2)(B) unless all benefits available to participants who are key employees are available to all other participants. "(5) SPECIAL RULE.—A plan shall not fail to meet the requirements of paragraph (2)(B) merely because the amount of life insurance on behalf of the employees under the plan bears a uniform relationship to the total compensation or the basic or regular rate of compensation of such employees. "(6) KEY EMPLOYEE DEFINED.—For purposes of this subsection, the term 'key employee' has the meaning given to such term by paragraph (1) of section 416(i), except that subparagraph (A)(iv) of such paragraph shall be applied by not taking into account employees described in paragraph (3)(B) who are not participants in the plan. "(7) CERTAIN CONTROLLED GROUPS, ETC.—All employees

who are treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section." 26 USC 79 note. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1983. SEC. 245. LIMITATION ON ESTATE TAX EXCLUSIONS UNDER SECTION 2039. 26 USC 2039. (a) GENERAL RuLE.—Section 2039 (relating to annuities) is amended by adding at the end thereof the following new subsection: "(g) $100,000 LIMITATION ON EXCLUSIONS UNDER SUBSECTIONS (C)

AND (e).—The aggregate amount excluded from the gross estate of any decedent under subsections (c) and (e) of this section shall not exceed $100,000." (b) TECHNICAL AMENDMENTS.—Subsections (c) and (e) of section 2039 are each amended by striking out "Notwithstanding the provi-

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96 STAT. 525

sions of this section" and inserting in lieu thereof "Subject to the limitation of subsection (g), notwithstanding any other provision of this section". (c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 2039 apply to the estates of decedents dying after December 31, 1982. "o*®SEC. 246. ORGANIZATIONS PERFORMING MANAGEMENT FUNCTIONS.

(a) GENERAL RULE.—Subsection (m) of section 414 (relating to employees of an affiliated service group) is amended by redesignating paragraphs (5) and (6) as paragraphs (6) and (7), respectively, and by inserting after paragraph (4) the following new paragraph:

26 USC 414.

"(5) CERTAIN ORGANIZATIONS PERFORMING MANAGEMENT FUNC-

TIONS.—For purposes of this subsection, the term 'affiliated service group' also includes a group consisting of— "(A) an organization the principal business of which is performing, on a regular and continuing basis, management functions for 1 organization (or for 1 organization and other organizations related to such 1 organization), and "(B) the organization (and related organizations) for which such functions are so performed by the organization described in subparagraph (A). For purposes of this paragraph, the term 'related organizations' has the same meaning as the term 'related persons' when used in section 103(b)(6)(C)." (b) EFFECTIVE DATE.—The amendments made by subsection (a) 26 USC 414 note, shall apply to taxable years beginning after December 31, 1983. SEC. 247. EXISTING PERSONAL SERVICE CORPORATIONS MAY LIQUIDATE UNDER SECTION 333 DURING 1983 OR 1984.

(a) IN GENERAL.—In the case of a complete liquidation of a per- 26 USC 333 note. sonal service corporation (within the meaning of section 535(c)(2)(B) of the Internal Revenue Code of 1954) during 1983 or 1984, the following rules shall apply with respect to any shareholder other than a corporation: (1) 'The determination of whether section 333 of such Code applies shall be made without regard to whether the corporation is a collapsible corporation to which section 341(a) of such Code applies. (2) No gain or loss shall be recognized by the liquidating corporation on the distribution of any unrealized receivable in such liquidation. (3)(A) Except as provided in subparagraph (C), any disposition by a shareholder of any unrealized receivable received in the liquidation shall be treated as a sale at fair market value of such receivable and any gain or loss shall be treated as ordinary gain or loss. (B) For purposes of subparagraph (A), the term "disposition" includes— (i) failing to hold the property in the trade or business which generated the receivables, and (ii) failing to hold a continuing interest in such trade or business. (C) For purposes of subparagraph (A), the term "disposition" does not include transmission at death to the estate of the decedent or transfer to a person pursuant to the right of such person to receive such property by reason of the death of the

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 96 STAT. 526

PUBLIC LAW 97-248—SEPT. 3, 1982 decedent or by bequest, devise, or inheritance from the decedent. (4) Unrealized receivables distributed in the liquidation shall be treated as having a zero basis. (5) For purposes of computing earnings and profits, the liquidating corporation shall not treat unrealized receivables distributed in the liquidation as an item of income. (b) UNREALIZED RECEIVABLES DEFINED.—For purposes of this section, the term "unrealized receivables" has the meaning given such term by the first sentence of section 751(c) of such Code. SEC. 248. EMPLOYEE LEASING.

