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(c)(1) A plan which makes the election, under paragraph (3) shall be treated as satisfying the requirement of subsection (a)(3) if and only if employer securities held on any date after December 31, 1974 and before January 1, 1985 have a fair market value, determined as of December 31, 1974, not in excess of 10 percent of the lesser of— (A) the fair market value of the assets of the plan determined on such date (disregarding any portion of the fair market value of employer securities which is attributable to appreciation of such securities after December 31, 1974) but not less than the fair market value of plan assets on January 1, 1975, or (B) an amount equal to the sum of (i) the total amount of the contributions to the plan received after December 31, 1974, and prior to such date, plus (ii) the fair market value of the assets of the plan, determined on January 1, 1975. (2) For purposes of this subsection, in the case of an employer security held by a plan after January 1, 1975, the ownership of which is derived from ownership of employer securities held by the plan on January 1, 1975, or from the exercise of rights derived from such ownership, the value of such security held after January 1, 1975, shall be based on the value as of January 1, 1975, of the security from which ownership was derived. The Secretary shall prescribe regulations to carry out this paragraph. (3) An election under this paragraph may not be made after December 31, 1975. Such an election shall be made in accordance with regulations prescribed by the Secretary, and shall be irrevocable. A plan may make an election under this paragraph only if on January 1, 1975, the plan holds no employer real property. After such election and before January 1, 1985 the plan may not acquire any employer real property,

(d) For purposes of this section— (1) The term "employer security" means a security issued by an employer of employees covered by the plan, or by an affiliate of such employer. A contract to which section 408(b)(5) applies shall not be treated as a security for purposes of this section. (2) The term "employer real property" means real property (and related personal property) which is leased to an employer of employees covered by the plan, or to an affiliate of such employer. For purposes of determining the time at which a plan acquires employer real property for purposes of this section, such property shall be deemed to be acquired by the plan on the date on which the plan acquires the property or on the date on which the lease to the employer (or affiliate) is entered into, whichever is later. (3)(A) The term "eligible individual account plan" means an individual account plan which is (i) a profit-sharing, stoclc bonus, thrift, or savings plan; (ii) an employee stock ownership plan; or (iii) a money purchase plan which was in existence on the date of enactment of this Act and which on such date invested primarily in qualifying employer securities. Such term excludes an individual retirement account or annuity described in section 408 of the Internal Revenue Code of 1954. (B) Notwithstanding subparagraph (A), a plan shall be treated as an eligible individual account plan with respect to the acquisition or holding of qualifying employer real property or qualifying employer securities only if such plan explicitly provides for acquisition and holding of qualifying employer securities or qualifying employer real property (as the case may be). In the case of a plan in existence on the date of enactment of this Act, this subparagraph shall not take effect until January 1, 1976.

Definltl ns

Post, p. 959.

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26 USC 401.

26 USC 1563.

Regulations. "Marketable obligation."

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

(4) The term "qualifying employer real property" means parcels of employer real property— (A) if a substantial number of the parcels are dispersed geographically; (B) if each parcel of real property and the improvements thereon are suitable (or adaptable without excessive cost) for more than one use; (C) even if all of such real property is leased to one lessee (which may be an employer, or an affiliate of an employer); and (D) if the acquisition and retention of such property comply with the provisions of this part (other than section 404 (a)(1)(B) to the extent it requires diversificaJtion, and sections 404(a)(1)(C), 406, and subsection (a) of this section). (5) The term "qualifying employer security" means an employer security which is stock or a marketable obligation (as defined in subsection (e)). (6) The term "employee stock ownership plan" means an individual account plan— (A) which is a stock bonus plan which is qualified, or a stock bonus plan and money purchase both of which are qualified, under section 401 of the Internal Revenue Code of 1954, and which is designed to invest primarily in qualifying employee securities, and (B) which meets such other requirements as the Secretary of the Treasury may prescribe by regulation. (7) A corporation is an affiliate of an employer if it is a member of any controlled group of corporations (as defined in section 1563(a) of the Internal Revenue Code of 1954, except that "applicable percentage" shall be substituted for "80 percent" wherever the latter percentage appears in such section) of which the employer who maintains the plan is a member. For purposes of the preceding sentence, the term "applicable percentage" means 50 percent, or such lower percentage as the Secretary may prescribe by regulation. A person other than a corporation shall be treated as an affiliate of an employer to the extent provided in regulations of the Secretary. An employer which is a person other than a corporation shall be treated as affiliated with another person to the extent provided by regulations of the Secretary. Regulations under this paragraph shall be prescribed only after consultation and coordination with the Secretary of the Treasury. ^g^ -pj^g Sccrctary may prescribe regulations specifying the extent to which conversions, splits, the exercise of rights, and similar transactions are not treated as acquisitions, (e) For purposes of subsection (d)(5), the term "marketable obligation" means a bond, debenture, note, or certificate, or other evidence of indebtedness (hereinafter in this subsection referred to as "obligation") if— (1) such obligation is acquired— (A) on the market, either (i) at the price of the obligation prevailing on a national securities exchange which is registered with the Securities and Exchange Commission, or (ii) if the obligation is not traded on such a national securities exchange, at a price not less favorable to the plan than the offering price for the obligation as established by current bid and asked prices quoted by persons independent of the issuer; (B) from an underwriter, at a price (i) not in excess of the public offering price for the obligation as set forth in a prospectus or offering circular filed with the Securities and

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Exchange Commission, and (ii) at which a substantial portion of the same issue is acquired by persons independent of the issuer; or (C) directly from the issuer, at a price not less favorable to the plan than the price paid currently for a substantial portion of the same issue by persons independent of the issuer; (2) immediately following acquisition of such obligation— (A) not more than 25 percent of the aggregate amount of obligations issued in such issue and outstanding at the time of acquisition is held by the plan, and (B) at least 50 percent or the aggregate amount referred to in subparagraph (A) is held by persons independent of the issuer; and (3) immediately following acquisition of the obligation, not more than 25 percent of the assets of the plan is invested in obligations of the employer or an affiliate of the employer. E X E M P T I O N S FROM P R O H I B I T E D

TRANSACTIONS

SEC. 408. (a) The Secretary shall establish an exemption procedure 29 USC 1108. for purposes of this subsection. Pursuant to such procedure, he may grant a conditional or unconditional exemption of any fiduciary or transaction, or class of fiduciaries or transactions, from all or part of the restrictions imposed by sections 406 and 407(a). Action under this subsection may be taken only after consultation and coordination with the Secretary of the Treasury. An exemption granted under this section shall not relieve a fiduciary from any other applicable provision of this Act. The Secretary may not grant an exemption under this subsection unless he finds that such exemption is— (1) administratively feasible, (2) in the interests of the plan and of its participants and beneficiaries, and (3) protective of the rights of participants and beneficiaries of such plan. Before granting an exemption under this subsection from section 406 Publication in (a) or 407(a), the b'ecretary shall publish notice in the Federal Reg- Federal R e g i s t e r, ister of the pendency of the exemption, shall require that adequate notice be given to interested persons, and shall aft'ord interested persons opportunity to present views. The Secretary may not grant an exemption under this subsection from section 406(b) unless he affords an opportunity for a hearing and makes a determination on the record with respect to the findings required by paragraphs (1), (2), and (3) of this subsection. (b) The prohibitions provided in section 406 shall not apply to Nonappucability. any of the following transactions: (1) Any loans made by the plan to parties in interest who are participants or beneficiaries of the plan if such loans (A) are available to all such participants and beneficiaries on a reasonably equivalent basis, (B) are not made available to highly compensated employees, officers, or shareholders in an amount greater than the amount made available to other employees, (C) are made in accordance with specific provisions regarding such loans set forth in the plan, (D) bear a reasonable rate of interest, and (E) are adequately secured. (2) Contracting or making reasonable arrangements with a party in interest for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor.

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(3) A loan to an employee stock ownership plan (as defined in section 407(d)(6)), if— (A) such loan is primarily for the benefit of participants and beneficiaries of the plan, and (B) such loan is at an interest rate which is not in excess of a reasonable rate. If the plan gives collateral to a party in interest for such loan, such collateral may consist only of qualifying employer securities (as defined in section 407(d)(5)). (4) The investment of all or part of a plan's assets in deposits which bear a reasonable interest rate in a bank or similar financial institution supervised by the United States or a State, if such bank or other institution is a fiduciary of such plan and if— (A) the plan covers only employees of such bank or other institution and employees of affiliates of such bank or other institution, or (B) such investment is expressly authorized by a provision of the plan or by a fiduciary (other than such bank or institution or affiliate thereof) who is expressly empowered by the plan to so instruct the trustee with respect to such investment. (5) Any contract for life insurance, health insurance, or annuities with one or more insurers which are qualified to do business in a State, if the plan pays no more than adequate consideration, and if each such insurer or insurers is— (A) the employer maintaining the plan, or (B) a party in interest which is wholly owned (directly or indirectly) by the employer maintaining the plan, or by any person which is a party in interest with respect to the plan, but only if the total premiums and annuity considerations written by such insurers for life insurance, health insurance, or annuities for all plans (and their employers) with respectto which such insurers are parties in interest (not including premiums or annuity considerations written by the employer maintaining the plan) do not exceed 5 percent of the total premiums and annuity considerations written for all lines of insurance in that year by such insurers (not including premiums or annuity considerations written by the employer maintaining the plan). (6) The providing of any ancillary service by a bank or similar financial institution supervised by the United States or a State, if such bank or other institution is a fiduciary of such plan, and (A) such bank or similar financial institution has adopted adequate internal safeguards which assure that the providing of such ancillary service is consistent with sound banking and financial practice, as determined by Federal or State supervisory authority, and (B) the extent to which such ancillary service is provided is subject to specific guidelines issued by such bank or similar financial institution (as determined by the Secretary after consultation with Federal and State supervisory authority), and adherence to such guidelines would reasonably preclude such bank or similar financial institution from providing such ancillary service (i) in an excessive or unreasonable manner, and (ii) in a manner that would be inconsistent with the best interests of participants and beneficiaries of employee benefit plans.

