Page:United States Statutes at Large Volume 120.djvu/1066

 PUBLIC LAW 109–280—AUG. 17, 2006

120 STAT. 1035

arrangement in an amount equal to at least 3 percent of the employee’s compensation. ‘‘(ii) APPLICATION OF RULES FOR MATCHING CONTRIBUTIONS.—The rules of clauses (ii) and (iii) of paragraph (12)(B) shall apply for purposes of clause (i)(I). ‘‘(iii) WITHDRAWAL AND VESTING RESTRICTIONS.— An arrangement shall not be treated as meeting the requirements of clause (i) unless, with respect to employer contributions (including matching contributions) taken into account in determining whether the requirements of clause (i) are met— ‘‘(I) any employee who has completed at least 2 years of service (within the meaning of section 411(a)) has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from such employer contributions, and ‘‘(II) the requirements of subparagraph (B) of paragraph (2) are met with respect to all such employer contributions. ‘‘(iv) APPLICATION OF CERTAIN OTHER RULES.—The rules of subparagraphs (E)(ii) and (F) of paragraph (12) shall apply for purposes of subclauses (I) and (II) of clause (i). ‘‘(E) NOTICE REQUIREMENTS.— ‘‘(i) IN GENERAL.—The requirements of this subparagraph are met if, within a reasonable period before each plan year, each employee eligible to participate in the arrangement for such year receives written notice of the employee’s rights and obligations under the arrangement which— ‘‘(I) is sufficiently accurate and comprehensive to apprise the employee of such rights and obligations, and ‘‘(II) is written in a manner calculated to be understood by the average employee to whom the arrangement applies. ‘‘(ii) TIMING AND CONTENT REQUIREMENTS.—A notice shall not be treated as meeting the requirements of clause (i) with respect to an employee unless— ‘‘(I) the notice explains the employee’s right under the arrangement to elect not to have elective contributions made on the employee’s behalf (or to elect to have such contributions made at a different percentage), ‘‘(II) in the case of an arrangement under which the employee may elect among 2 or more investment options, the notice explains how contributions made under the arrangement will be invested in the absence of any investment election by the employee, and ‘‘(III) the employee has a reasonable period of time after receipt of the notice described in subclauses (I) and (II) and before the first elective contribution is made to make either such election.’’. (b) MATCHING CONTRIBUTIONS.—Section 401(m) of such Code (relating to nondiscrimination test for matching contributions and employee contributions) is amended by redesignating paragraph

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