PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1813 "(g) GOVERNMENTAL PLANS MUST MAINTAIN SET-ASIDES FOR EXCLUSIVE BENEFIT OF PARTICIPANTS.— "(1) IN GENERAL. —A plan maintained by an eligible employer described in subsection (e)(1)(A) shall not be treated as an eligible deferred compensation plan unless all assets and income of the plan described in subsection (b)(6) are held in trust for the exclusive benefit of participants and their beneficiaries. "(2) TAXABILITY OF TRUSTS AND PARTICIPANTS. — For purposes of this title— "(A) a trust described in paragraph (1) shall be treated as an organization exempt from taxation under section 501(a), and "(B) notwithstanding any other provision of this title, amounts in the trust shall be includible in the gross income of participants and beneficiaries only to the extent, and at the time, provided in this section. "(3) CUSTODIAL ACCOUNTS AND CONTRACTS. — For purposes of this subsection, custodial accounts and contracts described in section 401(f) shall be treated as trusts under rules similar to the rules under section 401(f).". (b) CONFORMING AMENDMENT. —Paragraph (6) of section 457(b) is amended by inserting "except as provided in subsection (g)," before "which provides that". (c) EFFECTIVE DATES. — 26 USC 457 note. (1) IN GENERAL. — Except as provided in paragraph (2), the amendments made by this section shall apply to assets and income described in section 457(b)(6) of the Internal Revenue Code of 1986 held by a plan on and after the date of the enactment of this Act. (2) TRANSITION RULE.— In the case of a plan in existence on the date of the enactment of this Act, a trust need not be established by reason of the amendments made by this section before January 1, 1999. SEC. 1449. TRANSITION RULE FOR COMPUTING MAXIMUM BENEFITS UNDER SECTION 415 LIMITATIONS. (a) IN GENERAL. —Subparagraph (A) of section 767(d)(3) of the 26 USC 4ii note. Uruguay Round Agreements Act is amended to read as follows: "(A) EXCEPTION. —A plan that was adopted and in effect before December 8, 1994, shall not be required to apply the amendments made by subsection (b) with respect to benefits accrued before the earlier of— "(i) the later of the date a plan amendment apply- ing the amendments made by subsection (b) is adopted or made effective, or "(ii) the first day of the first limitation year beginning after December 31, 1999. Determinations under section 415(b)(2)(E) of the Internal Revenue Code of 1986 before such earlier date shall be made with respect to such benefits on the basis of such section as in effect on December 7, 1994 (except that the modification made by section 1449(b) of the Small Business Job Protection Act of 1996 shall be taken into account), and the provisions of the plan as in effect on December 7, 1994, but only if such provisions of the plan meet the requirements of such section (as so in effect).".
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