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Such ancillary services shall not be provided at more than reasonable compensation. (7) The exercise of a privilege to convert securities, to the extent provided in regulations of the Secretary, but only if the plan receives no less than adequate consideration pursuant to such conversion. (8) Any transaction between a plan and (i) a common or collective trust fund or pooled investment fund maintained by a party in interest which is a bank or trust company supervised by a State or Federal agency or (ii) a pooled investment fund of an insurance company qualified to do business in a State, if— (A) the transaction is a sale or purchase of an interest in the fund, (B) the bank, trust company, or insurance company receives not more than reasonable compensation, and (C) such transaction is expressly permitted by the instrument under which the plan is maintained, or by a fiduciary (other than the bank, trust company, or insurance company, or an affiliate thereof) who has authority to manage and control the assets of the plan. (9) The making by a fiduciary of a distribution of the assets of the plan in accordance with the terms of the plan if such assets are distributed in the same manner as provided under section 4044 of this Act (relating to allocation of assets), (c) Nothing in section 406 shall be construed to prohibit any fiduciary from— (1) receiving any benefit to which he may be entitled as a participant or beneficiary in the plan, so long as the benefit is computed and paid on a basis which is consistent with the terms of the plan as applied to all other participants and beneficiaries; (2) receiving any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred, in the performance of his duties with the plan; except that no person so serving who already receives full-time pay from an employer or an association of employers, whose employees are participants in the plan, or from an employee organization whose members are participants in such plan shall receive compensation from such plan, except for reimbursement of expenses properly and actually incurred; or (3) serving as a fiduciary in addition to being an officer, employee, agent, or other representative of a party in interest. (d) Section 407(b) and subsections (a), (b), (c), and (e) of this section shall not apply to any transaction in which a plan, directly or indirectly— (1) lends any part of the corpus or income of the plan to; (2) pays any compensation for personal services rendeied to the plan to; or (3) acquires for the plan any property from or sells any property to; any person who is with respect to the plan an owner-employee (as defined in section 401(c)(3) of the Internal Revenue Code of 1954), a member of the family (as defined in section 267(c)(4) of such Code) of any such owner-employee, or a corporation controlled by any such owner-employee through the ownership, directly or indirectly, of 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation. For purposes of this subsection a shareholder employee (as defined in section 1379 of the Internal

-194 O - 76 - 59 Pt. 1

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Post, p. 1025.

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Mr. Lang has followed up his Making of Religion by a revision of his brilliant refutation of Professor Max Müller and the philological method of expounding mythology, with the object of bringing it into harmony with his later opinions. Readers of the original edition will be glad of the opportunity of reading the book again, and of noting the changes made in it. Here, I think, they will be disappointed. The old arguments are for the most part still valid, but some of them have been weakened by the concessions Mr. Lang has thought it necessary to make, and the limitations already there have been marked and extended in a way that sometimes embarrasses the main position, if it does not deliver the author into his opponents' hands. Moreover, little account has been taken of the progress of inquiry during the last twelve years, fruitful as they have been in many directions. Mr. Lang would, I think, have done better to re-write the book, taking into account the results of discussion on the various points first attacked so trenchantly and successfully by him. Science is ever moving forward, and it is always inconvenient and sometimes dangerous to reprint a work which even, like this, at the time of its appearance constituted a great and significant advance on all that had been previously done. The ideas and the arguments of Myth, Ritual, and Religion, many of them novel when it was published, have now become by virtue of their very strength commonplaces of science. Our indebtedness to them is so great that we do not recognise it; and when we come to read them over again, something of their old force is apt to evaporate if they have not been brought up to date. But these drawbacks notwithstanding, the book is and will remain a standard authority on the origins of mythology and a sample of the solvent power of criticism.

As the preface to the new edition consists to some extent of a further reply to my strictures on The Making of Religion, I need not apologise for taking the opportunity to make a short rejoinder.

Religion is one of the most difficult words in the scientific vocabulary to define; but for Mr. Lang's argument as now developed its definition is essential. He defines it for the purpose


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26 USC 1379.

964^ ' ^^'

'

[88 STAT.

Revenue Code of 1954) and a participant or beneficiary of an individual retirement account, individual retirement annuity, or an individual retirement bond (as defined in section 408 or 409 of the Internal Revenue Code of 1954) and an employer or association of employers which establishes such an account or annuity under section 408(c) of such code shall be deemed to be an owner-employee. (e) Sections 406 and 407 shall not apply to the acquisition or sale by a plan of qualifying employer securities (as defined in section 407 (d)(5)) or acquisition, sale or lease by a plan of qualifying employer real property (as defined in section 407(d)(4)) — (1) if such acquisition, sale, or lease is for adequate consideration (or in the case of a marketable obligation, at a price not less favorable to the plan than the price determined under Section 407(e)(1)), (2) if no commission is charged with respect thereto, and (3) i f (A) the plan is an eligible individual account plan (as defined in section 407(d)(3)), or (B) in the case of an acquisition or lease of qualifying employer real property by a plan which is not an eligible individual account plan, or of an acquisition of qualifying employer securities by such a plan, the lease or acquisition is not prohibited by section 407(a). LIABILITY FOR BREACH OF FIDUCIARY DUTY

29 USC 1109.

SEC. 409. (a) Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this title shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as "the court may deem appropriate, including removal of such fiduciary. A fiduciary may also be removed for a violation of section 411 of this Act. (b) No fiduciary shall be liable with respect to a breach of fiduciary duty under this title if such breach was committed before he became a fiduciary or after he ceased to be a fiduciary. EXCULPATORY PROVISIONS; INSURANCE

29 USC 1110.

SEC. 410. (a^ Except as provided in sections 405(b)(1) and 405(d), any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this part shall be void as against public policy. (b) Nothing in this subpart shall preclude— (1) a plan from purchasing insurance for its fiduciaries or for itself to cover liability or losses occurring by reason of the act or omission of a fiduciary, if such insurance permits recourse by the insurer against the fiduciary in the case of a breach of a fiduciary oblijjation by such fiduciary; (2) a fiduciary from purchasing insurance to cover liability under this part from and for his own account; or (3) an employer or an employee organization from purchasing insurance to cover potential liability of one or more persons who serve in a fiduciary capacity with regard to an employee benefit plan.

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PROHIBITION AGAINST CERTAIN PERSONS HOLDING CERTAIN POSITIONS

SEC. 411, (a) No person who Has been convicted of, or has been 29 USC n i l. imprisoned as a result of his conviction of, robbery, bribery, extortion, embezzlement, fraud, grand larceny, burglary, arson, a felony violation of Federal or State law involving substances defined in section 102(6) of the Comprehensive Drug Abuse Prevention and Control Act of 1970, murder, rape, kidnaping, perjury, assault with intent to kill, 21 USC 802. any crime described in section 9(a)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-9(a)(1) h a violation of any provision of this Act, a violation of section 302 of the Labor-Management Relations Act, 1947 (29 U.S.C. 186), a violation of chapter 63 of title 18, United States Code, a violation of section 874, 1027, 1503, 1505, 1506, 1510, 1951, 18 USC 1341. or 1954 of title 18, United States Code, a violation of the Labor-Management Reporting and Disclosure Act of 1959 (29 U.S.C. 401), or con- J^^ use 40i spiracy to commit any such crimes or attempt to commit any such crimes, or a crime in which any of the foregoing crimes is an element, shall serve or be permitted to serve— (1) as an administrator, fiduciary, officer, trustee, custodian, counsel, agent, or employee of any employee benefit plan, or (2) as a consultant to any employee benefit plan, during or for five years after such conviction or after the end of such imprisonment, whichever is the later, unless prior to the end of such five-year period, in the case of a person so convicted or imprisoned, (A) his citizenship rights, having been revoked as a result of such conviction, have been fully restored, or (B) the Board of Parole of the United States Department of Justice determines that such person's service in any capacity referred to in paragraph (1) or (2) would not be contrary to the purposes of this title. Prior to making any such determination the Board shall hold an administrative hearing and shall give notice of such proceeding by certified mail to the State, county, and Federal prosecuting officials in the jurisdiction or jurisdictions in which such person was convicted. The Board's determination in any such proceeding shall be final. No person shall knowingly permit any other person to serve in any capacity referred to in paragraph (1) or (2) m violation of this subsection. Notwithstanding the preceding provisions of this subsection, no corporation or partnership will be precluded from acting as an administrator, fiduciary, officer, trustee, custodian, counsel, agent, or employee, of any employee benefit plan or as a consultant to any employee benefit plan without a notice, hearing, and determination by such Board of Parole that such service would be inconsistent with the intention of this section. (b) Any person who intentionally violates this section shall be fined P^"«^*ynot more than $10,000 or imprisoned for not more than one year, or both. (c) For the purposes of this section: Definitions. (1) A person shall be deemed to have been "convicted" and under the disability of "conviction" from the date of the judgment of the trial court or the date of the final sustaining of such judgment on appeal, whichever is the later event. (2) The term "consultant" means any person who, for compensation, advises or represents an employee benefit plan or who pro- • vides other assistance to such plan, concerning the establishment or operation of such plan. (3) A period of parole shall not be considered as part of a period of imprisonment.

