102 STAT. 3466 PUBLIC LAW 100-647—NOV. 10, 1988

"(I) the applicable rate under the plan's method
in effect under the plan on August 16, 1986,

"(II) the highest rate (as of the date of the termi-
nation, transfer, or distribution) determined under
any of the methods applicable under the plan at
any time after August 15, 1986, and before the
termination, transfer, or distribution in calculating
the present value of the accrued benefit of an
employee who is not a highly compensated em-
ployee under the plan (or any other plan used in
determining whether the plan meets the require-
ments of section 401 of the Internal Revenue Code
of 1986), or

"(III) 5 percent.

"(ii) ELIGIBLE AMOUNT.—For purposes of clause (i),

the term 'eligible amount' means any amount with

respect to a highly compensated employee which—

"(I) may be rolled over under section 402(a)(5) of

such Code,

"(II) is eligible for income averaging under sec-
tion 402(e)(l) of such Code, or capital gains treat-
ment under section 402(a)(2) or 403(a)(2) of such
Code (as in effect before this Act), or

"(III) may be transferred to another plan without
inclusion in gross income.

"(iii) AMOUNTS SUBJECT TO EARLY WITHDRAWAL OR
EXCESS DISTRIBUTION TAX.—For purposes of sections
72(t) and 4980A of such Code, there shall not be taken
into account the excess (if any) of—

"(I) the amount distributed to a highly com-
pensated employee by reason of such termination
or distribution, over

"(II) the amount determined by using the in-
terest rate applicable under clause (i).
"(iv) DISTRIBUTIONS OF ANNUITY CONTRACTS.—If an
annuity contract purchased after August 16, 1986, is
distributed to a highly compensated employee in
connection with such termination or distribution, there
shall be included in gross income for the taxable year of
such distribution an amount equal to the excess of—
"(I) the purchase price of such contract, over
"(II) the present value of the benefits payable
under such contract determined by using the in-
terest rate applicable under clause (i).
Such excess shall not be taken into account for pur-
poses of sections 72(t) and 4980A of such Code.

"(v) HIGHLY COMPENSATED EMPLOYEE.—For purposes
of this subparagraph, the term 'highly compensated
employee* has the meaning given such term by section
414(q) of such Code."

(10) Section 413(b) of the 1986 Code is amended by adding at
the end thereof the following new paragraph:

"(9) PLANS COVERING A PROFESSIONAL EMPLOYEE.—Notwith-
standing subsection (a), in the case of a plan (and trust forming
part thereof) which covers any professional employee, para-
graph (1) shall be applied by substituting 'section 410(a)' for
section 410', and paragraph (2) shall not apply."