26 USC 414.

(a) GENERAL RULE.—Section 414 (relating to definitions and special rules) is amended by adding at the end thereof the following new subsection: "(n) EMPLOYEE LEASING.—

"(1) IN GENERAL.—For purposes of the pension requirements listed in paragraph (3), except to the extent otherwise provided in regulations, with respect to any person (hereinafter in this subsection referred to as the 'recipient') for whom a leased employee performs services— "(A) the leased employee shall be treated as an employee of the recipient, but "(B) contributions or benefits provided by the leasing organization which are attributable to services performed for the recipient shall be treated as provided by the recipient. "(2) LEASED EMPLOYEE.—For purposes of paragraph (1), the

Ante, p. 514.

term 'leased employee' means any person who provides services to the recipient if— "(A) such services are provided pursuant to an agreement between the recipient and any other person (in this subsection referred to as the 'leasing organization'), "(B) such person has performed such services for the recipient (or for the recipient and related persons) on a substantially full-time basis for a period of at least 1 year, and "(C) such services are of a type historically performed, in the business field of the recipient, by employees. "(3) PENSION REQUIREMENTS.—For purposes of this subsection, the pension requirements listed in this paragraph are— "(A) paragraphs (3), (4), (7), and (16) of section 401(a), and "(B) sections 408(k), 410, 411, 415, and 416. "(4) TIME WHEN LEASED EMPLOYEE IS FIRST CONSIDERED AS

EMPLOYEE.—In the case of any leased employee, paragraph (1) shall apply only for purposes of determining whether the pension requirements listed in paragraph (3) are met for periods after the close of the 1-year period referred to in paragraph (2); except that years of service for the recipient shall be determined by taking into account the entire period for which the leased employee performed services for the recipient (or related persons). "(5) SAFE HARBOR.—This subsection shall not apply to any

leased employee if such employee is covered by a plan which is maintained by the leasing organization if, with respect to such employee, such plan—

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96 STAT. 527

"(A) is a money purchase pension plan with a noninteg r a t e d employer contribution r a t e of a t least 7 V-i percent, and "(B) provides for immediate participation and for full and immediate vesting. "(6) RELATED PERSONS.—For purposes of this subsection, the term 'related persons' has the s a m e m e a n i n g as when used in section 103(b)(6)(C)." (b) EFFECTIVE D A T E. — The amendment m a d e by subsection (a) 26 USC 414 note, shall apply to taxable year s beginning after December 31, 1983. SEC.

249.

NONDISCRIMINATORY COORDINATION TRIBUTION PLANS WITH OASDI.

OF

DEFINED

CON-

(a) IN GENERAL.—Section 401 (relating to qualified pension, profitsharing, stock bonus plans, etc.) is amended by redesignating subsection (1) as subsection (o), and by inserting after subsection (k) the following new subsection: "(1) NONDISCRIMINATORY COORDINATION OF D E F I N E D CONTRIBUTION P L A N S W I T H OASDI.—