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BONDING 29 USC 1112.

Limitation.

SEC. 112. (a) Every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan (hereafter in this section referred to as "plan official") shall be bonded as provided in this section; except that— (1) where such plan is one under which the only assets from which benefits are paid are the general assets of a union or of an employer, the administrator, officers, and employees of such plan shall be exempt from the bonding requirements of this section, and (2) no bond shall be required of a fiduciary (or of any director, officer, or employee of such fiduciary) if such fiduciary— (A) is a corporation organized and doing business under the laws of the United States or of any State; (B) is authorized under such laws to exercise trust powers or to conduct an insurance business; (C) is subject to supervision or examination by Federal or State authority; and (D) has at all times a combined capital and surplus in excess of such a minimum amount as may be established by regulations issued by the Secretary, which amount shall be at least $1,000,000. Paragraph (2) shall apply to a bank or other financial institution which is authorized to exercise trust powers and the deposits of which are not insured by the Federal Deposit Insurance Corporation, only if such bank or institution meets bonding or similar requirements under State law which the Secretary determines are at least equivalent to those imposed on banks by Federal law. The amount of such bond shall be fixed at the beginning of each fiscal year of the plan. Such amount shall be not less than 10 per centum of the amount of funds handled. I n no case shall such bond be less than $1,000 nor more than $500,000, except that the Secretary, after due notice and opportunity for hearing to all interested parties, and after consideration of the record, may prescribe an amount in excess of $500,000, subject to the 10 per centum limitation of the preceding sentence. For purposes of fixing the amount of such bond, the amount of funds handled shall be determined by the funds handled by the person, group, or class to be covered by such bond and by their predecessor or predecessors, if any, during the preceding reporting year, or if the plan has no preceding reporting year, the amount of funds to be handled during the current reporting year by such person, group, or class, estimated as provided in regulations of the Secretary. Such bond shall provide protection to the plan against loss by reason of acts of fraud or dishonesty on the part of the plan official, directly or through connivance with others. Any bond shall have as surety thereon a corporate surety company which is an acceptable surety on Federal bonds under authority granted by the Secretary of the Treasury pursuant to sections 6 through 13 of title 6, United States Code. Any bond shall be in a form or of a type approved by the Secretary, including individual bonds or schedule or blanket forms of bonds which cover a group or class. (b) I t shall be unlawful for any plan official to whom subsection (a) applies, to receive, handle, disburse, or otherwise exercise custody or control of any of the funds or other property of any employee iJenefit plan, without being bonded as required by subsection (a) and it shall be unlawful for any plan official of such plan, or any other person having authority to direct the performance of such functions, to permit such functions, or any of them, to be performed by any plan official, with respect to whom the requirements of subsection (a) have not been met.

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(c) I t shall be unlawful for any person to procure any bond required by subsection (a) from any surety or other company or through any agent or broker in whose business operations such plan or any party in interest in such plan has any control or significant financial interest, direct or indirect. (d) Nothing in any other provision of law shall require any person, required to be bonded as provided in subsection (a) because he handles funds or other property of an employee benefit plan, to be bonded insofar as the handling by such person of the funds or other property of such plan is concerned. (e) The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section including exempting a plan from the requirements of this section where he finds that (1) other bonding arrangements or (2) the overall financial condition of the plan would be adequate to protect the interests of the beneficiaries and participants. When, in the opinion of the Secretary, the administrator of a plan offers adequate evidence of the financial responsibility of the plan, or that other bonding arrangements would provide adequate protection of the beneficiaries and participants, he may exempt such plan from the requirements of this section.

Regulations.

LIMITATION ON ACTIONS

SEC. 413. (a) No action may be commenced under this title with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of— (1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission, the latest date on which the fiduciary could have cured the breach or violation, or (2) three years after the earliest date (A) on which the plaintiff had actual knowledge of the breach or violation, or (B) on which a report from which he could reasonably be expected to have obtained knowledge of such breach or violation was filed with the Secretary under this title; except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.

29 USC 1113.

EFFECTIVE DATE

SEC. 414. (a) Except as provided in subsections (b), (c), and (d), this part shall take effect on January 1, 1975. (b)(1) The provisions of this part authorizing the Secretary to promulgate regulations shall take effect on the date of enactment of this Act. (2) Upon application of a plan, the Secretary may postpone until not later than January 1, 1976, the applicability of any provision of sections 402, 403 (other than 403(c)), 405 (other than 405 (a) and (d)), and 410(a), as it applies to any plan in existence on the date of enactment of this Act if he determines such postponement is (A) necessary to amend the instrument establishing the plan under which the plan is maintained and (B) not adverse to the interest of participants and beneficiaries. (3) This part shall take effect on the date of enactment of this Act with respect to a plan which terminates after June 30, 1974, and before January 1, 1975, and to which at the time of termination section 4021 applies.

29 USC 1114.

Post,

p. 1014.

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[88 STAT.

(c) Section 406 and 407(a) (relating to prohibited transactions) shall not apply— (1) until June 30, 1984, to a loan of money or other extension of credit between a plan and a party in interest under a binding contract in eflfect on July 1, 1974 (or pursuant to renewals of such a contract), if such loan or other extension of credit remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be, and if the execution of the contract, the making of the loan, or the extension of credit was not, at the time of such execution, making, or extension, a prohibited transaction (within the meaning of section 503(b) of the Internal Revenue Code of 1954 or the corresponding provisions of prior law); (2) until June 30, 1984, to a lease or joint use of property involving the plan and a party in interest pursuant to a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), if such lease or joint use remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the execution of the contract was not, at the time of such execution, a prohibited transaction (within the meaning of section 503(b) of the Internal Revenue Code of 1954) or the corresponding provisions of prior law; (3) until June 30, 1984, to the sale, exchange, or other disposition of property described in paragraph (2) between a plan and a party in interest if— (A) in the case of a sale, exchange, or other disposition of the property by the plan to the party in interest, the plan receives an amount which is not less than the fair market value of the property at the time of such disposition; and (B) in the case of the acquisition of the property by the plan, the plan pays an amount which is not in excess of the fair market value of the property at the time of such acquisition; (4) Until June 30, 1977, to the provision of services, to which paragraphs (1), (2), and (3) do not apply between a plan and a party in interest— (A) under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such contract), or (B) if the party in interest ordinarily and customarily furnished such services on June 30, 1974, if such provision of services remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if such provision of services was not, at the time of such provision, a prohibited transaction (within the meaning of section 503(b) of the Internal Revenue Code of 1954) or the corresponding provisions of prior law; or (5) the sale, exchange, or other disposition of property which is owned by a plan on June 30, 1974, and all times thereafter, to a party in interest, if such plan is required to dispose of such property in order to comply with the provisions of section 407(a) (relating to the prohibition against holding excess employer securities and employer real property), and if the plan receives not less than adequate consideration. (d) Any election, or failure to elect, by a disqualified person under section 20b3(c)(1)(B) of this Act shall be treated for purposes of this part (but not for purposes of section 514) as an act or omission occurring before the effective date of this part.

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PUBLIC LAW 93-406-SEPT. 2, 1974

«91

PART 5—^ADMINISTRATION AND ENFORCEMENT CRIMINAL PENALTIES

SEC. 501. Any person who willfully violates any provision of part 1 of this subtitle, or any regulation or order issued under any such provision, shall upon conviction be fined not more than $5,000 or imprisoned not more than one year, or both; except that in the case of such violation by a person not an individual, the fine imposed upon such person shall be a fine not exceeding $100,000.

