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TITLE 26-INTERNAL REVENUE CODE (it) for adjusting the applicable percent- ages in the case of plans providing bene- fits other than a basic benefit, (iii) that any increase In the rate of ac- crual, and any increase in the compensa- tion base which may be taken into ac- count, shall, with respect only to such in- crease, begin a new period of participation in the plan, and (iv) when appropriate, in the case of pe- riods beginning after December 31, 1977, for adjustments in the applicable percent- ages based on changes in prevailing inter- est and mortality rates occurring after 1973. (4) Certain contributions and benefits may not be taken into account A defined benefit plan which provides con- tributions or benefits for owner-employees does not satisfy the requirements of this sub- section unless such plan meets the require- ments of subsection (a)(4) without taking into account contributions or benefits under chap- ter 2 (relating to tax on self-employment income), chapter 21 (relating to Federal In- surance 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 com- mencing at the later of- (1) age 65, or (ii) the day 5 years after the day the participant's current period of participa- tion began under a plan which provides no ancillary benefits and to which employees do not contribute. (B) Shareholder-employee The term "shareholder-employee" 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-employ- ee, the compensation received or accrued by the individual from the electing small business corporation. (6) Special rules Section 404(e) (relating to special limita- tions for self-employed individuals) and sec- tion 1379(b) (relating to taxability of share- holder-employee beneficiaries) do not apply to a trust to which this subsection applies. (k) Cross reference For exemption from tax of a trust qualified under this section, see section 501(a). (Aug. 16, 1954, ch. 736, 68A Stat. 134; Oct. 10, 1962, Pub. L. 87-792, § 2, 76 Stat. 809; Oct. 23, 1962, Pub. L. 87-863, § 2(a), 76 Stat. 1141; Feb. 26, 1964, Pub. L. 88-272, title II, § 219(a), 78 Stat. 57; July 30, 1965, Pub. L. 89-97, title I, § 106(d)(4), 79 Stat. 337; Nov. 13, 1966, Pub. L. 89-809,. title II, §§ 204(b)(1), (c), 205(a), 80 Stat. 1577, 1578; Jan. 12, 1971, Pub. L. 91-691, § 1(a), 84 Stat. 2074; Sept. 2, 1974, Pub. L. 93-406, title II, §§ 1012(b), 1016(a)(2), 1021, 1022(a)-(d), f), 1023, 2001(c)-(e)(4), (h)(1), 2004(a)(1), 88 Stat. 913, 929, 935, 937-940, 943, 952-955, 957, 979; Apr. 15, 1976, Pub. L. 94-267, § l(c)(1), (2), 90 Stat. 367; Oct. 4, 1976, Pub. L. 94-455, title VIII, § 803(b)(2), title XV, § 1505(b), title XIX, §§ 1901(a)(56), 1906(b)(13)(A), 90 Stat. 1584, 1738, 1773, 1834.) REFERENCES IN TEXT The Federal Insurance Contributions Act, referred to in subsecs. (a)(5), (d)(6), and (J)(4), is act Aug. 16, 1954, ch. 736, 68A Stat. 415, as amended, which is clas- sified generally to chapter 21 (§ 3101 et seq.) of this title. For complete classification of this Act to the Code, see section 3126 of this title and Tables volume. For the effective date of this paragraph, referred to in subsec. (a)(11)(H)(i), (ii), see Effective Date of 1974 Amendment note set out below. The Social Security Act, referred to in subsecs. (a)(15), (d)(6), and (J)(4), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended. Title II of the Social Securi- ty Act is classified generally to subchapter II (§ 401 et seq.) of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see sec- tion 1305 of Title 42 and Tables volume. Section 301 of the Tax Reduction Act of 1975, re- ferred to in subsec. (a)(21), is set out as a note under section 46 of this title. Section 101(6) of the Federal Credit Union Act, re- ferred to in subsec. (d)(1), is classified to section 1752(6) of Title 12, Banks and Banking. AMENDMENIS 1976-Subsec. (a). Pub. L. 94-455, §§ 803(b)(2), 1901(a)(56), 1906(b)(13)(A), struck out "or his dele- gate" following "Secretary" in pars. (5), (11), and (14), substituted references to Sept. 2, 1974, for references to the enactment of the Employee Retirement Income Security Act of 1974 in pars. (12), (13), (15), and (19), added par. (21), and added reference to par. (20) in the provisions following par. (21), such addition of refer- ence to par. (20) duplicating amendment by Pub. L. 94-267, § 1(c)(2). Pub, L. 94-267, § 1(c)(2,, substituted "(19), and (20)" for "and (19)". Subsec. (a)(20). Pub. L. 94-267, § l(c)(1), added subsec. (a)(20). Subsecs. (b), (c), (d). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (f). Pub. L. 94-455, § 1505(b), added reference to contracts (other than life, health, or accident, prop- erty, casualty, or liability insurance contracts) issued by an insurance company qualified to do a business in a State and struck out "or his delegate" following "Secretary". Subsecs. (h), (i), (J). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". 1974-Subsec. (a). Pub. L. 93-406, § 1021(a)(2), added provision that paragraphs (11). (12). (13), (14), (15), and (19) shall apply only in the case of a plan to which section 411 (relating to minimum vesting standards) applies without regard to subsection (e)(2) of this sec- tion. Subsec. (a)(3). Pub. L. 93-406, § 1016(a)(2)(A), substi- tuted provisions referring simply to a plan of which the trust is a part and the satisfaction by that plan of the requirements of section 410 (relating to minimum participation standards) for provisions referring to a trust, trusts, or trust or trusts and annuity plan or plans designated by the employer as constituting parts of a plan intended to qualify under subsec. (a) and spelling out the requisite coverage of the plan. Subsec. (a)(4). Pub. L. 93-406, § 1022(a), struck out provisons referring to persons whose principal duties consist in supervising the work of other employees and 71-999 0 - 78 - 21 (Vol. 7) Page 293 § 401