"(1) IN GENERAL.—Notwithstanding subsection (a)(5), the coordination of a defined contribution plan with OASDI meets the requirements of subsection (a)(4) only if the total contributions with respect to each participant, when increased by the OASDI contributions, bear a uniform relationship— "(A) to the total compensation of such employee, or "(B) to the basic or regular r a t e of compensation of such employee. "(2) DEFINITIONS.—For purposes of paragraph (1)— "(A) OASDI CONTRIBUTIONS.—The term 'OASDI contributions' means the product of— "(i) so much of the r e m u n e r a t i o n paid by the employer to the employee during the plan year as— "(I) constitutes wages (within the m e a n i n g of section 3121(a) without regard to paragraph (1) thereoO, and "(II) does not exceed the contribution and benefit base applicable under OASDI at the beginning of the plan year, multiplied by "(ii) the r a t e of tax applicable under section 3111(a) (relating to employer's OASDI tax) at the beginning of the plan year. In the case of an individual who is an employee within the m e a n i n g of subsection (c)(1), the preceding sentence shall be applied by taking into account his earned income (as defined in subsection (c)(2)). "(B) OASDI.—The term 'OASDI' means the system of oldage, survivors, and disability insurance established under title II of the Social Security Act and the Federal Insurance Contributions Act. "(C) R E M U N E R A T I O N. — The term ' r e m u n e r a t i o n ' means— "(i) total compensation, or "(ii) basic or regular rate of compensation, whichever is used in determining contributions or benefits under the plan. "(8) DETERMINATION OF COMPENSATION, E T C, OF SELF-EMPLOYED

INDIVIDUALS.—For purposes of this subsection, in the case of a n

26 USC 401.

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 96 STAT. 528

PUBLIC LAW 97-248—SEPT. 3, 1982

individual who is an employee within the meaning of subsection (c)(1)"(A) his total compensation shall include his earned income (as defined in subsection (c)(2)), and "(B) his basic or regular rate of compensation shall be determined (under regulations prescribed by the Secretary) with respect to that portion of his earned income which bears the same ratio to his earned income as the basic or regular compensation of the employees under the plan (other than employees within the meaning of subsection (c)(1)) bears to the total compensation of such employees." 26 USC 401 note. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to plan years beginning after December 31, 1983. SEC. 250. AUTHORITY OF SECRETARY TO ALLOCATE INCOME AND DEDUCTIONS IN THE CASE OF CERTAIN CORPORATIONS.

(a) IN GENERAL.—Part IX of subchapter B of chapter 1 (relating to items not deductible) is amended by adding after section 269 the following new section: 26 USC 269A.

"SEC. 269A. PERSONAL SERVICE CORPORATIONS FORMED OR AVAILED OF TO AVOID OR EVADE INCOME TAX. "(a) GENERAL RULE.—If—

"(1) substantially all of the services of a personal service corporation are performed for (or on behalf of) 1 other corporation, partnership, or other entity, and "(2) the principal purpose for forming, or availing of, such personal service corporation is the avoidance or evasion of Federal income tax by reducing the income of, or securing the benefit of any expense, deduction, credit, exclusion, or other allowance for, any employee-owner which would not otherwise be available, then the Secretary may allocate all income, deductions, credits, exclusions, and other allowances between such personal service corporation and its employee-owners, if such allocation is necessary to prevent avoidance or evasion of Federal income tax or clearly to reflect the income of the personal service corporation or any of its employee-owners. "(b) Definitions.—For purposes of this section— "(1) PERSONAL SERVICE CORPORATION.—The term 'personal service corporation' means a corporation the principal activity of which is the performance of personal services and such services are substantially performed by employee-owners. "(2) EMPLOYEE-OWNER.—The term 'employee-owner' means any employee who owns, on any day during the taxable year, more than 10 percent of the outstanding stock of the personal service corporation. For purposes of the preceding sentence, section 318 shall apply, except that '5 percent' shall be substituted for '50 percent' in section 318(a)(2)(C). "(3) RELATED PERSONS.—All related persons (within the meaning of section 103(b)(6)(C)) shall be treated as 1 entity." (b) CLERICAL AMENDMENT.—The table of sections for part IX of subchapter 1 is amended by inserting after the item relating to section 269 the following new item: "Sec. 269A. Personal service corporations formed or availed of to avoid or evade income tax."