^^^^^^^ ^g^^;

CIVIL ENFORCEMENT

S E C 502. (a) A civil action may be brought— (1) by a participant or beneficiary— (A) for the relief provided for in subsection (c) of this section, or (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan; (2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 409; (3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan; (4) by the Secretary, or by a participant, or beneficiary for appropriate relief in the case of a violation of 105 (c); (5) except as otherwise provided in subsection (b), by the Secretary (A) to enjoin any act or practice which violates any provision of this title, or (B) to obtain other appropriate equitable relief (i) to redress such violation or (ii) to enforce any provision of this title; or (6) by the Secretary to collect any civil penalty under subsection (i). (b) I n the case of a plan which is qualified under section 401(a), 403(a), or 405(a) of the Internal Revenue Code of 1954 (or with respect to which an application to so qualify has been filed and has not been finally determined) the Secretary may exercise his authority under subsection (a)(5) with respct to a violation of, or the enforcement of, parts 2 and 3 of this subtitle (relating to participation, vesting, and funding), only if— (1) requested by the Secretary of the Treasury, or (2) one or more participants, beneficiaries, or fiduciaries, of such plan request in writing (in such manner as the Secretary shall prescribe by regulation) that he exercise such authority on their behalf. I n the case of such a request under this paragraph he may exercise such authority only if he determines that such violation aifects, or such enforcement is necessary to protect, claims of participants or beneficiaries to benefits under the plan. (c) Any administrator who fails or refuses to comply with a request for any information which such administrator is required by this title to furnish to a participant or beneficiary (unless such failure or refusal results f rorn matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court's discretion be personally li^ible to such participant or beneficiary in the amount of up to $100 a day from the

29 USC 1132.

Ante, p. 849.

403^ ^05^ "*"'

gel?'^' ^^' ^^^

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Jurisdiction.

Ante, p. 874.

^^^^^^y-

Post, p. 971.

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper. (d)(1) An employee benefit plan may sue or be sued under this title as an entity. Service of summons, subpena, or other legal process of a court upon a trustee or an administrator of an employee benefit plan in his capacity as such shall constitute service upon the employee benefit plan. I n a case where a plan has not designated in the summary plan description of the plan an individual as agent for the service of legal process, service upon the Secretary shall constitute such service. The Secretary, not later than 15 days after receipt of service under the preceding sentence, shall notify the administrator or any trustee of the plan of receipt of such service. (2) Any money judgment under this title against an employee benefit plan shall be enforceable only against the plan as an entity and shall not be enforceable against any other person unless liability against such person is established in his individual capacity under this title. (e)(1) Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this title brought by the Secretary or by a participant, beneficiary, or fiduciary. State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under subsection (a)(1)(B) of this section. (2) Where an action under this title is brought in a district court of the United States, it may be brought in the district where the plan is administered, where the breach took place, or where a defendant I'esides or may be found, and process may be served in any other district where a defendant resides or may be found. (f) The district courts of the United States shall have jurisdiction, without respect to the amount in controversy or the citizenship of the parties, to grant the relief provided for in subsection (a) of this section in any action. (g) In any action under this title by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either part5^ (h) A copy of the complaint in any action under this title by a participant, beneficiary, or fiduciary (other than an action brought by one or more participants or beneficiaries under subsection (a)(1)(B) which is solely for the purpose of recovering benefits due such participants under the terms of the plan) shall be served upon the Secretary and the Secretary of the Treasury by certified mail. Either Secretary shall have the right in his discretion to intervene in any action, except that the Secretary of the Treasury may not intervene in any action under part 4 of this subtitle. If the Secretary brings an action under subsection (a) on behalf of a participant or beneficiary, he shall notify the Secretary of the Treasury. (i) I n the case of a transaction prohibited by section 406 by a party in interest with respect to a plan to which this part applies, the Secretary may assess a civil penalty against such party in interest. The amount of such penalty may not exceed 5 percent of the amount involved (as defined in section 4975(f)(4) of the Internal Revenue Code of 1954); except that if the transaction is not corrected (in such manner as the Secretary shall prescribe by regulation, which r e f l a tions shall be consistent with section 4975(f)(5) of such Code) within 90 days after notice from the Secretary (or such longer period as the Secretary may permit), such penalty may be in an amount not more than 100 percent of the amount invoh^'ed. This subsection shall not

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PUBLIC LAW 93-406-SEPT. 2, 1974

apply to a transaction with respect to a plan described in section 4975 (e)(1) of such Code. (j) I n all ciAdl actions under this title, attorneys appointed by the Secretary may represent the Secretary (except as provided in section 518(a) of title 28, United States Code), but all such litigation shall be subject to the direction and control of the Attorney General. (k) Suits by an administrator, fiduciary, participant, or beneficiary of an employee benefit plan to review a final order of the Secretary, to restrain the Secretary from taking any action contrary to the provisions of this Act, or to compel him to take action required under this title, may be brought in the district court of the United States for the district where the plan has its principal office, or in the United States District Court for the District of Columbia.

893 P°«'. P- ^vi.

CLAIMS PROCEDURE

SEC. 503. In accordance with regulations of the Secretary, every employee benefit plan shall— (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and (2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.

29 USC 1133,.

INVESTIGATIVE AUTHORITY

SEC. 504. (a) The Secretary shall have the power, in order to deter- ^^ "^^^ ^^^'*' mine whether any person has violated or is about to violate any provision of this title or any regulation or order thereunder— (1) to make an investigation, and in connection therewith to require the submission of reports, books, and records, and the filing of data in support of any information required to be filed with the Secretary under this title, and (2) to enter such places, inspect such books and records and question such persons as he may deem necessary to enable him to determine the facts relative to such investigation, if he has reasonable cause to believe there may exist a violation of this title or any rule or regulation issued thereunder or if the entry is pursuant to an agreement with the plan. The Secretary may make available to any person actually affected by any matter which is the subject of an investigation under this section, and to any department or agency of the United States, information concerning any matter which may be the subject of such investigation; except that any information obtained by the Secretary pursuant to section 6103(g) of the Internal Revenue Code of 1954 Post, p. g4\. shall be made available only in accordance with regulations prescribed by the Secretary of the Treasury. (b) The Secretary may not under the authority of this section Books or require any plan to submit to the Secretary any books or records of Lbliity!' ^'"'^^^" the plan more than once in any 12 month period, unless the Secretary has reasonable cause to believe there may exist a violation of this title or any regulation or order thereunder. (c) For the purposes of any investigation provided for in this title, the provisions of sections 9 and 10 (relating to the attendance of witnesses and the production of books, records, and documents) of the Federal Trade Commission Act (15 U.S.C. 49, 50) are hereby made applicable (without regard to any limitation in such sections respect-

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PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

ing persons, partnerships, banks, or common carriers) to the jurisdiction, powers, and duties of the Secretary or any officers designated by him. To the extent he considers appropriate, the Secretary may delegate his investigative functions under this section with respect to insured banks acting as fiduciaries of employee benefit plans to the appropriate Federal banking agency (as defined in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813 (q)). REGULATIONS

Po^t^'^ ^95^* ^^^" ^^^' Subject to title III and section 109, the Secretary may Ante, p. 850. ' prcscribe such regulations as he finds necessary or appropriate to carry out the provisions of this title. Among other things, such regulations ma^ define accounting, technical and.trade terms used in such provisions; may prescribe forms; and may provide for the keeping of books and records, and for the inspection of such books and records (subject to section 504(a) and (b)). OTHER AGENCIES AND DEPARTMENTS 29 USC 1136.

gj,Q_ 5(}g jj^ order to avoid unnecessary expense and duplication of functions among Government agencies, the Secretary may make such arrangements or agreements for cooperation or mutual assistance in the performance of his functions under this title and the functions of any such agency as he may find to be practicable and consistent with law. The Secretary may utilize, on a reimbursable or other basis, the facilities or services of any department, agency, or establishment of the United States or of any State or political subdivision of a State, including the services of any of its employees, with the lawful consent of such department, agency, or establishment; and each department, agency, or establishment of the United States is authorized and directed to cooperate with the Secretary and, to the extent permitted by law, to provide such information and facilities as he may request for his assistance in the performance of his functions under this title. The Attorney General or his representative shall receive from the Secretary for appropriate action such evidence developed in the performance of his functions under this title as may be found to warrant consideration for criminal prosecution under the provisions of this title or other Federal law. ADMINISTRATION

29 USC 1137. 5 USC 551.

701.

26 USC 1 et seq.

gj,(.^ 5Q/jr^ (^^ Subchapter II of chapter 5, and chapter 7, of title 5, United States Code (relating to administrative procedure), shall be applicable to this title, (b) Section 5108 of title 5, United States Code, is amended by adding at the end thereof the following new subsection: "(f) In addition to the number of positions authorized by subsection (a), the Secretary of Labor is authorized, without regard to any other provision of this section, to place 1 position in the Department of Labor in grade GS-18, and a total of 20 positions in the Department of Labor in grades GS-16 and 17." (c) No employee of the Department of Labor or the Department of the Treasury shall administer or enforce this title or the Internal Revenue Code of 1954 with respect to any employee benefit plan under which he is a participant or beneficiary, any employee organization of which he is a member, or any employer organization in which he has an interest. This subsection does not apply to an employee benefit plan which covers only employees of the United States.

