TO LIMIT WHERE BENEFIT COMPENSATION FOR HIGH 3 September 2, 1974 153 Pub. Law 93-406 88 STAT. 981 survivor annuity (as defined in section 401(a)(11) (H) (iii)) Ante, p. 935. . . shall not be taken into account. “(C) ADJUSTMENT $ 75,000 benefit beginning at age 55. 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 16. “(6) COMPUTATION OF 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 pre scribed 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 BENEFITS AND CHASED BY Pub. Law 93-406 . 154 - September 2, 1974 88 STAT. 982 paragraph (2)) to the participant's account, such annual addition “(A) $25,000, or "(B) 25 percent of the participant's compensation. "(A) employer contributions, "(i) the amount of the employee contributions in "(ii) cne-half of the employee contributions, and "(C) forfeitures. subparagraph (B) are determined without regard to any rollover Ante, pp. 968, contributions (as defined in sections 4027a) (5), 403(a) (4), 969, 959, 964. 408(d)(3), and 409(b) (3) (C)). (3) PARTICIPANT'S COMPENSATION.-For purposes of paragraph (1), the term “participant's compensation' means the com pensation of the participant from the employer for the year. In 26 USC 401. the case of an employee within the meaning of section 401(c)(1), the preceding sentence shall be applied by substituting for 'com- EDUCATIONAL INSTITUTIONS, HOSPITALS, AND HOME “(A) In the case of amounts contributed for an annuity the exclusion allowance which would be determined under Post, p. 986. section 403(b) (2) (without regard to this section) for the participant's taxable year in which such separation occurs if “(B) In the case of amounts contributed for an annuity Ante, p. 940. contract described in section 403(b) for any year in the case of a participant who is an employee of an educational insti- “(i) 25 percent of the participant's includible com- “(ii) the amount of the exclusion allowance deter- “(ii) $15,000. September 2, 1974 . 155 Pub. Law 93-406 88 STAT. 983 “(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 "Educational institution' means an educational institution as defined in sec- institution." tion 151 (e) (4). “(iii) For purposes of this paragraph the term 'home health service agency' means an organization described in subsection 501(c)(3) which is exempt from tax under section 501 (a) and which has been determined by the Secretary of Health, Education, and Welfare to be a home health agency (as defined in section 1861(c) of the Social Security Act). 79 Stat. 313; “(d) Cost-OF-LIVING ADJUSTMENTS.- 86 Stat. 1413. “(1) IN GENERAL.— The Secretary or his delegate shall adjust 42 USC 1335x. annually “(A) the $75,000 amount in subsection (b)(1)(A), "(C) in the case of a participant who is separated from (1)(B), for increases in the cost of living in accordance with regulations prescribed by the Secretary or his delegate. Such regulations shall provide for adjustment procedures which are similar to the procedures used to adjust primary insurance amounts under section 215(i)(2)(A) of the Social Security Act. “(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 PLAX AND DEFIXED 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 emplover, the sum of the defined benefit plar fraction and the defined contribution plan fraction for any vear 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 bene fit 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 42 USC 415. а RULES Pub. Law 93-406 156 - September 2, 1974 88 STAT. 984 “(A) the numerator of which is the sum of the annual additions to the participant's account as of the close of the year, and “(B) the denominator of which is the sum of the maximum amount of annual additions to such account which could have been made under subsection (c) for such year and for each prior year of service with the employer. “(4) SPECIAL TRANSITION FOR DEFINED CONTRIBUTION FRACTION.-In applying paragraph (3) with respect to years beginning before January 1, 1976– “(A) the aggregate amount taken into account under paragraph (3) (A) may not exceed the aggregate amount taken into account under paragraph (3) (B), and “(B) the amount taken into account under subsection (c) (2) (B) (i) for any year concerned is an amount equal to “(i) the excess of the aggregate amount of employee contributions for all years beginning before January 1, 1976, during which the employee was an active participant of the plan, over 10 percent of the employee's aggregate compensation for all such years, multiplied by “(ii) a fraction the numerator of which is 1 and the denominator of which is the number of years beginning before January 1, 1976, during which the employee was an active participant in the plan. Employee contributions made on or after October 2, 1973, shall be taken into account under subparagraph (B) of the preceding sentence only to the extent that the amount of such contributions does not exceed the maximum amount of contributions permissible under the plan as in effect on October 2, 1973. 