Sec. 103. Qualified cash or deferred arrangements must allow long-term employees working more than 500 but less than 1,000 hours per year to participate
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Subparagraph
(D)of section 401(k)(2) (defining qualified cash or deferred arrangement) is amended to read as follows: which does not require, as a condition of participation in the arrangement, that an employee complete a period of service with the employer (or employers) maintaining the plan extending beyond the close of the earlier of— the period permitted under section 410(a)(1) (determined without regard to subparagraph (B)(i) thereof), or subject to the provisions of paragraph (14), the first period of 3 consecutive 12-month periods during each of which the employee has at least 500 hours of service. . Section 401(k) (relating to cash or deferred arrangements) (as amended by section 102) is amended by adding at the end the following new paragraph: For purposes of paragraph (2)(D)(ii)— Paragraph (2)(D)(ii) shall not apply to an employee unless the employee has met the requirement of section 410(a)(1)(A)(i) by the close of the last of the 12-month periods described in such paragraph. In the case of employees who are eligible to participate in the arrangement solely by reason of paragraph (2)(D)(ii)— notwithstanding subsection (a)(4), an employer shall not be required to make nonelective or matching contributions on behalf of such employees even if such contributions are made on behalf of other employees eligible to participate in the arrangement, and an employer may elect to exclude such employees from the application of subsection (a)(4), paragraph (3), subsection (m)(2), and section 410(b). An employer may elect to exclude all employees who are eligible to participate in a plan maintained by the employer solely by reason of paragraph (2)(D)(ii) from the application of the vesting and benefit requirements under subsections
(b)and
(c)of section 416. For purposes of determining whether an employee described in clause
(i)has a nonforfeitable right to employer contributions (other than contributions described in paragraph (3)(D)(i)) under the arrangement, each 12-month period for which the employee has at least 500 hours of service shall be treated as a year of service. This subparagraph shall cease to apply to any employee as of the first plan year beginning after the plan year in which the employee meets the requirements of section 410(a)(1)(A)(ii) without regard to paragraph (2)(D)(ii). Paragraph (2)(D)(ii) shall not apply to employees described in section 410(b)(3). The rules of section 410(a)(4) shall apply to an employee eligible to participate in an arrangement solely by reason of paragraph (2)(D)(ii). 12-month periods shall be determined in the same manner as under the last sentence of section 410(a)(3)(A). . The amendments made by this section shall apply to plan years beginning after December 31, 2013, except that, for purposes of section 401(k)(2)(D)(ii) of the Internal Revenue Code of 1986 (as added by such amendments), 12-month periods beginning before January 1, 2014, shall not be taken into account.