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TITLE 26-INTERNAL REVENUE CODE of whom are employees within the meaning of section 401(c)(1), the amount determined under paragraph (1)(B) with respect to any participant shall not be less than the amount deductible under section 404(e) with respect to any individual who is an employee within the meaning of section 401(c)(1). (6) Special limitation for employee stock ownership plan (A) In the case of an employee stock owner- ship plan (as defined in subparagraph (B)), under which no more than one-third of the employer contributions for a year are allocat- ed to the group of employees consisting of of- ficers, shareholders owning more than 10 per- cent of the employer's stock (determined under subparagraph (B)(iv)), or employees described in subparagraph (B)(ii), the amount described in paragraph (c)(1)(A) (as adjusted for such year pursuant to subsection (d)(1)) for a year with respect to any partici- pant shall be equal to the sum of (I) the amount described in paragraph (c)(1)(A) (as so adjusted) determined without regard to this paragraph and (ii) the lesser of the amount determined under clause (I) or the amount of employer securities contributed.to the employee stock ownership plan. (B) For purposes of this paragraph- (i) the term "employee stock ownership plan" means a plan which meets the re- quirements of section 4975(e)(7) or section 301(d) of the Tax Reduction Act of 1975, (i) the term "employer securities" means, in the case of an employee stock ownership plan within the meaning of section 4975(e)(7), qualifying employer securities within the meaning of section 4975(e)(8), but only if they are described in section 301(d)(9)(A) of the Tax Reduction Act of 1975, or, in the case of an employee stock ownership plan described in section 301(d)(2) of the Tax Reduction Act of 1975, employer securities within the meaning of section 301(d)(9)(A) of such Act, (iii) an employee described in this clause is any participant whose compensation for a year exceeds an amount equal to twice the amount described in paragraph (1)(A) for such year (as adjusted for such year pursu- ant to subsection (d)(1)), determined with- out regard to subparagraph (A) of this para- graph, and (iv) an individual shall be considered to own more than 10 percent of the employer's stock if, without regard to stock held under the employee stock ownership plan, he owns (after application of section 1563(e)) more than 10 percent of the total combined voting power of all classes of stock entitled to vote or more than 10 percent of the total value of shares of all classes of stock. (7) Certain level premium annuity contracts under plans benefiting owner-employees Paragraph (1)(B) shall not apply to a con- tribution described in section 401(e) which is made on behalf of a participant for a year to a plan which benefits an owner-employee (within the meaning of section 401(c)(3)), if- (A) the annual addition determined under this section with respect to the participant for such year consists solely of such contri- bution, and (B) the participant is not an active partici- pant at any time during such year in a de- fined benefit plan maintained by the em- ployer. For purposes of this section and section 401(e), in the case of a plan which provides contributions or benefits for employees who are not owner-employees, such plan will not be treated as failing to satisfy section 401(a)(4) merely because contributions made on behalf of employees who are not owner- employees are not permitted to exceed the limitations of paragraph (1)(B). (d) Cost-of-living adjustments (1) In general The Secretary shall adjust annually- (A) the $75,000 amount in subsection (b)(1)(A), (B) the $25,000 amount in subsection (c)(1)(A), and (C) in the case of a participant who is sep- arated from service, the amount taken into account under subsection (b)(1)(B), for increases in the cost of living in accor- dance with regulations prescribed by the Sec- retary. Such regulations shall provide for ad- justment procedures which are similar to th! procedures used to adjust primary insurnnce amounts under section 215(i)(2)(A) of the Social Security Act. (2) Base periods The base period taken into account- (A) for purposes of subparagraphs (A) and (B) of paragraph (1) is the calendar quarter beginning October 1, 1974, and (B) for purposes of subparagraph (C) of paragraph (1) is the last calendar quarter of the calendar year before the calendar year in which the participant is separated from service. (e) Limitation in case of defined benefit plan and de- fined contribution plan for same employee (1) In general In any case in which an individual is a par- ticipant in both a defined benefit plan and a defined contribution plan maintained by the same employer, the sum of the defined bene- fit plan fraction and the defined contribution plan fraction for any year may not exceed 1.4. (2) Defined benefit plan fraction For purposes of this subsection, the defined benefit plan fraction for any year is a frac- tion- (A) the numerator of which is the project- ed annual benefit of the participant under the plan (determined as of the close of the year), and (B) the denominator of which is the pro- jected annual benefit of the participant under the plan (determined as of the close of the year) if the plan provided the maxi- mum benefit allowable under subsection (b). (3) Defined contribution plan fraction For purposes of this subsection, the defined contribution plan fraction for any year is a fraction- § 415 Page 342