September 2, 1974 - 151 Pub. Law 93-406 transaction (within the meaning of section 503(b) of such (C) the sale, exchange, or other disposition of property (i) in the case of a sale, exchange, or other disposition of the property by the plan to the disqualified person, the plan receives an amount which is not less than the fair market value of the property at the time of such disposition; and (ii) in the case of the acquisition of the property by the plan, the plan pays an amount which is not in excess of the fair market value of the property at the time of such acquisition; (D) Until June 30, 1977, the provision of services to which subparagraphs (A), (B), and (C) do not apply between a plan and a disqualified person (i) under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such contract), or (ii) if the disqualified person ordinarily and customarily furnished such services on June 30, 1974, if such provision of services remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the provision of services was not, at the time of such provision, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law; or (E) the sale, exchange, or other disposition of property which is owned by a plan on June 30, 1974, and all times thereafter, to a disqualified person, if such plan is required to dispose of such property in order to comply with the provisions of section 407(a)(2)(A) (relating to the prohibition against holding excess employer securities and employer real property) of the Employee Retirement Income Security Act 88 STAT 979 26 USC 503. of 1974, and if the plan receives not less than adequate Ante, p. 880. consideration. For the purposes of this paragraph, the term "disqualified person" has the meaning provided by section 4975 (e) (2) of the Internal Revenue Code of 1954. SEC. 2004. LIMITATIONS ON BENEFITS AND CONTRIBUTIONS. (a) PLAN REQUIREMENTS. (1) Section 401 (a) (relating to requirements for qualification) is amended by inserting after paragraph (15) the following new paragraph: "(16) A trust shall not constitute a qualified trust under this section if the plan of which such trust is a part provides for benefits or contributions which exceed the limitations of section 415." Ante, p. 938. Infra. (2) Subpart B of part I of subchapter D of chapter 1 is amended by inserting after section 414 the following new section: Ante, p. 925. "SEC. 415. LIMITATIONS ON BENEFITS AND CONTRIBUTION UNDER QUALIFIED PLANS. "(a) GENERAL RULE.— "(1) TRUSTS.-A trust which is a part of a pension, profitsharing, or stock bonus plan shall not constitute a qualified trust under section 401 (a) if— "(A) in the case of a defined benefit plan, the plan provides for the payment of benefits with respect to a participant which exceed the limitation of subsection (b), "(B) in the case of a defined contribution plan, contributions and other additions under the plan with respect to any Ante, p. 935. 88 STAT. 980 Pub. Law 93-406 Ante, p. 969. Ante, p. 959. 26 USC 405. Ante, p. 964. participant for any taxable year exceed the limitation of subsection (c), or "(C) in any case in which an individual is a participant in both a defined benefit plan and a defined contribution plan maintained by the employer, the trust has been disqualified under subsection (g). "(2) SECTION APPLIES TO CERTAIN ANNUITIES AND ACCOUNTS.— in the case of "(A) an employee annuity plan described in section 403 (a), "(B) an annuity contract described in section 403(b), "(C) an individual retirement account described in section 408(a), "(D) an individual retirement annuity described in section 408 (b), "(E) a plan described in section 405 (a), or "(F) a retirement bond described in section 409, such contract, annuity plan, account, annuity, plan, or bond shall not be considered to be described in section 403 (a), 403 (b), 405 (a), 408 (a), 408 (b), or 409, as the case may be, unless it satisfies the requirements of subparagraph (A) or subparagraph (B) of paragraph (1), whichever is appropriate, and has not been disqualified under subsection (g). In the case of an annuity contract described in section 403(b), the preceding sentence shall apply only to the portion of the annuity contract which exceeds the limitation of subsection (b) or the limitation of subsection (c), whichever is appropriate, and the amount of the contribution for such portion shall reduce the exclusion allowance as provided in section 403 (b)(2). "(b) LIMITATION FOR DEFINED BENEFIT PLANS. Ante, pp. 968, 969. "(1) IN GENERAL.-Benefits with respect to a participant exceed the limitation of this subsection if, when expressed as an annual benefit (within the meaning of paragraph (2)), such annual benefit is greater than the lesser of "(A) $75,000, or "(B) 100 percent of the participant's average compensation for his high 3 years. "(2) ANNUAL BENEFIT.