MODIFICATION OF 403(b) EXCLUSION ALLOWANCE TO CONFORM TO 415 MODIFICATIONS.

SEC. 1504. MODIFICATION OF 403(b) EXCLUSION ALLOWANCE TO CONFORM TO 415 MODIFICATIONS. (a) Definition of Compensation.— (1) In general.—Section 403(b)(3) (defining includible compensation) is amended by adding at the end the following: “Such term includes— “(A) any elective deferral (as defined in section 402(g)(3)), and “(B) any amount which is contributed or deferred by the employer at the election of the employee and which is not includible in the gross income of the employee by reason of section 125 or 457.”. (2) Effective date.—The amendment made by this subsection shall apply to years beginning after December 31, 1997. (b) Repeal of Rules in Section 415(e).—The Secretary of the Treasury shall modify the regulations regarding the exclusion allowance under section 403(b)(2) of the Internal Revenue Code of 1986 to reflect the amendment made by section 1452(a) of the Small Business Job Protection Act of 1996. Such modification shall take effect for years beginning after December 31, 1999.