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895

PUBLIC LAW 93-406-SEPT. 2, 1974 APPROPRIATIONS

SEC. 508. There are hereby authorized to be appropriated such sums as may be necessary to enable the Secretary to carry out his functions and duties under this Act.

29 USC 1138.

SEPARABILITY PROVISIONS

SEC. 509. If any provision of this Act, or the application of such provision to any person or circumstances, shall be held invalid, the remainder of this Act, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

29 USC 1139.

INTERFERENCE WITH RIGHTS PROTECTED UNDER ACT

SEC. 510. I t shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this title, section 3001, or the Welfare and Pension Plans Disclosure Act, or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this title, or the Welfare and Pension Plans Disclosure Act. It shall be unlawful for any person to discharge, fine, suspend, expel, or discriminate against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to this Act or the Welfare and Pensio;i Plans Disclosure Act, The provisions of section 502 shall be applicable in the enforcement of this section.

29 USC 1140.

Post, p. 995. 29 USC 301 note.

COERCIVE I N T E R F E R E N C E

SEC. 511. I t shall be unlawful for any person through the use of fraud, force, violence, or threat of the use of force or violence, to restrain, coerce, intimidate, or attempt to restrain, coerce, or intimidate any participant or beneficiary for the purpose of interfering with or preventing the exercise of any right to which he is or may become entitled under the plan, this title, section 3001, or the Welfare and Pension Plans Disclosure Act. Any person who willfully violates this section shall be fined $10,000 or imprisoned for not more than one year, or both.

29 USC 1141.

Penalty.

ADVISORY COUNCIL

SEC. 512. (a)(1) There is hereby established an Advisory Council cu1,n'E°mpi^yer on Employee Welfare and Pension Benefit Plans (hereinafter in this welfare and Pensection referred to as the "Council") consisting of fifteen members ^i°^f ®"^^'* appointed by the Secretary. Not more than eight members of the Establishment. 29 USC 1142. Council shall be members of the same political party. (2) Members shall be persons qualified to appraise the programs Membership. instituted under this Act. (3) Of the members appointed, three shall be representatives of employee organizations (at least one of whom shall be representative of any organization members of which are participants in a multiemployer p l a n); three shall be representatives of employers (at least one of whom shall be representative of employers maintaining or contributing to multiemployer plans); three representatives shall be appointed from the general public, one of whom shall be a person representing those receiving benefits from a pension plan; and there shall

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Duties.

5 USC 5332 and note. Travel expenses.

5 USC app. 14.

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

be one representative each from the fields of insurance, corporate trust, actuarial counseling, investment counseling, investment management, and the accounting field. (4) Members shall serve for terms of three years except that of those first appointed, five shall be appointed for terms of one year, five shall be appointed for terms of two years, and five shall be appointed for terms of three years. A member may be reappointed. A member appointed to fill a vacancy shall be appointed only for the remainder of such term. A majority of members shall constitute a quorum and action shall be taken only by a majority vote of those present and voting. (b) I t shall be the duty of the Council to advise the Secretary with respect to the carrying out of his functions under this Act and to submit to the Secretary recommendations with respect thereto. The Council shall meet at least four times each year and at such other times as the Secretary requests. In his annual report submitted pursuant to section 513(b), the Secretary shall include each recommendation which he has received from the Council during the preceding calendar year. (c) The Secretary shall furnish to the Council an executive secretary and such secretarial, clerical, and other services as are deemed necessary to conduct its business. The Secretary may call upon other agencies of the Government for statistical data, reports, and other information which will assist the Council in the performance of its duties. (d)(1) Members of the Council shall each be entitled to receive the daily equivalent of the annual rate of basic pay in effect for grade GS-18 of the General Schedule for each day (including travel time) during which they are engaged in the actual performance of duties vested in the Council. (2) While away from their homes or regular places of business in the performance of services for Council, members of the Council shall be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under section 5703(b) of title 5 of the United States Code. (e) Section 14(a) of the Federal Advisory Committee Act (relating to termination) shall not apply to the Council. RESEARCH, STUDIES, AND ANNUAL REPORT

29 USC 1143.

SEC. 513. (a)(1) The Secretary is authorized to undertake research and surveys and in connection therewith to collect, compile, analyze and publish data, information, and statistics relating to employee benefit plans, including retirement, deferred compensation, and welfare plans, and types of plans not subject to this Act. (2) The Secretary is authorized and directed to undertake research studies relating to pension plans, including but not limited to (A) the effects of this title upon the provisions and costs of pension plans, (B) the role of private pensions in meeting the economic security needs of the Nation, and (C) the operation of private pension plans including types and levels of benefits, degree of reciprocity or portability, and financial and actuarial characteristics and practices, and methods of encouraging the growth of the private pension system. (3) The Secretary may, as he deems appropriate or necessary, undertake other studies relating to employee benefit plans, the matters regulated by this title, and the enforcement procedures provided for under this title.

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Page:The Eurypterida of New York Volume 1.pdf/88

 Chart showing the eurypterid localities of New York. The dots give the approximate number of species occurring in each locality; their size indicates the relative frequency of the species. The belt ruled from right to left denotes the exposure of the Salina beds; that ruled from left to right the exposure of the Shawangunk grit. The eurypterid-bearing area of the Frankfort beds is inclosed between the dotted lines.


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897

(4) The research, surveys, studies, and publications referred to in this subsection may be conducted directly, or indirectly through grant or contract arrangements. (b) The Secretary shall submit annually a report to the Congress ^f^^°J^J'° covering his administration of this title for the preceding year, and °"^''^^^including (1) an explanation of any variances or extensions granted under section 110, 207, 303, or 304 and the projected date for terminat- Ante, pp. ssi, ing the variance; (2) the status of cases in enforcement status; (3) ^^^' *^^' ^^^' recommendations received from the Advisory Council during the preceding year; and (4) such information, data, research findings, studies, and recommendations for further legislation in connection with the matters covered by this title as he may find advisable. (c) The Secretary is authorized and directed to cooperate with the Congress and its appropriate committees, subcommittees, and staff in supplying data and any other information, and personnel and services, required by the Congress in any study, examination, or report by the Congress relating to pension benefit plans established or maintained by States or their political subdivisions. E F F E C T ON OTHER

LAWS

SEC. 514. (a) Except as provided in subsection (b) of this section, the provisions of this title and title IV shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 4(a) and not exempt under section 4 (b). This section shall take effect on January 1, 1975. (b)(1) This section shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975. (2)(A) Except as provided in subparagraph (B), nothing in this title shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities. (B) Neither an employee benefit plan described in section 4(a), which is not exempt under section 4(b) (other than a plan established primarily for the purpose of providing death benefits), nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies. (3) Nothing in this section shall be construed to prohibit use by the Secretary of services or facilities of a State agency as permitted under section 506 of this Act. (4) Subsection (a) shall not apply to any generally applicable criminal law of a State. (c) For purposes of this section: (1) The term "State law" includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State. A law of the United States applicable only to the District of Columbia shall be treated as a State law rather than a law of the United States. (2) The term "State" includes a State, any political subdivisions thereof, or any agency or instrumentality of either, which purports to regulate, directly or indirectly, the terms and conditions of employee benefit plans covered by this title. (d) Nothing in this title shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States (except as provided in sections 111 and 507(b)) or any rule or regulation issued under any such law.

29 USC 1144. P°^^>?• 1003. ^"'^' P- 83^.

"state law."

"state."

ggl"'^' ^^" ^^^'

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[88 STAT.

TITLE II—AMENDMENTS TO THE INTERNAL REVENUE CODE RELATING TO RETIREMENT PLANS SEC. 1001. AMENDMENT OF INTERNAL REVENUE CODE OF 1954.

26 USC 1 et seq.

Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1954.

Subtitle A—Participation, Vesting, Funding, Administration, Etc. PART 1—PARTICIPATION, VESTING, AND FUNDING SEC. 1011. MINIMUM PARTICIPATION STANDARDS.

Part I of subchapter D of chapter 1 (relating to pension, profitsharing, stock bonus, plans, etc.) is amended by adding at the end thereof the following: "Subpart B—Special Rules "Sec. "Sec. "Sec. "Sec. "Sec. "Sec. 26 USC 410.

410. Minimum participation standards. 411. Minimum vesting standards. 412. Minimum funding standards. 413. Collectively bargained plans. 414. Definitions and special rules. 415. Limitations on benefits and contributions under qualified plans.

"SEC. 410. MINIMUM PARTICIPATION STANDARDS. "(a)

PARTICIPATION.— " (1) MINIMUM AGE AND SERVICE CONDITIONS.— " (A) GENERAL RULE.—A trust shall not constitute

a qualified trust under section 401(a) if the plan of which it is a part requires, as a condition of participation in the plan, that an employee complete a period of service with the employer or employers maintaining the plan extending beyond the later of the following dates— " (i) the date on which the employee attains the age of 25; or " (ii) the date on which he completes 1 year of service. "(B)

Post, p. 901.

