Page:United States Statutes at Large Volume 111 Part 1.djvu/1088

 Ill STAT. 1064 PUBLIC LAW 105-34—AUG. 5, 1997 "(G) A governmental plan (within the meaning of section 414(d)) maintained by a State or local government or political subdivision thereof (or agency or instrumentality thereof) shall be treated as meeting the requirements of this paragraph.", (c) NONDISCRIMINATION RULES FOR SECTION 403(b) PLANS. — Section 403(b)(12) (relating to nondiscrimination requirements) is amended by adding at the end the following: "(C) STATE AND LOCAL GOVERNMENTAL PLANS.— For purposes of paragraph (1)(D), the requirements of subparagraph (A)(i) (other than those relating to section 401(a)(17)) shall not apply to a governmental plan (within the meaning of section 414(d)) maintained by a State or local government or political subdivision thereof (or agency or instrumentality thereof).". 26 USC 401 note. (d) EFFECTIVE DATES.— (1) IN GENERAL.— The amendments made by this section apply to taxable years beginning on or after the date of enactment of this Act. (2) TREATMENT FOR YEARS BEGINNING BEFORE DATE OF ENACTMENT. —^A governmental plan (within the meaning of section 414(d) of the Internal Revenue Code of 1986) maintained by a State or local government or political subdivision thereof (or agency or instrumentality thereof) shall be treated as satisfying the requirements of sections 401(a)(3), 401(a)(4), 401(a)(26), 401(k), 401(m), 403 (b)(1)(D) and (b)(12), and 410 of such Code for all taxable years beginning before the date of enactment of this Act. SEC. 1606. CLARIFICATION OF CERTAIN RULES RELATING TO EMPLOYEE STOCK OWNERSHIP PLANS OF S CORPORA- TIONS. (a) CERTAIN CASH DISTRIBUTIONS PERMITTED.— (1) Paragraph (2) of section 409(h) is amended by adding at the end the following new subparagraph: " (B) EXCEPTION FOR CERTAIN PLANS RESTRICTED FROM DISTRIBUTING SECURITIES.— "(i) IN GENERAL.—^A plan to which this subparagraph applies shall not be treated as failing to meet the requirements of this subsection or section 401(a) merely because it does not permit a participant to exercise the right described in paragraph (1)(A) if such plan provides that the participant entitled to a distribution has a right to receive the distribution in cash, except that such plan may distribute employer securities subject to a requirement that such securities may be resold to the employer under terms which meet the requirements of paragraph (1)(B). "(ii) APPLICABLE PLANS. — This subparagraph shall apply to a plan which otherwise meets the requirements of this subsection or section 4975(e)(7) and which is established and maintained by— "(I) an employer whose charter or bylaws restrict the ownership of substantially all outstanding employer securities to employees or to a trust described in section 401(a), or "(II) an S corporation.".

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