954
PUBLIC LAW 93-406-SEPT. 2, 1974
[88 STAT.
"(iii) that any increase in the rate of accrual, and any increase in the compensation base which may be taken into account, shall, with respect only to such increase, begin a new period of participation in the plan, and "(iv) when appropriate, in the case of periods beginning after December 31, 1977, for adjustments in the applicable percentages based on changes in prevailing interest and mortality rates occurring after 1973. "(4)
26 USC 1401. 26 USC 3101. 42 USC 401.
26 USC 1379.
Ante, p. 952.
CERTAIN
Repeal.
BENEFITS
MAY
NOT BE
TAKEN INTO ACCOUNT,—A defined benefit plan which provides contributions or benefits for owner-employees does not satisfy the requirements of this subsection unless such plan meets the requirements of subsection (a)(4) without taking into account contributions or benefits under chapter 2 (relating to tax on selfemployment income), chapter 21 (relating to Federal Insurance Contributions Act), title II of the Social Security Act, or any other Federal or State law. (5) DEFINITIONS.—For purposes of this subsection— " (A) BASIC BENEFIT.—The term 'basic benefit' means a benefit in the form of a straight life annuity commencing at the later of— " (i) age 65, or "(ii) the day 5 years after the day the participant's current period of participation began under a plan which provides no ancillary benefits and to which employees do not contribute. "(B) SHAREHOLDER-EMPLOYEE.—The term 'shareholderemployee' has the same meaning as when used in section 1379(d). " (C) COMPENSATION.—The term 'compensation' means— "(i) in the case of an employee within the meaning of subsection (c)(1), the earned income of such individual, or "(ii) in the case of a shareholder-employee, the compensation received or accrued by the individual from the electing small business corporation. " (6) SPECIAL RULES.—Section 404(e) (relating to special limitations for self-employed individuals) and section 1379(b) (relating to taxability of shareholder-employee beneficiaries) do not apply to a trust to which this subsection applies.", (e) REPEAL or BUTIONS.—
26 USC 401.
CONTRIBUTIONS AND
EXISTING TAX TREATMENT OF EXCESS CONTRI-
(1) The last sentence of section 401(d)(5) is amended to read as follows: "Subparagraphs (A) and (B) do not apply to contributions described in subsection (e)." (2) Paragraph (8) of section 401(d) is repealed. (3) Subsection (e) of section 401 is amended to read as follows: "(e)
CONTRIBUTIONS FOR PREMIUMS ON A N N U I T Y, ETC.,
CON-
TRACTS.—A contribution by the employer on behalf of an owneremployee is described in this subsection if— " (1) under the plan such contribution is required to be applied (directly or through a trustee) to pay premiums or other consideration for one or more annuity, endowment, or life insurance contracts on the life of such owner-employee issued under the plan, "(2) the amount of such contribution exceeds the amount deductible under section 404 with respect to contributions made by the employer on behalf of such owner-employee under the plan, and " (S) the amount of such contribution does not exceed the average 01 the amounts which were deductible under section 404 with
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