TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415.

SEC. 1444. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415. (a) Compensation Limit.— Subsection (b) of section 415 is amended by adding immediately after paragraph (10) the following new paragraph: “(11) Special limitation rule for governmental plans.— In the case of a governmental plan (as defined in section 414(d)), subparagraph (B) of paragraph (1) shall not apply.”. (b) Treatment of Certain Excess Benefit Plans.— (1) In general.— Section 415 is amended by adding at the end the following new subsection: “(m) Treatment of Qualified Governmental Excess Benefit Arrangements.— “(1) Governmental plan not affected.— In determining whether a governmental plan (as defined in section 414(d)) meets the requirements of this section, benefits provided under a qualified governmental excess benefit arrangement shall not be taken into account. Income accruing to a governmental plan (or to a trust that is maintained solely for the purpose of providing benefits under a qualified governmental excess benefit arrangement) in respect of a qualified governmental excess benefit arrangement shall constitute income derived from the exercise of an essential governmental function upon which such governmental plan (or trust) shall be exempt from tax under section 115. “(2) Taxation of participant.— For purposes of this chapter— “(A) the taxable year or years for which amounts in respect of a qualified governmental excess benefit arrangement are includible in gross income by a participant, and “(B) the treatment of such amounts when so includible by the participant, shall be determined as if such qualified governmental excess benefit arrangement were treated as a plan for the deferral of compensation which is maintained by a corporation not110 STAT. 1810 exempt from tax under this chapter and which does not meet the requirements for qualification under section 401. “(3) Qualified governmental excess benefit arrangement.— For purposes of this subsection, the term ‘qualified governmental excess benefit arrangement’ means a portion of a governmental plan if— “(A) such portion is maintained solely for the purpose of providing to participants in the plan that part of the participant’s annual benefit otherwise payable under the terms of the plan that exceeds the limitations on benefits imposed by this section, “(B) under such portion no election is provided at any time to the participant (directly or indirectly) to defer compensation, and “(C) benefits described in subparagraph (A) are not paid from a trust forming a part of such governmental plan unless such trust is maintained solely for the purpose of providing such benefits.”. (2) Coordination with section 457.— Subsection (e) of section 457 is amended by adding at the end the following new paragraph: “(14) Treatment of qualified governmental excess benefit arrangements.— Subsections (b)(2) and (c)(1) shall not apply to any qualified governmental excess benefit arrangement (as defined in section 415(m)(3)), and benefits provided under such an arrangement shall not be taken into account in determining whether any other plan is an eligible deferred compensation plan.”. (3) Conforming amendment.— Paragraph (2) of section 457(f) is amended by striking “and” at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting “, and”, and by inserting immediately thereafter the following new subparagraph: “(E) a qualified governmental excess benefit arrangement described in section 415(m).”. (c) Exemption for Survivor and Disability Benefits.— Paragraph (2) of section 415(b) is amended by adding at the end the following new subparagraph: “(I) Exemption for survivor and disability benefits provided under governmental plans.— Subparagraph (C) of this paragraph and paragraph (5) shall not apply to— “(i) income received from a governmental plan (as defined in section 414(d)) as a pension, annuity, or similar allowance as the result of the recipient becoming disabled by reason of personal injuries or sickness, or “(ii) amotmts received from a governmental flan by the beneficiaries, survivors, or the estate o an employee as the result of the death of the employee.”. (d) Revocation of Grandfather Election.— (1) In general.— Subparagraph (C) of section 415(b)(10) is amended by adding at the end the following new clause: “(ii) Revocation of election.— An election under clause (i) may be revoked not later than the last day of the third plan year beginning after the date of the enactment of this clause. The revocation shall110 STAT. 1811 apply to all plan years to which the election applied and to all subsequent plan years. Any amount paid by a plan in a taxable year ending after the revocation shall be includible in income in such taxable year under the rules of this chapter in effect for such taxable year, except that, for purposes of applying the limitations imposed by this section, any portion of such amount which is attributable to any taxable year during which the election was in effect shall be treated as received in such taxable year.”. (2) Conforming amendment.— Subparagraph (C) of section 415(b)(10) is amended by striking “This” and inserting: “(i) In general.— This”. (e) Effective Date.— (1) In general.— The amendments made by subsections (a), (b), and (c) shall apply to years beginning after December 31, 1994. The amendments made by subsection (d) shall apply with respect to revocations adopted after the date of the enactment of this Act. (2) Treatment for years beginning before january 1, 1995.— Nothing in the amendments made by this section shall be construed to imply that a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986) fails to satisfy the requirements of section 415 of such Code for any taxable year beginning before January 1, 1995.