Page:United States Statutes at Large Volume 102 Part 4.djvu/495

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3465

subparagraphs (A) and (B) and inserting in lieu thereof the following: "(A) HIGHLY COMPENSATED EMPLOYEES.—If 1 of the reasons a trust is not exempt from tax under section 501(a) is the failure of the plan of which it is a part to meet the requirements of section 401(a)(26) or 410(b), then a highly compensated employee shall, in lieu of the amount determined under paragraph (1), include in gross income for the taxable year with or within which the taxable year of the trust ends an amount equal to the vested accrued benefit of such employee (other than the employee's investment in the contract) as of the close of such taxable year of the trust. "(B) FAILURE TO MEET COVERAGE TESTS.—If a trust is not exempt from tax under section 501(a) for any taxable year solely because such trust is part of a plan which fails to meet the requirements of section 401(a)(26) or 410(b), paragraph (1) shall not apply by reason of such failure to any employee who was not a highly compensated employee during— "(i) such taxable year, or "(ii) any preceding period for which service was creditable to such employee under the plan." (5» Subsections (m)(4)(A) and (n)(3)(A) of section 414 of the 1986 Code are each amended by striking out "and (16)" and inserting in lieu thereof "(16), (17), and (26)". (6) Clause (iii) of section 1112(e)(3)(A) of the Reform Act is 26 USC 401 note. amended by striking out "a plan or merger" and inserting in lieu thereof "the plan". (7) Section 1112(e)(2) of the Reform Act is amended by striking out "employees covered by such agreement in". (8) Subsection (e) of section 1112 of the Reform Act is amended by striking out paragraph (3)(C) and by adding at the end of such subsection the following new paragraph: "(4) SPECIAL RULE FOR PLANS WHICH MAY NOT TERMINATE.—To

the extent provided in r^ulations prescribed by the Secretary of the Treasury or his delegate, if a plan is prohibited from terminating under title IV of the Employee Retirement Income Security Act of 1974 before the 1st year to which the amendment made by subsection (b) would apply, the amendment made by subsection (b) shall only apply to years after the 1st year in which the plan is able to terminate." (9) Subparagraph (B) of section 1112(e)(3) of the Reform Act is amended to read as follows: "(B) INTEREST RATE FOR DETERMINING ACCRUED BENEFIT OF HIGHLY C O M P E N S A T E D EMPLOYEES FOR CERTAIN PURPOSES.—In

the case of a termination, transfer, or distribution of assets of a plan described in subparagraph (A)(ii) before the 1st year to which the amendment made by subsection (b) applies— "(i) AMOUNT ELIGIBLE FOR ROLLOVER, INCOME AVERAGING, OR TAX-FREE TRANSFER.—For purposes of determin-

ing any eligible amount, the present value of the accrued benefit of any highly compensated employee shall be determined by using an interest rate not less than the highest of—

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