PUBLIC LAW 100-647—NOV. 10, 1988 102 STAT. 3485

requirements of this subsection" and inserting in lieu thereof

"In the case of a highly compensated employee, subsection (a)

shall not apply to any benefit attributable to a plan year".

(C) Paragraph (2) of section 125(b) of the 1986 Code is amended

by striking out "a plan shall be treated as failing to meet the
requirements of this subsection" and inserting in lieu thereof
"subsection (a) shall not apply to any plan year".

(12) Subparagraph (B) of section 125(cXD of the 1986 Code
(defining cafeteria plans) is amended to read as follows:

"(B) the participant may choose among 2 or more benefits
consisting of cash and qualified benefits."

(13XA) Paragraph (1) of section 125(e) of the 1986 Code (defin-
ing qualified benefits) is amended by inserting "and without
regard to section 89(a)" after "subsection (a)".

(B) The last sentence of section 125(bX2) of the 1986 Code is
amended to read as follows: "For purposes of the preceding
sentence, qualified benefits shall not include benefits which
(without regard to this paragraph) are includible in gross
income."

(14) Subsection (d) of section 129 of the 1986 Code is amended
by redesignating paragraph (8) as paragraph (7).

(15) Paragraph (7) of section 129(d) of the 1986 Code (as so
redesignated) is amended—

(A) by inserting "under all plans of the employer" after
"employees" the 2nd and 3rd time it appears in subpara-
graph (A),

(B) by striking out "there shall be disregarded" in
subparagraph (B) and inserting in lieu thereof "a plan may
disregard", and

(C) by striking out "415(qX7)" in subparagraph (B) and
inserting in lieu thereof "414(qX7)".

(16) Section 414(mX4) of the 1986 Code is amended by insert-
ing "and" at the end of subparagraph (A), by striking out the
comma at the end of subparagraph (B) and inserting in lieu
thereof a period, and by striking out subparagraphs (C) and (D).

(17) Paragraph (2) of section 414(t) of the 1986 Code is amend-
ed by striking out "132," and inserting in lieu thereof "132,
162(iX2), 162(k),".

(18) Paragraph (6) of section 129(e) of the 1986 Code is amend-
ed by striking out "of subsection (d)" and inserting in lieu
thereof "of subsection (d) (other than paragraphs (4) and (7)
thereof)".

(19) Subparagraph (Q of section 414(nX3) of the 1986 Code is
amended by striking out "132," and inserting in lieu thereof
"132,1620X9,162(kV'.

(20) Section 4140X1) of the 1986 Code (relating to application
of controlled group rules to certain employees) is amended by
striking out "of section 414" each place it appears.

(21) Section 89(jX6) of the 1986 Code is amended by striking
out "described in subparagraph (A), (B), or (C) of subsection
0X2)".

(22XA) Section 3121 of the 1986 Code (relating to definitions)
is amended by adding at the end thereof the following new sub-
section:

"(x) BENEFITS PROVIDED UNDER CERTAIN EMPLOYEE BENEFIT
PLANS.—-Notwithstanding any paragraph of subsection (a) (other