^^ ^^^ '^°26 USC 501.

Post, p. 901.

SPECIAL RULES FOR CERTAIN PLANS.—

"(i) I n the case of any plan which provides that after not more than 3 years of service each participant has a right to 100 percent of his accrued benefit under the plan which is nonforfeitable (within the meaning of section ^^^y^ ^^ YiQ time such benefit accrues, clause (ii) of subparagraph (A) shall be applied by substituting '3 years of service' for '1 year of service'. "(ii) I n the case of any plan maintained exclusively for employees of an educational institution (as defined in section 170(b)(1)(A) (ii)) by an employer which is exempt from tax under section 501(a) which provides that each participant having at least 1 year of service has a right to 100 percent of his accrued benefit under the plan which is nonforfeitable (within the meaning of section 411) at the time such benefit accrues, clause (i) of

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PUBLIC LAW 93-406-SEPT. 2, 1974

subparagraph (A) shall be applied by substituting '30' for '25'. This clause shall not apply to any plan to which clause (i) applies. "(2) MAXIMUM AGE CONDITIONS.—A trust shall not constitute a qualified trust under section 401(a) if the plan of which it is a part excludes from participation (on the basis of age) employees who have attained a specified age, unless— " (A) the plan is a— " (i) defined benefit plan, or "(ii) target benefit plan (as defined under regulations prescribed by the Secretary or his delegate), and " (B) such employees begin employment with the employer after they have attained a specified age which is not more than 5 years before the normal retirement age under the plan. " (3) DEFINITION OF YEAR OF SERVICE.— " (A) GENERAL RULE.—For purposes of this subsection, the

term 'year of service' means a 12-month period during which the employee has not less than 1,000 hours of service. For purposes of this paragraph, computation of any 12-month period shall be made with reference to the date on which the employee's employment commenced, except that, under regulations prescribed by the Secretary of Labor, such computation may be made by reference to the first day of a plan year in the case of an employee who does not complete 1,000 hours of service during the 12-month period beginning on the date bis employment commenced. " (B) SEASONAL INDUSTRIES.—In the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term 'year of service' shall be such period as may be determined under regulations prescribed by the Secretary of Labor. " (C) HOURS OF SERVICE.—For purposes of this subsection, the term 'hour of service' means a time of service determined under regulations prescribed by the Secretary of Labor. " (D) MARITIME INDUSTRIES.—For purposes of this subsection, in the case of any maritime industry, 125 days of service shall be treated as 1,000 hours of service. The Secretary of Labor may prescribe regulations to carry out this subparagraph. "(4) T I M E OF PARTICIPATION.—A plan shall be treated as not meeting the requirements of paragraph (1) unless it provides that any employee who has satisfied the minimum age and service requirements specified in such paragraph, and who is otherwise entitled to participate in the plan, commences participation in the plan no later than the earlier of— " (A) the first day of the first plan year beginning after the date on which such employee satisfied such requirements, or " (B) the date 6 months after the date on which he satisfied such requirements, unless such employee was separated from the service before the date referred to in subparagraph (A) or (B), whichever is applicable. " (5) BREAKS I N SERVICE.— " (A) GENERAL RULE.—Except as otherwise provided in

subparagraphs (B), (C), and (D), all years of service with the employer or employers maintaining the plan shall be taken into account in computing the period of service for purposes of paragraph (1).

899

^e use 401.

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PUBLIC LAW 93-406-SEPT. 2, 1974 "(B)

"(b)

45 USC 181.

STAT.

EMPLOYEES UNDER 3-YEAR loo PERCENT VESTING.—

I n the case of any employee who has any 1-year break in serv{QQ (as defined m section 4 1 1 (a)(6)(A)) under a plan to which the service requirements of clause (i) of paragraph (1) (B) apply, if such employee has not satisfied such requirements, service before such break shall not be required to be taken into account. " (C) 1-YEAR BREAK IN SERVICE.—In Computing an employee's period of service for purposes of subsection (a)(1) in the case of any participant who has any 1-year break in service (as defined in section 4 1 1 (a)(6)(A)), service before such break shall not be required to be taken into account under the plan until he has completed a year of service (as defined in paragraph (3)) after his return. " (D) NoNVESTED PARTICIPANTS.^—In the case of a participant who does not have any nonforfeitable right to an accrued benefit derived from employer contributions, years of service with the employer or employers maintaining the plan before a break in service shall not be required to be taken into account in computing the period of service for purposes of subsection (a)(1) if the number of consecutive 1-year breaks in service equals or exceeds the aggregate number of such years of service before such break. Such aggregate number of years of service before such break shall be deemed not to include any years of service not required to be taken into account under this subparagraph by reason of any prior break in service.

Post, p. 901.

26 USC 401.

[88

ELIGIBILITY.—

" (1) IN GENERAL,—A trust shall not constitute a qualified trust under section 401(a) unless the trust, or two or more trusts, or the trust or trusts and annuity plan or plans are designated by the employer as constituting parts of a plan intended to qualify under section 401(a) which benefits either— " (A) 70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all the employees are eligible to benefit under the plan, excluding in each case employees who have not satisfied the minimum age and service requirements, if any, prescribed by the plan as a condition of participation, or " (B) such employees as qualify under a classification set up by the employer and found by the Secretary or his delegate not to be discriminatory in favor of employees who are officers, shareholders, or highly compensated. " (2) EXCLUSION OF CERTAIN EMPLOYEES.—For purposes of paragraph (1), there shall be excluded from consideration— " (A) employees not included in the plan who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one 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, " (B) in the case of a trust established or maintained pursuant to an agreement which the Secretary of Labor finds to be a collective bargaining agreement between air pilots represented in accordance with title II of the Railway Labor ^Q^^ a^j^jj Qj^g QY jjiore employers, all employees not covered by such agreement, and

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 Rh of his argument as "the belief in a primal being, a Maker, undying, usually moral " (p. 3). I have not been able to find any corresponding definition of myth. Sometimes it is used (as on pp. xvii, 3, and 5) in opposition to religion, or (as on p. 29) to religion and morality; at other times it is said to consist of two elements, the rational and the irrational (p. 9). Again, the term rational seems to be the equivalent of religious, and irrational the converse (pp. 4, 10, &c.). It is pretty obvious that these terms are all purely subjective, purely arbitrary; and moreover they are not used consistently. Arguments built on terms thus loosely employed must suffer the fate of the house built on the sand.

Mr. Lang has quite missed the point of my remarks in the note (ante, vol. ix., p. 303) on the legends of the Noongahburrahs. Mrs. Langloh Parker has not yet informed us which of the stories in her second volume the black piccaninnies would not be allowed to hear. At all events they would be allowed to hear the legend of the Borah of Byamee in the first volume. Though that legend speaks of Byamee as a man, it treats him with greater reverence than some of the tales solemnly inculcated in the Wiradthuri mysteries do. If it cannot be said to "touch on sacred subjects," it is inseparably connected with the Legend of the Flowers in the second volume, which presumably does, and which Mr. Lang includes in his description of "a very charming and poetical aspect of the Baiame belief." Charming and poetical aspects are, it would seem, "rational": at least Mr. Lang so characterises the description of Artemis in the Odyssey (p. 10). Is the Legend of the Flowers within his definition of religion? It cannot be; for it recognises Byamee not as "a primal being," but as a glorified wizard of the tribe; nor as "a Maker," save of manna and flowers, which a wizard might very well be. Undying he is, but only " up to date," and moral, if it be moral to set his brand arbitrarily on three trees and thus taboo them to the starving people. In short, the legend is a myth, and "the blacks" do not "draw the line" as and where Mr. Lang seeks to draw it. His "essential distinction" does not correspond with the facts; his theory lays undue emphasis on facts otherwise to be explained; and his definition, framed to fit his theory, does not define religion as "the blacks" understand it.

Other points in the Preface to which I may refer are the names


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Page:United States Statutes at Large Volume 88 Part 1.djvu/945

 88 STAT. ]

PUBLIC LAW 93-406-SEPT. 2, 1974

901

" (C) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(b)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)). Subparagraph (B) shall not apply in the case of a plan which provides contributions or benefits for employees whose principal duties are not customarily performed aboard aircraft in flight. "(c) APPLICATION PLANS.—

OF

PARTICIPATION

STANDARDS

TO

26 USC 911.

26 USC 861.

CERTAIN

"(1) The provisions of this section (other than paragraph (2) of this subsection) shall not apply to— " (A) a governmental plan (within the meaning of section 414(d)),

Post. p. 925.

" (B) a church plan (within the meaning of section 414(e)) with respect to which the election provided by subsection (d) of this section has not been made, " (C) a plan which has not at any time after the date of the enactment of the Employee Retirement Income Security Act of 1974 provided for employer contributions, and " (D) a plan established and maintained by a society, order, or association described in-section 501(c)(8) or (9) if no part of the contributions to or under such plan are made by employers of participants in such plan. "(2) A plan described in paragraph (1) shall be treated as meeting the requirements of this section, for purposes of section 401 (a), if such plan meets the requirements of section 401(a)(3) as in effect on the day before the date of the enactment of this section.

