Page:United States Statutes at Large Volume 102 Part 4.djvu/492

 102 STAT. 3462

PUBLIC LAW 100-647—NOV. 10, 1988 "(I) as elective employer contributions to the simplified employee pension on behalf of the employee, or (II) to the employee directly in cash. "(ii) 5 0 PERCENT OP ELIGIBLE EMPLOYEES MUST ELECT.—

Clause (i) shall not apply to a simplified employee pension unless an election described in clause (i)(1) is made or is in effect with respect to not less than 50 percent of the employees of the employer eligible to participate. "(iii) REQUIREMENTS RELATING TO DEFERRAL PERCENTAGE.—Clause (i) shall not apply to a simplified employee pension for any year unless the deferral percentage for such year of each highly compensated employee eligible to participate is not more than the product of— "(I) the average of the deferral percentages for such year of all employees (other than highly compensated employees) eligible to participate, multiplied by "(II) 1.25." (2) Section 408(k)(6)(B) of the 1986 Code (relating to exception where more than 25 employees) is amended by inserting who were eligible to participate (or would have been required to be eligible to participate if a pension was maintained)" after "25 employees'. (3)(A) Section 408(k)(6)(D)(ii) of the 1986 Code (defining deferral percentage) is amended by striking out "(within the meaning of section 414(s))" and inserting in lieu thereof "(not in excess of the first $200,000)". (B) Subparagraph (B) of section 408(k)(7) of the 1986 Code (defining compensation) is amended to read as follows: "(B) COMPENSATION.—Except as provided in paragraph (2)(0), the term 'compensation' has the meaning given such term by section 414(s)." (C) Subparagraph (C) of section 408(k)(3) of the 1986 Code is amended by striking out "total" before "compensation". (D) Section 408(k)(8) of the 1986 Code is amended by striking out "paragraph (3)(C)" and inserting in lieu thereof "paragraphs (3)(C)and(6)(D)(ii)". (4) Section 408(k)(6) of the 1986 Code (relating to employee may elect salary reduction arrangement) is amended by redesignating subparagraph (F) as subparagraph (G) and by inserting after subparagraph (E) the following new subparagraph: "(F) EXCEPTION WHERE PENSION DOES NOT MEET REQUIREMENTS NECESSARY TO INSURE DISTRIBUTION OF EXCESS CON-

TRIBUTIONS.—This paragraph shall not apply with respect to any year for which the simplified employee pension does not meet such requirements as the Secretary may prescribe as are necessary to insure that excess contributions are distributed in accordance with subparagraph (C), including— "(i) reporting requirements, and "(ii) requirements which, notwithstanding paragraph (4), provide that contributions (and any income allocable thereto) may not be withdrawn from a simplified employee pension until a determination has been made

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