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96 STAT. 529

(c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 269A apply to taxable years beginning after December 31, 1982. ^°^^PART IV—MISCELLANEOUS SEC. 251. CHURCH PLANS. (a) EXCLUSION ALLOWANCE.— (1) ELECTION TO HAVE SECTION 4 1 5 RULES APPLY.—Subpara-

graph (B) of section 403(b)(2) (relating to exclusion allowance) is amended by striking out "(under section 415)" and inserting in lieu thereof "(under section 415 without regard to section 415(c)(8))". (2) YEARS OF SERVICE.—Section 403(b)(2) is amended by adding at the end thereof the following new subparagraphs: "(C) NUMBER OF YEARS OF SERVICE FOR DULY ORDAINED, COMMISSIONED, OR LICENSED MINISTERS OR LAY EMPLOYEES.—

For purposes of this subsection and section 415(c)(4)(A)— "(i) all years of service by— "(I) a duly ordained, commissioned, or licensed minister of a church, or "(II) a lay person, as an employee of a church, a convention or association of churches, including an organization described in section 414(e)(3)(B)(ii), shall be considered as years of service for 1 employer, and "(ii) all amounts contributed for annuity contracts by each such church (or convention or association of churches) or such organization during such years for such minister or lay person shall be considered to have been contributed by 1 employer. For purposes of the preceding sentence, the terms 'church' and 'convention or association of churches' have the same meaning as when used in section 414(e). "(D) ALTERNATIVE EXCLUSION ALLOWANCE.—

"(i) IN GENERAL.—In the case of any individual described in subparagraph (C), the amount determined under subparagraph (A) shall not be less than the lesser of— "(I) $3,000, or "(II) the includible compensation of such individual, "(ii) SUBPARAGRAPH NOT TO APPLY TO INDIVIDUALS

WITH ADJUSTED GROSS INCOME ovElR $17,000.—This Subparagraph shall not apply with respect to any taxable year to any individual whose adjusted gross income for such taxable year (determined separately and without regard to any community property laws) exceeds $17,000. "(iii) SPECIAL RULE FOR FOREIGN MISSIONARIES.—In the case of an individual described in subparagraph (C)(i) performing services outside the United States, there shall be included as includible compensation for any year under clause (i)(II) any amount contributed during such year by a church (or convention or association of churches) for an annuity contract with respect to such individual."

26 USC 403.

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 96 STAT. 530

PUBLIC LAW 97-248—SEPT. 3, 1982 (b) RETIREMENT INCOME ACCOUNTS PROVIDED BY C H U R C H E S, E T C. —

26 USC 403.

Section 403(b) is amended by adding a t the end thereof the following new paragraph: "(9) RETIREMENT INCOME ACCOUNTS PROVIDED BY CHURCHES, ETC.— "(A) A M O U N T S PAID TREATED AS CONTRIBUTIONS.—For pur-

poses of this title— "(i) a retirement income account shall be t r e a t e d as a n a n n u i t y contract described in t h i s subsection, and "(ii) a m o u n t s paid by a n employer described in paragraph (1)(A) to a retirement income account shall b e t r e a t e d as a m o u n t s contributed by the employer for a n a n n u i t y contract for the employee on whose behalf such account is m a i n t a i n e d. "(B) RETIREMENT INCOME ACCOUNT.—For purposes of t h i s

paragraph, the term ' retirement income account' means a defined contribution program established or m a i n t a i n e d by a church, a convention or association of churches, including a n organization described in section 414(e)(3)(A), to provide benefits under section 403(b) for a n employee described in paragraph (1) or his beneficiaries." (c) CONTRIBUTION L I M I T A T I O N S. — (1) APPLICATION O F SECTION 4 1 5 (C)(4)

