110 STAT. 1804 PUBLIC LAW 104-188—AUG. 20, 1996 each day of the plan year such trust benefits at least the lesser of— "(i) 50 emploj'ees of the employer, or "(ii) the greater of— "(I) 40 percent of all employees of the employer, or "(II) 2 employees (or if there is only 1 employee, such employee).", (b) SEPARATE LINE OF BUSINESS TEST. — Section 401(a)(26)(G) (relating to separate line of business) is amended by striking "paragraph (7)" and inserting "paragraph (2)(A) or (7)". 26 USC 401 note. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to years beginning after December 31, 1996. SEC. 1433. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR DEFERRED ARRANGEMENTS AND MATCHING CONTRIBU- TIONS. (a) ALTERNATIVE METHODS OF SATISFYING SECTION 401(k) NON- DISCRIMINATION TESTS.— Section 401(k) (relating to cash or deferred arrangements), as amended by section 1422, is amended by adding at the end the following new paragraph: " (12) ALTERNATIVE METHODS OF MEETING NONDISCRIMINA- TION REQUIREMENTS.— "(A) IN GENERAL. — A cash or deferred arrangement shall be treated as meeting the requirements of paragraph (3)(A)(ii) if such arrangement— "(i) meets the contribution requirements of subparagraph (B) or (C), and "(ii) meets the notice requirements of subparagraph (D). " (B) MATCHING CONTRIBUTIONS. — "(i) IN GENERAL. —The requirements of this subparagraph are met if, under the arrangement, the employer makes matching contributions on behalf of each employee who is not a highly compensated employee in an amount equal to— "(I) 100 percent of the elective contributions of the employee to the extent such elective contributions do not exceed 3 percent of the employee's compensation, and "(II) 50 percent of the elective contributions of the employee to the extent that such elective contributions exceed 3 percent but do not exceed 5 percent of the employee's compensation, " (ii) RATE FOR HIGHLY COMPENSATED EMPLOYEES.— The requirements of this subparagraph are not met if, under the arrangement, the rate of matching contribution with respect to any elective contribution of a highly compensated employee at any rate of elective contribution is greater than that with respect to an employee who is not a highly compensated employee, "(iii) ALTERNATIVE PLAN DESIGNS. —If the rate of any matching contribution with respect to any rate of elective contribution is not equal to the percentage required under clause (i), an arrangement shall not be treated as failing to meet the requirements of clause (i) if—
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