Page:United States Statutes at Large Volume 110 Part 3.djvu/76

 110 STAT. 1806 PUBLIC LAW 104-188—AUG. 20, 1996 " (11) ALTERNATIVE METHOD OF SATISFYING TESTS. — "(A) IN GENERAL. — A defined contribution plan shall be treated as meeting the requirements of paragraph (2) with respect to matching contributions if the plan— "(i) meets the contribution requirements of subparagraph (B) or (C) of subsection (k)(12), "(ii) meets the notice requirements of subsection (k)(12)(D), and "(iii) meets the requirements of subparagraph (B). "(B) LIMITATION ON MATCHING CONTRIBUTIONS.—The requirements of this subparagraph are met if— "(i) matching contributions on behalf of any employee may not be made with respect to an employ- ee's contributions or elective deferrals in excess of 6 percent of the employee's compensation, "(ii) the rate of an employer's matching contribution does not increase as the rate of an employee's contributions or elective deferrals increase, and "(iii) the matching contribution with respect to any highly compensated employee at any rate of an employee contribution or rate of elective deferral is not greater than that with respect to an employee who is not a highly compensated employee.". (c) YEAR FOR COMPUTING NONHIGHLY COMPENSATED EMPLOYEE PERCENTAGE.— (1) CASH OR DEFERRED ARRANGEMENTS.— Section 401(k)(3)(A) is amended— (A) by striking "such year" in clause (ii) and inserting "the plan year", (B) by striking "for such plan year" in clause (ii) and inserting "for the preceding plan year", and (C) by adding at the end the following new sentence: "An arrangement may apply clause (ii) by using the plan year rather than the preceding plan year if the employer so elects, except that if such an election is made, it may not be changed except as provided by the Secretary.". (2) MATCHING AND EMPLOYEE CONTRIBUTIONS.— Section 401(m)(2)(A) is amended— (A) by inserting "for such plan year" after "highly compensated employees", (B) by inserting "for the preceding plan year" after "eligible employees" each place it appears in clause (i) and clause (ii), and (C) by adding at the end the following flush sentence: "This subparagraph may be applied by using the plan year rather than the preceding plan year if the employer so elects, except that if such an election is made, it may not be changed except as provided by the Secretary.". (d) SPECIAL RULE FOR DETERMINING AVERAGE DEFERRAL PERCENTAGE FOR FIRST PLAN YEAR, ETC. — (1) Paragraph (3) of section 401(k) is amended by adding at the end the following new subparagraph: "(E) For purposes of this paragraph, in the case of the first plan year of any plan (other than a successor plan), the amount taken into account as the actual deferral percentage of nonhighly compensated employees for the preceding plan year shall be—

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