26 USC 415.

TO CHURCH

PLANS.—

Paragraph (4) of section 415(c) (relating to special election for section 403(b) contracts) is amended— (A) by striking out " o r a h o m e health service agency" each place it a p p e a r s and inserting in lieu thereof " a h o m e health service agency, or a church, convention or association of churches, or a n organization described in section 414(e)(3)(B)(ii)", (B) by inserting "(as determined for purposes of section 403(b)(2))" after "service for the employer" in subparagraph (A), (C) by adding a t the end of subparagraph (D) the following new clause: "(iv) For purposes of this paragraph, the term s 'church' and 'convention or association of c h u r c h e s ' h a v e the s a m e m e a n i n g a s w h e n used in section 414(e).", and (D) by striking o u t " A N D HOME HEALTH SERVICE A G E N C I E S " in the heading and inserting in lieu the r e o f ", HOME HEALTH SERVICE AGENCIES, AND CERTAIN CHURCHES, E T C. ". (2) TOTAL A N N U A L ADDITIONS.—Section 415(c) ( r e l a t i n g to limi-

tation on defined contribution plan) is amended by adding a t the end thereof the following paragraph: "(8) CERTAIN CONTRIBUTIONS BY CHURCH PLANS NOT TREATED AS EXCEEDING LIMITS.— "(A) ALTERNATIVE EXCLUSION ALLOWANCE.—Any c o n t r i b u -

Ante, p. 529.

tion or addition with respect to any participant, w h e n expressed as a n annual addition, which is allocable to the application of section 403(b)(2)(D) to such part i c i p a n t for such year, shall be t r e a t e d as not exceeding the limitations of paragraph (1). "(B) CONTRIBUTIONS NOT IN EXCESS OF $40,OOO ($IO,OOO PER YEAR).—

"(i) IN GENERAL.—Notwithstanding any other provision of this subsection, a t the election of a part i c i p a n t

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96 STAT. 531

who is a n employee of a church, a convention or association of churches, including a n organization described in section 414(e)(3)(B)(ii), contributions and other additions for a n a n n u i t y contract or retirement income account described in section 403(b) with respect to such participant, when expressed a s a n annual addition to such participant's account, shall be t r e a t e d as not exceeding the limitation of paragraph (1) if such annual addition is not in excess of $10,000. "(ii) $40,000 AGGREGATE LIMITATION.—The total a m o u n t of additions with respect to any participant which may be t a k e n into account for purposes of this subparagraph for all years may not exceed $40,000. "(iii) N o ELECTION IF PARAGRAPH (4)(A) ELECTION MADE.—No election may be m a d e under this subparagraph for any year if a n election is made under paragraph (4)(A) for such year. "(C) A N N U A L ADDITION.—For purposes of t h i s paragraph,

the term ' annual addition' has the m e a n i n g given such term by paragraph (2)." (3) CONFORMING AMENDMENT. — S e c t i o n 403(b)(2)(B) ( r e l a t i n g to

26 USC 403.

exclusion allowance) is amended by striking out " and home health service agencies" and inserting in lieu thereof " h o m e health service agencies, and certain churches, etc." (d) CORRECTION PERIOD

FOR C H U R C H

PLANS.—A

church

plan

26 USC 403 note,

(within the m e a n i n g of section 414(e) of the I n t e r n a l Revenue Code of 1954) shall not be t r e a t e d as not meeting the requirements of section 401 or 403 of such Code if— (1) by reason of any change in any law, regulation, ruling, or otherwise such plan is required to be amended to meet such requirements, and (2) such plan is so amended a t the next earliest c h u r c h convention or such other t i m e a s the Secretary of the Treasury or his delegate may prescribe. (e) EFFECTIVE D A T E S. —

26 USC 403 note.

(1) IN GENERAL.—Except a s provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 1981. (2) RETIREMENT INCOME ACCOUNTS.—The amendments

made

by subsection (b) shall apply to taxable year s beginning after December 31, 1974. (3) SECTION 4 1 5

AMENDMENTS.—The amendments

made

by

subsection (c) shall apply to years beginning after December 31, 1981. (4) CORRECTION PERIOD.—The amendment m a d e by subsection

(d) shall t a k e effect on July 1, 1982. (5) SPECIAL RULE FOR EXISTING DEFINED BENEFIT ARRANGE-

MENTS.—Any defined benefit a r r a n g e m e n t which is established by a church or a convention or association of churches (including a n organization described in section 414(e)(3)(B)(ii) of the I n t e r n a l Revenue Code of 1954) and which is in effect on the date of the e n a c t m e n t of this Act shall not be t r e a t e d a s failing to meet the requirements of section 403(b)(2) of such Code merely because it is a defined benefit a r r a n g e m e n t.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/574

 96 STAT. 532

PUBLIC LAW 97-248—SEPT. 3, 1982 SF:C. 252. DKFERRKD COMPENSATION PLANS FOR STATE JUDGES.

