Page:United States Statutes at Large Volume 100 Part 3.djvu/610

 100 STAT. 2418

PUBLIC LAW 99-514—OCT. 22, 1986

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"(ii) not later than the 1st April 15 following the close of the taxable year, each such plan may distribute to the individual the amount allocated to it under clause (i) (and any income allocable to such amount). The distribution described in clause (ii) may be made notwithstanding any other provision of law. "(B)

TREATMENT

OF

DISTRIBUTION

UNDER

SECTION

401 (k).—Except to the extent provided under rules prescribed by the Secretary, notwithstanding the distribution of any portion of an excess deferral from a plan under subparagraph (A)(ii), such portion shall, for purposes of applying section 401(k)(3)(A)(ii), be treated as an employer contribution. "(C) TAXATION OF DISTRIBUTION.—In the case of a distribution to which subparagraph (A) applies— "(i) except as provided in clause (ii), such distribution shall not be included in gross income (and no tax shall be imposed under section 72(t)), and "(ii) any income on the excess deferral shall, for purposes of this chapter, be treated as earned and received in the taxable year in which such excess deferral is made. "(3) ELECTIVE DEFERRALS.—For purposes of this paragraph, the term 'elective deferrals' means, with respect to any taxable year, the sum of— "(A) any employer contribution under a qualified cash or deferred arrangement (as defined in section 401(k)) to the extent not includible in gross income for the taxable year under subsection (a)(8) (determined without regard to this subsection), "(B) any employer contribution to the extent not includible in gross income for the taxable year under subsection (h)(1)(B) (determined without regard to this subsection), and "(C) any employer contribution to purchase an annuity contract under section 403(b) under a salary reduction agreement (within the meaning of section 3121(a)(5)(D)). "(4)

INCREASE IN LIMIT FOR AMOUNTS CONTRIBUTED UNDER

SECTION 403 (b) CONTRACTS.—The limitation under paragraph (1) shall be increased (but not to an amount in excess of $9,500) by the amount of any employer contributions for the taxable year described in paragraph (3)(C). "(5) COST-OF-LIVING ADJUSTMENT.—The Secretary shall adjust the $7,000 amount under paragraph (1) at the same time and in the same manner as under section 415(d). "(6) DISREGARD OF COMMUNITY PROPERTY LAWS.—This subsection shall be applied without regard to community property laws. "(7) COORDINATION WITH SECTION 72.—For purposes of applying section 72, any amount includible in gross income for any taxable year under this subsection but which is not distributed from the plan during such taxable year shall not be treated as investment in the contract. "(8) SPECIAL RULE FOR CERTAIN ORGANIZATIONS.—

"(A) IN GENERAL.—In the case of a qualified employee of a qualified organization, with respect to employer contributions described in paragraph (3)(C) made by such organiza-

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