; or (II) for which the only contributions are nonelective employer contributions and with respect to which the employer’s annual contribution rate is not at or above the rates specified in subsection (d)(4). (3) Exception for certain small and new employers (A) In general The term covered employer shall not include an employer for a calendar year if the employer— (i) did not employ during the preceding calendar year more than 10 employees who each received at least $5,000 of compensation (as defined in section 3401(a) of the Internal Revenue Code of 1986) from the employer for such preceding calendar year; (ii) did not normally employ more than 10 employees on a typical business day during the preceding calendar year; or (iii) was not in existence at all times during the calendar year and the preceding calendar year. (B) Operating rules In determining the number of employees for purposes of subparagraph (A)— (i) rules consistent with any rules applicable in determining the number of employees for purposes of section 408(p)(2)(C) and section 4980B(d) of the Internal Revenue Code of 1986 shall apply; (ii) all members of the same family (within the meaning of section 318(a)(1) of the Internal Revenue Code of 1986) shall be treated as 1 individual; and (iii) any reference to an employer shall include a reference to any predecessor employer. (4) Exception for governments and churches The term covered employer shall not include— (A) a government or entity described in section 414(d) of the Internal Revenue Code of 1986