Page:United States Statutes at Large Volume 92 Part 3.djvu/155

 PUBLIC LAW 95-600—NOV. 6, 1978

92 STAT. 2787

"(4) HIGHLY COMPENSATED EMPLOYEE.—For purposes of this subsection, the term 'highly compensated employee' means any employee who is more highly compensated than two-thirds of all eligible employees, taking into account only compensation which is considered in applying paragraph (3)." (b) TAXABILITY OF BENEFICIARIES.—Subsection (a) of section 402 is 26 USC 402

amended by adding at the end thereof the following new paragraph: "(8) CASH OR DEFERRED ARRANGEMENTS.—For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) shall not be treated 26 USC 401. as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash." 26 USC 401 (1) IN GENERAL.—The amendments made by this section shall note.

(c) EFFECTIVE DATE.—

apply to plan years beginning after December 31, 1979. (2) TRANSITIONAL RULE.—In the case of cash or deferred arrangements in existence on June 27, 1974— (A) the qualification of the plan and the trust under section 401 of the Internal Revenue Code of 1954; (B) the exemption of the trust under section 501(a) of such Code; (C) the taxable year of inclusion in gross income of the employee of any amount so contributed by the employer to the trust; and (D) the excludability of the interest of the employee in the trust under sections 2039 and 2517 of such Code, shall be determined for plan years beginning before January 1, 1980 in a manner consistent with Revenue Ruling 56-497 (1956-2 C.B. 284), Revenue Ruling 63-180 (1963-2 C.B, 189), and Revenue Ruling 68-89 (1968-1 C.B. 402).

26 USC 401. 26 USC 501.

26 USC 2039, 2517.

PART II—EMPLOYEE STOCK OWNERSHIP PLANS SEC. 141. ESOPS.

(a) IN GENERAL.—Subpart A of part I of subchapter D of chapter 1 (relating to general rule for pension, profit-sharing, stock bonus plans, etc.) is amended by adding at the end thereof the following new section: "SEC. 409A. QUALIFICATIONS FOR ESOPS.

26 USC 409A.

"(a) ESQ? DEFINED.—Except as otherwise provided in this title, for purposes of this title, the term 'ESOP' means a defined contribution plan which— 26 USC 401. "(1) meets the requirements of section 401(a), "(2) is designed to invest primarily in employer securities, and "(3) meets the requirements of subsections (b), (c), (d), (e), (f), (g), and (h) of this section. "(b) REQUIRED ALLOCATION OF EMPLOYER SECURITIES.—

"(1) IN GENERAL.—A plan meets the requirements of this subsection if— "(A) the plan provides for the allocation for the plan year of all employer securities transferred to it or purchased by it (because of the requirements of section 48(n)(l)(A)) to the

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