26 USC 457 note.

Subsection (c) of section 131 of the Revenue Act of 1978 is amended by adding a t the e n d thereof the following new paragraph: "(3) DEFERRED COMPENSATION PLANS FOR STATE J U D G E S. —

"(A) IN GENERAL.—The amendments m a d e by this section shall not apply to any qualified State judicial plan. "(B) Q U A L I F I E D STATE JUDICIAL P L A N. — For purposes of

subparagraph (A), the term 'qualified State judicial plan' means any retirement plan of a State for the exclusive benefit of judges or the i r beneficiaries if— "(i) such plan has been continuously in existence since December 31, 1978, "(ii) under such plan, all judges eligible to benefit under the plan— "(I) a r e required to participate, and "(II) a r e required to contribute the s a m e fixed percentage of the i r basic or regular r a t e of compensation as judge, "(iii) under such plan, no j u d g e has a n option as to contributions or benefits the exercise of which would affect the a m o u n t of includible compensation, "(iv) the retirement payments of a judge under the plan a r e a percentage of the compensation of judges of that State holding similar positions, and "(v) the plan during any year does not pay benefits with respect to any part i c i p a n t which exceed the limitations of section 415(b) of the I n t e r n a l Revenue Code of 1954." SEC.

26 USC 415.

2.^1.

PROFIT-SHARING DISABLED.

PLAN

CONTRIBUTIONS

ON BEHALF OF

(a) IN GENERAL. — Paragraph (3) of section 415(c) (defining participant's compensation) is amended to read as follows: "(3)

PARTICIPANT'S

COMPENSATION.—For

purposes

of

para-

g r a p h (D— "(A) IN GENERAL.—The term ' part i c i p a n t ' s compensation' means the compensation of the part i c i p a n t from the employer for the year. "(B) SPECIAL RULE FOR SELF-EMPLOYED INDIVIDUALS.—In

the case of a n employee within the m e a n i n g of section 401(c)(1), subparagraph (A) shall be applied by s u b s t i t u t i n g 'the participant's e a r n e d income (within the m e a n i n g of section 401(c)(2) b u t determined without regard to any exclusion under section 911)' for 'compensation of the participant from the employer'. "(C) SPECIAL RULES FOR PERMANENT AND TOTAL DISABIL-

ITY.—In the case of a participant— "(i) who is p e r m a n e n t l y and totally disabled (as defined in section 105(d)(4)), "(ii) who is not a n officer, owner, or highly compensated, and "(iii) with respect to whom the employer elects, a t such time and in such m a n n e r as the Secretary may prescribe, to have this subparagraph apply, the term ' part i c i p a n t ' s compensation' means the compensation the part i c i p a n t would have received for the year if the part i c i p a n t was paid a t the r a t e of compensation paid

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 533

immediately before becoming permanently and totally disabled. This subparagraph shall only apply if contributions made with respect to such participant are nonforfeitable when made." (b) DEDUCTIBILITY.—Subparagraph (B) of section 404(a)(3) (relating 26 USC 404. to limits on deductible contributions to stock bonus and profitsharing trusts) is amended by adding at the end thereof the following: "The term 'compensation otherwise paid or accrued during the taxable year to all employees' shall include any amount with respect to which an election under section 415(c)(3)(C) is in effect, but only to the extent that any contribution with respect to such amount is nonforfeitable." (c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 404 note, apply to taxable years beginning after December 31, 1981. SEC. 254. EXEMPTION FOR TRUSTS WHICH INCLUDE GOVERNMENTAL PLANS.

