100 STAT. 2432
PUBLIC LAW 99-514—OCT. 22, 1986
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"(B) EXCEPTION WHERE MORE THAN 25 EMPLOYEES.—This
paragraph shall not apply with respect to any year in the case of a simplified employee pension maintained by an employer with more than 25 employees at any time during the preceding year.
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"(C) DISTRIBUTIONS OF EXCESS CONTRIBUTIONS.—
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"(i) IN GENERAL.—Rules similar to the rules of section 401(k)(8) shall apply to any excess contribution under this paragraph. Any excess contribution under a simplified employee pension shall be treated as an excess contribution for purposes of section 4979. "(ii) EXCESS CONTRIBUTION.—For purposes of clause
(i), the term 'excess contribution' means, with respect 'J '^ • to a highly compensated employee, the excess of elective employer contributions under this paragraph over the maximum amount of such contributions allowable . ' under subparagraph (A)(iii). "(D) DEFERRAL PERCENTAGE.—For purposes of this para.' graph, the deferral percentage for an employee for a year I'.»shall be the ratio of— "(i) the amount of elective employer contributions " tf\-^.'-.. actually paid over to the simplified employee pension ' on behalf of the employee for the year, to "(ii) the employee's compensation (within the meaning of section 414(s)) for the year. "(E) EXCEPTION FOR STATE AND LOCAL AND TAX-EXEMPT
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PENSIONS.—This paragraph shall not apply to a simplified employee pension maintained by— "(i) a State or local government or political subdivision thereof, or any agency or instrumentality thereof, or "(ii) an organization exempt from tax under this title. "(F) HIGHLY COMPENSATED EMPLOYEE.—For purposes of
this paragraph, the term 'highly compensated employee' has the meaning given such term by section 414(q)." (b) EXCLUSION FROM GROSS INCOME.—Section 402 (relating to teixability of beneficiary of employees' trust), as amended by section 1105(a), is amended by inserting at the end thereof the following new subsection: "(h) SPECIAL RULES FOR SIMPUFIED EMPLOYEE PENSIONS.—For purposes of this chapter— "(1) IN GENERAL.—Except as provided in paragraph (2), contributions made by an employer on behalf of an employee to an b'» individual retirement plan pursuant to a simplified employee T pension (as defined in section 408(k))— "(A) shall not be treated as distributed or made available to the employee or as contributions made by the employee,
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t >• "(B) if such contributions are made pursuant to an arrangement under section 408(k)(6) under which an emi^uir ployee may elect to have the employer make contributions to the simplified employee pension on behalf of the employee, shall not be treated as distributed or made available or as contributions made by the employee merely because ' " the simplified employee pension includes provisions for such election.
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