26use5oi.

^6 USC 4oi.

" (d) ELECTION BY CHURCH TO HAVE PARTICIPATION, VESTING, FUNDING, ETC., PROVISIONS A P P L Y. —

" (1) IN GENERAL.—If the church or convention or association of churches which maintains any church plan makes an election under this subsection (in such form and manner as the Secretary or his delegate may by regulations prescribe), then the provisions of this title relating to participation, vesting, funding, etc. (as in effect from time to time) shall apply to such church plan as if such provisions did not contain an exclusion for church plans. " (2) ELECTION IRREVOCABLE.—An election under this subsection with respect to any church plan shall be binding with respect to such plan, and, once made, shall be irrevocable." SEC. 1012. MINIMUM VESTING STANDARDS.

(a) IN GENERAL.—Subpart B of part I of subchapter D of chapter 1 is amended by adding after section 410 the following new section: "SEC. 411. MINIMUM VESTING STANDARDS.

" (a) GENERAL RULE. — A trust shall not constitute a qualified trust under section 401(a) unless the plan of which such trust is a part provides that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age (as defined in subsection (a)(8)) and in addition satisfies the requirements of paragraphs (1) and (2) of this subsection and the requirements of paragraph (2) of subsection (b), and in the case of a defined benefit plan, also satisfies the requirements of paragraph (1) of subsection (b). "(1) EMPLOYEE CONTRIBUTIONS.—A plan satisfies the requirements of this paragraph if an employee's rights in his accrued benefit derived from his own contributions are nonforfeitable.

<«R.104 n

- 7 f i - RO T>t

1

26 USC 4ii.

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Page:United States Statutes at Large Volume 88 Part 1.djvu/946

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PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

"(2) EMPLOYER CONTRIBUTIONS.—^A plan satisfies the requirements of this paragraph if it satisfies the requirements of subparagraph (A), (B), o r (C). " (A) 10-YEAR VESTING.—A plan satisfies the requirements of this subparagraph if an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit derived from employer contributions. " (B) 5- TO 15-YEAR VESTING.—A plan Satisfies the requirements of this subparagraph if an employee who has completed at least 5 years of service has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions which percentage is not less than the percentage determined under the following table: „

.

.

Nonforfeitable

"Years of service: 5 6 7 8 9 10 11 12 13 14 15 or more "(C)

-

-

~

percentage 25 30 35 40 45 50 60 - 70 80 90 100.

RULE OF 45,—

"(i) A plan satisfies the requirements of this subparagraph if an employee who is not separated from the service, who has completed at least 5 years of service, and with respect to whom the sum of his age and years of service equals or exceeds 45, has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions determined under the following table: "If years of and sum of age then the service equal and service equals nonforfeitable or exceed— or exceeds— percentage is— 5 45 50 6 47 60 7 49 70 8 51 80 9 53 90 10 55 100. "(ii) Notwithstanding clause (i), a plan shall not be treated as satisfying the requirements of this subparagraph unless any employee who has completed at least 10 years of service has a nonforfeitable right to not less than 50 percent of his accrued benefit derived from employer contributions and to not less than an additional 10 percent for each additional year of service thereafter. "(3)

Post. p. 935.

CERTAIN

PERMITTED FORFEITURES, SUSPENSIONS, ETC.—

For purposes of this subsection— " (A) FORFEITURE ON ACCOUNT OF DEATH.—A right to an accrued benefit derived from employer contributions shall not be treated ns forfeitable solely because the plan provides that it is not payable if the participant dies (except in the case of a survivor annuity which is payable as provided in section 401(a) (11)). "(B)

SUSPENSION OF BENEFITS UPON REEMPLOYMENT OF

RETIREE.—A right to an accrued benefit derived from employer

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 903

PUBLIC LAW 93-406-SEPT. 2, 1974

88 STAT.]

contributions shall not be treated as forfeitable solely because the plan provides that the payment of benefits is suspended for such period as the employee is employed, subsequent to the commencement of payment of such benefits— " (i) in the case of a plan other than a multiemployer plan, by the employer who maintains the plan under which such benefits were being paid; and "(ii) in the case of a multiemployer plan, in the same industry, the same trade or craft, and the same geographic area covered by the plan as when such benefits commenced. The Secretary of Labor shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, including regulations with respect to the meaning of the term 'employed'. " (C) EFFECT OF RETROACTIVE PLAN AMENDMENTS.—A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because plan amendments may be given retroactive application as provided in section 412(c)(8). "(D)

Regulations.

Post,

p. 914.

Ante,

p. 829.

WITHDRAWAL, or MANDATORY CONTRIBUTION.—

"(i) A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that, in the case of a participant who does not have a nonforfeitable right to at least 50 percent of his accrued benefit derived from employer contributions, such accrued benefit may be forfeited on account of the withdrawal by the participant of any amount attributable to the benefit derived from mandatory contributions (as defined in subsection (c) (2)(C)) made by such participant. "(ii) Clause (i) shall not apply to a plan unless the plan provides that any accrued benefit forfeited under a plan provision described in such clause shall be restored upon repayment by the participant of the full amount of the withdrawal described in such clause plus, in the case of a defined benefit plan, interest. Such interest shall be computed on such amount at the rate determined for purposes of subsection (c)(2)(C) on the date of such repayment (computed annually from the date of such withdrawal). I n the case of a defined contribution plan, the plan provision required under this clause may provide that such repayment must be made before the participant has any one-year break in service commencing after the withdrawal. "(iii) In the case of accrued benefits derived from employer contributions which accrued before the date of the enactment of the Employee Retirement Income Security Act of 1974,^ a right to such accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that an amount of such accrued benefit may be forfeited on account of the withdrawal by the participant of an amount attributable to the benefit derived from mandatory contributions (as defined in subsection (c)(2)(C)) made by such participant before the date of the enactment of the Act if such amount forfeited is proportional to such amount withdrawn. This clause shall not apply to any plan to which any mandatory contribution is made after the date of the enactment of such Act. The Secretary or

Regulations.

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PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this clause. "(iv) For purposes of this subparagraph, in the case of any class-year plan, a withdrawal of employee contributions shall be treated as a withdrawal of such contributions on a plan year by plan year basis in succeeding order of time. " (v) For nonforfeitability where the employee has a nonforfeitable right to at least 50 percent of his accrued benefit, see section 401(a) (19).

^^ "^^ ''°^"(4)

SERVICE INCLUDED IN DETERMINATION OF NONFORFEITABLE

PERCENTAGE.—In Computing the period of service under the plan for purposes of determining the nonforfeitable percentage under paragraph (2), all of an employee's years of service with the employer or employers maintaining the plan shall be taken into account, except that the following may be disregarded: " (A) years of service before age 22, except that in the case of a plan which does not satisfy subparagraph (A) or (B) of paragraph (2), the plan may not disregard any such year of service during which the employee was a participant; " (B) years of service during a period for which the employee declined to contribute to a plan requiring employee contributions; " (C) years of service with an employer during any period for which the employer did not maintain the plan or a predecessor plan (as defined under regulations prescribed by the Secretary or his delegate); " (D) service not required to be taken into account under paragraph (6); " (E) years of service before January 1, 1971, unless the employee has had at least 3 years of service after December 31, 1970; and " (F) years of service before the first plan year to which this section applies, if such service would have been disregarded under the rules of the plan with regard to breaks in service as in effect on the applicable date. "(5)

Ante,

p. 898.

