PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2455
at the end of subparagraph (B), by striking out the period at the end of subparagraph (C) and inserting in lieu thereof ", and", and by adding at the end thereof the following new subparagraph: "(D) which does not require, as a condition of participation in the arrangement, that an employee complete a period of service with the employer (or employers) maintaining the plan extending beyond the period permitted under section 410(a)(1) (determined without regard to subparagraph (B)(i) thereof)." (3) OTHER REQUIREMENTS.—Subsection (k) of section 401 is
amended by redesignating paragraphs (4), (5), and (6) as paragraphs (5), (6), and (7), respectively, and by inserting after paragraph (3) the following new paragraph: "(4) OTHER REQUIREMENTS.— "(A) BENEFITS (OTHER THAN MATCHING CONTRIBUTIONS) MUST NOT B E C O N T I N G E N T ON ELECTION TO DEFER.—A Cash Or
deferred arrangement of any employer shall not be treated as a qualified cash or deferred arrangement if any other benefit provided by such employer is conditioned (directly or indirectly) on the employee electing to have the employer make or not make contributions under the arrangement in lieu of receiving cash. The preceding sentence shall not apply to any matching contribution (as defined in section 401(m)) made by reason of such an election. "(B)
STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS NOT ELIGIBLE.—A cash or deferred arrangement shall not be treated as a qualified cash or deferred arrangement if it is part of a plan maintained by— "(i) a State or local government or political subdivision thereof, or any agency or instrumentality thereof, or "(ii) any organization exempt from tax under this subtitle. "(C) COORDINATION WITH OTHER PLANS.—Except as
pro-
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vided in section 401(m), any employer contribution made pursuant to an employee's election under a qualified cash ' or deferred arrangement shall not be taken into account for purposes of determining whether any other plan meets the requirements of section 401(a) or 410(b). This subparagraph shall not apply for purposes of determining whether a plan meets the average benefit requirement of section 410(b)(2)(A)(ii)." (4) AGGREGATION RULE.—The last sentence of subparagraph (A) of section 401(k)(3) (relating to application of participation and discrimination standards) is amended by striking out "any employee" and inserting in lieu thereof "any highly compensated employee".
(c) PLAN NOT DISQUALIFIED IF EXCESS CONTRIBUTIONS DISTRIBUTED BEFORE THE END OF FOLLOWING PLAN YEAR.—
(1) IN GENERAL.—Subsection (k) of section 401 is amended by adding at the end thereof the following new paragraph: "(8) ARRANGEMENT NOT DISQUALIFIED IF EXCESS CONTRIBUTIONS DISTRIBUTED.—
"(A) IN GENERAL.—A cash or deferred arrangement shall not be treated as failing to meet the requirements of clause
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