(a) IN GENERAL.—Section 401(a) (relating to requirements of quali- 26 USC 401. fication for qualified pension, profit-sharing, and stock bonus plans) is amended by inserting immediately after paragraph (23) the following new paragraph: "(24) Any group trust which otherwise meets the requirements of this section shall not be treated as not meeting such requirements on account of the participation or inclusion in such trust of the moneys of any plan or governmental unit described in section 805(d)(6)." (b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 401 note. shall apply with respect to taxable years beginning after December 31, 1981.

Subtitle D—Taxation of Life Insurance Companies and Annuities PART I—COINSURANCE ARRANGEMENTS Subpart A—Modified Coinsurance Contracts SEC. 255. REPEAL OF OPTIONAL TREATMENT OF POLICIES REINSURED UNDER MODIFIED COINSURANCE CONTRACTS.

(a) REPEAL OF SECTION 820.—Section 820 (relating to optional 26 USC 820. treatment of policies reinsured under modified coinsurance contracts) is repealed. (b) CONFORMING AMENDMENTS.—

(1) Section 811 (relating to dividends to policyholders) is 26 USC 811. amended by adding at the end thereof the following new subsection: "(c) SPECIAL RULE FOR DIVIDENDS TO POLICYHOLDERS UNDER REINSURANCE CONTRACTS.—If, under the terms of a conventional coinsur-

ance contract, a life insurance company (hereinafter referred to as 'the reinsurer') is obligated to reimburse another life insurance company (hereinafter referred to as 'the reinsured') for dividends to policyholders on the policies reinsured, the amount of the deduction for dividends reimbursed shall, for purposes of section 809(d)(12), be Post, p. 534. equal to the amount of dividends to policyholders— "(1) which were paid by the reinsured, and

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Page:United States Statutes at Large Volume 96 Part 1.djvu/576

 96 STAT. 534

26 USC 809.

Ante, p. 533. Ante, p. 533. 26 USC 809 note.

PUBLIC LAW 97-248—SEPT. 3, 1982 "(2) with respect to which the reinsurer reimbursed the reinsured under the terms of such contract. The amount determined under the preceding sentence shall be properly adjusted to reflect the adjustments under subsection (b)(1)." (2) The first sentence of section 809(c)(1) (relating to premiums) is amended to read as follows: "The gross amount of premiums and other consideration, including— "(A) advance premiums, "(B) deposits, "(C) fees, "(D) assessments, "(E) consideration in respect of assuming liabilities under contracts not issued by the taxpayer, and "(F) the amount of dividends to policyholders reimbursed to the taxpayer by a reinsurer in respect of reinsured policies, on insurance and annuity contracts (including contracts supplementary thereto); less return premiums, and premiums and other consideration arising out of reinsurance ceded." (3) Section 809(d)(3) (relating to dividends to policyholders) is amended by inserting ", other than the deduction provided under paragraph (12)" before the period at the end thereof. (4) Section 809(d) (relating to deductions in computing gain and loss from operations) is amended by adding after paragraph (11) thereof the following new paragraph: "(12) DIVIDENDS REIMBURSED.—The deduction for the amount of dividends to policyholders reimbursed by the taxpayer to another insurance company in respect of policies the taxpayer has reinsured (determined under section 811(c))." (5) The table of sections for subpart E of part I of subchapter L of chapter 1 is amended by striking out the item relating to section 820. (c) EFFECTIVE D A T E S. —

(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 1981. (2) RULES APPLICABLE TO TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1982.—

(A) IN GENERAL.—In the case of any taxable year beginning before January 1, 1982— (i) any determination as to whether any contract met the requirements of subsection (b) of section 820 of the Internal Revenue Code of 1954 (as in effect before its repeal by this section) shall be made solely by reference to the terms of the contract, and (ii) the treatment of such contract under subsection (c) of such section 820 shall be made in accordance with the regulations under such section which were in effect on December 31, 1981. (B) PARAGRAPH NOT TO APPLY IF FRAUD INVOLVED.—The

provisions of subparagraph (A) shall not apply with respect to any deficiency which the Secretary of the Treasury or his delegate establishes was due to fraud with intent to evade tax.

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