Y E A R OF SERVICE.—

" (A) GENERAL RULE.—For purposes of this subsection, except as provided in subparagraph (C), the term 'year of service' means a calendar year, plan year, or other 12-consecutive month period designated by the plan (and not prohibited under regulations prescribed by the Secretary of Labor) during which the participant has completed 1,000 hours of service. " (B) HOURS OF SERVICE.—For purposes of this subsection, the term 'hours of service' has the meaning provided by section 410(a)(3)(C). " (C) SEASONAL INDUSTRIES.—In the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term 'year of service' shall be such period as may be determined under regulations prescribed by the Secretary of Labor. " (D) MARITIME INDUSTRIES.—For purposes of this subsection, in the case of any maritime industry, 125 days of service shall be treated as 1,000 hours of service. The Secretary of Labor may prescribe regulations to carry out the purposes of this subparagraph. "(6)

BREAKS I N SERVICE.— " (A) DEFINITION OF I-YEAR BREAK IN SERVICE.—For

purposes of this paragraph, the term '1-year break in service'

�


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 88 STAT. ]

PUBLIC LAW 93-406-SEPT. 2, 1974

means a calendar year, plan year, or other 12-consecutivemonth period, designated by the plan (and not prohibited under regulations prescribed by the Secretary of Labor) during which the participant has not completed more than 500 hours of service. " (B) 1 YEAR or SERVICE AFTER 1-YEAR BREAK IN SERVICE.—For purposes of paragraph (4), in the case of any employee who has any 1-year break in service, years of service before such break shall not be required to be taken into account until he has completed a year of service after his return. "(C)

1-YEAR BREAK I N SERVICE UNDER DEFINED CONTRIBUTION

PLAN.—For purposes of paragraph (4), in the case of any participant in a defined contribution plan, or an insured defined benefit plan which satisfies the requirements of subsection (b)(1)(F), who has any 1-year break in service, years of service after such break shall not be required to be taken into account for purposes of determining the nonforfeitable percentage of his accrued benefit derived from employer contributions which accrued before such break. " (D) NoNVESTED PARTICIPANTS.—For purposes of paragraph (4), in the case of a participant who, under the plan, does not have any nonforfeitable right to an accrued benefit derived from employer contributions, years of service before any 1-year break in service shall not be required to be taken into account if the number of consecutive 1-year breaks in service equals or exceeds the aggregate number of such years of service prior to such break. Such aggregate number of years of service before such break shall be deemed not to include any years of service not required to be taken into account under this subparagraph by reason of any prior break in service. " (7) ACCRUED BENEFIT.—

" (A) IN GENERAL.—For purposes of this section, the term 'accrued benefit' means— "(i) in the case of a defined benefit plan, the employee's accrued benefit determined under the plan and, except as provided in subsection (c)(3), expressed in the form of an annual benefit commencing at normal retirement age, or " (ii) in the case of a plan which is not a defined benefit plan, the balance of the employee's account. " (B) EFFECT OF CERTAIN DISTRIBUTIONS.—Notwithstand-

ing paragraph (4), for purposes of determining the employee's accrued benefit under the plan, the plan may disregard service performed by the employee with respect to which he has received— "(i) a distribution of the present value of his entire nonforfeitable benefit if such distribution was in an amount (not more than $1,750) permitted under regulations prescribed by the Secretary or his delegate, or "(ii) a distribution of the present value of his nonforfeitable benefit attributable to such service which he elected to receive. Clause (i) of this subparagraph shall apply only if such distribution was made on termination of the employee's Darticipation in the plan. Clause (ii) of this subparagraph shall apply only if such distribution was made on termination of the employee's participation in the plan or under such other

905

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Page:United States Statutes at Large Volume 88 Part 1.djvu/950

 906

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

circumstances as may be provided under regulations prescribed by the Secretary or his delegate. " (C) REPAYMENT OF SUBPARAGRAPH (b) DISTRIBUTIONS.—

42 USC 401,

For purposes of determining the employee's accrued benefit under a plan, the plan may not disregard service as provided in subparagraph (B) unless the plan provides an opportunity for the participant to repay the full amount of the distribution described m such subparagraph (B) with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C) and provides that upon such repayment the employee's accrued benefit shall be recomputed by taking into account service so disregarded. This subparagraph shall apply only in the case of a participant Avho— "(i) received such a distribution in any plan year to which this section applies, which distribution was less than the present value of his accrued benefit, "(ii) resumes employment covered under the plan, and " (iii) repays the full amount of such distribution with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C). In the case of a defined contribution plan, the plan provision required under this subparagraph may provide that such repayment must be made before the participant has any oneyear break in service commencing after such withdrawal. "(8) NORMAL RETIREMENT AGE.—For purposes of this section, the term 'normal retirement age' means the earlier of— " (A) the time a plan participant attains normal retirement age under the plan, or " (B) the later of— " (i) the time a plan participant attains age 65, or "(ii) the 10th anniversary of the time a plan participant commenced participation in the plan. "(9) NORMAL RETIREMENT BENEFIT.—For purposes of this section, the term 'normal retirement benefit' means the greater of the early retirement benefit under the plan, or the benefit under the plan commencing at normal retirement age. The normal retirement benefit shall be determined without regard to— " (A) medical benefits, and " (B) disability benefits not in excess of the qualified disability benefit. For purposes of this paragraph, a qualified disability benefit is a disability benefit provided by a plan which does not exceed the benefit which would be provided for the participant if he separated from the service at normal retirement age. For purposes of this paragraph, the early retirement benefit under a plan shall be determined without regard to any benefits commencing before benefits payable under title II of the Social Security Act become payable which— " (i) do not exceed such social security benefits, and "(ii) terminate when such social security benefits commence. " (10) CHANGES I N VESTING SCHEDULE.— " (A) GENERAL RULE.—A plan amendment

changing any vesting schedule under the plan shall be treated as not satisfy-

�


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Page:United States Statutes at Large Volume 88 Part 1.djvu/951

 88 STAT. ]

PUBLIC LAW 93-406-SEPT. 2, 1974

ing the requirements of paragraph (2) if the nonforfeitable percentage of the accrued benefit derived from employer contributions (determined as of the later of the date such amendment is adopted, or the date such amendment becomes effective) of any employee who is a participant in the plan is less than such nonforfeitable percentage computed under the plan without regard to such amendment. " (B) ELECTION or FORMER SCHEDULE.—A plan amendment changing any vesting schedule under the plan shall be treated as not satisfying the requirements of paragraph (2) unless each participant having not less than 5 years of service is permitted to elect, within a reasonable period after the adoption of such amendment, to have his nonforfeitable percentage computed under the plan without regard to such amendment. "(b)

ACCRUED BENEFIT REQUIREMENTS.— (1) GENERAL RULES.— " (A) 3-PERCENT METHOD.—A defined

benefit plan satisfies the requirements of this paragraph if the accrued benefit to which each participant is entitled upon his separation from the service is not less than— " (i) 3 percent of the normal retirement benefit to which he would be entitled if he commenced participation at the earliest possible entry age under the plan and served continuously until the earlier of age 65 or the normal retirement age specified under the plan, multiplied by.. "(ii) thenumber of years (not in excess of 3314) of his participation in the plan. In the case of a plan providing retirement benefits based on compensation during any period, the normal retirement benefit to which a participant would be entitled shall be determined as if he continued to earn annually the average rate of compensation which he earned during consecutive years of service, not in excess of 10, for which his compensation was the highest. For purposes of this subparagraph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year. " (B) 1331/^ PERCENT RULE.—A defined benefit plan satisfies the requirements of this paragraph for a particular plan year if under the plan the accrued benefit payable at the normal retirement age is equal to the normal retirement benefit and the annual rate at which any individual who is or could be a participant can accrue the retirement benefits payable at normal retirement age under the plan for any later plan year is not more than I33I/3 percent of the annual rate at which he can accrue benefits for any plan year beginning on or after such particular plan year and before such later plan year. For purposes of this subparagraph— " (i) any amendment to the plan which is in effect for the current year shall be treated as in effect for all other plan years; "(ii) any change in an accrual rate which does not apply to any individual who is or could be a participant in the current year shall be disregarded;

907

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PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

"(iii) the fact that benefits under the plan may be payable to certain employees before normal retirement age shall be disregarded; and "(iv) social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after the current year. " (C) FRACTIONAL RULE.—A defined benefit plan satisfies the requirements of this paragraph if the accrued benefit to which any participant is entitled upon his separation from the service is not less than a fraction of the annual benefit commencing at normal retirement age to which he would be entitled under the plan as in efi'ect on the date of his separation if he continued to earn annually until normal retirement age the same rate of compensation upon which his normal retirement benefit would be computed under the plan, determined as if he had attained normal retirement age on the date on which any such determination is made (but taking into account no more than the 10 years of service immediately preceding his separation from service). Such fraction shall be a fraction, not exceeding 1, the numerator of which is the total number of his years of participation in the plan (as of the date of his separation from the service) and the denominator of which is the total number of years he would have participated in the plan if he separated from the service at the normal retirement age. For purposes of this subparagraph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year. "(D)

Ante, p. 898.

ACCRUAL FOR SERVICE BEFORE EFFECTIVE

DATE.—

Subparagraphs (A), (B), and (C) shall not apply with respect to years of participation before the first plan year to which this section applies, but a defined benefit plan satisfies the requirements of this subparagraph with respect to such years of participation only if the accrued benefit of any participant with respect to such years of participation is not less than the greater of— " (i) his accrued benefit determined under the plan, as in effect from time to time prior to the date of the enactment of the Employee Retirement Income Security Act of 1974, or " (ii) an accrued benefit which is not less than one-half of the accrued benefit to which such participant would have been entitled if subparagraph (A), (B), or (C) applied with respect to such years of participation. " (E) F I R S T TWO YEARS OF SERVICE.—Notwithstanding subparagraphs (A), (B), and (C) of this paragraph, a plan shall not be treated as not satisfying the requirements of this paragraph solely because the accrual of benefits under the plan does not become effective until the employee has two continuous years of service. For purposes of this subparagraph, the term 'years of service' has the meaning provided by section 410(a)(3)(A). "(F)

CERTAIN INSURED DEFINED BENEFIT PLANS.—Notwith-

standing subparagraphs (A), (B), and (C), a defined benefit

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