— "(A) IN GENERAL.-For purposes of paragraph (1), the term 'annual benefit' means a benefit payable annually in the form of a straight life annuity (with no ancillary benefits) under a plan to which employees do not contribute and under which no rollover contributions (as defined in sections 402 (a) (5), 403 (a) (4), 408 (d) (3), and 409 (b) (3) (C) are made. "(B) ADJUSTMENT FOR CERTAIN OTHER FORMS OF BENEFIT.— If the benefit under the plan is payable in any form other than the form described in subparagraph (A), or if the employees contribute to the plan or make rollover contributions (as defined in sections 402 (a) (5), 403 (a) (4), 408 (d) (3) and 409 (b)(3)(C)), the determinations as to whether the limitation described in paragraph (1) has been satisfied shall be made, in accordance with regulations prescribed by the Secretary or his delegate, by adjusting such benefit so that it is equivalent to the benefit described in subparagraph (A). For purposes of this subparagraph, any ancillary benefit which is not directly related to retirement income benefits shall not be taken into account; and that portion of any joint and survivor annuity which constitutes a qualified joint and survivor annuity (as defined in section 401 (a) (11) (H) (iii)) Ante, p. 935. shall not be taken into account. "(C) ADJUSTMENT ΤΟ $75,000 LIMIT WHERE BENEFIT BEGINS BEFORE AGE 55.-If the retirement income benefit under the plan begins before age 55, the determination as to whether the $75,000 limitation set forth in paragraph (1) (A) has been satisfied shall be made, in accordance with regulations prescribed by the Secretary or his delegate, by adjusting such benefit so that it is equivalent to such a benefit beginning at age 55. "(3) AVERAGE COMPENSATION FOR HIGH 3 YEARS.-For purposes of paragraph (1), a participant's high 3 years shall be the period of consecutive calendar years (not more than 3) during which the participant both was an active participant in the plan and had the greatest aggregate compensation from the employer. In the case of an employee within the meaning of section 401 (c) (1), the preceding sentence shall be applied by substituting 26 USC 401. for 'compensation from the employer' the following: 'the participant's earned income (within the meaning of section 401(c) (2) but determined without regard to any exclusion under section 911)'. "(4) TOTAL ANNUAL BENEFITS NOT IN EXCESS OF $10,000.-Notwithstanding the preceding provisions of this subsection, the benefits payable with respect to a participant under any defined benefit plan shall be deemed not to exceed the limitation of this subsection if "(A) the retirement benefits payable with respect to such participant under such plan and under all other defined benefit plans of the employer do not exceed $10,000 for the plan year, or for any prior plan year, and "(B) the employer has not at any time maintained a defined contribution plan in which the participant participated. "(5) REDUCTION FOR SERVICE LESS THAN 10 YEARS.-In the case of an employee who has less than 10 years of service with the employer, the limitation referred to in paragraph (1), and the limitation referred to in paragraph (4), shall be the limitation determined under such paragraph (without regard to this paragraph), multiplied by a fraction, the numerator of which is the number of years (or part thereof) of service with the employer and the denominator of which is 10. (6) COMPUTATION OF BENEFITS AND CONTRIBUTIONS.-The computation of— "(A) benefits under a defined contribution plan, for purposes of section 401 (a) (4), Ante, p. 938. "(B) contributions made on behalf of a participant in a defined benefit plan, for purposes of section 401(a) (4), and "(C) contributions and benefits provided for a participant in a plan described in section 414(k), for purposes of this Ante, p. 925. section shall not be made on a basis inconsistent with regulations prescribed by the Secretary or his delegate. "(c) LIMITATION FOR DEFINED CONTRIBUTION PLANS. "(1) IN GENERAL.-Contributions and other additions with respect to a participant exceed the limitation of this subsection if. when expressed as an annual addition (within the meaning of 88 STAT. 982 Pub. Law 93-406 154 September 2, 1974 paragraph (2)) to the participant's account, such annual addition is greater than the lesser of $25,000, or "(B) 25 percent of the participant's compensation. "(2) ANNUAL ADDITION.--For purposes of paragraph (1), the term 'annual addition' means the sum for any year of "(A) employer contributions, "(B) the lesser of— "(i) the amount of the employee contributions in excess of 6 percent of his compensation, or "(ii) one-half of the employee contributions, and "(C) forfeitures. For the purposes of this paragraph, employee contributions under subparagraph (B) are determined without regard to any rollover Ante, pp. 968, contributions (as defined in sections 402(a) (5), 403 (a) (4), 969, 959, 964, 408 (d) (3), and 409 (b) (3) (C)). 