Page:United States Statutes at Large Volume 120.djvu/1067

 120 STAT. 1036

26 USC 416.

VerDate 14-DEC-2004

10:20 Jul 12, 2007

PUBLIC LAW 109–280—AUG. 17, 2006

(12) as paragraph (13) and by inserting after paragraph (11) the following new paragraph: ‘‘(12) ALTERNATIVE METHOD FOR AUTOMATIC CONTRIBUTION ARRANGEMENTS.—A defined contribution plan shall be treated as meeting the requirements of paragraph (2) with respect to matching contributions if the plan— ‘‘(A) is a qualified automatic contribution arrangement (as defined in subsection (k)(13)), and ‘‘(B) meets the requirements of paragraph (11)(B).’’. (c) EXCLUSION FROM DEFINITION OF TOP-HEAVY PLANS.— (1) ELECTIVE CONTRIBUTION RULE.—Clause (i) of section 416(g)(4)(H) of such Code is amended by inserting ‘‘or 401(k)(13)’’ after ‘‘section 401(k)(12)’’. (2) MATCHING CONTRIBUTION RULE.—Clause (ii) of section 416(g)(4)(H) of such Code is amended by inserting ‘‘or 401(m)(12)’’ after ‘‘section 401(m)(11)’’. (d) TREATMENT OF WITHDRAWALS OF CONTRIBUTIONS DURING FIRST 90 DAYS.— (1) IN GENERAL.—Section 414 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: ‘‘(w) SPECIAL RULES FOR CERTAIN WITHDRAWALS FROM ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGEMENTS.— ‘‘(1) IN GENERAL.—If an eligible automatic contribution arrangement allows an employee to elect to make permissible withdrawals— ‘‘(A) the amount of any such withdrawal shall be includible in the gross income of the employee for the taxable year of the employee in which the distribution is made, ‘‘(B) no tax shall be imposed under section 72(t) with respect to the distribution, and ‘‘(C) the arrangement shall not be treated as violating any restriction on distributions under this title solely by reason of allowing the withdrawal. In the case of any distribution to an employee by reason of an election under this paragraph, employer matching contributions shall be forfeited or subject to such other treatment as the Secretary may prescribe. ‘‘(2) PERMISSIBLE WITHDRAWAL.—For purposes of this subsection— ‘‘(A) IN GENERAL.—The term ‘permissible withdrawal’ means any withdrawal from an eligible automatic contribution arrangement meeting the requirements of this paragraph which— ‘‘(i) is made pursuant to an election by an employee, and ‘‘(ii) consists of elective contributions described in paragraph (3)(B) (and earnings attributable thereto). ‘‘(B) TIME FOR MAKING ELECTION.—Subparagraph (A) shall not apply to an election by an employee unless the election is made no later than the date which is 90 days after the date of the first elective contribution with respect to the employee under the arrangement. ‘‘(C) AMOUNT OF DISTRIBUTION.—Subparagraph (A) shall not apply to any election by an employee unless the amount of any distribution by reason of the election

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