Page:United States Statutes at Large Volume 100 Part 3.djvu/637

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2445

(1) IN GENERAL.—Subsection (b) of section 402 (relating to taxability of beneficiary of nonexempt trust) is amended by adding at the end thereof the following new paragraph: "(2) FAILURE TO MEET REQUIREMENTS OF SECTION 4i0(b).—

"(A) IN GENERAL.—In the case of a trust which is not exempt from tax under section 501(a) solely because such trust is part of a plan which fails to meet the requirements of section 410(b)— "(i) such trust shall be treated as exempt from tax under section 501(a) for purposes of applying paragraph (1) to employees who are not highly compensated employees, and "(ii) paragraph (1) shall be applied to the vested accrued benefit (other than employee contributions) of any highly compensated employee as of the close of the employer's taxable year described in paragraph (1) (rather than contributions made during such year). "(B) FAILURE IN MORE THAN i YEAR.—If a plan fails to meet the requirements of section 410(b) for more than 1 taxable year, any portion of the vested accrued benefit to which subparagraph (A) applies shall be included in gross income only once. "(C) HIGHLY COMPENSATED EMPLOYEE.—For purposes of

this paragraph, the term 'highly compensated employee' has the meaning given such term by section 414(q)." (2) CONFORMING AMENDMENT.—The heading for section 402(b)

is amended to read as follows: "(b) TAXABILITY OF BENEFICIARY OF NONEXEMPT TRUST.— "(1) IN GENERAL.—". (d) TECHNICAL AND CONFORMING AMENDMENTS.—

(1) Section 401(k)(3)(A) is amended by striking out "subparagraph (A) or (B) o f before "section 410(b)(1)". (2) Section 404(a)(2) is amended by striking out "and (22)" and inserting in lieu thereof "(22), and (26)". (3) Sections 4060t))(l) and 4070t))(l) are each amended by striking out "(without regard to paragraph (1)(A) thereof)' after "section 410(b)". (4) Section 818(a)(3) is amended by striking out "and (22)" and inserting in lieu thereof "(22), and (26)". (e) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendments made by this section shall apply to plan years beginning after December 31, 1988. (2) SPECIAL RULE FOR COLLECTIVE BARGAINING AGREEMENTS.—

In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before March 1, 1986, the amendments made by this section shall not apply to employees covered by any such agreement in plan years beginning before the earlier of— (A) the later of— (i) January 1, 1989, or •I (ii) the date on which the last of such collective • bargaining agreement terminates (determined without regard to any extension thereof after February 28, 1986), or (B) January 1, 1991. (3) WAIVER OF EXCISE TAX ON REVERSIONS.—

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