26 USC 403. “(5) SPECIAL RULES FOR SECTIONS 403(b) and 408.–For purposes Ante, p. 959. of this subsection, any annuity contract described in section 403 (b) (except in the case of a participant who has elected under subsection (c) (4) (D) to have the provisions of subsection (c) (4) (C) apply), any individual retirement account described in section 408(a), any individual retirement annuity described in section 408 (b), and any retirement bond described in section 409. for the benefit of a participant shall be treated as a defined contribution plan maintained by each employer with respect to which the participant has the control required under subsection (b) or Ante, p. 925. (c) of section 414 (as modified by subsection (n)). In the case of any annuity contract described in section 403(b), the amount of the contribution disqualified by reason of subsection (g) shall reduce the exclusion allowance as provided in section 403(b) (2). “(f) COMBINING OF PLANS. “(1) IN GENERAL.-For purposes of applying the limitations of subsections (b), (c), and (e) “(A) all defined benefit plans (whether or not terminated) of an employer are to be treated as one defined benefit plan, and “(B) all defined contribution plans (whether or not termi. nated) of an employer are to be treated as one defined con tribution plan. “(2) ANNUAL COMPENSATION TAKEN INTO ACCOUNT FOR DEFINED BENEFIT PLANS.-If the employer has more than one defined benefit plan “(A) subsection (b)(1)(B) shall be applied separately with respect to each such plan, but September 2, 1974 - 157 Pub, Law 93-406 86 STAT. 985 “(B) in applying subsection (b)(1)(B) to the aggregate of such defined benefit plans for purposes of this subsection, the high 3 years of compensation taken into account shall be the period of consecutive calendar years (not more than 3) during which the individual had the greatest aggregate com pensation from the employer. "(g) AGGREGATION OF Plans. -The Secretary or his delegate, in applying the provisions of this section to benefits or contributions under more than one plan maintained by the same employer, and to any trusts, contracts, accounts, or bonds referred to in subsection (a) (2), with respect to which the participant has the control required under section 414 (b) or (c), as modified by subsection (h), shall, under Ante, p. 925. regulations prescribed by the Secretary or his delegate, disqualify one or more trusts, plans, contracts, accounts, or bonds, or any combination thereof until such benefits or contributions do not exceed the limitations contained in this section. In addition to taking into account such other factors as may be necessary to carry out the purposes of subsections (e) and (f), the regulations prescribed under this paragraph shall provide that no plan which has been terminated shall be disqualified until all other trusts, plans, contracts, accounts, or bonds have been disqualified. “(h) 50 PERCENT CONTROL.—For purposes of applying subsections (b) and (c) of section 414 to this section, the phrase “more than 50 percent shall be substituted for the phrase 'at least 80 percent each place it appears in section 1563(a)(1). 26 USC 1563. "(i) RECORDS Not AvailABLE FOR Past PERIODS.-Where for the period before January 1, 1976, or (if later) the first day of the first plan year of the plan, the records necessary for the application of this section are not available, the Secretary or his delegate may by regulations prescribe alternative methods for determining the amounts to be taken into account for such period. “(j) REGULATIONS; DEFINITION OF YESR.—The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section, including, but not limited to, revulations defining the term 'year' for purposes of any provision of this section. “(k) SPECIAL RULES. “(1) DEFINED BENEFIT PLAN AND DEFINED CONTRIBUTION PLAN.-For purposes of this title, the term 'defined contribution plan' or 'defined benefit plan' means a defined contribution plan (within the meaning of section 414(i)) or a defined benefit plan (within the meaning of section 414 (i)), whichever applies, which is “(A) a plan described in section 401 (a) which includes a trust which is exempt from tax under section 501(a), “(B) an annuity plan described in section 403(a), "(c) a qualified bond purchase plan described in section 105 (a), “(D) an annuity a contract described in section 403(b), “(E) an individual retirement account described in section 408(a), “(F) an individual retirement annuity described in section “(G) an individual retirement bond described in section 26 USC 415 |
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