Page:United States Statutes at Large Volume 94 Part 1.djvu/252

 94 STAT. 202

26 USC 219.

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PUBLIC LAW 96-222—APR. 1, 1980

of subparagraph (B), by striking out the semicolon at the end of subparagraph (C) and inserting in lieu thereof ", or", and by adding at the end thereof the following new subparagraph: "(D) under a simplified employee pension if, at the time of the payment, it is reasonable to believe that the employee will be entitled to a deduction under section 219 for such payment;". (C) CORRECTION OF CERTAIN EXCESS CONTRIBUTIONS.—Sub-

26 USC 408.

26 USC 219.

paragraph (A) of section 408(d)(5) (relating to certain distributions of excess contributions after due date for taxable year) is amended by adding at the end thereof the following new sentence: "If employer contributions on behalf of the individual are paid for the taxable year to a simplified employee pension, the dollar limitation of the preceding sentence shall be increeised by the lesser of the amount of such contributions or $7,500." (D) CLARIFICATION OF SECTION 219(b)(7).—Paragraph (7) of section 2190t)) (relating to simplified employee pensions) is amended to read as follows: "(7) SPECIAL RULES IN CASE OF SIMPUFIED EMPLOYEE PENSIONS.—

"(A) LIMITATION.—If there is an employer contribution on behalf of the employee to a simplified employee pension, the limitation under paragraph (1) shall be the lesser of— "(i) 15 percent of the compensation includible in the employee's gross income for the taxable year (determined without regard to the employer contribution to the simplified employee pension), or "(ii) the sum of— "(I) the amount contributed by the employer to the simplified employee pension and included in gross income G)ut not in excess of $7,500), and "(II) $1,500, reduced (but not below zero) by the amount described in subclause (I). "(B) CERTAIN LIMITATIONS DO NOT APPLY TO EMPLOYER

CONTRIBUTION.—Paragraphs (2) and (3) shall not apply with respect to the employer contribution to a simplified employee pension. "(C) SPECIAL RULE FOR APPLYING SUBPARAGRAPH (A)(ii).—

In the case of an employee who is an officer, shareholder, or owner-employee described in section 408(k)(3), the $7,500 amount specified in subparagraph (A)(ii)(I) shall be reduced by the amount of tax taken into account with respect to such individual under subparagraph (D) of section 408(k)(3)." (E) COORDINATION WITH PLAN FOR SHAREHOLDER-EMPLOY-

26 USC 404.

EES.—Paragraph (4) of section 404(h) (relating to effect on self-employed individuals) is amended— (i) by inserting "or described in section 1379(b)(1)" after "of subsection (e)", (ii) by inserting "or a shareholder-employee (as defined in section 1379(d))" after "section 401(c)(1)", and (iii) by striking out "SELF-EMPLOYED INDIVIDUALS" in

the paragraph heading and inserting in lieu thereof "SELF-EMPLOYED EMPLOYEES".

INDIVIDUALS

OR

SHAREHOLDER-

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