26 USC 401. Post, p. 986. Arte, p. 940. "(3) PARTICIPANT'S COMPENSATION. For purposes of paragraph (1), the term 'participant's compensation' means the compensation of the participant from the employer for the year. In the case of an employee within the meaning of section 401 (c) (1), the preceding sentence shall be applied by substituting for 'compensation of the participant from the employer' the following: the participant's earned income (within the meaning of section 401 (c) (2) but determined without regard to any exclusion under section 911)'. "(4) SPECIAL ELECTION FOR SECTION 403(b) CONTRACTS PUR CHASED BY EDUCATIONAL INSTITUTIONS, HOSPITALS, AND HOME HEALTH SERVICE AGENCIES. "(A) In the case of amounts contributed for an annuity contract described in section 403(b) for the year in which occurs a participant's separation from the service with an educational institution, a hospital, or a home health service agency, at the election of the participant there is substituted for the amount specified in paragraph (1)(B) the amount of the exclusion allowance which would be determined under section 403(b) (2) (without regard to this section) for the participant's taxable year in which such separation occurs if the participant's years of service were computed only by taking into account his service for the employer during the period of years (not exceeding ten) ending on the date of such separation. "(B) In the case of amounts contributed for an annuity contract described in section 403(b) for any year in the case of a participant who is an employee of an educational institution, a hospital, or a home health service agency, at the election of the participant there is substituted for the amount specified in paragraph (1)(B) the least of "(i) 25 percent of the participant's includible compensation (as defined in section 403(b) (3)) plus $4,000, "(ii) the amount of the exclusion allowance determined for the year under section 403(b) (2), or "(iii) $15,000. "(C) In the case of amounts contributed for an annuity contract described in section 403(b) for any year for a participant who is an employee of an educational institution, a hospital, or a home health service agency, at the election of the participant the provisions of section 403(b) (2) (A) shall not apply. September 2, 1974 - 155 Pub. Law 93-406 "(D) (i) The provisions of this paragraph apply only if the participant elects its application at the time and in the manner provided under regulations prescribed by the Secretary or his delegate. Not more than one election may be made under subparagraph (A) by any participant. A participant who elects to have the provisions of subparagraph (A), (B), or (C) of this paragraph apply to him may not elect to have any other subparagraph of this paragraph apply to him. Any election made under this paragraph is irrevocable. "(ii) For purposes of this paragraph the term 'educational institution' means an educational institution as defined in section 151 (e) (4). "(iii) For purposes of this paragraph the term 'home "(A) the $75,000 amount in subsection (b) (1) (A), for increases in the cost of living in accordance with regulations "(2) BASE PERIODS.-The base period taken into account- "(A) for purposes of subparagraphs (A) and (B) of paragraph (1) is the calendar quarter beginning October 1, 1974, and "(B) for purposes of subparagraph (C) of paragraph (1) is the last calendar quarter of the calendar year before the calendar year in which the participant is separated from service. "(e) LIMITATION IN CASE OF DEFINED BENEFIT PLAN AND DEFINED CONTRIBUTION PLAN FOR SAME EMPLOYEE.— “(1) IN GENERAL.-In any case in which an individual is a participant in both a defined benefit plan and a defined contribution plan maintained by the same employer, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any year may not exceed 1.4. "(2) DEFINED BENEFIT PLAN FRACTION. For purposes of this subsection, the defined benefit plan fraction for any year is a fraction "(A) the numerator of which is the projected annual benefit of the participant under the plan (determined as of the close of the year), and "(B) the denominator of which is the projected annual benefit of the participant under the plan (determined as of the close of the year) if the plan provided the maximum benefit allowable under subsection (b). "(3) DEFINED CONTRIBUTION PLAN FRACTION.-For purposes of this subsection, the defined contribution plan fraction for any year is a fraction 88 STAT. 983 "Educational institution." 79 Stat. 313; 86 Stat. 1413. 42 USC 1395x. 42 USC 415. |